GAUTAM KUNDU Vs. MANOJ KUMAR ASSISTANT DIRECTOR, EASTERN REGION, DIRECTORATE OF ENFORCEMENT (PREV

Tags Bail Money Laundering

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Crl.), 1706 of 2015, Judgment Date: Dec 16, 2015

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1706 OF 2015
(Arising out of SLP(Crl.) No.6701 of 2015)

GAUTAM KUNDU … APPELLANT(S)

:VERSUS:

MANOJ KUMAR, ASSISTANT DIRECTOR,
EASTERN REGION, DIRECTORATE OF
ENFORCEMENT (PREVENTION OF MONEY
LAUNDERING ACT) GOVT. OF INDIA … RESPONDENT(S)

J U D G M E N T
Pinaki Chandra Ghose, J.
1. Leave granted.

2. This appeal, by special leave, is directed against the judgment and
order dated 21st July, 2015 passed by the High Court of Calcutta in CRM
No.6285 of 2015, whereby the High Court has rejected appellant's
application for bail under Section 439 of the Code of Criminal Procedure,
1973. The appellant was arrested on 25.03.2015 in relation to an offence
alleged to have been committed under Section 3 of the Prevention of Money
Laundering Act, 2002, (hereinafter referred to as "PMLA").

3. The appellant is the Chairman of Rose Valley Real Estate Construction
Ltd. (hereinafter referred to as the "Rose Valley"), a public company
incorporated in the year 1999 and registered under the Companies Act, 1956.
Certain non-convertible debentures were issued by the Rose Valley by
'private placement method.' No advertisements etc. were issued to the
public. The said debentures were issued to the employees of the Company and
to their friends and associates after fulfilling the formalities for
private placement of debentures. Thus, the appellant collected money by
issuing secured debentures by way of private placement in compliance with
the guidelines issued by the Securities and Exchange Board of India from
time to time.

4. On 26.03.2013, the Adjudicating Officer, SEBI, passed an order
imposing a penalty of Rs.1 crore upon the Rose Valley for violation of the
provisions of Sections 11(C) of the Securities and Exchange Board of India
Act, 1992 (hereafter referred to as the SEBI Act) which was reduced to
Rs.10 lakhs by the Securities Appellate Tribunal, Mumbai. A letter was
issued on 26.06.2013 by the Securities and Exchange Board of India ("SEBI")
to the appellant Rose Valley informing the appellant about the offences
alleged to have been committed by it under the Companies Act, SEBI Act &
Regulations, and Section 405 of the Indian Penal Code. The appeal filed by
the appellant before the Securities Appellate Tribunal was allowed on
12.12.2013, holding that the appellant Company has repaid all the money
collected from the investors. It was further held by the Securities
Appellate Tribunal that there are no grounds for violation of Section
11(C)(3) of the SEBI Act.

5. On the basis of the aforementioned letter dated 26.06.2013 issued by
SEBI, the respondent filed a report being ECIR No.KIZO/02/2014 dated
27.02.2014, alleging commission of offence by the Rose Valley and its
officers, punishable under Section 24 of the SEBI Act. Thereafter, search
and seizure was conducted at the offices of the Rose Valley.

6. A complaint was filed by the respondent authorities, being C/14214 of
2013, alleging that the Rose Valley transferred the money raised by issue
of debentures from the account of one company to that of another company.
It is also alleged that the money collected by issuing the debentures for
the purpose of one business has been invested in some other business. The
proceedings under Section 24 of the SEBI Act has been challenged in the
High Court by way of revision and the said revision is pending for hearing
and further proceeding of the complaint case, being C/14214 of 2013, has
been stayed by the High Court. The High Court also directed the respondent
not to take any coercive measure against the appellant.

7. Vide its order dated 18.06.2014, SEBI directed the appellant Rose
Valley to refund the money to the customers of the Ashirbad Scheme. This
order was challenged before the Securities Appellate Tribunal by way of
Appeal No.233 of 2014. On 19.06.2014, a Show Cause Notice under Section
8(1) of the PMLA was served upon Rose Valley and its officials. Rose Valley
filed a writ petition before the High Court of Calcutta challenging the
said Show Cause Notice. The said writ petition was dismissed by the learned
Single Judge of the High Court. Thereafter, the matter was taken in appeal
before the Division Bench of the Calcutta High Court, being AST No.345 of
2014. The Division Bench of the High Court dismissed the said appeal and
directed the appellant Rose Valley to appear before the Adjudicating
Authority under Section 8 of the PMLA and directed the Adjudicating
Authority to decide the preliminary objections as may be raised by the Rose
Valley, including the applicability of the PMLA as also the validity of the
search and seizure against Rose Valley. It was further directed that the
Adjudicating Authority should pass a reasoned order in the matter and
communicate the same to the appellant Rose Valley within two days from the
date of passing such order.

