The present article attempts to cover important and landmark judgments delivered by Supreme Court and High Courts of the country, on issues arising out of Prevention of Money-Laundering Act, 2002 (PMLA). Since the law relating to money laundering is still developing and evolving in India, therefore, the judgments on the same have mostly been pronounced by the Delhi and Bombay High Courts, apart from the Supreme Court of India. The law relating to PMLA in the year 2022 has an important date, which is 27-7-2022, the day when Supreme Court delivered the landmark judgment of Vijay Madanlal Choudhary v. Union of India1. The judgments up to July 2022 had adopted divergent views, especially on applicability of Section 45, pertaining to grant of bail and the twin conditions attached with it. It is post Vijay Madanlal Choudhary2, that the haze got clearer and law having attained a quietus. The judgments by various High Courts reflect a polarised divergent view of interpretation, which got settled substantially with the judgment of Vijay Madanlal Choudhary3. The judgments from January to June 2022 are covered in this part, which are as follows:
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(1) Anish Mohammed Rawther v. Enforcement Directorate4
(Delivered on January 3, 2022)
Coram: Single Judge Bench of HM Justice Krishna S. Dixit
Authored by: HM Justice Krishna S. Dixit
The primary issue before the court was about applicability of PMLA to the State of Jammu and Kashmir, in view of a separate Jammu and Kashmir State Ranbir Penal Code, 1989 (for short “RPC”). It was argued by the accused that RPC offences have been kept outside the purview of PMLA, being not mentioned in the Schedules of the same. Holding that PMLA does not intend to create a “money laundering haven” in any province of the country, the Court held that even though nothing in PMLA mentions about RPC, 1989, the same cannot drive one to hastily conclude that offences thereunder are alien to the principle object and policy content of the Act. PMLA has been enacted to give effect to international conventions and conferences and the provisions must be construed in the above backdrop. When the opening sections of the PMLA mention unequivocally that “it extends to the whole of India”, then RPC offences cannot be kept aloof from the ambit of the Act as it would militate against the parliamentary intent. Referring to Section 2(2), the Court held that the phrase “corresponding law” refers to laws, which though not even included under the Schedule of the Act, would be relatable to all those laws having relative or similar provisions to which the Act applies. RPC being a substitute of IPC in the State of J&K indisputably, would therefore be covered within the ambit of the phrase “corresponding law”. The court profitably refers to the judgment of the High Court of Jammu and Kashmir in Ahsan Ahmad Mirza v. Enforcement Directorate5, wherein it was held that Section 120 RPC shall be deemed to be a scheduled offence corresponding to Section 120-B IPC under Part-A of Schedule appended to the PMLA.
For yet another reason, the Court held that PMLA shall be applicable on all the fours to the State of J&K, which is that offence was committed post enactment of the Jammu and Kashmir Reorganisation Act, 2019 with effect from 9-8-2019. In view thereof, even the IPC stands extended to the State of J&K, and enforcement case information report (ECIR) registered subsequent to the said notification shall also be maintainable as PMLA by virtue of the said amendment applies to territories of J&K as well.
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(2) Directorate of Enforcement v. V.C. Mohan6
(Delivered on January 4, 2022)
Coram: 2-Judge Bench of HM Justices A.M. Khanwilkar and C.T. Ravikumar
The challenge was laid to the judgment and order of Telangana High Court, through which anticipatory bail was granted to the respondent, accused in offences concerning PMLA. The judgment of the High Court granting anticipatory bail was set aside on the ground that it dealt with the said prayer as if it was a prayer in connection with ordinary offences under IPC, 1860. Even though the offence under PMLA is dependent on the predicate offence mentioned in the Schedule to the PMLA, it does not mean that it does not ipso facto imply that the bail is also to be governed by the very same considerations of ordinary/normal offences. Section 45 comes into play immediately in such circumstances, when once the prayer for anticipatory bail is made in connection with offences under PMLA. Even though the application is under Section 438 CrPC, however, the interplay and consideration of Section 45, PMLA must not only be reflected but duly considered whilst adjudicating the said anticipatory bail application. Accordingly, the judgment of the High Court was set aside and the matter remanded/restored back to be disposed off afresh on merits by the High Court.
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(3) Rajeev Sharma v. Directorate of Enforcement7
(Delivered on January 7, 2022)
Coram: Single Judge Bench of HM Justice Mukta Gupta
Authored by: HM Justice Mukta Gupta
The petitioner applied for regular bail under Section 439 CrPC read with Section 45 of the PMLA. The ECIR under PMLA came to be registered as a consequence of the FIR registered under Sections 3, 4, and 5 of the Official Secrets Act, 1923 read with Section 120-B IPC. The allegation against the petitioner was that he was working as a senior freelance journalist. He represented various newspapers including a Chinese newspaper i.e. Global Times from 2014-2016. The petitioner whilst working with this Chinese newspaper, transmitted certain information, which was sensitive, confidential, and covered by the Official Secrets Act, 1923. The said transmission of information led to the commission of offences punishable under the provisions of the Official Secrets Act. The contentions of the petitioner were essentially twofold:
(a) That the provisions under which the FIR came to be registered under the Official Secrets Act were not scheduled offences mentioned under the Schedule of the PMLA.
(b) The amount which was alleged to have been “proceeds of crime” laundered by the petitioner was admittedly less than Rs 1 crore and thus, in view of the proviso to Section 45 of the PMLA, he was entitled to be enlarged on bail.
On the first argument of offence being made out under PMLA, in view of the Official Secrets Act not being a scheduled offence, but offences under Sections 411 and 120-B IPC being scheduled offences, the Court held that the same is a matter to be dealt by the learned trial court at the stage of the trial and cannot be adjudged in bail application. The charge-sheet did not disclose the offence under Section 411 IPC, but the said plea was taken for the first time in the course of arguments. Only Section 120-B is a scheduled offence that is mentioned in the charge-sheet.
On the second issue, it was held that admittedly the amount which was received in the accounts of the petitioner and transferred to other accounts was much less than Rs 1 crore, when Section 45 comes into play; the petitioner was having deep roots in the society; the petitioner joined the investigation as and when directed prior to his arrest by the Enforcement Directorate (ED), it was a fit case for granting bail to the petitioner. The court was primarily driven by the quantum of the amount involved being less than Rs 1 crore alleged to be laundered by the petitioner in the matter.
