THE DIRECTORATE OF ENFORCEMENT versus M. GOPAL REDDY & ANR

[2023] 3 S.C.R. 79

THE DIRECTORATE OF ENFORCEMENT

M. GOPAL REDDY & ANR.

(Criminal Appeal No. 534 of 2023)

FEBRUARY 24, 2023

[M. R. SHAH AND C. T. RAVIKUMAR, JJ.]

Prevention of Money Laundering Act, 2002 – s.45 –Applicability of, to applications u/s.438, CrPC – Held: Once theprayer for anticipatory bail is made in connection with offence underthe 2002 Act, the underlying principles and rigours of s.45 mustget triggered, although the application is u/s.438, CrPC – In thepresent case, once the enquiry/investigation against respondent No.1 was going on for the offence under the 2002 Act, the rigour ofs.45 of the 2002 Act would be attracted – Impugned order passedby the High Court holding that the provisions of s.45 shall not beapplicable w.r.t the anticipatory bail applications u/s.438, CrPCand granting anticipatory bail to respondent No.1 is unsustainable– Further, the impugned order is erroneous even on merits, set aside– Code of Criminal Procedure, 1973 – s.438.

Code of Criminal Procedure, 1973 – s.438 – Exercise ofdiscretion under – Economic offences – Held: In case of economicoffences having an impact on the society, the Court must be veryslow in exercising the discretion u/s.438.

Allowing the appeal, the Court

HELD: 1.1 Respondent No. 1 is apprehending his arrest inconnection with the complaint/case by the ED for the offence ofmoney laundering under Section 3 of the Prevention of MoneyLaundering Act, 2002 and punishable under Section 4 of the saidAct. An enquiry/investigation is going on against respondent No.1 for the scheduled offence in connection with FIR No. 12/2019.Once the enquiry/investigation against respondent No. 1 is goingon for the offence under the Act, 2002, the rigour of Section 45 ofthe Act, 2002 would be attracted. By the impugned judgment andorder, while granting anticipatory bail the High Court has observedthat the provisions of Section 45 of the Act, 2002 shall not be

Aapplicable with respect to the anticipatory bail applications/proceedings under Section 438 Cr.PC. For which the High Courthas relied upon the decision of this Court in the case of NikeshTarachand Shah. In the case of Dr. V.C. Mohan, this Court hasspecifically observed and held that it is the wrong understandingthat in the case of Nikesh Tarachand Shah this Court has heldBthat the rigour of Section 45 of the Act, 2002 shall not be applicableto the application under Section 438 Cr. PC. In the case of Dr.V.C. Mohan in which the decision of this Court in the case of NikeshTarachand Shah was pressed into service, it is specificallyobserved by this Court that it is one thing to say that Section 45Cof the Act, 2002 to offences under the ordinary law would not getattracted but once the prayer for anticipatory bail is made inconnection with offence under the Act, 2002, the underlyingprinciples and rigours of Section 45 of the Act, must get triggered– although the application is under Section 438 Cr.PC. Therefore,

the observations made by the High Court that the provisions ofDSection 45 of the Act, 2002 shall not be applicable in connectionwith an application under Section 438 Cr.PC is just contrary tothe decision in the case of Dr.V.C. Mohan and the same is onmisunderstanding of the observations made in the case of NikeshTarachand Shah. Once the rigour under Section 45 of the Act,E2002 shall be applicable the impugned judgment and order passedby the High Court granting anticipatory bail to respondent No. 1is unsustainable. [Paras 5 and 5.1][86-G-H; 87-A-B; 88-B-G]

1.2 Even otherwise on merits also, the impugned judgmentand order passed by the High Court granting anticipatory bail toFrespondent No. 1 is erroneous and unsustainable. While grantingthe anticipatory bail to respondent No. 1 the High Court has notat all considered the nature of allegations and seriousness of theoffences alleged of money laundering and the offence(s) underthe Act, 2002. Looking to the nature of allegations, it can be said

that the same can be said to be very serious allegations of moneyGlaundering which are required to be investigated thoroughly. Incase of economic offences, which are having an impact on thesociety, the Court must be very slow in exercising the discretionunder Section 438 of Cr.PC.[Paras 6 and 6.3][88-G-H; 89-A, H;90-A]

