Directorate Of Enforcement vs M. Gopal Reddy

The Directorate of Enforcement …Appellant(s)

Versus

M. Gopal Reddy & Anr. …Respondent(s)

JUDGMENT

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned

judgment and order dated 02.03.2021 passed by the High

Court of Telangana at Hyderabad in Criminal Petition No.

1148/2021, by which, the High Court has allowed the said

bail application and has granted the anticipatory bail in

favour of respondent No. 1 herein and has directed to

release him on bail in the event of his arrest in connection

with F. No. ECIR/HYZO/36/2020 dated 15.12.2020 on the Signature Not Verified Digitally signed by R Natarajan Date: 2023.02.24 16:49:43 IST file of the Assistant Director, Enforcement Directorate Reason:

(hereinafter referred to as the ED), Government of India,

1 Hyderabad, which was registered for the offence of money

laundering under Section 3 of the Prevention of Money

Laundering Act, 2002 (hereinafter referred to as the Act,

2002) and punishable under Section 4 of the said Act, the

Directorate of Enforcement has preferred the present

appeal.

2. A FIR was registered by Economic Offences Wing (EOW),

Bhopal vide FIR No. 12/2019 dated 10.04.2019 wherein 20

persons/companies were named as suspected in the said

scam. M/s Max Mantena Micro 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 Systems Limited, Bangalore and M/s Tata

Consultancy Services (TCS) were given the contract for the

period of 5 years for the maintenance & operation of the

said portal. Some of the officials of MPSEDC in collusion

with the companies entrusted with maintenance and

testing of the portals namely M/s Osmo IT Solutions and

M/s Antares Systems Ltd, illegally accessed the e­Tender

2 portal and rigged the bidding process to suit a few private

bidders for huge amounts of bribe considerations.

2.2 As per the investigating agency, the preliminary

investigation by the Police established that various e­

tenders were illegally accessed and bids of a few

companies were manipulated to illegally make the bids of

those concerns as the lowest one.

2.3 Apart from tenders mentioned in the first preliminary

charge sheet filed by the EOW Bhopal namely No. 91, 93,

94 (Water Resource Dept); 2 tenders vide Nos. 49985 &

49982 of PWD; Tender no 49813, Tender No. 786 of

MPRDC; and Tenders vide Nos. 10030 & 10044, it was

suspected that many other tenders have also been

tampered using the same modus operandi. M/s Mantena

Group of Companies, Hyderabad, was suspected to be a

major beneficiary of this e­tender scam. As per the EOW

charge sheet, a joint venture of the Mantena Group known

as M/s Max Mantena Micro JV is the direct beneficiary of a

tampered e­tender No. 10030 worth Rs. 1020 Crore.

2.4 According to the investigating agency, the investigation

into the said FIR for the offences under Sections 120B,

3 420, 471 IPC and Section 7 r/w Section 13(2) of Prevention

of Corruption (PC) Act is going 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, a search

operation was conducted under the provisions of Section

17(1) of PMLA, 2002. Accordingly, 18 premises were

searched including the residences of the promoters and

offices of M/s Mantena Constructions Ltd, M/s Anteras

Pvt Ltd, M/s Osmo IT Solutions Pvt Ltd, M/s Arni Infra,

etc. a good amount of incriminating documents and digital

devices have been seized and are being examined for

evidence. It is clear from the ED investigation done so far

that a systematic conspiracy has been planned and

executed by a number of infrastructure companies based

at Hyderabad in collusion with a few Government officials

and IT management companies to illegally win e­tenders.

Further large amounts of bribes running into crore(s) of

rupees have exchanged hands using hawala channels. The

public funds meant for development activities have been

4 diverted and siphoned off for personal illegal enrichment

and for making illegal bribe payments. The appellant

department has recovered fund trail evidence and

generation of black money through bogus and over­billing

by the infra companies.

2.6 That respondent No. 1 herein who at the relevant time was

the Additional Chief Secretary in the Water Resources

Department in the State of Madhya Pradesh, was

summoned by the ED to explain the sudden spurt in the

allocation of tenders to M/s Mantena Construction during

his stint in the State of MP.

2.7 That apprehending his arrest in connection with ED case

for the scheduled offence under the Act, 2002, respondent

No. 1 herein approached the High Court by way of present

anticipatory bail application under Section 438 Cr.PC.

Without considering the rigour/bar under Section 45 of

the Act, 2002 and observing that as per the decision of this

Court in 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 not apply to Section 438

Cr.PC proceedings, the High Court has allowed the 5 anticipatory bail application and has directed that in case

of his arrest in connection with ED case he be released on

bail.

2.8 Feeling aggrieved and dissatisfied with the impugned

judgment and order passed by the High Court granting

anticipatory bail to respondent No. 1 in ED case, the

Directorate of Enforcement (ED) has preferred the present

appeal.

3. Shri K. M. Nataraj, learned ASG, appearing on behalf of the

ED – appellant has vehemently submitted that in the facts

and circumstances of the case, the High Court has

committed a very serious error in allowing the anticipatory

bail application and granting anticipatory bail to

respondent No. 1 in connection with ED case under the

Act, 2002.

