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.
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 September to December 2024 are covered in this part, which are as follows:
Abbreviations for various common terminologies in the judgments
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Art. — Article |
Assn. — association |
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APIICL — Andhra Pradesh Industrial Infrastructure Corporation Limited |
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CJM — Chief Judicial Magistrate |
CG — Central Government |
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CB — Constitution Bench |
CBI — Central Bureau of Investigation |
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COI — Constitution of India |
Co. — company |
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Commr. — Commissioner |
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DB — Division Bench |
ECIR — Enforcement Case Information Report |
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ED — Enforcement Directorate |
Govt. — Government |
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GOI — Government of India |
HC — High Court |
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IPC — Penal Code, 1860 |
JB — Judge Bench |
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IEA — Evidence Act, 1872 |
Ltd. — Limited |
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ML — money laundering |
MP — Member of Parliament |
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NBWs — non-bailable warrants |
NPA — non-performing asset |
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NCLT — National Company Law Tribunal |
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PAO — provisional attachment orders |
POC — proceeds of crime |
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P&H — Punjab and Haryana |
Pvt. — Private |
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r/w– read with |
SFIO — Serious Fraud Investigation Office |
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SC — Supreme Court |
SB — Single Bench |
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Sec. — Section |
UOI — Union of India |
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u/s — under Section |
v. — versus |
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Vijay Madandal judgment — Vijay Madanlal Choudhary v. Union of India1 |
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WP — writ petition |
w.e.f. — with effect from |
The judgments are as follows:
(1) Jogendra Tiwari v. Union of India2
(Delivered on 3-9-2024)
Coram: Single Judge Bench of HM Justice Rongon Mukhopadhyay
The petition related to grant of regular bail in connection with the Enforcement Case Information Report registered by the Enforcement Directorate under various provisions of the PMLA. The Enforcement Case Information Report pertinently was launched on the basis of 4 first information reports (FIRs) and thereafter, through addendums 15 FIRs were further added and subsumed in the investigation being carried out by the Enforcement Directorate. The petitioner was pertinently an accused in only 3 FIRs, in all of which the police had filed a closure report, not recommending the petitioner to be sent to trial. There were number of FIRs which were also quashed by High Court on various grounds. Thus, the Enforcement Case Information Report and resultant allegation of proceeds of crime hinged upon 6 FIRs, which were the basis of the ongoing investigation by the Enforcement Directorate and the Enforcement Case Information Report registered with it. Referring to the Vijay Madanlal judgment3 and the subsequent judgments of Anil Tuteja v. Enforcement Directorate4, on a similar point, the petitioner contended that presumption under Section 24 PMLA cannot be raised since the Special Court is yet to frame charges against him.
The predicate offence was registered against the petitioner on the allegations of land grabbing by forceful means and by producing forged documents in various cases in different-different proceedings. During the course of investigation, the search carried out in various premises of the petitioner, it was revealed that petitioner was doing the business of sand and liquor in the name of other individuals, entities and several FIRs had also been registered on the allegations of illegal sale of sand, illegal storage of liquor and extortion. On the basis thereof, Enforcement Case Information Report was registered and a complaint case came to be filed by the Enforcement Directorate. However, in the complaint case it was stated by the Enforcement Directorate that proceeds of crime relating to only 9 FIRs was being considered, whereas those of other remaining FIRs was not being taken into consideration.
The Enforcement Directorate opposing the petition contended that protest petitions had been filed to the closure reports filed by the investigation agencies and since the protest petition was pending, the scheduled offence could not be treated to have been concluded into complete acquittal/exoneration of the accused persons.
The High Court considered the impact of filing of protest petition (of the complainant) to the closure report/final report filed by the police in relation to any scheduled offence and its impact. Relying on the judgment of the Supreme Court in Mukhtar Zaidi v. State of U.P.5, the High Court reiterated the legal proposition that the protest petition (of the complainant) so filed simply serves the purpose of drawing the Magistrate’s attention to the materials in the case diary and inviting/soliciting a careful scrutiny and application of mind by the Magistrate. It cannot be held that simply because there is a protest petition, it assumes the character of a complaint case under Section 200, Criminal Procedure Code, 1973 (CrPC). The Magistrate always has the liberty to reject such a protest petition along with all other materials which may have been filed in support of the same. The complainant on such rejection by the Magistrate may file a private petition under Section 200 CrPC even if the Magistrate has declined to consider favourably the objections of the complainant or passes any order treating the said protest petition as a complaint. The Court thus held that even though protest petitions (of the complainant) were therefore pending, none of the cases revealed generation of any proceeds of crime by the petitioner himself directly. The dispute was essentially civil in nature, with no conclusive role having been attributed specifically or assigned to the petitioner.
The High Court further considered that petitioner had already spent substantial duration under incarceration, and the trial had not yet started. The probability of the trial not getting concluded in near future was very much existing and thus, petitioner was entitled to be enlarged on bail. Majority of the cases which formed the scheduled offences, the involvement or complicity of the petitioner could not be established affirmatively, leading to quashment of the case qua him or his acquittal in them. Therefore, there was no question of the probability of the petitioner committing the same offence. Accordingly, the bail application of the petitioner was allowed, enlarging the petitioner on regular bail by High Court.
***
(2) Priyavrat Mandhana v. Enforcement Directorate6
(Delivered on 12-9-2024)
Coram: 2-Judge Bench of HM Justices Revati Mohite Dere and Prithviraj K. Chavan
Authored by: HM Justice Prithviraj K. Chavan
The petitioner filed Section 482 CrPC petition challenging his arrest effected by the Enforcement Directorate and consequential detention in view of the search and seizure operations carried out under Section 17 PMLA. The High Court was called upon to examine whether the arrest of the petitioner by the Enforcement Directorate was in terms of the law laid down by the Supreme Court in Arvind Kejriwal v. Enforcement Directorate7, and whether there was sufficient material with the authorised officer who had recorded his reasons to believe in writing with the corresponding necessity to arrest him.
Factual matrix of the case
The petitioner had responded to Section 50 summons and cooperated with the investigation when statements came to be recorded by the Enforcement Directorate. He was subjected to interrogation for prolonged hours under the pretext of conducting search and seizure operations by the Enforcement Directorate. The father of the petitioner was released by the Special Judge on finding his arrest illegal on 25 July 2024, till when the petitioner was not arrested despite being summoned and questioned/interrogated by the Enforcement Directorate. Post 25 July 2024, on 29 July 2024 under the pretext of second search, the petitioner was interrogated again and immediately arrested on the basis of bank statements of a company involved in the commission of the predicate offence. The petitioner was also found to be giving “evasive replies” on being confronted with the bank statements of the transactions with the various companies.
The petitioner whilst challenging his arrest contended that the arrest of the petitioner was precipitated only after 25 July 2024, after the father of the petitioner was released and till then investigation had been conducted for the preceding 9 months, but the petitioner was not arrested. The Enforcement Directorate had collected all the necessary documents, evidence and material during the aforesaid exercise. A specious “reason to believe” was created by the Enforcement Directorate in the air for arresting him and somehow taking into custody. The Enforcement Directorate was already in possession of all the materials, documents and evidence much prior to the date of release of the petitioner’s father, which had been subsequently quoted as a reason to put him under arrest.
Consideration and discussions by the Court
The High Court after examining the contentions of both the parties, referring and relying upon the Supreme Court’s judgment of the Arvind Kejriwal case8, observed that higher threshold is required for making an arrest, necessitating a review of the material available to demonstrate the person’s guilt. Production of the reasons to believe before the Special Court/Magistrate cannot be construed and it is not the same as furnishing or providing the reasons to believe to the arrestee, who has a right to challenge his arrest being violative of Section 19 PMLA. The reasons to believe are not synonymous with the “subjective satisfaction of the officer” and the belief must be held in good faith. The Court can always examine whether the “reasons for the belief” have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose for which arrest is affected.
The “need and necessity to arrest” must be referable to the satisfaction of formal parameters to arrest and take a person into custody. The High Court also observed that since the Enforcement Directorate was already in possession of sufficient material qua the petitioner and his companies, as well as the alleged transactions with various banks, all during the arrest and interrogation of the petitioner’s father, therefore on the said pretext of collecting the very same material (already in possession of the Enforcement Directorate) the petitioner’s arrest could not have been effected to under Section 19 PMLA. Thus, the arrest of the petitioner was not based on any objective reasons to believe but was purely the subjective satisfaction of the Enforcement Directorate, without any rational connection to the quoted reasons to believe or purpose of arrest. Since the life and liberty of the petitioner is sacrosanct in view of the constitutional mandate of Article 21 of the Constitution of India, therefore the petitioner was entitled for grant of bail. The petitioner was accordingly directed to be released on bail by allowing his application.
***
(3) Adnan Nisar v. Enforcement Directorate9
(Delivered on 17-9-2024)
Coram: Single Judge Bench of HM Justice Vikas Mahajan
The matter pertained to grant of regular bail in relation to offences registered under the provisions of the PMLA. The bail applications were filed by various accused persons who were being prosecuted by the Enforcement Directorate on a letter received as mutual legal assistance request (for short, “MLA”) as received from the US Department of Justice, Washington. Through this MLA request, it was alleged that the petitioner had committed offences pertaining to fraud, deception, information technology and money laundering under the corresponding provisions of the US statutes. The offences pertained to fraudulent transfer of crypto currencies of value more than approximately US$ 5 lakhs. This was done by the various accused persons acting in conspiracy with each other through the trading platform WazirX.
Factual matrix of the case
On the MLA request so received by the Enforcement Directorate, it was found that the offences alleged under the various provisions of the US statutes pertained and corresponded to Section 75, Information Technology Act, 2000 and Sections 420 and 424, Penal Code, 1860 in India which were all scheduled offences. Accordingly, Enforcement Case Information Report came to be registered for investigation, search, seizure and attachment of proceeds of crime under the Act. During the said search and seizure exercise, Enforcement Directorate found that accused persons were converting stolen cryptocurrency into cash and utilising the same for various purposes including creation of immovable assets within India. These cryptocurrencies were received in various accounts linked with the credentials of the accused persons, of which in their statements under Section 50 PMLA, none of the accused persons were able to justify the source of the said amounts received in huge quantities.
Consideration of the bail application by the Court
The primary contention of the petitioner was that the authorities under the PMLA cannot prosecute any person on a notional basis or on the assumption that scheduled offence has been committed. No provision of any Indian law had been violated and thus Enforcement Directorate could not have registered any Enforcement Case Information Report.
Answering the said contention, referring to Section 2(1)(ra) PMLA, the Court stated that offences having cross-border implications are included within the ambit of the PMLA and the jurisdiction of Enforcement Directorate is attracted in both of the two categories of offences, viz. firstly, when any offence has been committed at a place outside India which would have constituted an offence specified under the Schedule had it been committed in India and the proceeds of crime so generated has been transferred to India of such offence; and secondly, when the scheduled offence has occurred in India and the proceeds of crime have travelled to a place outside India. The case at hand was found by the Court to be falling in the first category, since the proceeds of crime were generated in the US with the commission of offences thereunder and transferred in India.
Referring to “Part C” of the Schedule to the PMLA, the High Court also stated that offences having cross-border implications, especially all the offences against property under Chapter XVII of the Penal Code, 1860 have been included under the Act. Referring thereafter to the definition of corresponding law under Sections 2(1)(ia) and 2(2), the Court stated that the phrase “corresponding law” means any law of any foreign country dealing with the offences of that country which correspond to the scheduled offences. A deeming fiction is created under the statute wherein offences committed in any foreign country corresponding to similar offences in the Indian territory shall be deemed to have been committed as scheduled offences under the PMLA. It will be treated by deeming fiction as a predicate offence by the Enforcement Directorate, provided such offence corresponds to the offences specified in “Part C” of the PMLA having cross-border implications, the proceeds of crime of which have travelled/transferred to India. The contention of the petitioner was accordingly rejected. Referring to Section 44(1)(c) as interpreted in the Vijay Madanlal judgment10, the Court held that Special Court is authorised to examine the request for transfer of trial of predicate offence to itself on a case-to-case basis and thus Section 44(1)(c) is not mandatory. In the context of a predicate offence under the corresponding law of a foreign country, the same can be tried only as per the procedure in force in that foreign country and therefore, Section 44(1)(c) (pertaining to transfer of trial of predicate offence to the PMLA Special Court) will have no application in such cases.
The petitioners had further contended that the Enforcement Directorate could not have initiated a separate investigation based on an offence committed abroad, which was impermissible, since the US authorities had sought limited assistance of the WazirX accounts to let them be seized and frozen. The Enforcement Directorate went beyond the said MLA request and not only registered offences under the PMLA, but also started an investigation therein.
