This article analyses landmark judgments delivered by the Supreme Court and High Courts between April and August 2024 on key issues under the Prevention of Money-Laundering Act, 2002, including arrest safeguards, bail standards, attachment of property, and procedural compliance.
The present article attempts to cover all the important and landmark judgments delivered by the Supreme Court and High Courts of the country, on issues arising out of the Prevention of Money-Laundering Act, 2002 (PMLA). The judgments from April to August 2024 are covered in this part, which are as follows:
Abbreviations for various common terminologies in the judgments
|
Art. — Article |
Assn. — association |
|
CJM — Chief Judicial Magistrate |
CG — Central Government |
|
CB — Constitution Bench |
CBI — Central Bureau of Investigation |
|
COI — Constitution of India |
Co. — company |
|
Commr. — Commissioner |
|
|
DB — Division Bench |
ECIR — Enforcement Case Information Report |
|
ED — Enforcement Directorate |
Govt. — Government |
|
HC — High Court |
JB — Judge Bench |
|
MLA — Member of Legislative Assembly |
Ltd. — Limited |
|
ML — money laundering |
NPA — non-performing asset |
|
MP — Member of Parliament |
NCLT — National Company Law Tribunal |
|
Pankaj Bansal judgment — Pankaj Bansal v. Union of India1 |
|
|
Pavana Dibbur judgment — Pavana Dibbur v. Enforcement Directorate2 |
PAO — provisional attachment order |
|
POC — proceeds of crime |
Pvt. — Private |
|
P&H — Punjab and Haryana |
|
|
r/w — read with |
|
|
SFIO — Serious Fraud Investigation Office |
SBBEL — Shree Bankey Behari Exports Limited |
|
SC — Supreme Court |
SB — Single Bench |
|
Sec. — Section |
UOI — Union of India |
|
u/s — under Section |
v. — versus |
|
WP — writ petition |
w.e.f. — with effect from |
The judgments are as follows:
(1) Brij Bala Kapur v. Enforcement Directorate3
(Delivered on 6-2-2024)
Coram: Single Judge Bench of HM Subramonium Prasad, J.
The petitioner approached the High Court, challenging the provisional attachment order issued by the Enforcement Directorate in relation to Enforcement Case Information Report registered by it.
Factual matrix of the case
The first information report (FIR) in relation to predicate offences under various provisions of the Penal Code, 1860 (IPC) came to be registered on the basis of complaints from various banks alleging that the company R.A. Distributors Private Limited had prepared 17 fake bills of entry and presented them before ICICI Bank for making foreign outward remittances. Similar such complaints were filed against other companies on similar allegations of hatching a well-planned conspiracy for opening of sham accounts with ICICI Bank on the basis of forged documents and thereafter ensuring foreign remittances in large amounts. The remittances were alleged to be to the tune of around Rs 428 crores in favour of various Hong Kong and UAE based companies. Consequent thereto, the proceedings were also initiated under the PMLA against various companies and their promoters and Directors. The petitioner and her husband were also Directors and shareholders in one of such companies. The petitioner pleaded that she is just a housewife and not engaged actively into the day-to-day business activities of the company. In her Section 50 statement, also she stated that all the important decisions were taken by her husband and her son relating to the companies and that she never attended any of the meetings and made her signatures as per the say of her husband.
It was further pleaded on behalf of the petitioner that the properties attached through the provisional attachment order were purchased much prior to the period under scrutiny and therefore without any application of mind, the provisional attachment orders was passed by the respondent Enforcement Directorate. It was further contended that without any “reasons to believe” under Section 5 PMLA, provisional attachment order was passed by the competent authority and the property attached vide the said provisional attachment order was a property gifted to her by her father, having no connection with the offences of money laundering.
Consideration and discussion by the Court
The High Court first considered the maintainability of writ petition in the face of availability of alternative remedy of pleading the whole matter before the adjudicating authority (AA) and the Appellate Tribunal under Section 25 PMLA. Referring to the judgment of Enforcement Directorate v. PC Financial Services (P) Ltd.4, the Court discussed that in the face of statutory remedies available before the AA and appellate remedies before the Appellate Tribunal, the parties cannot be allowed to short-circuit or circumvent such statutory procedures. If writ petitions are entertained, it would defeat the very provision of the statute which may provide for certain conditions for filing the appeal like limitation, payment of court fees or pre-deposit of some amounts of penalty or fulfilment of some other conditions for entertaining the appeal. The writ court therefore cannot allow such bypassing of statutory remedies without any special reasons. Referring further to the judgment of Rai Foundation v. Enforcement Directorate5, in somewhat similar facts, the High Court held that by mere issuance of provisional attachment order, the person concerned is not divested of his ownership rights over the property. Furthermore, the writ court also cannot go into the merits of the issue at the said stage even before attachment order has become final, or when the investigation is completed or the trial is concluded. Multiple other judgments and precedents were referred to by the High Court to hold that the remedy under Section 26 cannot be allowed to be obviated by the writ petitioner.
The High Court further held that the present case is not a case of patent lack of jurisdiction and the AA possesses ample powers to look into the facts of the case and consider grievances of the petitioner before coming to a conclusion as to whether the property in question is proceeds of crime or not.
The High Court also negated the contention of the petitioner that since one of the accused had been discharged, therefore the benefit of the findings be extended to her as well. The High Court held that merely because proceedings have been dropped against some individuals will not imply that proceedings against the petitioner also stand dropped or will be dropped. The petitioner can still be prosecuted under the PMLA in absentia of the other co-accused persons. Accordingly, the writ petition was dismissed on the grounds of availability of alternative remedy.
***
(2) Dilbag Singh v. Union of India6
(Delivered on 8-2-2024)
Coram: Single Judge Bench of HM Vikas Bahl, J.
The petitioner challenged the arrest made by the Enforcement Directorate as also the remand order passed subsequent thereto by the Special Court, the PMLA remanding the petitioner to the custody of Enforcement Directorate on various grounds. The petitioner was arrested by the Enforcement Directorate on 8-1-2024 in relation to the Enforcement Case Information Report so registered.
Factual matrix of the case
The FIRs in relation to predicate offences were registered in Yamunanagar District, Haryana against the petitioner under various provisions of IPC. The petitioners were not an accused in the aforesaid FIR but had been arrayed as accused in the complaints filed by the Enforcement Directorate before the Special Court. A search was carried out in pursuance of the said Enforcement Case Information Report from the morning of 4-1-2024 till late evening hours of 8-1-2024 in the residential premises of the petitioners, when they were throughout detained/confined to their houses. Thereafter, the arrest was shown to have been effected formally in the noon hours of 8-1-2024 in the aforesaid house of the petitioners. The Enforcement Directorate further pleaded that written grounds of arrest were duly informed and communicated in writing to both the petitioners on 8-1-2024. The petitioners were produced before the Special Court, Gurugram, instead of Sessions Court, Ambala on 9-1-2024. They were remanded to seven days’ custody on 9-1-2024 granted to the Enforcement Directorate by the Special Court, Gurugram.
The petitioners challenged this arrest and the subsequent order of remand on various grounds, including that the necessary material as constituting the grounds for arrest was never supplied/forwarded to the AA immediately after arresting the petitioner and thus there was total non-compliance of Section 19(2) PMLA. Further there was no mention of any grounds of arrest nor necessity for doing so reflected by the Enforcement Directorate at the time of either the compliance of Section 19(2) or at the stage of remand by the Special Court, Gurugram.
The petitioner further contended that they were detained and subjected to house arrest with effect from the morning hours of 4-1-2024, which amounted to being taken into custody and therefore within 24 hours from the morning of 4-1-2024. They were not produced before the jurisdictional Magistrate despite being in confinement for more than 24 hours. Rather they were produced before the competent court only on 9-1-2024 and not before. The petitioner further contended that as per Section 19(3) PMLA, within 24 hours of arrest he was supposed to be produced before the Magistrate which was also not done. The competent court of jurisdiction for his production was the Sessions Judge, Ambala and not the Sessions Judge, Gurugram.
The grounds of arrest were also argued to be vague and failed to disclose the actual material upon which the arresting officer arrived at the conclusion that petitioners are prima facie guilty of the commission of the offence. There was non-compliance of Section 19(2) inasmuch as the reasons and intimation of arrest was also not forwarded to the AA as per Rule 3(8), Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (PMLA Rules, 2005).
The respondent Enforcement Directorate to the contrary, contended that part of the cause of action has arisen before the Special Court, Gurugram, owing to which therefore the petitioner was produced before the Gurugram Court. Further the arrest of the petitioners was effected on 8-1-2024 and not from the morning of 4-1-2024 as alleged by them. Therefore, the counting of the 24 hours period ought to have been done from 24-1-2024 and not before.
Consideration and discussion by the Court
Referring to Section 19(2), the Court stated that immediately after arrest, the officer concerned is required to forward the copy of the arrest order along with the material in his possession through the AA and to be produced before the jurisdictional Special Court within 24 hours. Referring to the judgment of V. Senthil Balaji v. State7, the Court held that both Sections 19(2) and (3) have a salutatory role to play and any non-compliance of the mandate of Section 19 would enure to the benefit of the person arrested. Further, at the time of remand, the Special Judge is obligated to peruse the grounds of arrest, consider the materials in possession of the arresting officer relied upon for constituting reasons to believe or effecting the arrest of the accused person. The Special Judge after perusing the grounds of arrest must ascertain whether there was proper compliance of the mandate of Section 19 by recording an appropriate finding in the said regard.
Referring to the judgment of Pankaj Bansal case8, the Court held that the Magistrate/Special Judge before whom the accused person after arrest is produced is under a bounden duty to ensure that Section 19 PMLA is duly complied and in the event of any failure entitles the arrestee to be released. Section 167, Criminal Procedure Code is meant to give effect to Section 19 PMLA and any order of remand must precede the application of mind and satisfaction about compliance of inbuilt safeguards stipulated under Section 19.
The Court found that Section 19(2) had neither been noticed nor been remotely even complied with by the officer concerned of Enforcement Directorate arresting the petitioners. How the petitioner had committed the offence of money laundering within the territorial jurisdiction of the Special Court at Gurugram had not been discussed in the remand order. It was incumbent upon the Special Court, Gurugram to have considered and examined the entire material to ascertain as to whether any cause of action had arisen within its territorial limits on the basis of which ED had produced the petitioners, the same had unfortunately never been done by the remanding court. The impugned order also failed to record that grounds of arrest were duly furnished to the petitioner and on the basis of materials in his possession the arresting officer had formed the “reason to believe” that the petitioner is guilty of the offence of money laundering and liable to be arrested. Thus, the remand order for having failed to have examined and scrutinised the compliance of the mandatory provisions of Sections 19(2) and (3) thus became vulnerable to be set aside on the said ground alone.
On the contention of the petitioners that they were illegally detained from the morning of 4-1-2024 (and not from 8-1-2024 as contended by the Enforcement Directorate), the High Court observed that the petitioners were not permitted to leave the house during the time of the search, with their movements being detained and controlled by the authorities, even though it was in the residential premises of the petitioner. On the basis of totality of circumstances, the High Court concluded that the petitioners were detained in the premises in question against their consent, in their home, to secure their presence within the premises for having access and unlocking of locker, safe, almirah and documents, etc. Referring to the Rules 3(7) and (8), PMLA Rules, 2005, the Court highlighted that the petitioner had not attended the search of his own volition, but was forced to attend the same by staying confined in the premises for days altogether till the time the search was concluded. The authorities even otherwise without keeping the petitioners in custody would have carried out the search of various commodities and materials placed in their house, but they chose not to do so. The petitioner therefore ought to have been taken within 24 hours of such detention to the nearest gazetted officer. It was nothing but illegal detention/unlawful restraint and the petitioners would be deemed to have been arrested on 4-1-2024 itself when limitations on their movement were placed by the Enforcement Directorate officers. Referring to the Division Bench judgment of the Punjab and Haryana High Court in Pranav Gupta v. Union of India9, the High Court reiterated that arrest is always reckonable from the date of unlawful restraint and not from the date of formal or actual arrest. Unless the accused willingly accompanied or stayed with the Enforcement Directorate officials it would be construed that by stopping the petitioner from moving out or moving freely, instead he was kept in unlawful restraint. In the garb of summons, therefore the Enforcement Directorate officials had attempted to impose unlawful restraint on the petitioners. Referring further to the judgment in Ashak Hussain Allah Detha v. Collector of Customs (P) Bombay10, holding wherever restraint or deprivation of one’s personal liberty takes place in the hands of an authority clothed with the power to arrest, then the same would amount to arrest even if it is within one’s own house.
Referring further to the judgment of Andhra Pradesh High Court in Iqbal Kaur Kwatra v. District General of Police11, the High Court observed that police custody does not necessarily mean custody after formal arrest but any form of police surveillance and restriction on the movements of the person concerned by the police. It cannot necessarily mean detention or confinement, but a person comes in the custody as soon as he comes in the hands of the police officer. In view of the aforesaid law, therefore the petitioner was deemed to have been illegally confined and unlawfully detained from the morning hours of 4-1-2024, when even without any formal arrest, he was restrained at home.
