The Delhi High Court recently granted bail to Rana Kapoor, the main accused in a money laundering case stemming from the Yes Bank scam.
The prime allegation against Kapoor is that he violated banking norms and illegally extended credit facilities to several companies, in lieu of personal illegal gratification.
The Enforcement Directorate (ED) filed its complaint (the equivalent of a chargesheet in regular criminal cases) before the trial court in Delhi, in 2021.
As per practice, the ED files its complaint before the trial court at the end of its investigation; post which, the trial court must apply its mind and decide if there is enough merit to proceed with a trial.
If there is, the accused persons are summoned by court and directed to appear and participate in the trial.
At the time of appearance, the accused persons have to apply for bail before court and fulfil any conditions which may be imposed by court for grant of bail.
This is a routine matter so long as the accused has cooperated with the investigation and if they have not been arrested previously. In most cases courts are inclined to grant bail, subject to the accused appearing before court on every date fixed for trial proceedings.
Twin Conditions for Bail Under PMLA
Such a bail application was filed by Kapoor and rejected by the Delhi trial court, post which the matter came in challenge before the High Court. One of the prime objections raised by the State against grant of bail was that the twin conditions under Section 45, PMLA, must be satisfied before such bail is granted.
In addition to considering any bail application as per standard law on bail, Section 45 requires a trial court to comply with the following conditions before granting bail to a PMLA accused:
The Public Prosecutor must be given an opportunity to oppose bail;
Where the Public Prosecutor opposes the bail application, bail can only be granted if the trial court reaches satisfaction that there are reasonable grounds to believe that the accused has not committed the alleged offences and also would not commit any other offence when out on bail.
The above conditions have been widely criticised as arbitrary, as they de facto require a trial court to take a prima facie view on the guilt or innocence of an accused at the stage of investigation i.e. when he is arrested.
Further, the trial court is also expected to arrive at a conclusion that the accused would not commit any offence when out on bail, which appears to be an unfair burden upon any judicial officer and would act as a deterrent against grant of bail.
However, the twin conditions were held to be constitutional by the SC in its recent ruling in Vijay Madanalal Choudhary v. Union of India.
The Question Before the Delhi High Court
The question for interpretation before the Delhi High Court in Rana Kapoor’s case was whether the twin conditions must be satisfied even at post cognizance stage i.e. where the ED has not arrested the accused during investigation and the accused is simply seeking bail from the court on being summoned to face trial.
The Delhi High Court granted bail to Kapoor while placing reliance on the judgment of the SC in Satinder Kumar Antil v. CBI, which laid down guidelines for grant of bail for different kinds of offences. In relation to offences such as PMLA, Antil held that if an accused has not been arrested during investigation and has cooperated with the authorities, he would be entitled to bail at the stage of summoning.
The above judgment in Rana Kapoor clarifies that the infamous bail conditions would not have to be satisfied by an undertrial covered by the Antil Judgment.
Delhi High Court Order: A Positive Step, But…
This is a positive step for protection of liberty of accused and also to avoid clogging of jails with PMLA undertrials. However, the arbitrary burden of the twin conditions still applies in case of bail applicants who were arrested at any time during investigation.
The Calcutta High Court in its recent judgment of ED v. Debarata Halder cancelled bail granted to an accused who was arrested at the stage of investigation and had sought bail after he was summoned as accused by the trial court.
The Calcutta HC held that as the accused was arrested by the ED at the stage of investigation, the twin conditions of bail must be satisfied even after trial starts, for the trial court to grant bail.
The above position creates an unfortunate situation on many fronts.
Firstly, it creates an unfair divide between persons who were arrested by the ED and those who were never arrested, as post commencement of trial the custody of accused persons is often unnecessary.
Considering the draconian and limitless powers with the ED for carrying out arrests, the same leaves the liberty of accused persons hanging in the balance, even after trial starts.
Secondly, a bare reading of the language of Section 45 suggests that it applies solely to arrests by the ED. Hence, to even extend its application to post summoning bail seems erroneous and puts an unfair burden on persons facing trial.
Thirdly, Section 45 burdens the Court with the duty to reach prima facie satisfaction that no offence has been committed (where the public prosecutor opposes bail), even though the same Court has summoned the accused to face trial. This appears to be an obvious contradiction and would make it even more tough to obtain bail at post summoning stage.
Further, in these cases as no arrest has been carried out by the ED at the stage of investigation, it does not appeal to reason why the public prosecutor should object bail when the stage of investigation is already over.
Fourthly, whether or not the Court would be forced to decide its prima facie satisfaction depends solely on whether the public prosecutor wishes to oppose the bail, whereas a question such as this should solely vest in the Court’s discretion and not be subject to the view of the government’s lawyer.
The Need of the Hour
The Vijay Madanlal judgment raised various concerns on questions of liberty and other fundamental rights of citizens.
While judgments watering down the immense scope of powers of the ED and the draconian nature of the PMLA on any front are welcome, it is imperative that issues concerning liberty are visited at a larger level and decided in a manner to protect rights of all similarly placed accused persons.
The Rana Kapoor judgment is a welcome step, but the law on PMLA bail requires heavy purposive interpretation to prevent abuse and/or unnecessary detention.
The issues dealt with in the above-mentioned judgments are expected to be brought in the near future before the SC, for better clarity.
(Rajiv Bhatnagar is a Partner in the disputes practice group of Khaitan and Co and regularly advises clients on PMLA and various other white-collar statutes. Ishan Khanna is a Principal Associate in the Disputes practice of Khaitan & Co., and specialises in white-collar criminal litigation and advisory. This is an opinion piece and the views expressed are the authors' own. The Quint neither endorses them nor is responsible for them.)
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