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REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1340   2019 (Arising out of SLP(Crl.) No.7523 of 2019)

P. CHIDAMBARAM      ...Appellant

VERSUS

DIRECTORATE OF ENFORCEMENT        …Respondent

J U D G M E N T

R. BANUMATHI, J.

Leave granted.

2. This appeal relates to the alleged irregularities in Foreign Investment

Promotion Board (FIPB) clearance given to the INX Media for  receiving

foreign investment to the tune of Rs.305 crores against approved inflow of

Rs.4.62 crores.  The High Court of Delhi rejected the appellant’s plea for

anticipatory bail in the case registered by Central Bureau of Investigation

(CBI) being RC No.220/2017-E-0011 under Section 120B IPC read with

Section 420 IPC, Section 8 and Section 13(2) read with Section 13(1)(d) of

the  Prevention  of  Corruption  Act,  1988.  By  the  impugned  order  dated

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20.08.2019, the High Court also refused to grant anticipatory bail  in the

case registered by the Enforcement Directorate in ECIR No.07/HIU/2017

punishable under Sections 3 and 4 of the Prevention of Money-Laundering

Act, 2002.

3. Grievance of the appellant is that against the impugned order of the

High Court, the appellant tried to get the matter listed in the Supreme Court

on 21.08.2019; but the appellant  could not get an urgent hearing in the

Supreme Court seeking stay of the impugned order of the High Court.  The

appellant was arrested by the CBI on the night of 21.08.2019.  Since the

appellant was arrested and remanded to custody in CBI case, in view of the

judgment  of  the Constitution Bench in  Shri  Gurbaksh Singh Sibbia  and

others v. State of Punjab (1980) 2 SCC 565,  the appellant cannot seek

anticipatory  bail  after  he is  arrested.   Accordingly,  SLP(Crl.)  No.7525 of

2019  preferred  by  the  appellant  qua  the  CBI  case  was  dismissed  as

infructuous vide order dated 26.08.2019 on the ground that the appellant

has already been arrested and remanded to custody.  This Court granted

liberty to the appellant to work out his remedy in accordance with law.  

4. On 15.05.2017, CBI registered FIR in RC No.220/2017-E-0011 under

Section 120B IPC read with Section 420 IPC, Section 8 and Section 13(2)

read  with  Section  13(1)(d)  of  the  Prevention  of  Corruption  Act,  1988

against  the  accused  viz.  (i)  INX  Media  through  its  Director  Indrani

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Mukherjea;  (ii)  INX News through  its  Director  Sh.  Pratim  Mukherjea  @

Peter  Mukherjea  and  others;  (iii)  Sh.  Karti  P.  Chidambaram;  (iv)  Chess

Management Services through its Director Sh. Karti P. Chidambaram and

others; (v) Advantage Strategic Consulting through its Director Ms. Padma

Vishwanathan  @  Padma  Bhaskararaman  and  others;  (vi)  unknown

officers/officials  of  Ministry  of  Finance,  Govt.  of  India;  and  (vii)  other

unknown persons for the alleged irregularities in giving FIPB’s clearance to

INX Media to receive overseas funds of Rs.305 crores against approved

Foreign Direct Investment (FDI) of Rs.4.62 crores.

5. Case of the prosecution in the predicate offence is that in 2007, INX

Media Pvt. Ltd. approached Foreign Investment Promotion Board (FIPB)

seeking approval for FDI upto 46.216 per cent of the issued equity capital.

While sending the proposal by INX Media to be placed before the FIPB,

INX Media had clearly mentioned in it  the inflow of FDI to the extent of

Rs.4,62,16,000/- taking the proposed issue at its face value.  The FIPB in

its meeting held on 18.05.2007 recommended the proposal of INX Media

subject  to  the  approval  of  the  Finance  Minister-the  appellant.   In  the

meeting,  the Board did not  approve the downstream investment by INX

Media  in  INX News.   In  violation  of  the  conditions  of  the  approval,  the

recommendation of FIPB:- (i) INX Media deliberately made a downstream

investment to the extent of 26% in the capital of INX News Ltd. without

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specific approval of FIPB which included indirect foreign investment by the

same Foreign Investors; (ii) generated more than Rs.305 crores FDI in INX

Media which is in clear violation of the approved foreign flow of Rs.4.62

crores by issuing shares to the foreign investors at a premium of more than

Rs.800/- per share.

6. Upon receipt of a complaint on the basis of a cheque for an amount of

Rs.10,00,000/-  made  in  favour  of  M/s  Advantage  Strategic  Consulting

Private  Limited  (ASCPL)  by  INX  Media,  the  investigation  wing  of  the

Income  Tax  Department  proceeded  to  investigate  the  matter  and  the

relevant information was sought from the FIPB, which in turn, vide its letter

dated 26.05.2008 sought clarification from the INX Media which justified its

action saying that the downstream investment has been authorised and that

the same was made in accordance with the approval of FIPB.  It is alleged

by the prosecution that in order to get out of the situation without any penal

provision,  INX  Media  entered  into  a  criminal  conspiracy  with  Sh.  Karti

Chidambaram, Promoter Director,  Chess Management Services Pvt. Ltd.

and the appellant-the then Finance Minister of India.  INX Media through

the  letter  dated  26.06.2008  tried  to  justify  their  action  stating  that  the

downstream investment has been approved and the same was made in

accordance with approval.

7. The FIR further alleges that for the services rendered by Sh. Karti

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Chidambaram  to  INX  Media  through  Chess  Management  Services  in

getting the issues scuttled by influencing the public servants of FIPB unit of

the  Ministry  of  Finance,  consideration  in  the  form  of  payments  were

received against invoices raised on INX Media by ASCPL.  It is alleged in

the FIR that the very reason for getting the invoices raised in the name of

ASCPL for the services rendered by Chess Management Services was with

a view to conceal the identity of Sh. Karti Chidambaram inasmuch as on the

day when the invoices were raised and payment was received.  It is stated

that  Sh.  Karti  Chidambaram  was  the  Promoter,  Director  of  Chess

Management  Services  whereas  ASCPL  was  being  controlled  by  him

indirectly.  It  is alleged that the invoices approximately for an amount of

Rs.3.50 crores were falsely got raised in favour of INX Media in the name of

other companies in which Sh. Karti Chidambaram was having sustainable

interest either directly or indirectly.  It  is alleged that such invoices were

falsely got raised for creation of acquisition of media content, consultancy in

respect of market research, acquisition of content of various genre of Audio-

Video etc.  It  is  alleged that  INX Media Group in his record has clearly

mentioned the purpose of payment of Rs.10,00,000/- to ASCPL as towards

“management  consultancy  charges  towards  FIPB  notification  and

clarification”.   Alleging that  the above acts  of  omission  and commission

prima facie disclose commission of offence, CBI has registered FIR in RC

No.220/2017-E-0011 on 15.05.2017 under Section 120B read with Section

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420 IPC, Section 8 and Section 13(2) read with Section 13(1)(d) of the

Prevention of Corruption Act, 1988 against the aforesaid accused.  

8. On the  basis  of  the  said  FIR  registered  by  CBI,  the  Enforcement

Directorate  registered  a  case  in  ECIR  No.07/HIU/2017  against  the

aforesaid accused persons for allegedly committing the offence punishable

under Sections 3 and 4 of the Prevention of Money-Laundering Act, 2002

(PMLA).   Ever  since  the  registration  of  the  cases  in  2017,  there  were

various proceedings seeking bail and number of other proceedings pending

filed by Sh. Karti Chidambaram and other accused.  Finally, the Delhi High

Court granted bail to Sh. Karti Chidambaram in INX Media case filed by CBI

on 23.03.2018.  Thereafter, the appellant moved Delhi High Court seeking

anticipatory bail both in CBI case and also in money-laundering case filed

by Enforcement Directorate.  On 25.07.2018, the Delhi High Court granted

the appellant interim protection from arrest in both the cases and the same

was extended till 20.08.2019 – the date on which the High Court dismissed

the appellant’s petition refusing to grant anticipatory bail.

9. The  High  Court  dismissed  the  application  refusing  to  grant

anticipatory bail  to  the appellant  by holding that  “it  is  a classic  case of

money-laundering”.   The High Court observed that “it  is a clear case of

money-laundering”.  The learned Single Judge dismissed the application for

anticipatory bail by holding “that the alleged irregularities committed by the

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appellant makes out a prima facie case for refusing pre-arrest bail to the

appellant”.   The  learned  Single  Judge  also  held  that  “considering  the

gravity of the offence and the evasive reply given by the appellant to the

questions put to him while he was under the protective cover extended to

him by the court are the twin factors which weigh to deny the pre-arrest bail

to the appellant”.  Being aggrieved, the appellant has preferred this appeal.

10. Lengthy arguments were heard on number of hearings stretched over

for long time.  Learned Senior counsel appearing for the appellant Mr. Kapil

Sibal and Mr. Abhishek Manu Singhvi made meticulous submissions on the

concept of life and liberty enshrined in Article 21 of the Constitution of India

to  urge that  the appellant  is  entitled to the privilege of  anticipatory bail.

Arguments were also advanced on various aspects – whether the court can

look  into  the  materials  produced  by  the  respondent-Enforcement

Directorate to seek custody of the appellant when the appellant was not

confronted with those documents on the three dates of interrogation of the

appellant  conducted  on  19.12.2018,  01.01.2019  and  21.01.2019.

Interlocutory  application  was  filed  by  the  appellant  to  produce  the

transcripts of the questions put to the appellant and the answers given by

the appellant, recorded by Enforcement Directorate.  Countering the above

submissions,  Mr.  Tushar  Mehta,  learned  Solicitor  General  made  the

submissions that grant of anticipatory bail  is not part of Article 21 of the

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Constitution of India.  Mr. Tushar Mehta urged that having regard to the

materials  collected  by  the  respondent-Enforcement  Directorate  and  the

specific  inputs  and  in  view  of  the  provisions  of  the  special  enactment-

PMLA, custodial interrogation of the appellant is required and the appellant

is not entitled to the privilege of anticipatory bail.