The High Court also proceeded to discuss that all the clauses under Section 19 are mandatory conditions required to be fulfilled both before and immediately after effecting the arrest. The requirement of forwarding the material in the possession of the arresting officer to the AA in a sealed envelope is also an indispensable requirement. Admittedly, in the present case there was no compliance of Section 19(2) pertaining to forwarding of the material to the AA “immediately after the arrest”. The word “immediately” occurring under Section 19(2) read with Section 17 implies “contemporaneously” insofar as forwarding of the reasons recorded in writing of arrest to be forwarded to the AA in a sealed envelope. This compliance of forwarding of the material to the AA has to be effected before passing the order of remand, to be placed before the Magistrate concerned as a proof of its compliance. Accordingly, the High Court held that both arrest as well as order of remand were vitiated for non-compliance of Section 19(2) which was not done till 9-1-2024 by the arresting authority. Even the remand order passed by the Special Judge did not record any fact about its compliance since admittedly no material was produced before the Special Court.
The High Court also distinguished the provisions Section 19(2) from Section 157, Criminal Procedure Code stating that the PMLA is a special Act and provisions of bail as contained under Section 45 are entirely different from the corresponding provisions for bail as provided under the Criminal Procedure Code. Since, the conditions for grant of bail are stringent under Section 45, resultantly the compliance of provisions of Section 19 is also required to be stringently observed. Section 19(2) therefore was sent to be held to brook no exception.
The Court then discussed the ground of non-compliance of Section 19(1) PMLA wherein Enforcement Directorate justified the grounds of arrest just referring to the conduct of the petitioners being evasive in their answers to the investigating authority. Referring to the judgment of Pankaj Bansal case, the High Court reiterated that it is not for the Enforcement Directorate to seek an admission of guilt from the person summoned for interrogation since the same would become violative of the accused’s fundamental right against self-incrimination under Article 20(3) of the Constitution of India. The accused may choose to remain silent in the face of questions being asked to him and mere non-cooperation of a witness in response to summons issued under Section 50 will not render him liable to be arrested under Section 19. Also, because the accused person is giving “evasive replies” or has not confessed before the Enforcement Directorate, it cannot be presumed or understood that he is not cooperating with the investigation.
The High Court then referred and relied upon the judgment of the Supreme Court in Pebam Ningol Mikoi Devi v. State of Manipur12, wherein in the context of preventive detention under the National Security Act, 1980, the Supreme Court held that subjective satisfaction of the authority concerned is required, but it must be premised on some pertinent material. The Supreme Court had referred to William Shakespeare on liberty stating that “a man is master of his liberty”.
Since, admittedly the petitioners were not the accused till date in any of the eight FIRs, made the basis of grounds of arrest of both the petitioners and admittedly no notices under Section 50 were ever issued to them, a perusal of the grounds of arrest of both the petitioners shows that the Enforcement Directorate had simply proceeded to arrest the petitioner because the petitioner had adopted an attitude of non-cooperation by evading the queries and by giving misleading answers.
The High Court further held that there ought to have been independent reasons to believe and grounds existential to arrest the petitioner.
Since, the arrest of the petitioner was illegal, therefore the remand order premised thereupon dated 9-1-2024 and all other consequential orders also got vitiated. Relying on the judgment of State of Punjab v. Davinder Pal Singh Bhullar13, the High Court held that once an order/action is found to be illegal, then all subsequent and consequential proceedings would fall automatically and the superstructure cannot stand on the basis of such non est order/action. Accordingly, the writ petitions were allowed and the impugned arrest orders, arrest memos along with the remand orders passed by the Special Judge, Gurugram were all set aside.
***
(3) Naresh Goyal v. Enforcement Directorate14
(Delivered on 6-5-2024)
Coram: Single Judge Bench of HM N.J. Jamadar, J.
The regular bail application was filed by the petitioner on medical grounds claiming the benefit of the proviso to Section 45 on the ground of the applicant being both “sick” and “infirm”. The petitioner was prosecuted both in relation to the predicate offence registered in FIR under various provisions of IPC with Prevention of Corruption Act, 1988, as also by the Enforcement Directorate. The petitioner pleaded his entitlement for the grant of regular bail on the grounds of being terribly sick, having been rendered physically infirm, and that his wife too is suffering from terminal cancer.
Factual matrix
The FIR under predicate offences was registered against the applicant on the allegation that he had deceived various banks by taking huge loans, siphoning off the funds received from the bank showing bogus expenses and personal expenses and resultantly cause wrongful loss to both, Canara Bank as well as the erstwhile Syndicate Bank. Consequent to the FIR in the predicate offence, Enforcement Case Information Report was also registered by the Enforcement Directorate. The regular bail application pleaded that the applicant was suffering from duodenal cancer, treatment for which is complicated and not possible to be made available in the custody of the Enforcement Directorate. Thus, his detention in such conditions would be in gross violations of the right to life under Article 21 of the Constitution of India. The Enforcement Directorate to the contrary, contended that the applicant is already receiving the best possible treatment for his health issues and alleged infirmities and does not deserve to be enlarged on bail.
The High Court while referring to the proviso to Section 45 discussed its impact on the twin conditions prescribed under Section 45(1). Such a proviso is not to be found in other statutes containing such special twin conditions like Maharashtra Control of Organised Crime Act (MCOCA), Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS) and Unlawful Activities (Prevention) Act, 1967 (UAPA). The proviso vests discretion in the Court to pose unto itself and decide the question as to whether the person seeking bail falls within any of the exceptional categories and if so, whether the exercise of the discretion would be justifiable. Parliament has used the words “sick” or “infirm” disjunctively. Not every kind of sickness would justify grant of bail lest the object behind prescribing stringent conditions in the matter of grant of bail would stand frustrated. The reports of medical experts assist the Court in forming an opinion as to whether the person claiming bail is suffering from such a sickness as to warrant his release on bail or not.
Referring to the judgment of Kewal Krishan Kumar v. Enforcement Directorate15, the High Court reiterated that a person even though not sick but maybe infirm is therefore entitled to grant of bail falling under the excepted category. Infirmity may not only be related to age but also consists of a disability that incapacitates a person to perform ordinary routine activities on a day-to-day basis. Referring further to the judgment of Vijay Agrawal v. Enforcement Directorate16, the High Court underscored that if sufficient treatment for any ailment is not available in the jail then the accused concerned under incarceration is entitled to an opportunity to have adequate and effective medical treatment at his own cost. Referring further to the judgment of the Delhi High Court in Devki Nandan Garg v. Enforcement Directorate17, the Court discussed that a person falling under the proviso to Section 45(1) need not satisfy the twin conditions under Section 45 and in such cases what is to be seen is the nature of the ailment and whether it requires treatment outside the jail.
Discussing the facts at hand in the case of the petitioner-accused, the High Court held that the sickness of the applicant and his wife amounts to infirmity of both mind as well as body in combination with each other. The medical reports of the applicant produced before the High Court clearly depicted that he was suffering from duodenal cancer which had progressed to advanced stages and therefore it could not be held that the applicant is not sick. Being a senior citizen of 72 years of age, therefore, the argument cannot be considered that whether the applicant is getting adequate treatment in the hospital but it must be held that the applicant in view of his peculiar ailment is entitled to get the treatment at the hospital of his choice and further specialised treatment at an even more specialised centre/hospital.
The precious value of personal liberty gets lost by accepting the argument that the applicant is getting the best of his treatment in the jail from State authorities and therefore, he does not deserve to be released on bail. The legislative intent of enacting the proviso to Section 45(1) is clearly defeated and rendered otiose if such a contention of the Enforcement Directorate is accepted that the petitioner does not deserve bail howsoever critical his health condition may be. This is coupled with the fact that the wife of the petitioner is also suffering from a life-threatening disease.
Accordingly, the bail application of the petitioner was allowed by the High Court accepting the ground of proviso to Section 45(1) PMLA.
***
(4) Sanjay Kansal v. Enforcement Directorate18
(Delivered on 9-5-2024)
Coram: Single Judge Bench of HM Amit Sharma, J.
The petition related to the grant of regular bail in relation to offences registered under the PMLA against the petitioner. The Enforcement Case Information Report by the Enforcement Directorate was recorded on the basis of scheduled offences registered by the Central Bureau of Investigation vide FIR under various provisions of IPC, as well as the Prevention of Corruption Act, 1988.
Factual matrix of the case
The Central Bureau of Investigation had registered the FIR in a predicate offence against the officials of State Bank of India and various companies on the allegation that loan and credit facilities of around Rs 625 crores were obtained by one company, Shree Bankey Behari Exports Limited (for short, “SBBEL”), which later on became non-performing asset. The loan was declared as fraud on account of fudging of balance sheets, diversion of funds and related party transactions. It was further alleged that proceeds from the sale of various inventories were diverted and not appropriated to reduce the outstanding loan and also bogus transactions were shown for procuring loans and legitimate funds received from the banks were misappropriated for other purposes.
Insofar as the applicant was concerned, he being the nephew of the main accused was also one of the promoters and directors of the company and alleged to have played an instrumental role in the opening of various firms on papers. The present applicant was accused also of being involved into the activities of money laundering.
The petitioner contended that he was a mere employee acting in the capacity of a field boy on the instructions of the Directors of SBBEL, nor was he the beneficiary of any of the alleged illegal activities carried out by the company. The petitioner further contended that since he had become an approver in the predicate offence, therefore he would be entitled to the advantage of exoneration even in the proceedings under the PMLA of being granted pardon in both cases and becoming a witness for the prosecution. Therefore, having become an approver in the predicate offence, being entitled for pardon and resultantly being discharged of the predicate offence, therefore the petitioner would automatically stand exonerated in the PMLA proceedings as well.
The Enforcement Directorate to the contrary, contended that the petitioner assisted knowingly in the commission of the offence of money laundering by accommodating bogus sale and purchase of inventories of SBBEL and he was the one who was handling day-to-day transactions with paper entities as mentioned in the complaint.
Consideration and discussion by the Court
The Court first dealt with the issue as to whether just because the applicant has become an approver in the predicate offence, thereby being entitled to a pardon therein would he be entitled to be discharged and exonerated in the PMLA proceedings as well. Referring to the Vijay Madanlal and Pavana Dibbur judgments, the Court held that since the present applicant has been granted pardon in the scheduled/predicate offence, the evidence given in the predicate offence proceedings cannot be used for the purposes of the present proceedings under the PMLA. Even in the scheduled/predicate offence, his status is merely converted from being an accused to a witness, subject to full and complete disclosure under Section 308, Criminal Procedure Code. Therefore, the fact that he is still subjected to certain conditions in the predicate offence proceedings leads to a clear inference that the petitioner has not been absolutely absolved in the predicate offence. It is not a case where the petitioner has been discharged or acquitted along with other accused persons, leading to the disappearance of the scheduled offence completely and entirely. To the contrary, the predicate offence proceedings are still pending and are ongoing.
The Court thereafter discussed the considerations that would prevail for the High Court at the stage of the grant of bail. The primary material relied upon by the Enforcement Directorate against the present applicant is essentially in the form of a statement’s made under Section 50 by the applicant himself and other accused persons. Referring to the judgment of the Delhi High Court in Sanjay Jain v. Enforcement Directorate19, on the weightage carried by Section 50 statements in bail application, the High Court reiterated that such statements are to be meticulously examined and appreciated during the course of trial. Though such a Section 50 statement can certainly be looked into at the stage of considering the bail application, but in case of any contradiction or distinction or inconsistency with other statements, such contradictions and inconsistencies will enure to the benefit of the accused applicant for consideration of the application for grant of bail.
The High Court found that, admittedly the applicant was not a key managerial personnel in the company nor was he holding any specific portfolio or designation in SBBEL that would have led to inference that he was responsible or in charge of running the day-to-day affairs of the company. Therefore, it could not be held that he had “knowingly assisted in the offence of money laundering”. Further no property belonging to the applicant had been attached nor alleged to be part of proceeds of crime by the Enforcement Directorate. The applicant had made and carried out various transactions on a commission basis and simply got commissions on a fixed rate basis for the said purpose. Referring to the judgment of Vijay Agrawal v. Enforcement Directorate20, the Court further held that the evidentiary value of statements recorded under Section 50 PMLA has to be tested at the end of the trial and not at the stage of consideration of bail application. There must be firm circumstances pointing to the fact that the petitioner accused had knowledge that the money he is dealing with is tainted money. There must be some substantial link between the money received and criminal activity relating to a scheduled offence which can be attributed to the petitioner. The statements recorded of the other co-accused persons also showed that the applicant was working as a field boy on the instructions of co-accused persons who were holding key positions in decision-making.
The High Court also found that similarly placed accused persons who had been arrayed as accused had not been arrested by the Enforcement Directorate. Referring to the judgment of Sanjay Jain case of the Delhi High Court, the Court reiterated that non-arrest of co-accused by the investigating agencies in any case is a relevant factor to be taken into account in addition to other surrounding factors for the concession of bail. The doctrine of parity in such cases is not wholly irrelevant and not entirely immaterial. The Enforcement Directorate cannot be allowed to have made selective arrests and arraignments as that would lead to arbitrariness on the part of Enforcement Directorate in effecting arrests.
Accordingly, the High Court found that the petitioner had made out a prima facie case for the grant of bail under Section 45, more so when he had already spent 1 year and 9 months in custody and granted bail in the predicate offence. He had also become an approver in the predicate offence proceedings and had joined investigations whenever required by the investigating authorities till he was arrested in relation to the present Enforcement Case Information Report. Accordingly, the bail application was allowed on the aforesaid grounds by the High Court.
