money laundering

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A Bench comprising of Justice S.J. Mukhopadhaya (Chairperson) and Justice B.L. Bhat (Judicial member) rejected an appeal challenging an NCLT judgement where it allowed a liquidator to sell the assets of a company which had been attached by the Directorate of Enforcement (ED) during the period of ‘Moratorium’.

The Resolution Professional had filed an application before the NCLT for releasing the attachment of certain assets of Varrsana Ispat Limited (Corporate Debtor) by the ED. The NCLT held that ordering the release of the attached assets would not be maintainable since the attachment order was issued before the order of declaration of ‘Moratorium’ in the present case. The aforesaid NCLT order had been challenged in this appeal.

The Tribunal rejected the appellant’s contentions that Section 14 of the Insolvency and Bankruptcy Code, 2016 would have an overriding effect over the Prevention of Money Laundering Act, 2002 and that creditors and investigative agencies could not disrupt the ‘Corporate Insolvency Resolution Process’ during the period of ‘Moratorium’. The bench observed that since the provisions of the Prevention of Money Laundering Act, 2002 pertained to ‘proceeds of crime,’ Section 14 of the I&B Code would not be applicable to such a proceeding.

The Order stated that the offence of money-laundering has nothing to do with the ‘Corporate Debtor’ but will be applicable to individuals such as ex-Directors and shareholders of the ‘Corporate Debtor,’ who cannot be given protection from the Prevention of Money Laundering Act, 2002 by taking advantage of Section 14 of the I&B Code. Rather, it held that both the Acts would be invoked simultaneously. Since the attachments were made by the ED long before the initiation of the Corporate Insolvency Resolution Process, this would disallow the ‘Resolution Professional’ from taking advantage of Section 14 of the I&B Code. [Varrsana Ispat Limited v. Deputy Director, Directorate of Enforcement, Company Appeal (AT) (Insolvency) No. 493 of 2018, decided on 27-07-2020]

Case BriefsHigh Courts

Delhi High Court: Anup Jairam Bhambhani J., granted bail to an accused in a money-laundering case involving a sum of more than INR 2000 crores. Upholding the legal principle of the presumption of innocence of an accused until proven guilty, the Court found that in the absence of compelling grounds and reasons, the under-trial accused could not be detained in judicial custody.

The applicant sought regular bail after being arrested in the complaint case arising from an Enforcement Case Information Report (ECIR). According to the Enforcement Directorate’s (ED) allegations, the applicant owns 50% shares in a company which in turn owns 50% of an RBI recognized non-banking financial company Religare Enterprises Ltd. (REL). It is alleged that the applicant misappropriated money, amounting to over INR 2036 crores, lent by REL to entities controlled or owned by the applicant.

The Court opined that the applicant was not in a position to tamper with evidence, since the allegedly offending transactions cannot be altered by virtue of their being reflected in several records, including those of regulatory bodies such as the RBI, SEBI, etc. and also because all records of such transactions had already been seized by the ED. Since the ED had confirmed that it would not interrogate the applicant while he was in judicial custody, it found the applicant’s detention unreasonable, especially as there was no foreseeable timeline within which the ED was to complete its investigations.

Bench held that the applicant had deep roots in society and was not a flight-risk, so “no purpose would be served by keeping him in judicial custody.” The nature of an offence should have a limited role in determining the merits of a bail application, and even though the applicant is accused of committing an offence whose financial implications are large in quantum, such losses cannot be compensated for by keeping the under-trial applicant in prolonged custody. It emphasized on the importance of time-bound investigations, stating that “criminal investigation is not a metaphorical fishing-rod handed to an investigating agency, to indulge its penchant for ‘fishing around’ for evidence.”

Highlighting the dire situation of undertrials in prisons, it reiterated Sanjay Chandra v. CBI’s (2012) 1 SCC 40 ruling that every man is innocent until duly tried and found guilty, and that it would be inappropriate to refuse bail to an undertrial simply to give him “a taste of imprisonment as a lesson.” It approved the bail application and directed the applicant to be released, subject to certain conditions laid down in the order. [Shivinder Mohan Singh v. Directorate of Enforcement, 2020 SCC OnLine Del 766 , decided on 23-07-2020]

Op EdsOP. ED.