Contention of Mr. Kapil Sibal, learned Senior counsel:-

11. Mr.  Kapil  Sibal,  learned Senior counsel  appearing on behalf  of  the

appellant  submitted  that  the  clearance  for  INX  FDI  was  approved  by

Foreign Investment Promotion Board (FIPB) consisting of six Secretaries

and the  appellant  as  the  then Finance Minister  granted  approval  in  the

normal course of official business.  The learned Senior counsel submitted

that  the  crux  of  the  allegation  is  that  the  appellant’s  son  Sh.  Karti

Chidambaram tried to influence the officials of FIPB for granting ex-post

facto  approval  for  downstream investment  by  INX Media  to  INX News;

whereas neither the Board members of FIPB nor the officials of FIPB have

stated anything about the appellant’s son Sh. Karti Chidambaram that he

approached and influenced them for ex-post facto approval.  The learned

Senior counsel contended that the entire case alleges about money paid to

ASCPL and  Sh.  Karti  Chidambaram  is  neither  the  share-holder  nor  a

Director in the said ASCPL; but the Enforcement Directorate has falsely

alleged that  Sh.  Karti  Chidambaram has  been controlling  the  company-

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ASCPL.  It was submitted that the appellant has nothing to do with the said

ASCPL to whom money has been paid by INX Media.

12. Taking us through the impugned judgment and the note said to have

been submitted by the Enforcement Directorate before the High Court, the

learned  Senior  counsel  submitted  that  the  learned  Single  Judge  has

“copied and pasted” paragraphs after paragraphs of the note given by the

respondent  in  the  court.   It  was  urged that  there  was no basis  for  the

allegations  contained  in  the  said  note  to  substantiate  the  alleged

transactions/transfer of money as stated in the tabular column given in the

impugned order.   

13. So  far  as  the  sealed  cover  containing  the  materials  sought  to  be

handed over by the Enforcement Directorate, the learned Senior counsel

raised strong objections and submitted that  the Enforcement Directorate

cannot randomly produce the documents in the court “behind the back” of

the appellant for seeking custody of the appellant.  Strong objections were

raised  for  the  plea  of  Enforcement  Directorate  requesting  the  court  to

receive  the  sealed  cover  and  for  looking  into  the  documents/material

collected during the investigation allegedly showing the trail of money in the

name of companies and the money-laundering.

14. The appellant was interrogated by the respondent on three dates viz.

19.12.2018, 01.01.2019 and 21.01.2019.  So far as the observation of the

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High  Court  that  the  appellant  was  “evasive”  during  interrogation,  the

learned Senior counsel submitted that the appellant has well cooperated

with the respondent and the respondent cannot allege that the appellant

was “non-cooperative”.  On behalf of the appellant, an application has also

been filed seeking direction to the respondent to produce the transcripts of

the  questioning  conducted  on  19.12.2018,  01.01.2019  and  21.01.2019.

The learned Senior counsel submitted that the transcripts will show whether

the appellant was “evasive” or not during his questioning as alleged by the

respondent.

15. Learned Senior counsel submitted that the provision for anticipatory

bail i.e. Section 438 Cr.P.C. has to be interpreted in a fair and reasonable

manner  and  while  so,  the  High  Court  has  mechanically  rejected  the

anticipatory bail.  It was further submitted that in case of offences of the

nature  alleged,  everything  is  borne  out  by  the  records  and  there  is  no

question of the appellant being “evasive”.  The learned Senior counsel also

submitted  that  co-accused  Sh.  Karti  Chidambaram  and  Padma

Bhaskararaman were granted bail and the other accused Indrani Mukherjea

and Sh. Pratim Mukherjea @ Peter Mukherjea are on statutory bail and the

appellant is entitled to bail on parity also.

Contention of Mr. Abhishek Manu Singhvi, learned Senior counsel:-

16. Reiterating  the  submission  of  Mr.  Kapil  Sibal,  Mr.  Abhishek  Manu

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Singhvi, learned Senior counsel submitted that the Enforcement Directorate

cannot  say that  the appellant  was “non-cooperative” and “evasive”.   Mr.

Singhvi  also urged for production of  transcripts  i.e.  questions put  to the

appellant and the answers which would show whether the appellant has

properly  responded  to  the  questions  or  not.   Placing  reliance  upon

Additional District Magistrate, Jabalpur v. Shivakant Shukla  (1976) 2 SCC

521, the learned Senior counsel submitted that the respondent cannot rely

upon the documents without furnishing those documents to the appellant or

without questioning the appellant about the materials collected during the

investigation.   Reiterating  the  submission  of  Mr.  Sibal,  Mr.  Singhvi

contended that the High Court has denied anticipatory bail to the appellant

on the basis of materials produced by the respondent in the cover before

the court which were never shown to the appellant nor was the appellant

confronted with the same.  The learned Senior counsel submitted that the

alleged occurrence was of the year 2007-08 and Sections 420 IPC and

120B IPC and Section 13 of the Prevention of Corruption Act were not part

of the “scheduled offence” of Prevention of Money-Laundering Act in 2008

and were introduced by a notification dated 01.06.2009 and in view of the

protection given under Article 20(1) of the Constitution of India, there can

never  be  a  retrospective  operation  of  a  criminal/penal  statute.   Placing

reliance upon  Rao Shiv Bahadur Singh and another v. State of Vindhya

Pradesh AIR 1953 SC 394,  it  was contended that  the appellant  has to

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substantiate the contention that the acts charged as offences were offences

“at the time of commission of the offence”.  The learned Senior counsel

urged that in 2007-2008 when the alleged acts of commission and omission

were  committed,  they  were  not  “scheduled  offences”  and  hence

prosecution  under  Prevention  of  Money-Laundering  Act,  2002  is  not

maintainable.  

17. The learned Senior counsel  has taken strong exception to the two

factors stated by the High Court in the impugned order for denying pre-

arrest bail i.e. (i) gravity of the offence; and (ii) the appellant was “evasive”

to deny the anticipatory bail.  The learned Senior counsel submitted that the

“gravity of the offence” cannot be the perception of the individual or the

court  and the test  for  “gravity of the offence” should be the punishment

prescribed by the statute for the offence committed.  Insofar as the finding

of the High Court that  “the appellant  was evasive to the questions”,  the

learned  Senior  counsel  submitted  that  the  investigating  agency-

Enforcement Directorate cannot expect an accused to give answers in the

manner  they  want  and  that  the  accused  is  entitled  to  protection  under

Article  20(3)  of  the  Constitution  of  India.   Reliance  was  placed  upon

Santosh s/o Dwarkadas Fafat v. State of Maharashtra (2017) 9 SCC 714.  

Contention of Mr. Tushar Mehta, learned Solicitor General:-

18. Taking us through the Statement of Objects and Reasons and salient

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features of the PMLA, the learned Solicitor General submitted that India is a

part of the global community having responsibility to crackdown on money-

laundering with an effective legislation and PMLA is a result  of the joint

initiatives  taken  by  several  nations.  Taking  us  through  the  various

provisions  of  the  PMLA,  the  learned  Solicitor  General  submitted  that

money-laundering  poses  a  serious  threat  to  the  financial  system  and

financial  integrity  of  the  nation  and has  to  be  sternly  dealt  with.  It  was

submitted that PMLA offence has two dimensions – predicate offence and

money-laundering.  Money-laundering  is  a  separate  and  independent

offence punishable under Section 4 read with Section 3 of the PMLA.   

19. Learned Solicitor General submitted that under Section 19 of PMLA,

specified officers, on the basis of material in possession, having reason to

believe which is to be recorded in writing that the person has been guilty of

the offence under the Act, have power to arrest. It was urged that the power

to arrest and necessary safeguards are enshrined under Section 19 of the

Act.   It was submitted that since respondent has collected cogent materials

to  show  that  it  is  a  case  of  money-laundering  and  the  Enforcement

Directorate  has  issued  Letter  rogatory  and  if  the  Court  intervenes  by

granting anticipatory bail, the authority cannot exercise the statutory right of

arrest and interrogate the appellant.  

20. The  learned  Solicitor  General  submitted  that  they  have  obtained

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specific  inputs from overseas banks and also about the companies and

properties and it is a clear case of money-laundering.  The learned Solicitor

General submitted that the Court has power to look into the materials so

collected by the Enforcement Directorate and the same cannot be shared

with the appellant  at  this  initial  stage when the Court  is considering the

matter for grant of pre-arrest bail. Relying upon number of judgments, the

learned Solicitor General has submitted that as a matter of practice, Courts

have always perused the case diaries produced by the prosecution and

receive  and  peruse  the  materials/documents  to  satisfy  its  judicial

conscience. In support of his contention, learned Solicitor General placed

reliance  upon  Romila  Thapar  and  Others  v.  Union  of  India  and  Others

(2018) 10 SCC 753, Jai Prakash Singh v. State of Bihar and Another (2012)

4 SCC 379 and Directorate of Enforcement and Another v. P.V. Prabhakar

Rao  (1997) 6 SCC 647  and other judgments and requested the Court to

peruse  the  materials  produced  by  the  Enforcement  Directorate  in  the

sealed cover.

21. Opposing the grant of anticipatory bail, the learned Solicitor General

submitted that the Enforcement Directorate has cogent evidence to prove

that  it  is  a  case of  money-laundering  and  there  is  a  need  of  custodial

interrogation of the appellant.  The learned Solicitor General submitted that

the economic offences stand as a class apart and custodial interrogation is

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required for the Enforcement Directorate to trace the trail  of  money and

prayed for dismissal of the appeal.

22. As noted earlier, the predicate offences are under Sections 120B IPC

and 420 IPC, Section 8 and Section 13(2) read with Section 13(1)(d) of

Prevention of Corruption Act.  Case is registered against the appellant and

others  under  Sections  3  and  4  of  PMLA.   The  main  point  falling  for

consideration  is  whether  the  appellant  is  entitled  to  the  privilege  of

anticipatory bail.  In order to consider whether the appellant is to be granted

the  privilege  of  anticipatory  bail,  it  is  necessary  to  consider  the  salient

features of the special enactment – Prevention of Money-Laundering Act,

2002.