***
(5) Tarsem Lal v. Enforcement Directorate21
(Delivered on 16-5-2024)
Coram: 2-Judge Bench of HM Abhay S. Oka and Ujjal Bhuyan, JJ.
Authored by: HM Abhay S. Oka, J.
The batch of appeals were preferred against the orders passed by various High Courts through which the anticipatory bail applications of the accused persons being investigated/prosecuted under the provisions of the PMLA were rejected by the High Courts. The commonality of facts amongst all the cases was that the accused persons had participated throughout during investigation post-registration of Enforcement Case Information Report by the Enforcement Directorate and responded to summons whenever so required by the Enforcement Directorate to be present. However, when the complaints came to be filed by the Enforcement Case Information Report post-investigation, summons were issued to them by the Special Court before which the complaint case/charge-sheet was filed by the Enforcement Directorate. In response to summons they filed anticipatory bail applications, which came to be rejected by the Special Courts and the High Courts, in view of having failed to meet the twin conditions prescribed under Section 45 PMLA.
The contentions of the petitioners were that if the accused has not been arrested during the investigation by the Enforcement Directorate, on filing of the complaint/charge-sheet they cannot be required to appear and be subjected to custody merely on the cognizance PMLA offence so taken by the Special Court. If the authorities had no reason to believe that the accused ought to be arrested during investigation, then it is all the more special reason for the Special Court to enlarge the person concerned on anticipatory bail after taking cognizance of the complaint.
The Enforcement Directorate to the contrary, contended that if in response to summons once the accused appears before the Special Court, he is deemed to be in its custody and Section 437, Criminal Procedure Code will not apply, but the accused must apply for grant of bail under Section 439, Criminal Procedure Code. Once the application for the regular bail under Section 439, Criminal Procedure Code is preferred, the accused will have to satisfy between the twin conditions so prescribed under Section 45 PMLA. The guidelines issued in Satender Kumar Antil v. CBI22, will not apply to special enactments like the PMLA.
Consideration and discussion by the Court
The Court first dealt with the extent of applicability of the Criminal Procedure Code to the special enactment of the PMLA. Referring to its earlier judgment of Yash Tuteja v. Union of India23, the Court held that the provisions of Criminal Procedure Code from Sections 200 to 204, Criminal Procedure Code apply equally to the Special Court also and there is no provision under the PMLA which overrides or negates the provisions of Sections 200 to 204, Criminal Procedure Code. Referring and relying upon the interpretation of Section 204, Criminal Procedure Code as done by the Supreme Court earlier in Inder Mohan Goswami v. State of Uttaranchal24, fact warrants that in complaint cases at the first instance, warrants should not be issued but summons must be issued, the Court held that the procedure shall govern the complaint cases filed under Section 44(1)(b) PMLA as well. Therefore, the Special Court must issue summons on the complaint at the first instance allowing the accused to appear before the Court in response to such summons. Failure of the accused to respond to summons may entail further stages of issuance of bailable warrant followed by issuance of non-bailable warrant. The object of issuance of summons is to ensure the accused’s presence before the Court to ensure his appearance. This is nowhere aimed at taking the accused into custody. Referring to Section 205, Criminal Procedure Code along with Sections 65 and 71 PMLA and their correlation, the Court held that whenever summons are issued, the Court does so for ensuring that the accused appears in response to those summons. Under Section 205 the accused may even seek exemption from appearance before the Court in response to summons, which cannot happen if the accused is treated to be in custody on responding to summons and appearing before the Court on the designated date.
Referring further to Section 88 and provisions of Chapter VI, Criminal Procedure Code, the Court held that when the accused, in response to summons, appears before the Court/Special Court, then a bond is taken from him for his appearance on the subsequent dates. The Court can always take bonds from the accused person who appears in response to summons and there cannot be any reason, much less ground for the Special Court not to accept a bond, if the accused adequately responds to the summons. Referring to the judgment of Pankaj Jain v. Union of India25, the Supreme Court held that the expression “may” used under Section 88 is discretionary in nature, obligating the Court to exercise its discretion of taking bonds from the person appearing before it, who may appear as an accused or as a witness. Therefore, in all the cases where the accused has not been arrested during investigation, but his presence is required on filing of the complaint/charge-sheet, then summons must be issued whilst taking cognizance of the complaint. The Special Court may then direct the accused to furnish bonds in accordance with Section 88, Criminal Procedure Code. If the accused breaches the bond given under Section 88 to the Special Court, then Section 89 may be resorted to for issuance of the warrant by the Special Court to the accused concerned for breach of bond. Even at this stage, the Court resorting to Section 70 may cancel the warrant so issued against the accused person and again take an undertaking from him for appearing in response to the summons with other appropriate conditions. In all these cases, whenever the Special Court is exercising powers under Section 88 of issuance of a bond or cancellation of a warrant issued by it under Section 70, It is not exercising the powers of granting bail or considering the application for bail. Therefore, the rigours of twin conditions under Section 45 will have no application to such contingencies whenever the accused appears and responds to the notice issuing summons on cancellation of the warrant.
Referring thereafter to the judgment of Satender Kumar Antil case, especially para 89, Supreme Court reiterated that wherever accused is not arrested consciously by the prosecution during investigation, then he should not be arrested at the instance of Court on filing of charge-sheet. Likewise, after taking cognizance of the complaint under Section 44(1)(b) PMLA by the Special Court, the Enforcement Directorate and authorities named under Section 19 are rendered powerless to arrest any accused named in the complaint. The Supreme Court also deprecated the practice of the accused persons being taken into custody whosoever appeared before the Special Court in response to the summons issued on filing of complaint by the Enforcement Directorate. Such practice being followed by the Special Court was held to be illegal and violative of Article 21 of the Constitution of India. If Enforcement Directorate wants custody of the accused who appears after service of summons for conducting further investigation in the same offence, Enforcement Directorate will have to seek custody of the accused by applying to the Special Court supported with brief reasons for the same. Even on such an application moved by the Enforcement Directorate for custody of the accused (post-cognizance and filing of the complaint), the Special Court will permit custody only if it is satisfied that custodial interrogation, at that stage, of the accused is required even though he was not arrested under Section 19 during the investigation.
Operative conclusions
After discussing the legal position, the Supreme Court broadly concluded as follows:
1. The provisions of Criminal Procedure Code, especially Sections 200 to 205 shall apply to the complaint filed under Section 44(1)(b) PMLA. If the accused has not been arrested by Enforcement Directorate during investigation till the filing of complaint, then the Court should issue a summons to the accused and not a warrant.
2. The Court, if the accused appears in response to the summons, should not treat him as if he is in custody but ought to direct the accused to furnish bond in terms of Section 88, Criminal Procedure Code and even grant him personal exemption from personal appearance by exercising powers under Section 205, Criminal Procedure Code if circumstances warrant.
3. Wherever the accused tenders a bond under Section 88, Criminal Procedure Code, the powers of the Enforcement Directorate to arrest a person under Section 19 ceased to exist. The Enforcement Directorate has to seek custody of the accused only from the Court after filing of the complaint and tendering of the bond under Section 88 by the accused to the Special Court.
4. The Supreme Court accordingly set aside all the orders rejection of bail applications passed by the courts below and directed the appellants/accused persons to appear before the Special Court and furnish bonds as per Section 88, Criminal Procedure Code within one month from the date of the judgment. The orders passed by various High Courts were accordingly set aside.
***
(6) Revati Cements (P) Ltd. v. Union of India26
(Delivered on 27-5-2024)
Coram: Single Judge Bench of HM Sudhir Kumar Jain, J.
—
The petitioners filed the writ petition seeking quashment and setting aside of the provisional attachment order issued under Section 5(1) PMLA and consequential proceedings arising out of complaint filed under Section 5(5) PMLA by the Enforcement Directorate before AA in pursuance of the impugned provisional attachment order.
Factual matrix of the case
The petitioner, Revati Cements Private Limited was allotted a coal block along with another company Kamal Sponge Steel & Power Limited by the Ministry of Coal, Government of India (for short, “GOI”). A joint venture special purpose vehicle was constituted out of the agreement executed between the petitioner and Kamal Sponge Steel & Power Limited for the purposes of exploring, prospecting, developing and carrying out mining activities from the aforesaid coal block allotted by the GOI.
In June 2012, Central Bureau of Investigation registered FIR on allegations of corruption in the allocation of coal blocks to private companies across the country during the period 2006 to 2009 under various provisions of IPC and Prevention of Corruption Act, 1988. Consequentially, Enforcement Directorate also registered an Enforcement Case Information Report under Sections 3 and 4 PMLA followed by filing of charge-sheet against 6 accused persons including Petitioner 1 company. The Central Bureau of Investigation subsequently initiated attachment proceedings in relation to the properties of Petitioner 1 and attached land admeasuring 26.76 hectares in District Satna with a total value of Rs 4.68 crores, approximately. The petitioner approached the High Court for release of the aforesaid attached properties and their substitution with a bank guarantee of the equivalent sum of Rs 4.68 crores. Two preliminary objections were taken by the Enforcement Directorate before the High Court. Firstly, that the writ petition could not have been instituted or entertained at Delhi High Court, since the entire proceedings and the attached property was situated in the State of Madhya Pradesh. Secondly, writ petition could not have been preferred with such a relief of substitution of bank guarantee since there is no provision under the PMLA or the Rules framed thereunder for substitution of attached properties with a bank guarantee.
Discussion by the Court
Analysing the scheme of Sections 5 and 8 PMLA, the Court held that the order of provisional attachment is passed by the Deputy Director, whereafter in terms of Section 5(5), a complaint has to be formally filed before the AA. Under Section 8, thereafter AA confirms the provisional attachment order.
Discussing the allegations against Petitioner 1, the Court found that total proceeds of crime alleged to have been generated by the petitioner were amounting to Rs 49.2 crores as quantified during investigation. It is these properties worth of the aforesaid value which were attached vide the two provisional attachment orders. The AA confirmed the attachment of both the properties under Section 8 PMLA, out of which the subject-matter of the writ petition pertained to land in question admeasuring 26.76 hectares had a value worth Rs 4.68 crores.
The Court held that the FIR in relation to the predicate offence was registered at Delhi by the Central Bureau of Investigation followed by trial which is also pending before the Special Court at Delhi only. The original complaint in pursuance of the attachment order has also been filed before the AA at Delhi and the petitioner is participating in the aforesaid proceedings before the AA at Delhi only. Therefore, the cause of action has clearly arisen in Delhi and petitions were held to be maintainable before the Delhi High Court.
On the issue of maintainability of writ petition in the face of alternative remedy before the PMLA Appellate Tribunal, the High Court referred to the judgment of Telangana High Court in Y.S. Bharathi Reddy v. Enforcement Directorate27, which relied on order passed by the Appellate Tribunal in Hetero Drugs Ltd. v. Enforcement Directorate 28, to hold that there is no provision under the PMLA and Rules made thereunder for replacement of attached immovable property with any other property. The said power even cannot be exercised by the Appellate Tribunal under Section 35(1) PMLA and therefore in the absence of such specific power vested either with the AA or the Appellate Tribunal under the PMLA, writ petition was therefore clearly maintainable as the only available remedy.
Referring further to the judgments of Delhi High Court in Enforcement Directorate v. A. Raja29, Gagan Infraenergy Ltd. v. Enforcement Directorate30, and other judgments, the Court reiterated that there is a difference between “proceeds of crime” and amount equivalent to proceeds of crime. The Court may not agree for substitution of the attached property in case of attachment of proceeds of crime but Court may allow substitution of attached property in case of attachment being on account of equivalent value of proceeds of crime. Referring further to the judgment of the Supreme Court in Esskay Properties and Investments (P) Ltd. v. Union of India31, the High Court discussed that Supreme Court had lifted the attachment order on production of fixed deposit of Rs 3 crores in lieu of part of the attached property with no lien of any other party except the Enforcement Directorate and the order of attachment was thus substituted by fixed deposit without prejudice to the rights and contentions of the parties.
The High Court also referred to multiple other judgments of the Telangana High Court, wherein in lieu of the attached immovable property equivalent value of fixed deposit or bank guarantee was allowed to be offered and deposited with the Enforcement Directorate.
Ultimately, the High Court permitted the release and substitution of the subject land by bank guarantee of the equivalent amount to be furnished by the petitioner in favour of the Enforcement Directorate within 15 days. The writ petition was accordingly allowed by the High Court.
***
(7) Satish Motilal Bidri v. Union of India32
(Delivered on 28-6-2024)
Coram: Single Judge Bench of HM Bechu Kurian Thomas, J.
The petitioner challenged the provisional attachment order issued in May 2024 by the Enforcement Directorate under Section 5 PMLA.