1.3 The rigour of Section 45 of the Act, 2002 shall beapplicable even with respect to the application under Section 438Cr.PC and therefore, the impugned judgment and order passedby the High Court granting anticipatory bail to respondent No. 1is unsustainable. [Para 7][90-B]

Nikesh Tarachand Shah Vs. Unoin of India and Anr.(2018) 11 SCC 1 : [2017] 12 SCR 358; The Asst.Director Enforcement Directorate Vs. Dr. V.C. Mohan2022 SCC OnLine SC 452; P. Chidambaram Vs.Directorate of Enforcement (2019) 9 SCC 24:[2019]12 SCR 172 – relied on.

Y.S. Jagan Mohan Reddy Vs. CBI (2013) 7 SCC 439 –referred to.

Case Law Reference

CRIMINAL APPELLATE JURISDICTION : Criminal AppealNo.534 of 2023.

From the Judgment and Order dated 02.03.2021 of the High Courtof Telangana at Hyderabad in Criminal Petition No.1148 of 2021.

K.M. Nataraj, A.S.G., Mukesh Kumar Maroria, Sharath Nambiar,S.A. Haseeb, Mukul Singh, Deepabali Dutta, Zoheb Hussain, KanuAgarwal, Rajan Kumar Choursia, Mukul Singh, Nakul Chengapa K.K.,Advs. for the Appellant.

Vikas Singh, Aman Lekhi, Sr. Advs., Santosh Kumar Tripathi,Siddharth Krishna Dwivedi, Ms. Deepeika Kalia, Aditya Kaul, VijayAgarwal, Varun K. Chopra, Yugant Sharma, Tushar, Mehul Sharma, M/s. VKC Law Offices, Aniket Seth, Ujjawal Sinha, Ritwiz Rishab, SnehilSonam, Advs. for the Respondents.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 02.03.2021 passed by the High Court of Telangana atHyderabad in Criminal Petition No. 1148/2021, by which, the High Court

Ahas allowed the said bail application and has granted the anticipatory bailin favour of respondent No. 1 herein and has directed to release him onbail in the event of his arrest in connection with F. No. ECIR/HYZO/36/2020 dated 15.12.2020 on the file of the Assistant Director, EnforcementDirectorate (hereinafter referred to as the ED), Government of India,Hyderabad, which was registered for the offence of money launderingBunder Section 3 of the Prevention of Money Laundering Act, 2002(hereinafter referred to as the Act, 2002) and punishable under Section4 of the said Act, the Directorate of Enforcement has preferred thepresent appeal.

2. FIR was registered by Economic Offences Wing (EOW),CBhopal vide FIR No. 12/2019 dated 10.04.2019 wherein 20 persons/companies were named as suspected in the said scam. M/s Max MantenaMicro JV, Hyderabad was one among them.

2.1 As per the FIR, the Government of Madhya Pradesh e-Procurement Portal was being run by MPSEDC. M/s Antares SystemsDLimited, Bangalore and M/s Tata Consultancy Services (TCS) weregiven the contract for the period of 5 years for the maintenance &operation of the said portal. Some of the officials of MPSEDC in collusionwith the companies entrusted with maintenance and testing of the portalsnamely M/s Osmo IT Solutions and M/s Antares Systems Ltd, illegallyEaccessed the e-Tender portal and rigged the bidding process to suit afew private bidders for huge amounts of bribe considerations.2.2 As per the investigating agency, the preliminary investigationby the Police established that various e- tenders were illegally accessedand bids of few companies were manipulated to illegally make the bidsof those concerns as the lowest one.F