23. Prevention of Money-laundering Act, 2002 – Special Enactment:-

Money-laundering is the process of concealing illicit sources of money and

the  launderer  transforming  the  money  proceeds  derived  from  criminal

activity  into  funds  and  moved  to  other  institution  or  transformed  into

legitimate asset. It is realised world around that money laundering poses a

serious threat not only to the financial systems of the countries but also to

their integrity and sovereignty.  The Prevention of Money-laundering Act,

2002 was enacted in pursuance of the Political Declaration adopted by the

Special  Session  of  the  United  Nations  General  Assembly  held  in  June

1998, calling upon the Member States to adopt national money-laundering

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legislation and programme, primarily with a view to meet out the serious

threat posed by money laundering to the financial system of the countries

and to their integrity and sovereignty.   

24. Statement of  Objects and Reasons to  the Prevention of  Money-

laundering Act,  2002 recognises that  money laundering poses a serious

threat not only to the financial systems of the countries but also to their

integrity  and  sovereignty.   PMLA is  a  special  enactment  containing  the

provisions  with  adequate  safeguards  with  a  view  to  prevent  money-

laundering. The Preamble to the Prevention of Money-Laundering Act, 2002

states  that  “An  Act  to  prevent  money-laundering  and  to  provide  for

confiscation of property derived from, or involved in, money-laundering and

for matters connected therewith or incidental thereto.”

25. Chapter  II  of  PMLA contains  provisions  relating  to  the  offences  of

money-laundering.  Section 2(1)(p) of PMLA defines “money-laundering”

that it has the same meaning assigned to it in Section 3.  Section 2(1)(ra) of

PMLA defines “offence of cross border implications”.  To prevent offences of

“cross border implications”, PMLA contains Sections 55 to 61 dealing with

reciprocal arrangement for assistance in certain matters and procedure for

attachment  and  confiscation  of  property  between  the  contracting  States

with regard to the offences of money-laundering and predicate offences.

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Section  2(1)(y)  of  PMLA  defines  “scheduled  offence”  which  reads  as

under:-

“2. Definitions –  

(1)……

(y)  “scheduled offence” means –  

(i) the offences specified under Part A of the Scheduled; or

(ii) the offences specified under Part B of the Schedule if the total value

involved in such offences is one crore rupees or more; or

(iii)the offences specified under Part C of the Schedule.”

“Scheduled Offence” is a sine qua non for the offence of money-laundering

which would generate the money that is being laundered.  PMLA contains

Schedules which originally contained three parts namely Part A, Part B and

Part  C.   Part  A contains  various  paragraphs  which  enumerate  offences

under the Indian Penal Code, Narcotic Drugs and Psychotropic Substances

Act,  1985, offences under the Explosives Substances Act,  1908 and the

offences under the Prevention of Corruption Act, 1988   (paragraph 8) etc.

The Schedule was amended by Act 21 of 2009 (w.e.f. 01.06.2009).  Section

13  of  Prevention  of  Corruption  Act  was  inserted  in  the  Part  A of  the

Schedule to PMLA by the Amendment Act, 16 of 2018 (w.e.f. 26.07.2018).  

26. Section 3 of PMLA stipulates “money-laundering” to be an offence.

Section 3 of PMLA states that whosoever directly or indirectly attempts to

indulge or knowingly assists or knowingly is a party or is actually involved in

any  process  or  activity  connected  with  the  proceeds  of  the  crime  and

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projecting it as untainted property shall be guilty of the offences of money

laundering.   The  provisions  of  the  PMLA  including  Section  3  have

undergone  various  amendments.   The  words  in  Section  3  “with  the

proceeds  of  crime  and  projecting”  has  been  amended  as  “proceeds  of

crime  including  its  concealment,  possession,  acquisition  or  use  and

projecting or claiming” by the Amendment Act 2 of 2013 (w.e.f. 15.02.2013).

27. Section 4 of PMLA deals with punishment for money laundering.  Prior

to Amendment Act 2 of 2013, Section 4 provided punishment with rigorous

imprisonment for a term which shall not be less than three years but which

may extend to seven years and the fine which may extend to Rs.5,00,000/-.

By Amendment Act 2 of 2013, Section 4 is amended w.e.f. 15.02.2013 vide

S.O.  343(E)  dated  08.02.2013.   Now,  the  punishment  prescribed  under

Section 4 of PMLA to the offender is rigorous imprisonment for a term which

shall not be less than three years but which may extend to seven years and

the offender is also liable to pay fine.  The limit of fine has been done away

with  and  now  after  the  amendment,  appropriate  fine  even  above

Rs.5,00,000/- can be imposed against the offender.

28. Section 5 of PMLA which provides for attachment of property involved

in money laundering, states that where the Director or any other officer not

below  the  rank  of  Deputy  Director  authorised  by  the  Director  for  the

purposes of this Section, has “reason to believe” (the reason for such

19

belief  to  be  recorded  in  writing),  on  the  basis  of  material  in  his

possession, that (a) any person is in possession of any proceeds of crime;

and (b) such proceeds of crime are likely to be concealed, transferred or

dealt with in any manner which may result in frustrating any proceedings

relating to confiscation of such proceeds of crime under Chapter III, he may,

by  order  in  writing,  provisionally  attach  such  property  for  a  period  not

exceeding one hundred and fifty days from the date of the order, in such

manner as may be prescribed.  Section 5 provides that no such order of

attachment shall be made unless, in relation to the scheduled offence, a

report has been forwarded to a Magistrate under Section 173 of the Code

of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a

person authorised to investigate the offence mentioned in that Schedule,

before a Magistrate or court for taking cognizance of the scheduled offence,

as the case may be.

29. The term “reason to believe” is not defined in PMLA.  The expression

“reason to believe” has been defined in Section 26 of IPC.  As per the

definition in Section 26 IPC, a person is said to have “reason to believe” a

thing, if he has sufficient cause to believe that thing but not otherwise.  The

specified officer must have “reason to believe” on the basis of material in

his  possession  that  the  property  sought  to  be  attached  is  likely  to  be

concealed,  transferred  or  dealt  with  in  a  manner  which  may  result  in

20

frustrating any proceedings for confiscation of their property under the Act.

It is stated that in the present case, exercising power under Section 5 of the

PMLA, the Adjudicating Authority had attached some of the properties of

the appellant.  Challenging the attachment, the appellant and others are

said to have preferred appeal before the Appellate Tribunal and stay has

been granted by the Appellate Authority and the said appeal is stated to be

pending.

30. As  rightly  submitted  by  the  learned  Solicitor  General,  sufficient

safeguards are provided under the provisions of PMLA.  Under Section 5 of

PMLA,  the  Director  or  any  other  officer  not  below  the  rank  of  Deputy

Director  authorised  by  the  Director  for  the  purposes  of  Section  5  who

passed the impugned order is required to have “reason to believe” that the

properties sought to be attached would be transferred or dealt  with in a

manner which would frustrate the proceedings relating to confiscation of

such properties.  Further, the officer who passed the order of attachment is

required to record the reasons for such belief.  The provisions of the PMLA

and the Rules also provide for manner of forwarding a copy of the order of

provisional attachment of property along with material under sub-section (2)

of Section 5 of PMLA to the Adjudicating Authority.   

31. In order to ensure the safeguards, in exercise of power under Section

73  of  PMLA,  the  Central  Government  has  framed  “The  Prevention  of

21

Money-Laundering (The  Manner  of  Forwarding  a  Copy  of  the  Order  of

Provisional Attachment of Property along with the Material, and Copy of the

Reasons along with the Material in respect of Survey, to the Adjudicating

Authority and its period of Retention) Rules, 2005”.   Rule 3 of the said

Rules provides for manner of forwarding a copy of the order of provisional

attachment  of  property  along with  the  material  under  sub-section  (2)  of

Section 5 of the Act to the Adjudicating Authority.  Rule 3 stipulates various

safeguards  as  to  the  confidentiality  of  the  sealed  envelope  sent  to  the

Adjudicating Authority.

32. Section 17 of PMLA deals with the search and seizure.  Section 17

which deals with search and seizure states that where the Director or any

other officer not below the rank of Deputy Director authorised by him for the

purposes of this section on the basis of the information in his possession

has  “reason  to  believe”  (reason  for  such  belief  to  be  recorded  in

writing) that any person has committed an offence which constitutes the

money laundering or is in possession of any proceeds of crime involved in

money laundering etc. may search building, place and seize any record or

property found as a result of such search.  Section 17 of PMLA also uses

the expression “reason to believe”  and “reason for such belief  to be

recorded in writing”.  Here again, the authorised officer shall immediately

on search and seizure or upon issuance of freezing order forward a copy of

22

the reasons so recorded along with the material in his possession to the

Adjudicating Authority in a “sealed envelope”  in the manner as may be

prescribed and such Adjudicating Authority shall  keep such reasons and

material  for  such period as may be prescribed.   In  order  to  ensure the

sanctity of the search and seizure and to ensure the safeguards, in exercise

of power under Section 73 of PMLA, the Central Government has framed

“The  Prevention  of  Money-Laundering  (Forms,  Search  and  Seizure  or

Freezing and the Manner of Forwarding the Reasons and Material to the

Adjudicating Authority, Impounding and Custody of Records and the period

of Retention) Rules, 2005”.

33. Section 19 of PMLA deals with the power of the specified officer to

arrest.  Under sub-section (1) of Section 19 of PMLA, the specified officer

viz. the Director, the Deputy Director, Assistant Director or any other officer

authorised in this behalf by the Central Government by general or special

order,  on  the  basis  of  the  material  in  possession,  having  “reason  to

believe” and “reasons for such belief be recorded in writing”  that the

person has been guilty of offence punishable under the PMLA, has power

to  arrest  such person.   The authorised officer  is  required  to  inform the

accused the grounds for such arrest at the earliest and in terms of sub-

section (3) of Section 19 of the Act,  the arrested person is required to be

produced to the jurisdictional Judicial Magistrate or Metropolitan Magistrate

23

within 24 hours excluding the journey time from the place of arrest to the

Magistrate’s Court.  In order to ensure the safeguards, in exercise of power

under  Section  73  of  the  Act,  the  Central  Government  has  framed  “The

Prevention  of  Money-Laundering  (The  Forms  and  the  Manner  of

Forwarding a Copy of Order of Arrest of a Person along with the Material to

the Adjudicating Authority and its Period of Retention) Rules, 2005”.  Rule 3

of the said Rules requires the arresting officer to forward a copy of order of

arrest  and  the  material  to  the  Adjudicating  Authority  in  a  sealed  cover

marked “confidential” and Rule 3 provides for the manner in maintaining the

confidentiality of the contents.  