The scourge of money laundering is an issue that has plagued society for ages now, carrying with it the potential to not only destabilise the international financial system, but has also having been instrumental in funding for terrorism, illicit drugs and trafficking among a few major issues which erode modern day society. The efforts of the international community as a whole to tackle this menace though, have been relatively recent. The formation of the Financial Action Task Force (FATF), as an international organisation to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, in the year 1989 was a major step forward in the battle against money laundering. From time to time the FATF has passed stringent recommendations to curb laundering of money. Though India joined the FATF comparatively late, in 2010, its efforts to tackle money laundering as a standalone issue had already commenced with the introduction of the Prevention of Money Laundering Bill, 1998 in the Lok Sabha on 4th August 1998 by the Government of the day, which was subsequently referred to the Standing Committee on Finance and subsequently upon receipt of its recommendations was passed by both Houses of Parliament and received the assent of the President on 17th January 2003, giving birth to the Prevention of Money Laundering Act, 2002 (PMLA)[1]. The PMLA contains stringent provisions to tackle money laundering, including but not limited to a broad definition of “proceeds of crime” [Section 2(1)(u)], which is the very basis for prosecution under the Act, attachment of property prior to conviction for money laundering (Section 5), freezing of bank accounts (Section 17) arrest of a person (Section 19) on the subjective satisfaction of the Enforcement Directorate (the agency tasked with the implementation of the Act) reverse burden of proof as to the legitimacy of the “proceeds of crime” (Section 24) and making admissible statements made before specified officials of the Enforcement Directorate (Section 50).

One of the most controversial provisions of the PMLA, the constitutionality of which has already been challenged before the different High Courts of the country[2], is Section 24, which places the burden upon the accused to dispel the presumption that the property in possession of an accused is not “proceeds of crime” and is untainted. The original provision at the time of passing of the enactment read as follows: 

“24. Burden of Proof: When a person is accused of having committed the offence under Section 3, the burden of proving that proceeds of crime are untainted property shall be on the accused.”

The same was subsequently amended. The present article is not seeking to comment on the constitutional validity of Section 24 PMLA but to understand upon whom does Section 24 PMLA thrust the responsibility to prove a fact i.e. the prosecution or the accused and at what stage can it be invoked by the prosecution.

Section 24 PMLA, is a shift from the traditional responsibility/duty/obligation cast upon the prosecution to prove its case against an  accused  beyond reasonable doubt. The duty of the prosecution to prove its case beyond reasonable doubt is an integral part of the Fundamental Right of a person accused of having committed an offence to be presumed innocent until proven guilty.

The parliamentary debates at the time of introduction of the same show that the same was indeed a controversial provision, with jurists of the stature of no less than Mr. Fali S. Nariman (Senior Advocate & Ex-Member of Parliament) and Late Mr. Ram Jethmalani (Senior Advocate & Ex-Member of Parliament) having voiced reservations about incorporation of such a provision.

Mr. Fali S. Nariman stated[3] “...But what worries me is the burden of proof, that is, Section 24….”. The Late Mr. Ram Jethmalani in fact argued[4] that “When a person is accused of having committed an offence under Clause 3, the burden of proving that the proceeds of crime are untainted property shall be on the accused. The presumption is not arising from, at least, some fact having been proved. Merely because you accuse somebody, he has to prove it. Therefore, please understand that this presumption is totally unreasonable, irrational, and will create a lot of problems. It will not stand the test of constitutional validity at all.”