2.3 Apart from tenders mentioned in the first preliminary chargesheet filed by the EOW Bhopal namely No. 91, 93, 94 (Water ResourceDept); 2 tenders vide Nos. 49985 & 49982 of PWD; Tender no 49813,Tender No. 786 of MPRDC; and Tenders vide Nos. 10030 & 10044, itGwas suspected that many other tenders have also been tampered usingthe same modus operandi. M/s Mantena Group of Companies, Hyderabad,was suspected to be major beneficiary of this e-tender scam. As perthe EOW charge sheet, joint venture of the Mantena Group known asM/s Max Mantena Micro JV is the direct beneficiary of tamperede-tender No. 10030 worth Rs. 1020 Crore.H

2.4 According to the investigating agency, the investigation intothe said FIR for the offences under Sections 120B, 420, 471 IPC andSection 7 r/w Section 13(2) of Prevention of Corruption (PC) Act isgoing on and the said offences are scheduled offences under the Act,2002. The ED has initiated money laundering investigation in File No.ECIR/HYZO/36/2020.

2.5 According to the ED, in order to gather evidence, searchoperation was conducted under the provisions of Section 17(1) of PMLA,2002. Accordingly, 18 premises were searched including the residencesof the promoters and offices of M/s Mantena Constructions Ltd, M/sAnteras Pvt Ltd, M/s Osmo IT Solutions Pvt Ltd, M/s Arni Infra, etc. agood amount of incriminating documents and digital devices have beenseized and are being examined for evidence. It is clear from the EDinvestigation done so far that systematic conspiracy has been plannedand executed by number of infrastructure companies based atHyderabad in collusion with few Government officials and ITmanagement companies to illegally win e-tenders. Further large amountsof bribes running into crore(s) of rupees have exchanged hands usinghawala channels. The public funds meant for development activities havebeen diverted and siphoned off for personal illegal enrichment and formaking illegal bribe payments. The appellant department has recoveredfund trail evidence and generation of black money through bogus andover-billing by the infra companies.

2.6 That respondent No. 1 herein who at the relevant time wasthe Additional Chief Secretary in the Water Resources Department inthe State of Madhya Pradesh, was summoned by the ED to explain thesudden spurt in the allocation of tenders to M/s Mantena Constructionduring his stint in the State of MP.

2.7 That apprehending his arrest in connection with ED case forthe scheduled offence under the Act, 2002, respondent No. 1 hereinapproached the High Court by way of present anticipatory bail applicationunder Section 438 Cr.PC. Without considering the rigour/bar under Section45 of the Act, 2002 and observing that as per the decision of this Courtin the case of Nikesh Tarachand Shah Vs. Unoin of India and Anr.;(2018) 11 SCC 1, the provisions of Section 45 of the Act, 2002 do notapply to Section 438 Cr.PC proceedings, the High Court has allowed theanticipatory bail application and has directed that in case of his arrest inconnection with ED case he be released on bail.

84SUPREME COURT REPORTS

A2.8 Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court granting anticipatory bail to respondentNo. 1 in ED case, the Directorate of Enforcement (ED) has preferredthe present appeal.

3. Shri K. M. Nataraj, learned ASG, appearing on behalf of theBED – appellant has vehemently submitted that in the facts andcircumstances of the case, the High Court has committed very seriouserror in allowing the anticipatory bail application and granting anticipatorybail to respondent No. 1 in connection with ED case under the Act,2002.

C3.1 It is submitted that as such the High Court has materiallyerred in observing that the provisions of Section 45 of the Act, 2002 shallnot be applicable to Section 438 Cr.PC proceedings. It is submitted thatfor that the High Court has erred in relying upon the decision of thisCourt in the case of Nikesh Tarachand Shah (supra). It is submittedthat subsequently in the case of The Asst. Director EnforcementDDirectorate Vs. Dr. V.C. Mohan (2022 SCC OnLine SC 452) -(Criminal Appeal No. 21/2022), this Court has clarified that it is thewrong reading of the decision in the case of Nikesh Tarachand Shah(supra) that the provisions of Section 45 of the Act, 2002 shall not beapplicable to the anticipatory bail proceedings. It is submitted that in theEcase of Dr. V.C. Mohan (supra) it is specifically observed and held bythis Court that Section 45 of the Act, 2002 shall be applicable with respectto the offences under the Act, 2002 and the rigour of Section 45 of theAct, 2002 shall get triggered – although the application is under Section438 of Cr.PC. It is submitted that therefore, the impugned judgment andorder passed by the High Court is just contrary to the decision of thisFCourt in the case of Dr. V.C. Mohan (supra).