Referring to the history behind the enactment of the PMLA, as also elaborated in Vijay Madanlal judgment11, the Court referred to Section 56 under Chapter IX of the enactment, whereunder Central Government has been authorised to enter into an agreement with any foreign country for enforcing the provisions of the PMLA, exchange of information for the prevention of offences of money laundering and such other connected matters. Pursuant to Section 56, the Government of India and the Government of USA entered into a treaty, whereunder they agreed to provide MLA in criminal matters to each other for the purposes of taking the testimony or statements of persons accused or witness of the offences committed in the foreign territory; providing documents, records and items of evidence and any such other form of assistance for effective investigation of any offence. The MLA request was also being made by the US authorities in pursuance of the said mutual treaty between both the countries. The MLA request received by the Government of India pointed out that a seizure warrant had been issued for seizing and freezing the accounts of the petitioner. The High Court also referred to Section 60 PMLA which authorises Enforcement Directorate to effect attachment, seizure and confiscation of property in the contracting Union of India on receiving a letter of request from a contracting party with whom it has a treaty. Thus, the Court negated the argument of the petitioner that Enforcement Directorate could not have investigated the matter on receiving the MLA request by holding that the said request can be executed by conducting an inquiry, investigation or survey by the Enforcement Directorate. Referring to Section 2(na) PMLA and Section 2(h) CrPC, along with the judgment of H.N. Rishbud v. State (Delhi Admn.)12, the High Court held that investigation includes a lot of variegated steps, one of them being discovery and arrest of the suspected offender. Thus, arrest is a necessary part of the procedure of investigation to secure not only the presence of the accused but for several other purposes of unearthing and collecting of evidence, custodial interrogation, etc. Therefore, when MLA request was received from the US authorities, Enforcement Directorate was clearly empowered to do everything required, including arresting the accused post lodging of Enforcement Case Information Report under Sections 3 and 4 PMLA. Thus, the contention of the petitioner was rejected that Enforcement Directorate had exceeded the scope of MLA request made to it by the US authorities by the High Court.
The Court then discussed the procedure on receipt of MLA request by the Central Government and the recourse open to it. Referring to Sections 58, 60(2) and 61 PMLA, the High Court held that the Central Government, upon receipt of any letter of request from a contracting State may either forward the said request to any authority under the Act or to the Special Court as it thinks fit for execution of such a request. Thus, the Central Government was well within its power to forward the MLA request in the present case directly to the Enforcement Directorate and no breach of provisions of Chapter IX of the PMLA can be contended. Referring to Section 188 CrPC, the Court held that the requirement of grant of sanction shall not arise in the present matter. This is because the PMLA being a standalone offence and once the proceeds of crime generated from the predicate offence committed on a foreign soil had travelled/transferred to India, the offence of money laundering was presumed to have been committed in India in its entirety. Therefore, no sanction under Section 188 CrPC is required for the said offence. The offence of money laundering having been committed independently in India with the possession of such money, cannot by any stretch of imagination be treated as an offence committed in India.
The petitioners had also contended that though the petitioner was alleged to have committed offences under various provisions of the US statutes but however the said content of the US statutory provisions delineating such offences were nowhere quoted properly in the complaint, nor any reference made to the ingredients of such offences by the Enforcement Directorate anywhere, neither in the complaint nor in the documents accompanying the said complaint.
The High Court in the context of the aforesaid argument referred to the judgment of Hari Shanker Jain v. Sonia Gandhi13, for observing that under Section 57, Evidence Act, 1872, the Indian courts are obliged to take judicial notice of the laws in force in the territory of India only and that such an exercise cannot extend or be applied to foreign laws. The other provisions of the Evidence Act, 1872, viz. Sections 45 and 84, permit proof being tendered and opinion of experts being used in evidence in proof of a point of foreign law and therefore the provisions of the said foreign law have to be pleaded like any other fact if any party wants to rely on the same. Discussing the law as prevailing in the courts in England, the Court held that even English Courts do not take judicial notice of foreign law, which are usually matters of evidence requiring proof as questions of fact. In the same context reference has also been made to the judgments at Mundipharma AG v. Wockhardt Ltd.14 The MLA request received by the Enforcement Directorate was just a certified copy which cannot be a substitute for the statute or a provision of the corresponding US law enacted in the United States of America. In the absence of any material on record in the form of a relevant statute supported by the opinion of experts, the Enforcement Directorate failed to establish even prima facie that the alleged predicate offences corresponded to the offences mentioned in the Schedule to the PMLA and therefore there could not be any presumption of proceeds of crime having been generated.
Referring further to the Vijay Madanlal judgment15 and Prem Prakash v. Enforcement Directorate16, the High Court stated that initial burden is always on the prosecution (Enforcement Directorate) to establish prima facie the three basic or foundational facts, as follows:
1. Firstly, that the criminal activity relating to a scheduled offence has been committed.
2. Secondly, that the property in question has been derived or obtained, directly or indirectly, by any person as a result of that criminal activity.
3. Thirdly, the person concerned is directly or indirectly involved in any process or activity connected with the said property being proceeds of crime.
It is only when the aforementioned three foundational facts are prima facie established in a given case that it shall be presumed that burden has shifted on the shoulders of the accused under Section 24(a) PMLA to convince the Court that the twin conditions under Section 45(a) (viz. that there are reasonable grounds to believe that he is not guilty of such offence) are being met to be enlarged on bail. In the present case, therefore the aforementioned three foundational facts were clearly not established even prima facie.
The High Court then considered the contention of the petitioner that the incriminatory material relied upon by the Enforcement Directorate against them are the statements recorded under Section 50, most of which were recorded after their arrest. Therefore, such statements were inadmissible being hit by Section 25, Evidence Act, 1872, having recorded post his arrest. Analysing this contention of the petitioner, the High Court held that the statements recorded prior to the petitioner’s arrest pertained only to his professional credentials, whereas the statements recorded post-arrest recorded his confessions pertaining to his involvement in the commission of the alleged fraud or scam and ML. The statements recorded post-arrest of the petitioner, therefore were inadmissible clearly and cannot be looked into by the Court for inferring any guilt on his part. Referring to the judgment of Prem Prakash case17, the High Court reiterated that statements given in judicial custody, pursuant even to another proceeding instituted by the same investigating agency are inadmissible and cannot be considered. Therefore, all such incriminatory material has to be discarded and cannot be taken into consideration for opposing the bail application of the petitioner by the Enforcement Directorate.
The High Court then considered whether the WhatsApp/Telegram chats between the petitioner and the co-accused persons can be taken into consideration in the absence of any scientific reports. Referring to the judgment of Bharat Chaudhary v. Union of India18, the Court reiterated that WhatsApp messages being virtual and verbal communications are matters of evidence with regard to their meaning and contents to be proved during trial by evidence in chief and cross-examination. Therefore, the same could not be considered or reckoned by the Court when produced for opposing the bail application by the Enforcement Directorate.
The petitioners further contended that even though proceedings under Section 50 PMLA may be judicial proceedings, but confession made by any accused therein cannot be treated as a judicial confession. If such confession is retracted, then guilt cannot be established on the basis of such retracted confession alone in the absence of any other reliable evidence. Referring to the judgments of Bhagwan Singh v. State of M.P.19, Puran v. State of Punjab20, and Raman Bhuraria v. Enforcement Directorate21, the High Court reiterated the settled position that retracted confessions/statements even though admissible, the reliability of such statements is always suspect and questionable. Such retracted statements cannot form basis for the guilt of the applicant in offence as alleged and their probative value is always to be tested during the trial on the basis of other corroborative circumstances. The same cannot be relied upon as a substantive piece of evidence, without corroborative evidence that would lend credence to such retracted statements. Thus, the High Court held that the petitioner Adnan Nisar had no knowledge, whatsoever about the length and breadth of the business operations of the co-accused Vishal or that they were known or acquainted with each other or aware of each other’s activities. Thus, prima facie it could not be inferred that the petitioner Adnan Nisar was possessed of the requisite mens rea for commission of the said offences, in the absence of they having been acquainted or identified with the accused.
The Court also found that the petitioner had been in custody for more than 15 months when the maximum sentence that could be awarded under the PMLA is 7 years. Since, the documentary evidence was voluminous and a large number of witnesses were to be examined by the Enforcement Directorate, inevitably trial was bound to take time. The High Court, thus finding the case to be appropriate, allowed the application and enlarged the petitioner on bail.
***
(4) Amit Katyal v. Union of India22
(Delivered on 17-9-2024)
Coram: Single Judge Bench of HM Justice Neena Bansal Krishna
The matter pertained to grant of regular bail in relation to Enforcement Case Information Report registered by the Enforcement Directorate. The FIR in relation to the predicate offence had been registered by the Central Bureau of Investigation under various provisions of the Penal Code, 1860, as also Prevention of Corruption Act, 1988 against various persons including the erstwhile Railway Minister, Lalu Prasad Yadav and others for entering into criminal conspiracy for abusing official position in order to obtaining pecuniary benefits in the form of land parcels being transferred to family members and shell companies in return of appointment to various posts in various zones of Indian Railways (commonly known as Job for Land Scam). The RC alleged that land measuring around 1.05 lakh sq ft situated at Patna were acquired by the family members of Lalu Prasad Yadav through 5 sale deeds and 2 gift deeds.
Factual matrix of the case
In view of the predicate offences being registered by the Central Bureau of Investigation, Enforcement Case Information Report was accordingly registered against various persons including the petitioner. The allegation against the petitioner was that one parcel of land of Hazari Rai was purchased by a company, M/s AK Infosystems Pvt. Ltd. by paying an amount of Rs 10.83 lakhs to Hazari Rai. The petitioner was serving as a director of the company on the date of purchase, who had transferred his shareholding in the company and resigned immediately in June 2014. The land parcel of Hazari Rai was purchased by the company in April 2014 and petitioner became a protected witness supporting the prosecution story. The petitioner contended that he had no knowledge of the scam, nor did he participate or benefit from the same directly/indirectly and was not aware that the land was a bribe. When the company was transferred to the family members of Lalu Prasad Yadav, he was not holding any portfolio in the Government and mere transfer by the company to a third person is not an offence. The petitioner also joined the investigation and whenever required, appeared before the Enforcement Directorate by cooperating in every possible manner.
The Enforcement Directorate to the contrary contended that petitioner was the kingpin of various land transactions entered into by the company M/s AK Infosystems Pvt. Ltd. and had actively participated in the land for job scam. The petitioner had acquired several immovable properties in Patna on the directions of Lalu Prasad Yadav and thereafter handed the company to the family members for a paltry amount in 2014.
Consideration and discussion by the Court
Relying on the judgment of Mohan Lal Rathi v. Union of India23, the High Court observed that grant of pardon under Section 306 CrPC to the petitioner would not fall within the purview of the words “finally absolved by a Court of competent jurisdiction” as held to be a ground of quashing of the PMLA proceedings in the Vijay Madanlal judgment24. This is because the pardon granted under Section 306 CrPC to any person in the scheduled offence does not ipso facto result in acquittal in the predicate offence.
Furthermore, the High Court also observed that out of the 17 accused arrayed by the Enforcement Directorate in its complaint, none of the accused had ever been arrested, despite having played a more serious role and being the main perpetrators or the beneficiaries of the offence under the PMLA. The prosecution complaint had been filed without their arrest by the Enforcement Directorate. The petitioner was also arrested unceremoniously suddenly in November 2023, despite him having joined and cooperated with the investigation fully. Referring to the judgment of State of M.P. v. Sheetla Sahai25, the Court held that such an attitude of the Enforcement Directorate reflects a pick and choose policy, which has been deprecated time and again by the Supreme Court. This entitles the petitioner to bail on the ground also that role of the present petitioner is much less than that of the other accused persons. Reference was also made to the judgment of Ajmer Singh v. State of Haryana26.
Apart from the above, the High Court further held that the proceeds of crime that were alleged to have been laundered was a land parcel worth Rs 10.83 lakhs, and at no place the value of proceeds of crime was quantified to be more than such amount by the Enforcement Directorate. Therefore, the case of the petitioner was clearly covered by the proviso to Section 45 PMLA, wherein the minimum threshold of Rs 1 crore has been fixed.
Referring to the judgment of Prem Prakash case27 and Vijay Nair v. Enforcement Directorate28, it was held that fundamental right under Article 21 of the Constitution of India cannot be arbitrarily subjugated to the statutory bar under Section 45 PMLA. Thus, since the trial was bound to take inordinately long time in getting concluded, therefore no purpose would be served by further detention of the petitioner in judicial custody. Accordingly, the bail application was allowed and the petitioner was enlarged on bail.
***
(5) Tanaji Dattu Padwal v. Enforcement Directorate29
(Delivered on 14-10-2024)
Coram: Single Judge Bench of HM Justice Madhav J. Jamdar
The petition related to prayer for grant of regular bail in relation to offences registered under the provisions of the PMLA. The petitioner sought the benefit of Section 436-A CrPC, having been incarcerated for more than 3 years and 7 months. He contended that the maximum punishment under Section 4 PMLA is 7 years and therefore, extending the benefit of Section 436-A of having completed more than half of the statutory term, the petitioner was entitled to be enlarged on bail.