It is noteworthy that though the Courts have upheld the validity of provisions similar to Section 24 PMLA, however, they have at the same time held that in such statutes providing for such a reverse burden, it is incumbent for the prosecution to first prove the foundational facts beyond any reasonable doubt, which would in itself be subjected to greater scrutiny, before the presumption can be raised against an  accused[5] . The Courts have further gone onto hold that even in such situations it is incumbent upon the prosecution to prove the guilt of the  accused  and it cannot be absolved of this responsibility[6]. Specifically in the context of Section 24 PMLA, various High Courts have held that the presumption contained therein is not to be interpreted that the property concerned is “proceeds of crime”, it can only be held so once it is proven by the prosecution, and it is only upon such proof can the same be taken to be involved in money laundering[7]. It has been further held that Section 24 PMLA does not contain a presumption as to the knowledge of the  accused  of the “proceeds of crime”, which still has to be demonstrated by the  prosecution. In fact, the High Court of Kerala has gone a step further and held in  Kavitha G. Pillai v. The Joint Director[8] (supra) that the presumption contained is only that the same are “proceeds of crime” and the question of whether the same are actually ill-gotten can only be determined upon the proof of the scheduled offence.

Considering the fact that Section 24 PMLA is nonetheless a very drastic provision, and prone to misuse and abuse by over-zealous and/or corrupt officials, Courts have to tread cautiously while proceeding with cases of money laundering. In the words of William Blackstone, in his commentaries on the Laws of England “It is better that ten guilty persons escape than that one innocent suffer”.The same would hold true even with respect to Section 24 PMLA, which is not a presumption as to guilt but a rebuttable presumption of a fact. Therefore, the question as to what stage the presumption kicks in, becomes pertinent. Does it apply at all stages even during a bail application? Does it apply during the stage of summoning an accused or framing charges? Or does it apply only at the final stages of the trial?

Owing to the fact that the unamended Section 24 PMLA as originally enacted was prone to abuse, arising out of the wide gamut of meanings which could be assigned to the word “ accused ” prevalent therein, Parliament deemed it fit to amend it vide the PMLA (Amendment) Act, 2012 and amended it as follows:

“24. Burden of proof—In any proceeding relating to proceeds of crime under this Act,—

(a) in the case of a person charged with the offence of money-laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and

(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.”

    (emphasis supplied)

A comparison of the unamended and amended Section 24 PMLA would show that the word “ accused ” has been replaced with the phrase “Charged with the offence of money laundering”. It would thus be necessary to interpret the latter phrase to arrive at a conclusion as to when the said presumption would operate against an  accused .

Historically, the Courts had been hesitant to rely upon the Parliamentary Debates in aid of interpretation of a provision, as can be seen from decisions of the  Supreme Court in State of Travancorev. Bombay Co. Ltd.[9] , State of West Bengal v. Union of India[10]. Subsequently, the Courts commenced placing reliance upon the Parliamentary Debates to decipher the intention of an ambiguous word/phrase appearing in a provision, as discernible from the debates surrounding the said provision. As recently as 2017, a 7-Judge Bench of the  Supreme Court, in of Abhiram Singhv. C.D. Commachen[11]  placed reliance upon Parliamentary Debates to understand the connotation of the word “his” appearing in Section 123(3) of the Representation of People Act, 1951. Thus, the Parliamentary Debates while amending Section 24 PMLA would be relevant to ascertain the meaning of the word “charged” appearing therein.

During the course of the Debates leading to the passing of the PMLA (Amendment) Act, 2012, Mr. P. Chidambaram, the then Finance Minister, indicated that “If you look at the original section in the parent Act, Section 24, when a person is accused of having committed the offence, the burden of proving that the proceeds of crime are untainted property shall be on the accused. This was a drastic provision. Simply by an accusation that he had committed an offence of money-laundering, the burden of proof was shifted to the accused. He may not even be charged at that time. This was what we found to be an onerous provision and an unfair provision……then, the question was asked that by using the word ‘charged’, whether we are shifting the burden of proof even at the stage of the report under 173(8). The answer is: obviously, no. Under 173(8), what is filed is a report after investigation. The word ‘charge’ occurs for the first time in the Criminal Procedure Code under Section 211, ‘Every charge under this Code shall state the offence with which the accused is charged.’ So, we borrow the language of 211 and say, replace the word ‘accused’ and say ‘when a person is charged with an offence, that is when the court frames a charge against him under Section 211’. Only at that stage, the burden shifts to him.”  The same is a clear indication of the legislative intent that the presumption against a person is not to apply even at the stage of summoning a person or at the stage of deciding a bail application, but only to apply at the stage when charges are framed against the person.