3.2 It is further submitted by Shri K.M. Nataraj, learned ASGappearing on behalf of the ED that even otherwise while granting theanticipatory bail the High Court has not properly appreciated and/orconsidered the seriousness of the offences which are scheduled offencesGunder the Act, 2002. It is submitted that the High Court has consideredthe anticipatory bail application, as if, the High Court was dealing withthe prayer for anticipatory bail in connection with the ordinary offencesunder IPC.

3.3 It is further vehemently submitted by learned ASG that duringHinvestigation, the ED investigation has established that there is nexus

between Srinivas Raju Mantena and respondent No. 1 herein and thesame needs to be investigated in detail.

3.4 It is submitted that the ED had gathered material which indicatesnexus between respondent No. 1 and Srinivas Raju Mantena, who isfound to have committed the offences of money laundering. It is submittedthat respondent No. 1 was summoned by ED but instead of appearingbefore the IO, he filed criminal petition before the High Court andobtained the interim relief. It is submitted that he appeared before theED and his statement was recorded under Section 50 of the Act, 2002.It is submitted that however on both the occasions he was totally evasiveand non-cooperative and therefore, his custodial interrogation is required.

3.5 It is further submitted by learned ASG that during theinvestigation the ED has found that respondent No. 1 had availed andenjoyed free trips in last one year alone on the luxury plane of Mantenaon multiple occasions. It is submitted that during investigation it has beenfound that respondent No. 1 had also availed other patronages fromSrinivas Raju Mantena like sponsoring foreign exchange through HawalaChannels for his son.

3.6 It is submitted that while granting anticipatory bail to respondentNo. 1 the High Court has not considered the nature of allegations andseriousness of offences alleged against respondent No. 1 who at therelevant time was working as an Additional Chief Secretary.

3.7 Making the above submissions and relying upon above decisionas well as the decision of this Court in the case of P. Chidambaram Vs.Directorate of Enforcement; (2019) 9 SCC 24 as well as the decisionin the case of Y.S. Jagan Mohan Reddy Vs. CBI; (2013) 7 SCC439, it is prayed to allow the present appeal and quash and set aside theimpugned judgment and order passed by the High Court.

4. Present appeal is vehemently opposed by Shri Vijay Agarwal,learned counsel appearing on behalf of respondent No. 1 herein.

4.1 It is vehemently submitted by learned counsel appearing onbehalf of respondent No. 1 that in the facts and circumstances of thecase the High Court has not committed any error in granting anticipatorybail to respondent No. 1.

4.2 It is vehemently submitted that in the present case so far asthe main FIR is concerned, the other accused have been acquitted/

Adischarged. It is submitted that as held by this Court in the catena ofdecision that if the person is finally discharged/acquitted of the scheduledoffence or the criminal case against him is quashed by the Court ofcompetent jurisdiction, there can be no offence of money- launderingagainst him or any one claiming such property being the property linkedto stated scheduled offence through him.B

4.3 It is further submitted that in the present case even respondentNo. 1 was not named in the FIR for the scheduled offence(s).

4.4 It is further submitted that the offence under the Act, 2002 isdependent on predicate offence which would be ordinary law includingCthe provisions of the IPC. It submitted that therefore, as other accusedpersons have been acquitted/discharged for the predicate offence/schedule offence there is no question of any offence by respondent No.1 under the Act, 2002/money laundering.

4.5 It is further submitted by learned counsel appearing on behalfDof respondent No. 1 that while granting the anticipatory bail the HighCourt has followed the decision of this Court in the case of NikeshTarachand Shah (supra), the law which was prevalent at the relevanttime.

