Kerala High Court Denies Pre-Arrest Bail in ₹25 Crore Cashew Fraud Case, Cites Stringent PMLA Conditions

Kochi: The Kerala High Court, while dismissing a pre-arrest bail plea in a money laundering case, has reinforced the stringent 'twin conditions' under Section 45 of the Prevention of Money-Laundering Act (PMLA), 2002. Justice Dr. Kauser Edappagath ruled that mere possession of 'proceeds of crime' is sufficient to establish a prima facie case under the Act, and the mandatory conditions for bail apply equally to anticipatory bail applications.

The court denied relief to Aneesh Babu, a cashew dealer accused by the Directorate of Enforcement (ED) of laundering over ₹25 crores generated from alleged predicate offences.

Background of the Case

The ED initiated an investigation against Aneesh Babu based on five separate FIRs filed by the Kerala Police in Kollam. The police cases alleged that Babu, along with others, defrauded multiple individuals by promising to supply cashews from Tanzania and offering jobs abroad. The total amount involved in these alleged cheating and forgery cases, which are considered 'predicate offences' under PMLA, is pegged at ₹25,52,79,015/-.

The ED contended that this amount constituted 'proceeds of crime' and that Babu was involved in laundering it, thereby committing an offence under Section 3 of the PMLA. Following the dismissal of his initial pre-arrest bail plea by a Sessions Court, Babu approached the High Court.

Arguments from Both Sides

Applicant's Contentions: - Sri. Liju V. Stephen , representing Aneesh Babu, argued that his client was innocent and had been falsely implicated. - He claimed the ED's case was a "counterblast" to a complaint Babu had filed against an ED officer with the Vigilance and Anti-Corruption Bureau. - The counsel contended that even if the allegations were accepted, they did not constitute an offence under the PMLA, and therefore the rigorous twin conditions for bail under Section 45 were not applicable.

Enforcement Directorate's Submissions: - Sri. A.R.L Sundhareshan , the learned Additional Solicitor General of India (ASGI), strongly opposed the bail plea. - He submitted that there was substantial evidence of the applicant's involvement in a large-scale economic offence. - The ASGI emphasized that under Section 45 of the PMLA, bail can only be granted if the court has reasonable grounds to believe the accused is not guilty and is unlikely to commit any offence while on bail. He argued that the applicant failed to meet this high threshold.

Court’s Reasoning and Legal Principles

Justice Edappagath's order provided a detailed analysis of the PMLA's stringent bail provisions, highlighting their overriding effect on the general provisions of the criminal procedure code (now BNSS ).

The Twin Conditions of Section 45: The court underscored that its power to grant bail in PMLA cases is circumscribed by Section 45. It cited landmark Supreme Court judgments, including Vijay Madanlal Choudhary v. Union of India , to reaffirm that these twin conditions are mandatory and apply to pre-arrest bail applications as well.

> “The power to grant bail to a person accused of having committed an offence under the PMLA is not only subject to the limitations imposed under Section 438 or 439 of Cr. P.C ( Sections 482 or 483 of BNSS ), but also subject to the restrictions imposed by the twin conditions of sub-section (1) of Section 45 of PMLA.”

Prima Facie Case of Money Laundering: The court explained that the offence of money laundering is attracted when a person is involved in any activity connected with the proceeds of crime, including its concealment, possession, or use.

The judgment noted: > "As the predicate offences involve scheduled offences under PMLA, the above-mentioned amount obtained by the applicant and the other accused falls within the definition of 'proceeds of crime'. Mere possession of the proceeds of crime would attract the offence under Section 3 of the PMLA."

The court found that the investigation had revealed that ₹2.03 crores were credited directly to the applicant's bank account by the complainants, which were not used for the stated purpose of importing cashews. This, the court held, was sufficient to make out a prima facie case of money laundering.

The Final Decision

Concluding that it was impossible at this stage to be satisfied that Babu was not guilty, the court dismissed the bail application. The judge noted that the investigation was at a crucial stage, the amount involved was substantial, and the applicant was reportedly not cooperating with the ED.

The court deemed the custodial interrogation of the applicant necessary and highlighted the risk of him influencing witnesses or interfering with the investigation if granted pre-arrest bail.