8. A complaint was filed by the respondent on April 2, 2015, in the
Court of learned Chief Judge, City Sessions Court at Kolkata, against the
appellant under Section 4 of PMLA, though no offence is made out against
the appellant under Section 3 of the PMLA. The said complaint has been
registered as ML Case No.3 of 2015. Despite having fully cooperated with
the investigation, the appellant was arrested on 25.03.2015 on suspicion of
having committed an offence punishable under the provisions of the PMLA and
is detained in custody since then.

9. While the appellant was in custody, his father expired on 06.04.2015
upon which he moved an application before the High Court of Calcutta for
interim bail to perform the rituals for his deceased father. The High Court
vide its order 08.04.2015, directed release of the appellant on provisional
bail for two weeks on the conditions mentioned in the said order. On
completion of the period of provisional bail, the appellant duly
surrendered before the Court of learned Chief Judge, City Sessions Court at
Kolkata.

10. On 06.07.2015, the appellant filed a fresh bail application under
Section 439 of the Code of Criminal Procedure before the High Court of
Calcutta, being CRM No.6285 of 2015. Vide impugned judgment and order the
High Court has rejected the said application of the appellant holding that
no order has yet been passed by any competent Court of law that no offence
is made out against the appellant under Section 24 of the SEBI Act. It is
pertinent to mention here that a criminal revision praying for quashing of
the proceedings initiated against the appellant under Section 24 of the
SEBI Act is still pending for decision before the High Court.

11. Aggrieved by the rejection of the bail application filed under
Section 439 of the Code of Criminal Procedure, the appellant has approached
this Court through this appeal by special leave.

12. We have heard Mr. Gopal Subramanium, learned senior counsel appearing
for the appellant and also Mr. Ranjit Kumar, learned Solicitor General for
India. For proper appreciation of submission made by learned counsel
appearing for the parties, it would be necessary to consider the
authorities cited on behalf of the both parties.

13. Mr. Gopal Subramanium, learned senior counsel appearing for the
appellant submitted that there is no offence made out under PMLA against
the appellant as Section 24 of the SEBI Act is not a separate scheduled
offence under the PMLA. Section 12A read with Section 24 of SEBI Act is the
scheduled offence under the PMLA since 2009. Neither the complaint filed by
SEBI nor the complaint filed by the respondent (which is based entirely on
SEBI complaint) prosecutes the appellant for violation of Section 12A read
with Section 24 of the SEBI Act.

14. According to learned senior counsel for the appellant, Section 24 of
the SEBI Act was printed separately in the Schedule of PMLA for the first
time vide PMLA (Amendment) Act, 2012 w.e.f. 15.02.2013, which is clearly an
inadvertent typographical error. The description of offence given under
paragraph 11 of the Schedule to PMLA for Section 24 of the SEBI Act reads
as "acquisition of securities or control", which is different from the
description given to the Section under the SEBI Act, which describes the
Section as "Offences". Rather the heading "acquisition of securities or
control" is part of the heading of Section 12A read with Section 24 which
is the scheduled offence. The relevant extract of the Schedule to the

PMLA, as it stood after the 2009 Amendment, is as follows:

Paragraph 8 - The Securities and Exchange Board of India Act, 1992 (15 of
1992)

The relevant extract of the Schedule to the PMLA as it stands today after
the Amendment Act of 2012 w.e.f. 15.02.2013 is as follows:

Paragraph 11 - The Securities and Exchange Board of India Act, 1992 (15 of
1992)

15. The learned senior counsel for the appellant submitted that if the
offences prescribed against the sections in paragraph 11 in both the rows
are read together, the same will appear as the heading of Section 12A of
the SEBI Act. A conjoint reading of two rows under paragraph 11 of Part A
of the Schedule would show that the same is in substance a reproduction of
paragraph 8 of Part B of the Schedule of PMLA as was prevailing prior to
the amendment effected on 15.02.2013 and therefore, the position remains
unchanged. Section 12A of the SEBI Act is as follows:

"Prohibition of manipulative and deceptive devices, insider trading and
substantial acquisition of securities or control.

