The Impact of Money Laundering on National Integrity: A Legal Analysis

Exploring the implications of money laundering on national integrity, the recent Supreme Court judgment sheds light on the gravity of financial crimes. Analyzing the case involving allegations of money laundering, the judgment highlights the importance of upholding the rule of law in safeguarding the nation’s financial system. Dive into the legal nuances of this crucial case and understand the significance of combating such illicit activities for the welfare of the country.

Facts

Sh. Karti Chidambaram granted bail in the INX Media case filed by CBI on 23.03.2018.
Alleged irregularities in FIPB clearance given to INX Media for foreign investment of Rs.305 crores against approved inflow of Rs.4.62 crores.
Payments received by Karti Chidambaram for influencing public servants of FIPB unit of Ministry of Finance through Chess Management Services.
Invoices raised in ASCPL’s name to conceal Karti Chidambaram’s identity as services rendered by Chess Management Services.
Violations of FIPB approval by INX Media include downstream investment without specific approval and FDI generation above approved limit.
Investigation initiated based on INX Media’s payment to ASCPL, raising suspicions of money laundering.
FIR registered by CBI which led to Enforcement Directorate filing a money laundering case.
Allegations of falsified invoices and criminal conspiracy with Karti Chidambaram and the then Finance Minister of India.
The High Court dismissed the application for anticipatory bail to the appellant, stating it was a classic case of money-laundering.
The appellant was granted interim protection from arrest by the Delhi High Court which was extended till 20.08.2019.
The appellant’s petition for anticipatory bail was dismissed on 20.08.2019 by the High Court.
The High Court observed that the case was clear case of money-laundering.
The learned Single Judge denied anticipatory bail based on the irregularities committed by the appellant.
As per the judgment in ‘Shri Gurbaksh Singh Sibbia and others v. State of Punjab (1980) 2 SCC 565’, the appellant cannot seek anticipatory bail after being arrested.
The High Court of Delhi rejected the appellant’s plea for anticipatory bail in cases registered by CBI and Enforcement Directorate.
SLP(Crl.) No.7525 of 2019 by the appellant regarding the CBI case was dismissed as infructuous on 26.08.2019 as the appellant was already arrested and remanded to custody.

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Arguments

Senior counsel argued for bail on the basis of parity with co-accused who were granted bail or on statutory bail.
The counsel disputed the Enforcement Directorate’s claim of the appellant being non-cooperative and evasive.
Referenced legal cases to argue that the alleged offences were not part of the scheduled offences under the Prevention of Money-Laundering Act at the time of occurrence.
Strong exception taken to the High Court’s denial of pre-arrest bail based on the gravity of the offence and perceived evasiveness of the appellant.
Arguments made on the interpretation of the provision for anticipatory bail under Section 438 Cr.P.C.
Discussion on the approval process for INX FDI and lack of evidence regarding direct involvement of the appellant’s son in alleged wrongdoings.
Objections raised against the Enforcement Directorate submitting materials without confrontation to the appellant and the court.
The appellant’s cooperation during interrogation emphasized, with a request for transcripts to be produced to verify alleged evasiveness.
Counterarguments by the Solicitor General for custodial interrogation based on collected materials and provisions of the PMLA.
The appellant’s stance that reliance on materials without confrontation is unjustifiable, and the need for transparency in presenting the accused’s responses during interrogation.
The Solicitor General presented 14 specific inputs from overseas banks supporting the case of money laundering.
The Court has the power to review materials collected by the Enforcement Directorate during the bail consideration process.
Citing legal precedents, the Solicitor General emphasized the importance of judicial review of case diaries and materials by the Court.
The Solicitor General urged the Court to examine the materials in a sealed cover provided by the Enforcement Directorate.
The Solicitor General argued against anticipatory bail, citing the need for custodial interrogation due to the seriousness of the money laundering allegations.
The primary offences registered against the appellant are under various sections of the IPC and PMLA.
Money laundering was emphasized as a threat to the financial system and national integrity, warranting strict action.
The Prevention of Money Laundering Act, 2002 was discussed, highlighting the powers of specified officers to arrest based on evidence of the offence.
Arguments were made regarding the distinction between statements recorded under Section 161 Cr.P.C. and documentary evidence in the case diary.
The independence of the offence of money laundering under the PMLA was stressed.