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(4) Ajay Kumar v. Directorate of Enforcement8
(Delivered on January 28, 2022)
Coram: 2-Judge Bench of HM Justices V.M. Deshpande and Vinay Joshi
Authored by: HM Justice Vinay Joshi
The solitary issue before the Division Bench of the Bombay High Court arose out of reference made to it in view of conflicting views of various Single Benches about the effect of post-amended Section 45 of the PMLA through amendment dated 19-4-2018. This amendment to Section 45 was necessitated in view of the judgment of the Supreme Court in Nikesh Tarachand Shah v. Union of India.9 There was a sharp cleavage of opinion, with certain High Courts having already decided that the defect in Section 45 (which constituted the basis for its unconstitutionality and being struck down resultantly by the Supreme Court) was not removed or rectified through the amending Act of 2018, but continued operating. Thus, Section 45 could not be invoked for consideration of bail application under PMLA. It was contended on behalf of ED that the basis and foundation of the declaration of unconstitutionality in Nikesh Tarachand Shah10 stood removed in view of legislative intervention and was duly cured. In the wake of such amendment, the judgment of Nikesh Tarachand Shah11 lost its binding value and the bail application was to be considered in light of twin conditions imposed vide amended Section 45 of the 2002 Act. The question referred for resolution by the two-Judge Bench stated as follows:
Whether the twin conditions in Section 45(1) of the 2002 Act, which was declared unconstitutional by the judgment of the Supreme Court in Nikesh Tarachand Shah v. Union of India12, stand revived in view of the legislative intervention vide Amendment Act 13 of 2018?13”
PRE AND POST AMENDMENT
Section 45 – Prior to Nikesh
Section 45 – Post Nikesh
45. Offence to be
cognizable and non-bailable.—
45. Offences to be cognizable and non-bailable.—
(1) Notwithstanding contained in the Criminal Procedure Code, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless—
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of 16 years, or is a woman or is sick or infirm, may be released on bail if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by-
(i) the Director; or
(ii) Any officer of the Central Government or State Government authorized in writing in this behalf by the Central Government by a General or a Special Order made in this behalf by that Government.
(1-A) Notwithstanding anything contained in the Criminal Procedure Code, 1973 (2 of 1974), or any other provision of this act, no police officer shall investigate into an offence under this Act unless specifically authorized, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed;
(2) The limitation on granting of bail specified in sub-Section (1) is in addition to the limitations under the Criminal Procedure Code, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.
(1) [Notwithstanding anything contained in the Criminal Procedure Code, 1973 (2 of 1974), no person accused of an offence under this Act shall be released on bail or on his own bond unless]
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:
Provided that a person, who is under the age of sixteen years or is a woman or is sick or infirm, or is accused either on his owns or along with other co-accused of money laundering a sum of less than 1 crore rupees may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by—
(i) the Director; or
(ii) Any officer of the Central Government or State Government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government.
[(1A) Notwithstanding anything contained in the Criminal Procedure Code, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under
this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.]
(2) The limitation on granting of bail specified in sub-section (1) is in addition to the limitations under the Criminal Procedure Code, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.”
The Court noted that legislative competence to amend the laws was never tested nor the constitutional validity of the amendment was laid to challenge by the petitioners. It is only the effect of the amendment which is being examined. The power and scope of jurisdiction of the Reference Court was held to be advisory and consultative in nature and not at par with the original jurisdiction exercisable under Article 226 of the Constitution of India.
The court extensively referred to the object of the amending Bill introduced on 1-2-2018 as an attempt to include one and all offences within the ambit of Sections 3 and 4 of the PMLA to be covered by twin conditions of Section 45. Reference was made to Rule 7, Chapter I of the Bombay High Court Appellate Side Rules, 1960 for holding the scope and powers of reference Bench as only for the limited purpose of resolving inconsistency on the point of law. The court cannot decide on questions that are either not referred to it or do not arise out of the reference. It was thus held that the Amendment of 2018 to Section 45 changes its entire complexion, even though the entire Section is not re-enacted/redrafted. In light of the settled principle of presumption of constitutionality of legislative enactments, the underlying principle in rigours of Section 45 gets triggered whilst dealing with the bail application.
The amending Act has not reintroduced the twin conditions in Section 45 but has simply done away with the defaults existing earlier. Reference was made to the judgment of Shamarao V. Parulekar v. District Magistrate, Thana17, wherein the Court held that when a subsequent Act amends an earlier one in such a way as to incorporate itself, or a part of itself into the earlier, then the earlier Act must thereafter be read and construed as if the altered words had been written into the earlier Act with pen and ink and the old words be scored out, so as to imply that the amendment has been existing from the date of enactment of the original statute.
Thus, even though the entire Section 45 has not been re-enacted, the twin conditions stood revived and operate at full throttle by virtue of the Amendment Act in view of the legislative intervention vide Amendment Act, 13 of 2018.
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(5) Directorate of Enforcement v. Kamma Srinivasa Rao18
(Delivered on February 15, 2022)
Coram: Single Judge Bench of HM Justice Kunuru Lakshman
Authored by: HM Justice Kunuru Lakshman
The ED and the accused persons filed two sets of petitions, one under Section 482 for quashing of the proceeding and the other under Section 438 CrPC for the grant of bail in relation to the ECIR registered by the ED. The scheduled offences were registered by the CBI and ACB Ranchi, against the directors of the company for the execution of a four-lane national highway and the loan advances that were raised from the lender banks for the execution of the project with a cost of Rs 1655 crores. The allegation revolved around fraudulent inducement of the bank for releasing loans using false documents and thus generating proceeds of crime resultantly. The application seeking judicial remand/custody was returned by the Sessions Judge for non-compliance of Section 41-A, with the notice not being duly issued under the said provision. Thus, where on one hand the ED filed a petition challenging the said order returning the remand application passed by the Sessions Judge, on the other hand, the petitioner-accused filed a petition for grant of their enlargement on anticipatory bail. Thus, three issues arose before the court, which were as follows:
B. Whether the Designated Court possesses the power to return a remand application filed by the ED?
C. Whether the petitioner in the given fact and the circumstances entitled to be enlarged on anticipatory bail?
Answering the first issue, referring to various provisions of PMLA specifically Sections 19, 65 and 71, Court held that provisions of PMLA shall prevail and override the provisions of CrPC, to the extent of inconsistency between the provisions of CrPC and PMLA. Referring to the judgment of Gangula Ashok v. State of A.P.19, it was held that in light of Sections 4 and 5 CrPC, if any special enactment contains any provision contrary to the provision of the Code, such other provisions would then apply in place of the provisions and the procedure laid down under CrPC. However, if there is no inconsistency or the provisions of the special enactment are silent, then by necessary implication provisions of CrPC shall apply. Referring further to the judgment of the Gautam Kundu v. Directorate of Enforcement20, it was held that thus the provision under CrPC will be applicable to PMLA proceeding only till they are consistent with the latter statute and the moment any inconsistency arises or separate provisions exist in both the statutes governing the same subject-matter, PMLA shall take precedence over CrPC. The court in the process thus compared Section 41-A vis-à-vis Section 19 of the PMLA. It was held that Section 19 provides enough protective measures and is a specific provision laying down the manner and procedure for the arrest of the person, accused of committing an offence of money laundering. In view thereof, the general power and procedure of arrest provided under Section 41-A shall cease to apply qua the offences under PMLA. The procedure laid down under Section 19 obligates the officer arresting the accused to immediately forward the copy of the arrest order and material in his possession (on the basis of which arrest has been made to the adjudicating authority) in a sealed envelope. His arrest has to be confirmed by the adjudicating authority in view of the reason and material forwarded by the arresting officer, which thus operates a sufficient safeguard on arbitrary use of powers.