12A. No person shall directly or indirectly -

(a) use or employ, in connection with the issue, purchase or sale of any
securities listed or proposed to be listed on a recognized stock exchange,
any manipulative or deceptive device or contrivance in contravention of the
provisions of this Act or the rules or the regulations made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with
issue or dealing in securities which are listed or proposed to be listed on
a recognized stock exchange;

(c) engage in any act, practice, course of business which operates or
would operate as fraud or deceit upon any person, in connection with the
issue, dealing in securities which are listed or proposed to be listed on a
recognized stock exchange, in contravention of the provisions of this Act
or the rules or the regulations made thereunder;

(d) engage in insider trading;

(e) deal in securities while in possession of material or non-public
information or communicate such material or non-public information to any
other person, in a manner which is in contravention of the provisions of
this Act or the rules or the regulations made thereunder;

(f) acquire control of any company or securities more than the percentage
of equity share capital of a company whose securities are listed or
proposed to be listed on a recognized stock exchange in contravention of
the regulations made under this Act."

Section 24 of the SEBI Act reads as follows:

"24. Offences. - (1) Without prejudice to any award of penalty by the
Adjudicating Officer under this Act, if any person contravenes or attempts
to contravene or abets the contravention of the provisions of this Act or
of any rules or regulations made thereunder, he shall be punishable with
imprisonment for a term which may extend to ten years, or with fine, which
may extend to twenty-five crore rupees or with both.

(2) If any person fails to pay the penalty imposed by the Adjudicating
Officer or fails to comply with any of his directions or orders, he shall
be punishable with imprisonment for a term which shall not be less than one
month, but which may extend to ten years or with fine, which may extend to
twenty-five crore rupees or with both."

16. According to the learned senior counsel for the appellant, the fact
that no new offence was meant to be added by way of the 2012 amendment, is
clear from a plain reading of the "Statement of Objects and Reasons" to the
Amendment of 2012, as well as the "Notes on Clauses" on the Amendment Act,
2012 and from a comparison of the Schedules of PMLA of 2009 and amended
PMLA of 2012. It is submitted by the learned senior counsel for the
appellant that the respondent is wrongly reading Section 24 of SEBI Act
simplicitor as a separate scheduled offence, whereas Section 24 is a
general penal provision for violation of any and every provisions of the
SEBI Act or any rules or regulations made thereunder.

17. It was further submitted by the learned senior counsel appearing for
the appellant that if the intent of the legislature was to incorporate
Section 24 of SEBI Act alone as an offence, in that event, there would have
been no necessity to incorporate "12A read with Section 24" inasmuch as
Section 24 of the SEBI Act prescribes that all violations of provisions of
SEBI Act would be punishable in terms of Section 24 of the SEBI Act, 1992.
Had that been the intention of the legislature, the legislature would have
mentioned either "offences and penalties under SEBI Act, 1992" or only
Section 24 and the heading thereof, as scheduled offence. There was or
could be no necessity to specify section 12A separately if the legislature
intended to incorporate Section 24 as a separate scheduled offence.

18. Further, the Enforcement Directorate's own document titled "FAQs" on
their website mentions the Schedule to PMLA which treats Section 12A r/w
Section 24 of the SEBI Act as a scheduled offence and not Section 24 alone.
Similarly, the Schedule to PMLA on the website of the Ministry of Finance-
Financial Intelligence Unit also mentions S.12A r/w 24 of the SEBI Act as
the scheduled offence and not Section 24 alone. This reflects the
authority/government's own understanding of the Schedule. Thus, it can be
safely said that the printing of Section 24 of SEBI Act separately under
the Schedule to the PMLA is vide an inadvertent typographical error that
has crept into the legislation as is apparent from the marginal note
therein. It is an accepted principle of interpretation of statutes that
where an inadvertent grammatical or other error has palpably crept into the
legislation, the Court is at liberty to disregard the error in applying the
statute. (Afcons Infrastructure Ltd. v. Cherian Verkey Construction Co. (P)
Ltd., (2010) 8 SCC 24).