3.1 It is submitted that as such the High Court has materially

erred in observing that the provisions of Section 45 of the

Act, 2002 shall not be applicable to Section 438 Cr.PC

proceedings. It is submitted that for that the High Court

has erred in relying upon the decision of this Court in the

case of Nikesh Tarachand Shah (supra). It is submitted

6 that subsequently in the case of The Asst. Director

Enforcement Directorate Vs. Dr. V.C. Mohan (2022 SCC

OnLine SC 452) ­ (Criminal Appeal No. 21/2022), this

Court has clarified that it is the wrong reading of the

decision in the case of Nikesh Tarachand Shah (supra)

that the provisions of Section 45 of the Act, 2002 shall not

be applicable to the anticipatory bail proceedings. It is

submitted that in the case of Dr. V.C. Mohan (supra) it is

specifically observed and held by this Court that Section

45 of the Act, 2002 shall be applicable with respect to the

offences under the Act, 2002 and the rigour of Section 45

of the Act, 2002 shall get triggered – although the

application is under Section 438 of Cr.PC. It is submitted

that therefore, the impugned judgment and order passed

by the High Court is just contrary to the decision of this

Court in the case of Dr. V.C. Mohan (supra).

3.2 It is further submitted by Shri K.M. Nataraj, learned ASG

appearing on behalf of the ED that even otherwise while

granting the anticipatory bail the High Court has not

properly appreciated and/or considered the seriousness of

7 the offences which are scheduled offences under the Act,

2002. It is submitted that the High Court has considered

the anticipatory bail application, as if, the High Court was

dealing with the prayer for anticipatory bail in connection

with the ordinary offences under IPC.

3.3 It is further vehemently submitted by learned ASG that

during investigation, the ED investigation has established

that there is a nexus between Srinivas Raju Mantena and

respondent No. 1 herein and the same needs to be

investigated in detail.

3.4 It is submitted that the ED had gathered material which

indicates nexus between respondent No. 1 and Srinivas

Raju Mantena, who is found to have committed the

offences of money laundering. It is submitted that

respondent No. 1 was summoned by ED but instead of

appearing before the IO, he filed a criminal petition before

the High Court and obtained the interim relief. It is

submitted that he appeared before the ED and his

statement was recorded under Section 50 of the Act, 2002.

It is submitted that however on both the occasions he was

8 totally evasive and non­cooperative and therefore, his

custodial interrogation is required.

3.5 It is further submitted by learned ASG that during the

investigation the ED has found that respondent No. 1 had

availed and enjoyed free trips in last one year alone on the

luxury plane of Mantena on multiple occasions. It is

submitted that during investigation it has been found that

respondent No. 1 had also availed other patronages from

Srinivas Raju Mantena like sponsoring foreign exchange

through Hawala Channels for his son.

3.6 It is submitted that while granting anticipatory bail to

respondent No. 1 the High Court has not considered the

nature of allegations and seriousness of offences alleged

against respondent No. 1 who at the relevant time was

working as an Additional Chief Secretary.

3.7 Making the above submissions and relying upon above

decision as 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 decision in the case of Y.S.

Jagan Mohan Reddy Vs. CBI; (2013) 7 SCC 439, it is

9 prayed to allow the present appeal and quash and set

aside the impugned 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

on behalf of respondent No. 1 that in the facts and

circumstances of the case the High Court has not

committed any error in granting anticipatory bail to

respondent No. 1.

4.2 It is vehemently submitted that in the present case so far

as the main FIR is concerned, the other accused have been

acquitted/discharged. It is submitted that as held by this

Court in the catena of decision that if the person is finally

discharged/acquitted of the scheduled offence or the

criminal case against him is quashed by the Court of

competent jurisdiction, there can be no offence of money­

laundering against him or any one claiming such property

being the property linked to stated scheduled offence

through him.

10 4.3 It is further submitted that in the present case even

respondent No. 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

is dependent on predicate offence which would be ordinary

law including the provisions of the IPC. It submitted that

therefore, as other accused persons 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

behalf of respondent No. 1 that while granting the

anticipatory bail the High Court has followed the decision

of this Court in the case of Nikesh Tarachand Shah

(supra), the law which was prevalent at the relevant time.

4.6 It is submitted that the prospective overruling of the said

decision by this Court in the case of Dr. V.C. Mohan

(supra) therefore, cannot be pressed into service while

challenging the impugned judgment and order passed by

11 the High Court granting anticipatory bail relying upon the

decision/law prevalent at the relevant time.

4.7 It is further submitted by learned counsel appearing on

behalf of respondent No. 1 that in the present case cogent

reasons have been given by the High Court while granting

anticipatory bail to respondent No. 1 and considering the

fact that respondent No. 1 has cooperated in the

investigation and appeared twice earlier before the IO/ED,

the impugned judgment and order passed by the High

Court granting anticipatory bail may not be interfered with

by this Court.

