landmark judgments on prevention of money laundering act

Part I of the compendium on landmark judgments on Prevention of Money-Laundering Act, 2002 covered judgments from January to June 2022. In view of the considerable volume of judgments delivered in the year 2022 on the subject, the compendium has been divided into three parts so as to ensure brevity and flow in reading for the reader. Part II of this compendium discussed the landmark judgments on money laundering laws and covers judgments delivered from July to December 2022. Around 19 to 20 judgments were covered under Part I from January to June 2022 and 12 judgments were covered in Part II. The remaining 12 Judgments are covered hereunder. They are as follows:

(1) Vanpic Ports (P) Ltd. v. Directorate of Enforcement1

(Delivered on September 27, 2022)

Coram: 2-Judge Bench of HM Justices Ujjal Bhuyan and Surepalli Nanda

Authored by: HM Justice Ujjal Bhuyan

The statutory appeal was filed under Section 42 of the PMLA against the order passed by Appellate Tribunal for PMLA, New Delhi (for short “ATPMLA”) assailing the order relating to continuation of attachment of property of the appellant. A consequential direction was also sought for release of the said attached property from attachment.

Appellant stated itself to be a special purpose vehicle (SPV) company known as Vanpic project, a Government to government project that was created out of an arrangement between Government of Andhra Pradesh and Government of Ras Al-Khaimah, one of the emirates of United Arab Emirates. Large tracts of land were acquired as assigned and patta land by the SPV company. CBI registered FIRs in these investments, stating the same to be made at the instance of the erstwhile CM Late Dr Y.S.R. Reddy. However, in the charge-sheets filed by CBI, the applicant accused Vanpic Ports Private Limited was not an accused. The lands belonging to Vanpic Projects Private Limited were attached resultantly with initiation of proceedings under PMLA, in which land petitioner’s Company Vanpic Ports Private Limited also had financial interests. The objections to the attachment orders were preferred by both companies, but the said provisional attachment orders came to be confirmed by the adjudicating authority and thereafter even by the ATPMLA. Interestingly the ATPMLA recorded all the findings favourably in the favour of the appellant, stating that prima facie there was no quid pro quo and that confirmation orders were contrary to the provisions of PMLA; confirmation orders suffered from non-application of mind, violation of principle of natural justice, nonetheless ATPMLA directed continuance of attachment of the subject properties, whilst relegating the appellant to Special Court, PMLA for the final adjudication by it. Even the physical possession was taken over of the part of the attached land during the pendency of appeal before the ATPMLA.

Interpreting Sections 5 and 8, the Court held that on the anvil of both provisions, it was to be examined whether ATPMLA had erred in abdicating its adjudicatory functions, whilst relegating the appellant to Special Court for seeking release of attached properties after having found the attachment to be illegal. The sine qua non for exercising powers under Section 5(1) was found to be that attaching authorities must have “reasons to believe”, recorded in writing, as the basis for inferring that the person is in possession of proceeds of crime, which are likely to be concealed. The reasons to believe must have direct nexus or live link with the material in possession pertaining to above two aspects. Likewise, the adjudication authority under Section 8(1) also must have reasons to believe that the noticee to whom the notice is issued under Section 3 is in possession of proceeds of crime and has committed offence under Section 3. The reasons to believe of adjudicating authority must be formed and constituted independent of the “reasons to believe” formed by the attaching authority under Section 5(1). Both have to exist separately and independently of each other and that the formation of “reasons to believe” by the adjudicating authority must be separate, independent of the belief formed under Section 5(1).

The Court then explained the concept of “reasons to believe” in light of Section 26 IPC, 1860 and drawing analogy from judgments delivered under pari materia provisions of other enactments. Referring to the judgments of Calcutta Discount Co. Ltd. v. ITO2; S. Narayanappa v. CIT3; Sheo Nath Singh v. CIT4 and ITO v. Lakhmani Mewal Das5, the Court held that the phrase implies and contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. The said belief must not be premised on suspicion, but on information. If any authority passes an order without the precondition being satisfied, then it is supposed to be “acting without jurisdiction”. A rational connection with the formation of belief and live material on the basis of such formation of beliefs takes place is necessary. The communication of “reasons to belief” accompanies with itself a mandatory duty and direction of communication of the same to the person affected. Any order passed contrary to the aforementioned procedure is nullity in the eyes of law and attached property can be directed to be released from attachment. The court accordingly referring to the findings returned by ATPMLA held that conclusions of ATPMLA are not in sync with the findings returned by it. Where on one hand the ATPMLA held that order confirming attachment of adjudicating authority to be bad in law, it erred in not setting it aside.