34. As rightly submitted by Mr. Tushar Mehta, the procedure under PMLA

for arrest ensures sufficient safeguards viz.:- (i) only the specified officers

are authorised to arrest; (ii) based on “reasons to believe” that an offence

punishable under the Act has been committed; (iii)  the reasons for such

belief to be recorded in writing; (iv) evidence and the material submitted to

the Adjudicating Authority  in  sealed envelope in the manner as may be

prescribed ensuring the safeguards in maintaining the confidentiality; and

(v) every person arrested under PMLA to be produced before the Judicial

Magistrate or Metropolitan Magistrate within 24 hours.  Section 19 of PMLA

provides for  the power to  arrest  to  the specified officer  on the basis  of

material in his possession and has “reason to believe” and the “reasons

24

for such belief to be recorded in writing” that any person has been guilty

of  an  offence  punishable  under  PMLA.   The  statutory  power  has  been

vested upon the specified officers of higher rank to arrest the person whom

the officer has “reason to believe” that such person has been guilty of an

offence  punishable  under  PMLA.   In  cases  of  PMLA,  in  exercising  the

power to grant anticipatory bail would be to scuttle the statutory power of

the  specified  officers  to  arrest  which  is  enshrined  in  the  statute  with

sufficient safeguards.    

35. Section 71 of PMLA gives overriding effect to the provisions of PMLA.

Section  71  of  PMLA states  that  the  provisions  of  the  Act  would  have

overriding  effect  on  the  provisions  of  all  other  Acts  applicable.   The

provisions of PMLA shall prevail over the contrary provisions of the other

Acts.  Section 65 of PMLA states that the provisions of Code of Criminal

Procedure, 1973 shall apply to the provisions under the Act insofar as they

are not inconsistent with the provisions of PMLA.   

36. Insofar as the issue of grant of bail is concerned, Section 45 of PMLA

starts  with  non-obstante clause.   Section 45 imposes two conditions for

grant of bail to any person accused of any offence punishable for a term of

imprisonment of more than three years under Part-A of the Schedule of the

Act viz., (i) that the prosecutor must be given an opportunity to oppose the

application for such bail; (ii) that the court must be satisfied that there are

25

reasonable grounds for believing that the accused persons is not guilty of

such offence and that he is not likely to commit any offence while on bail.   

37. The twin conditions under Section 45(1)  for  the offences classified

thereunder in Part-A of the Schedule was held arbitrary and discriminatory

and invalid in Nikesh Tarachand Shah v. Union of India and another (2018)

11 SCC 1.  Insofar as the twin conditions for release of accused on bail

under  Section  45  of  the  Act,  the  Supreme Court  held  the  same to  be

unconstitutional as it violates Articles 14 and 21 of the Constitution of India.

Subsequently,  Section 45  has  been amended by Amendment  Act  13  of

2008.  The words “imprisonment for a term of imprisonment of more than

three  years  under  Part  A  of  the  Schedule”  has  been  substituted  with

“accused  of  an  offence  under  this  Act…..”.  Section  45  prior  to  Nikesh

Tarachand and post Nikesh Tarachand reads as under:-

Section 45 - Prior to Nikesh Tarachand Shah Section 45 - Post Nikesh Tarachand Shah Section  45.  Offence to  be cognizable and non-

bailable.

(1) Notwithstanding  contained  in  the  Code  of Criminal  Procedure,  1973  (2  of  1974),  no

person accused of an offence punishable

for a term of imprisonment of more than

three years under Part A of the Schedule

shall  be released on bail  or on his own

bond unless- (i) the Public Prosecutor has been given

an opportunity to oppose the application

for such release; and (ii) where the Public Prosecutor opposes

the application, the court is satisfied that

there  are  reasonable  grounds  for

believing  that  he  is  not  guilty  of  such

offence  and  that  he  is  not  likely  to

commit any offence while on bail;

Provided that a person, who, is under the age of

Section 45. Offences to be cognizable and non-bailable.

(2) Notwithstanding  anything  contained  in  the  Code  of Criminal Procedure, 1973                (2 of 1974),  no

person accused of an offence under this Act shall

be released on bail or on his own bond unless- (i)  the  Public  Prosecutor  has  been  given  an

opportunity  to  oppose  the  application  for  such

release; and (ii)  where  the  Public  Prosecutor  opposes  the

application,  the  court  is  satisfied  that  there  are

reasonable  grounds  for  believing  that  he  is  not

guilty of  such offence and that  he is not  likely to

commit any offence while on bail;

Provided that a person, who, is under the age of sixteen

years, or is a woman or is sick or infirm, or is accused either

on  his  own  or  along  with  other  co-accused  of  money

laundering a sum  of less than one crore rupees may be

released on bail, if the Special court so directs:

26

sixteen years, or is a woman or is sick or infirm,

may be released on bail, if the Special Court so

directs:

38. The occurrence was of the year 2007-2008. CBI registered the case

against Sh. Karti  Chidambaram, the appellant and others on 15.05.2017

under Sections 120-B IPC read with Section 420 IPC and under Section 8

and  Section  13(2)  read  with  Section  13(1)(d)  of  the  Prevention  of

Corruption Act. Learned Senior counsel for the appellant, Mr. A.M. Singhvi

has submitted that there could not have been ‘reasons to believe’ that the

appellant has committed the offence under Section 3 of PMLA, since in

2007-2008 the time of commission of alleged offence, Sections 120-B IPC

and 420 IPC and Section 13 of the Prevention of Corruption Act were not

there in Part ‘A’ of the Schedule to PMLA and were included in Part ‘A’ of

the Schedule only by Amendment Act 21 of 2009 w.e.f.  01.06.2009 and

w.e.f.  26.07.2018  respectively  and  therefore,  no  prima-facie  case  of

commission of offence by the appellant under PMLA is made out. It was

urged that under Article 20 of the Constitution, no person shall be convicted

of  any  offence  except  for  violation  of  law  in  force  at  the  time  of  the

commission of that act charged as offence. When Section 120B IPC and

Section 420 IPC and Section 13 of Prevention of Corruption Act were not

then included in Part A of the Schedule, in 2007-2008, then the appellant

and others cannot be said to have committed the offence under PMLA.

Insofar as Section 8 of the Prevention of Corruption Act is concerned, it was

27

submitted that Section 8 of the Prevention of Corruption Act is not attracted

against  the  appellant  as  there  are  no  allegations  in  the  FIR  that  the

appellant  accepted or  agreed to  accept  any gratification as a motive or

reward for inducing any public servant and hence, the accusation under

Section  8  of  the  Prevention  of  Corruption  Act  does  not  apply  to  the

appellant.  It  was further submitted that  even assuming Section 8 of  the

Prevention of  Corruption  Act  is  made out,  the amount  allegedly  paid  to

ASCPL was only Rs.10,00,000/- whereas, Rs.30,00,000/- was the amount

then stipulated to attract Section 8 to be the Scheduled offence under Part

A of the Schedule to the Act and therefore, there was no basis for offence

against the appellant and in such view of the matter, the appellant is entitled

for anticipatory bail.

39. Section  45  of  the  PMLA makes  the  offence  of  money  laundering

cognizable  and  non-bailable  and  no  person  accused  of  an  offence

punishable for a term of imprisonment of more than three years under Part

A of  the  Schedule  shall  be  released on bail  unless  the  twin  conditions

thereon  are  satisfied.   Section  120-B  IPC  –  Criminal  Conspiracy and

Section 420 IPC -  Cheating and dishonestly inducing delivery of property

were included in Part A of the Schedule to PMLA by way of Amendment Act

21 of 2009 w.e.f. 01.06.2009 and by way of Amendment Act 2 of 2013 w.e.f.

15.02.2013. Likewise, Section 13 of the Prevention of Corruption Act has

28

been  introduced  to  Part  A of  the  Schedule  (Paragraph  8) by  way  of

Amendment Act 16 of 2018 w.e.f. 26.07.2018. As pointed out earlier, the

FIR was registered by CBI under Section 8 of the Prevention of Corruption

Act also which was then in Part A of the Schedule at the time of alleged

commission of offence.  

40. Learned  Senior  counsel  submitted  that  since  the  offence  under

Sections 120-B IPC and 420 IPC and under Section 13 of Prevention of

Corruption Act were included in the Schedule only w.e.f. 01.06.2009 and

w.e.f.  26.07.2018  respectively  and  there  can  never  be  a  retrospective

operation  of  a  criminal/penal  statue  and  the  test  is  not  whether  the

proceeds are  retained by  the  person;  but  the  test  as  laid  down by  the

Constitution  Bench of  this  Court  is,  the test  of  the acts  constituting the

offence at  the time of  the commission of  the offence and the appellant

cannot  be  proceeded  with  prosecution  under  PMLA  in  violation  of

constitutional protection under Article 20(1) of the Constitution of India.

41. Under Article 20(1) of the Constitution, no person shall be convicted of

any offence except for violation of law in force at the time of commission of

that  act  charged as an offence.  FIR for the predicate offence has been

registered by CBI under Section 120B IPC, 420 IPC and Section 13 of the

Prevention of Corruption Act and also under Section 8 of the Prevention of

Corruption Act. As discussed earlier,  Section 120B IPC and Section 420

29

IPC were included in Part A of the Schedule only by Amendment Act 21 of

2009 w.e.f. 01.06.2009. Section 13 of the Prevention of Corruption Act was

included in Part A of the Schedule by Amendment Act 16 of 2018 w.e.f.

26.07.2018. Section 8 of the Prevention of Corruption Act is punishable with

imprisonment extending upto seven years. Section 8 of the Prevention of

Corruption Act was very much available in Part A of the Schedule of PMLA

at  the  time  of  alleged  commission  of  offence  in  2007-2008.  It  cannot

therefore be said  that  the appellant  is  proceeded against  in  violation of

Article 20(1) of the Constitution of India for the alleged commission of the

acts which was not an offence as per law then in existence. The merits of

the contention that Section 8 of the Prevention of Corruption Act cannot be

the predicate offence qua the appellant, cannot be gone into at this stage

when this Court is only considering the prayer for anticipatory bail.  