Factual matrix of the case
The petitioner was accused of inducing large number of investors to make deposits in one M/s Masters FinServ Company with the promise of generating huge profits on their investments with high interest rates. On such false assurances the complainants made large-scale investments from which the petitioner accused person along with the proprietor of M/s Masters FinServ were alleged to have embezzled around Rs 73 crores of the deposited money. The petitioner was accused of arranging and creating two mule accounts for receiving the credit of Rs 85.50 lakhs on a commission basis. The petitioner thus assisted the proprietors of M/s Masters FinServ in firstly raising the money from gullible investors and thereafter embezzling the same for personal purposes. The predicate offence was registered as FIR under various provisions of IPC, followed by registration of Enforcement Case Information Report by the Enforcement Directorate. The petitioner challenged the provisional attachment order so issued by the Enforcement Directorate attaching his properties.
A preliminary objection was taken by the Enforcement Directorate about maintainability of the writ petition in the face of availability of alternative remedy before the appellate authority under the PMLA under Section 26 PMLA followed by a further appeal by the High Court under Section 42.
Repelling the aforesaid preliminary objection, the High Court referred to a recent judgment of the Supreme Court in PHR Invent Educational Society v. UCO Bank33, stating that alternative remedy shall not become a bar to maintainability when statutory authority has failed to act in accordance with the provisions of the enactment in question. Notwithstanding the existence of alternative remedy, the writ petition may be entertained if the statutory authority is found to have acted ultra vires its powers conferred by the parent enactment.
The Court then scanned the provisional attachment order issued by the Enforcement Directorate and found that one of the immovable properties so attached through the provisional attachment order was purchased in January 2004, much before the alleged commission of predicate offences between January 2021 and November 2022. The property provisionally attached was found to have been purchased more than a decade and a half before the alleged offence itself took place and hence could not be treated as proceeds of crime.
Holding that one of the prerequisites of Section 5 PMLA is that property sought to be attached must have been obtained or derived as a result of any criminal activity relating to the scheduled offence. Even a property obtained indirectly can also be regarded as proceeds of crime if the value utilised for procuring the property was derived from the criminal activity in question. Referring further to the judgment of Punjab and Haryana High Court in Seema Garg v. Enforcement Directorate34, the High Court held that property purchased prior to the commission of scheduled offence does not and cannot fall within the limb of the definition of proceeds of crime. It may certainly fall within the purview and ambit of the third limb of the definition of proceeds of crime, however cannot be treated retrospectively as being a proceeds of crime. Referring further to the judgments of Andhra Pradesh High Court in Satyam Computer Services Ltd. v. Enforcement Directorate35 and Enforcement Directorate v. Axis Bank36, the Court held that the PMLA being a statute dealing with substantive rights, the same cannot have any retrospective effect.
Referring to the decision in the Vijay Madanlal judgment, the High Court held that the property was admittedly acquired much prior to the commission of the alleged act constituting the scheduled offences. Holding that powers of attachment can be used only for attaching those properties which have been acquired utilising the proceeds of crime, and not any and every property, the Court held that the purpose of the PMLA is to remove tainted money and also to initiate proceedings against those indulging in circulation of such tainted money. However, the authorities are not enabled and authorised to proceed against properties that are unconnected with any other criminal activity in question. Thus, the provisional attachment order was found to have been illegally and arbitrarily issued to the extent of the attachment in question and notwithstanding the existence of alternative remedy can be interfered with under Article 226 of the Constitution of India.
Insofar as the other properties were concerned, for their release, the petitioner was directed to avail the alternative remedy. The provisional attachment order of May 2024 was therefore quashed and set aside in relation to the properties acquired much prior to commission of the predicate offences. However, the provisional attachment order in relation to other properties was not interfered by the High Court and the petitioner relegated to alternative remedy to pursue the challenge before such authorised forums for release of their property.
***
(8) Dennis Sagaya Jude v. Enforcement Directorate37
(Delivered on 3-7-2024)
Coram: Single Judge Bench of HM Hemant Chandangoudar, J.
The petitioner challenged the order taking cognizance, on the complaint filed by Enforcement Directorate, passed by the Special Court, Bangalore under various provisions of the PMLA. The FIR in relation to predicate offences pertained to various offences so registered under IPC.
The prosecution case was that various bank accounts were opened by using forged documents with Syndicate Bank. The funds of Karnataka State Agricultural Marketing Board through those accounts were transferred to various banks, finally withdrawn and siphoned off by the accused persons. Consequently, the Enforcement Directorate also registered a case wherein the petitioner was arrayed as A-17, accused of dealing and transacting in the said proceeds of crime generated out of the scheduled offence.
The petitioner contended before the High Court that he had received the amount in question without being aware of the same being proceeds of crime and after receipt of the same withdrew and handed over the same to his father on the instructions of the co-Accused 5, Krishna Kumar. Thereafter, his father Gunashekar transferred the same amount to various other bank accounts, all belonging to A-5, and finally handed over the amount to the father of A-5, post-withdrawal from those accounts. The petitioner contended that he thus had never knowingly assisted or played any role in the concealment and utilisation of proceeds of crime by projecting it as untainted money the ultimate beneficiary of which was A-5.
The Enforcement Directorate to the contrary, contended that the petitioner assisted in the transaction and flow of money from one channel to another in collusion with the A-5 and whether he has knowledge or not of the same is a matter to be considered full-fledged during the trial and not in Section 482 proceedings. The petitioner is further required to rebut the presumption raised against him under Section 24 PMLA and there is no requirement that the petitioner ought to have had knowledge that the money transferred to his account was proceeds of crime. Mere possession in his hand would lead to the inference that he was assisting A-5 by using it as untainted money.
The Court framed two issues in the matter for its consideration and deliberation which were as follows:
(i) Whether there is prima facie sufficient evidence to indicate that petitioner A-17 had knowledge that the funds transferred into his account had been derived from criminal activity related to a scheduled offence, or that the petitioner A-17 knowingly assisted the prime accused, i.e. the A-5, in concealment or transfer of the illicit proceeds as untainted property?
(ii) Whether the petitioner, who is not an accused in the scheduled offence can be prosecuted for the offence under Section 3, punishable under Section 4 PMLA, in the absence of knowledge that the money transferred to his account and utilised were from the proceeds of the crime?
The Court then discussed the ingredients of Section 3 PMLA, one of them being knowledge on the part of the accused about the property in his hands representing the proceeds of crime. It is not sufficient for the property to be connected merely to the scheduled offence, but the person must also be aware of its illicit origin. Referring to the judgments of Pavana Dibbur and Anoop Bartaria v. Enforcement Directorate38, the High Court reiterated that “knowingly assisting” is one of the prerequisites for treating the person as co-accused in the commission of offence under Section 3 PMLA. Sufficient material particulars must also be narrated in the complaint on behalf of Enforcement Directorate to infer knowledge on the part of accused of the fact that he was dealing with the proceeds of crime.
Referring to the judgment of Karnataka High Court in Razorpay Software (P) Ltd. v. Union of India39, the High Court reiterated that “knowledge and reason to believe” on the part of the accused about the property being derived from criminal activity related to sc9heduled offence is one of the essentials for initiating prosecution under Section 3 by the Enforcement Directorate. It summed up the following ingredients of the offence of money laundering to have been committed by the accused for being brought under the net of PMLA as follows:
(a) directly or indirectly attempted to indulge; or
(b) knowingly assisted or knowingly was a party; or was
(c) actually involved in any process or activity connected with the proceeds of the crime.
The petitioner was found by the High Court to have acted on the instructions of A-5 Krishna Kumar and had simply received the amount in his account and handed over the same to his father. The final utilisation of the proceeds of crime was actually arranged by A-5 along with A-1, Vijay Akkash which was clear from the flow chart filed with the complaint itself by the Enforcement Directorate. Thus, the prosecution had not adduced any prima facie evidence to indicate that the petitioner as A-17 had knowledge of the fact that fund transferred to his account had been derived from criminal activity of the alleged scheduled offences nor adduced any evidence to indicate that petitioner “knowingly assisted” the prime accused, viz. A-5 and A-1 in the concealment and transfer of the illicit proceeds of crime. The petitioner was thus very much distant to the alleged commission of offence of money laundering and the complaint failed to bring forth any allegation supported by material evidence that the petitioner was actively involved in projecting the proceeds of crime as untainted property.
Referring to the judgment of Supreme Court in Satish Mehra v. State (NCT of Delhi)40, the Court held that framing of charge must take place on grave suspicion of commission of offence and the judge must be fairly certain that there is no prospect of the case ending in conviction of the accused. If the judge is almost certain that trial would be an exercise in futility and a sheer waste of time, then the accused must be discharged under Section 227, Criminal Procedure Code. Referring further to the judgments of Avinash J. Mahale v. State of Maharashtra41, of the Bombay High Court and Vipul Prakash Patil v. State of Karnataka42, of the Karnataka High Court for the same proposition, the Court held that since there was no sufficient evidence or any specific allegation establishing that petitioner knowingly assisted in concealment of the proceeds of crime, there was no purpose of continuance of proceedings under the PMLA against him. Accordingly, the petition was allowed and proceedings qua the petitioner were quashed by the High Court.
***
(9) Arvind Kejriwal v. Enforcement Directorate43
(Delivered on 12-7-2024)
Coram: 2-Judge Bench of HM Sanjiv Khanna and Dipankar Datta, JJ.
Authored by: HM Sanjiv Khanna, J.
The appeal arose out of the judgment of Delhi High Court, which affirmed the arrest order and the consequential remand of the petitioner effected by the Enforcement Directorate. The petitioner was arrested on 21-3-2024 and the remand was given on 22-3-2024, which was challenged in the writ petition as being violative essentially of Section 19 PMLA. The High Court after having found no illegality dismissed the same.
The matter raised important questions regarding the scope and ambit of the powers available with the courts of examining the legality of arrest under Section 19 by the Enforcement Directorate.
Factual matrix of the case
The Central Bureau of Investigation had registered FIR in relation to various predicate offences punishable under the provisions of IPC as also that of the Prevention of Corruption Act, 1988. The allegations in these FIRs centered around the excise policy alleged to have been framed by the Government of Delhi for the benefit of the cartel of liquor manufacturers, wholesalers and retailers, which provided undue pecuniary gain to public servants and other accused persons involved in the conspiracy.
On the basis thereof in August 2022, Enforcement Case Information Report came to be registered by the Enforcement Directorate and the complaint case under Section 44 PMLA came to be filed before the Special Court, in the series of which in the seventh complaint, the name of the petitioner figured as an accused. The petitioner being the Chief Minister of National Capital Territory of Delhi (for short, “NCTD”) was issued notices under Section 50 for his appearance and recording of statements but he failed to appear and join investigation. Eventually the arrest was effected, including on the ground that he did not respond to summons or cooperate with the investigating agency.
Referring to the Vijay Madanlal judgment and Pankaj Bansal case, the Court discussed the various inbuilt checks provided under Section 19, which designated officers are obligated mandatorily to adhere to. First being “the reasons to believe of the alleged involvement of the arrestee, so recorded in writing”. Secondly, “furnishing of the reasons so recorded to the arrestee” and lastly, “forwarding of the material in possession along with the order of arrest to the AA”. Referring further to the judgment of V. Senthil Balaji case, the Supreme Court underscored that Magistrates are statutorily obligated to examine the compliance of various inbuilt checks and safeguards prescribed under Section 19 and the prayer for custodial remand must be accordingly considered after ensuring the due compliance of Section 19 PMLA by the Magistrate. Any failure on the part of the arresting authority in ensuring compliance of Section 19(1) PMLA shall result into violation of Article 22 (1) of the Constitution of India.
The Pankaj Bansal judgment reiterated what was held in V. Senthil Balaji case. Therefore, if the Court fails to discharge its duty in right earnest and the proper perspective whilst remanding the accused, then it is the duty of the Constitutional Courts to rectify that error.
If the arrest itself is unconstitutional, being violative of Article 22(1) of the Constitution of India, the remand order consequentially cannot rectify the illegality attached to such an arrest and violation of Section 19 PMLA will equally vitiate the arrest. Referring to the judgments of Prabir Purkayastha v. State (NCT of Delhi)44 and Roy V.D. v. State of Kerala45, Supreme Court reiterated that right to be informed about the ground flows from Article 22(1) of the Constitution of India and infringement of this fundamental right would vitiate the whole arrest. The power to arrest is statutory in character under Section 19 and can be exercised only in the conditions and the manner as provided statutorily.
The Supreme Court further held that the powers under Section 19 PMLA is a drastic power to arrest without a warrant from the Court, without even instituting a criminal case and thus of a drastic and extreme nature. The condition attached under Section 19 are therefore salutary and serves as a check against otherwise harsh and pernicious powers. The power of judicial review to examine the validity of the arrest remains both before and after filing of the criminal proceedings/prosecution complaint and it cannot be contended that courts, by declaring any arrest as illegal, are interfering with the investigation process of the Enforcement Directorate.
Referring to the judgment of Gifford v. Kelson46, Supreme Court held that there is a difference between the “reasons to believe” and “suspicion”, wherein the former is beyond the speculation of doubt and conveys conviction founded on evidence regarding existence of a fact or doing of an act. This reasoning establishes the arrestee’s guilt as also the legal necessity, which must be founded on the material in the form of documents and oral statements, and cannot exist in thin air. Section 26 IPC defines “reasons to believe” as also interpreted in Joti Parshad v. State of Haryana47, to mean a sufficient cause to believe a thing and not otherwise. Therefore, reasons constituting the formation of belief must have a rational connection with the elements bearing on the formation of belief and cannot be extraneous or irrelevant for the purposes of the provision. Referring further to the judgment of A.S. Krishnan v. State of Kerala48, the Court held that therefore, the “reasons to believe” are not only to be produced before the remand court, but also be furnished to the arrestee to enable him to exercise his right to challenge the validity of the arrest.
