TMI Blog2022 (3) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... bail, and economic offences of the nature involved in the case were prima facie grave, it is not a rule that bail shall inevitably be denied. No case may be seen as setting a precedent with respect to grant/rejection of bail, except on principle, and it will be for the Court concerned to determine the gravity of the charged offence in each case based on the facts and circumstances. Further, the gravity of the offence is a factor which is in addition to the triple test/tripod test. In matters of regular bail under Section 439 Cr.P.C., a Court must consider aspects, including but not limited to, the larger interest of the State or public, whether the accused is a flight risk, whether there is likelihood of his tampering with evidence, whether there is likelihood of his influencing witnesses, etc. Apart from these, another factor relevant to the question of bail would be the gravity of the alleged offence and/or nature of the allegations levelled, which may serve as an additional test and can be applied while keeping in view the severity of the punishment that the offence entails - It is equally well-settled that economic offences constitute a class apart and need to be visited wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh: Mr. Mukul Rohatgi, Sr. Advocate with Mr. Sandeep Kapur, Mr. Virinder Pal Singh Sandhu, Mr. Vivek Suri, Ms. Niharika Karanjawala, Mr. Abhimanshu Dhyani, Mr. Sahil Modi and Ms. Kajal, Advocates Respondent Through: Mr. Amit Mahajan, CGSC with Mr. Kritagya Kumar Kait, Advocate (VIA VIDEO CONFERENCING) J U D G M E N T MANOJ KUMAR OHRI, J. 1. The present application has been filed under Section 439 Cr.P.C. on behalf of the applicant seeking regular bail in Complaint Case No.24/2021 filed under Sections 44/45 of the Prevention of Money Laundering Act, 2002 (hereinafter, referred to as the PMLA ) and arising out of ECIR No.11/HIU/2021 registered under Sections 3/4 PMLA by the respondent/ED. Factual Background 2. Pithily put, the case of the prosecution is that subsequent to the removal of Sh. Rana Kapoor, the then MD and CEO of Yes Bank Ltd. (hereinafter, referred to as the Bank ), certain complaints came to be filed assailing his role in grant of various credit facilities to borrowers, in violation of banking norms and against receipt of illegal gratification, which resulted in huge loss to the Bank. One of these complaints was in relation to M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L and JPIL were sham . Though the Term loan given by the Bank to OBPL was prima facie secured, inter-alia, by the pledge of 8 crore shares of CG Power, the said shares were already pledged with Edelweiss and ABFL, against whom the Group companies had pre-existing loan obligations. It was further alleged that OBPL was part of Avantha Group and as such, was controlled by the applicant. It carried no business activity and had no employees working in it. It did not even have any experience in handling of O M work of a thermal power plant and was shown to have been contracted by JPIL only to create a paper trail. Notably, the company neither provided any service under the agreement to JPIL nor received any consideration for the same. 6. It was also alleged that the Term loan taken by OBPL was routed from one Group company to another and eventually used to repay the existing loans of Avantha Power Infrastructure Limited (hereinafter, referred to as APIL ) and AHL taken from Edelweiss and ABFL. The applicant, who is the ultimate beneficial owner of OBPL, JPL and JPIL, was instrumental in generation of proceeds of crime, as he had the knowledge that Term loan was being taken from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted on stock exchanges, which were worth ₹ 728 crores on the date of the pledge; (ii) Pledge of 12.6 crore shares of JPL; (iii) Corporate Guarantee of ₹ 370 crores given by AHL. The above collaterals collectively amounted to over ₹ 850 crores on the date of the pledge. Further, OBPL had paid ₹ 68 crores towards the loan facility and ₹ 14.16 crores as fees to the Bank. (C) On 05.06.2018, i.e. the day on which the pledge was invoked by the Bank, the value of shares of CG Power was around ₹ 480 crores. Even though the shares vested with the Bank on said date in view of Section 176 of the Contract Act, 1872, the Bank held on to the shares for more than 02 years and sold the same in July/August, 2020, when the value had gone down to about ₹ 105 crores. In this regard, it was also urged that it was the responsibility of the Bank to check the aggregate value of CG Power shares at the end of each business day in terms of facility letter dated 29.12.2017. The rates of the shares on different dates were stated to be as follows:- As on date of pledge ₹ 728 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heduled offence is not made out against the applicant. As