The Court further stated that multiple judgments by various courts like the Division Bench judgment of the Delhi High Court in Vakamulla Chandrashekhar v. Enforcement Directorate21 have led to legislative amendments to the PMLA, whereunder an explanation was specifically added under Section 45. The arrest of any person post 2019 Amendment to the PMLA is thus subject only to Sections 19 and 45. Thus, pre-arrest protection under Section 41-A CrPC cannot be extended in the case and context of offences under PMLA, especially in view of its “Statement of Objects and Reasons” of the PMLA Amendment Act of 2019. It relates to the prevention of commission of economic offences of a large scale. Referring to the judgment of P.V. Ramana Reddy v. Union of India22, it was held that Section 41-A, CrPC was made applicable to arrest under the CGST Act, because of an absence of any such provisions akin to Section 19 of the PMLA. The provisions of Section 70(1) of the CGST Act are somewhat similar to Sections 40 and 41-A CrPC. Thus, the CGST Act does not contemplate a separate procedure of arrest as contemplated in Sections 19, 45 and Arrest Rules of PMLA, 2005. Relying on State of Punjab v. Barkat Ram23, Badaku Joti savant v. State of Mysore24 and Illias v. Collector of Customs25, the Court held that the officers exercising powers under Section 19 are not police officers but are just authorised officers and in view thereof, the provisions of Section 41-A specifically shall not apply to them.
On the second issue, it was held that the Sessions Judge (Designated Court) had no power to return the remand application filed under Section 167(2) CrPC and that he exceeded his powers by rejecting the remand application. The court performs the judicial function whilst deciding an application for remand and is bound to pass a judicial order with due application of mind. Only two possibilities exist regarding the outcome of any remand application; either to remand the accused to judicial custody, where further investigation is required or release him on bail satisfying conditions has been prescribed. Referring to the judgment of Manubhai Ratilal Patel v. State of Gujarat26, it was held that the purpose of remand application under Section 167 was elaborated upon, and it was held that there is no such power vested with the Magistrate to return the remand application.
On the third issue, about the maintainability and consideration of anticipatory bail application under Section 438 CrPC, it was held that since the Designated Court/Sessions Judge had returned the remand application, in light of which the accused was relieved from ED’s custody, therefore the accused for all intent and purposes was never in the custody of the ED on the date of filing of the Section 438 application. Referring to the judgments of Gurbaksh Singh Sibbia v. State of Punjab27 and Narinderjit Singh Sahni v. Union of India28, it was held that anticipatory bail application is preferred seeking prevention of the arrest and taking into custody of the accused by the police. Thus, the anticipatory bail application was clearly maintainable and could have been pressed for by the accused. However, on merits and applying the twin test laid down under Section 45 of the PMLA, it was held that the allegation against the accused was serious and that he was the main conspirator having derived the proceeds of crime. Thus, the anticipatory bail application was accordingly rejected; the order of Sessions Judge/Designated Court was also set aside being contrary to the settled law and for want of power to pass such an order. The accused was directed in all the cases to surrender before the Designated Court, which was accordingly directed to consider the application for remand afresh in accordance with the law.
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(6) Directorate of Enforcement v. Gagandeep Singh29
(Delivered on February 17, 2022)
Coram: Single Judge Bench of HM Justice Chandra Dhari Singh
Authored by: HM Justice Chandra Dhari Singh
The criminal revision petition was preferred by the ED against the discharge of the accused-respondent from the commission of offences under the PMLA, 2002.
An FIR was registered under the various provisions of Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) and those of IPC by the Amritsar police against the respondent and other accused persons. However, there was no recovery of contraband from the respondents before the High Court. They were alleged of being involved in an international syndicate of money laundering, generated out of drug trafficking in Australia and in other countries. The private respondent was alleged to be operating with his counterparts present in Australia and other countries, who all have been apprehended as well. Against this backdrop, a criminal complaint under Section 44, PMLA came to be filed by ED. In the proceedings relating to NDPS, the respondent was acquitted of the charges framed against them by the Sessions Court, Amritsar, on the ground that the prosecution failed to establish the involvement of the respondent (before the High Court) in entering into a criminal conspiracy. Thereafter, the Sessions Judge, Patiala House Courts (PMLA, New Delhi) also passed an order discharging all the accused persons from criminal prosecution under PMLA, which order came to be challenged before the High Court.
The court whilst analysing the argument of both the parties held that the Sessions Court at Amritsar had discharged the respondent of all the offences under the NDPS Act; holding that no offence was made out and that the respondents were never involved in drug trafficking. The essential ingredient of offence under Section 3 of the PMLA was held to be constitutive of a “factum of knowledge” whilst committing the offence of money laundering.
Though certain materials, properties, and cash were recovered and attached by the ED, it was never established by the ED that such properties were obtained through “proceeds of crime” of drug trafficking or were knowingly laundered. Since no scheduled offence was made out against the respondent, the investigation proceedings into the PMLA also consequentially were not treated to have been established against them in the first instance. Accordingly, the conviction in the scheduled offence was held to be a prerequisite and precondition to the offence of money laundering under PMLA. Accordingly, the discharge order was affirmed and upheld by the High Court.
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(7) Marath Sashidharan v. Directorate of Enforcement30
(Delivered on February 23, 2022)
Coram: Single Judge Bench of HM Justice Sarang V. Kotwal
Authored by: HM Justice Sarang V. Kotwal
The petitioner was an accused in the predicate offence registered by the Bombay Police under the provisions of Sections 406, 465, 467, 468, 471 and 120-B IPC. The allegations were essentially that a higher number of employees with a higher salary were shown to have been employed with Mumbai Metropolitan Region Development Authority (for short “MMRDA”). The amounts that were received as a differential amount over and above those paid to those employees of MMRDA were diverted to third-party accounts, from where they were routed back in the account of the beneficiaries of the illegality viz. the accused persons. The applicant took the defence that he was much lower in the hierarchy of management, without any decision-making power regarding the tenders. Thus, he should not be prosecuted under PMLA as he was not personally involved in the offence of money laundering. The others who had actually made false entries were never made accused and the applicant is stated to have been singled out in the whole case as an accused.
The Court held that the applicant was aware and conscious of illegality happening in the MMRDA, when despite knowledge he allowed the funds to be diverted abroad and then re-routed back for the personal use of co-accused persons. Interpreting Section 2(1)(u) r/w Section 3 of the PMLA, it was held that the applicant accused “knowingly assists” and “knowingly was a party” to the whole process connected with the generation of the proceeds of crime. Thus, the applicant, even without any overt role was privy to the offence of money laundering and everything done by him knowingly. Referring to the judgment of Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra31, Court held that the order granting bail in the case of the existence of twin conditions (as laid down by Section 45 PMLA), the court must reflect and there must be an application of mind at least, as to why the accused must be granted or denied the privilege of bail. The evidence is not to be weighed meticulously, but a finding has to be arrived at on the basis of broad probabilities. Thus, the applicant could reasonably be believed to have been involved in the whole process of money laundering, owing to which he was not entitled to grant of bail.