The Court further stated that guilt can only be established on the basis of admissible evidence to be laid before the Court and cannot be based on inadmissible evidence, which is premised upon the “material in possession” with the designated officer. Therefore, reasons so recorded must show that the arrestee is guilty on the basis of material available with the authority. The Court however cannot equate framing of the charge on one hand and putting the accused on trial on the other. A person may face the charge and trial even when he is on bail. The Court drew the fine distinction between Section 19 and 45 PMLA and recorded the key and fine distinction between the both. Whereas under Section 19(1), the designated officer whilst arresting must have reasons to believe that the arrestee is guilty, the Special Court on the other hand whilst considering the bail application has to arrive at the objective opinion, including the “reasons to believe” so recorded by the designated officer, to determine whether there are reasonable grounds to believe that the accused is not guilty. And the entire material and evidence can be led in the trial and whether it is admissible or not can also be examined.
The Court then proceeded to refer to the contents of the “reasons to believe” that were furnished on behalf of the Enforcement Directorate as recorded by the designated officer whilst effecting the arrest of the petitioner under Section 19 PMLA. The Court after narrating the same observed that a cartel was formed after framing of the liquor policy, wherein one group/person effectively would be controlling the manufacturing, wholesale and retail entities of liquor business in return for the bribes/kickback. The petitioner had been described as the kingpin/key conspirator in formulation of the policy which favoured certain persons in exchange of kickbacks from the liquor businessmen. The statements of various witnesses and co-accused persons were also examined which pointed out the principal role of the accused in the framing of the liquor policy, from which allegedly kickbacks to the tune of Rs 100 crores from the beneficiary group/cartel were stated to have been passed over. Eventually the Court found that proceeds of crime worth Rs 45 crores as part of the bribes received was said to be deposited with the political party owned by the petitioner Arvind Kejriwal.
The Court then examined whether all the reasons or some of the reasons as mentioned in the “reasons to believe” be referred to for inferring the guilt and material under Section 19(1) PMLA for determining the guilt or innocence of the person. The Court further held that “reasons to believe” must be examined based on what is mentioned and recorded therein. The officer however cannot refuse to ignore or not consider the material which exonerates the arrestee and selectively picks up the material which is pointing towards his guilt to effect the arrest. Thus, officers cannot be allowed to selectively pick and choose material implicating the person to be arrested to justify the powers exercised by them. The courts however cannot go into the correctness of the opinion formed or sufficiency of the material on which reasons to believe that the accused is guilty are based. The courts are concerned only as to whether reasons to believe are premised upon relevant factors or not. The extent of profits earned by the middleman, manufacturers and retailers, due to the advent of the new liquor policy in Delhi, as also alleged in the charge-sheet showed unlawful gains to a private person at the expense of the public exchequer. However, the Court after examining all the facts, surrounding circumstances and reasons as produced by the Enforcement Directorate for arresting the petitioner held, they were found to be independent and separate from each other for arresting the petitioner.
Referring to judgments of Arnesh Kumar v. State of Bihar49 and Mohd. Zubair v. State (NCT of Delhi)50, the Supreme Court held that power to arrest is not unbridled and the officer must be satisfied that arrest is necessary. Therefore, while transplanting the same rationale to arrest under Section 19, the Court held that such a power must be restricted to necessary instances and must not be exercised routinely or in a cavalier fashion. The doctrine of need and necessity to arrest, permeates through the scheme of Section 19 as well and it must also be tested on the “principles of proportionality”. Proportionality is more concerned with the aims and intentions of the decision maker and whether the decision-maker has achieved more or less the correct balance or equilibrium whilst exercising any power prejudicial to the fundamental rights of the other person.
Accordingly, the Supreme Court formulated certain questions and referred them for consideration by a larger Bench of more than 3 Judges to be answered appropriately. These questions of laws so formulated by the Bench for reconsideration by the larger Bench are as follows:
(a) Whether the “need and necessity to arrest” is a separate ground to challenge the order of arrest passed in terms of Section 19(1) PMLA?
(b) Whether the “need and necessity to arrest” refers to the satisfaction of formal parameters to arrest and take a person into custody, or it relates to other personal grounds and reasons regarding necessity to arrest a person in the facts and circumstances of the said case?
(c) If Questions (a) and (b) are answered in the affirmative, what are the parameters and facts that are to be taken into consideration by the Court while examining the question of “need and necessity to arrest”?
In the peculiar facts and circumstance, since the petitioner had already suffered an incarceration of over 90 days and questions so referred would have taken time for the resolution by the larger Bench, he was enlarged on interim bail by the Supreme Court. Certain conditions were imposed by the Supreme Court to be respected and adhered to by the petitioner during the life of interim bail granted to him.
***
(10) Sagar Maruti Suryawanshi v. Enforcement Directorate51
(Delivered on 25-7-2024)
Coram: Single Judge Bench of HM N.J. Jamadar, J.
The petitioner filed an application for the grant of regular bail, being prosecuted for offences under the PMLA by the Enforcement Directorate.
Factual matrix of the case
The allegations against the applicant were that as the office-bearers of Seva Vikas Co-Operative Bank Ltd., he along with the Chairman, Amar Mulchandani, hatched a conspiracy with the borrowers to siphon off public money deposited with the bank. In pursuance of the said conspiracy, various loans were sanctioned without any due diligence or ascertaining the creditworthiness and repayment capacity of the borrowers. Loans were advanced in huge amounts and resultantly they turned non-performing asset leading to an outstanding amount of approximately Rs 430 crores to Sewa Bank. Honest and unsuspecting depositors who had deposited their hard-earned money, resultantly were defrauded as their investments were so diverted as loan amounts only to be siphoned off by the applicants. The applicant was accused of defrauding the bank to the tune of Rs 61 crores approximately. Accordingly, various offences under the provisions of IPC came to be registered vide FIR No. 160 of 2018 followed by registration of Enforcement Case Information Report by the Enforcement Directorate.
The Maharashtra Government also directed the Joint Registrar to conduct a test audit of all the loan accounts in excess of Rs 50 lakhs in which the audit revealed misappropriation involving 124 loan accounts which constituted 92% of the loan exposure of the bank. On the basis of the said audit report three more FIRs came to be registered subsequently being FIR Nos. 525, 526 and 527 of 2021, in all of which the applicant was the accused. The subject-matter of all the FIRs was misappropriation of the loan amount in various loan cases by the complainant investors. Eventually, the applicant was arrested by the Enforcement Directorate.
Interestingly, post investigation in relation to FIR No. 163/2018, on its basis an Enforcement Case Information Report No. 10/2021 was registered. However, a “C” summary closure report in relation to the predicate offence was filed, which was also accepted by the Magistrate under Section 190, Criminal Procedure Code. Thus, according to the petitioner, since the predicate offence ceased to exist with the filing of the “C” summary report and closure of the predicate offence, the foundation having disappeared, Enforcement Case Information Report No. 10/2021 also came to an end automatically by operation of law. The Enforcement Case Information Report and the resultant prosecution, therefore, could not have been continued against the petitioner. The petitioner further contended that the Enforcement Case Information Report and the prosecution cannot continue on the basis of subsequent FIRs by subsuming them in the ongoing PMLA proceedings. It was further contended that the majority of the co-accused were either not at all arrested against whom there were serious allegations, situated akin to the petitioner. It was further contended that the applicant was advanced a loan of Rs 1.50 crores out of which Rs 1.28 crores has already been repaid and therefore the money laundered would fall below the threshold of Rs 1 crore. The appellant, therefore, was not guilty of the offence punishable under Sections 3 and 4 PMLA. The petitioner further contended that the test audit report which was the foundation of the alleged fraud was also set aside by the State Government in the revisional proceedings and once the test audit report was set aside, the allegations of fraudulent transactions and the FIR registered resultantly on the basis thereof also disappeared.
The Enforcement Directorate on the other hand, opposed the bail contending that the release of the accused would cause serious prejudice to the investigation and would result in delay of trial and therefore the petitioner not be enlarged from bail.
Consideration and discussion by the Court
The Court firstly dealt with the issue as to whether even after closure of investigation in relation to FIR No. 163/2018, the Enforcement Case Information Report No. 10/2021 registered on the premise thereof could continue on the basis of subsequent FIRs registered on the overlapping subject-matters. Holding that offence of money laundering depends on generation of proceeds of crime and it has no causal connection with the scheduled offence. Referring to Vijay Madanlal judgment, especially paras 109, 134 and 147 to 151 and Pavana Dibbur judgment, the Court reiterated the settled legal position that with the closure, discharge or acquittal in relation to the predicate offence of the accused, the prosecution under the PMLA cannot survive. Referring to the judgment of the Division Bench of the Bombay High Court in Naresh Goyal v. Enforcement Directorate52, the Court specifically answered the issue regarding the effect of acceptance of “C” summary report in a predicate offence by the Competent Magistrate’s Court.
Relying also on the judgments of Prakash Industries Ltd. v. Enforcement Directorate53 of the Delhi High Court and Chetan Gupta v. Enforcement Directorate54 of the Punjab and Haryana High Court, the High Court held that in view of acceptance of the “C” summary report, the predicate offence comes to an end. The wall of predicate offence on which the plaster of the scheduled offence of the PMLA has to be applied, disappears; “no wall, no plaster”. Otherwise, therefore, the criminal prosecution by the Enforcement Directorate could not have continued.
But in the present case, the Court found the facts to be different, since there were subsequent FIRs registered on overlapping allegations, viz. FIR No. 525, 526, 527 of 2021, alleging the same modus operandi across various loan accounts. The Enforcement Directorate chose to continue the prosecution on the same Enforcement Case Information Report registered earlier instead of opening and registering a new Enforcement Case Information Report. The money laundering investigation was being done in respect of cumulative losses, discovered in the reports of the auditor and all the FIRs. Therefore, the real issue is: “Whether the subsequent development in the form of registration of three subsequent FIRs Nos. 525, 526 and 527 of 2001 empowered the Enforcement Directorate to continue investigation and prosecution against the petitioners.” Thus, in view of the peculiar facts of the case where subsequent FIRs were registered on the similar allegations of siphoning off the money from the bank through fraudulent loans, the existence of proceeds of crime can be prima facie inferred. The criminal activity of deriving or obtaining the proceeds of crime was allegedly accomplished by the various perpetrators of the predicate offence. Thus, prima facie the allegations of existence of proceeds of crime were made much before the “C” summary report could be accepted through the subsequent FIRs.
Referring to Explanation (ii) of Section 44(1) PMLA inserted through the amending Act of 2019, the Court noted that a complaint filed by the Enforcement Directorate shall be deemed to include any subsequent complaint in respect of further investigation that may be conducted to bring any further evidence against the accused persons. Therefore, in a given case where subsequent FIRs are inextricably linked with the previous FIR and cumulatively demonstrate the commission of the offence of money laundering, the subsequent FIRs can be taken note of by the Special Court for permitting the Enforcement Directorate to proceed with investigation into the offence on the basis of such subsequent FIRs. Referring again to the Vijay Madanlal judgment, the High Court held that under Section 66 PMLA, after discovery of new volumes of undiscovered property even Enforcement Directorate through its communication or information can trigger registration of a scheduled offence contemporaneously for further investigation in a pending case by the jurisdictional police.
The High Court thus discussed the test for allowing subsummation of subsequent FIRs: the test being whether the genesis of the subsequent FIR and the prior one is the same. If the subsequent FIRs have the genesis in the same transaction with overlapping allegations on which the previous FIR was registered, then the fact that the prior FIR resulted in closure report or filing of “C” summary report or otherwise terminated, will not necessarily render the investigation into the offence of money laundering non est. The test is, therefore, whether subsequent FIRs disclose processes or activities connected with the proceeds of crime in extension of or in relation to the previously registered FIR. Therefore, the contention of the petitioner was rejected by the High Court, applying the aforesaid test, that filing of “C” summary report in the lead FIR would not automatically lead to termination PMLA proceedings and that subsequent FIRs can be subsumed in the previous Enforcement Case Information Report.
The Court also rejected the contention of the petitioner that merely because the test audit report has been set aside by the State Government in revisional proceedings, the prosecution by the Enforcement Directorate would also lose sanctity.
However, the Court found that the money trail admittedly did not lead to inference of the applicant being the beneficiary of all the transactions. Rather the co-accused persons had withdrawn the cash amounts, and the amounts were transferred into the accounts of co-accused persons who were the real beneficiaries. The petitioner who was found to have repaid the majority of the amount already borrowed by him from the bank and thus the seriousness of the allegation was not existing qua him, since the loan amount was borrowed apparently for purchasing a car.
The money trail, since did not lead to the applicant, clearly, there was no prima facie case that the applicant was instrumental in the generation, acquisition, layering, placement and use of the proceeds of crime as alleged against him. Except the fact that co-accused Sheetal is the wife of the accused who had received substantial amounts cannot lead to the inference of guilt on the part of the petitioner.