42. Yet another contention advanced on behalf  of  the appellant is  that

minimum threshold for the Enforcement Directorate to acquire jurisdiction at

the relevant time was Rs.30 lakhs whereas, in the present case, there is no

material  to  show  any  payment  apart  from  the  sum  of  Rs.10  lakhs

(approximately)  allegedly  paid  by  INX  Media  to  ASCPL with  which  the

appellant is said to be having no connection whatsoever. The merits of the

contention that Section 8 of the Prevention of Corruption Act (then included

in  Schedule  A of  the  PMLA in  2007-08)  whether  attracted  or  not  and

whether  the  Enforcement  Directorate  had  the  threshold  to  acquire

30

jurisdiction under PMLA cannot be considered at this stage while this Court

is considering only the prayer for anticipatory bail.   

43. In terms of Section 4 of the PMLA, the offence of money-laundering is

punishable with rigorous imprisonment for a term not less than three years

extending  to  seven  years  and  with  fine.   The  Second  Schedule  to  the

Criminal Procedure Code relates to classification of offences against other

laws and in terms of the Second Schedule of the Code, an offence which is

punishable with imprisonment for three years and upward but not more than

seven years is a cognizable and non-bailable offence.  Thus, Section 4 of

the Act read with the Second Schedule of the Code makes it clear that the

offences under the PMLA are cognizable offences.  As pointed out earlier,

Section 8 of the Prevention of Corruption Act was then found a mention in

Part ‘A’ of the Schedule       (Paragraph 8). Section 8 of the Prevention of

Corruption Act is punishable for a term extending to seven years.  Thus, the

essential  requirement  of  Section  45  of  PMLA “accused  of  an  offence

punishable for a term of imprisonment of more than three years under Part

‘A’ of the Schedule” is satisfied making the offence under PMLA. There is

no merit in the contention of the appellant that very registration of the FIR

against the appellant under PMLA is not maintainable.

Whether Court can look into the documents/materials collected during investigation

31

44. During  the  course  of  lengthy  hearing,  much  arguments  were

advanced  mainly  on  the  question  whether  the  court  can  look  into  the

documents  and materials  produced  by  the  prosecution  before  the  court

without first confronting the accused with those materials.

45. The learned Solicitor General submitted that during investigation, the

Enforcement Directorate has collected materials and overseas banks have

given specific inputs regarding the companies and properties that money

has been parked in the name of shell companies and the said money has

been used to  make legitimate  assets  and that  custodial  interrogation  is

necessary with regard to the materials so collected.  The learned Solicitor

General sought to produce the materials so collected in the sealed cover

and requested the  court  to  peruse the  documents  and the  materials  to

satisfy  the conscience of  the court  as to  the necessity  for  the custodial

interrogation.

46. Contention of learned Solicitor General requesting the court to peruse

the documents produced in the sealed cover was strongly objected by the

appellant  on the grounds :–  (i)  that  the Enforcement  Directorate  cannot

randomly place the documents in the court behind the back of the accused

to  seek  custody  of  the  accused;  (ii)  the  materials  so  collected  by

Enforcement Directorate during investigation cannot be placed before the

court unless the accused has been confronted with such materials.

32

47. Mr. Kapil Sibal, learned Senior counsel submitted that the statements

recorded under Section 161 Cr.P.C. are part of the case diary and the case

diary must reflect day to day movement of the investigation based on which

the investigating agency came to the conclusion that the crime has been

committed so that a final report can be filed before the court.  The learned

Senior counsel submitted that during the course of such investigation, the

investigating officer may discover several  documents which may have a

bearing on the crime committed; however the documents themselves can

never be the part of the case diary and the documents would be a piece of

documentary evidence during trial which would be required to be proved in

accordance with the provisions of the Evidence Act before such documents

can be relied upon for the purpose of supporting the case of prosecution.

Enforcement Directorate does not maintain a case diary; but maintain the

file with paginated pages. It was urged that even assuming that there is a

case diary maintained by the respondent in conformity with Section 172

Cr.P.C., the opinion of the investigating officer for the conclusion reached by

the  authorised  officer  under  PMLA,  can  never  be  relied  upon  for  the

purposes of consideration of anticipatory bail.

48. Having regard to the submissions, two points arise for consideration –

(i)  whether  the  court  can/cannot  look  into  the  documents/materials

produced before the court unless the accused was earlier confronted with

those documents/materials?; and (ii)  whether the court is called upon to

33

hold  a  mini  inquiry  during  the  intermediary  stages  of  investigation  by

examining whether the questions put to the accused are ‘satisfactory’ or

‘evasive’, etc.?   

49. Sub-section (2) of Section 172 Cr.P.C. permits any court to send for

case  diary  to  use  them in  the  trial.   Section  172(3)  Cr.P.C.  specifically

provides that neither the accused nor his agents shall be entitled to call for

case diary nor shall he or they be entitled to see them merely because they

are referred to by the court. But if they are used by the police officer who

made them to refresh his memory or if the court uses them for the purpose

of  contradicting  the  such  police  officer,  the  provisions  of  Section  161

Crl.P.C.  or  the  provision  of  Section  145  of  the  Evidence  Act  shall  be

complied with. In this regard, the learned Solicitor General placed reliance

upon  Balakram v.  State  of  Uttarakhand  and  others (2017)  7  SCC 668.

Observing  that  the  confidentiality  is  always  kept  in  the  matter  of

investigation and it is not desirable to make available the police diary to the

accused on his demand, in Balakram, the Supreme Court held as under:-

“15. The police diary is only a record of day-to-day investigation made by

the investigating officer. Neither the accused nor his agent is entitled to call

for such case diary and also are not entitled to see them during the course

of  inquiry  or  trial.  The  unfettered  power  conferred  by  the  statute  under

Section 172(2) CrPC on the court to examine the entries of the police diary

would not allow the accused to claim similar unfettered right to inspect the

case diary.

……….

34

17. From  the  aforementioned,  it  is  clear  that  the  denial  of  right  to  the

accused to inspect the case diary cannot be characterised as unreasonable

or arbitrary. The confidentiality is always kept in the matter of investigation

and it is not desirable to make available the police diary to the accused on

his demand.”

50.  Reiterating the same principles in  Sidharth and others v.  State of

Bihar (2005) 12 SCC 545, the Supreme Court held as under:-

“27. Lastly, we may point out that in the present case, we have noticed that

the entire case diary maintained by the police was made available to the

accused. Under Section 172 of the Criminal Procedure Code, every police

officer  making  an  investigation  has  to  record  his  proceedings  in  a  diary

setting forth the time at which the information reached him, the time at which

he began and closed his investigation, the place or places visited by him

and a statement of the circumstances ascertained through his investigation.

It is specifically provided in sub-clause (3) of Section 172 that neither the

accused nor his agents shall be entitled to call for such diaries nor shall he

or they be entitled to see them merely because they are referred to by the

court, but if they are used by the police officer who made them to refresh his

memory,  or  if  the court  uses them for  the purpose of  contradicting such

police  officer,  the  provisions  of  Section  161  CrPC  or  the  provisions  of

Section  145  of  the  Evidence  Act  shall  be  complied  with.  The  court  is

empowered to call for such diaries not to use it as evidence but to use it as

aid to find out anything that happened during the investigation of the crime.

These provisions have been incorporated in the Code of Criminal Procedure

to achieve certain specific objectives. The police officer who is conducting

the investigation may come across a series of information which cannot be

divulged to the accused. He is bound to record such facts in the case diary.

But if the entire case diary is made available to the accused, it may cause

serious prejudice to others and even affect the safety and security of those

who may have given statements to the police. The confidentiality is always

kept in the matter of criminal investigation and it is not desirable to make

35

available the entire case diary to the accused. In the instant case, we have

noticed  that  the  entire  case  diary  was  given  to  the  accused  and  the

investigating officer was extensively cross-examined on many facts which

were  not  very  much  relevant  for  the  purpose  of  the  case.  The  learned

Sessions Judge should have been careful in seeing that the trial of the case

was conducted in accordance with the provisions of CrPC.”  [underlining

added]

The same position has been reiterated in Naresh Kumar Yadav v. Ravindra

Kumar and others (2008) 1 SCC 632 [Paras 11 to 14],  Malkiat Singh and

others v. State of Punjab (1991) 4 SCC 341 [Para 11] and other judgments.

51. It  is  seen from various judgments  that  on several  instances,  court

always received and perused the case diaries/materials collected by the

prosecution  during  investigation  to  satisfy  itself  as  to  whether  the

investigation is proceeding in the right direction or for consideration of the

question of grant of bail etc.  In Directorate of Enforcement and another v.

P.V. Prabhakar Rao (1997) 6 SCC 647,  the Supreme Court perused the

records to examine the correctness of the order passed by the High Court

granting bail.  In R.K. Krishna Kumar v. State of Assam and others (1998) 1

SCC  474,  the  Supreme  Court  received  court  diary  maintained  under

Section 172 Cr.P.C. and perused the case diary to satisfy itself  that the

investigation  has  revealed  that  the  company  thereon  has  funded  the

organisation (ULFA) and that the appellants thereon had a role to play in it.

While considering the question of arrest of five well known human rights

activists, journalists, advocates and political workers, in Romila Thapar and

36

Others v. Union of India and Others (2018) 10 SCC 753, this Court perused

the registers containing relevant documents and the case diary produced

by the State of Maharashtra.  However, the court avoided to dilate on the

factual  position  emerging  therefrom on the  ground that  any  observation

made thereon might cause prejudice to the accused or to the prosecution in

any manner. Upholding the validity of Section 172(3) Crl.P.C. and observing

that “there can be no better custodian or guardian of the interest of justice

than the court trying the case”, in Mukund Lal v. Union of India and another

1989 Supp. (1) SCC 622, the Supreme Court held as under:-  

3. …..  

“So  far  as  the  other  parts  are  concerned,  the  accused  need  not

necessarily have a right of access to them because in a criminal trial

or enquiry, whatever is sought to be proved against the accused, will

have to be proved by the evidence other than the diary itself and the

diary can only be used for a very limited purpose by the court or the

police officer as stated above. ……….  When in the enquiry or trial,

everything  which  may  appear  against  the  accused  has  to  be

established and brought before the court by evidence other than the

diary and the accused can have the benefit of cross-examining the

witnesses and the court has power to call for the diary and use it, of

course not as evidence but in aid of the enquiry or trial, I am clearly of

the opinion, that the provisions under Section 172(3) CrPC cannot be

said to be unconstitutional.”

