“Be you ever so high, the law is above you,” said Lord Denning. This oft-repeated aphorism underlining the accountability of those wielding power and influence—whether in or out of office—was vindicated with the Central Bureau of Investigation (CBI) arresting and securing the custody of former Union Finance Minister P. Chidambaram on August 21.
Chidambaram’s arrest became possible after the Delhi High Court, on August 20, dismissed his application for anticipatory bail and lifted an interim protection from arrest granted to him earlier in a corruption case. On August 22, the CBI Special Court in Delhi granted the CBI custody of Chidambaram for interrogation until August 26, dismissing his plea that custodial interrogation was not required for investigation in the case. On August 23, the Supreme Court granted Chidambaram interim protection from arrest by the Enforcement Directorate (E.D.) until August 26.
The case pertains to a foreign direct investment (FDI) approval granted by Chidambaram in 2007 when he was the Union Finance Minister in the United Progressive Alliance government under Prime Minister Manmohan Singh. Chidambaram had granted his approval to a proposal submitted by a six-member panel of the Foreign Investment Promotion Board (FIPB) in favour of the FDI in a TV channel proposed to be started by INX Media Private Limited. The company had sought FDI up to 46.216 per cent of the issued equity capital.
The FIPB unit in the Department of Economic Affairs of the Ministry of Finance examined the proposal, found it to be in order and submitted the case to Chidambaram. The allegation is that INX Media received FDI of up to Rs.305 crore, in excess of the amount approved by the FIPB. It is alleged that Chidambaram’s son, Karti Chidambaram, exerted influence on the FIPB by virtue of his relationship with the Finance Minister and thereby prevented punitive action against the INX Group. Thus, it is alleged, an undue pecuniary advantage to INX Media was given and, as a consideration thereof, a substantial amount of money was paid to the companies in which Karti Chidambaram had sustainable interest directly or indirectly.
The FIPB, chaired by the Secretary, Economic Affairs, consisted of six Secretaries to the Government of India. It had unanimously recommended the proposal and placed it before the Finance Minister for his approval, along with several other proposals. In May 2007, the Finance Minister granted his approval in the normal course of official business.
The CBI recorded the first information report (FIR) on May 15, 2017, against four companies, Karti Chidambaram and officers of the Ministry of Finance under Section 120B read with Section 420 of the Indian Penal Code and Section 8 and 13 (1)(d) read with Section 13(2) of the Prevention of Corruption Act (PCA). The FIR was curiously silent on Chidambaram’s role as the Finance Minister and did not name him as one of the accused.
The allegation was that INX Media had made downstream investment without obtaining prior approval of the FIPB and, in order to regularise that investment, had approached Karti Chidambaram and made a payment of Rs.10 lakh to a company allegedly associated with Karti.
Approver in the case
The CBI’s allegation got buttressed when the co-founder of INX Media, Indrani Mukerjea, currently lodged in Byculla jail, Mumbai, in her daughter Sheena Bora’s murder case, turned approver in the prosecution case against the Chidambarams. The CBI Special Judge, Arun Bhardwaj, pardoned her in the INX case in July following her submission that she had voluntarily agreed to become an approver in the case. The CBI told the court that it had accessed some conversations to which Indrani Mukerjea was privy, and therefore, her turning approver would help solve the case. Indrani Mukerjea, according to reports, also said that she had met Karti Chidambaram on the advice of the Finance Minister in order to fix the deal and ease possible objections from the Income Tax Department.
Further allegations are that Indrani Mukerjea and her husband, Peter Mukerjea, paid $5 million and $4,50,000 to P. Chidambaram in 2007-08 and 2008-09 for settling the issues relating to the violation of the Foreign Exchange Management Act (FEMA) by their companies.
Karti Chidambaram’s company claimed that it had received the said amount towards “consultancy work” and denied that Karti was ever a shareholder or director of INX Media.
Money laundering involves the offence of concealing, possessing, acquiring or using proceeds of crime and projecting or claiming them as untainted property. Section 3 of the Prevention of Money Laundering Act (PMLA) mandates that the act of money laundering should be intentional; therefore, it has to be traced to the point of time when the actual transaction took place. Offences punishable under Section 120B of the IPC and Section 13 of the PCA were inserted in the schedule of the PMLA with effect from June 1, 2009, that is, after the period in which the alleged offences had been committed. It is a settled principle of law that the provisions of law cannot be applied retrospectively.