On the aspect of physical dispossession of the petitioner from the property, post attachment, it was held that physical dispossession of the property is an extreme and drastic action, which is completely unwarranted in any case. The powers under Section 8(4) of confiscation of the attached property can be resorted to only after final findings of the Special Court and not before. It is an exception, not the rule. The taking over of the physical possession by the ED was therefore held to be illegal, as also orders of ATPMLA and AO, PMLA, New Delhi. The writ petition was allowed with the quashing of provisional attachment order and consequential directions to release the attached property in favour of the petitioner.

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(2) Anil Vasantrao Deshmukh v. State of Maharashtra6

(Delivered on October 4, 2022)

Coram: Single Judge Bench of HM Justice N.J. Jamadar

Authored by: HM Justice N.J. Jamadar

Application for grant of regular bail under Section 439 was preferred by the applicant who was holding the office of Home Minister, Government of Maharashtra. It was alleged that the applicant misused his official position and power to exercise undue influence over transfers and posting of police officials, for ulterior conspiration and motives. Scheduled offences were registered under the provision of PC Act and IPC by the CBI, which escalated the registration of offences under PMLA by the ED. Whilst considering the application for bail it was held that statutory restrictions are limitations to the exercise of discretion by the court, but cannot imply an absolute bar against grant of bail. At the stage of grant of bail, it is not expected of the court to arrive at a finding that the applicant has not committed any offence for granting bail. Such an exercise is against the intention of the legislature and the court must maintain delegate balance between judgment of acquittal and conviction and an order granting bail much before commencement of trial. The court is expected to sift through the material brought on record to access the probability of the accused being not ultimately convicted and probability of his being found guilty. The expression “proceeds of crime” must be construed strictly and all properties recovered or attached by the investigating agencies in connection with criminal activity relating to scheduled offence under general law cannot be regarded as “proceeds of crime” in an omnibus manner. Mere possession of unaccounted property, even though actionable for tax violation may not be regarded as “proceeds of crime” unless concerned tax legislation prescribed such violation as an offence and such offence is included in the Schedule to the 2002 Act. The derivation or procurement of the property as the “proceeds of crime” must be indicative of criminal activity relating to the scheduled/predicate offence already accomplished. Authorities cannot resort to prejudicial action against any person for money laundering on assumptions and presumptions that property owned by them are “proceeds of crime”. Thus, money transferred to the account of charitable society in which family members of the applicant were members before the alleged dates of commission of predicate offence is of no significance and cannot be treated as a tainted or illicit money. No allegations were levelled by the ED that property that had been derived or obtained was “as a result of criminal activity”. Unaccounted cash could not be justifiably demonstrated as “proceeds of crime”. Insofar as the transfer and postings were concerned, by virtue of his office, position, and portfolio it was well within his power to offer suggestions about the place of postings. The allegations were all based on hearsay statements of witnesses examined by the police. No specific allegation or categorical material to show that amounts/money received in the account were derived directly as a result of scheduled offence and had no other source. For whom the amount was collected; at whose instance it was collected; who was the mastermind as all have not been explained appropriately by ED. The credentials of the person giving the statements to ED were also seriously doubtful, who himself was possessing criminal antecedents. In such circumstances therefore, no prima facie case or reasonable grounds for believing that the applicant accused may be guilty of offences under PMLA were clearly existing. The twin conditions under Section 45 were appropriately met and accordingly court enlarged the accused applicant on bail.>

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(3) Harsha D. v. State7

(Delivered on October 17, 2022)

Coram: Single Judge Bench of HM Justice Maheshan Nagaprasanna

Authored by: HM Justice Maheshan Nagaprasanna

The challenge was made to the order passed by the Additional Chief Metropolitan Magistrate (ACMM), Bengaluru, through which the ED was allowed to issue summons and interrogate the petitioner applicants who were in custody in relation to commission of offences under various provisions of IPC, which are also scheduled offences to PMLA. Consequent to registration of the aforesaid offences and taking the petitioner behind bars, ED got active, registered an ECIR, moved an application before the ACMM for service of summons and interrogation of various accused persons for alleged commission of offences under various provisions of PMLA. The permission for so was granted by the ACMM, which was laid to challenge before the High Court on the ground that only the Special Court constituted under PMLA is competent to entertain and decide such requests, and that the court of ACMM never possessed any jurisdiction to pass such an order permitting ED to interrogate or investigate.