19. Learned senior counsel for the appellant further submitted that the
description given to the offence under Section 24 of SEBI Act, in the
Schedule to PMLA is "acquisition of securities or control", and even if
Section 24 is treated as a separate scheduled offence, the words used in
the description have to be given meaning to and its application has to be
restricted to the offence described under it in the Schedule. The learned
senior counsel for the appellant further submitted that this Court has held
in numerous judgments that the Court should give meaning to each and every
word used by the legislature and it is not a sound principle of
construction to brush aside words in a statute as being inapposite surplus,
if they can have a proper application in circumstances conceivable within
the contemplation of the statute. [See: Gurudevatta VKSSS Maryadit v. State
of Maharashtra, (2001) 4 SCC 534 at para 26]. It has also been held by this
Court that "the courts always presume that the legislature inserted every
part thereof for a purpose and the legislative intent is that every part of
the statute should have effect. The legislature is deemed not to waste its
words or to say anything in vain and a construction which attributes
redundancy to the legislature will not be accepted except for compelling
reasons." [Visitor, AMU v. K.S. Misra, (2007) 8 SCC 593, at para 13)].

20. Therefore, learned senior counsel for the appellant submitted, the
words "acquisition of securities or control", appearing next to Section 24
of the SEBI Act in the Schedule to the PMLA must be given due meaning and
construed to mean that only that extent of the offence which pertains to
""acquisition of securities or control" is a punishable offence under PMLA
and not any other violation under the SEBI Act.

21. It was further submitted by the learned senior counsel for the
appellant that Section 24 alone cannot by itself be a scheduled offence
under the PMLA since it does not enumerate a specific offence rather it is
the nature of a "catch-all" penal provision, which imposes punishment for
any contravention of the SEBI Act, Rules or Regulations and does not
precisely define or specify any offence in particular. Inclusion of Section
24 as a separate offence would be a violation of the basic principle of
criminal jurisprudence that 'criminal law has to be clear and unambiguous.'
It has been held by this Court in numerous judgments that criminal law
ought to be absolutely clear, specific and not vague, failing which it
would suffer from arbitrariness. [Ref: (i) State of Madhya Pradesh v.
Baldeo Prasad, (1961) 1 SCR 970; (ii) Harakchand Ratanchand Banthia & Ors.
v. Union of India & Ors., (1969) 2 SCC 166; and (iii) A.K. Roy & Ors. v.
Union of India & Ors., (1982) SCR 272].

22. It was alternatively submitted by the learned senior counsel
appearing for the appellant that assuming if Section 24 simplicitor is
treated as a scheduled offence, it was introduced vide PMLA (Amendment)
Act, 2012, w.e.f. 15.02.2013 i.e. much after the offences were alleged to
have been committed and bar against ex-post facto laws under Article 20(1)
would be attracted. Section 2(u) of PMLA defines "proceeds of crime" and
states that it must be as a result of criminal activity relating to a
scheduled offence. Under Section 3 of the PMLA, in order for the offence of
money laundering to be triggered, it must be established at the threshold
that the "proceeds of crime" was as a result of criminal activity relating
to a scheduled offence on the date such crime was committed. He submitted
that the offences are alleged to have been committed between the years 2001
and 2007. The offence under Section 12A r/w Section 24 of SEBI Act became
scheduled offence only by way of the Prevention of Money Laundering
(Amendment) Act, 2009 w.e.f. 01.06.2009, much after the alleged commission
of crime and the appellant is admittedly not accused of violation of
Section 12A r/w Section 24 of the SEBI Act.

23. Mr. Ranjit Kumar, learned Solicitor General appearing on behalf of the
respondent, on the other hand, submitted that Rose Valley Group of
Companies floated as many as 27 companies although two out of them, i.e.
Rose Valley Real Estate Construction Ltd. ("Rose Valley") and Rose Valley
Hotels Entertainment Ltd. were the front runners to allure the investors to
invest in (i) Ashirbad Scheme, (ii)Time Share Scheme, and (iii) Debenture
Scheme, promising high returns to the investors and the funds so collected
from the public at large were subsequently laundered in associated
companies. Rose Valley made a public issue of debentures without filing any
offer document in violation of Section 56 of the Companies Act, 1956, nor
did it file statement in lieu of prospectus as claimed by it. On the basis
of the information/documents received from SEBI, the respondent filed a
complaint in the Court of Chief Metropolitan Magistrate at Calcutta for
Scheduled Offence under Section 24 of the SEBI Act. The respondent
conducted searches of the premises of the Rose Valley Group on 22.05.2014
and 23.05.2014, resulting into seizure of incriminating documents and
Indian currency of Rs.37.07 lacs. The respondent's action of search and
seizure was challenged by the appellant by filing a writ petition before
the High Court of Calcutta which was dismissed on 7.7.2014.