The predicate offences were pertinently registered under various provisions of the Penal Code, 1860 on the allegations of having siphoned off an amount totalling to the tune of more than Rs 71 crores by misusing his position of Chief Executive Officer of Cooperative Bank. The applicant facilitated the illegal withdrawal of cash on the instructions of the co-accused persons and thus caused severely huge and large financial losses to the Bank.
Referring to the provisions of Section 436-A CrPC, the Court observed that the provision was introduced through an amendment in June 2006, being subsequent to the enactment of Sections 4 to 45 PMLA. Relying upon the Vijay Madanlal judgment30, especially paras 412 to 418, the High Court reiterated the position that Section 436-A is distinct from Section 167 CrPC, which provides for an absolute right of bail as in the case of default bail. Under Section 436-A, statutory discretion has been vested, but at the same time the constitutional right of the accused regarding speedy trial under Article 21 of the Constitution of India. Thus, Section 436-A would apply also to offences under the PMLA, when the rigours of Section 45 PMLA can suitably be relaxed. Relying further upon the judgment of the Supreme Court in Ajay Ajit Peter Kerkar v. Enforcement Directorate31, the Court held that Section 436-A applies even to incarcerations under PMLA and the Court can deny the benefit of the same in appropriate cases where the trial is found to have been delayed at the instance of the accused.
Accordingly, after recording that there were more than 250 witnesses to be produced on behalf of the prosecution and trial was bound to take time in its conclusion, and the applicant was not responsible for the delay in conducting of the trial, the Court allowed the bail application and enlarged the applicant on bail.
***
(6) Pankaj Kumar Tiwari v. Enforcement Directorate32
(Delivered on 24-10-2024)
Coram: Single Judge Bench of HM Justice Manoj Kumar Ohri
The application was filed seeking regular bail in a complaint case arising out of Enforcement Case Information Report registered by the Enforcement Directorate. The predicate offence that had been registered by the Serious Fraud Investigation Office, which culminated into filing of a complaint case under various provisions of the Companies Act, 2013 and that of the Penal Code, 1860. The Enforcement Directorate also filed a complaint on the basis of the complaint case of Serious Fraud Investigation Office against the petitioners and various other persons, primarily the ex-promoters and directors of Bhushan Power & Steel Limited (for short, “BSL”). The allegations were that the ex-promoters and the directors had obtained loans of around Rs 56 crores from various banks and financial institutions and siphoned off the funds, so received as loan accounts, by using complex web of companies and financial transactions from the year 2009-2010 onwards. It was also alleged by the Serious Fraud Investigation Office that whilst availing the aforesaid credit facilities from the Banks, forged documents were used and fraud was played of showing false increase in valuation of assets and inflated figures of stock in transit. The principal accused persons being the ex-promoters and directors were actively aided by the present applicants applying for bail before the High Court, arrayed as accused by the Enforcement Directorate in its complaint case.
The petitioner towards grant of bail contended that the documents for availing letter of credit (LC) facility from the banks were simply draft templates and were unsigned. The Enforcement Directorate had relied upon the statements given by the applicants themselves as well as of other co-accused persons, who all were employees of BSL and despite being accused in the predicate offence, they were not made an accused or impleaded by the Enforcement Directorate in its complaint. Since the petitioner had been enlarged on bail under Section 212(6), Companies Act, 2013, which is pari materia and similar to Section 45 PMLA, insofar as the twin conditions are concerned, therefore the parameters were clearly satisfied for grant of bail even under Section 45. The petitioner further pleaded that being a senior citizen, he has deep roots in the society and therefore there is no possibility of flight risk of petitioner evading the trial or criminal prosecution launched by the Enforcement Directorate.
The Enforcement Directorate to the contrary contended that by misusing his professional qualification, the applicant had aided the ex-promoters and directors in planning the siphoning off the entire loan proceeds and funds received from the bank. The consideration for grant of bail under Section 45 is entirely different from that available under the Companies Act, 2013 as the twin conditions have to be satisfied separately by the accused person in respect of the specific allegations raised under different enactments (PMLA) of ML.
Consideration and discussion by the Court of the bail application
The Court found that the complaint filed by the Serious Fraud Investigation Office was so filed without arresting the accused person and they were even granted bail in relation to the predicate offence. The allegation against the applicant was that he had fraudulently created documents for availing the LC facility from the banks and proceeds from fraudulent discounting. However, the applicant was not a director, nor had directly played any role in creation of shell companies. No money, as benefit of the alleged illegal transaction, was said to have travelled to the applicant’s account anywhere. The only material cited against both the applicants are the statements recorded under Section 50 PMLA, either of the applicant himself or of the co-accused persons in the investigation conducted by the Serious Fraud Investigation Office and therefore the veracity of the same can be tested only during the trial of the offence. The Court reiterated that “bail is the rule and jail an exception”, which is nothing but a crystallisation of the constitutional mandate enshrined under Article 21 of the Constitution of India. Since, the accused applicant had been incarcerated for more than a year and conclusion of trial in the near future was completely uncertain it would have amounted to deprivation of Article 21 rights and personal liberty guaranteed to the applicant if the incarceration is continued. Referring and relying upon the judgment of Manish Sisodia v. Enforcement Directorate33, the High Court held that Article 21 cannot be arbitrarily subjugated to the statutory bar under Section 45 PMLA, since inordinate delay in the conclusion of the trial and higher threshold for grant of bail cannot go together. Such statutory restrictions (twin conditions) cannot come in the way of the Constitutional Courts in granting bail. Even in case of interpretation of penal statute, however stringent it may be, Constitutional Courts must lean in favour of constitutionalism and Rule of Law of which personal liberty is an intrinsic part. Since the applicant had already undergone substantial sentence of more than 9 months, whereas the maximum sentence for the offence he was being prosecuted for is 7 years, therefore he was entitled to be enlarged on bail. Accordingly, the High Court allowed the bail application and enlarged the applicant petitioner on bail.
***
(7) Enforcement Directorate v. State of T.N.34
(Delivered on 28-10-2024)
Coram: 2-Judge Bench of HM Justices S.M. Subramaniam and V. Sivagnanam
Authored by: HM Justice S.M. Subramaniam
The Enforcement Directorate challenged the closure report of November 2022 filed by the State of Tamil Nadu (Police), as accepted by the Magistrate under Section 190 CrPC in relation to the FIR registered for the scheduled offences. Pertinently, the FIR in relation to predicate offences was registered under various provisions of the Penal Code, 1860 on the allegations of having cheated and deceived one M. Leema Rose on the pretext of execution of sale deed in favour of the petitioner. The part amount was received by the applicant, later on also seized from the house of Mr Natarajan with whom the petitioner had conspired with for receiving the complainant and grabbing the land from him. In the process, they were also involved in allegations of preparation of a forged and fabricated sale agreement, due to which the provisions under Sections 466, 467, 468 and 471, Penal Code, 1860 were also attracted. Thus, on the basis of the said FIR, Enforcement Directorate registered Enforcement Case Information Report for commission of various offences under provisions of the PMLA. The prosecution complaint also came to be filed before the Special Court, wherein the application filed for discharge of the petitioners was dismissed by the Special Court.
On a petition filed by the accused person, initially the High Court quashed the crime/FIR so registered against the accused persons. This order was challenged before the Supreme Court which set aside the quashment order of the High Court holding that the question of date of execution of stamp agreement and recovery of huge amounts of cash is the question of fact which can be decided only during the trial. Meanwhile, the Enforcement Directorate also filed a complaint case before the Special Court in relation to the Enforcement Case Information Report registered by it in which a discharge application was filed by the accused persons which was also rejected by the Special Court. This order was also affirmed by the High Court. After all the aforesaid orders, in November 2022, closure report was filed by the State Police, investigating the predicate offence, before the Judicial Magistrate, who also accepted the closure.
Against the order of High Court affirming the framing of charges in the Enforcement Directorate complaint case, a separate special leave petition (SLP) was filed before the Supreme Court by the accused persons in which Enforcement Directorate was granted liberty by the Supreme Court to question and challenge the closure report filed by the State Police, since the accused petitioners therein contended and pleaded that in view of acceptance of the closure report, the prosecution under the PMLA ceased to survive.
The Enforcement Directorate challenged the acceptance of closure report by the Magistrate before the High Court contending that the closure report filed by the State Police was without examining and appropriately investigating the allegations raised in the FIR, especially relating to forgery and fabrication of the sale agreement the closure report as such had no legs to stand upon and the learned Magistrate also did not consider the material available on record and the investigation earlier conducted by the State Police themselves. The filing of the closure report mysteriously raised serious suspicion, and the Magistrate ought to have considered the whole criminal case holistically while accepting the closure report instead of passing a cryptic order. The Enforcement Directorate further contended that it was obligatory for the Magistrate to have ordered further investigation and to have examined whether the investigation had proceeded in the right direction and whether the materials collected by the police established the commission of the offence. The matter went up to the Supreme Court, when twice on both the occasions the Supreme Court declined to interfere in the investigation or the complaint case filed by the Enforcement Directorate.
The State of Tamil Nadu (on behalf of the police authorities) contended that the State being the prosecuting agency, had the prerogative to file a closure report, and once the same was accepted by the Magistrate, Enforcement Directorate had no locus standi to challenge the same when the predicate offence had been found not to have been committed. The Enforcement Directorate cannot be treated as an “aggrieved person” having locus standi to challenge the closure report before the High Court. The counsel for the private respondents also contended in the same voice echoing the submissions of the State of Tamil Nadu that when the predicate offence disappeared, the PMLA cannot exist and therefore the jurisdiction of the Enforcement Directorate to challenge the closure report also disappeared.
Consideration and discussion by the Court
The High Court observed that Enforcement Directorate had passed an order under Section 5 attaching the proceeds of crime through its provisional attachment orders. Since the predicate offence was closed, the Appellate Tribunal, the PMLA had set aside the attachment orders which thus led to the Enforcement Directorate being aggrieved on setting aside of its attachment orders. The confiscation of proceeds of crime has to be decided finally under Section 8(5) PMLA by the authorities of the Enforcement Directorate, therefore Enforcement Directorate had no choice or the option but to challenge the closure report filed in the predicate offence.
Also, the complaint case had already been filed for commission of offences under Sections 3 and 4 by the Enforcement Directorate before the Special Court. The same could not be closed/set aside by the Supreme Court only on the ground of filing of closure report in relation to the predicate offence. Since the very action of the Enforcement Directorate is dependent upon the existence of the predicate offence, for continuing the proceedings under the PMLA there was no option available, but to challenge the closure report itself. Also, the Supreme Court in the petition filed by the accused persons granted liberty to the Enforcement Directorate to take all appropriate steps available under law including recall of the closure order if so advised. Therefore, in view of the liberty granted by the Supreme Court, the Enforcement Directorate was well authorised to challenge the closure report. The Vijay Madanlal judgment35 never laid down any law that acquittal or discharge or quashment in the predicate offence of the accused persons cannot be questioned by the Enforcement Directorate before the High Court under Section 482 CrPC. No restraint has been imposed in relation thereto but to the contrary vide para 290 of the judgment, the Supreme Court recognised the rights of the Enforcement Directorate to work out remedies as per law in such eventuality. The Enforcement Directorate therefore, for the purposes of achieving the aims and objectives for which the PMLA has been enacted and for appropriately dealing with the proceeds of crimes so discovered, is always entitled to take recourse to the remedies available under law, including challenging the closure report filed in relation to the predicate offence.
The High Court also observed that powers under Section 482 CrPC are inherent in nature and it is always open for anyone connected with and concerned with the outcome of the case to approach the High Court under Section 482 for highlighting and bringing to its notice the commission of an illegality, leading to miscarriage of justice even by the investigating agency. Since the Enforcement Directorate having identified that the proceeds of crime was directly concerned with the outcome of the investigation of predicate offence, therefore it can rightly invoke Section 482 CrPC for setting aside the order passed by the Magistrate and also the closure report.
The PMLA contemplates a new set of offences and procedures to be followed while dealing with the offence with the Enforcement Directorate as the investigating agency. Working of the Enforcement Directorate with the State investigating agency has to be in tandem and cannot be contrary to it. The Supreme Court, therefore, left it on the Enforcement Directorate to avail the remedies available under law, which has to deal with the menace of money laundering affecting the economic aspects leading to a vicious cycle.
The High Court then also analysed the legality and validity of the closure report filed by the State Police, as also its acceptance by the Magistrate under Section 190. It observed that the investigating officer carelessly came to the conclusion that there is no evidence to prove the fabrication of the false documents in the form of an anti-dated sale agreement. The offence of fabrication and forgery was added subsequently during the investigation by way of an alteration report by the police authority itself on the basis of discovery of a stamp paper being anti-dated in a false document. The challenge to the said alteration and addition of a new offence was challenged up to the Supreme Court by the accused persons, which was not interfered in any manner by the Supreme Court. The Magistrate therefore failed to view the whole controversy holistically and consider the order of the Supreme Court, through which the FIR of the predicate offence was restored to its file, after being quashed by the High Court in the earlier rounds. The role played by the respondent accused persons also amply displays that they attempted to project tainted money as untainted by creating fabricated agreement for sale. In the PMLA case also, where the accused person sought discharge from the High Court, the Division Bench had observed that there were prima facie material and evidence present for prosecuting the accused persons for the commission of the said offences. Therefore, in the face of successive judicial observations and judgments pertaining to various rounds of challenge to the predicate as well as the PMLA offence, the same could not have been closed so easily by the investigating authorities by filing a closure report. The Enforcement Directorate is therefore well within its rights to file a Section 482 CrPC petition for meeting the ends of justice. To the contrary, the filing of closure report by the very same State agency is undoubtedly suspicious and doubtful, with an attempt to bury the predicate offence for extraneous considerations.