Here it would be interesting to note that despite the legislative intent being to shield those people who are simply “ accused ” and have not yet been “charged” for the offence of Money Laundering, Courts no less than the   Supreme Court have held Section 24 PMLA to be applicable even at the stage of bail. The  Supreme Court in Gautam Kunduv. Directorate of Enforcement[12], Rohit Tandon v. Directorate of Enforcement[13], the  Gujarat High Court in Pradeep Nirankarnath Sharmav. Directorate of Enforcement[14], Rakesh Manekchand Kothariv. Union of India[15], Jignesh Kishorebhaiv. State of Gujarat[16], the  High Court of Bombay in Chhagan Chandrakant Bhujbalv. Union of India[17], the  High Court of Madras in Farouk Irani v. The Deputy Director, Directorate of Enforcement[18]  have all implicitly held Section 24 to be applicable at the stage of Bail. However, two facts become important to note here, first in none of the cases cited above did the Courts delve into the meaning of the phrase “Charged with the offence of money laundering” and second, most of the aforesaid decisions came at a time when Section 45 PMLA provided two conditions to be complied with before an  accused  person could be released on bail, one of them being the requirement of the  accused  to demonstrate that he is not guilty of the scheduled offence relating to the proceeds of crime. The twin conditions were subsequently held to be unconstitutional by the  Supreme Court in Nikesh Tarachand Shah v. Union of India[19] being violative of Articles 14 and 21 of the Constitution of India. It is possible that the views of the Supreme Court and of the  High Courts in the aforementioned decisions on Section 24 PMLA being applicable at the stage of bail were in light of the existence of the twin conditions against release on bail in Section 45 PMLA, requiring an  accused  to demonstrate his innocence, which is in essence a supplementary provision to Section 24 PMLA.

At the same time, it would be noteworthy there are also judgments which have held that Section 24 PMLA is inapplicable at the stage of bail, such as the decision of the  Bombay High Court in Chhagan Chandrakant Bhujbalv. Assistant Director, Directorate of Enforcement[20] and the decision of the  Gujarat High Court in Jignesh Kishorebhai Bhajiawala v. State of Gujarat[21] and the decision of the  High Court of Delhi in Upendra Raiv.Directorate of Enforcement[22] , wherein the said Courts have implied that Section 24 PMLA would not apply at the stage of bail. It would be relevant to note that the said judgments were passed after the judgment passed by the Supreme Court in Nikesh Tarachand Shah (supra) and the said Courts took the same into consideration, which makes it safe to infer that the earlier decisions applying Section 24 PMLA even at the stage of bail could have been in view of the existence of the twin conditions against release of a person on bail as contained in Section 45 PMLA. Now with the twin conditions having been held unconstitutional and further in view of the clear intent of the legislators while amending Section 24 PMLA it can be said that Section 24 cannot be invoked at the stage of bail or till after the framing of charges by a competent court and hence the earlier judgments mentioned above, can no longer be considered as binding precedent on the aspect of applicability of Section 24 PMLA at the stage of bail.