24. He further submitted that the investigation conducted by the
respondent revealed that Rose Valley illegally and fraudulently collected
public money from the general public in the State of West Bengal, Assam,
Tripura and Odisha, amounting to Rs.12363.63 crores (approx). In addition
to this, Rose Valley illegally and fraudulently collected public funds from
the States of Karnataka, Bihar, Maharashtra, Jharkhand, Uttar Pradesh,
Delhi, Madhya Pradesh, amounting to more than Rs.3120.97 crores (approx).
Therefore, the funds of Rs.12.82 crores collected from the general public
under the garb of Debenture Schemes is a tip of the iceberg.

25. Mr. Ranjit Kumar, learned Solicitor General further submitted that
the "scheduled offences" and "offence of money laundering" are mutually
exclusive and independent of each other. Section 3 of the PMLA deals with
the offence of money laundering punishable under Section 4 of the said Act,
whereas the 'Schedule' to PMLA involving offences under 28 paragraphs
enable the respondent to conduct the investigation for the collection of
evidence relating to offence of money laundering. In the present case, the
respondent filed the complaint under Section 45 of PMLA and cognizance of
the same has been taken by the Special Court on 02.04.2015 under Section
44(1)(b) of PMLA. He further submitted that the complaint filed by SEBI has
nothing to do with the merits of the present case and the High Court stayed
the proceedings of the SEBI complaint on the ground that the CMM had no
authority to take cognizance of the offence as the latest amendment in
Section 26 of SEBI Act makes the offence triable by the Court of Sessions.

26. The learned Solicitor General submitted that Section 45 of PMLA refers
only to the term 'Special Court' and therefore has to be given restricted
meaning. According to him, PMLA is a 'Special Law' applicable to the
subject of money laundering, and deals with economic offenders and white
collar criminals. The object of PMLA is to prevent money-laundering and to
provide for confiscation of property derived from, or involved in, money-
laundering. To enable the scheme of the Act, reliance was placed on various
provisions of the PMLA. He further submitted that Section 44 of the PMLA
only confers jurisdiction on the Special Court to deal with offences under
the PMLA. Section 45 of PMLA makes the offence of money laundering
cognizable and non-bailable and also provides that notwithstanding the
provisions of Criminal Procedure Code, 1973, 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 the Public Prosecutor has been given an opportunity to oppose the
application for such release.

27. The learned Solicitor General lastly submitted that 'money
laundering' being an economic offence poses a serious threat to the
National Economy and National Interest and committed with cool calculation
and deliberate design with the motive of personal gain regardless of the
consequences to the society. Hence, for Money Launderers 'jail is the rule
and bail is an exception, which finds support from many landmark judgments
of this Court.

28. Before dealing with the application for bail on merit, it is to be
considered whether the provisions of Section 45 of the PMLA are binding on
the High Court while considering the application for bail under Section 439
of the Code of Criminal Procedure. There is no doubt that PMLA deals with
the offence of money laundering and the Parliament has enacted this law as
per commitment of the country to the United Nations General Assembly. PMLA
is a special statute enacted by the Parliament for dealing with money
laundering. Section 5 of the Code of Criminal Procedure, 1973 clearly lays
down that the provisions of the Code of Criminal Procedure will not affect
any special statute or any local law. In other words, the provisions of any
special statute will prevail over the general provisions of the Code of
Criminal Procedure in case of any conflict.

29. Section 45 of the PMLA starts with a non obstante clause which
indicates that the provisions laid down in Section 45 of the PMLA will have
overriding effect on the general provisions of the Code of Criminal
Procedure in case of conflict between them. Section 45 of the PMLA imposes
following two conditions for grant of bail to any person accused of an
offence punishable for a term of imprisonment of more than three years
under Part-A of the Schedule of the PMLA: (i) That the prosecutor must be
given an opportunity to oppose the application for bail; and (ii) That the
Court must be satisfied that there are reasonable grounds for believing
that the accused person is not guilty of such offence and that he is not
likely to commit any offence while on bail.