Referring to provisions of Sections 43 and 44 read with Section 71 of the PMLA, as also in the judgments of A.R. Antulay v. R.S. Nayak8 and Vijay Madanlal Choudhary v. Union of India9 of the Supreme Court, it was held that once allegations under PMLA trigger and ECIR was registered, then powers, authority of ED will be covered by the provisions of PMLA. Everything under the umbrella of PMLA has to be adjudicated and decided by the Special Court constituted for the said purpose and every application, request ought to have been placed before the Special Court concerned to take permission to record the statements. The Special Court has the powers of a Magistrate, but not the other way round. Thus, the orders passed by ACMM were clearly without jurisdiction and bereft of statutory authority. The Court held that the Special Court enjoys all the powers of the court of original jurisdiction, it holds a dual capacity and powers of both the Magistrate and the Court of Session, depending upon the stage of the case. Thus, the orders passed by the ACMM were quashed and set aside by the High Court granting liberty to the ED to move the said appropriate application before the Special Court possessing jurisdiction in the matter.

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(4) Directorate of Enforcement v. Padmanabhan Kishore10

(Delivered on October 31, 2022)

Coram: 2-Judge Bench of HM Justices Uday U. Lalit and Bela M. Trivedi

Authored by: HM Justice Uday U. Lalit

The allegation against the respondent-accused was that he in conspiracy with other co-accused persons had committed the offence of offering of bribe to a public servant. The Court held that so long as the amount to be offered as a bribe is in the hands of the bribe giver and it does not get impressed with the requisite intent, being actually handed over as a bribe it would definitely be untainted money. The moment such money (to be offered as a bribe) is handed over without such intent it would be merely an entrustment. If thereafter it is appropriated by the public servant, the offence would be misappropriation but certainly not of bribe. In such circumstances therefore when the amount to be offered as bribe is to be handed over, the person concerned in whose possession such a money lies can safely be proceeded for the aspects of possession and acquisition of “bribe money as proceeds of crime”. By giving or handing over money such person will be assisting and knowingly will be a party to an activity connected with the “proceeds with crime”. Absent such intent and active participation of handing over of money as a bribe on the part of the person concerned, money would not resume the character of being “proceeds of crime”. Thus, the respondent was prima facie involved in the activity connected with the “proceeds of crime” as a bribe giver, in possession and acquisition of the money to be handed over as bribe.

Accordingly the judgment of High Court was set aside quashing the proceedings under PMLA and it was held that the same were maintainable qua the respondent-accused. The respondent was directed to be continued to be arrayed and proceeded against in relation to the ECIR registered by the ED.

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(5) Lakhwinder Singh v. Union of India11

(Delivered on November 10, 2022)

Coram: Single Judge Bench of HM Justice Sandeep Sharma

Authored by: HM Justice Sandeep Sharma

The petitioner was neither an accused in the initial FIR, nor his name found mentioned in the final report under Section 173 CrPC (charge-sheet submitted by the police). The properties owned by the petitioner were attached on the presumption that the same were “proceeds of crime”, found to have been derived or obtained from criminal activity under Sections 3 and 4 of the PMLA. The primary argument of the petitioner was that on a notional or presumptive basis, properties cannot be attached by ED and the ED cannot proceed under its provisions criminally against any person. Referring to the judgment of Delhi High Court in Prakash Industries Ltd. v. Directorate of Enforcement12, the Court held that even though the offence of money laundering is a separate standalone offence, the “proceeds of crime” ought to have preceded from commission of predicate offences and thereafter laundered over. The activity of money laundering must be inextricably linked to criminal activity. Even though there were serious allegations of illegal mining against the petitioner, there was no material, document or evidence, evidencing the aforesaid allegation. The figure of Rs 35 crores was thus imaginary and presumptive, with conclusions drawn by the ED being so done in a hot haste manner. Holding that gravity of offence alone cannot be decisive ground to deny bail, but competing factors also be balanced appropriately by the court whilst exercising its discretion. It was held that the object of bail is neither punitive nor preventive. Referring to longline of judgments on consideration governing grant of bail viz. Sanjay Chandra v. CBI13, Manoranjana Sinh v. CBI14 and Prasanta Kumar Sarkar v. Ashis Chatterjee15, the Court allowed application granting regular bail to the petitioner.