4.6 It is submitted that the prospective overruling of the said decisionEby this Court in the case of Dr. V.C. Mohan (supra) therefore, cannotbe pressed into service while challenging the impugned judgment andorder passed by the High Court granting anticipatory bail relying uponthe decision/law prevalent at the relevant time.

4.7 It is further submitted by learned counsel appearing on behalfFof respondent No. 1 that in the present case cogent reasons have beengiven by the High Court while granting anticipatory bail to respondentNo. 1 and considering the fact that respondent No. 1 has cooperated inthe investigation and appeared twice earlier before the IO/ED, theimpugned judgment and order passed by the High Court grantinganticipatory bail may not be interfered with by this Court.G

5. We have heard learned counsel appearing on behalf of therespective parties at length. At the outset, it is required to be noted thatrespondent No. 1 is apprehending his arrest in connection with thecomplaint/case by the ED for the offence of money laundering underSection 3 of the Prevention of Money Laundering Act, 2002 and

punishable under Section 4 of the said Act. An enquiry/investigation isgoing on against respondent No. 1 for the scheduled offence in connectionwith FIR No. 12/2019. Once the enquiry/investigation against respondentNo. 1 is going on for the offence under the Act, 2002, the rigour ofSection 45 of the Act, 2002 would be attracted. Section 45 of the Act,2002 reads as under: -

“45. Offences to be cognizable and non-bailable.—

(1) [Notwithstanding anything contained in the Code of CriminalProcedure, 1973 (2 of 1974), no person accused of an offence[under this Act] shall be released on bail or on his own bondunless—]

(i) the Public Prosecutor has been given an opportunity to opposethe application for such release; and

(ii) where the Public Prosecutor opposes the application, thecourt is satisfied that there are reasonable grounds for believingthat he is not guilty of such offence and that he is not likely tocommit any offence while on bail:

Provided that person, who, is under the age of sixteenyears, or is woman or is sick or infirm [or is accused either onhis own or along with other co- accused of money-laundering asum of less than one crore rupees], may be released on bail, if theSpecial Court so directs:

Provided further that the Special Court shall not takecognizance of any offence punishable under Section 4 except upona complaint in writing made by

(i) the Director; or

(ii) any officer of the Central Government or StateGovernment authorised in writing in this behalf by the CentralGovernment by general or special order made in this behalfby that Government.

[(1-A) Notwithstanding anything contained in the Code ofCriminal Procedure, 1973 (2 of 1974), or any other provision ofthis Act, no police officer shall investigate into an offence underthis Act unless specifically authorised, by the Central Government

Aby general or special order, and, subject to such conditions asmay be prescribed.]

(2) The limitation on granting of bail specified in [* * *]sub-section (1) is in addition to the limitations under the Code ofCriminal Procedure, 1973 (2 of 1974) or any other law for theBtime being in force on granting of bail.”

5.1 By the impugned judgment and order, while grantinganticipatory bail the High Court has observed that the provisions ofSection 45 of the Act, 2002 shall not be applicable with respect to theanticipatory bail applications/proceedings under Section 438 Cr.PC. ForCwhich the High Court has relied upon the decision of this Court in thecase of Nikesh Tarachand Shah (supra). In the case of Dr. V.C.Mohan (supra), this Court has specifically observed and held that it isthe wrong understanding that in the case of Nikesh Tarachand Shah(supra) this Court has held that the rigour of Section 45 of the Act, 2002shall not be applicable to the application under Section 438 Cr. PC. InDthe case of Dr. V.C. Mohan (supra) in which the decision of this Courtin the case of Nikesh Tarachand Shah (supra) was pressed into service,it is specifically observed by this Court that it is one thing to say thatSection 45 of the Act, 2002 to offences under the ordinary law wouldnot get attracted but once the prayer for anticipatory bail is made inEconnection with offence under the Act, 2002, the underlying principlesand rigours of Section 45 of the Act, must get triggered – although theapplication is under Section 438 Cr.PC. Therefore, the observations madeby the High Court that the provisions of Section 45 of the Act, 2002 shallnot be applicable in connection with an application under Section 438Cr.PC is just contrary to the decision in the case of Dr. V.C. MohanF(supra) and the same is on misunderstanding of the observations madein the case of Nikesh Tarachand Shah (supra). Once the rigour underSection 45 of the Act, 2002 shall be applicable the impugned judgmentand order passed by the High Court granting anticipatory bail to respondentNo. 1 is unsustainable.G