We  fully  endorse  the  reasoning  of  the  High  Court  and  concur  with  its

conclusion. We are of the opinion that the provision embodied in sub-section

(3) of Section 172 of the CrPC cannot be characterised as unreasonable or

arbitrary. Under sub-section (2) of Section 172 CrPC the court itself has the

unfettered  power  to  examine  the  entries  in  the  diaries.  This  is  a  very

37

important safeguard. The legislature has reposed complete trust in the court

which is conducting the inquiry or the trial. It has empowered the court to call

for  any  such  relevant  case  diary;  if  there  is  any  inconsistency  or

contradiction arising in the context of the case diary the court can use the

entries for the purpose of contradicting the police officer as provided in sub-

section (3) of Section 172 of the CrPC. Ultimately there can be no better

custodian or guardian of the interest of justice than the court trying the case.

No court will deny to itself the power to make use of the entries in the diary

to  the  advantage  of  the  accused by  contradicting  the  police  officer  with

reference to the contents of the diaries. In view of this safeguard, the charge

of  unreasonableness  or  arbitrariness  cannot  stand  scrutiny.  …….  Public

interest demands that such an entry is not made available to the accused for

it  might  endanger  the  safety  of  the  informants  and  it  might  deter  the

informants from giving any information to assist the investigating agency,

…….” [underlining added]

52. So far as the production of the case diary during trial and reference to

the same by the court and the interdict against accused to call  for case

diary is governed by Section 172 Cr.P.C. As per sub-section (3) of Section

172,  neither  the accused nor  his  agent  is  entitled to  call  for  such case

diaries and also not entitled to see them during the course of enquiry or

trial.  The  case  diaries  can  be  used  for  refreshing  memory  by  the

investigating officer and court can use it  for the purpose of contradicting

such police officer as per provisions of Section 161 or Section 145 of the

Indian Evidence Act. Unless the investigating officer or the court so uses

the  case  diary  either  to  refresh  the  memory  or  for  contradicting  the

investigating officer as previous statement under Section 161, after drawing

38

his attention under Section 145, the entries in case diary cannot be used by

the accused as evidence (vide Section 172(3) Cr.P.C.).

53. It  is  well-settled that  the court  can peruse the case diary/materials

collected  during  investigation  by  the  prosecution  even  before  the

commencement of the trial inter-alia in circumstances like:- (i) to satisfy its

conscience  as  to  whether  the  investigation  is  proceeding  in  the  right

direction; (ii) to satisfy itself that the investigation has been conducted in the

right  lines  and  that  there  is  no  misuse  or  abuse  of  process  in  the

investigation; (iii) whether regular or anticipatory bail is to be granted to the

accused or not; (iv) whether any further custody of the accused is required

for the prosecution; (v) to satisfy itself as to the correctness of the decision

of the High Court/trial court which is under challenge. The above instances

are  only  illustrative  and  not  exhaustive.   Where  the  interest  of  justice

requires,  the  court  has  the  powers,  to  receive  the  case  diary/materials

collected during the investigation. As held in  Mukund Lal, ultimately there

can be no better custodian or guardian of the interest of justice than the

court  trying  the  case.  Needless  to  point  out  that  when  the  Court  has

received and perused the documents/materials, it is only for the purpose of

satisfaction of court’s conscience. In the initial stages of investigation, the

Court may not extract or verbatim refer to the materials which the Court has

perused (as has been done in this case by the learned Single Judge) and

make observations which might cause serious prejudice to the accused in

39

trial and other proceedings resulting in miscarriage of justice.  

54. The Enforcement Directorate has produced the sealed cover before

us containing the materials collected during investigation and the same was

received. Vide order dated 29.08.2019, we have stated that the receipt of

the sealed cover would be subject  to our finding whether the court  can

peruse the materials or not. As discussed earlier, we have held that the

court  can  receive  the  materials/documents  collected  during  the

investigation  and  peruse  the  same  to  satisfy  its  conscience  that  the

investigation  is  proceeding  in  the  right  lines  and  for  the  purpose  of

consideration  of  grant  of  bail/anticipatory  bail  etc.  In  the  present  case,

though  sealed  cover  was  received  by  this  Court,  we  have  consciously

refrained from opening the sealed cover and perusing the documents. Lest,

if  we peruse the materials  collected by the respondent and make some

observations  thereon,  it  might  cause prejudice  to  the  appellant  and the

other co-accused who are not before this court when they are to pursue the

appropriate relief before various forum. Suffice to note that at present, we

are only at the stage of considering the pre-arrest bail. Since according to

the  respondent,  they  have  collected  documents/materials  for  which

custodial  interrogation  of  the  appellant  is  necessary,  which  we  deem

appropriate  to  accept  the  submission  of  the  respondent  for  the  limited

purpose of refusing pre-arrest bail to the appellant.

55. Of course, while considering the request for anticipatory bail and while

40

perusing the materials/note produced by the Enforcement Directorate/CBI,

the learned Single Judge could have satisfied his conscience to hold that it

is not a fit case for grant of anticipatory bail.  On the other hand, the learned

Single Judge has  verbatim quoted the note produced by the respondent-

Enforcement  Directorate.   The  learned  Single  Judge,  was  not  right  in

extracting the note produced by the Enforcement Directorate/CBI which in

our  view,  is  not  a  correct  approach for  consideration of  grant/refusal  of

anticipatory bail.  But such incorrect approach of the learned Single Judge,

in our view, does not affect the correctness of the conclusion in refusing to

grant  of  anticipatory  bail  to  the  appellant  in  view  of  all  other  aspects

considered herein.

Re: Contention:- The appellant should have been confronted with the materials  collected  by  the  Enforcement  Directorate  earlier,  before being produced to the court.   

56. On  behalf  of  the  appellant,  it  was  contended  that  the  materials

produced by the  Enforcement  Directorate  could  have never  been relied

upon  for  the  purpose  of  consideration  of  anticipatory  bail  unless  the

appellant  was  earlier  confronted  with  those documents/materials.  It  was

submitted that  if  the appellant’s  response was completely  “evasive”  and

“non co-operative”  during  the  three  days  when he was interrogated i.e.

19.12.2018,  01.01.2019  and  21.01.2019,  the  respondent  should  place

before  the  court  the  materials  put  to  the  appellant  and  the  responses

41

elicited from the accused to demonstrate to the court that “the accused was

completely evasive and non-co-operative”.   

57. Contention of the appellant that the court will have to scrutinise the

questions put to the accused during interrogation and answers given by the

appellant  and  satisfy  itself  whether  the  answers  were  “evasive  or  not”,

would amount to conducting “mini trial” and substituting court’s view over

the  view  of  the  investigating  agency  about  the  “cooperation”  or

“evasiveness”  of  the  accused  and  thereafter,  the  court  to  decide  the

questions of grant of anticipatory bail.  This contention is far-fetched and

does not merit acceptance.   

58. As rightly submitted by learned Solicitor General that if the accused

are  to  be  confronted  with  the  materials  which  were  collected  by  the

prosecution/Enforcement  Directorate  with  huge  efforts,  it  would  lead  to

devastating  consequences  and  would  defeat  the  very  purpose  of  the

investigation  into  crimes,  in  particular,  white  collar  offences.   If  the

contention of the appellant is to be accepted, the investigating agency will

have to question each and every accused such materials collected during

investigation  and  in  this  process,  the  investigating  agency  would  be

exposing the evidence collected by them with huge efforts using their men

and resources and this would give a chance to the accused to tamper with

the evidence and to destroy the money trail apart from paving the way for

the accused to influence the witnesses.  If the contention of the appellant is

42

to  be  accepted  that  the  accused  will  have  to  be  questioned  with  the

materials  and the  investigating  agency  has  to  satisfy  the  court  that  the

accused was “evasive” during interrogation, the court will have to undertake

a “mini trial” of scrutinizing the matter at intermediary stages of investigation

like interrogation of the accused and the answers elicited from the accused

and to find out whether the answers given by the accused are ‘evasive’ or

whether  they are  ‘satisfactory’ or  not.   This  could  have never  been the

intention of the legislature either under PMLA or any other statute.   

59. Interrogation  of  the  accused  and  the  answers  elicited  from  the

accused and the opinion whether the answers given by the accused are

“satisfactory” or “evasive”, is purely within the domain of the investigating

agency and the court cannot substitute its views by conducting mini trial at

various stages of the investigation.

60. The  investigation  of  a  cognizable  offence  and  the  various  stages

thereon including the interrogation of the accused is exclusively reserved

for the investigating agency whose powers are unfettered so long as the

investigating  officer  exercises  his  investigating  powers  well  within  the

provisions of the law and the legal bounds. In exercise of its inherent power

under Section 482 Cr.P.C.,  the court can interfere and issue appropriate

direction  only  when  the  court  is  convinced  that  the  power  of  the

investigating officer is exercised mala fide or where there is abuse of power

and  non-compliance  of  the  provisions  of  Code  of  Criminal  Procedure.

43

However, this power of invoking inherent jurisdiction to issue direction and

interfering with the investigation is exercised only in rare cases where there

is  abuse  of  process  or  non-compliance  of  the  provisions  of  Criminal

Procedure Code.

61. In King-Emperor v. Khwaja Nazir Ahmad AIR 1945 PC 18 : 1944 SCC

Online PC 29, it was held as under:-

“…..it is of the utmost importance that the judiciary should not interfere with

the police in matters which are within their province and into which the law

imposes upon them the duty of enquiry.

In India as has been shown there is a statutory right on the part of the police

to  investigate  the  circumstances  of  an  alleged  cognizable  crime  without

requiring any authority from the judicial authorities, and it  would, as their

Lordships  think,  be an unfortunate  result  if  it  should be held  possible to

interfere with those statutory rights by an exercise of the inherent jurisdiction

of the Court. The functions of the judiciary and the police are complementary

not  overlapping  and  the  combination  of  individual  liberty  with  a  due

observance of  law and order  is  only  to  be obtained  by leaving  each  to

exercise its own function, always, of course, subject to the right of the Court

to intervene in an appropriate case when moved under S. 491 of the Crl.