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(6) Rajiv Chakraborty Resolution Professional of EIEL v. Directorate of Enforcement16

(Delivered on November 11, 2022)

Coram: Single Judge Bench of HM Justice Yashwant Varma

Authored by: HM Justice Yashwant Varma

An important question arose about the impact and effect of a moratorium that comes into effect under Section 14 of the IBC, 2016 on powers of the Enforcement Directorate to proceed for attachment under provisions of PMLA. The writ petitions challenged the validity of attachment orders passed by the adjudicating authority belonging to the accused under ECIR. The challenge to orders of attachment was essentially on the ground that once moratorium under Insolvency and Bankrutpcy Code (IBC) comes into effect, ED stood denuded of its jurisdiction to exercise powers of attachment under PMLA, specifically under Section 5. The company under insolvency was subjected to a moratorium order and thereafter received offers from multiple prospective resolution applicants for taking over assets of the corporate debtor. However, they hit the bottleneck of attachment orders passed by ED. A preliminary objection was taken about the maintainability of the writ petition, in view of availability of alternative remedy against the order of attachment before Appellate Tribunal, PMLA on behalf of ED. However since there were conflicting views rendered by courts and National Company Law Tribunals (NCLTs), the High Court overruled the preliminary objection and chose to decide the matter on merits. Further it was held that NCLT whilst discharging its functions under IBC cannot decide upon the challenge to orders of attachment passed under PMLA by the adjudicating authority. Thus, the High Court was held to be the appropriate forum under Article 226 to decide upon the said aspect. Even otherwise since there were jurisdictional and legal issues relating to statutory interpretation, said writ petition was held to be maintainable. After examining rival contentions, High Court broadly held as follows:

(a) In view of Section 32-A of the PMLA, relying on the judgment of Nitin Jain Liquidator PSL Ltd. v. Directorate of Enforcement17, it was held that no action can be taken against the properties of corporate debtor in respect of offences committed prior to commencement of corporate insolvency resolution process (CIRP) and once the resolution plan comes to be approved or when sale of liquidation starts taking place, the process of resolution or liquidation must be taken forward unhindered. Thus, penalties connected with the offences committed prior thereto get dissolved at such stage. This interpretation of Section 32-A is in the larger interest of all the stakeholders, especially the imperative need to attract resolution applicants who would otherwise be shy and not forthcoming if penalties arising out of offences are to affect the corporate debtor. The constitutionality of Section 32-A of the IBC has been affirmed by the Supreme Court in Manish Kumar v. Union of India18, to be in tune with the larger aims and objectives of IBC. The cessation of liabilities under Section 32-A arising out of various offences and conditions thus takes place when larger public interest has to be subserved.

(b) Relying on the judgment of Biswanath Bhattacharya v. Union of India19 of the Supreme Court, it was held that powers of the attachment which stand comprised under Sections 5, 6 and 8 are basically adoptions of principles of civil forfeiture, in recognition and implementation of legislative intent that perpetrators of money laundering offences do not enjoy the fruits thereof. The attachment of property under Section 5 of the PMLA is an aspect of civil forfeiture permissible and available to the sovereign when property is illegally acquired. There is no right to enjoy property that is derived from unlawful conduct and thus the non-conviction-based asset forfeiture model is an internationally accepted practice in the fight against organised crime and money laundering. PMLA permits property equivalent in value to be attached when the actual property is not available for attachment. When a person accused of money laundering has absconded, or goes untraceable, then property equivalent in value can be attached permissibly.

(c) Attachment by ED is not a debt recovery action, nor does ED acts as the creditor when it moves ahead for attachment. It is towards the larger objective of restraining the alienation of property pending the trial of offence of money laundering, which is illegitimately attached to commission of crime. The State whilst exercising powers of attachment acts with the idea of taking all that away what has been illegitimately secured by prescribed “criminal activity”.