30. The conditions specified under Section 45 of the PMLA are mandatory
and needs to be complied with which is further strengthened by the
provisions of Section 65 and also Section 71 of the PMLA. Section 65
requires that the provisions of Cr.P.C. shall apply in so far as they are
not inconsistent with the provisions of this Act and Section 71 provides
that the provisions of the PMLA shall have overriding effect
notwithstanding anything inconsistent therewith contained in any other law
for the time being in force. PMLA has an overriding effect and the
provisions of Cr.P.C. 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 Cr.P.C. 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.

31. It was submitted on behalf of the appellant that Section 12A read with
Section 24 of the SEBI Act does not include Section 24 of the said Act as a
scheduled offence but it is only Section 12A which is to be construed as a
scheduled offence as the description of offence against Section 24 of the
SEBI Act mentioned under paragraph 11 of the Schedule to PMLA is part of
Section 12A of the said Act. In this context it was submitted by the
learned Solicitor General that PMLA being a Special Statute cannot be given
restricted meaning while interpreting its provisions including the Schedule
which is an integral part of this Act. PMLA has been enacted by the
Parliament as per commitment of the country to the United Nations and
having global dimensions and cannot be confined to national boundaries of
our country. Moreover, its legislative intent has to be gathered from the
plain reading of the language used in the provisions of the Act and the
Schedule appended thereunder. Hence, there is no ambiguity that Section 24
of the SEBI Act is a scheduled offence under Paragraph 11 of the Schedule.
The fact remains that Section 24 of the SEBI Act is inclusive in nature and
also includes Section 12A within its ambit and scope. Further, on perusal
of various offences listed in the Schedule in 28 Paragraphs, it could be
seen that only penal provisions of the Statutes have been incorporated in
the Schedule. There is no denying the fact that Section 24 of the SEBI Act
is a penal provision of inclusive nature and thus it clearly reflects the
legislative intent of a scheduled offence under PMLA. Admittedly, the
complaint was filed by SEBI against the appellant on the allegation of
committing offence punishable under Section 4 of PMLA. The complaint
reveals that SEBI received a letter from the Ministry of Corporate Affairs,
Office of the Registrar of Companies ("ROC"), West Bengal, with reference
to Rose Valley in which the ROC had stated that Rose Valley has repeatedly
issued debentures in the years 2001-2002, 2004-2005, 2005-2006 and 2007-
2008 to more than 49 persons in each financial year without filing offer
documents with either the ROC or the SEBI and requested SEBI to investigate
into the matter. From the information provided by ROC, it was observed that
Rose Valley had raised a total sum of Rs.1282.225 lakhs from 2585 persons
by issuing secured debentures to the general public without complying with
the norms related to IPO of securities as per first provision to Section
67(3) of the Companies Act, 1956. Rose Valley by making public issue of
debentures during the period between 2001-2002 to 2007-2008, without
complying with the public issue norms, violated the provisions of erstwhile
SEBI (Disclosure and Investor Protection) Guidelines, 2000 and the
provisions of Section 117(A) of the Companies Act, 1956 and other
provisions of SEBI Act which is a Scheduled Offence under PMLA.

32. We have heard the learned counsel for the parties. At this stage we
refrained ourselves from deciding the questions tried to be raised at this
stage since it is nothing but a bail application. We cannot forget that
this case is relating to “Money Laundering” which we feel is a serious
threat to the national economy and national interest. We cannot brush aside
the fact that the schemes have been prepared in a calculative manner with a
deliberative design and motive of personal gain, regardless of the
consequence to the members of the society.

33. With regard to the questions raised by Mr. Gopal Subramanium, learned
senior counsel appearing on behalf of the appellant, at this stage, we do
not think that we should answer or deal with the same in view of the fact
that the matter is pending before a Division Bench of the High Court in
writ jurisdiction, as has been pointed out before us. Hence, any
observation or remarks made by us may cause prejudice to the case of both
the sides. Therefore, we feel that it would be proper for us only to deal
with the matter concerning bail. We note that admittedly the complaint is
filed against the appellant on the allegations of committing the offence
punishable under Section 4 of the PMLA. The contention raised on behalf of
the appellant that no offence under Section 24 of the SEBI Act is made out
against the appellant, which is a scheduled offence under the PMLA, needs
to be considered from the materials collected during the investigation by
the respondents. There is no order as yet passed by a competent court of
law, holding that no offence is made out against the appellant under
Section 24 of the SEBI Act and it would be noteworthy that a criminal
revision praying for quashing the proceedings initiated against the
appellant under Section 24 of SEBI Act is still pending for hearing before
the High Court. We have noted that Section 45 of the 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 the PMLA imposes two conditions for grant of bail, specified under
the said Act. We have not missed the proviso to Section 45 of the said Act
which indicates that the legislature has carved out an exception for grant
of bail by a Special Court when any person is under the age of 16 years or
is a woman or is a sick or infirm. Therefore, there is no doubt that the
conditions laid down under Section 45A of the 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 committing offence punishable under Section 4
of the PMLA, even when the application for bail is considered under Section
439 of the Code of Criminal Procedure.