Accordingly, the High Court allowed the petition filed by the Enforcement Directorate and set aside the closure report filed by the police in relation to the predicate offence. The closure report and order passed by the Magistrate approving the same under Section 190 CrPC, was also set aside by allowing the criminal petition so filed.
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(8) Enforcement Directorate v. Bibhu Prasad Acharya36
(Delivered on 6-11-2024)
Coram: Single Judge Bench of HM Justices Abhay S. Oka and Augustine George Masih
The appeals arose out of the judgment passed by the High Court, through which the proceedings and order taking cognizance by the Special Court, the PMLA on the complaint filed by the Enforcement Directorate had been quashed.
Factual matrix of the case
The respondent was the Vice-Chairman and Managing Director of Andhra Pradesh Industrial Infrastructure Corporation Limited (for short, “APIICL”) and the complaint case came to be filed against him by the Enforcement Directorate without obtaining a sanction from the employer authority under Section 197 CrPC.
The Enforcement Directorate contended before the Supreme Court that the respondent-accused was not a public servant under Section 197, whilst holding the position of Managing Director of APIICL, nor was he employed in connection with the affairs of the State Government. Further, the complaint cannot be quashed for want of sanction by the Special Court, since the requirement of sanction would have to be decided at the time of trial and could not have been decided initially. The respondent accused to the contrary contended that the petitioner came to be appointed by virtue of the powers vested in the State Government and thus continued to be a public servant, requiring a prior sanction from the State Government.
Consideration and discussion by the Court
Referring to the judgment of Centre for Public Interest Litigation v. Union of India37, the Supreme Court reiterated that the purpose and object of prior sanction is to protect public servants from frivolous prosecutions, and that they are not prosecuted for anything done in discharge of their duties. The protection has been granted for the purposes of screening honest and sincere officers, towards any decision or any action taken by them, stated to be reasonably connected with the discharge of their official duties. Referring further to the judgment of Parkash Singh Badal v. State of Punjab38, it was stated that the question relating to the need of sanction under Section 197 is not necessarily to be considered at the threshold but can also be examined and determined from stage to stage during the course of trial. The precondition for applicability of Section 197 is that the accused must be a public servant, and can be removed from his office by or with the Government sanction only. The offence alleged to have been committed must be such as it is attributable to or relatable to the discharge of official duties. The respondent-accused was found to be a civil servant, who was alleged to have conspired and connived with the erstwhile Chief Minister of the State and allotted huge lands for the special economic zone (SEZ) project to the group companies of the said Chief Minister. Referring and relying upon the judgment of P.K. Pradhan v. State of Sikkim39, it was held that the offence alleged to have been committed must have something to do or must be related in some manner with the discharge of official duty. If such a reasonable connection between action/decision and the duty exists, it does not matter even if the act exceeds what is strictly necessary for the discharge of duty, the sanction may still be required. The question of sanction can be raised at any time, including even immediately after the cognizance is taken by the Court. Thus, the plea of absence of sanction can even be considered after cognizance is taken by the Special Court and it cannot be contended that the High Court’s jurisdiction to consider such an objection cannot be sustained.
Examining the facts of the case and the holding that the acts alleged against the respondent-accused were all committed by him whilst purporting to act in discharge of official duties, there is surely a connection between the duties and the acts complained of by the respondent. Thus, Section 197 was clearly available and rightly invoked for the requirement of sanction from the authority. After perusing various provisions of the PMLA, especially Section 44, the Supreme Court held that there is nothing inconsistent with Section 197(1) CrPC. Its applicability cannot be therefore excluded unless there is an express provision inconsistent with Section 197(1). Section 197 applies squarely to complaint cases filed under Section 44(1)(b) also. Though Section 71 gives an overriding effect to provisions of the PMLA, but, however in view of Section 65, provisions of CrPC apply to the proceedings to the extent they are not in conflict with the PMLA. Section 71 therefore cannot be invoked to say that requirement of sanction under Section 197 will not apply to the PMLA. Since admittedly in the present case cognizance has been taken without the prior sanction under Section 197 CrPC, therefore the cognizance order got vitiated. However, it is always open to the appellant to move to the Special Court for taking cognizance of the offence after procuring sanction from the employer department of the respondent. Accordingly, the appeals so filed by the Enforcement Directorate were dismissed by the Supreme Court.
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(9) Sanjay Aggarwal v. Enforcement Directorate40
(Delivered on 11-11-2024)
Coram: Single Judge Bench of HM Justice Chandra Dhari Singh
The petition was filed under Section 482 CrPC/Section 528, Nagarik Suraksha Sanhita, 2023 seeking return of the complaint case filed by the Enforcement Directorate for filing the same without concluding the investigation and passing appropriate orders discharging the accused in the complaint case so filed under Section 44 PMLA against him. The primary contention of the petitioner was that the complaint was filed before the Special Court which never took cognizance of the same as per the procedure and principles enshrined under Sections 200 and 201 CrPC and in fact the cognizance of the complaint could have never been stated to have been taken by the Special Court (PMLA) itself.
Factual matrix of the case
On the basis of complaint received from Bank of Baroda, Central Bureau of Investigation registered RC for commission of various offences under the provisions of the Penal Code, 1860 as well as the Prevention of Corruption Act, 1988 against the various bank officials and private persons in relation to various foreign exchange transactions in current accounts of various firms/companies amounting to approximately Rs 6000 crores. The Central Bureau of Investigation found after preliminary inquiry that huge amounts of advance import remittances were sent from the newly opened accounts of account-holders without ensuring compliance of banking guidelines issued by Reserve Bank of India (RBI). On the basis of the said FIR registered by the Central Bureau of Investigation, an Enforcement Case Information Report came to be registered by the Enforcement Directorate in October 2015 under various provisions of the PMLA, followed by search and investigation exercise under Section 17 along with arrest under Section 19 PMLA. The initial complaint was filed by the Enforcement Directorate in December 2015 for commission of offences under Sections 3, 4 including the petitioner herein, the cognizance of which was taken on the same day itself by the Special Court, which has become the ground of challenge before the High Court in the present petition.
Thereafter, second and supplementary complaints were filed from time to time by the Enforcement Directorate before the Special Court against other additional accused persons. The supplementary complaints were filed on discovery of the wider and far-reaching fraud and spectrum of the scam, having international ramifications and on the basis of further investigations through which further proceeds of crime were traced out by the Enforcement Directorate.
In the above backdrop, the petitioner moved an application seeking dropping of the proceedings before him and discharging him on the ground that the Special Court had never taken any cognizance of the complaint cases filed by the Enforcement Directorate against him. This application was dismissed in April 2022 by the Special Court. The petitioner, relying upon the judgment of the Supreme Court in R.R. Chari v. State of U.P.41, contended that “taking cognizance of an offence” implies application of mind by the Magistrate to the complaint filed before it, when the alleged offence is said to have been entertained by the Magistrate under Section 190 CrPC, a case is said to be committed to a court only when the Magistrate takes cognizance of the alleged offence by applying his mind or on receipt of the complaint under Section 200 CrPC. The cognizance by the Magistrate is the “first prerequisite” for initiation of proceedings without which proceedings cannot be said to have been commenced before the Magistrate. Thus, the entire foundation of the commencement of the criminal proceedings before the Special Court was defective and consequently vitiated. The petitioner further contended that Explanation II to Section 44(1)(b) was inserted through the year 2019, allowing filing of supplementary complaints and thus prior to 2019 there was no authority available with the Enforcement Directorate for filing any supplementary complaints and therefore such an action is also without any authority of law. The initial report filed as a complaint case by the Enforcement Directorate was thus an incomplete report which cannot meet the requirements of Section 173(2) CrPC on the basis of which cognizance of the offence could not have been taken by the Court concerned.
The Enforcement Directorate on the other hand contended opposing the petition that formal order need not be passed by the Magistrate taking cognizance of the complaint, but the High Court must glean from the contents of the order as to whether cognizance and judicial notice has actually been taken or not. No objection was taken by the petitioner with respect to taking of cognizance for two-and-a-half years, whereafter at a belated stage such an application was made.
Consideration and discussion by the Court
The Court referred to the order dismissing the application of the petitioner for discharge passed in April 2022. Thereafter, the Court framed the core issue involved in the petition before it as follows:
40. …Whether any cognizance was taken by the learned trial court and whether the learned trial court could have taken cognizance upon the complaint filed by the ED while the investigation is still ongoing? If answer to the same is in affirmative, then whether the Explanation II of Section 44(1)(b) PMLA introduced by way of amendment applies retrospectively?
Explaining the phrase “taking cognizance of an offence”, the Court referred and relied upon various precedents and judgments of the Supreme Court on the issue. Relying upon the judgments of R.R. Chari case42, and Devarapalli Lakshminarayana Reddy v. V. Narayana Reddy43, the High Court stated that cognizance is taken when the Court concerned applies its mind judicially to the materials concerned, oral or documentary as well as other information present and brought before its attention after investigation by the investigating authorities. Mere issuance of a search warrant or a warrant of arrest cannot mean that cognizance of an offence has been taken, but it is so done only when there is application of judicial mind under Section 200 CrPC (in case of a complaint).
Referring thereafter to the judgment of Yash Tuteja v. Union of India44 of the Supreme Court, it was stated that once a complaint is filed before the Special Court, provisions of Sections 200 to 204 CrPC are clearly attracted and apply to the complaint. There is no provision under the PMLA which excludes the application of provisions of CrPC as applicable to complaint cases. Therefore, even the Special Court under the PMLA is obligated to assess before taking cognizance as to “whether prima facie case exists for an offence under Section 3”. The Court will dismiss the complaint under Section 203 CrPC if no prima facie case is established or made out.
In the above backdrop, the High Court referred to the order taking cognizance of the complaint filed by Enforcement Directorate, passed by the Special Court. The trial court took judicial notice of the offence vide the aforesaid order and decided to proceed with the matter when it directed for checking and registration of the complaint.
Referring to the judgment of Pradeep S. Wodeyar v. State of Karnataka45, it was stated that provisions of CrPC would apply squarely even to procedure undertaken before a Special Court also, enacted under a special statute and unless the said special statute explicitly prohibits application of the provisions of CrPC, it does not cease to apply. Therefore, a mere change in the form of cognizance order passed by the Special Court will not alter the effect of the order till any injustice is stated to have been made out. Thus, it is not necessary for the Special Court to record its reasons for the cognizance since the said complaint is filed by a specialised investigating agency under a statute, unlike the private complaint filed under Section 190 CrPC. The complaint filed by the investigating agency was accompanied by necessary documents, material and evidence in support of the allegations levied by it, which if perused by the Special Court and so mentioned in the order taking cognizance, can be the basis for taking cognizance of the offence. Thus, for all the purposes and reasons, the Special Court can be understood to have taken cognizance upon the complaint of the Enforcement Directorate so committed under the PMLA. The High Court thus held that the petitioner’s contention does not hold any water and is liable to be rejected.
The petitioner had further contended that the learned Court which passed the order taking cognizance was not a Special Court, but was merely a “Link Judge”. Referring to the notification passed by the High Court of June 2012, wherein all the Sessions Court in Delhi were designated as Special Courts for the purposes of Section 53 PMLA, the High Court stated that all the Sessions Court of Delhi are duly empowered to try offences under the PMLA and therefore are also empowered to take cognizance of the complaint and the offences mentioned thereunder.
The High Court then dealt with the contention of the petitioner that an incomplete charge-sheet was filed by the Enforcement Directorate without completing the investigation. Referring to the provisions of Section 44(1)(b) Explanation II, as also the definition of investigation under Section 2(h) CrPC, Section 2(na) PMLA, the High Court stated that it includes all the proceedings conducted by the director or by an authority authorised by the Central Government under the enactment for collection of evidence. Thus, collection of evidence can be treated as “part of investigation”. A supplementary complaint can always be filed by the Enforcement Directorate against an accused, already facing prosecution before the Special Court on discovery of new facts, evidence and materials during investigation. Investigation would include additional investigation within its ken and the agency concerned always possesses the right to submit a supplementary complaint to present the newly collected material on record during the said additional investigation.