(d) Referring to the judgment of Directorate of Enforcement v. Axis Bank20, it was held that there is no conflict between the provisions of PMLA and IBC as a third party who is a bona fide purchaser can always approach the adjudicating authority to seek release of the attached property by showing that interest in such property is acquired bona fide, for lawful and adequate consideration. There was no intent, whilst acquiring such interest or charge to defeat or frustrate the law, nor was he privy to the commission of scheduled offence or the offence of money laundering. An interest in the property of an accused acquired by a third party acting bona fide acquired prior to its commission of prescribed offence evincing illicit pecuniary benefit to accused cannot be defeated or frustrated by attachment of such property under Section 8 of the PMLA. Thus bona fide third-party claimant has a legitimate right to proceed ahead with the enforcement of its claim in accordance with law, notwithstanding order of attachment under PMLA, the latter action of attachment is not rendered irrelevant or unenforceable. The order of attachment under PMLA would remain valid and operative to the extent of value of the property as it exceeds the claim of a third party. The remainder of the value, if any, thereafter, to be made available for purposes of PMLA. Thus, the attachment under PMLA takes a back seat allowing a secured creditor or a bona fide third-party claimant to enforce its claim qua the attached property.

(e) Holding the impact of the moratorium under Section 7 to be operative against all claims for debts, the word “proceedings” under Section 7 shall imply as all those proceedings, that are relatable to enforcement or recovery of a debt owed by the corporate debtor. It cannot extend to criminal/quasi-criminal proceedings pertaining to “proceeds of crime” or the tainted property derived illegitimately from criminal activities.

(f) Thus, moratorium order under Section 7 of the IBC cannot prevent the authorities under PMLA from exercising powers conferred by Sections 5 and 8 notwithstanding the pendency of CIRP.

g) The attachment under PMLA cannot be viewed as an effacement of all the rights that may exist or claim to be exercisable in respect of the property. Relying on the judgment of the Supreme Court in Balkrishan Gupta v. Swadeshi Polytex Ltd.21, it was held that there is no automatic vesting of property in the Central Government or with ED, but what exists is just an attachment order till ordered so by the Special Court. Relying on the judgment of Kerala State Financial Enterprises Ltd. v. High Court of Kerala22, Court elaborated upon the concept of attachment as taking into the custody of law of property of any person.

(h) On the aspect of operability of two different non obstante clauses under both the enactments of IBC and PMLA, relying on the judgment of Maruti Udyog Ltd. v. Ram Lal23, it was held that the test to be applied is that of “subject and the dominant purpose”. The dominant purpose for which the legislation has been enacted, if it is a later enactment, then ordinarily non obstante clauses of a subsequent legislation shall prevail over the former. However, the purpose, objective and dominant purpose of both the legislation must be examined and suitably viewed for examining when one takes precedence over other.

(i) The enforcing authority with attachment powers under PMLA does not enjoy any superior or overarching interest in the attached property and that interests of bona fide third-party claimants must always be protected. The claims of parties over the property that may be attached in question of distribution, priorities will all have to be settled independently and in accordance with law and an order of attachment by ED does not invest in it a superior or overriding right on the property. The High Court accordingly dismissed all the writ petitions and repelled the challenge to the orders of provisionals as well as confirmation of attachment orders passed by ED and adjudicating authority respectively.

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(7) Nik Nish Retail Ltd. v. Union of India24

(Delivered on November 28, 2022)

Coram: Single Judge Bench of HM Justice Subhendu Samanta

Authored by: HM Justice Subhendu Samanta

The primary issue involved before the High Court was whether quashing of a case of scheduled offence shall automatically result in quashing of subsequent cases registered under provisions of PMLA. The CBI Kolkata registered FIR under Sections 420, 409 and 120-B IPC read with Section 13 of the PC Act. On the said premise the ECIR came to be registered against the petitioner for offences of money laundering under PMLA. The offences were registered on allegation of irregularities in sanctioning of loan facilities to the petitioner by the Union Bank of India. The properties were attached by ED provisionally, which was confirmed subsequently by the adjudicating authority as well. The Appellate Tribunal, PMLA, New Delhi however set aside the aforesaid orders of attachment by the adjudicating authority holding that the properties that were subject-matter of attachment were all acquired and possessed by the respective owners much before availing of loan facilities and therefore no “proceeds of crime” can be said to be invested in these properties, nor the properties could have been attached under Section 5 of the PMLA. They were found to be not purchased from the alleged “proceeds of crime” and resultantly allegation of money laundering not found to be prima facie sustainable for the purposes of attachment under Section 5(5) of the PMLA by the adjudicating authority.