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(8) Sukesh Gupta v. Govt. of India32
(Delivered on February 23, 2022)
Coram: Single Judge Bench of HM Justice Shameem Akther
Authored by: HM Justice Shameem Akther
Challenge was laid to the validity of the criminal proceedings instituted in pursuance of the complaint and investigation launched by the ED against the petitioner. The primary case of the petitioner was that he was never an accused in the case registered by the CBI nor originally in the said FIR, there was absolutely any whisper or allegation against the petitioner in the said FIR. The petitioner was dealing with gold as a director of the company and due to fluctuations in the Forex market, the rupee value suddenly crashed, owing to which the prices of gold also dipped downwards. He was never involved in the commission of any of the “scheduled offences” registered by the CBI and thus, could not be prosecuted under the provisions of PMLA as well. It was held that the trial of money laundering offence is an independent trial, governed by its own provisions under the PMLA, which is a special enactment. It cannot be construed that the proceedings under the PMLA are to go hand-in-hand or equated with the prosecution initiated for the commission of predicate/scheduled offences. The offence under Section 3 of the PMLA is an independent offence and it may extend even to a person who may be unconnected or may not be the actual offender of the scheduled offence but comes under the net of “offence of money laundering” under Section 2(1)(u). A person booked for a scheduled offence, but subsequently acquitted of such a scheduled offence can still be proceeded under PMLA, if it is found that he was dealing with the proceeds of crime. Prosecution can be independently initiated under PMLA only for the offence of money laundering, as it relates to any property which may directly or indirectly be derived or obtained as a result of criminal activity relatable to the scheduled offence. The process or activity contemplated under Section 3 is relatable to “proceeds of crime”, as a continuing activity. The offence of money laundering is thus, a standalone offence and trial proceedings are completely different from that of the scheduled offence.
It was further argued that the competent court under the PMLA can release the property only if it is found on the conclusion of trial under PMLA that an offence of money laundering has not taken place. Registration of ECIR does not make any person an accused before the ED, nor would the provisions of Article 20(3) be attracted. Mere registration of ECIR and issuance of summons does not give rise to any cause of action, much less a reason for any person to rush the High Court for grant of anticipatory bail. A person is duty-bound to respond to summons and notices issued under Section 50(2) for giving evidence during the case. Relying on the judgment of M. Shobana v. Directorate of Enforcement33, passed by the Madras High Court, it was held that investigation into the offence of money laundering, followed by criminal prosecution should not be treated as double prosecution of the petitioner. ECIR registered by ED cannot be equated with an FIR under Section 154 CrPC. Accordingly, the Section 482 petition for quashing the criminal proceedings was dismissed by the High Court.
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(9) Gautam Thapar v. Directorate of Enforcement34
(Delivered on March 2, 2022)
Coram: Single Judge Bench of HM Justice Manoj Kumar Ohri
Authored by: HM Justice Manoj Kumar Ohri
The accused-petitioner in the case proceeded under Sections 3 and 4 of the PMLA as a consequence of the FIR’s registered by the CBI under Sections 120-B, 406, 420, 468, 471 IPC. It was alleged that the petitioner had conspired with the management of Yes Bank Ltd., for grant of various credit facilities to borrowers in violation of banking norms and against receipt of illegal ratification, which later on resulted in huge loss to the bank. The applicant as the founder and chairman of Avantha Group was the mastermind behind the short-term loans issued from the bank in favour of various shell companies. The loan advances paid to such shell companies were diverted and utilised towards repayment of loans of Avantha Group. The agreements which were entered into between various companies were thus alleged to be “sham transactions” and these bogus companies were created only for generating a paper trail. The term loans were routed from one group company to another and eventually used to repay the existing loans of Avantha Group of Companies, with the applicant as the principal beneficiary. The applicant was thus proceeded under PMLA for generation and laundering of proceeds of crime. The question arose about the applicability of twin conditions under Section 45 of the PMLA post the decision in Nikesh Tarachand Shah v. Union of India35 and the impact of the amendment made to the provision by virtue of Amending Finance Act, 2018. Referring to the judgment of Sanjay Chandra v. CBI,36 court applied the test of “pointing finger of acquisition” and “the seriousness of charge”qua and against the applicant. They were held to be serving as an additional test in the cases of economic offences.
Applying the mandate of Section 24 of the PMLA it was held that the burden of proof that the money or the finances generated are not the proceeds of crime and therefore not tainted shifts on the accused persons. In view of the same, referring and relying upon the judgment of the Bombay High Court in Ajay Kumar v. Directorate of Enforcement37, it was held that the amendment to Section 45 introduced through the Finance Act of 2018 removed the defect under Section 45 that was previously the ground for it being struck down by the Supreme Court in Nikesh Tarachand Shah v. Union of India38. With the substitution of words “under this Act” under Section 45(1), the reason for its unconstitutionality as pointed out in the judgment of Nikesh Tarachand Shah39 had disappeared, and thus, clearly, the consideration of twin conditions and Section 45 was revived. Accordingly, finding the applicant accused to be prima facie involved in the generation and laundering of the proceeds of crime and projecting it as untainted, the bail application was rejected.
The above view that the amendment to Section 45 through the Finance Act 2018 dated 19-4-2018 completely removed the defect of unconstitutionality under Section 45(1) has also been followed and adopted by various High Courts in the following judgments:
● Abdul Gafoor v. Directorate of Enforcement40 passed by the Kerala High Court.
● N. Umashankar v. Directorate of Enforcement41 passed by the Madras High Court.
● Ahmed A.R. Buhari v. Directorate of Enforcement42 passed by Madras High Court.
● Sajjan Kumar v. Directorate of Enforcement43 passed by Delhi High Court.
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(10) Raj Singh Gehlot v. Directorate of Enforcement44
(Delivered on March 2, 2022)
Coram: Single Judge Bench of HM Justice Manoj Kumar Ohri
Authored by: HM Justice Manoj Kumar Ohri
The allegations against the applicant were that he had founded one company M/s Aman Hospitality Pvt. Ltd., which had borrowed loans from J&K Bank towards development of a hotel project. The promoters’ contribution was also pegged at a certain amount, which amount was not contributed/pooled into the company and the loan amount that was sanctioned by the bank was also diverted to other companies of the Ambience Group for repayment of their loans; for settling the loan amounts of outstanding loan amounts of Ambience Group of Companies and for meeting expenses of applicant, his family, and his friends. Eventually, the borrower company (M/s Aman Hospitality Pvt. Ltd.) defaulted, and the loans were resultantly owing to the aforementioned transactions turned into non-performing assets (NPA). An FIR accordingly came to be registered under the provisions of Sections 409, 420 RPC and 5(1)(c)/5(1)(d) read with Section 5(2) of the J&K RPC, Act for misappropriation and diversion of funds from the loan of rupees 100 crores sanctioned by the bank. Resultantly, ECIR came to be registered in view of the aforesaid FIR in raising of loan from the bank and its subsequent diversion and default in repayment.