Therefore the Amendment of 2019, introducing Explanation II to Section 44(1)(b) was merely a clarificatory-cum-explanatory provision clarifying the meaning of the provisions already enshrined under the PMLA as well as CrPC. The provision therefore introduced through an amendment to correct, clarify or declare what was already a part of a law previously enacted and intended, will apply retrospectively. Explanation II to Section 44(1)(b) therefore has retrospective effect, since it did not introduce any new procedural arrangement, but only clarified it beyond any pale of doubt. Referring to the Vijay Madanlal judgment46, the High Court stated that Explanation II introduced through the 2019 Amendment will apply also to complaints instituted or filed before its introduction. The said Amendment clarifies the legislature’s intent to enable ongoing investigative processes while simultaneously advancing the trial on the basis of available evidence.
Accordingly, the writ petition filed by the petitioner was dismissed as being without any substance.
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(10) Dilbag Singh v. Union of India47
(Delivered on 13-11-2024)
Coram: 2-Judge Bench of HM Justices Sheel Nagu and Anil Kshetarpal
Authored by: HM Justice Anil Kshetarpal
The batch of petitions related to the validity of attachment of various properties belonging to the petitioners as proceeds of crime under the provisions of the PMLA in relation to offences registered by the Enforcement Directorate. The following issues arose for consideration before the High Court at the behest of the petitioners:
1. Whether any property of the petitioner can be attached which was acquired prior to the scheduled offence and cannot be said to have any connection with the proceeds of crime?
2. Whether the impugned provisional attachment orders is also without jurisdiction on account of non-compliance of mandatory provisions of Section 5(1), i.e. “reason to believe” as was held by the Supreme Court in the Vijay Madanlal judgment48?
3. Whether the impugned order is liable to be set aside on account of non-compliance of various provisions of the PMLA for being in violation of first proviso to Section 5(1), as no final report was submitted in 3 of the 8 FIRs and cancellation report was filed in the others?
Factual matrix of the case
Nine FIRs under various provisions of the Penal Code, 1860 and environmental laws were registered against the petitioners, in three of which the final report (closure) was filed; in two, cancellation reports were filed and investigations were pending in the other four. The said FIRs were registered in the years 2022 and 2023, with the Enforcement Case Information Report having been registered in September 2023. The petitioner was arrested after the search was carried out by the Enforcement Directorate on 8 January 2024, whereafter a provisional attachment orders attaching the property of the petitioner and others was passed, observed that proceeds of crime were generated and were existing to the tune of Rs 337 crores in the matter at the instance of the authorities of the Enforcement Directorate. These proceeds of crime were alleged to have been generated from illegal mining activities undertaken by the petitioners.
The primary contention of the petitioner was that attached properties were purchased on before the commission of the alleged scheduled offences and were thus untainted properties which could not have been therefore attached by the Enforcement Directorate. Without complying with the mandatory provisions of Section 5 PMLA, the said provisional attachment orders had been passed. The compliance of Section 5(1) was not affected since the “reasons to believe” are not recorded and forwarded to the director immediately post-attachment by the Enforcement Directorate.
Consideration and discussion by the Court
The Court then traced the development and history of amendments of various provisions of the PMLA, holding eventually that the phrase proceeds of crime has undergone substantial changes over the period of time. It, therefore, applies to not only to the property derived/obtained as a result of criminal activity, but also to the value of any other property. By virtue of the Amendments of 2015 and 2019 to the PMLA, now “property equivalent in value” to the proceeds of crime can be attached by the Enforcement Directorate, if the actual proceeds of crime is either not traceable or taken out of the country. Therefore, the earlier view of the High Courts and the Supreme Court that properties acquired before the alleged crime and before the enactment of the PMLA cannot be attached, stands altered and modified in view of the 2015 and 2019 Amendments to the PMLA.
The High Court also observed that the “reasons to believe” were duly recorded in writing on the basis of material in position whilst passing the provisional attachment orders by the competent authority. The search was carried down by the Enforcement Directorate on the petitioner’s premises and on the basis of the said search activity, the information, evidence and the documents so recovered during the said search constituted the basis of recording the “reasons to believe”. Therefore, there cannot be any illegality attributed to the provisional attachment orders passed by the authorities under the PMLA.
The petitioner had contended that he was not named in the FIRs taken into consideration by the Enforcement Directorate for carrying out investigations. The Enforcement Directorate failed to disclose any specific material implicating the petitioner either directly or indirectly with the scheduled offences or the proceeds of crime. Interpreting Section 5, the Court held that it is not necessary that property must be in possession of only the accused named in the FIR for being attached. What is required is that the person must be in possession of the proceeds of crime and such proceeds of crime is likely to be transferred or dealt with in a manner for frustrating the PMLA proceedings. Forwarding of a report to the Magistrate under Section 173 CrPC is not a sine qua non for ordering provisional attachment by the Enforcement Directorate, but such a report is required to be filed against the person in possession of proceeds of crime. Requirement of thus, Section 5(1) was found to have been duly fulfilled since the final report has been submitted in as many as 3 FIRs involving the scheduled offences.
The High Court thereafter interpreted the word “immediately” occurring under Section 5(1). Referring to Section 10, General Clauses Act, 1897 it stated that the said term allows a reasonable time for doing what is required under the statute. Since the statute does not fix any time-limit expressly, but merely says “immediately”, it implies that it should be done with reasonable speed and expedition, with a sense of urgency and without any unnecessary delay. Further there was no express consequence provided for the non-compliance of the aforesaid provision, which indicated that it is directory in nature.
The High Court also found that the petitioner had an alternative efficacious remedy available under Section 8 before the adjudicating authority and thereafter, appellate remedy before the Tribunal. In view of the above also, it is not appropriate to entertain the writ petition. Accordingly, the batch of writ petitions were dismissed by the High Court.
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(11) Balwant Singh v. Enforcement Directorate49
(Delivered on 18-11-2024)
Coram: Single Judge Bench of HM Justice Mahabir Singh Sindhu
The petitioner challenged the arrest effected on the orders of the Special Court on the application under Section 309(2) CrPC moved by the Enforcement Directorate before it. The petitioner thus challenged the order passed by the Special Court which granted custody to the Enforcement Directorate of the petitioner post-filing of the complaint case before it under Section 44(1) PMLA.
Factual matrix of the case
The predicate offences were registered by the Central Bureau of Investigation under various provisions of the Penal Code, 1860 and the Prevention of Corruption Act, 1988 against one Tara Corporation Limited on the grounds of having played fraud in procuring loans from a nationalised bank. The loan amount was never used for the intended purposes, instead was diverted to the accounts of sister concerns and other shell companies to misuse the loan amount.
The petitioner was not arrested during investigation by the Enforcement Directorate, which filed the complaint straightaway against various persons including the petitioner. Since the petitioner failed to appear before the Special Court as well in response to the summons so issued, therefore non-bailable warrants came to be issued against him. In view of the judgment of Tarsem Lal v. Enforcement Directorate50, the petitioner moved an application under Section 70(2) seeking cancellation of the non-bailable warrant which was accordingly cancelled, and the petitioner required to appear regularly before the Special Court by furnishing personal bonds under Section 88 CrPC. The petitioner even furnished bonds along with surety and an undertaking of regularly appearing before the Special Court in pursuant of its orders under Section 88.
After the aforesaid exercise happened and bonds along with sureties were submitted by the petitioner, Enforcement Directorate moved an application under Section 309(2) CrPC seeking custodial interrogation of the petitioner for 7 days, which application came to be allowed by the Special Court and the petitioner was remanded to Enforcement Directorate’s custody. Thereafter from time to time, on the subsequent dates before the Special Court were adjourned and the custody of the petitioner continuously went on increasing and continuing with the adjournment of dates after dates before the Special Court.
The petitioner thus laid challenge to the aforesaid order and contended that the Special Court had erred in remanding him to custody for not responding to the summons.
Consideration and discussion by the Court
The High Court found that after furnishing of bail/surety bonds by the petitioner, the petitioner had not misused the concession in any manner, nor any material was produced on behalf of the Enforcement Directorate pointing out the necessity of custodial interrogation of the petitioner. The contents of the application filed under Section 309 also were nothing but simply reiteration and repetition of the complaint case filed already before the Special Court. After taking cognizance of the complaint case by the Special Court, the Enforcement Directorate never sent any notice to the petitioner under Section 50 PMLA for appearing before it nor approached the Special Court for conducting any “further investigations qua the petitioner in terms of Section 44(1)(d), Explanation of the PMLA”. Thus, the application of the Enforcement Directorate was not for any further investigation but simply for taking the accused into custodial interrogation. The Enforcement Directorate also did not follow the appropriate course of pointing out the necessity of further investigation involving the role of the petitioner and how towards the said further investigation, the custody of the petitioner was necessary when he had already been enlarged on bail bonds under Section 88 CrPC.
Thus, the Special Court acted in a routine manner without examining properly the request made by the Enforcement Directorate in a routine manner and negating the salutary protection emanating from Article 21 of the Constitution of India available to the petitioner. The High Court further held that the Special Court is not supposed to be acting as an extended arm of the Enforcement Directorate, passing remand orders against the suspect as a matter of course.
Referring to Explanation 1 to Section 309 CrPC, the Court held that there are two preconditions for exercise of powers available under Section 309, viz. firstly, the accused must be in custody already and secondly, sufficient evidence has been obtained to raise a suspicion that the accused may have committed an offence, and it appears likely that further evidence may be obtained by a remand. Both the conditions in the present case were not satisfied as neither the petitioner was in custody nor any sufficient evidence was obtained by the Enforcement Directorate to the effect that he had committed the offence of money laundering as no order recording “reasons to believe” for arresting the petitioner under Section 19 PMLA was ever passed by the Enforcement Directorate prior to filing of the complaint case by it. Thus, the orders of remand of the petitioner to the custody of Enforcement Directorate were passed without any application of the judicial mind by the Special Court. The Court accordingly allowed the petition and quashed the order passed by the Special Court as also the subsequent remand of the petitioner.
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(12) Hari Om Rai v. Enforcement Directorate51
(Delivered on 20-11-2024)
Coram: Single Judge Bench of HM Justice Manoj Kumar Ohri
The petitioner filed regular bail application in relation to Enforcement Case Information Report and proceedings registered under the PMLA against the applicant. The Enforcement Case Information Report was registered on the basis of the FIR registered in relation to predicate offences under various provisions of the Penal Code, 1860 followed by a successive different FIR on similar allegations. The prosecution complaint briefly alleged against the applicant that he had conspired fraudulently to setup Vivo Group of Companies in India without revealing their true beneficial ownership and carried out his declaration before government bodies. Vivo Mobile India Pvt. Ltd. concealed their Chinese ownership by falsely projecting itself as a subsidiary of a Hong Kong based company. But later on, it was revealed that it was always under the ultimate control of Vivo China. By creating the said meshed and pan-India structure, Vivo India thus through such fraudulent conduct acquired proceeds of crime to the tune of more than Rs 2 lakh crores. The proceeds of crime so generated and acquired were thereafter siphoned off by Vivo India to overseas trading companies under the control of Vivo China. There were other allegations also of forging of various documents on the part of various officials of Vivo Mobile India Pvt. Ltd. for opening of bank accounts and utilising such forged documents in other such government departments.
The present applicant before the High Court is the Managing Director of Lava International Ltd., engaged in the business and manufacturing and sale of mobile phones under the brand “Lava”, competitor of Vivo. It has been alleged against the petitioner that he had, by setting up and being a part of a web of companies, concealed the true ownership and provided the logistical and ground support helping Vivo China gaining a foothold in India by circumventing foreign direct investment (FDI) norms. The allegation against the petitioner was that he had transferred a sum of Rs 3.17 crores to one Labquest Engineering Pvt. Ltd. for helping Vivo China set up a number of companies without disclosing the actual controller of all those entities. The applicant was further alleged of inviting certain Chinese nationals to India for exploring the possibilities of a joint venture between Vivo and Lava which eventually did not lead to fruition.
The petitioner contended that the amount alleged to have been transferred to Labquest was by way of a loan arrangement, which was thereafter being repaid and therefore it was not any support amount. Many other co-accused persons were granted bail by either the Sessions Court or the High Court.
The Enforcement Directorate, opposing the bail application, contended that the applicant was directly involved in setting up the operations of the Chinese company Vivo and used Labquest as a front entity for establishing the network of Vivo companies in India. Thereafter, the applicant has even been providing guidance regarding the ongoing criminal investigation to various company officials of Vivo India Ltd.
Consideration and discussion by the Court
On the allegation of inviting various Chinese nationals to India, the High Court observed that there was no material proof produced before the Court to prove that the said Chinese nationals had come to India on invitations sent by the applicant. The invitation letters produced on record were issued much prior, 7 years before the commission of the scheduled offences. Insofar as the allegation against the lending of money to Labquest Ltd. was concerned, the Court found that the said was a loan arrangement, in which money was being repaid with interest and only Rs 21 odd lakhs remained to be returned back. Thus, there was no evidence of undue gain established on the part of Labquest Ltd. with the aforesaid in form of an amount extended as a loan by the petitioner’s company to Labquest Ltd.