In the meanwhile, the bank and the petitioner arrived at a settlement, vide which the petitioner agreed to pay the entire outstanding amount to the Union Bank of India towards satisfaction of the claims made by the bank. On the strength of a settlement agreement between the petitioners and the bank, the High Court quashed the proceedings of the scheduled offences registered by the CBI against the petitioners. Thus, the substratum of the PMLA offences disappeared and petitioner contended that the question of existence of any “proceeds of crime” thereof does not arise. Relying on the judgment of Parvathi Kollur v. State25 of the Supreme Court of India, and the judgment of Harish Fabiani v. Directorate of Enforcement26, the High Court held that no action of money laundering can proceed against any person in relation to the property linked to the stated scheduled offence, if the person named in the criminal activity is finally absolved by a court of criminal jurisdiction owing to an order of discharge, acquittal or quashing of an criminal case of the scheduled offence.

In view of both the circumstances viz. setting aside of attachment order by the PMLA Appellate Tribunal and quashing of FIR of predicate offence by the High Court under Section 482, the offences under PMLA were also quashed by the High Court holding the prosecution to be unsustainable.

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(8) P. Anand v. Directorate of Enforcement27

(Delivered on December 1, 2022)

Coram: Single Judge Bench of HM Justice A.D. Jagadish Chandira

Authored by: HM Justice A.D. Jagadish Chandira

Petitioner was being proceeded against by the ED for abetting and assisting the principal accused persons in the three ingredients of offence of money laundering viz. “placement”, “layering”, “integration” for acquisition of assets of the tainted money. The petitioner took the defence that he was not the main accused, even if the allegation were accepted on the face value but had abetted the commission of the main accused in the offence of money laundering as a dummy person with his name present only on paper. Relying on the Supreme Court judgments, it was held that even though a person might not be involved in the original criminal activity relating to the commission of scheduled offence, but is involved into activities of money laundering as the principal abettors, their prosecution for money laundering cannot be stated to be illegal, but a valid one. The petitioner even though being an illiterate, uneducated person was pleading the defence of being a dummy man, however he was deployed to act as director and the signatory in all the companies for several years which were engaged in the activity of money laundering. Thus, the mens rea of the petitioner in abetting the offence of main accused was held to be present writ large impalpable failing to satisfy the the twin conditions of bail under Section 45 of the PMLA and the bail application came to be rejected by the Court.

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(9) Sanjay Pandey v. Directorate of Enforcement28

(Delivered on December 8, 2022)

Coram: Single Judge Bench of HM Justice Jasmeet Singh

Authored by: HM Justice Jasmeet Singh

The regular bail application under Section 439 CrPC was preferred in relation to the criminal prosecution initiated by the ED against the petitioner on the grounds of interception of telephonic calls by the petitioner’s company of MTNL lines at National Stock Exchange (NSE). The scheduled/predicate offences of Sections 409 and 420 read with Section 120-B IPC, 1860 as also under Sections 69-B, 72 and 72-A of the IT Act, 2000, Sections 20, 21, 24 and 26 of the Telegraph Act, 1885 and Sections 3 and 6 of the Wireless Telegraphy Act, 1933 and Section 13(2) r/w Section 13(1)(d) of the Prevention of Corruption Act, 1988 came to be registered against the petitioners.

It was specific defence of the petitioner that NSE had approached their company ISEC for engaging their services for analysis of calls from landlines of NSE and that even before their involvement, it had been done as a routine and regular exercise by the NSE through its own empanelled companies. It was further argued that services of ISEC were engaged by the NSE for tapping and recording of calls of its own employees, which cannot be treated as an offence.