5. We have heard learned counsel appearing on behalf of the

respective parties at length. At the outset, it is required to

be noted that respondent No. 1 is apprehending his arrest

in connection with the complaint/case by the ED for the

offence of money laundering under Section 3 of the

Prevention of Money Laundering Act, 2002 and punishable

under Section 4 of the said Act. 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 going on

12 for the offence under the Act, 2002, the rigour of Section

45 of the Act, 2002 would be attracted. Section 45 of the

Act, 2002 reads as under: ­

“45. Offences to be cognizable and non­bailable.—

(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 money­laundering a sum of less than one crore rupees], may be released on bail, if the Special Court so directs:

Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by —

(i) the Director; or

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

[(1­A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any

13 other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.]

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

5.1 By the impugned judgment and order, while granting

anticipatory bail the High Court has observed that the

provisions of Section 45 of the Act, 2002 shall not be

applicable with respect to the anticipatory bail

applications/proceedings under Section 438 Cr.PC. For

which the High Court has relied upon the decision of this

Court in the case of Nikesh Tarachand Shah (supra). In

the case of Dr. V.C. Mohan (supra), this Court has

specifically observed and held that it is the wrong

understanding that in the case of Nikesh Tarachand Shah

(supra) this Court has held that the rigour of Section 45 of

the Act, 2002 shall not be applicable to the application

under Section 438 Cr. PC. In the case of Dr. V.C. Mohan

(supra) in which the decision of this Court in the case of

14 Nikesh Tarachand Shah (supra) was pressed into service,

it is specifically observed by this Court that it is one thing

to say that Section 45 of the Act, 2002 to offences under

the ordinary law would not get attracted but once the

prayer for anticipatory bail is made in connection with

offence under the Act, 2002, the underlying principles 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 of Section 45 of the Act, 2002 shall not be

applicable in connection with an application under Section

438 Cr.PC is just contrary to the decision in the case of Dr.

V.C. Mohan (supra) and the same is on misunderstanding

of the observations made in the case of Nikesh Tarachand

Shah (supra). Once the rigour under Section 45 of the Act,

2002 shall be applicable the impugned judgment and

order passed by the High Court granting anticipatory bail

to respondent No. 1 is unsustainable.

6. Even otherwise on merits also, the impugned judgment

and order passed by the High Court granting anticipatory

15 bail to respondent No. 1 is erroneous and unsustainable.

While granting the anticipatory bail to respondent No. 1 the

High Court has not at all considered the nature of

allegations and seriousness of the offences alleged of

money laundering 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 serious allegations of money

laundering which are required to be investigated

thoroughly. As per the investigating agency, they have

collected some material connecting respondent No. 1

having taken undue advantage from Srinivas Raju

Mantena. From the impugned judgment and order passed

by the High Court, it appears that the High Court has

considered the matter, as if, it was dealing with the prayer

for anticipatory bail in connection with the ordinary offence

under IPC.

6.1 Now so far as the submissions on behalf of respondent No.

1 that respondent No. 1 was not named in the FIR with

respect to the scheduled offence and that the other

accused are discharged/acquitted is concerned, merely

because other accused are acquitted, it cannot be a

16 ground not to continue the investigation against

respondent No. 1. An enquiry/investigation is going on

against respondent No. 1 with respect to the scheduled

offences. Therefore, the enquiry/investigation itself is

sufficient at this stage.

6.2 While granting the anticipatory bail, what is weighed with

the High Court and what is observed by the High Court is

as under: ­ “A careful reading of the aforesaid legal position and in the light of the circumstances of the case on hand, which clearly indicates that the 1st respondent has a doubt regarding the involvement of the petitioner in commission of the crime and he is being summoned for disclosure and in case of his non­disclosure of any material, on the pretext of non­co­operation, the 1st respondent may proceed to arrest him. The petitioner is a retired employee aged about 60 years and is a permanent resident of Hyderabad, Further, major part of the investigation has been completed with respect to the incriminating documents and digital devices, which have already been seized. Hence, there may not be a chance of tampering with the investigation at this stage, because as rightly pointed out by the learned Senior Counsel for the petitioner that a criminal case has already been filed against the other accused and the same is pending before the Special Court at Bhopal.”

6.3 From the aforesaid, it can be seen that the High Court has

not at all considered the nature of allegations and the

seriousness of the offences alleged against respondent No.

1. As per the catena of decision of this Court, more

particularly, observed in the case of P. Chidambaram

17 (supra) in case of economic offences, which are having an

impact on the 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 case

and the reasoning given by the High Court and as observed

hereinabove, the rigour of Section 45 of the Act, 2002 shall

be applicable even with respect to the application under

Section 438 Cr.PC and therefore, the impugned judgment

and order passed by the High Court granting anticipatory

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 granting anticipatory bail to respondent

No. 1 is hereby quashed and set aside. Respondent No. 1

be dealt with in accordance with law. However, it is

observed and made clear that after respondent No. 1 is

arrested, if he files any regular bail application, the same

be considered in accordance with law and on its own

merits and considering the material collected during

18 enquiry/investigation of the case. Present appeal is

accordingly allowed. No costs.

………………………………….J. [M.R. SHAH]

NEW DELHI; ………………………………….J. FEBRUARY 24, 2022 [C.T. RAVIKUMAR]

19