P.C. ….” [underlining added]

62. The above decision in  Khwaja Nazir  Ahmad has been quoted with

approval by the Supreme Court in  Abhinandan Jha and others v. Dinesh

Mishra AIR  1968  SC  117 and  State  of  Bihar  and  another  v.  J.A.C.

Saldanha and others (1980) 1 SCC 554.  Observing that the investigation of

the offence is the field exclusively reserved for the executive through the

police department and the superintendence over which vests in the State

44

Government, in J.A.C. Saldanha, it was held as under:-

“25. There is a clear-cut and well demarcated sphere of activity in the field of

crime detection and crime punishment. Investigation of an offence is the field

exclusively  reserved for  the executive  through the police  department  the

superintendence over which vests in the State Government. The executive

which is charged with a duty to keep vigilance over law and order situation is

obliged to prevent crime and if an offence is alleged to have been committed

it is its bounded duty to investigate into the offence and bring the offender to

book. Once it investigates and finds an offence having been committed it is

its duty to collect evidence for the purpose of proving the offence. Once that

is  completed  and  the  investigating  officer  submits  report  to  the  court

requesting the court to take cognizance of the offence under Section 190 of

the Code its duty comes to an end. On a cognizance of the offence being

taken  by  the  court  the  police  function  of  investigation  comes to  an  end

subject to the provision contained in Section 173(8), there commences the

adjudicatory function of the judiciary to determine whether an offence has

been committed and if so, whether by the person or persons charged with

the crime by the police in its report to the court,  and to award adequate

punishment according to law for the offence proved to the satisfaction of the

court. There is thus a well defined and well demarcated function in the field

of crime detection and its subsequent adjudication between the police and

the  Magistrate. This  had been recognised  way  back  in  King  Emperor v.

Khwaja Nazir Ahmad AIR 1944 PC 18 ……...”.  

The same view was reiterated in  Dukhishyam Benupani,  Asstt.  Director,

Enforcement Directorate (FERA) v. Arun Kumar Bajoria (1998) 1 SCC 52,

M.C. Abraham and Another v. State of Maharashtra and Others  (2003) 2

SCC 649, Subramanian Swamy v. Director, Central Bureau of Investigation

and another (2014) 8 SCC 682 and Divine Retreat Centre v. State of Kerala

and Others (2008) 3 SCC 542.

45

63. Investigation into crimes is the prerogative of the police and excepting

in rare cases, the judiciary should keep out all the areas of investigation.  In

State of Bihar and another v. P.P. Sharma, IAS and another 1992 Supp. (1)

222,  it  was held that “The investigating officer is an arm of the law and

plays a pivotal role in the dispensation of criminal justice and maintenance

of law and order. …..Enough power is therefore given to the police officer in

the area of investigating process and granting them the court latitude to

exercise its discretionary power to make a successful investigation…”.  In

Dukhishyam Benupani, Asstt. Director, Enforcement Directorate (FERA) v.

Arun Kumar Bajoria (1998) 1 SCC 52, this Court held that “……it is not the

function of the court  to monitor  investigation processes so long as such

investigation does not transgress any provision of law. It must be left to the

investigating agency to decide the venue, the timings and the questions

and  the  manner  of  putting  such  questions  to  persons  involved  in  such

offences. A blanket order fully insulating a person from arrest would make

his interrogation a mere ritual.”   

64. As held by the Supreme Court in a catena of judgments that there is a

well-defined and demarcated function in the field of investigation and its

subsequent adjudication. It is not the function of the court to monitor the

investigation  process  so  long  as  the  investigation  does  not  violate  any

provision of law. It must be left to the discretion of the investigating agency

to decide the course of investigation. If the court is to interfere in each and

46

every  stage of  the investigation and the interrogation of  the accused,  it

would  affect  the  normal  course  of  investigation.  It  must  be  left  to  the

investigating agency to proceed in its own manner in interrogation of the

accused, nature of questions put to him and the manner of interrogation of

the accused.

65. It  is  one  thing  to  say  that  if  the  power  of  investigation  has  been

exercised by an investigating officer  mala fide or  non-compliance of  the

provisions  of  the  Criminal  Procedure  Code  in  the  conduct  of  the

investigation, it is open to the court to quash the proceedings where there is

a clear case of abuse of power. It is a different matter that the High Court in

exercise of  its  inherent  power under Section 482 Cr.P.C.,  the court  can

always issue appropriate direction at the instance of an aggrieved person if

the  High  Court  is  convinced  that  the  power  of  investigation  has  been

exercised by the investigating officer mala fide and not in accordance with

the provisions of the Criminal Procedure Code.  However, as pointed out

earlier that power is to be exercised in rare cases where there is a clear

abuse  of  power  and  non-compliance  of  the  provisions  falling  under

Chapter-XII of the Code of Criminal Procedure requiring the interference of

the  High  Court.  In  the  initial  stages  of  investigation  where  the  court  is

considering the question of grant of regular bail or pre-arrest bail, it is not

for the court to enter into the demarcated function of the investigation and

collection  of  evidence/materials  for  establishing  the  offence  and

47

interrogation of the accused and the witnesses.

66. Whether direction to produce the transcripts could be issued:-

Contention of the appellant is that it has not been placed before the court

as  to  what  were  the  questions/aspects  on  which  the  appellant  was

interrogated  on  19.12.2018,  01.01.2019  and  21.01.2019  and  the

Enforcement Directorate has not been able to show as to how the answers

given by the appellant are “evasive”.  It was submitted that the investigating

agency-Enforcement  Directorate  cannot  expect  the  accused  to  give

answers  in  the  manner  they  want  and  the  investigating  agency  should

always keep in their mind the rights of the accused protected under Article

20(3) of the Constitution of India.  Since the interrogation of the accused

and  the  questions  put  to  the  accused  and  the  answers  given  by  the

accused are part of the investigation which is purely within the domain of

the  investigation  officer,  unless  satisfied  that  the  police  officer  has

improperly and illegally exercised his investigating powers in breach of any

statutory  provision,  the  court  cannot  interfere.   In  the  present  case,  no

direction could be issued to the respondent to produce the transcripts of the

questions put to the appellant and answers given by the appellant.

Grant of Anticipatory bail in exceptional cases:-

67. Ordinarily, arrest is a part of procedure of the investigation to secure

not only the presence of the accused but several other purposes.  Power

48

under Section 438 Cr.P.C. is an extraordinary power and the same has to

be  exercised  sparingly.   The  privilege  of  the  pre-arrest  bail  should  be

granted only in exceptional cases.  The judicial discretion conferred upon

the court has to be properly exercised after application of mind as to the

nature and gravity of the accusation; possibility of applicant fleeing justice

and other factors to decide whether it is a fit case for grant of anticipatory

bail.  Grant of anticipatory bail to some extent interferes in the sphere of

investigation of an offence and hence, the court must be circumspect while

exercising such power for grant of anticipatory bail.  Anticipatory bail is not

to be granted as a matter of rule and it has to be granted only when the

court  is  convinced that  exceptional  circumstances exist  to  resort  to  that

extraordinary remedy.

68. On  behalf  of  the  appellant,  much  arguments  were  advanced

contending that anticipatory bail is a facet of Article 21 of the Constitution of

India.  It was contended that unless custodial interrogation is warranted, in

the facts and circumstances of the case, denial of anticipatory bail would

amount to denial of the right conferred upon the appellant under Article 21

of the Constitution of India.

69. Article 21 of the Constitution of India states that no person shall be

deprived  of  his  life  or  personal  liberty  except  according  to  procedure

prescribed  by  law.   However,  the  power  conferred  by  Article  21  of  the

Constitution of India is not unfettered and is qualified by the later part of the

49

Article i.e. “…except according to a procedure prescribed by law.”  In State

of M.P. and another v. Ram Kishna Balothia and another (1995) 3 SCC 221,

the Supreme Court held that the right of anticipatory bail is not a part of

Article 21 of the Constitution of India and held as under:-

“7.  ……We find it  difficult  to accept the contention that Section 438 of the

Code of Criminal Procedure is an integral part of Article 21. In the first place,

there was no provision similar to Section 438 in the old Criminal Procedure

Code. The Law Commission in its 41st Report recommended introduction of a

provision for grant of anticipatory bail. It observed:

“We agree that this would be a useful advantage. Though we must

add that it  is in very exceptional cases that such power should be

exercised.”

In the light of this recommendation, Section 438 was incorporated, for the first

time,  in  the  Criminal  Procedure  Code  of  1973.  Looking  to  the  cautious

recommendation of the Law Commission, the power to grant anticipatory bail

is conferred only on a Court of Session or the High Court.  Also, anticipatory

bail cannot be granted as a matter of right. It is essentially a statutory right

conferred long after the coming into force of the Constitution. It  cannot be

considered as an essential ingredient of Article 21 of the Constitution. And its

non-application to a certain special category of offences cannot be considered

as violative of Article 21.” [underlining added]

70. We are conscious of  the fact  that  the legislative intent  behind  the

introduction of Section 438 Cr.P.C. is to safeguard the individual’s personal

liberty and to protect him from the possibility of being humiliated and from

being subjected to unnecessary police custody.  However, the court must

also keep in view that a criminal offence is not just an offence against an

50

individual,  rather  the  larger  societal  interest  is  at  stake.   Therefore,  a

delicate  balance is  required  to  be  established between  the  two rights  -

safeguarding the personal liberty of an individual and the societal interest. It

cannot be said that refusal to grant anticipatory bail would amount to denial

of  the  rights  conferred  upon  the  appellant  under  Article  21  of  the

Constitution of India.

71. The learned Solicitor General has submitted that depending upon the

facts of each case, it is for the investigating agency to confront the accused

with the material, only when the accused is in custody. It was submitted that

the  statutory  right  under  Section  19  of  PMLA has  an  in-built  safeguard

against  arbitrary  exercise of  power  of  arrest  by  the investigating officer.

Submitting that custodial interrogation is a recognised mode of interrogation

which is not only permissible but has been held to be more effective, the

learned Solicitor General placed reliance upon  State Rep. By The CBI v.