The Enforcement Directorate had chosen not to arrest Sheetal, the wife of the petitioner despite being the co-accused, nor many other co-accused persons as rightly contended by the petitioner. The High Court therefore formed a prima facie view that the prosecution may not eventually succeed in establishing the guilt against the petitioner and accordingly proceeded to hold that prima facie case was not made out against him. The petitioner was accordingly enlarged on regular bail on meeting the twin condition under Section 45(1) PMLA by allowing his application.
***
(11) Manish Sisodia v. Enforcement Directorate55
(Delivered on 9-8-2024)
Coram: 2-Judge Bench of HM B.R. Gavai and K.V. Viswanathan, JJ.
Authored by: HM B.R. Gavai, J.
The matter pertained to the grant of regular bail to the petitioner in relation to the Enforcement Case Information Report registered by the Enforcement Directorate. The petitioner had been serving as Deputy Chief Minister in the Government of Delhi and had been arrested both in relation to the commission of the scheduled offence in FIR registered by the Central Bureau of Investigation for various offences punishable under the provisions of the Prevention of Corruption Act, 1988 read with various provisions of IPC. Simultaneously, he was also taken into custody by the Enforcement Directorate on registration of offences under the PMLA.
Factual matrix of the case
The bail application before the Supreme Court was the third round of litigation initiated at the instance of the petitioner. In the previous two rounds, the bail application was rejected, giving the Government and the Enforcement Directorate 6 to 8 months’ time for the completion of the investigation and filing of the charge-sheet, whereafter liberty was given to the petitioner to revive his prayer afresh for the grant of bail.
The appellant was one of the accused in the infamous liquor scam in which the accusation pertained to the framing of a liquor policy by the ruling government which led to huge losses to the State exchequer and also benefited private liquor companies and groups in the sale and purchase of liquor in Delhi. The petitioner contended before the Supreme Court that documentary records were running into more than 65,000 pages with more than 500 witnesses to be adduced by the prosecution, and therefore, the trial was inevitably bound to take time. Accordingly, the bail was prayed for on various grounds.
The petitioner further contended that Enforcement Directorate had deliberately concealed documents which were exculpatory for the petitioner by placing them in the category of “un-relied upon documents”. The said documents were not supplied to the petitioner and an inordinate delay happened on the part of Enforcement Directorate and Central Bureau of Investigation in producing the list of the said “un-relied upon documents”.
The Enforcement Directorate on the other hand, raised a preliminary objection on the maintainability of the bail application directly before the Supreme Court at the instance of the petitioner, instead of first approaching the trial court and exhausting the proper channel of rejection of the bail application. It was further contended that the petitioner himself had been delaying the whole trial process by moving repeated applications for the supply of documents, owing to which the matter could not be proceeded on merits to the prejudice of the Enforcement Directorate itself, owing to which the trial was delayed.
Consideration and discussion by the Court
The Court referred to its earlier order of 21-5-2024, where the Supreme Court had recorded the assurance given by the prosecution that trial will be concluded by taking appropriate steps within next 6 to 8 months after filing of the charge-sheet/complaint by the Enforcement Directorate. The appellant was granted liberty to revive his prayer afresh after filing of the final complaint/charge-sheet by the Enforcement Directorate. This liberty clearly implied the liberty to approach the Supreme Court and not to approach the trial court afresh and climbing up the ladder again from the trial court to the Supreme Court.
Since, the trial court and the High Courts have already taken a view in the matter and a lot of time was spent in litigating for the grant of bail, therefore the Court had on the basis of assurance given by the Solicitor General granted the said liberty. The liberty for revival of the prayer implied that petitioner was to approach the Supreme Court only and nowhere else, since the matter involved life and liberty of the petitioner.
Referring to its earlier order passed in the earlier bail applications, the Court stated that the constitutional mandate guaranteed under Article 21 of the Constitution of India must be read into Section 45 PMLA. The Constitution of India being the higher law, protects the basic right of every person charged of an offence and being an undertrial be provided with the speedy trial. If the trial cannot be expedited to reasons not attributable to the accused and likely to take years, the right to bail will have to be read into Section 45 PMLA.
Referring to its earlier judgment of Ramkripal Meena v. Enforcement Directorate56, the Court underscored that rigours of Section 45 ought to be suitably relaxed to afford constitutional liberty to the petitioner. The Court found that far from the trial being concluded within a time-bound period, it was yet to commence and therefore the observation on the aspect of the merits of the matter lost its binding value in the face of the right to speedy trial of the accused concerned. In cases of delay of trial coupled with long incarceration, the said factors are read into Section 439, Criminal Procedure Code and Section 45 PMLA.
On the contention that the petitioner had been delaying the trial court proceeding by moving repeated and successive applications, it was stated that all such 13/14 applications moved by the appellant were allowed by the trial court, with the appellant being allowed to either inspect or be provided with a copy of the documents so relied upon by the prosecution. Such orders were challenged before the High Court at the instance of the prosecution agency also, but however were of no avail. Therefore, the finding of the trial court whilst rejecting the bail application that the appellant-petitioner was responsible for delaying the trial, is not supported by any record. Further, for availing the right to fair and speedy trial the accused cannot be denied the right to have inspection of the documents including the “un-relied upon documents”. The appellant had already been subjected to and suffered incarceration of more than 17 months and thus when the trial had not even commenced, he was all the more deprived of his right to a speedy trial.
Referring to the judgment of Javed Gulam Nabi Shaikh v. State of Maharashtra57, the Supreme Court reiterated that the State or any other prosecuting agency loses its locus to oppose the prayer for bail even when the crime committed is serious or when it lacks the wherewithal to provide or protect the fundamental rights of the accused to have a speedy trial under Article 21. There is not even the remotest possibility of the trial being concluded in the near future and the petitioner-appellant could not have been kept behind bars for an unlimited period of time in the hope of speedy completion of the trial. This would clearly be a deprivation of his fundamental right of liberty under Article 21 of the Constitution of India.
Rejecting the objection raised on behalf of the Enforcement Directorate about the petitioner tampering with the evidence being an influential Minister in the ruling government, the Court noted that since the case largely involved documentary evidence already seized by the prosecution, therefore there is no possibility of tampering with the evidence. Stringent conditions can always be imposed as a precondition for a grant of bail in such cases for ensuring that witnesses are not being influenced or evidence is not tampered upon. Accordingly, bail application was allowed by the Supreme Court.
***
(12) Bhagwan Bhagat v. Enforcement Directorate58
(Delivered on 12-8-2024)
Coram: 2-Judge Bench of HM Abhay S. Oka and Augustine George Masih, JJ.
Authored by: HM Abhay S. Oka, J.
The appellants sought regular bail in relation to the complaints filed against them by the Enforcement Directorate under the PMLA.
In a short judgment, the Supreme Court held that the said complaints failed to disclose or plead the correlation between the FIRs so registered for predicate offences and the proceeds of crime so generated out of the said predicate offences. No prima facie material was pleaded in the complaints showing how the predicate offences directly or indirectly generated proceeds of crime in the form of money or illegally mined minerals. Though allegations of large-scale illegal mining were levelled but factual assertions in the complaint and the basis on which offences under Sections 3 and 4 PMLA were constituted were not at all explained. Except Section 120-B, other offences were not at all predicate offences, which were offences not scheduled with the PMLA.
Thus, the complaints failed to indicate or implicate the appellants as guilty of offence of money laundering. Accordingly, holding that since the appellants were not involved in any other offence of money laundering under the PMLA, there were reasonable grounds to believe that they are not guilty. Having already undergone incarceration for a period of one year approximately, the case was clearly made out for enlarging the appellants on bail. Accordingly, the appeals were allowed and the appellants were enlarged on regular bail by the Supreme Court.
***
(13) Kalvakuntla Kavitha v. Enforcement Directorate59
(Delivered on 27-8-2024)
Coram: 2-Judge Bench of HM B.R. Gavai and K.V. Viswanathan, JJ.
Authored by: HM B.R. Gavai, J.
The petitioner approached the Supreme Court for grant of regular bail, assailing the judgment of the Delhi High Court which rejected the bail application. The name of the petitioner cropped up as one of the co-accused persons in the ill-famous and notorious liquor scam of Delhi in which certain liquor policies were framed and in view of the liquor policies large number of companies and beneficiaries were benefited with corresponding loss to the State exchequer. Also, through the said liquor policy, a system of payment of commission to the liquor retailers and wholesale dealers was introduced, from which allegedly huge kickbacks were received by the politicians and the political party in power. Accordingly, the FIR in relation to the predicate offences came to be registered under the various provisions of IPC as well as the PMLA leading to registration of Enforcement Case Information Report by the Enforcement Directorate.
The petitioner contended before the Supreme Court that there are around 493 witnesses to be examined and more than fifty thousand pages to be considered by the trial court during the trial; appellant being a woman is entitled to special treatment under proviso to Section 45(1) PMLA.
The Enforcement Directorate opposed the bail application stating that appellant was accused of being the kingpin in arranging the deal between co-accused Arvind Kejriwal, the Chief Minister of Delhi and the South lobby. There was ample material incriminating her in the commission of the offences of money laundering, so recorded under Section 50 PMLA read with the statements under Section 164, Criminal Procedure Code. The High Court had rightly denied the benefit of proviso to Section 45(1) to the petitioner stating that she holds a special position as an elected Member of Parliament and well-educated lady being well aware of the consequences of her decisions and actions.
The Court relying on the judgment of Manish Sisodia case60, recorded that in the case at hand the charge-sheet by the Central Bureau of Investigation and complaint case by the Enforcement Directorate both have been filed and as such the custody of the appellant is not necessary for the purposes of investigation. There was no likelihood of the trial being concluded in near future, the said situation being impossible.
Relying further on the judgment of Manish Sisodia case, the Supreme Court reiterated the settled position that fundamental rights under Article 21 of the Constitution of India is superior to statutory restrictions and prolonged incarceration before being pronounced guilty of an offence should not be permitted to become punishment without trial.
Interpreting the proviso to Section 45 PMLA, the Court held that the proviso permits certain categories of accused persons including women to be released on bail without insisting upon the twin requirement under Section 45(1). Therefore, when a statute specifically provides a special treatment for a certain category of accused, for denying such a benefit the Court is required to give specific reasons as to why such a benefit is being denied to that accused belonging to the excepted category. Criticising the reasoning adopted by the High Court, the Supreme Court held that merely because the accused has a special status being a Member of Parliament or a Member of the Legislative Assembly (MLA), Minister or Chief Minister, they are not entitled for any differential treatment and should be treated equally as any other accused. Therefore, the separate treatment, on the ground that the appellant lady was highly qualified and a well-accomplished person, extended by the High Court by denying the advantage of proviso to Section 45(1) was clearly unsustainable. The High Court erroneously observed that proviso to Section 45(1) is applicable only to vulnerable women and misapplied the ratio laid down by the Supreme Court in Saumya Chaurasia v. Enforcement Directorate61.
The courts are required to be more sensitive and sympathetic towards the category of persons included under the first proviso to Section 45 and the proviso nowhere specifies the category of women to be “vulnerable to be extended its advantage”. Merely because a woman is highly educated or sophisticated or Member of Parliament or MLA, it cannot be held that she is not entitled to the benefit of proviso to Section 45(1) PMLA.
Accordingly, the bail application of the petitioner was allowed by setting aside the judgment of the High Court with imposition of certain conditions by the Supreme Court.
***
(14) Saumya Chaurasia v. Enforcement Directorate62
(Delivered on 28-8-2024)
Coram: 2-Judge Bench of HM Aniruddha Bose and Bela M. Trivedi, JJ.
Authored by: HM Bela M. Trivedi, J.
The appeal arose out of the order passed by Chhattisgarh High Court, through which the regular bail application of the petitioner had been rejected, who had been arrested by the Enforcement Directorate for commission of various offences under the PMLA.
Necessary facts
A search and seizure under Section 132, Information Technology Act was carried out by the information technology (IT) authorities against an individual named Suryakant Tiwari at Bengaluru. The said Suryakant Tiwari was accused of running a mining cartel and extortion racket against the coal delivery orders from various coal washery owners. This was being done in connivance with senior bureaucrats of Chhattisgarh including the appellant who was working as the Deputy Secretary to the erstwhile Chief Secretary of State of Chhattisgarh. The appellant was alleged of exercising considerable influence and assisting Suryakant Tiwari the main accused in operating his syndicate and extortion racket. Approximately, Rs 540 crores were alleged to have been collected through extortion by Suryakant Tiwari and substantial part of this money was utilised by the appellant also by purchasing various properties in her name as well as the name of her family members. The predicate offence was registered by the Karnataka Police under Sections 204, 353 and 384 IPC, whereafter the Enforcement Directorate registered Enforcement Case Information Report against the appellant.
The appellant essentially contended that she was not named in the FIR relating to the scheduled offence nor in the Enforcement Case Information Report registered initially which was registered against Suryakant Tiwari. She had also duly cooperated during the interrogation and investigation by the Enforcement Directorate. Even otherwise insofar as the scheduled offence was concerned, the charge-sheet eventually came to be filed only in relation to FIR of the scheduled offence under Sections 204 and 353 only, both of which are not scheduled offences to the PMLA. No proceedings under the PMLA can be continued against any accused in absentia of the scheduled offence. The petitioner further contended that in view of proviso to Section 45, the appellant being a lady, she deserves to be enlarged on bail, more so having spent more than one year into custody and when the continued custody was not at all required.