The court in its ultimate reasoning held that whatever ISEC undertook was in pursuance of a contract entered into and executed with the NSE by the petitioner’s company. Referring to the Constitution Bench judgment of K.S. Puttaswamy v. Union of India29 it was held that tapping phone lines or recording calls without consent of any person results in breach of privacy, which is an important facet of right to personal life and liberty guaranteed under Article 21. As such thus even though there was contravention of the provisions of the Telegraph Act, but since offences under the Telegraph Act are not enlisted schedule offences under PMLA, therefore PMLA was not attracted. The applicant’s company ISEC was never conferred with independent powers for intercepting and tapping of phone lines of employees of NSE. Offences of Sections 405, 406, 409 and 420 IPC were also not stated to been made out against the accused person, since whatever was done was in terms of a pure business arrangement between the ISEC and the NSE and there was never any dishonest intent (at the inception of contract) to cause a wrongful loss or wrongful gain on an intention to defraud any person by the petitioner’s company.

No person had been specifically named whose loss was caused. Even prior to the coming into scene of the petitioner or their company ISEC into the whole process, the NSE had been routinely undertaking the said exercise of recording calls of its employees, but through other entities and companies. They are also not stated to be involved in commission of offences leading to pecuniary advantage in terms of the Prevention of Corruption Act. Performance of business contract and realisation of a contractual compensation for delivery of services cannot be classified under the category of a “pecuniary advantage” under PC Act. Thus offences under the predicate enactments/scheduled offences were not made out to have been committed by the petitioner against the employee of NSE. A clear-cut case of grant of bail under Section 45, PMLA was made out and the bail application was accordingly allowed.

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(10) Vijay Agrawal v. Directorate of Enforcement30

(Delivered on December 13, 2022)

Coram: Single Judge Bench of HM Justice Dinesh Kumar Sharma

Authored by: HM Justice Dinesh Kumar Sharma

The petitioner sought interim bail on medical grounds as stating to be suffering from severe ailments relating to spine and back. In the MRI reports that were procured during treatment at hospital, the health condition had worsened, and it was pleaded that he was not in condition to face any further continued detention. The bail was opposed by the ED on the ground of the appellant not meeting twin conditions under Section 45 of the PMLA for being enlarged on bail. Extensive reference was made to medical reports prepared by various hospitals and specialists stating the severe medical condition of the accused. The court however, rejecting the submissions of the ED held that howsoever serious the offence maybe, and the twin conditions of Section 45 might have to be satisfied, the health condition of any human being is paramount and cannot be ignored. The custody during investigation is not punitive but must take into account his precarious and serious health. The court cannot be ignorant of the fundamental rights of even an accused to get himself adequately and effectively medically treated under Article 21 of the Constitution of India. It is not necessary that the grant of bail on medical grounds be considered only when the person is breathing last or in a position where he may not survive. If the ailments are very painful and need immediate redressal, the Court may permit interim bail even in offences under PMLA on medical grounds for enabling the accused to take appropriate medical care. Accordingly, the accused was enlarged on interim bail as a special case.

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(11) Directorate of Enforcement v. Debabrata Halder31

(Delivered on December 20, 2022)

Coram: Single Judge Bench of HM Justice Tirthankar Ghosh

Authored by: HM Justice Tirthankar Ghosh

The petitioner challenged the grant of bail by the Special Court (CBI/PMLA) in offences relating to PMLA to the respondent-accused persons. The allegation was that a bank guarantee was encashed fraudulently with the active collusion of bank officials along with the beneficiaries, the respondent-accused persons. The accused was found to be involved in the commission of offences of money laundering indulging in criminal conspiracy for laundering of the illicit “proceeds of crime”. He was arrested under Section 19, PMLA and accordingly produced before the Special Court, and thereafter remanded from time to time. Final report under Section 45 was filed by the ED against 13 persons including the respondent-accused. Respondent 1 accused was alleged to be the kingpin and main architect conspirator of the whole offence. Delving into the consideration governing grant/denial of the bail, and referring to the judgment of Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra32, interpreting the twin conditions for grant of bail, the Court held that what is required is to assess the probability based on reasonable material corrected during investigation of the likelihood of the guilt or acquittal of the accused during the trial. The phrase “reasonable grounds for believing” and the expression “reasonable grounds” means something more than “prima facie grounds under Section 45”, which would mean that court has to grant bail only if there is a genuine case against the accused in which there is prima facie likelihood of his involvement. When a person has responded to summons during investigation of the ED, then bail must be granted as a matter of practice. Accordingly, the order of bail passed in favour of the respondent-Accused 2-11 by the trial court was affirmed.