6. Even otherwise on merits also, the impugned judgment andorder passed by the High Court granting anticipatory bail to respondentNo. 1 is erroneous and unsustainable. While granting the anticipatorybail to respondent No. 1 the High Court has not at all considered thenature of allegations and seriousness of the offences alleged of moneyHlaundering and the offence(s) under the Act, 2002. Looking to the nature

of allegations, it can be said that the same can be said to be very seriousallegations of money laundering which are required to be investigatedthoroughly. As per the investigating agency, they have collected somematerial connecting respondent No. 1 having taken undue advantagefrom Srinivas Raju Mantena. From the impugned judgment and orderpassed by the High Court, it appears that the High Court has consideredthe matter, as if, it was dealing with the prayer for anticipatory bail inconnection with the ordinary offence under IPC.

6.1 Now so far as the submissions on behalf of respondent No. 1that respondent No. 1 was not named in the FIR with respect to thescheduled offence and that the other accused are discharged/acquittedis concerned, merely because other accused are acquitted, it cannot bea ground not to continue the investigation against respondent No. 1. Anenquiry/investigation is going on against respondent No. 1 with respectto the scheduled offences. Therefore, the enquiry/investigation itself issufficient at this stage.

6.2 While granting the anticipatory bail, what is weighed with theHigh Court and what is observed by the High Court is as under: -

“A careful reading of the aforesaid legal position and in the lightof the circumstances of the case on hand, which clearly indicatesthat the 1[st] respondent has doubt regarding the involvement ofthe petitioner in commission of the crime and he is being summonedfor disclosure and in case of his non-disclosure of any material,on the pretext of non-co-operation, the 1[st] respondent may proceedto arrest him. The petitioner is retired employee aged about 60years and is permanent resident of Hyderabad, Further, majorpart of the investigation has been completed with respect to theincriminating documents and digital devices, which have alreadybeen seized. Hence, there may not be chance of tampering withthe investigation at this stage, because as rightly pointed out bythe learned Senior Counsel for the petitioner that criminal casehas already been filed against the other accused and the same ispending before the Special Court at Bhopal.”

6.3 From the aforesaid, it can be seen that the High Court has notat all considered the nature of allegations and the seriousness of theoffences alleged against respondent No. 1. As per the catena of decisionof this Court, more particularly, observed in the case of P. Chidambaram(supra) in case of economic offences, which are having an impact on

Athe society, the Court must be very slow in exercising the discretion

under Section 438 of Cr.PC.

7. Considering the overall facts and circumstances of the caseand the reasoning given by the High Court and as observed hereinabove,the rigour of Section 45 of the Act, 2002 shall be applicable even withBrespect to the application under Section 438 Cr.PC and therefore, theimpugned judgment and order passed by the High Court grantinganticipatory bail to respondent No. 1 herein in connection with F. No.ECIR/HYZO/36/2020 dated 15.12.2020 is unsustainable. Consequently,the impugned judgment and order passed by the High Court grantinganticipatory bail to respondent No. 1 is hereby quashed and set aside.CRespondent No. 1 be dealt with in accordance with law. However, it isobserved and made clear that after respondent No. 1 is arrested, if hefiles any regular bail application, the same be considered in accordancewith law and on its own merits and considering the material collectedduring enquiry/investigation of the case. Present appeal is accordinglyDallowed. No costs.

Divya Pandey

(Assisted by : Abhishek Pratap Singh and Shevali Monga, LCRAs)

Appeal allowed.