Decoding Rana Kapoor's bail order: Why only few PMLA cases see trial in court?

"Basically, arrest of a person in general is an extreme end of power which has far reaching consequences. The extreme power of arrest has to be used very carefully and cautiously by ED officer," said the bail order of a PMLA court while granting bail to Yes Bank founder Rana Kapoor this week. The fact that Kapoor was granted bail, he remains in jail due to other pending cases is well known, but what's interesting here is the observations made by Special Judge MG Deshpande in his order and how the Enforcement Directorate (ED) came under heavy scrutiny for not starting the trial even after over 26 months.

Kapoor was arrested for his alleged role in a money laundering case briefly. He was first arrested in March 2020 by the ED on alleged money laundering charges under the Prevention of Money Laundering Act (PMLA). He was subsequently charged in other loan fraud cases being probed by both the ED and the Central Bureau of Investigation (CBI).

During investigation, the agency arrested a few co-accused and all were granted bail. "Economic Offences are different in nature and have to be looked from the perspective of its gravity and magnitude, that does not mean that undertrial prisoners should be kept without trial and should be dragged to undergo minimum sentence without trial," the court observed.

Alleged laundered money never came to Yes Bank co-founder Rana Kapoor, says court in bail order

The 53 page- bail order laid special emphasis on Section 44 (1) (c) of the PML Act and noted that the ED never took care to follow the true spirit of this clause.

The court also came down heavily on the CBI and said, "If both Investigating Agencies are making further investigation, as contended by ED and CBI herein, without filing Progress Report, there will be no end and the outer limit of the sentence of 7 years will be crossed in the guise of further investigation, keeping the accused i.e. Rana Kapoor in undue incarceration, without any trial.”

Interestingly the court held that no charge sheet has been filed in the predicate offence and Kapoor’s name is not mentioned in the FIR. The allegations against Kapoor are the ED’s story. In the absence of any specific role attributed to Kapoor in the predicate offence, his involvement in the PMLA case cannot be ascertained.

Under this section there has to be a “simultaneous” but separate trial of a money laundering case and the “predicate” offence at the special PMLA court itself. It allows the court which has taken cognizance of the scheduled offence to commit the offences to the Special Court taking up cognizance of money laundering upon an application made by the ED. It may result in trial of the predicate offence by the same Special Court trying the offence of money laundering respectively.

In Kapoor's case the Special Court noted that "ED simply opposes bail applications heavily, but never takes any active step in proceeding with trials". The ED is required to “commit” or transfer the predicate offence to the special court, otherwise the trial cannot begin and this can be cited as a reason why Kapoor's trial has not yet begun. “On the contrary, rather than honouring and following the mandate of Section 44(1) (c) scrupulously, the ED appears to have sabotaged the same. ED is quite aware that unless the case relating to the Scheduled Offence is committed to this Court as per Sec 44(1)(c) of PML, the court cannot begin the trial" said the court.

Also read: Delhi HC grants bail to former Yes Bank CEO Rana Kapoor in money laundering case

“If the ED, which is under legal obligation but not following the true spirit of Section 44(1) (c) of the PML Act, then who will comply the same?” the court asked

"Basically, the applicant (Kapoor) is without trial for more than 2 years 2 months and 3 days and there is no possibility of commitment to the case relating to Scheduled Offence in near future" reads the bail order. "The way in which ED has been dealing with this case and even not aware of the said mandate until prevailed upon the Court to give repeated directions. If the same continues, the trial will never begin and the conclusion thereof will be only a dream" said Judge Deshpande.

"It is evident that the applicant (A3) had undergone undue incarceration for 73% of the minimum punishmentof 3 years provided under Sec.4 of the PML Act. In this long period of undue incarceration both, CBI and ED, had never taken any care to follow the true spirit of Sec.44(1)(c) of the PML Act," the court said.

The Judge listed 11 PMLA cases having 17 undertrial prisoners since 2019 in which ED has not taken any step to commit the cases relating to predicate offence at the PMLA court. It added that the Mumbai Special PMLA Court has the maximum number of cases and not a single trial has concluded.

Speaking to CNBC TV18, Kapoor's advocate Vijay Aggarwal said that in most of the PMLA cases filed by ED accused are still awaiting their trial for long. "The court has absolutely made it clear in its bail order and there was no reason for not granting bail. If we look at other such cases, the agency has been working at a very slow pace to put the cases on trial. Each time, the agency claims that their investigation is under progress, and they arrested numerous people behind the case, but can't prove anything. The main accused behind such cases is never arrested."

"Framing of charges is the first step towards starting the trial after the agency has completed its investigation and filed a chargesheet. The special judges have on several occasions asked ED to take steps to begin the trial and to get the predicate offences transferred to the PMLA courts. But, the agency is not doing it and hence results are seen on conviction rates" said another lawyer requesting anonymity. "If only cases are registered but not put to trial, how can ED conviction rates go up?" he said.

ED has recently stated that a total of 5,906 ECIRs have been recorded and 1,142 prosecution complaints or charge sheets have been filed by it till now under the PMLA and it arrested a total 513 people under these Enforcement Case Information Reports (ECIR) and prosecution complaints.

Trials, according to the data have been completed in a total of 25 cases under the PMLA until now. This resulted in conviction in 24 cases. One case resulted in acquittal. The number of accused convicted under the anti-money laundering law in these cases stands at 45. The percentage of conviction is as high as 96 percent, according to data.

Ministry of Finance in its reply to Rajya Sabha recently said that 32 accused have been convicted under the provisions of Prevention of Money Laundering Act, 2002 (PMLA) during the last 5 years. 354 arrests have been made under PMLA in the last 5 years.

As on 31/12/2022, trials in 1055 cases are continuing before the different Special Courts, PMLA across the country. (d) As on date, the Directorate has secured 22 conviction orders wherein 36 accused have been convicted.

The percentage of conviction in PMLA cases is 95.65%. There are few cases wherein proceedings under PMLA could not proceed further due to quashing of the predicate offences investigated by Law Enforcement Agencies.