Anil  Sharma  (1997)  7  SCC  187;  Sudhir  v.  State  of  Maharashtra  and

Another  (2016)  1  SCC  146;  and  Assistant  Director,  Directorate  of

Enforcement v. Hassan Ali Khan (2011) 12 SCC 684.  

72. Ordinarily, arrest is a part of the process of the investigation intended

to  secure  several  purposes.  There  may  be  circumstances  in  which  the

accused may provide information leading to discovery of material facts and

relevant  information.  Grant  of  anticipatory  bail  may  hamper  the

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investigation. Pre-arrest bail is to strike a balance between the individual’s

right  to  personal  freedom  and  the  right  of  the  investigating  agency  to

interrogate the accused as to the material so far collected and to collect

more information which may lead to recovery of  relevant  information.  In

State Rep. By The CBI v. Anil Sharma  (1997) 7 SCC 187, the Supreme

Court held as under:-

“6. We find force in the submission of the CBI that custodial interrogation is

qualitatively more elicitation-oriented than questioning a suspect who is well

ensconced with a favourable order under Section 438 of the Code. In a case

like  this  effective  interrogation  of  a  suspected  person  is  of  tremendous

advantage in disinterring many useful informations and also materials which

would have been concealed. Success in such interrogation would elude if

the suspected person knows that he is well  protected and insulated by a

pre-arrest  bail  order  during  the  time  he  is  interrogated.  Very  often

interrogation  in  such  a  condition  would  reduce  to  a  mere  ritual.  The

argument that the custodial interrogation is fraught with the danger of the

person being subjected to third-degree methods need not be countenanced,

for, such an argument can be advanced by all accused in all criminal cases.

The Court has to presume that responsible police officers would conduct

themselves in a responsible manner and that those entrusted with the task

of disinterring offences would not conduct themselves as offenders.”

73. Observing that  the arrest  is  a part  of  the investigation intended to

secure several purposes, in Adri Dharan Das v. State of W.B. (2005) 4 SCC

303, it was held as under:-

“19. Ordinarily, arrest is a part of the process of investigation intended to

secure several purposes. The accused may have to be questioned in detail

regarding various facets of motive, preparation, commission and aftermath

of the crime and the connection of other persons, if any, in the crime. There

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may  be  circumstances  in  which  the  accused  may  provide  information

leading to discovery of  material  facts.  It  may be necessary  to  curtail  his

freedom in order to enable the investigation to proceed without hindrance

and to protect witnesses and persons connected with the victim of the crime,

to prevent his disappearance, to maintain law and order in the locality. For

these or other reasons, arrest may become an inevitable part of the process

of investigation. The legality of the proposed arrest cannot be gone into in an

application under Section 438 of the Code. The role of the investigator is

well defined and the jurisdictional scope of interference by the court in the

process of investigation is limited. The court ordinarily will not interfere with

the investigation of a crime or with the arrest of the accused in a cognizable

offence. An interim order restraining arrest, if passed while dealing with an

application under Section 438 of the Code will amount to interference in the

investigation, which cannot, at any rate, be done under Section 438 of the

Code.”

74. In Siddharam Satlingappa Mhetre v. State of Maharashtra and Others

(2011)  1  SCC  694,  the  Supreme  Court  laid  down  the  factors  and

parameters to be considered while dealing with anticipatory bail. It was held

that the nature and the gravity of the accusation and the exact role of the

accused must be properly comprehended before arrest is made and that

the court  must evaluate the available material  against  the accused very

carefully. It was also held that the court should also consider whether the

accusations have been made only with the object of injuring or humiliating

the applicant by arresting him or her.  

75. After referring to Siddharam Satlingappa Mhetre and other judgments

and  observing  that  anticipatory  bail  can  be  granted  only  in  exceptional

53

circumstances, in Jai Prakash Singh v. State of Bihar and another (2012) 4

SCC 379, the Supreme Court held as under:-

“19. Parameters  for  grant  of  anticipatory  bail  in  a  serious  offence  are

required to be satisfied and further while granting such relief, the court must

record  the  reasons  therefor.  Anticipatory  bail  can  be  granted  only  in

exceptional circumstances where the court is prima facie of the view that the

applicant has falsely been enroped in the crime and would not misuse his

liberty. (See D.K. Ganesh Babu v. P.T. Manokaran (2007) 4 SCC 434, State

of Maharashtra v.  Mohd. Sajid Husain Mohd. S. Husain (2008) 1 SCC 213

and Union of India v. Padam Narain Aggarwal (2008) 13 SCC 305.)”

Economic Offences:-

76. Power under Section 438 Cr.P.C. being an extraordinary remedy, has

to  be  exercised  sparingly;  more  so,  in  cases  of  economic  offences.

Economic offences stand as a different class as they affect the economic

fabric of the society.  In  Directorate of Enforcement v. Ashok Kumar Jain

(1998) 2 SCC 105, it was held that in economic offences, the accused is

not entitled to anticipatory bail.

77. The learned Solicitor General submitted that the “Scheduled offence”

and  “offence  of  money  laundering”  are  independent  of  each  other  and

PMLA being  a  special  enactment  applicable  to  the  offence  of  money

laundering  is  not  a  fit  case  for  grant  of  anticipatory  bail.   The  learned

Solicitor  General  submitted  that  money  laundering  being  an  economic

offence  committed  with  much  planning  and  deliberate  design  poses  a

serious threat to the nation’s economy and financial integrity and in order to

54

unearth  the laundering and trail  of  money,  custodial  interrogation of  the

appellant is necessary.

78. Observing that economic offence is committed with deliberate design

with  an  eye  on  personal  profit  regardless  to  the  consequence  to  the

community,  in  State  of  Gujarat  v.  Mohanlal  Jitamalji  Porwal  and  others

(1987) 2 SCC 364, it was held as under:-

“5. ….The entire community is aggrieved if the economic offenders who ruin

the  economy  of  the  State  are  not  brought  to  book.  A murder  may  be

committed  in  the  heat  of  moment  upon  passions  being  aroused.  An

economic offence is committed with cool calculation and deliberate design

with  an  eye  on  personal  profit  regardless  of  the  consequence  to  the

community. A disregard for the interest of the community can be manifested

only  at  the  cost  of  forfeiting  the trust  and faith  of  the community  in  the

system  to  administer  justice  in  an  even-handed  manner  without  fear  of

criticism from the quarters which view white collar crimes with a permissive

eye unmindful of the damage done to the national economy and national

interest…..”  

79. Observing that economic offences constitute a class apart and need

to be visited with different approach in the matter of bail,  in  Y.S. Jagan

Mohan Reddy v. CBI (2013) 7 SCC 439, the Supreme Court held as under:-

“34. Economic offences constitute a class apart and need to be visited with

a different approach in the matter of bail.  The economic offences having

deep-rooted conspiracies and involving huge loss of public funds need to be

viewed seriously and considered as grave offences affecting the economy of

the country as a whole and thereby posing serious threat to the financial

health of the country.

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35. While  granting  bail,  the  court  has  to  keep  in  mind  the  nature  of

accusations, the nature of evidence in support thereof, the severity of the

punishment  which  conviction  will  entail,  the  character  of  the  accused,

circumstances which are peculiar to the accused, reasonable possibility of

securing the presence of the accused at the trial, reasonable apprehension

of the witnesses being tampered with, the larger interests of the public/State

and other similar considerations.” [underlining added]

80. Referring to  Dukhishyam Benupani, Assistant Director, Enforcement

Directorate  (FERA)  v.  Arun  Kumar  Bajoria (1998)  1  SCC  52,  in

Enforcement Officer, Ted, Bombay v. Bher Chand Tikaji Bora and others

(1999) 5 SCC 720, while hearing an appeal by the Enforcement Directorate

against the order of the Single Judge of the Bombay High Court granting

anticipatory bail to the respondent thereon, the Supreme Court set aside

the order of the Single Judge granting anticipatory bail.  

81. Grant of anticipatory bail at the stage of investigation may frustrate the

investigating  agency  in  interrogating  the  accused  and  in  collecting  the

useful  information  and  also  the  materials  which  might  have  been

concealed. Success in such interrogation would elude if the accused knows

that he is protected by the order of the court.  Grant of anticipatory bail,

particularly  in  economic  offences  would  definitely  hamper  the  effective

investigation.  Having regard to the materials said to have been collected by

the respondent-Enforcement Directorate and considering the stage of the

investigation, we are of the view that it is not a fit case to grant anticipatory

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bail.  

82. In  a  case  of  money-laundering  where  it  involves  many  stages  of

“placement”,  “layering  i.e.  funds  moved  to  other  institutions  to  conceal

origin”  and  “interrogation  i.e.  funds  used  to  acquire  various  assets”,  it

requires  systematic  and analysed investigation which would  be of  great

advantage. As held in  Anil  Sharma,  success in such interrogation would

elude if the accused knows that he is protected by a pre-arrest bail order.

Section 438 Cr.P.C. is to be invoked only in exceptional cases where the

case  alleged  is  frivolous  or  groundless.  In  the  case  in  hand,  there  are

allegations  of  laundering  the  proceeds  of  the  crime.  The  Enforcement

Directorate  claims  to  have  certain  specific  inputs  from various  sources,

including overseas banks. Letter rogatory is also said to have been issued

and some response have been received by the department. Having regard

to the nature of allegations and the stage of the investigation, in our view,

the investigating agency has to be given sufficient freedom in the process

of investigation. Though we do not endorse the approach of the learned

Single  Judge  in  extracting  the  note  produced  by  the  Enforcement

Directorate,  we do not  find  any  ground warranting  interference with  the

impugned order.  Considering the facts and circumstances of the case, in

our  view,  grant  of  anticipatory  bail  to  the  appellant  will  hamper  the

investigation and this is not a fit  case for exercise of discretion to grant

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anticipatory bail to the appellant.  

83. In the result, the appeal is dismissed.  It is for the appellant to work

out his remedy in accordance with law.  As and when the application for

regular bail is filed, the same shall be considered by the learned trial court

on its own merits and in accordance with law without being influenced by

any of the observations made in this judgment and the impugned order of

the High Court.

…………………………..J.                                                                   [R. BANUMATHI]

…………………………..J.                                                              [A.S. BOPANNA]

New Delhi; September 05, 2019