The ED counsel contended that the set of evidence in the money-laundering case and the CBI corruption case is different and the PMLA case is more heinous and "much, much, much more serious than it meets the eyes".
"It is the gravest of grave offence as it is an economic offence which is a standalone offence," Solicitor General Tushar Mehta, representing the ED, argued.
Justice Suresh Kait heard the arguments of the ED counsel and Chidambaram and reserved the order on the bail plea.
The 74-year-old Chidambaram is in Tihar jail in the INX Media money-laundering case.
The senior Congress leader has sought bail, saying as the evidence is documentary and in the custody of probe agencies, he cannot tamper them.
Senior advocate Kapil Sibal, appearing for Chidambaram, said since the beginning, the probe agency's case was never that the Congress leader tried to influence witnesses, but suddenly in October, when he was in custody, it was alleged that he had tried to put pressure and influence key witnesses.
At the outset, the judge asked the solicitor general how many witnesses the ED has examined between October 24 and 30, when Chidambaram was in their custody.
Mehta said three witnesses were summoned during that period and while two did not appear, the third gave a handwritten letter and the witness is "so scared" that he does not want to be confronted with Chidambaram.
The high court pointed out that Chidambaram's counsel has argued that up to October 24, there was no allegation of influencing witnesses and on October 30, when they sought extension of his police custody, which was denied by the trial court, the ED argued that he tired to influence witnesses.
To this, Mehta said the contention of influencing witnesses will only come while arguing on bail application and not at the time of seeking his police custody.
"Three witnesses were influenced and one of them is the person who gave us a handwritten letter. There is evidence that previously also he tried to influence, win over and threatened witnesses," he submitted.
He added, "Prior to October 24 and even during this time, there was an attempt to influence witnesses. There is destruction of material evidence."
Mehta said he will place in sealed cover, the handwritten letter of the witness and the court can go through it to satisfy its conscience.
When the court asked if the ED has examined the concerned witness, he said after going through the letter, no prudent agency will confront him with the accused.
He said the investigation conducted till now has covered 16 countries, 12 properties abroad and 15 bank accounts linked to Chidambaram and Letters Rogatory have been sent to various countries.
On the issue whether the high court can look into the material placed by the agency in sealed cover, Mehta said the Supreme Court's findings are clear and categorical that not only the court see the evidence, it is the custodian and guardian of the interest of justice.
He said the agency wants to protect its witnesses as they might be helping it in the investigation.
The ED, in its written response filed through advocates Amit Mahajan and Rajat Nair, has opposed the bail plea, saying the gravity of offences allegedly committed by Chidambaram does not entitle him for the relief.
Chidambaram, in the bail plea filed through advocate Arshdeep Singh, has denied ED's claim that he used the office of finance minister for personal gains and laundered the proceeds of crime, saying no material directly or indirectly linking him with the alleged offence has been put to him so far or placed before the court.
The purpose of ED's opposition to grant of bail is not to advance the cause of justice but to harm his health which has already suffered severe damage after 75 days of custody since August 21, he said.
Chidambaram has referred to the Supreme Court's October 22 order granting him bail in the CBI case and said it has stated there was no evidence of tampering, flight risk and influencing witnesses against him in the corruption case.
Chidambaram, who was granted bail by the Supreme Court on October 22 in the INX media corruption case, is lodged in Tihar Jail under judicial custody in ED's money-laundering case.
On November 1, the high court while disposing of the interim bail plea of Chidambaram, who was suffering from Crohn's disease, had directed the Tihar Jail superintendent to provide him clean and hygienic surroundings and also mineral water, home cooked food and mosquito protection nets and repellant.
Chidambaram had sought anticipatory bail in the money-laundering case from the high court which dismissed the plea. The decision was challenged in the Supreme Court which also refused to grant him the relief.
The ED had arrested him in the money-laundering case on October 16. He was arrested by the CBI on August 21 in the INX Media corruption case.
The case was registered by the CBI on May 15, 2017, alleging irregularities in a Foreign Investment Promotion Board (FIPB) clearance granted to the INX Media group for receiving overseas funds of Rs 305 crore in 2007, during Chidambaram's tenure as finance minister.
Thereafter, the ED had lodged a money-laundering case in this regard in 2017.