'Punishment Before Conviction Anti-Thesis Of Rule Of Law': Kerala High Court Grants Bail To Managing Director In Popular Finance Scam

The Kerala High Court on Thursday granted bail to the Managing Director of Popular Finance, Thomas Daniel, who is alleged to have committed offences under the Prevention of Money Laundering Act, 2002 (PMLA). Daniel had been accused of cheating several depositors by collecting fixed deposits without authority, after promising to pay interest and thereafter failing to pay the interest and the amounts collected. It was further alleged that amounts so collected by Daniel were used as untainted money for the acquisition of property. He was thus alleged to have committed the offence of money laundering under Section 3 of PMLA. Justice Bechu Kurian Thomas observed that when there is only a remote possibility of conviction sometime later in the future, the liberty of the individual must be given preference. "The constitutional courts are entrusted with the solemn function of protecting the liberty of the individual, which manifests as fundamental rights. Punishment before conviction is the antithesis of the rule of law. When the liberty of an individual is pitted against the remote possibility of a conviction much later, the scales of balance must lean in favour of the former". Daniel was initially arrested in connection with the Popular Finance fraud on August 29, 2020. As many as 1368 crimes were later registered against him, which formed the basis for the predicate offences. Subsequently, the investigation was transferred to the CBI, which also registered offences under the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act), apart from Sections 406 and 420 IPC. That investigation is still underway, and no final report has yet been filed for the alleged predicate offences. Meanwhile, the ED initiated proceedings under Sections 3 and 4 of the PMLA, arrested the petitioner, and submitted a complaint alleging the offence of money laundering on the 58th day of his arrest.The petitioner's earlier bail applications before the High Court and the Sessions Court were dismissed by the respective courts. He thus filed the present plea for regular bail contending that he was innocent of the allegations levelled against him and that he had not committed money laundering. He submitted that he had been conducting the business since 1965 without any complaint. He averred that only the interest had become payable, and not the fixed deposits given by the complainants, and added that he could not cater to the interests due on the deposits from April 2020 onwards due to the lockdown imposed on account of the outbreak of the COVID-19 pandemic and not due to any fraudulent act. It was also pointed out that it was the complaint of the first complainant that triggered all other depositors to demand the return of their money, while adding that there had been no default in interest payment or failure to return the deposit to the said complainant. The petitioner submitted that discussions were currently underway with other potential business concerns to restructure the business and to repay the deposits of the investors under a settlement scheme to be worked out, and his presence was thus necessary for the negotiations. The counsel for the petitioner further submitted that the predicate offences for which the petitioner proceeded against under PMLA were still under investigation by the CBI, and the final report had not been filed even after three years, due to which it would be impermissible to proceed under the Act. The counsel for the respondents however argued that the petitioner ought not to be granted bail, in view of the restriction on the right of courts to grant bail under Section 45 PML Act, and in the absence of any finding by the court that the petitioner is not guilty of the offence. It was also argued that since the petitioner had defrauded a large number of investors and the proceeds of the crime ran into more than rupees thousand crores, releasing him on bail at this juncture would prejudice the prosecution as well as the investors. Additionally, it was submitted that the twin conditions under Section 45 of the PML Act were not satisfied for granting bail to the petitioner since there were explicit materials to conclude his guilt. Findings of the Court The Court at the outset noted that of the predicate offences alleged against the petitioner under Sections 420 ('Cheating and dishonestly inducing delivery of property'), 406 ('Punishment for Criminal Breach of Trust'). 409 ('Criminal breach of trust by public servant, or by banker, merchant or agent'), 421 ('Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors'), 465 ('Punishment for Forgery'), and 471 ('Using as Genuine a Forged Document'), read with 120B IPC, that under Sections 406, 409 and 465 were not predicate offences, and the inclusion could only have been inadvertent. The Court further observed that since the offences registered against the petitioner under the Kerala Protection of Interests of Depositors in...

'Punishment Before Conviction Anti-Thesis Of Rule Of Law': Kerala High Court Grants Bail To Managing Director In Popular Finance Scam

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'Punishment Before Conviction Anti-Thesis Of Rule Of Law': Kerala High Court Grants Bail To Managing Director In Popular Finance Scam

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