The High Court thereafter while referring to the judgments of Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra52, stated that while considering a bail application, in view of the twin conditions prescribed under the enactment, the satisfaction of the Court, as regards the likelihood of accused not committing an offence while on bail, must be construed to mean an offence under the Act and not any offence whatsoever be it a minor or major offence. Thus, the offence must be covered under the enactment under which application for grant of bail is being pressed for and bail is being sought, not any other different enactment. The High Court also found that trial is not likely to be concluded in the near future and therefore Section 45 cannot operate as an absolute prohibition on the grant of bail. The most relevant factor is the duration of the minimum and maximum sentence for the offence whenever the bail application is being considered in light of the twin conditions. Till and until the delay in disposal of trial is not attributable to the accused person, the Constitutional Courts should not decline to issue prerogative writs against the accused person. Taking into account the prolonged custody of the accused, and that there were more than 80,000 pages of documents needed to be analysed by the trial court and a large number of witnesses to be deposed before the Sessions Court, the High Court observed that it is a fit case for grant of bail. The High Court also observed that after all accused in the money laundering case cannot be equated with those punishable with death, imprisonment for life, 10 years or more like other offences under the Narcotic Drugs and Psychotropic Substances Act, 1985, murder, rape, dacoity, etc. Also, the arrest of certain co-accused persons had also been declared illegal by the trial court and the other 3 had already been released on bail. Accordingly, the bail application was allowed by the High Court and the petitioner/applicant was enlarged on regular bail.
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(13) M. Venkatesan v. Enforcement Directorate53
(Delivered on 25-11-2024)
Coram: 2 Judge Bench of HM Justices S.M. Subramaniam and M. Jothiraman
Authored by: HM Justice S.M. Subramaniam
The petitioner filed Section 482 CrPC petition seeking a direction to the Special Court, PMLA and Central Bureau of Investigation cases, for conducting simultaneous joint trial of both the trials relating to the scheduled offence as well as the PMLA offence. The petitioner was admittedly an accused both in the scheduled as well as the PMLA offence and contended that if the trial in PMLA case gets completed/concluded during the pendency of the trial for the predicate offence, the rights of the accused will be severely prejudiced. Therefore, simultaneous joint trial is a necessity. The petitioner pleaded that the said conclusion of the PMLA trial, prior to the Central Bureau of Investigation trial, may result in causing prejudice to the interests of the accused who may be denied of a fair trial in the PMLA offence depending on the outcome of the trial of the scheduled offence.
The Enforcement Directorate to the contrary contended that trial in the PMLA is distinct entirely from trial in predicate offence and the PMLA being a standalone offence, process there is no impediment for the Special Court to proceed with the PMLA trial. The PMLA trial is not dependent on the predicate offence and resultantly cause no bar in conducting the PMLA trial during the pendency of the trial in predicate offence. Reliance was placed upon the judgments of the coordinate Bench of the Madras High Court by the Enforcement Directorate to fortify its submission that both the trials may continue separately, independent of each other. The various judgments of Madras High Court had already taken a view that an unconcluded predicate offence trial is not a bar for proceeding under the PMLA. This is because if the trial in scheduled offence ends in conviction of the accused person, the proceedings in the PMLA cannot be kept dependent upon the outcome of the appeal preferred against such conviction before the High Court, likewise the trial of the PMLA offence cannot be kept on hold for commencement, till the trial in predicate offence gets concluded.
Consideration and discussion by the Court
Referring to Explanations (i) and (ii) of Section 44 PMLA, the Court held that the jurisdiction of the Special Court trying the offences under the PMLA cannot be dependent upon any orders passed in respect of the scheduled offence and the trial of both offences by the same Court shall not be construed as a joint trial. The Special Court therefore is competent and possesses jurisdiction to conduct separate trials both under the PMLA case and for the predicate offence if it happens to be the same Special Court. Section 44 vests powers with the PMLA Court, the unfettered jurisdiction to conduct trial irrespective of the fact whether predicate offence is pending or otherwise. The completion of trial in the PMLA case is independent, since nature of offence and the procedures contemplated are distinct and different. The High Court accordingly declined the plea of the petitioner to have a joint simultaneous trial of both the offences, holding that such an order would amount to stalling of the trial in economic offences. Accordingly, the writ petitions were dismissed.
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(14) Bermaco Energy Systems Ltd. v. Enforcement Directorate54
(Delivered on 2-12-2024)
Coram: Single Judge Bench of HM Justices Bharati Dangre and Manjusha Deshpande
The petitioner had challenged the order passed by the PMLA Appellate Tribunal, New Delhi under Section 42 PMLA before the High Court through statutory appeal filed under the enactment. Through the order under challenge, the PMLA Appellate Tribunal had rejected the application moved by the petitioner seeking stay of eviction from the tax property belonging to them, pursuant to confirmation of orders of attachment passed by the Enforcement Directorate. The appellant had pleaded that there was no case of organised crime so committed by him and even the notice of eviction was silent on the aspect of money laundering having committed by them.
The question that arose before the Division Bench and the issue which fell for consideration was, “whether the appeals against the PMLA Appellate Tribunal should be entertained on the civil side or the criminal side of the High Court?” The petitioner contended that it lies on the criminal side, whereas the Enforcement Directorate contended the other way round.
Consideration and discussion by the Court
Scanning the provisions of the PMLA enactment, the High Court observed that both the adjudicating authority as well as appellate authority under the PMLA are vested with the same powers as available to the civil court under the Civil Procedure Code, 1908, as provided vide Sections 11 and 35. The order passed by Appellate Tribunal is made executable as a decree of a civil court and in the event of inability to get the same executed, such an order is transferred to the civil court for being so executed accordingly. By virtue of Section 35(5) the proceedings before the Appellate Tribunal are also deemed to be judicial proceedings. Vide Section 65, the provisions of CrPC are applicable in the matters of arrest, search and seizure, attachment, confiscation and all other such penal proceedings undertaken under the enactment. Thus, the exercises of search, seizure, attachment and confiscation are governed by the CrPC. By virtue of Section 71, the Act has been provided an overriding effect, notwithstanding anything inconsistent with any other enactment for the time being in force. By virtue of Section 8(5), if the offence is found to have been committed by the accused person concerned, then the properties so generated as proceeds of crime shall stand confiscated on the conclusion of the trial. Thus, this provision of attachment and confiscation is supplementary to the offence of money laundering created under the statute. Referring to the Vijay Madanlal judgment55, the High Court reiterated that proceedings of attachment and its adjudication by the adjudicating authority are in aid to the trial of the offence of money laundering, the appeal being preferred against such an order of the adjudicating authority before the Appellate Tribunal is an extension of the very same set of proceedings.
The High Court also observed that the Enforcement Directorate itself has been filing appeals under Section 42 PMLA against orders passed by the Appellate Tribunal invoking the criminal appellate jurisdiction of the High Court because they are treated to be essentially criminal in nature. Referring to Rule 3 of the Bombay High Court Appellate Side Rules, 1960 it has been held that all appeals arising from orders passed under any special statute other than the CrPC, are to be heard by the Division Bench of criminal appellate jurisdiction when such an order relates to imposition of penalty or confiscation.
The ultimate test to be applied for ascertaining the nature of the proceedings, whether it is civil or criminal is whether the attachment of property was on account of registration of an offence under the PMLA or in pursuance of civil proceedings; what is proposed to be done with the property on culmination of the trial and since in the present case the result of attachment depends entirely upon the result of the criminal trial of the offence of ML, ending eventually into confiscation if the accused person is found guilty, then the proceedings are clearly said to be involving criminal element. The appeal would therefore lie on the criminal side of the High Court and accordingly the Division Bench directed the appeal to be listed before the appropriate Bench exercising criminal appellate jurisdiction.
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(15) Arissan Energy Ltd. v. Enforcement Directorate56
(Delivered on 3-12-2024)
Coram: Single Judge Bench of HM Justice Tirthankar Ghosh
The writ petition was filed challenging the orders of freezing of account under Section 17(1-A) PMLA by the Enforcement Directorate.
Factual matrix of the case
The predicate offences were registered by the Central Bureau of Investigation under various provisions of the Penal Code, 1860 read with the Prevention of Corruption Act, 1988. The Enforcement Case Information Report came to be registered consequently by the Enforcement Directorate, whereafter search, seizure and investigation were carried out on the premises of the petitioner company. In the list of the various accused persons, whose properties were being attached, the petitioner contended that the petitioner company was neither named as accused in the FIR, nor any of the associate or group company of the petitioner was so mentioned. The petitioner further contended that the search and seizure exercise was without recording of any “reasons to believe” by the Enforcement Directorate, which was carried out mechanically on the basis of wild allegations levelled against the petitioner. Pertinently the petitioner is a highly reputed group of institutions, who was not aware of the reasons, material or evidence being relied upon by the Enforcement Directorate for passing the provisional attachment orders against them.
Consideration and discussion by the Court
Petitioner contended that the search and seizure under Section 17(1) must also satisfy the defining characteristics of money laundering and proceeds of crime as well as the respective procedural requirements. It cannot be resorted to on assumptions and presumptions that the property is a proceeds of crime by the Enforcement Directorate.
The Enforcement Directorate to the contrary pointed out that in connection with the investigation carried out by it, money amounting to multiple crores were transferred from the bank account of the petitioner’s company to the bank accounts of Abhijeet Group of Companies. They were transferred through a circumlocutious route, whereafter the said funds were utilised for accumulation or raising of immovable assets. The Court framed a tabular chart in respect to the money trail so alleged by the Enforcement Directorate pertaining to transactions between the petitioner’s company and the Abhijeet Projects Ltd. There was an alternative remedy of challenging the frozen assets by the Enforcement Directorate of the petitioner, and therefore by passing the same the writ petition has been filed.
Discussing the aforesaid contentions raised by both the parties, the High Court held that once a money trail had been discovered of transactions between Corporate Power Ltd. to Abhijeet Projects Ltd., with the said amount was transferred to the petitioner the prima facie guilt of the petitioner was established. Once such money trail had been established by the investigating agency, in its freezing order, its mere mention would be enough information furnished to the accused. It is then for the petitioner to explain the circumstances as to how he had received the money from the source and thereafter engaged into the transactions alleged against him. The Court would therefore not interfere in such circumstances where the persons responsible for generating or using proceeds of crime are called upon to explain the proceeds of crime acquired by them through banking transactions. The petitioner therefore must be relegated to the remedy of representing his grievance before the adjudicating authority. The High Court further held that authorised officer may always pass an order of freezing any property under Section 17(1-A), to prevent its immediate transfer or dispossession by the owner except without the prior permission of the officer.
The High Court also observed that under Section 17(2) immediately upon the said search, seizure or issuance of the freezing order, the authorised officer must forward copy of the reasons so recorded to the adjudicating authority in a sealed envelope. Thus, under Section 17(1-A) what is expected of the authorities is an intimation to the affected party/person to inform the reasons briefly of freezing the account or seizing any property. The “reasons to believe” along with the material have to be forwarded in the sealed envelope to the adjudicating authority, which implies that the same is not to be necessarily disclosed to the accused. With respect to such reasons, material and evidence on the basis of which freezing or attachment takes place, it is not necessary to communicate everything to the accused, for maintaining secrecy. Otherwise the phrase “sealed envelope” under Section 17(2) PMLA would be rendered futile.
Accordingly, the Court held that no interference was called for in the action of the respondent Enforcement Directorate of communicating the necessary circumstances and reasons for freezing the accounts and properties of the petitioner. The writ petition laying challenge to the same was accordingly dismissed holding it to be not maintainable.
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(16) Parvez Ahmed v. Enforcement Directorate57
(Delivered on 4-12-2024)
Coram: Single Judge Bench of HM Justice Jasmeet Singh
The petition filed under Section 439 CrPC seeking regular bail in relation to offences registered against them under the PMLA by the Enforcement Directorate.
Factual matrix of the case
The predicate offence was registered by the National Investigation Agency (NIA) under various provisions of the Unlawful Activities (Prevention) Act, 1967 along with Section 120-B, Penal Code, 1860. The allegations against the petitioners were that various office-bearers of Popular Front of India (for short, “PFI”) between 2018 and 2020 had raised unaccounted funds and monies and actively involved themselves by utilising the said funds in anti-CAA-NRC protests held in Delhi. The anti-CAA-NRC protests resulted in Delhi riots of February 2020 in which the petitioners as PFI members played a key role, especially for collection and raising of donations and funds for mobilising all the activities. The petitioners were also alleged to have issued bogus donation slips in the name of various entities and were also actively involved in the activities of Social Democratic Party of India (for short, “SDPI”) as a political front. In the bank accounts of PFI since 2009, an amount of Rs 32 crores had been deposited in cash, without identification of the so-called donations and the donors. Thus, the identity of the donors was deliberately concealed as part of a larger conspiracy for utilising such funds in PFIs in various unlawful or anti-national activities in India. The said amount was therefore treated as proceeds of crime, alleged to be considered, processed and projected as untainted money by the petitioners. These amounts were shown as donations, layered, placed and integrated through numerous bank accounts by the petitioners and thereafter utilised for unlawful purposes.
