Case BriefsHigh Courts

Orissa High Court: S.K. Panigrahi, J., while addressing a matter with regard to money laundering by way of ponzi schemes, stated that,

“Act of money laundering is done in an exotic fashion encompassing a series of actions by the proverbial renting of credibility from the innocent investors.”

Petitioner has sought bail in a complaint case pending before Sessions Judge, Special Court under PMLA.

Cheating

Case under Sections 406, 420, 468, 471 and 34 of Penal Code and Sections 4, 5 and 6 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 was registered on the basis of a complaint alleging that the complainant had been cheated and defrauded by alluring to invest Rs 10,000 in the attractive investment scheme of Fine Indiasales (P) Ltd.

Complainant further submitted that he had introduced 20 more people to invest in the said scheme.

Complainant neither received the financial product nor the product voucher as per the agreement with FIPL.

FIPL collected huge amounts of money from the public and ultimately duped huge amount from innocent public by giving false assurance of high return for their deposit of money.

In view of the above, complainant requested for an investigation.

FIPL floated a fraudulent scheme

According to the investigation it was found that, FIPL had floated a fraudulent scheme with a terminal ulterior motive to siphon off the funds collected from public.

Ponzi Scheme

The advertised scheme of FIPL, ex-facie appeared to be a bodacious Ponzi scheme, inducing the susceptible depositors by way of misrepresentation, promising immediate refund in case of any default and timely payment of return on the part of FIPL.

Investigation prima facie established that the accused persons connected with  FIPL not only criminally conspired and cheated the depositors but also lured them into the scheme with a rogue mindset.

Machiavellian Layering | Shell Companies

Investigation revealed that the said money, stained with the sweat, tears and blood of multitudes of innocent people has since been moved around and subjected to Machiavellian layering through a myriad of shell companies and bogus transactions.

The collected amount was immediately transferred to different bank accounts of individuals as well as firms under the management and control of the Promotors/Directors/Shareholders of the said FIPL which is nothing but an act of sheltering.

Money Laundering

Modus Operandi adopted while transferring the prodigious sum of ill-gotten wealth with the singular intention of concealing the original source of funds and to project the tainted money as untainted ex facie constitute the offence of money laundering.

Court’s Observation

On the cursory look, Court prima facie observed that dishonesty, untruth and greed eroded the faith of common investors.

One of the significant stages of money laundering is “layering”, and in the present case, multiple use of corporate vehicles was done and the amount was layered further.

The act money laundering involves the process of placement, layering and integration of “proceeds of crime” as envisaged under Section 2 (u) of the Act, derived from criminal activity into mainstream fiscal markets and transmuted into legitimate assets.

“…laundering of tainted money having its origins in large scale economic crimes pose a solemn threat not only to the economic stability of nations but also to their integrity and sovereignty.”

Proceeds of Crime

Petitioner along with others attempted to project the “proceeds of crime” as untainted money by transferring the same to different bank accounts in a bid to camouflage it and project it to be genuine transactions.

Financial Terrorism

Bench added to its analysis that, offence of money laundering is nothing but an act of “financial terrorism” that poses a serious threat not only to the financial system of the country but also to the integrity and sovereignty of a nation.

Supreme Court’s opinion

Supreme Court of India has consistently held that economic offences are sui generis in nature as they stifle the delicate economic fabric of a society.

Faustain bargain

Perpetrators of such deviant “schemes,” including the petitioner in the present case, who promise utopia to their unsuspecting investors seem to have entered in a proverbial “Faustian bargain” and are grossly unmindful of untold miseries of the faceless multitudes who are left high and dry and consigned to the flames of suffering.

Reputational Damage of the Country

Abuse of financial system in the manner that occurred in the present case can inflict the reputation of the country in the world of business and commerce.

Alleged offence of money laundering committed by the petitioner is serious in nature and the petitioner’s role is not unblemished.

Hence, Court refused bail to the accused/petitioner. [Mohammad Arif v. Directorate of Enforcement, Govt. of India, 2020 SCC OnLine Ori 544 , decided on 13-07-2020]


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Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: A Coram of Manmohan Singh (Chairman), J. and G.C. Mishra (Member) set aside the Adjudicating Authority’s order allowing retention of seized property, on the ground of non-compliance of provisions of Prevention of Money Laundering Act, 2002.

An investigation was initiated on the basis of a notice issued by the Income Tax Department under Black Money Act, 2015 against one Sanjay Bhandari for not disclosing his foreign assets for the purpose of taxation before the tax authorities. Since the appellant had received a certain sum as legal fees for advice rendered to Sanjay Bhandari, a search and seizure was initiated against him pursuant to which the respondent prayed for retention of seized property. Appellant objected to the same stating that the seized material was not connected with the proceedings related to Sanjay Bhandari. Adjudicating Authority allowed retention of documents under Section 17(4) PMLA vide order dated 26-05-2017. Hence, the present appeal.

The Tribunal noted that neither any report against the appellant had been forwarded to the Magistrate, nor had any complaint against the appellant been filed before a Magistrate. It was observed that the prescribed period for filing prosecution complaint is ninety days. But in the present case, no prosecution complaint had been filed even after almost a year and ten months had passed. Further, Section 8(3)(a) of PMLA provides that attachment or retention of seized property shall continue during an investigation for a period not exceeding ninety days. The said prescribed period had already expired as more than a year had elapsed but the properties and records had not been returned so far which was in clear violation of the provisions of PMLA.

It was opined that if a particular thing is to be done in a particular manner, it must be done in that way and none other. Reliance in this regard was placed on Dipak Babaria v. State of Gujarat, (2014) 3 SCC 502.

In view of the above, the appeal was allowed directing the respondent to return seized documents/records to the appellant.[Sanjeev Kapoor v. Deputy Director, Directorate of Enforcement, Delhi, 2019 SCC OnLine ATPMLA 8, decided on 09-04-2019]