the scheduled offence is not made out, the question of applicant s role in money laundering does not arise. Further, in the scheduled offence, neither charge sheet has been filed nor the applicant has been arrested. (J) While referring to Section 45 PMLA, it was submitted that the twin conditions set out in sub-clause (1) thereof, having been struck down in Nikesh Tarachand Shah v. Union of India reported as (2018) 11 SCC 1 , are not applicable to the present case. Notably, the Special Court also did not apply Section 45 PMLA against the applicant. It was also averred that by virtue of the Finance Act, 2018, the only amendment made in Section 45(1) PMLA is that the term punishable for a term of imprisonment of more than three years under Part A of the Schedule has been substituted with the term under this Act . The same does not result in revival of the twin conditions, which were categorically struck down by the Supreme Court in Nikesh Tarachand Shah (Supra). If the legislature had intended to revive the twin conditions under Section 45 PMLA, it would and should have brought back the entire section. In this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Enforcement reported as 2022 SCC OnLine Del 47. Contentions raised on behalf of the respondent/ED 10. Per contra, Mr. Amit Mahajan, learned CGSC appearing for the respondent, vehemently opposed the bail application and made the following submissions:- (A) OBPL is a paper company with no business activity, which lacked the financial strength to service the proposed loan. Accordingly, the officers of Avantha Group connived with the officers of the Bank and created a paper trail to facilitate sanctioning of the loan in favor of OBPL on the basis of sham agreements. In this regard, attention was drawn to the fact that the Memorandum of Association of OBPL was amended one day prior to its entering into agreement with JPIL, i.e., on 14.12.2017, to include O M services. (B) After the Term loan was disbursed by the Bank, the funds were used to service pre-existing loan obligations of Avantha Group. The Group engaged in layering tactics to project the funds as untainted money and routed them between Group companies, to ultimately settle liability towards Edelweiss and ABFL. The same amounts to money laundering and further investigation/backtracking in this regard is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money are grave. (H) On Section 45 PMLA, it was submitted that the provision was amended by way of Finance Act, 2018 to cure the defects pointed out by the Supreme Court in Nikesh Tarachand Shah (Supra). Till date, the amendment has not been struck down or declared ultra vires. As such, the twin conditions under Section 45(1) PMLA stand revived. Reference was made to the judgment dated 28.01.2022 passed in Ajay Kumar v. Directorate of Enforcement, Criminal Application (BA) No. 1149/2021, where a Division Bench of the Bombay High Court, while answering a reference in respect of Section 45 PMLA post the decision in Nikesh Tarachand Shah (Supra) and the amendment made in the provision by virtue of Finance Act, 2018, has held that the twin conditions in Section 45(1) PMLA stand revived. (I) The authorized officer, on the basis of the material in his possession and after having reason to believe that the applicant was guilty of an offence punishable under PMLA, arrested him in terms of Section 19 of the Act. The charged offence being under PMLA, the onus to prove his innocence is on the applicant, which has not been discharged. Further, the likelihood of his indulging in sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family. 15. Subsequently, in Ram Govind Upadhyay v. Sudarshan Singh and Others reported as (2002) 3 SCC 598, certain considerations that may be borne in mind by Courts while determining the question of bail were illustrated by the Supreme Court in the following terms:- 4. Apart from the above, certain other which may be attributed to be relevant considerations may also be noticed at this juncture, though however, the same are only illustrative and not exhaustive, neither there can be any. The considerations being: (a) While granting bail the court has to keep in mind not only the nature of the accusations, but the severity of the punishment, if the accusation entails a conviction and the nature of evidence in support of the accusations. (b) Reasonable apprehensions of the witnesses being tampered with or the apprehension of there being a threat for the complainant should also weigh with the court in the matter of grant of bail. (c) While it is not expected to have the entire evidence establishing the guilt of the accused beyond reasonable doubt but there ought always to be a prima facie satisfaction of the court in support of the charge. (d) Frivo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the accused had committed the offence; (ii) nature and gravity of the accusation; (iii) severity