Though the court referred to a host of judgments on consideration for the application of bail and the factors that should enter into consideration for the grant/denial of the said bail application, it was held that the accused must satisfy the additional conditions of Section 45 of the PMLA. Referring to the judgments of Moti Ram v. State of M.P.45 and Ram Govind Upadhyay v. Sudarshan Singh46, various factors to be kept into mind by the courts whilst adjudicating the bail application were discussed. The factors as aforementioned were held to be not completely exhaustive, exhausting the grounds and considerations for bail, but were always subject to applicable statutory provisions. Relying on the various judgments, especially the judgment of Y.S. Jagan Mohan Reddy v. CBI47 and P. Chidambaram v. Directorate of Enforcement48, it was held that gravity of offence is an important factor in determining whether or not to grant bail, especially in grave economic offences. The court must also consider additional factors before granting bail including the larger interest of the State or public, whether the accused is at a flight risk, apart from the existing factors of likelihood or tempering of the evidence or influencing the witnesses by the accused. The gravity of the offence and nature of the allegations levelled constitute and serve as additional tests to be also applied. Referring to the judgments of Rohit Tandon v. Directorate of Enforcement49 and State of Maharashtra v. Vishwanath Maranna Shetty50, the Court held that at the stage of considering application of bail, the court must just examine prima facie whether the accused was possessed of the requisite “mens rea”.
The applicant had deep roots in the society; he was not arrested under the scheduled offence and the charge-sheet came to be filed without arrest, thus overall, in view of the statement of the witnesses recorded under Section 50 of the PMLA, and documents collected during the investigation, the applicant was otherwise entitled for grant of bail. But the court however denied bail solely on the grounds of the accused failing to meet the twin tests of Section 45 of the PMLA. It was found that the applicant had successfully diverted and converted the loan amount received from the bank for ulterior purposes. The court in such cases have to be strict, accordingly in light of the parameters of Section 45, the bail application of the applicant was rejected.
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(11) Abhishek Banerjee v. Directorate of Enforcement51
(Delivered on March 11, 2022)
Coram: Single Judge Bench of HM Justice Rajnish Bhatnagar
Authored by: HM Justice Rajnish Bhatnagar
The FIR was registered against the petitioner with primary allegations of illegal excavation and theft of coal taking place in the collieries of Eastern Coalfield Ltd. Resultantly, ECIR under PMLA was also registered in relation to the same and summons were issued to petitioner along with other co-accused persons, who were women. The allegations of money laundering were ranging to the extent of Rs 13,000 crores with the help of the coal mafia syndicate. The money was alleged to have been transferred even overseas to other countries. The primary argument of the petitioner was as follows:
A. The petitioner being residents of Kolkata can be examined by an officer of the respondent ED under Section 50 of the PMLA only at Kolkata.
B. Petitioner 2 being a woman can be examined only at her residence in light of Section 160 (proviso), CrPC.
D. Every police officer has a territorial limitation under Section 160 CrPC, and that he cannot summon any person outside the limits of his/her adjoining police station. Section 50 of the PMLA also has to be read in a manner where an officer or respondent in any jurisdiction can summon only such persons who are residing within the limits of its own or adjoining jurisdictions.
The Court referring to Sections 2 and 7 CrPC along with the provisions falling under Chapter XII held that jurisdiction of police officers is territorial in nature, limited to the respective local areas falling under the respective police stations. However, in light of Section 48, PMLA exercise of powers by the authorised officers under PMLA is not territorially restricted in any manner as envisaged under CrPC. Referring to Sections 55 (definition), 56 (agreement with foreign countries), 57 (letter of request to a contracting State in certain cases), 59 (reciprocal arrangements for processes and assistance for transfer of accused person) and 60 (attachment, seizure, confiscation, etc., of property in a contracting State or India) of the PMLA, the Court held that the legislature has created separate machinery for dealing with offences of money laundering and despite being aware of the territorial limitation in the CrPC the legislature chose not to incorporate those limitations in the PMLA. The provisions under PMLA do not attach investigating powers and authorities with territorial limitations. Clearly, the scheme as provided under CrPC has not been followed in the case of PMLA and thus, it cannot be treated to be restricted by territorial caskets envisaged under CrPC. Authorities under PMLA undertake a special investigation, having Pan India ramifications and connections, unlike IPC offences which are mostly localised. ED is a national investigative agency established under PMLA, without any territorial limitations.
The proceedings under Section 50 are statutorily considered to be civil in nature and authorised officers of ED can summon and enforce the attendance of “any person” whose attendance is considered necessary for the purposes of investigation. For this reason, no limitation of any nature can be so imposed and a combined reading of Section 50 of the PMLA along with Section 160 CrPC clearly shows inherent inconsistencies between both, making simultaneous operations of both the provisions impossible. The judgments relied upon by the petitioner of Asmita Agarwal v. Enforcement Directorate52, holding the same to have been delivered in the context of Foreign Exchange Regulation Act, 1973 (FERA) distinguished. The provisions of FERA were not providing a dispensation akin to Section 50 but were silent on the manner and mode of investigation, areas of investigation, inquiry, etc. for which reason, therefore, Sections 160 and 167 CrPC were held to be applicable.
Relying on the judgment of Nalini Chidambaram v. Directorate of Enforcement53, rendered by the Madras High Court, it was held that Section 50(2) gives sufficient ammunition to an authority to summon “any person” whose attendance is considered necessary. It is to be interpreted to mean absolute power to seek attendance at the designated office of ED. The Court further held that merely because trappings of police power are existing with the officers of ED, they cannot be treated as “police officers” under all circumstances or in their office. No hard and fast rule can be laid down that women can never be summoned or called outside the place of their residence. The word “person” under Section 50 includes a woman and is certainly open to the authority to summon her physically or otherwise through an agent. The judgment of Nalini Chidambaram54 has been appealed against in the Supreme Court and an interim order has been granted for the limited purpose restricted to the petitioner therein.
Relying upon the judgment of Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn.55, the Court held that merely because an interim order has been passed, the binding effect of the judgment does not cease to have its operability or binding nature on other proceedings. Interpreting Sections 65 and 71 CrPC, and correlating it with PMLA, it was held that CrPC would apply only if the field is not covered in any manner by the provisions of special enactment or by way of PMLA. Since Section 50 is exhaustive, extensive prescribing the process of investigation, therefore PMLA being a special law/provision shall prevail and override the general provisions of CrPC. Protection to women is absent visibly from an investigation under PMLA which is conducted by high-level officers as defined under Section 48, headed by the Director appointed under Section 25 of the Central Vigilance Commission Act, 2003. The Directorate of Enforcement cannot be treated as a police station under Section 2(s) CrPC.
Accordingly, the writ petitions challenging the notices/summons issued by the ED were all dismissed by the High Court.