In the case of Karti Chidambaram, the Delhi High Court has stayed his arrest in proceedings under the PMLA.
In the case of P. Chidambaram, Attorney General K.K. Venugopal told the Delhi High Court that the material on record indicated that Chidambaram was personally involved in the act of money laundering, that he was also found to be a beneficiary of the proceeds of the crime and that in order to unearth the money trail, his custodial interrogation was essential.
Arguments in court
The Attorney General highlighted Chidambaram’s non-cooperation in the investigation and said that in the absence of his custodial interrogation, investigation in the case could not be taken to its logical conclusion in view of the gravity of the offence. “Chidambaram is giving evasive replies and is not cooperating in the investigation while he is under the protective umbrella of interim orders,” he told the High Court. Interrogation conducted under the protection order of the court was a mere ritual, the High Court was told.
In his last order delivered on August 20, prelude to his retirement, the Delhi High Court judge, Justice Sunil Gaur, held that Chidambaram could not claim parity with his co-accused, Karti, as the latter had committed the offence at the behest of his father, and therefore, the advantage of the stay on Karti Chidambaram’s arrest could not be extended to him.
The Delhi High Court found that about Rs.3 crore had come into the account of M/s Advantage Strategic Consulting Pvt Ltd (ASCPL) and other concerns during Chidambaram’s tenure as Finance Minister. “ASCPL and other concerns are beneficially controlled and managed by Karti Chidambaram,” the High Court noted.
The High Court also noted that the investigation conducted had revealed that ASCPL and other concerns were not conducting any genuine and bona fide business activities.
The High Court justified the denial of anticipatory bail to Chidambaram on the grounds that he was a high-profile economic offender. It observed: “Time has come to recommend to Parliament to suitably amend the law to restrict the provisions of pre-arrest bail and make it inapplicable to economic offenders of high-profile cases. It is [the] need of the hour. The law must come down upon economic offenders with a heavy hand. When economic offenders are on pre-arrest bail, then the investigation conducted is at a superficial level. This not only weakens mega scam cases, but it actually stiffs the prosecution. This court cannot permit the prosecution in this sensitive case to end up in smoke like it has happened in some other high-profile cases.”
The High Court added:
“The facts of [the] instant case prima facie reveal that petitioner [P. Chidambaram] is the kingpin, that is, the key conspirator in this case. Law-enforcing agencies cannot be made ineffective by putting legal obstacles of offences in question being scheduled or not scheduled, as these legal pleas are sub-judice before Supreme Court and cannot persuade the High Court to grant pre-arrest bail, as the gravity of offence committed by Chidambaram is quite evident from case diaries produced by the investigating agencies. The gravity of offence committed by Chidambaram demands denial of pre-arrest bail to him.
“Economic offences constitute a class part [sic] and need to be visited with a different approach in matters of bail. Taking note of huge magnitude of conspiracy angle qua petitioner, it would be premature to jump to a conclusion that provisions of PMLA would not apply to the instant case, as it cannot be said that the amount involved is below Rs.30 lakh. Rather, money laundering involved in this INX Media scam and Aircel Maxis deal scandal is of Rs.3,500 crore.”
The Delhi High Court’s reasoning may have had to do with the fact that until 2012, when the PMLA was amended, the Act applied to crimes, with the exception of serious ones like terrorism, only when the money involved was Rs.30 lakh or above. The 2012 amendment could not be retrospectively applied to the Chidambarams.
The High Court also disagreed with Chidambaram’s counsel that not naming him in the FIR was in his favour and would militate against his custodial interrogation. The High Court held that it was inconsequential as he had been projected to be the main accused on whose dictates the offence of this magnitude could be committed. “Simply because he is a sitting Member of Parliament would not justify grant of pre-arrest bail to him in this sensitive case,” the High Court reasoned.
“Offenders must be exposed, no matter what their status is. He is a member of [the] legal fraternity too. But this by itself does not and cannot justify concession of pre-arrest bail to him,” the High Court added.