of the punishment in the event of conviction; (iv) danger of the accused absconding or fleeing, if released on bail; (v) character, behaviour, means, position and standing of the accused; (vi) likelihood of the offence being repeated; (vii) reasonable apprehension of the witnesses being influenced; and (viii) danger, of course, of justice being thwarted by grant of bail. 18. Time and again, it has been opined by Courts across the country that bail is the rule and jail an exception. Besides reiterating this view, the Supreme Court in Sanjay Chandra (Supra) has further laid down that both factors, i.e. severity of the punishment and gravity of the offence, have to be simultaneously weighed while determining whether or not to grant bail to an accused. Relevant excerpt from the decision is extracted hereunder:- 21. In bail applications, generally, it has been laid down from the earliest times that the object of bail is to secure the appearance of the accused person at his trial by reasonable amount of bail. The object of bail is neither puni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutional rights but rather recalibrating the scales of justice . xxx 37. The principles, which the Court must consider while granting or declining bail, have been culled out by this Court in Prahlad Singh Bhati v. NCT, Delhi thus : (SCC pp. 284-85, para 8) 8. The jurisdiction to grant bail has to be exercised on the basis of well-settled principles having regard to the circumstances of each case and not in an arbitrary manner. While granting the bail, the court has to keep in mind the nature of accusations, the nature of [the] evidence in support thereof, the severity of the punishment which conviction will entail, the character, behaviour, means and standing 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 or State and similar other considerations. It has also to be kept in mind that for the purposes of granting the bail the legislature has used the words reasonable grounds for believing instead of the evidence which means the court dealing with the grant of bail c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an important factor for determining whether or not to grant bail, and economic offences of the nature involved in the case were prima facie grave, it is not a rule that bail shall inevitably be denied. No case may be seen as setting a precedent with respect to grant/rejection of bail, except on principle, and it will be for the Court concerned to determine the gravity of the charged offence in each case based on the facts and circumstances. Further, the gravity of the offence is a factor which is in addition to the triple test/tripod test. Relevant excerpt from the decision is extracted below:- 22. The learned Senior Counsel for the appellant has also placed reliance on the decision on the decision in Sanjay Chandra v. CBI xxx The said case was a case of financial irregularities and in the said circumstance this Court in addition to taking note of the deep-rooted planning in causing huge financial loss, the scope of consideration relating to bail has been taken into consideration in the background of the term of sentence being seven years if convicted and in that regard it has been held that in determining the grant or otherwise of bail, the seriousness of the charge a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of bail would be the gravity of the alleged offence and/or nature of the allegations levelled, which may serve as an additional test and can be applied while keeping in view the severity of the punishment that the offence entails. 22. It is equally well-settled that economic offences constitute a class apart and need to be visited with a different approach, given their severity and magnitude. Albeit these offences are likely to adversely impact the economic fabric of the country, bail shall not be denied to a person accused of an economic offence in a routine manner. Each case must be adjudged on the basis of the peculiar facts and circumstances, while striking a balance between the right to personal liberty of the accused and the interest of the society in general. 23. During the course of arguments, an issue regarding applicability of Section 45(1) PMLA was raised on behalf of the parties. In connection therewith, I shall advert at the very outset to the provision, as it stood prior to the amendment in 2018:- 45. Offences to be cognizable and non-bailable.