The petitioners had been in custody for more than 2 years and thus the petitioners contended that in view of the judgments of Prem Prakash case58 and Manish Sisodia v. Enforcement Directorate59, they are entitled for grant of anticipatory bail.
The Enforcement Directorate to the contrary contended that the petitioners had played an active role in raising of funds illegally in various accounts of PFI from across the country. The proceeds of crime were identified as exceeding Rs 60 crores with more than Rs 32 crores being deposited as substantial cash deposits.
Consideration and discussion by the Court
Referring and relying upon the observations made in the Vijay Madanlal judgment60, especially paras 106 to 109, the High Court observed that for any property to be proceeds of crime, the same must have been derived directly and indirectly as a “result of criminal activity”, which is a scheduled offence under the PMLA. The property/proceeds of crime must therefore be obtained following the commission of the scheduled offence or from the scheduled offence. In the present case, as per the allegations of the Enforcement Directorate itself all the petitioners had simply collected funds on behalf of the organisation from unknown sources, showing them as legitimate donations for utilising them to commit terrorist activities (scheduled offences). The collection of funds, which were eventually used for commission of scheduled offences, cannot be termed as proceeds of crime to invoke Section 3 PMLA. The said collection of funds preceded the crime and commission of scheduled offence and was not as a result of the said offence following it. Thus, they cannot be treated as having been generated as a result of the scheduled offence, since they were not following but preceding the commission of the scheduled offences.
The High Court further held, relying upon the judgment of the Supreme Court in Manish Sisodia v. CBI61, that admittedly the funds were collected and deposited in the PFI’s account as per the allegation of the Enforcement Directorate itself. Therefore, the proceeds of crime were not in the dominion or control of the petitioners but under the dominion and control of a person different from the accused persons who did not have the actual conscious possession of the proceeds of crime. Since the petitioners simply collected funds and deposited the same in the PFI’s account, therefore prima facie the dominion and control over the alleged proceeds of crime was not with the petitioners. Thereafter, the High Court discussed various judgments holding that prolonged incarceration of any accused person when the trial is bound to take time and is not likely to be concluded in the near future leads to automatic relaxation of rigours of statutory provisions providing statutory conditions for grant of bail. The statutory conditions in such cases, the twin conditions under Section 45 in the present case, must melt down in such circumstances and Enforcement Directorate cannot oppose the bail application of the accused who already have suffered prolonged incarceration. Accordingly, the bail application of the petitioners was allowed, and the petitioners were enlarged on regular bail by the High Court.
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(17) Uppal Chadha Hi Tech Developers (P) Ltd. v. State (NCT of Delhi)62
(Delivered on 9-12-2024)
Coram: Single Judge Bench of HM Justice Chandra Dhari Singh
The petitioner filed the Section 482 CrPC/Section 528, Nagarik Suraksha Sanhita, 2023 seeking quashment of the FIR registered by the Economic Offences Wing, New Delhi (for short, “EOW”) for various offences under the Penal Code, 1860. The said FIR came to be registered by the EOW on a letter requisition sent by the Enforcement Directorate for registration of FIR purportedly in exercise of powers under Section 66(2) PMLA.
Factual matrix of the case
One FIR No. 16/2018 was registered against the petitioners and several others by the Police Station, EOW under various provisions of the Penal Code, 1860. On the basis thereof, one Enforcement Case Information Report came to be registered by the Enforcement Directorate against M/s Uppal Chadha Hi-Tech Developers Pvt. Ltd. and others including the petitioners. The said FIR came to be compounded and resultantly quashed by the High Court in view of the settlement arrived at between the complainants and the petitioner. Subsequently, another FIR was registered on the same allegations by another complainant which also came to be quashed in the same manner in view of settlement between the parties. Since, the FIRs on the basis of which Enforcement Case Information Report was registered were quashed, writ came to be filed challenging the Enforcement Case Information Report for being quashed by the High Court. The High Court declined to quash the Enforcement Case Information Report in view of registration of a new FIR (third one) treating it as a scheduled offence legitimising the existence of the said Enforcement Case Information Report. Meanwhile, Enforcement Directorate also issued a letter in May 2023 during the pendency of the aforesaid writ petition to the EOW under Section 66(2) PMLA sharing information about the alleged offences uncovered and unearthed during search and seizure operations conducted by the Enforcement Directorate on the premises of the petitioner and the various companies which were being arrayed in the FIR. The third FIR meanwhile as FIR No. 55/2023 also came to be registered on the basis of the parties having arrived at a settlement. The EOW on the basis of information sent by Enforcement Directorate under Section 66(2) registered a new FIR No. 13/2024 in March 2024 under various provisions of the Penal Code, 1860. In view of the said FIR No. 13/2024 registered by the EOW, Enforcement Directorate executed an addendum to the aforementioned Enforcement Case Information Report as part of the ongoing Enforcement Case Information Report investigation in relation to the previous FIRs (which all were quashed by the High Court in view of settlements).
The High Court quashed all the FIRs in view of settlement of the petitioner with various parties and the only FIR that remained was the FIR registered by EOW on the intimation letter by the Enforcement Directorate. It is thus this FIR No. 13/2024 registered by the EOW that became the subject-matter of challenge by the petitioners before the High Court.
Contentions of the parties
The petitioners contended that the FIR registered at the instance of Enforcement Directorate on the basis of its intimation letter to the EOW was nothing but an “insurance FIR” which Enforcement Directorate got registered to maintain and keep the investigation continuing under the PMLA against the petitioners. The intimation sent under Section 66(2) by the Enforcement Directorate is not a new information, disclosing any fresh cause of action or fresh set of allegations, but was the very same material, very same set of allegations which were already the subject-matter of previous FIRs, all of which were quashed. The Enforcement Directorate essentially abdicated its responsibility of carrying out investigation to unearth any new set of allegations passing the buck entirely to the EOW to register an FIR and carry out investigation. The EOW also in turn abdicated its statutory responsibility of independently examining and investigating the matter prior to registration of FIR and examining whether there was any new cause of action actually disclosed in the said intimation letter by the Enforcement Directorate. The EOW thus compromised the integrity of its investigative process. The Enforcement Directorate sent the intimation letter only when FIRs were successively quashed by the High Court in view of settlements by various parties. Thus, the conduct of Enforcement Directorate was nothing but a mala fide intent and part of a larger scheme of continuous harassment of a business group.
The Enforcement Directorate, to the contrary contended that during the search and seizure operation, it was discovered that there was large-scale diversion of funds by the companies of which the petitioners were directors/promoters to the tune of around Rs 474 crores. The booking amounts and investments raised from various investor/home buyers of the projects were diverted for the purposes other than development of the said projects which resulted in non-completion of the project in time for which the home buyers had given their money. Thus, it was these sets of fresh material that came to the knowledge of Enforcement Directorate which were the basis of intimation sent to EOW. The Enforcement Directorate further contended that around 40 companies as shell entities were created by the same set of directors/promoters for circumventing the land ceiling laws and their subsequent merger with the main company, M/s Uppal Chadha Hi-Tech Developers Pvt. Ltd. for eventually transferring the land in its favour. The power/duty of the Enforcement Directorate to intimate the investigating agency of the commission of predicate offences is the sanguine duty of Enforcement Directorate also acknowledged in the Vijay Madanlal judgment63. The mere registration of FIR cannot lead to any grievance on the part of the petitioners, more so when there was large-scale diversion and siphoning of funds to the extent of more than Rs 500 crores.
Consideration and discussion by the Court
Discussing the scope of powers available under Section 482 CrPC/Section 528, Nagarik Suraksha Sanhita, 2023, the High Court observed that it has the authority to take into consideration the material that may be produced on behalf of the accused to arrive at any decision when a quashing petition is brought before it. Referring to the judgment of Neeharika Infrastructure (P) Ltd. v. State of Maharashtra64, the Court held that where the allegations made in the FIR do not disclose the commission of any offence, where a criminal proceeding is manifestly attended with mala fides or is maliciously instituted, the criminal proceedings may be quashed. However, the material so placed must be of such an impeccable quality that would persuade the reasonable person to dismiss and condemn the accusations as false.
The Court then went through and examined the subject-matter of various FIRs which were registered initially, especially FIR No. 16/2018 and others of similar nature at the instance of various complaints that came to be quashed on the grounds of settlement with the accused persons. The FIRs were quashed after recording the statements on behalf of the complainants that they do not have any continuing dispute with the petitioners and no objection if the FIRs are being quashed. To examine the various contentions, the Court framed the core issue as to whether reinvestigation of a similar offence/similar grounds is permissible just because a new FIR has been registered which contains the same set of allegations against the same accused persons, when earlier FIRs on the same set of allegations had already been quashed. Referring to the judgments of T.T. Antony v. State of Kerala65, and Anju Chaudhary v. State of U.P.66, the Court held that the second FIR for the same offence or occurrence giving rise to one or more cognizable offences was not permissible. The “test of sameness” should be applied as to find out whether both the FIRs were arising out of the same incident, same occurrence, forming part of the same transaction and with the same subject-matter. If the answer is in the affirmative, then the FIRs are liable to be quashed.
The Court after scanning the contents, allegations and narrations of the various FIRs registered against the petitioners arrived at the conclusion that the FIR under challenge registered by the EOW before it was liable to be quashed in light of the “test of sameness”. The EOW failed to apply an independent mind to verify and assess the contents of the letter intimation sent by the Enforcement Directorate and proceeded to register the FIR mechanically on the same set of allegations which were made in the earlier FIRs and FIRs which were quashed.
The EOW pertinently merely repeated the allegations in its letter of intimation qua the commission of cognizable offences. No independent opinion was formed regarding the commission of cognizable offence, nor any new allegation was made. Thus, the FIR so registered by EOW was clearly untenable. The said FIR also reflected a mala fide intention to harass and prejudice the petitioners by the EOW. Insofar as the allegations of forming 40 shell companies, leading to violation of various land ceiling laws, the Court referred to the affidavit filed in parallel proceedings by the Ghaziabad Development Authority (for short, “GDA”) wherein the land area with the petitioner company was found to be falling within the ceiling limits even after the merger. The GDA per se did not register any offence under the specific provisions of the U.P. Imposition of Ceiling on Land Holdings Act, 1960, especially under Section 36 and therefore FIR under the various provisions of the Penal Code, 1860 could not have been registered in the absence of such specific FIR under the provisions of the U.P. Imposition of Ceiling on Land Holdings Act, 1960.
The High Court also found that the purpose and motive behind registration of the impugned FIR by EOW on the asking of Enforcement Directorate was nothing else except to keep the investigation against the petitioner company alive, despite the absence of any fresh or credible information. The dispute of the majority of the investors and homebuyers already stood compromised/settled and therefore the act of respondent EOW was highly doubtful.
In conclusion, the Court accordingly held the FIR to be an abuse of the process of law and quashed the same allowing the writ petition filed by the petitioners.
(18) Leena Paulose v. Enforcement Directorate67
(Delivered on 12-7-2024)
Coram: Single Judge Bench of HM Justice Swarana Kanta Sharma
The petitioner filed writ petition under Article 226 of the Constitution of India read with Section 482 CrPC laying challenge to the orders passed by the Sessions Court, through which the possession of 26 luxurious vehicles attached by the Enforcement Directorate was granted to it for disposal to third parties in accordance with law.
Factual matrix of the case
The petitioner is a model, actor and a business woman who got married to one Sukesh Chandrasekhar after which they both lived together in Bangalore and Chennai. Her husband, pretending to be a high-ranking government official, extorted approximately Rs 200 crores from one complainant, Mrs Aditi Singh through impersonation and blackmailing tactics adopted by him. Interestingly, Sukesh Chandrasekhar had orchestrated the whole scam with the aid of many other persons. Accordingly, FIR under various provisions of the Penal Code, 1860 read with Section 66-D of the Information Technology Act, 2000 (IT Act) was registered against both the petitioner and her husband. On the basis thereof, Enforcement Directorate also registered an ECIR and started investigation into the offence of money laundering under the PMLA. A search operation was carried out under Section 17 in the house and various premises owned by the petitioners, wherein various commodities, including luxury cars were seized by the Enforcement Directorate. Both the husband and the petitioner were arrested by the Enforcement Directorate, whereafter prosecution/complaint case was also filed before the Special Court, the PMLA and cognizance was taken by the Court. An application was moved thereafter by Enforcement Directorate seeking permission under Rule 4(2) of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by Adjudicating Authority) Rules, 2013 (for short, “Attachment Rules, 2013”) for the disposal of vehicles seized by it during the searches as mentioned above carried out under Section 17. This included 16 luxury highly priced cars 9 impugned before the High Court granted possession as also permission for disposal of all such luxury cars to the Enforcement Directorate. The Enforcement Directorate was also directed to file the status report regarding disposal of all the vehicles by it, the proceeds of which were directed to be deposited with the government treasury. It is these orders passed by the Sessions Court, which were challenged before the High Court granting permission to the Enforcement Directorate to sell all the vehicles, including the luxury ones as well.