The Enforcement Directorate to the contrary contended that the prosecution had during investigation collected substantive evidence showing strong nexus between the appellant and the other accused persons especially Suryakant Tiwari, as also prima facie material establishing money laundering at the hands of the appellant. The use of expression “may be” under proviso to Section 45 PMLA clearly indicates that benefit of the proviso is not available mandatorily or automatically but it is subject to discretion to be exercised by the courts.
Consideration and discussion by the Court
The Court then perused the role of the appellant as spelt out in the charge-sheet cum complaint filed by the Enforcement Directorate. It revealed that the appellant exercising influence and clout in the Chief Minister’s office ensured posting of pliant officers in the coal-mining districts, who would succumb to the pressure and dictates of Suryakant Tiwari. The illegal extortion racket from coal and iron pellet transportation could not have been run without the active involvement and connivance of the appellant. The appellant was accused to have acquired proceeds of crime of more than Rs 30 crores and it also acquired immovable properties on a large scale during the check period which coincided with the coal levy scam (illegal extortion racket of Suryakant Tiwari). The assets of which he was found to be the real and beneficial owner were also identified and attached by the issuance of provisional attachment orders by the authorities under the PMLA. Thus, there was prima facie material of the involvement of the appellant in the commission of offence of money laundering.
On the contention of the exemption for women from applicability of the twin conditions of Section 45 PMLA, the Court referred to the judgment of para 23 of Enforcement Directorate v. Preeti Chandra63, wherein the Supreme Court stated that proviso to Section 45 confers discretion on the Court to grant bail whenever the accused is a woman. A similar such provision exists under Section 437, Criminal Procedure Code, interpreting which, it has been held time and again that it does not mean that necessarily the person should be released on bail without exercise of any discretion.
The Court interpreting the expression “may be” under first proviso to Section 45 held that such provision cannot be by any stretch of imagination be held to be obligatory or mandatory in nature, otherwise all serious offences under such special enactments would be committed involving women and persons of tender age below 16 years. The provision simply requires the courts to be more sensitive and sympathetic towards the category of persons included under the first proviso, but however courts should not be oblivious also to the fact that nowadays educated and well-placed women in the society engage themselves in commercial ventures and inadvertently/advertently engage into illegal activities. The courts therefore should exercise their discretion judiciously using their prudence, considering the involvement of the persons falling in such special category of offences, nature of evidence collected by the investigating agency and a role attributed to them.
Accordingly, after scanning the evidence collected and produced by the Enforcement Directorate before the Court, the Court held that appellant being posted as Deputy Secretary and Officer on Special Duty (OSD) in the Office of the Chief Minister was actively involved in the offence of money laundering and generating the proceeds of crime under the PMLA. The appellant cannot be held to be not guilty of the said offences and entitled to special benefits as contemplated under second proviso to Section 45, despite being a lady.
On the contention that the charge-sheet filed in relation to the FIR of predicate offence never included any of the scheduled offences, the Court held that whenever FIR is registered under particular offences mentioned in the Schedule to the PMLA and charge-sheet is filed, it is the court of competent jurisdiction which decides whether the charge is required to be framed against the accused for the scheduled offence or not. The IO therefore cannot be said to be the final authority or the final conclusion as to whether the offence scheduled in the PMLA existed or not, more particularly when they were once mentioned in the FIR registered against the accused person. Referring to the Vijay Madanlal judgment, the Court held that only in the event when the person named in the criminal activity relating to the scheduled offences is finally absolved by the court of competent jurisdiction owing to an order of discharge, acquittal or owing to quashing of the said criminal case (scheduled offence) against him, can there be disappearance of offences registered under the PMLA. Since, admittedly in the present case, there was neither any discharge nor acquittal nor quashing of the criminal case by the court of competent jurisdiction against Suryakant Tiwari, therefore the ratio of Vijay Madanlal judgment was clearly not attracted.
Also, on the ground that appellant indulged in misstatement of incorrect facts before the Supreme Court, she was held not entitled for grant of any relief and appeal was accordingly dismissed with cost of Rs 1,00,000 imposed by the Court.
***
(15) Prem Prakash v. Enforcement Directorate64
(Delivered on 28-8-2024)
Coram: 2-Judge Bench of HM B.R. Gavai and K.V. Viswanathan, JJ.
Authored by: HM K.V. Viswanathan, J.
The petition related to grant of regular bail in relation to Enforcement Case Information Report registered by the Enforcement Directorate under Sections 3 and 4 PMLA.
Factual matrix of the case
The predicate offence was registered through FIR under various provisions of IPC, wherein the principal allegation was that for the transfer of certain properties to the appellant being the principal beneficiary, original records of the Circle Office, Ranchi and other government offices were falsified for preparation of forged sale deeds. The said property on the basis of such forged documents was transferred by Punit Bhargava, with the sale proceeds being received partly in his own account as well as in the account of one M/s Jamini Enterprises, of which the petitioner was the beneficial owner. The appellant was alleged to have conspired with other accused persons in the generation and acquisition of the proceeds of crime in the form of landed property and was thus taken into custody in relation to the Enforcement Case Information Report registered by Enforcement Directorate.
Consideration and discussion by the Court
Referring to the Vijay Madanlal judgment, the Court stated that even though certain conditions are provided under Section 45 against grant of bail, however there is no absolute restraint against the grant of the same. The discretion eventually vests with the Court which is not arbitrary or irrational but purely judicial, guided by the principles of law as provided under Section 45 PMLA. Referring further to the judgment of Manish Sisodia case65, the Court reiterated that even under the PMLA, the governing principle is that bail is the rule and jail an exception. The High Courts and trial courts must recognise this principle, as on account of non-grant of bail even in straightforward open-and-shut cases, courts get flooded with large number of bail petitions adding to the huge pendency. Section 45 also does not by imposing twin conditions rewrite the principle to mean deprivation is a norm and liberty and exception. The only requirement is that the twin conditions must be satisfied.
The Court further underscored that if it is luminescent that trial will not be concluded or the case be not decided within a foreseeable time, then the prayer for bail becomes meritorious. Even though the prosecution pertains to economic offences, it is not proper to equate these cases with those punishable with death. The Supreme Court also discussed the foundational facts necessary for attracting the presumption under Section 24 PMLA. The foundational facts being — firstly, that the criminal activity relating to the scheduled offence has been committed; secondly, that the property in question has been derived or obtained, directly or indirectly by any person as a result of that activity; and thirdly, the person concerned is knowingly, directly or indirectly, involved in any process or activity connected with the said property as proceeds of crime. Then only the offence of money laundering and presumption under Section 24 is attracted. The presumption under Section 24 is also therefore a rebuttable presumption and not a conclusive one.
The counter-affidavit filed by the investigating agency before the original Court/Special Court is very significant in the PMLA bail matters. The said counter-affidavit filed by the investigating agency must demonstrate how the three foundational facts as stated supra have been met out to prima facie establish the case against the accused person. This counter-affidavit must specifically crystallise, albeit briefly, material sought to be relied upon to establish prima facie the three foundational facts, whereafter only the responsibility of the accused arises to satisfy the Court considering his/her bail application that there are reasonable grounds to believe that he is not guilty of a PMLA offence.
Applying the aforesaid principles, and the complaint filed by the Enforcement Directorate, Court found that the statement of the appellant was recorded, whilst being in judicial custody at Birsa Munda Central Jail, Ranchi. In view of Section 25, Evidence Act, as also under para 339 of Vijay Madanlal judgment, wherein the Supreme Court held that protection of Section 25, Evidence Act gets available to statement of accused person even if tendered in judicial custody, because the statement was given in judicial custody by the appellant accused, incriminating in nature against himself, it will be hit by the Bar under Section 25, Evidence Act. Thus, the statement became inadmissible since the appellant was in a vulnerable position qua the investigating agency which was in the dominating position in view of the arrest in another proceedings. There was a conducive atmosphere for the investigating agency to have obtained a confession from the petitioner.
Referring to the two judgments of Madras High Court in Blukuri Seshapani Chetti, In re66 and Kodangi, In re67, the Supreme Court reiterated that confession made to the police in the course of investigation of a “Crime A”, even though it relates to another “Crime B” is equally inadmissible. The purport and spirit of Section 25 exclude altogether confessions made to the police and it does not matter even slightest of what crime such a confession is treated or related to. Therefore, even a statement made under Section 50 PMLA to the officers of the Enforcement Directorate became inadmissible in nature, since the appellant accused could not be treated as operating with a free mind. Therefore, even though the appellant was at the relevant point of time of making the confession, was in custody in relation to a different Enforcement Case Information Report, it would not matter since the said statement was given whilst being in custody.
Whilst assessing the binding value of the statement given by the co-accused, the Court held that it will not have the character of substantive evidence, nor can the prosecution start with such a statement to establish its case. Referring to the judgment of Kashmira Singh v. State of M.P.68, the Supreme Court held that the statement of the co-accused Afshar Ali, so recorded by the Enforcement Directorate, can be looked at only for the purposes of lending assurance to the other standalone substantive evidence gathered by the investigating agencies. Independently, the statement of Afshar Ali does not prima facie indicate anything about the role of the appellant in the forgery of sale deed and other documents of being involved in the offence of money laundering. Likewise, the statements given by other co-accused persons also failed to directly implicate the petitioner and no material was adduced before the Court as to have demonstrated that beneficial interest in M/s Jamini Enterprises lied with the appellant. It was only on the basis of statements of the co-accused persons that the allegation of money laundering was made against the appellant. The appellant was therefore held to have satisfied the twin conditions for grant of bail.
In the eventual analysis, the Supreme Court allowed the appeal and enlarged the petitioner on bail with imposition of suitable conditions.
***
(16) Vijayraj Surana v. Enforcement Directorate69
(Delivered on 28-8-2024)
Coram: 2-Judge Bench of HM S.M. Subramaniam and V. Sivagnanam, JJ.
Authored by: HM S.M. Subramaniam, J.
The writ petition was preferred seeking quashment of all the proceedings registered by the Enforcement Directorate against the petitioner on the ground that the predicate offence and the FIR registered by the Central Bureau of Investigation in relation thereto had been quashed already by the Karnataka High Court.
Factual matrix of the case
The petitioners obtained huge loans running into thousands of crores from IDBI and SBI Bank. The aforesaid loan amount was invested into shell companies and rerouted for purposes alien to the objective for which loan was taken and used by the promoters. The Central Bureau of Investigation (for short, “CBI”) acting on the allegations had registered the FIR under various provisions of IPC and the Prevention of Corruption Act, 1988 against the petitioners. Based on the FIR registered by the CBI, the Enforcement Case Information Report was registered by the Enforcement Directorate and complaints and supplementary complaints were filed. The Serious Fraud Investigation Office (for short, “SFIO”) complaint on the overlapping set of allegations pertinently was also registered much prior to the registration of FIR by the CBI and was very much existing on the date Enforcement Case Information Report was registered by the Enforcement Directorate. The SFIO complaints under Section 202(6), Companies Act was directed against one Surana Industries Limited and other group companies.
Meanwhile, the Karnataka High Court quashed the FIR registered by the CBI with respect to scheduled offence on the ground that SFIO was already carrying out the investigation against the petitioner, pursuant to which complaint under Section 435, Companies Act had also been filed before the Special Court. Therefore, SFIO alone has the jurisdiction to try the offences alleged against the petitioner and not the CBI. Thus, the High Court had quashed the FIR on the technical ground that the SFIO alone has the jurisdiction to try and prosecute the said offences against the petitioners.
The Enforcement Directorate therefore contended that the FIR in relation to the predicate offence was still in force qua other accused persons, except the petitioner and the complaint filed by the SFIO was still standing. The High Court of Karnataka therefore never quashed the SFIO complaint. Admittedly, the proceedings under Section 447, Companies Act are categorised as a scheduled offence under the PMLA and the petitioner was also arrested by the SFIO in relation to the said offences.
Consideration and discussion by the Court
The Court referring to the Vijay Madanlal judgment held that the PMLA is a sui generis legislation, the primary focus of which is proceeds of crime arising from the commission of scheduled offences mentioned under the Act. The offence otherwise has nothing to do with the criminal activity relating to the scheduled offence derived or obtained as a result of that crime and Section 3 thus construed as a standalone provision.
The Court further held that the Enforcement Case Information Report cannot be equated with the FIR and is always independent of the FIR registered in relation to the scheduled offence. On the registration of Enforcement Case Information Report, a new offence and a new life in the form of a separate offence emerges which breathes on its own without the support of FIR. Therefore, they both are two different documents, both tending to take shape on their own, independent of each other. Therefore, automatic quashing of Enforcement Case Information Report, once the FIR stands quashed cannot be accepted since both are entirely different. Therefore, the Court must always adopt an interpretation which serves the cause of justice whilst relying upon and referring to the binding precedents of the Supreme Court and if required clarify that the application of the principles laid down by the Supreme Court suitably has not to cause injustice. Referring contextually to Vijay Madanlal judgment again, especially para 281, the High Court held that mere quashing of the FIR on technical grounds by itself will not make the Enforcement Case Information Report liable to be quashed. Rather in the proceedings pertaining to quashing of FIR in a scheduled offence the Court must have dealt with not merely the procedural irregularities, technical grounds or the issue of maintainability but something much more in the nature of substantive ground. The Court must examine the grounds based on which FIR concerning the scheduled offence was quashed and only when it is so quashed after careful examination of the merits of the matter, would then lead the Enforcement Case Information Report to lose its significance and liable to be quashed. Therefore, it is the bounden duty of the Court to examine whether the FIR was quashed after thoroughly examining the sustainability of the commission of the scheduled offence before rendering the PMLA offence ineffective in existence.