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(12) Christian Michel James v. Directorate of Enforcement56
(Delivered on March 11, 2022)
Coram: Single Judge Bench of HM Justice Manoj Kumar Ohri
Authored by: HM Justice Manoj Kumar Ohri
The bail application was preferred under Section 439 CrPC read with Section 45 of the PMLA in relation to offences registered under Sections 3 and 4 of the PMLA by the respondents. The petitioner was accused to be a middleman-cum-commission agent in relation to the supply of 12 VVIP helicopters by an Italian company to the Government of India. The CBI had registered offences for various allegations ranging from dilution of conditions of the tender and mandatory altitude requirements to technical specifications of the helicopters, to be purchased. The technical specification and evaluations were lowered down and softened under instructions of the co-accused Shri S.P. Tyagi erstwhile Chief of Air Staff. Thus, later on, the allegations of bribery in the whole procurement process of VVIP helicopters came to light and the contract was resultantly terminated by the Government of India. The ECIR came to be recorded against the applicant petitioner (Christian Michel James) and others in July 2014. The applicant was an Italian citizen and was extradited to India, whereafter ED sought the arrest for the same. It was contended on behalf of the applicant that the Italian Court has already tried and acquitted the applicant and another accused person after considering all materials and documents and thus continuation of proceedings before courts in India is in violation of Article 15 of the UN Convention against Transnational Organised Crime and its protocol. The court in response to this contention, referred to and relied upon the judgment of Piara Singh v. State of Punjab,57 wherein, it was held that a finding of fact recorded in favour of the accused in earlier proceedings before a competent court would not operate as a bar to the trial or conviction of the accused for the subsequent distinct offence. Also referring to the judgment of Gramophone Co. of India Ltd. v. Birendra Bahadur Pandey58, it was held that national courts will endorse and follow international laws only till it does not come in conflict with national laws. National courts being organs of the State and not organs of international law, must enforce national law if international law conflicts with it. It was thus held that trial in Italy against the applicant was concluded in 2014, whereas the charge-sheet in the predicate offence was filed only in the year 2017 based on material not available with the Italian Courts. Therefore, the observation, findings of the same shall not accrue in favour of the petitioners at all. Referring to Article 17 of Extradition Treaty with the UAE, the Court further held that the applicant’s extradition was sought in respect of offences of “money laundering” as well. The treaty involved with the UAE is much different from that with the other countries, employing the phrase “connected with the offences” in respect of which extradition is sought. The contention of the applicant was rejected that invocation of offences under PMLA, and arrest of the applicant was against the extradition treaty. The applicant was found to be the key accused, having played the pivotal role of a middleman engaged by beneficiary Italian company for obtaining confidential information regarding procurement process of VVIP helicopters by the Government of India. The funds received by the applicant in his companies thus constitute proceeds of crime, out of which money was diverted by him to One Media Exim Pvt. Ltd. and thereafter projected as untainted money. The court further found that there was a serious flight risk involved in the matter as the applicant was imminently apprehended to abscond out of country once enlarged on bail. Applying twin conditions under Section 45, PMLA Court held that, applicant has no roots in Indian society; possesses a grave flight risk and therefore in view of the parameters set out under, there was no reasonable ground to believe that the applicant is not guilty of the alleged offence the bail application was accordingly rejected.
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(13) Sanjay Agarwal v. Directorate of Enforcement59
(Delivered on April 13, 2022)
Coram: Single Judge Bench of HM Justice Bibek Chaudhuri
Authored by: HM Justice Bibek Chaudhuri
The petitioner in this case was proceeded under the provisions of Section 135 of the Customs Act, Section 12 of the Passports Act, 1967 for diversion of gold, ornaments, and jewellery in large quantities, meant for export from the Kolkata Airport. The said gold jewellery and ornaments were diverted for domestic market, after completion of all the export formalities and documentation relating to custom duties. After completion of all formalities as prescribed by Customs Department, gold jewellery and ornaments to be exported out of India were handed over to his father by the accused applicant. The petitioner was even subjected to preventive detention under the provision of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act, 1974) on the allegations of smuggling goods, abetting smuggling, or engaging in transportation of smuggled goods, albeit the detention was revoked later by the Advisory Board.
The petitioner pleaded in support for his prayer for bail that he was discharged from the criminal prosecution under the provisions of Sections 132 and 139 of the Customs Act, 1962 and the Passport (Entry Into India) Act, 1920. The argument thus was that in such circumstances prosecution under PMLA ought not to survive and petitioner be enlarged on bail in the said offences.
Repelling the aforesaid contention, Court held that the only prerequisite for a crime under PMLA is registration of the predicate/scheduled offence as prescribed under various paragraphs of the Schedule appended to the Act, nothing more than that. The crime under PMLA thereafter stands on its own and does not require the support or the existence of a predicate/scheduled offence, nor is it anymore dependent upon the ultimate result of a predicate/scheduled offence. Explaining the scope and meaning of “money laundering” under Section 2(p) of the PMLA, the Court held that money laundering has 2 essential ingredients:
(a) involvement in any process or activity connected with the proceeds of crime; and
(b) projecting it as untainted property.
The modus operandi of the petitioner in committing the offence and illegally procuring money has thus fallen within the four corners of the offence of money laundering under Section 2(p) of the PMLA. The petitioner was thus, when proceeded for violations of provisions of the Customs Act, found to be involved in the generation of “proceeds of crime”. Therefore, considering various factors especially the judgment of Enforcement Directorate v. V.C. Mohan60 of the Supreme Court, the bail was denied to him.
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(14) J. Sekar v. Directorate of Enforcement61
(Delivered on May 5, 2022)
Coram: 2-Judge Bench of HM Justices Vineet Saran and J.K. Maheshwari
The issue before the court was tenability and sustainability of criminal proceedings under the provisions of PMLA, when the FIR with respect to the scheduled offence was closed for want of evidence. It was contended that in the absence of evidence connected with the crime of scheduled offence, based on identical set of facts and circumstances of which the offences under PMLA were premised and kick-started, the prosecution under the PMLA could not be continued. Accordingly, complaint-cum-charge-sheet that was filed under Section 44(1) of the PMLA, was laid to challenge by the petitioner.
The allegations essentially were that huge amounts of unaccounted cash were deposited in bank accounts of petitioner, on the basis of which a search and seizure operation under IT Act was initiated. Huge quantities of currency notes and gold were seized, in light of which the offences under Sections 409, 420 read with Section 120-B IPC and provisions of the Prevention of Corruption Act, 1988 were registered against the appellant and two others. ED also consequentially registered ECIR after finding the commission of offences under Section 2(1)(u) read with Section 2(1)(y) of the PMLA. Subsequently, the CBI filed a closure report after a detailed investigation in predicate offences under Section 173(2) CrPC, which came to be accepted by the competent court. The High Court thereafter quashed the FIR in the remaining cases registered out of the very same set of allegations and evidence.
The appellant accordingly at this stage approached the High Court seeking quashing of the pending criminal proceeding in relation to the PMLA offences. Reliance on the behalf of the petitioner was placed on twin judgments of Radheshyam Kejriwal v. State of W.B.62 and Ashoo Surendranath Tewari v. CBI63.