The petitioner, laying challenge to the aforesaid orders, contended that many cars were purchased much prior to the date of the alleged offence, and therefore they could not have come under the ambit and scope of proceeds of crime. Three of the luxury cars were also taken on rent, the seizure of which is also arbitrary. The Sessions Court ought to have kept the cars intact till the conclusion of trial instead of granting the permission straightaway for disposal of the same during the pendency of the trial.
The Enforcement Directorate, to the contrary, contended that the vehicles were being sold off transparently through MSTC, a Government of India undertaking and there was no question of any loss to the petitioners. The selling of cars was necessitated, since their value was depreciating with the passage of time and a lot of costs were being incurred in their maintenance which was a financial burden on the Enforcement Directorate. The cars in question were purchased by the organised crime syndicate members headed by the husband of the petitioner using the proceeds of crime generated from the scheduled offence.
Consideration and discussion by the Court
Referring to Sections 17(4) and 8 of the PMLA, the Court observed that Section 17 grants Enforcement Directorate wide powers to conduct searches and seizure if there is “reasons to believe” that proceeds of crime are existing. Referring also to the provisions of Attachment Rules, 2013, it observed that Enforcement Directorate is authorised to take possession of the property seized and frozen under Section 17, after formal adjudication by the adjudicating authority as to whether all or any properties are involved in money laundering. Rule 4 of the Attachment Rules, 2013 that wherever attached property so confirmed by the adjudicating authority is subject to speedy and natural decay or the expenses of maintenance is likely to exceed its value, such property may be sold on the orders of the PMLA Court. Pertinently, the petitioner did not challenge any of the orders passed under Section 8 of attachment, nor under Section 17 of seizure or freezing of the various properties treated as proceeds of crime by the Enforcement Directorate. The order passed by the adjudicating authority under Section 8 confirming the attachment had also not been challenged at all, the obvious statutory consequence of which is taking over of the physical possession of the said properties by the Enforcement Directorate on confirmation of the attachment. The luxury cars admittedly were movable properties who were liable to speedy and natural decay and bound to incur substantial expenses on their maintenance. The expenditure on the maintenance also was likely to exceed their value and cause unnecessary burden upon the government exchequer. Thus, there was per se no infirmity in the process followed by the Enforcement Directorate in moving the application under the provisions of Attachment Rules of 2013 for disposal of the various luxury cars seized by it.
The Court then analysed and interpreted Rule 4 of the Attachment Rules, 2013 stating that properties attached by Enforcement Directorate “shall be sold” by it if in the opinion of the Court, the condition mentioned thereunder are duly satisfied, viz. the property being liable to speedy and natural decay and expenses likely to exceed their value. Even though the cars were retained in the warehouse, their care and protection being luxury cars from various environmental onslaughts and decay due to rusting cannot be ignored. Referring to the judgment of Manjit Singh v. State68, the Court observed that permission for speedy disposal of the seized and attached properties must be ordered by the Court keeping in view the expected life of the property, rather than the conclusion of the investigation/trial. There is no prejudice caused to the accused owner, since if the trial concludes in his favour, he would recover the monetary value of the vehicle rather than a decayed, non-operational, rusted vehicle almost reduced to junk and at much depreciated value. Even the accused does not suffer any financial loss due to the prolonged judicial process, which may be subjected to appeal before the High Court. Conversion of sale proceeds on immovable property therefore on the orders of a Special Court to interest bearing fixed deposit ensures equal justice to both the parties regardless of the trial duration. The rights of both the accused as well as the investigating authority are protected since a piece of junk or scrap at the end of trial is of no use to either of the parties. Referring to Section 8(6), the High Court observed that the Special Court can always pass an order for release of the property seized if the accused is not found guilty. In case the vehicles are sold, the sale proceeds deposited in the form of interest-bearing fixed deposits in the government treasury may be repaid to the accused person in case of his acquittal post-trial.
Accordingly, the High Court affirming the orders passed by the Special Court, the PMLA dismissed the petition filed by the petitioner.
***
(18) Enforcement Directorate v. Ajay S. Mittal69
(Delivered on 28-5-2024)
Coram: Single Judge Bench of HM Justice Swarana Kanta Sharma
The petition was filed under Section 482 CrPC seeking quashment of order passed by the Sessions Court through which the pending bail application instituted by the respondent was withdrawn from the Special Judge, CBI-16 and transferred to Special Judge, CBI-05. The said order was passed by the Principal District & Sessions Judge, accepting the allegations of “real likelihood of bias” alleged by the wife of the respondent-accused against the Presiding Judge. The High Court thus was confronted with the issue as to whether there was actual apprehension of “bias”, with the real danger affecting and prejudicing the accused therein.
Factual matrix of the case
A prosecution complaint was filed against various accused persons. On being summoned, the respondent and his wife Archana Mittal were arrested in relation to the Enforcement Case Information Report in question by the Enforcement Directorate. The wife Archana Mittal was granted bail by the very same Special Judge, CBI-16, but the application of her husband, the respondent Ajay Mittal for grant of regular bail remained pending. Several adjournments were sought for one reason or another on behalf of the respondent-accused in the said regular bail application, whereafter during the pendency of the same a transfer petition was filed by the respondent before the Principal District Judge seeking transfer of the proceedings to some other Court, which was allowed vide the impugned order.
The transfer of the case was granted on the ground that the wife of the respondent, also a co-accused was watching the hearing online on 10 April 2024, when after all the counsels had left, the learned Judge of CBI-16 Court allegedly passed the following comment — “lene do datein, ED matters me kaunsi bail hoti hai”. On the basis of this complaint the transfer application was filed contending that the learned Presiding Judge was predisposed and prejudiced in a preconceived manner against the accused.
The Enforcement Directorate challenging the aforesaid transfer before the High Court order contended that the presence of the respondent’s wife Archana Mittal online on screen on the date of alleged statement is not reflected. On mere asking of any applicant, that too an accused in the case, transfer should not be allowed casually, lest it would seriously undermine the confidence and credibility of the judicial system. The discretion for transfer must be exercised judicially and on the basis of contention/allegation of “bias”. The learned District and Sessions Judge had already rejected similar transfer petitions filed by other accused persons earlier, wherein similar reliefs were sought on account of alleged prejudice against the accused by the learned Presiding Officer in the respective trials. In the present case, the respondent had failed to disclose any real reason or actual “bias”, and his request was based on conjectures, arising out of an apprehension without any substantial proof.
Consideration and discussion by the Court
The Court referred to Section 408 CrPC, which vests the power with District and Sessions Judge is empowered to transfer cases and appeals.
Referring to the definition of “bias” as occurring under various dictionaries, the High Court observed that it is referrable to motivation on the part of the Judge to unfairly favour one party and disfavour another. Referring to the judgments in State of W.B. v. Shivananda Pathak70, Kumaon Mandal Vikas Nigam Ltd. v. Girja Shankar Pant71, the High Court reiterated that “bias” and partiality cannot be defined to mean total absence of preconceptions in the mind of the Judge, else than no one has ever had a fair trial and no one will. The human mind, even at infancy, is no blank piece of paper and every human being is born with predispositions. Therefore, “bias” includes the attributes of malice, spite or ill-will. Mere general statements on the part of any Judge are not sufficient for indication of ill-will.
Referring further to the judgments of the Supreme Court in the matters of Gurcharan Dass Chadha v. State of Rajasthan72, State of Punjab v. Davinder Pal Singh Bhullar73 and S. Parthasarathi v. State of A.P.74, the High Court observed that mere allegations of apprehension are insufficient that justice will not be done. The Court must further see whether the apprehension is reasonable or not. There must be real likelihood of “bias”, and surmises and conjectures have no place for seeking transfer of case proceedings. The test of real likelihood of “bias” is whether a reasonable person, in possession of relevant information, would have thought that “bias” was likely and whether the adjudicator was likely to be disposed of to decide the matter only in a particular way.
The High Court, after referring to all the above principles and precedents proceeded to the facts of the matter. An inquiry was held internally on the directions of the High Court, and it was found that the discussions and conversation of the Court staff were never heard by the wife of the respondent, but what the Judge replied (her alleged statement regarding bail was clearly heard by the respondent’s wife. Only the statement of the Presiding Judge has been quoted, whereas the conversation or the statement of other Court staff has not at all been mentioned or referred to in the transfer application. Thus, statements of the Presiding Officer can be easily misinterpreted, misheard when taken out of context and without a complete understanding of the surrounding circumstances. Without hearing the other side, therefore, relying on the statements of one side was therefore unjust. It was impossible to fairly assess whether the statement indicated any actual “bias” or was perhaps misunderstood or misrepresented comment. Overheard conversations cannot be the basis of order of transfer. A Judge is not required to be unnecessarily sensitive to allegations made by the parties and recuse himself from the case. If such wild allegations become the basis of seeking transfer of proceedings from one Court to another, then it will lead to complete anarchy in the adjudicatory process.
The High Court further found that “no affidavit” was ever filed by the wife of the accused-respondent along with the transfer petition instituted before the learned District and Sessions Judge. Rather the transfer petition was filed by the pairokar of the accused, his brother, who had never heard the alleged conversation or statement made by the Presiding Officer.
There was inordinate delay also in sending the email seeking transfer of the proceedings after the statement was made by the Presiding Judge concerned. The unexplained delay of 7 days from the date of the alleged statement raises suspicion over the manner in which allegations were made. Thus, there was no evidence at all to even reasonably substantiate the allegations of “bias” against the learned Special Judge by the wife of the accused. The accused had sought repeated adjournments in the consideration of his bail application, which was granted leniently by the Special Judge. So much so that the learned Special Judge was accommodating the respondent-accused on every date of hearing on their mere asking. Thus, raising an objection after seeking so many adjournments, which were all at the behest of the respondent-accused himself also makes the apprehension of “bias” merely a conjectural notion.
The High Court also observed that there is no certainty regarding the context in which the comment was made, nor any enquiry was ever carried out also. Also, whether the comment is specifically pertained to this particular case or any other case is also not clear, nor was the same ever determined. Thus, there was never any legitimate foundation of premise on the basis of which the respondent herein could have apprehended “bias” on the part of the learned Special Judge, sufficient enough to transfer the case from his Court to another.
The High Court then insisted upon the compliance of principle of “audi alteram partem”, in the case of even the Judges. A Judge against whom allegations of “bias” have been made must necessarily be given an opportunity to respond to the allegations and should not be made a victim of unchecked and unverified accusations against him. Judges also are entitled to be treated with the same fairness and impartiality with which they are expected to treat others in their conduct and through their judgments. Whenever any utterance or action of a Judge is brought in question, being attributed the colour of “bias”, it is imperative that their part of story be also heard before passing any order against them or relying unilaterally on the statements made by them. In the present case, the High Court found that no opportunity was ever granted to the learned Special Judge to respond to the allegations made by the respondent-accused, before the case was transferred to another Court. Thus, this oversight of not providing any opportunity to present his side of the story had undermined the basic tenets of fairness and natural justice. It was essential in view of the nature of allegations to have called for the comments of the staff also employed in the Court of the Judge before whom the learned Special Judge had allegedly made this comment.
The High Court then also discussed the demoralising effect of such transfer orders by holding that applications for transfer of case from one Court to another must be dealt with extreme circumspection and caution, as it has adverse effects on the entire judiciary as well. Reputation of a Judge is one of his most vital assets, painstakingly built over years of dedicated service. Therefore, Judges also have a right to protect their reputation like all other individuals and on flimsy grounds that some comment had been made, when the context is not known and the learned Judge was never heard, the transfer application could not have been allowed so lightly and casually.
The High Court also highlighted and underscored the necessity of beautiful banters between Bar and Bench who share bonding of bonhomie highlighting that if every such exchange our conversation between the Bar and the Bench is being questioned by litigant watching proceedings through videoconferencing and used what alleging “bias” against the Presiding Judge concerned, then such a relationship between the Bar and Bench would be the casualty.
In conclusion, the High Court held that there was thus no base foundational context, basis, reason, or facts for inferring reasonable apprehension or real likelihood of “bias” on the part of the learning Special Judge for allowing the application of transfer by the District and Sessions Judge. Accordingly, the impugned order of transfer so passed was set aside and the District and Sessions Judge was directed to decide the transfer petition afresh. The High Court also laid down guidelines to be followed by the Principal District & Sessions Judges while dealing with transfer applications of such nature alleging “bias” against the Presiding Officer. These guidelines broadly read as follows:
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The comments of the Judge concerned from whom the case is sought to be transferred on ground of “bias” will be called mandatorily.
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The application will be decided after considering the said comments and in light of principles of real apprehension of “bias”.
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The other principles regarding the attending circumstances being considered will also be taken into consideration at the time of deciding such applications which should not be allowed routinely.
Accordingly, the petition filed by the Enforcement Directorate was disposed of with the aforesaid directions and guidelines.
*Expert in Constitutional, Civil & Securitisation Laws, Practising Advocate, Supreme Court of India.
**4th year student, Dr Ram Manohar Lohiya National Law University, Lucknow.
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