However, insofar as the principle accused Debabrata Halder was concerned, it was observed that the trial court failed to record its satisfaction and findings regarding the broad probabilities relating to the existence of reasonable grounds for believing that the accused Debabrata Halder was not guilty of the offence alleged under PMLA, 2002. He was the mastermind and kingspin of the whole offence which was overlooked by the trial court and thus without adhering specially to the mandate of Section 45, the principal respondent Debabrata Halder was enlarged on bail.

It was further held that the investigation agency is under no obligation to seek a formal specific prayer for convening further investigation, which is the sole prerogative of the investigation agency. The only duty cast upon the investigation agency is to the extent of informing the court concerned of its intent to convene and conduct further investigation, which was done in the present case. Accordingly, the bail granted to Respondent 1 Debabrata Halder was set aside, with a collateral direction to surrender back to the competent court within 72 hours.

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(12) Sky Light Hospitality v. Union of India33

(Delivered on December 22, 2022)

Coram: Single Judge Bench of HM Justice Pushpendra Singh Bhati

Authored by: HM Justice Pushpendra Singh Bhati

Two broad issues arose before the Single Bench of the High Court, which were as follows:

  1. Whether the copy of the ECIR in question may be given to the petitioner-accused as a matter of their fundamental right.
  2. Whether the ECIR in question may be quashed and if so, on what grounds.

On the first issue, it was held that referring to the judgment of Vijay Madanlal Choudhary v. Union of India34, that ECIR is not a statutory document. There is no provision under the 2002 Act requiring authority under Section 48 to record ECIR or to furnish copy thereof to the accused unlike Section 154 CrPC, 1973. ECIR cannot be equated with an FIR to be mandatorily required to be recorded and supplied to the accused applying provisions of CrPC, in view of the special mechanism envisaged by the PMLA, especially under Sections 65 and 71 thereunder. It is enough if ED at the time of arrest closes the broad grounds of such arrest to the accused person.

On the second issue, Court held that offences under PMLA are independent, separate, and standalone, qua the scheduled/predicate offences, from which the PMLA proceedings arise. The PMLA proceedings, being inherently civil in nature, cannot be stated to be put on hold till the criminal proceedings in the PMLA/predicate offences attain a quietus. Since the process of investigation is pending and qua the petitioner with permission for further investigation has been sought by the ED, therefore no fault can be found in the procedures so followed by the investigative authorities under PMLA. There is a likelihood that petitioners who are not accused in the PMLA complaint at a later stage may be arrayed as accused after supplementary investigation by ED. Therefore, interference by the High Court was held to be of a premature nature and on this issue also the relief sought for by the petitioners was declined. The writ petition was therefore dismissed.

*    *    *

† Expert in Constitutional, Civil and Financial Laws, Practicing Advocate at the Supreme Court of India.

1. Civil Miscellaneous Second Appeal No. 6 of 2020, decided on 27-9-2022. (Telangana HC)

2. AIR 1961 SC 372.

3. AIR 1967 SC 523.

4. (1972) 3 SCC 234.

5. (1976) 3 SCC 757.

6. 2022 SCC OnLine Bom 3150.

7. (2023) 2 Kant LJ 97. (Kar)

8. (1988) 2 SCC 602.

9. 2022 SCC OnLine SC 929.

10. 2022 SCC OnLine SC 1490.

11. 2022 SCC Online HP 6166.

12. 2022 SCC OnLine Del 2087.

13. (2012) 1 SCC 40.

14. (2017) 5 SCC 218.

15. (2010) 14 SCC 496.

16. 2022 SCC OnLine Del 3703.

17. 2021 SCC OnLine Del 5281.

18. (2021) 5 SCC 1.

19. (2014) 4 SCC 392.

20. 2019 SCC OnLine Del 7854.

21. (1985) 2 SCC 167.

22. (2006) 10 SCC 709.

23. (2005) 2 SCC 638.

24. 2022 SCC OnLine Cal 4044.

25. SLP (Crl) No. 4258 of 2021, order dated 16-8-2022 (SC).

26. 2022 SCC OnLine Del 3121.

27. 2022 SCC OnLine Mad 5555.

28. 2022 SCC OnLine Del 4279.

29. (2017) 10 SCC 1.

30. 2022 SCC OnLine Del 4494.

31. 2022 SCC OnLine Cal 4095.

32. (2005) 5 SCC 294.

33. 2022 SCC OnLine Raj 2530.

34. 2022 SCC OnLine SC 929.

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