The Court held that the proceedings started based on unaccounted recovery of cash and other items were all found to have led to the findings of commission of no offence by the petitioner. It was found that the petitioner had caused no wrongful loss to the Government and the allegations thus could not be substantiated with prosecutable evidence. The Court referring to the twin judgments of Radheshyam Kejriwal v. State of W.B.64 and Ashoo Surendranath Tewari v. CBI65, held that though adjudication proceedings (civil in nature) and the criminal prosecution may go on simultaneously. However, when the allegation for both are identical and overlapping, an exoneration of the person concerned on merits in the scheduled offence, then exoneration from PMLA should also happen, if the edifice of the PMLA offences is also erected on the foundation of very same set of allegations, evidence, and facts. The court can look into allegations and materials collected in relation to predicate offences and find out whether a prima facie offence under PMLA is made out or not. Accordingly, continuation of offence in relation to ECIR registered under the PMLA was held to be unwarranted by the court and it was so quashed by the Supreme Court. The judgment by the High Court was set aside.
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(15) C. Parthasarthy v. Director of Enforcement66
(Delivered on May 17, 2022)
Coram: Single Judge Bench of HM Justice K. Lakshman
Authored by: HM Justice K. Lakshman
The ECIR was registered against the company as well as its directors which came to be recorded after allegations of diversion of large-scale client funds through shell companies which resulted in huge losses to the investors. He was taken into custody on being arrested by the ED. The Petitioner on expiry of 60 days from the date of his arrest filed an application seeking default bail under Section 167(2) CrPC citing expiry of 60 days. The said application was returned as infructuous on the ground that a charge-sheet/complaint was already filed by respondent ED on 19.03.2022 before the expiry of 60 days. Subsequently another application under Section 167 was filed by ED seeking extension of remand to complete the investigation, which application was allowed, extending the custody of petitioner further by 15 days. In this backdrop, a default bail application again came to be filed under Section 167(2) on behalf of petitioner contending that no complaint/charge-sheet was filed in terms of Section 173(2) CrPC. The investigation was yet to be completed, on the basis of which erroneously earlier bail application was returned as infructuous holding that charge-sheet was already filed previously.
It is this order, returning the application for grant of statutory bail under Section 167(2), CrPC that was assailed by petitioner before the High Court. The contention of the petitioner were broadly as follows:
(a) Only a complaint in the form of interim report and not a complete charge-sheet/complaint was filed previously, when the statutory bail application of the petitioner was rejected. What is contemplated under Section 173(2) CrPC is a complaint/charge-sheet comprising details of duly completed investigation and not an incomplete report.
(b) The object of Section 167(2) CrPC was clearly defeated in present case, wherein the prosecution failed to complete investigation within a statutory period of 60 days and filed a complete charge-sheet within the prescribed time. Reliance was placed on judgments of M. Ravindran v. Directorate of Revenue Intelligence67, Directorate of Revenue Intelligence and Uday Mohanlal Acharya v. State of Maharashtra68.
Referring to M. Ravindran v. Directorate of Revenue Intelligence69, Directorate of Revenue Intelligence and Uday Mohanlal Acharya v. State of Maharashtra70, it was held that Section 167(2) has been incorporated in light of the reports of the Law Commissionfor ensuring and protecting the personal liberty of accused person. It balances need for sufficient time limits to complete the investigation, with that to protect the Civil liberties of the accused. Section 167(2) CrPC is not the date of taking cognizance of the offence, but the date of filing of chargesheet. The right of statutory bail ceases to exist the moment a chargesheet is filed within the prescribed period of 60 or 90 days. However, the Court must decide whether the chargesheet /complaint under Section 44 of the PMLA is actually final or not. Implying thereby, that it must be prepared and forwarded for being filed before Court only post-completion of the investigation and not before.
Referring to the judgments of Satya Narain Musadi v. State ofBihar71 and Sidhartha Vashisht v. State (NCT of Delhi)72, it was held that cognizance of any offence by the Court can be taken only after submission of a complete chargesheet, post investigation of a cognizable offence. It is at this stage that the police station forwards to the Magistrate, empowered to take cognizance of the offence, a police report with the prescribed documents and details. A charge-sheet thus can be filed only after completion of investigation, and not otherwise. It is said to be completed; if sufficient material is collected by investigating officer based on which cognizance can be taken under Section 167 CrPC. The said principle applies on all fours to a complaint also, that is to be filed by the ED under Section 44(1)(d)(ii). If the Court finds that the investigating officer has not filed a complete charge-sheet under Section 173 CrPC, then treating the same as an abuse of process, on completion of 60 days of custody, the accused is entitled to be enlarged on bail.
Referring to the judgment of Sharadchandra Vinayak Dongre v. State of Maharashtra73 rendered by the Bombay High Court, it was held that Section 173(8) CrPC comes into picture only after completion of investigation and filing of complete chargesheet, prior to which it is just a ‘report’, which cannot be treated as a chargesheet. An incomplete charge-sheet cannot be treated as a police report under Section 173(8) CrPC, on the basis of which the Magistrate cannot take cognizance.
Such an incomplete charge-sheet cannot be utilised or be used to defeat the right of statutory bail. If it appears to the Court from the contents of the chargesheet that investigation is not completed and many crucial witnesses are yet to be examined to prove the overt acts of the accused or some other vital evidence is still to be secured, then on such default of the prosecuting agency of filing incomplete charge-sheet, the petitioner/accused is entitled to be released on bail. The said procedure applies to a complaint also filed under Section 43 by the ED, the delay in filing of which provides accrual of statutory bail in favor of the accused.
Referring to the judgment of Ashok Munilal Jain v. Directorate of Enforcement74, the Court held that the accused is entitled to statutory bail even under Section 167(2) CrPC in PMLA proceedings as well and it cannot be held that Section 167(2) CrPC does not apply to PMLA offences. It is thus incumbent on the court to examine whether the complaint so filed within the statutory time-limit of 60 days from the date of arrest. Referring to the judgment of Directorate of Enforcement v. Kamma Srinivasa Rao75, it was held that the special Designated Court does not possess any power to return the application seeking judicial remand. There is no provision under CrPC or PMLA that empowers a Designated Court to return an application seeking remand or an application seeking bail. Such provisions are existing only under Order 7 CPC, but are visibly absent in CrPC. Accordingly, in the ultimate analysis, the petitioner was held to be entitled for grant of statutory bail under Section 167(2) and the order extending the remand of the accused was also quashed by the Telangana High Court.