Referring to Section 44 PMLA, the Court stated that even the Special Court is required to apply its mind to the sustainability of the case presented before it. The High Court further held that when proceeds of crime is traced in a parallel investigation by the Enforcement Directorate and offence of money laundering prima facie exists, an Enforcement Case Information Report cannot be quashed lightly. In the present case admittedly, the complaint and prosecution at the behest of SFIO is still pending with the Special Court being seized of the matter. The Court is yet to test the allegations on the merits of the offences charged in the FIR qua the predicate offence under Section 448, Companies Act.
Accordingly, the High Court declined to quash the Enforcement Case Information Report registered by the Enforcement Directorate and dismissed the writ petitions.
***
(17) Amar S. Mulchandani v. Enforcement Directorate70
(Delivered on 29-8-2024)
Coram: 2-Judge Bench of HM Bharati Dangre and Manjusha Deshpande, JJ.
Authored by: HM Bharati Dangre, J.
The petitioner challenged the validity of the Enforcement Case Information Report registered by the Enforcement Directorate on the ground that the FIR No. 163/2018, on the basis of which the Enforcement Case Information Report was registered, was closed with the filling of a “C” summary report before the jurisdictional Magistrate. Resultantly, the predicate offence had disappeared and the Enforcement Case Information Report could not survive its validity or legality.
Factual matrix of the case
The various FIRs came to be registered in relation to the operation of one Seva Vikas Co-Operative Bank Ltd. (for short, “Seva Bank”), Pimpri. The first being FIR No. 163/2018. It was alleged that the bank had advanced loans in huge amounts to various entities from the money deposited by innocent depositors with the bank. These loan accounts subsequently turned into non-performing asset as the financial creditworthiness of the borrowers was never verified or ascertained by Seva Bank before lending the amounts. On the basis of the aforesaid FIR No. 163/2018, Enforcement Case Information Report No. 10/2021 came to be registered on the commission of offences of money laundering by the various accused persons including the Directors of Seva Bank.
Meanwhile an audit report was also filed by the Joint Registrar, Sugar Commissioner, alleging various irregularities and illegalities in respect to 124 loan accounts of Seva Bank, in view of which subsequently FIR Nos. 525, 526 of 2021 and 527 of 2022 came to be registered with the Pimpri Police Station. All these FIRs were so registered under various provisions of IPC for predicate offences against the Board of Directors of Seva Bank, including the petitioner. Cumulative gist of all the FIRs of the accused having caused grave financial losses to Seva Bank on account of irregularities in sanction of loan to three distinct groups.
On 18-4-2022, after registration of various FIRs, a “C” summary report was filed in relation to FIR No. 163/2018, on the basis of which, initially Enforcement Case Information Report No. 10 was registered. The said “C” summary report so filed by the investigating agency closing the investigation was duly accepted by the Magistrate holding that there is nothing to indicate that the alleged accused persons had any intention to cheat Seva Bank or its shareholders. Also, the audit report of the Joint Registrar, Sugar Commissioner on the basis of which FIR Nos. 525, 526 and 527/2021 were registered was set aside by the State Government in revisional proceedings being unsustainable and legally untenable. In August 2023, a supplementary complaint under Section 44 was filed by the Enforcement Directorate before the Special Court, reflecting the petitioner Amar Mulchandani as A-4, of which the Special Judge took cognizance and issued process against the petitioner.
The petitioner in this backdrop sought for quashing and setting aside the Enforcement Case Information Report No. 10 and the consequential proceedings instituted before the Special Court essentially on the ground that the proceedings in the predicate offence on the basis of which the Enforcement Case Information Report came to be registered, viz. FIR No. 163/2018 became non est and unsustainable, in view of filing of the “C” summary report and its acceptance by the Competent Magistrate. The petitioner further contended that there is no power or provision under the PMLA to subsume subsequent FIRs into a pre-existing Enforcement Case Information Report and even if subsumption is to be done, there must be shown a causal link between the subsumed FIRs and the existing Enforcement Case Information Report.
The Enforcement Directorate on the other hand contended that even though the original Enforcement Case Information Report No. 10 was registered on the basis of FIR No. 163/2018, however when the magnitude of allegations expanded, subsequent FIRs on the basis of the report of the Joint Registrar came to be registered which cumulatively alleged misappropriation to the tune of Rs 429.57 crores involving 124 non-performing asset loan accounts accounting for 92% of the loans of Seva Bank. In all there were three FIRs relating to scheduled offences in all of which the petitioner was an accused along with other accused persons, the Board of Directors and members of the management of Seva Bank as also various borrowers and the beneficiaries of the said loan accounts/transactions.
In view of the overlapping nature of all the FIRs, the subsequent FIRs were all subsumed to investigate into the larger canvas of the entire loan scam of Seva Bank containing 124 loan accounts as stated above. Thus, the Enforcement Directorate also started enquiring into the modus operandi adopted in the sanction of loans from various banks without assessing the security value and creditworthiness of the mortgaged property and the borrower. Instead of registering three separate Enforcement Case Information Reports corresponding to the various different FIRs, the Enforcement Directorate decided to continue investigation under the umbrella of the same Enforcement Case Information Report No. 10 by subsuming the subsequent FIRs registered after FIR No. 163/2018.
Consideration and discussion by the Court
The Court accepted the contention of the petitioner that filling of “C” summary report amounts to an acquittal of the accused persons once the same is accepted by the jurisdictional Magistrate. Referring to the judgments of State of Maharashtra v. Bhimrao Vithal Jadhav71, of the Bombay High Court, the High Court accepted the contention of the petitioner that “C” summary report amounts to an acquittal. Reliance was also placed on Naresh Goyal case72, by the High Court for accepting the said contention.
Thereafter referring to the Vijay Madanlal judgment, the High Court stated that predicate offence generally precedes the offence of money laundering but it is not necessary that if the predicate offence comes to an end, the FIR automatically comes to an end. In a case like the present where multiple FIRs were registered exposing the larger scam of loan borrowings in 194 accounts, the filing of closure report in one of them shall not lead to the automatic termination PMLA proceedings. The later FIRs, registered subsequent to the initial FIR No. 163/2018, had overlapping and commonality of the offences which formed the basis of Enforcement Case Information Report No. 10 by the Enforcement Directorate. There was a causal link between all the FIRs wherein extension of loan facilities with the active collusion of the Board of Directors, officials of the bank and various beneficiary borrowers was involved.
Since, the Enforcement Case Information Report therefore had subsumed the subsequently registered FIRs, it cannot be said to be non est when admittedly the scheduled offence had been committed, proceeds of crimes had been generated and they were laundered over. The High Court held that Vijay Madanlal judgment had never equated Enforcement Case Information Report with FIR and the former had been held to be an internal document. Thus, there was absolutely no restriction in bringing on record any subsequent scheduled offence registered by way of an FIR in respect of the same transaction, same subject-matter and similarly placed accused persons.
The High Court further held that scheduled offences by way of second and third FIR still exists which are currently under investigation by the local police involving multiple complainants and on the ground that even when the closure report has been filed in one of them, others cannot be automatically closed or accused be exonerated.
Referring to judgment of Rajinder Singh Chadha v. Union of India73, the High Court underscored that Enforcement Case Information Report is a genus and it may have different species provided there is a connect between the genus and the species. When the proceeds of crime generated from various FIRs have a proximate connectivity and were layered commonly, a common Enforcement Case Information Report and complaint can be filed by the Enforcement Directorate without any necessity of separate Enforcement Case Information Report’s. Referring again to the Vijay Madanlal judgment, the High Court observed that there cannot be possibly any restriction in bringing on record any subsequent scheduled offence registered by way of FIR alleged to have been committed in respect of the same transaction, which was the subject-matter of the ongoing Enforcement Case Information Report in relation to any FIR registered earlier (even though closed later).
Accordingly, the Court concluded by holding that the grievance of the petitioner does not deserve any consideration and accordingly dismissed the batch of writ petitions.
***
(18) Enforcement Directorate v. Bablu Sonkar74
(Delivered on 9-2-2024)
Coram: 2-Judges Bench of Abhay S. Oka and Ujjal Bhuyan, JJ.
Majority Opinion Authored by: HM Abhay S. Oka, J.
The first respondent had filed the writ petition before the Bombay High Court for quashment of the complaint filed by the Enforcement Directorate under the PMLA. In the writ petitions filed, there was no interim relief granted earlier pending the hearing of the petition. After the same was finally heard and reserved for final judgment on 21-4-2023, the roster of the Bench concerned was only up to 4-6-2023, which was changed to be vested with another Bench, with effect from 5-6-2023. However, on 26-6-2023, the writ petition of the respondent was listed for further hearing and the impugned order came to be passed in chambers on the said day. The Bench recorded that there were similar matters involving the same issue, and the judgment will have impact on other cases also which were pending. The Single Bench accordingly re-reserved the judgment after reopening it, whilst tagging it with other connected matters for being decided in accordance with law of similar nature. The respondent was however in the said in-chamber proceedings directed to be released on interim bail by the Special Court in relation to the said Enforcement Case Information Report. It is this order which came to be challenged before the Supreme Court.
The Supreme Court found that on the date the case was released, the roster of the said writ petition was being notified to be dealt with by another Bench. The grant of bail whilst releasing the said writ petition is shocking, as even if such a prayer could have been made, the Bench was not competent to hear the said prayer for grant of bail, which could have been heard only by the roster Bench, as notified by the Chief Justice and none else. The bail was also granted in the said offence under the PMLA without recording any reasons meeting the twin conditions, by vaguely observing that the same is being granted to “strike a balance”.
The Court further observed that the roster notified by the Chief Justice is not an empty formality, which binds all the judges. Without any prayer for grant of bail, the Bench could not have heard the case unless it was so specifically assigned to it by the Bench of the Chief Justice. Accordingly, the impugned order granting bail was set aside by the Supreme Court, whilst directing the respondent to surrender and apply afresh for grant of bail before the Roster Bench, so notified by the Chief Justice. Accordingly, the appeal was partly allowed.
***
*Expert in Constitutional, Civil & Securitisation Laws and Practising Advocate, Supreme Court of India.
**4th year student, Dharmashastra National Law University, Jabalpur.
1. (2024) 7 SCC 576 : (2024) 3 SCC (Cri) 450.
2. (2023) 15 SCC 91 : 2023 SCC OnLine SC 1586.
8. Pankaj Bansal v. Union of India, (2024) 7 SCC 576 : (2024) 3 SCC (Cri) 450.
12. (2010) 9 SCC 618 : (2010) 3 SCC (Cri) 1450.
13. (2011) 14 SCC 770 : (2012) 4 SCC (Civ) 1034 : (2012) 4 SCC (Cri) 496 : (2014) 1 SCC (L&S) 208.
20. (2023) 2 HCC (Del) 651 : 2023 SCC OnLine Del 3176.
21. (2024) 7 SCC 61 : (2024) 3 SCC (Cri) 39.
22. (2022) 10 SCC 51 : (2023) 1 SCC (Cri) 1.
23. (2024) 8 SCC 465 : (2024) 3 SCC (Cri) 731.
24. (2007) 12 SCC 1 : (2008) 1 SCC (Cri) 259.
25. (2018) 5 SCC 743 : (2018) 2 SCC (Cri) 867.
33. (2024) 6 SCC 579 : (2024) 3 SCC (Civ) 226 : (2024) 245 Comp Cas 80.
36. (2020) 220 Comp Cas 147 : 2019 SCC OnLine Del 7854.
40. (1996) 9 SCC 766 : 1996 SCC (Cri) 1104.
44. (2024) 8 SCC 254 : (2024) 3 SCC (Cri) 573.
45. (2000) 8 SCC 590 : 2001 SCC (Cri) 42.
46. (1943) 51 Man. R 120.
47. 1993 Supp (2) SCC 497 : 1993 SCC (Cri) 691.
48. (2004) 11 SCC 576 : 2005 SCC (Cri) 612.
49. (2014) 8 SCC 273 : (2014) 3 SCC (Cri) 449.
56. (2024) 12 SCC 682 : 2024 SCC OnLine SC 2276.
57. (2024) 9 SCC 813 : (2025) 1 SCC (Cri) 222.
60. Manish Sisodia v. Enforcement Directorate, (2024) 12 SCC 660.
61. (2024) 6 SCC 401 : (2024) 3 SCC (Cri) 217.
62. (2024) 6 SCC 401 : (2024) 3 SCC (Cri) 217.
64. (2024) 9 SCC 787 : (2025) 1 SCC (Cri) 198.
65. Manish Sisodia v. Enforcement Directorate, (2024) 12 SCC 660.
72. Naresh Goyal v. Enforcement Directorate, 2023 SCC OnLine Bom 2121.
74. (2024) 3 SCC 714 : (2024) 2 SCC (Cri) 282.