Delhi High Court: Yogesh Khanna, J., remarked that,
Once the Parliament steps in and cures the defect pointed out by a Constitutional Court, the defect appears to be cured and the presumption of constitutionality is to apply to such provision.
Instant petitions were for grant of bail to the applicants.
An enquiry under FEMA, 1999 was commenced on 1-07-2017 by the respondent at various places against Naresh Jain and others, it was alleged that the petitioners and others had appeared on numerous occasions before the Enforcement Directorate and the enquiry was conducted for 2 years under Section 47 of the FEMA.
Further, the ED registered FIR with EOW Cell for Scheduled Offences under the Prevention of the Money Laundering Act, 2002. Thereafter, the petitioners appeared before the ED on several occasions. Searches were conducted by the ED under PMLA at the residential premises of the petitioner Bimal Jain also.
Prosecution complaint was filed before the Special Judge, PMLA against eight accused persons, including the petitioners herein. Petitioner Bimal Kumar Jain also joined the investigation of FEMA as also PMLA on various occasions.
Senior Counsel for the petitioner submitted that:
a) while arresting Bimal Jain, the procedure under Section 19 PMLA was not followed.
b) the Enforcement Directorate cannot be the complainant and the Investigating Officer at the same time; and
c) effect of declaration of twin conditions under Section 45 of the PMLA have been declared unconstitutional and ultra vires in view of decision in Nikesh Tarachand Shah v. Union of India, (2018) 11 SCC 1.
Analysis, Law and Decision
Non-Compliance under Section 19 of the PMLA
High Court stated that since the arrest of accused Bimal Jain was in execution of the NBWs therefore, the provision under Section 19 of the PMLA could not be adhered to.
Admittedly, Bimal Jain was arrested in execution of the NBW by the Special Judge, PMLA while taking cognizance of prosecution complaint filed by the Enforcement Directorate and thus there was no occasion to comply with the requirement of Section 19 of the PMLA.
Bench stated that, the very fact the complaint was filed by the Enforcement Directorate arraying petitioner Bimal Jain as accused 2, prima facie shows there were reasons to believe the person was guilty of offence punishable under PMLA as the complaint was filed only against a person who was presumed to be guilty.
The Complainant and the Investigating Agency cannot be the same
Court referred to the decision of Mukesh Singh v. State (NCT) of Delhi, (2020) 10 SCC 120.
Twin conditions of Section 45 of the PMLA
Supreme Court in Nikesh Tarachand Shah v. Union of India, (2018) 11 SCC 1 declared Section 45 of the PMLA as it stood then, as unconstitutional and violative of Articles 14 and 21 of the Constitution of India, but the defects pointed out were cured by the legislature and an amendment to Section 45(1) was made vide Finance Act, 2018.
Supreme Court’s decision in P. Chidambaram v. E.D., (2019) 9 SCC 24 took judicial note of the above amendment.
High Court stated that the legislature has the power to cure the underlying defect pointed out by a Court, while striking down a provision of law and pass a suitable amendment. Bench referred to the decision of Supreme Court in State of Karnataka v. Karnataka Pawn Brokers Association, (2018) 6 SCC 363 it was held:-
“24. On analysis of the aforesaid judgments it can be said that the Legislature has the power to enact validating laws including the power to amend laws with retrospective effect. However, this can be done to remove causes of invalidity. When such a law is passed, the Legislature basically corrects the errors which have been pointed out in a judicial pronouncement. Resultantly, it amends the law, by removing the mistakes committed in the earlier legislation, the effect of which is to remove the basis and foundation of the judgment. If this is done, the same does not amount to statutory overruling.”
Adding to the above analysis, Court remarked that merely because the entire section was not re-enacted would be of no consequence since the provision even after being declared unconstitutional, does not get repealed or wiped out from the statute book and it only becomes unenforceable.
Therefore, High Court held that there is a presumption in favour of constitutionality since the amended Section 45(1) of the PMLA has not been struck down, Court referred to the decision of the Supreme Court in Nagaland Senior Govt. Employees Welfare Assn. v. State of Nagaland, (2010) 7 SCC 643.
If Section 45(1) of the PMLA is ignored, whether the petitioners are entitled to bail per parameter of Section 439 CrPC?
The investigation by EG revealed that Naresh Jain and Bimal Jain along with other accomplices hatched a criminal conspiracy to cause loss to the exchequer and banks by indulging in illegal foreign exchange transaction on the basis of forged/fabricated documents.
Naresh Jain also facilitated parking of funds abroad by Indian nationals through his international Hawala transaction structure created in India and in various other jurisdictions. Naresh Jain conducted international Hawala operation and domestic operation of providing accommodation entries to co-conspirators.
Investigation so far, revealed that Naresh Jain incorporated and operated 450 Indian entities and 104 foreign entities. These entities were incorporated by using original identity proofs and documents of dummy shareholders and directors as well by fabricating identity proofs and documents of these shareholders and directors. Fabricated documents were used to open bank accounts as well.
Further, it was alleged that the petitioners were well connected in India and abroad and there was an apprehension that they will flee from the country to evade trial in case they were enlarged on bail. It was also alleged that Bimal Jain had evaded the summons issued by the department and had refused to join investigation.
ED alleged that the petitioners were involved in various criminal cases and even two Red Corner Notices were issued by Interpol against Naresh Kumar Jain.
Even the allegations were that the petitioners forged their medical certificates and Naresh Jain continues the criminal activities while in Jail and the investigation in the case is still going on and a large number of activities/fact accounts/witnesses /employees and beneficiaries are involved.
Adding to the above allegations, it was stated that if enlarged on bail there was every likelihood the petitioners may flee to Dubai or elsewhere to avoid the process of law and they were flight risks.
Hence, bail was not granted to the petitioners and the petitions were dismissed. [Bimal Kumar Jain and Naresh Jain v. Directorate of Enforcement, Bail Appln. 112 of 2021, decided on 30-07-2021]
Advocates before the Court:
For the Petitioner/s: Vikram Chaudhri, Sr. Advocate with Naveen Malhotra, and Harshit Sethi, Advocates.
For the Respondent: S.V.Raju, ASG, .Zoheb Hossain, Special Counsel, Amit Mahajan, CGSC, Aarushi Singh, Mallika Hiremath, Vivek Gurnani, and Agni Sen, Advocates