34. We have further noted the directions given by this Court in Subrata
Chattoraj v. Union of India and Ors., (2014) 8 SCC 768, in particular to
paragraph 35.4.

35. We cannot brush aside the fact that the appellant floated as many as
27 companies to allure the investors to invest in their different companies
on a promise of high returns and funds were collected from the public at
large which were subsequently laundered in associated companies of Rose
Valley Group and were used for purchasing moveable and immoveable
properties.

36. We do not intend to further state the other facts excepting the fact
that admittedly the complaint was filed against the appellant on the
allegation of committing offence punishable under Section 4 of the PMLA.
The contention made on behalf of the appellant that no offence under
Section 24 of the SEBI Act is made out against the appellant, which is a
scheduled offence under the PMLA, needs to be considered from the material
collected during the investigation and further to be considered by the
competent court of law. We do not intend to express ourselves at this stage
with regard to the same as it may cause prejudice the case of the parties
in other proceedings. We are sure that it is not expected at this stage
that the guilt of the accused has to be established beyond reasonable doubt
through evidences. We have noted that in Y.S. Jagan Mohan Reddy v. Central
Bureau of Investigation, (2013) 7 SCC 439, this Court has observed that 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 country. In Union of India v.
Hassan Ali Khan, (2011) 10 SCC 235, this Court has laid down that what will
be the burden of proof when attempt is made to project the proceeds of
crime as untainted money. It is held in the said paragraph that allegations
may not ultimately be established, but having been made, the burden of
proof that the monies were not the proceeds of crime and were not,
therefore, tainted shifted on the accused persons under Section 24 of the
PML Act, 2002. The same proposition of law is reiterated and followed by
the Orissa High Court in the unreported decision of Smt. Janata Jha v.
Assistant Director, Directorate of Enforcement (CRLMC No. 114 of 2011
decided on December 16, 2013). Therefore, taking into account all these
propositions of law, we feel that the application for bail of the appellant
should be seen at this stage while the appellant is involved in the
economic offence, in general, and for the offence punishable under Section
4 of the PMLA, in particular.

37. We have further noted that the High Court at the time of refusing the
bail application, duly considered this fact and further considered the
statement of the Assistant General Manager of RBI, Kolkata, seizure list,
statements of directors of Rose Valley, statements of officer bearers of
Rose Valley, statements of debenture trustees of Rose Valley, statements of
debenture holders of Rose Valley, statements of AGM of Accounts of Rose
Valley and statements of Regional Managers of Rose Valley for formation of
opinion whether the appellant is involved in the offence of money
laundering and on consideration of the said statements and other materials
collected during the investigation, the High Court specifically stated as
follows:

“By making a pragmatic approach to the provision of Section 45(1) of the
P.M.L. Act and on consideration of the antecedents of the petitioner in
collection of money from open market for issuing secured debentures in
violation of the guidelines of SEBI and on further consideration of the
manner of keeping accounts of Rose Valley, I am unable to hold that the
petitioner is not likely to commit any offence while on bail. As a result,
I cannot persuade myself to grant bail to the petitioner at this stage.
So, prayer for bail is rejected. The application is dismissed.”

38. In these circumstances, we do not find that the High Court has
exercised its discretion capriciously or arbitrarily in the facts and
circumstances of this case. We further note that the High Court has called
for all the relevant papers and duly taken note of that and thereafter
after satisfying its conscience, refused the bail. Therefore, we do not
find that the High Court has committed any wrong in refusing bail in the
given circumstances. Accordingly, we do not find any reason to interfere
with the impugned order so passed by the High Court and the bail, as prayed
before us, challenging the said order is refused. Consequently the appeal
is dismissed.

………………………………J

(Pinaki Chandra Ghose)

………………………………J

(R.K. Agrawal)

New Delhi;

December 16, 2015.

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