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(16) JSW Steel Ltd. v. Directorate of Enforcement76
(Delivered on June 13, 2022)
Coram: Single Judge Bench of HM Justice Maheshan Nagaprasanna
Authored by: HM Justice Maheshan Nagaprasanna
The petitioner entered into a contract for the supply of iron ore, fines, and lumps with one M/s Obulapuram Mining Company Private Limited (for short “OMC”) owned by Mr G. Janardhana Reddy at their plant situated at Vijayanagar. Advanced payment towards supply of same by way of bank transfer was also executed. Subsequently, a CBI inquiry was directed by the Supreme Court in September 2011 into illegal mining and export of iron ore by group, companies, and firms of Mr G. Janardhana Reddy, whereafter FIR came to be registered by CBI under various provisions against Mr G. Janardhana Reddy, other members of group, companies, and firms along with him, who all were accused of offences punishable under IPC, Prevention of Corruption Act, 1988 and the mining enactments. The petitioner was not an accused initially in the said FIR registered by CBI against Reddy Brothers and his group of companies. During the pendency of those proceedings at the behest of the CBI, ECIR came to be registered by ED under PMLA. The name of the petitioner figured for the first time in September 2013 in the supplementary report of CBI when he was arrayed as an accused in the PMLA proceedings as well. Some of the accused persons filed quashing petitions before the High Court on the ground that PMLA cannot have a retrospective effect to affect the contracts that were entered into prior to its introduction or inclusion of the predicate offences in the Schedule of which were touching upon the contracts. Accordingly, the attachment orders, attaching various properties and accounts in relation to the contracts executed prior to the introduction of PMLA were quashed by the High Court in the earlier petitions. In appeal, though Supreme Court did not grant an interim stay of High Court judgment, but clarified that it shall not operate as a precedent. Thus, the judgment of the High Court that had declared that PMLA cannot operate retrospectively to invoke predicate offences which are not included in the Schedule to PMLA on the date of the transaction, became ineffective insofar as it was sought to be drawn benefit by the petitioner as a precedent for themselves.
The petitioner contended that on the date of registration of “PMLA crime” as ECIR, offences so alleged were not scheduled offences under PMLA and thus, very initiation of proceedings was illegal. The contract between the petitioner and OMC was of 2009, with ECIR being registered on 25-9-2012. Offences which were alleged to have been committed by the petitioner were prior/earlier to insertion of provisions in the Schedules of PMLA and thus, PMLA had no application on the date of commission of the offences.
Another Division Bench of Karnataka High Court in Dyani Antony Paul v. Union of India77, dismissed writ petitions on similar issues taking a contrary view. The Karnataka High Court held that time of the commission of scheduled offence would not be relevant in context of prosecution under PMLA, but rather the time at which the act of money laundering is committed under Section 2(1)(u) read with Sections 3 and 4 of the PMLA. PMLA indicts any person acquiring assets through illegal means, who comes before society and claims that the said money has been acquired by proper means, when he would be guilty of offence of money laundering. A person might have committed an offence long back but proceeds of it are being placed, layered or sought to be integrated as untainted money in the mainstream of the economy at a much later period is also said to have committed the offence of money laundering. What is necessary for commission of offences under Sections 3 and 4 of the PMLA is not the date of commission of scheduled offence, but the connection of transaction to “proceeds of crime”, which is sufficient. The date of acquisition of properties or “proceeds of crime” is immaterial, but the date of projecting the proceeds of crime as untainted will have to be ascertained for finding out whether offence under PMLA has been committed or not. The Division Bench thus, dismissed the writ petition that pleaded for retrospective applicability of PMLA in the context of offences that were not scheduled offences on the date of their commission.
Referring to the judgments of State of Bihar v. Deokaran Nenshi78 and Radha Mohan Lakhotia v. Directorate of Enforcement79, it was held that offence of money laundering under PMLA is a continuing offence and cannot be treated as a committed offence. There are 2 categories of offences – “continuing offences” and “committed offences”. The process of projecting “proceeds of crime” as untainted and thereby ploughing such tainted money into the economy of the country can by no stretch of imagination be treated as a “committed offence” but has to be a “continuous ongoing offence”. Thus, in such cases, the question of retrospectivity can never arise. The Court thus referred to two judgments of Coordinate Bench, one answering in favour of issue and quashing PMLA proceedings and other against, resultantly dismissing the proceedings.
High Court in this case thus dismissed the writ petitions on the ground that, overall matter and issue is pending before the Supreme Court, therefore, it would be violative of judicial discipline, specifically when High Courts have been cautioned from entertaining petitions delivering conflicting views when principle umbrella issue is pending consideration before it. Reference was made to judgments of D.K. Trivedi & Sons v. State of Gujarat80, Chhavi Mehrotra v. Director General, Health Services81, Union of India v. Jaiswal Coal Co. Ltd.82 and Mohinder Kumar v. State of Haryana83, to hold that when proceedings are pending before a higher court (Supreme Court), then consideration of similar petitions/applications by High Courts on merits must be avoided. The court thus decided to await the decision of the Supreme Court regarding kernel of the issue as to whether offences alleged have to be scheduled offences as on the date of the contract execution. Accordingly, writ petition was dismissed by the High Court.
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(17) Ankur Khanna v. Directorate of Enforcement84
(Delivered on June 22, 2022)
Coram: Single Judge Bench of HM Justice Sandeep K. Shinde
Authored by: HM Justice Sandeep K. Shinde
Petitioner was involved in online betting and gambling activities, in relation to which offences under Sections 420, 408, 120-B IPC read with Section 34 of the Penal Code, 1860; Sections 3 and 4 of the Goa Daman and Diu Public Gambling Act, 1976; Section 66-D of the Information Technology Act, 2000 were registered against the petitioner. They were found to be involved in serious criminal activities without permission from competent authorities and siphoning of huge money through secret networks, causing loss to the State exchequer. Documents and evidence relating to hawala transactions in international circuits and receipt of money in the form of cryptocurrencies were also found on the premises when same were seized. It was argued that Sections 3 and 4 of the PMLA, were not attracted in case of the petitioner as they are not covered by the same. Interpreting Section 3, especially the phrase “proceeds of crime“, Court held that it not only indicates actual involvement in any process connected with proceeds of crime, but even causing assistance in process of the activity connected with proceeds of crime. Any attempt to use, possess or project proceed of crime as untainted money would also attract offence under Section 3 and punishable under PMLA as was held by the court. For invocation of Section 3, requirement is not that the person should be charged for commission of a scheduled offence, but what is required is his involvement actual or otherwise in any process or activity connected with the proceeds of crime which include its possession, acquisition use or projecting it as untainted property. Thus, even though a person is unconnected with the activity of generating proceeds of crime, his/her mere involvement in further projecting it as untainted property would constitute an offence of money laundering. Thus, since the petitioner had been involved in channelising, routing, and rerouting of undisclosed financial transactions through online betting and gambling exercises, he was found to have committed the offences of Sections 3 and 4 of the PMLA resultantly the bail application was rejected.
†Partner at SVS Attorneys; Expert in Constitutional, Civil and Financial laws;Practicing Advocate at the Supreme Court of India.
5. WP (C) No. 2780 of 2019, decided on 15-10-2019
17. (1952) 2 SCC 1.
18. (2022) 1 ALD (Crl) 838 (Andhra Pradesh HC)
32. Criminal Petition No. 5196 of 2019, decided on 23-2-2022 (Telangana HC)
41. Crl. O.P. Nos. 3381, 3383 and 3385 of 2021, decided on 10-3-2021 (Madras HC)
43. (2022) 3 HCC (Del) 510.
51. (2022) 2 HCC (Del) 27.
75. (2022) 1 ALD (Crl) 838 (Andhra Pradesh HC).