The High Court was emphatic that discretion to grant or deny pre-arrest bail could not be exercised dehors the gravity of offence. “It would be preposterous to say that prosecution of petitioner is baseless, politically motivated and act of vendetta, as on the basis of material collected so far, it can be safely said that prima facie case is made out against petitioner, thereby, justifying denial of pre-arrest bail to him. The magnitude of this case dissuades this court to grant pre-arrest bail to petitioner,” the High Court concluded. The High Court had granted P. Chidambaram interim protection from arrest on May 31, 2018, pending a decision on his plea for anticipatory bail.
Some of the observations of the High Court, however, made observers wonder whether the judge, instead of confining himself to the merits of the anticipatory bail plea, was tempted to dwell on the merits of substantive allegations against P. Chidambaram.
The High Court observed thus: “This is a classic case of money laundering. The twin factors which have weighed to deny pre-arrest bail to him are gravity of offence and evasive replies given by him to the questions put to him while he was under protective cover extended to him by this court. The parameters governing pre-arrest bail and regular bail are altogether different. Gravity of the offence amply justifies denial of pre-arrest bail.”
The CBI Special Judge, Ajay Kumar Kuhar, also reached similar conclusions while granting the CBI custody of Chidambaram until August 26.
However, both the High Court and the CBI Special Judge did not make clear how P. Chidambaram could take advantage of the interim protection granted to him earlier by being “evasive” in the investigation. As an accused, Chidambaram has a constitutional right to silence even during the custodial interrogation under Article 20(3).
Chidambaram’s counsel argued that the grounds often cited for denial of bail, namely, that the accused would run away or that he would tamper with evidence were not valid in his case. As none of the offences alleged was punishable with more than seven years’ imprisonment, they were not “serious” or “grave” as claimed, they pointed out.
According to the CBI, however, the allegations of payment made to the accused in 2007-08 and 2008-09 are specific and categorical. “The trail of this money, if so paid, is to be ascertained. No doubt, it is a case to a large extent based on documentary evidence, but those documents need to be traced and their value and their worth for the purpose of the investigation in this case is to be ascertained,” the CBI told the Special Judge on August 22.
Undue haste?
Whatever the merits of the allegations against Chidambaram, the CBI, by making his arrest on August 21 a spectacle, shown live on television, with its officers climbing the walls of Chidambaram’s Delhi residence to find him, when he had appeared at a press conference in the Congress office just a little while earlier, has only made credible the suspicions that its intentions in arresting him were political. That the CBI did not wait for the hearing of Chidambaram’s appeal in the Supreme Court, scheduled for August 23, also made it appear that there was undue haste on its part.
The unseemly haste also underlined the vendetta politics of the BJP government at the Centre. In 2010, when Chidambaram was Home Minister, the CBI had arrested Bharatiya Janata Party leader and current Home Minister Amit Shah in connection with the Sohrabuddin Sheikh fake encounter case. Observers were quick to draw similarities between these two arrests. Amit Shah, who was then charged with murder besides kidnapping, was granted bail by the Gujarat High Court on October 29, 2010, and was barred from entering Gujarat for over two years. He was acquitted of all charges in December 2014 by the CBI Special Court.
The Supreme Court, too, did not cover itself with glory during this episode. Its refusal to grant urgent listing and hearing of Chidambaram’s appeal against the Delhi High Court’s denial of bail to him on August 20-21, before the CBI could arrest him, disappointed many senior advocates.
Citing “defects” in his petition, the Supreme Court delayed its listing well after his arrest, thus making it infructuous. The senior advocates, in their statement, concluded that both rule of law and democracy were in peril because of the Supreme Court’s denial of anticipatory bail to P. Chidambaram.
It is no one’s case that the serious allegations against Chidambaram should not be investigated and taken to their logical conclusion if he is found guilty by a competent court. But the denial of timely legal remedies to him as an accused makes one wonder whether the CBI is at all keen to ensure justice in the case. One may be right in inferring that by seeking his arrest and custody in the manner that it did, the CBI is perhaps fulfilling the goals of its political masters, which appear to be the harassment of political rivals and the management of headlines in order to divert people’s attention from the real issues facing the country.
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