-( 1) [Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 65 and also Section 71 of PMLA. ...PMLA has an overriding effect and the provisions of CrPC would apply only if they are not inconsistent with the provisions of this Act. Therefore, the conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 of CrPC. That coupled with the provisions of Section 24 provides that unless the contrary is proved, the authority or the Court shall presume that proceeds of crime are involved in money-laundering and the burden to prove that the proceeds of crime are not involved, lies on the appellant. xxx 34. We have noted that Section 45 of PMLA will have overriding effect on the general provisions of the Code of Criminal Procedure in case of conflict between them. As mentioned earlier, Section 45 of PMLA imposes two conditions for grant of bail, specified under the said Act. Therefore, there is no doubt that the conditions laid down under Section 45-A of PMLA, would bind the High Court as the provisions of special law having overriding effect on the provisions of Section 439 of the Code of Criminal Procedure for grant of bail to any person accused of commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minatory and violative of Articles 14 and 21 of the Constitution of India. 28. Post the decision in Nikesh Tarachand Shah (Supra), an amendment was made to Section 45 PMLA vide the Finance Act, 2018 and brought into effect from 19.04.2018. The new Section 45(1) PMLA reads as follows:- 45. Offences to be cognizable and non-bailable.-( 1) [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 : Provided further that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supra), on a challenge made by the Directorate of Enforcement to the grant of anticipatory bail to the respondent, the Supreme Court set aside the impugned order and remanded the matter back for re-consideration. It was held as under:- This appeal takes exception to the judgment and order dated 25.06.2021 passed by the High Court of Telangana at Hyderabad in Criminal Petition No. 4134 of 2021, whereby the High Court granted anticipatory bail to the respondent in connection with offence concerning the Prevention of Money Laundering Act (for short 'PMLA Act') being F.No. ECIR / HYZO / 20/2019/2246 bearing summons dated 11.05.2021. xxx Indeed, the offence under the PMLA Act is dependent on the predicate offence which would be under ordinary law, including provisions of Indian Penal Code. That does not mean that while considering the prayer for grant of anticipatory bail in connection with PMLA offence, the mandate of Section 45 of the PMLA Act would not come into play. Mr. Dama Seshadri Naidu, learned senior counsel appearing for the respondent invited our attention to the dictum in paragraph 42 of the judgment in Nikesh Tarachand Shah vs. Union of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this backdrop, this Court is of the opinion that the applicant s presence during the trial can be secured by taking adequate measures, including surrender of his passport, and imposing necessary conditions in terms of the decision in P. Chidambaram (Supra). Considering the foregoing, the applicant satisfies the triple test for grant of bail. 35. Though it has been urged on behalf of the respondent that further investigation in the case, besides backtracking of funds siphoned off by AHL and sent abroad to entities in which the applicant and his wife are beneficial owners, is pending, it is observed that an accused cannot be kept languishing in jail for long, undetermined periods, only on the ground that investigation is stated to be pending [Refer: P. Chidambaram v. Central Bureau of Investigation reported as (2020) 13 SCC 337]. 36. At the same time however, based on the categorical observations made by the Supreme Court in Dr. V.C. Mohan (Supra) and Parkash Gurbaxani (Supra), this Court reckons that the present bail application needs to be tested on the touchstone of the twin conditions set out in Section 45(1) PMLA as well. 37. At this stage, it is deemed apposite to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., on 15.12.2017, and were thus alleged to be in fact sham agreements, as OBPL is stated to be a paper company having no employees and/or any prior experience in handling of O M work. It has also been alleged that neither any service was provided by OBPL nor any consideration was paid by JPIL to OBPL. 40. As per the prosecution complaint, certain Bank officials colluded with the applicant for the grant of Term loan, which was ostensibly obtained by OBPL to furnish security deposit in favor of JPIL, however in reality, the same was sought with malafide intentions to be siphoned off and diverted towards repayment of facilities availed of by Avantha Group companies and for meeting other expenses. The Bank was fully aware of the real purpose for which the loan was obtained. Reportedly, public money under the garb of Term loan was siphoned off in this way, resulting in generation of proceeds of crime as well as its layering and ultimate projection as untainted money. 41. A submission was made on behalf of the applicant that the market value of CG Power shares pledged with the Bank, as on the date of invocation of pledge, was ₹ 480 crores and thus sufficient, alongwith o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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