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Analysis

Denial of anticipatory bail may amount to denial of right under Article 21 of the Constitution if custodial interrogation is not warranted
The power under Article 21 is restricted by ‘…except according to a procedure prescribed by law’
Articles and cases emphasizing the role of police in investigating crimes and the limited monitoring function of the court during investigation
Recommendation for anticipatory bail in exceptional cases by Law Commission
Interference with investigation process is limited to rare cases of abuse of power or non-compliance with CrPC
Investigation distinct from adjudication by police and Magistrate
Court’s discretion in bail determination depending on nature of accusations and various other factors
Role of custodial interrogation in economic offenses and effectiveness over questioning suspects with bail protections
Granting anticipatory bail selectively in economic offenses due to their impact on the economy
Unconstitutionality of certain provisions under PMLA and amendments made post related court decisions
Section 71 of PMLA states that the provisions of the Act would have overriding effect on the provisions of all other Acts applicable.
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.
PMLA contains Schedules which originally contained three parts namely Part A, Part B, and Part C, with various paragraphs enumerating specific offenses under different Acts.
The Prevention of Money-laundering Act, 2002 was enacted to meet the serious threat posed by money laundering to the financial system of countries.
Judicial discretion in granting anticipatory bail should be exercised carefully considering the nature and gravity of the accusation.
The court can receive and peruse the materials collected during investigation to ensure the investigation is proceeding correctly and for considering bail applications.
Allowing accused access to all collected materials during the investigation can lead to interference, tampering with evidence, and influencing witnesses.
Grant of anticipatory bail can interfere with the investigation of an offense and should be granted sparingly, only in exceptional cases.
The court is empowered to call for case diaries not as evidence but as an aid to ascertain events during the investigation.
The provisions of PMLA provide safeguards, and the court can peruse the materials to satisfy its conscience about the investigation.
Proper balance between personal liberty and societal interests is essential while considering bail applications in cases of money laundering.
The court must ensure that the investigation is conducted properly without misuse or abuse of process.
The court can use case diaries to contradict investigating officers but accused are not entitled to see them during the inquiry or trial.
Confidentiality in criminal investigations should be maintained to protect informants and ensure justice.
Section 45 of PMLA cannot have retrospective operation, and provisions must align with the offenses at the time of commission.
Interference with investigative powers of police officers should be done only in case of mala fide or breach of statutory provisions.
Provisions under PMLA and Rules provide for forwarding orders and materials to the Adjudicating Authority for proper adjudication.
The court must exercise caution in granting anticipatory bail to ensure the accused doesn’t evade justice or influence the investigation.
The court’s power to peruse case diaries is crucial for examining the correctness of decisions made by lower courts or High Court.
Investigating agencies need sufficient freedom to conduct investigations, especially in cases involving white-collar crimes like money laundering.
Section 26 IPC defines ‘reason to believe’ as having sufficient cause to believe a thing.
Provisions of Section 161 Crl.P.C. and Section 145 of the Evidence Act must be complied with if statements are used to refresh memory or contradict a police officer.
Section 17 of PMLA allows search and seizure based on ‘reason to believe’ with the reasons recorded in writing and forwarded to Adjudicating Authority.
Section 19 of PMLA grants power to specified officers for arrest based on written reasons and requires production before Magistrate within 24 hours.
Central Government has framed rules for search and seizure and arrest procedures under PMLA.
Offences under PMLA are cognizable and non-bailable, with stringent conditions for bail.
PMLA includes provisions for cross-border implications and assistance, with defined scheduled offences.
PMLA aims to prevent money laundering and provides for property confiscation.
Section 4 of PMLA deals with punishment for money laundering, with recent amendments allowing higher fines.
Investigating agencies have unfettered powers for cognizable offences within legal bounds, with court intervention possible in case of abuse or malice.
The learned Single Judge’s approach in extracting the note produced by the Enforcement Directorate was not endorsed by the court.
No grounds were found warranting interference with the impugned order.
Granting anticipatory bail to the appellant was deemed likely to hamper the ongoing investigation.
The court concluded that this case was not suitable for the exercise of discretion to grant anticipatory bail to the appellant.