The above legal question about burden of proof can be tackled in another manner. To rebut the presumption raised against him, an  accused  person would have to demonstrate that the property in question is not “proceeds of crime”. In order to do that he would, as has been correctly held by the  High Court of Andhra Pradesh in  B. Rama Raju  v. Union of India (supra), the  accused  would have to show his income, earnings, assets to show how he has acquired the property in question. In  Abdul Rashid Ibrahim Mansuriv. State of Gujarat[23], the Supreme Court while dealing with a case pertaining to NDPS Act held that the burden of proof cast on the  accused  under Section 35[24] of the said Act can be discharged through different modes. Firstly, the accused  can rely on the materials available in the prosecution evidence. Secondly, he can elicit answers from prosecution witnesses through cross-examination to dispel any such doubt. Thirdly, he may also adduce other evidence when he is called upon to enter on his defence. At the first opportunity, “the accused  can rely on the materials available in the prosecution evidence” is fraught with its own difficulties i.e. how do ensure the prosecution relies upon material which will favor the accused. It must also be kept in mind that it is not something alien to investigating agencies to place reliance upon only those materials which favor the prosecution and to either ignore or to keep from the Court the material favoring the accused. This has prompted the Courts to hold that in the interests of a fair trial, complete disclosure of materials in the possession of the investigating agencies has to be made to the accused so that he is in a position to effectively defend himself/ herself[25]. But here also there are limitations in terms of whether the un-relied upon documents are documents which were seized by the Investigating Officer under a seizure memo or the same are simply in his custody or it is a situation where the accused  claims that he handed the said documents over to the Investigating Officer during the course of investigation, but the same have been neither seized by him nor are the same in his custody. In such situations whether the said documents can be summoned by a Court before framing of charges is debatable and therefore would it be fair to place a reverse burden of proving that the “proceeds of crime” are untainted upon an accused? The answer has to be a loud and resounding NO. To apply the reverse burden on an accused person in such situations would be violative of the right to fair trial as prescribed under the Constitution of India.

In fact, the Supreme Court has recently, in Mohan Lal v. State of Punjab[26], while dealing with a case involving the NDPS Act, 1985, held that in statutes providing a reverse burden, “…the onus will lie on the prosecution to demonstrate on the face of it that the investigation was fair, judicious with no circumstances that may raise doubts about its veracity. The obligation of proof beyond reasonable doubt will take within its ambit a fair investigation, in the absence of which there can be no fair trial. If the investigation itself is unfair, to require the accused to demonstrate prejudice will be fraught with danger vesting arbitrary powers in the police which may well lead to false implication also. Investigation in such a case would then become an empty formality and a farce…”

Likewise, in a  prosecution for the offences punishable under Section 3 PMLA it is incumbent upon the  prosecution to demonstrate its fairness otherwise the Court ought to be loathe to convict an  accused  based on an unfair  prosecution.

Therefore, this presumption under Section 24 PMLA can be effectively discharged by an accused  only during the course of Trial and not at the pre-charge stages, as normally the Courts do not permit reliance upon defence material before charges are framed. Therefore to invoke the presumption under Section 24 PMLA at a stage prior to framing of charges would be unfair, illegal and contrary to the legislative intent as discussed above.

*Advocates, practicing in Delhi on the criminal side for the last 16 and 4 years respectively. Authors specialise in white collar crimes. Regularly appearing before trial courts, appellate courts and Adjudicating Authorities in matters relating to Prevention of Corruption Act, Prevention of Money Laundering Act and other economic/white collar crimes.

[1] Prevention of Money Laundering Act, 2002

[2] B. Rama Raju v. Union of India, 2011 SCC OnLine AP 152 The said judgment is presently under challenge before Supreme Court as Special Leave to Appeal (C) No. 28394/2011 titled as B. Rama Raju v. Union of India and is pending for arguments along with a batch of other petitions and; Usha Agarwal v. Union of India, 2017 SCC OnLine Sikk 146  ; K. Sowbhagya v. Union of India, 2016 SCC OnLine Kar 282 . All the said judgments have upheld the constitutional validity of Section 24 PMLA.

[3] Rajya Sabha Debate dated 25.07.2002

[4] Rajya Sabha Debate dated 25.07.2002

[5] Hanif Khan v. Central Bureau of Narcotics, judgment dated 21.08.2019 passed by Supreme Court in Criminal Appeal No. 1206 of 2013; Babu v. State of Kerala, (2010) 9 SCC 189; Naresh Jain  v. The Deputy Director, Directorate of Enforcement, judgment dated 12.09.2019 passed by Appellate Tribunal for Money Laundering in FPA-PMLA-1332/DLI/2016, FPA-PMLA-1333/DLI/2016, FPA-PMLA-1929/DLI/2017, MP-PMLA-3813/DLI/2017, FPA-PMLA-1930/DLI/2017, MP-PMLA-3816/DLI/2017, FPA-PMLA-1931/DLI/2017, MP-PMLA-3837/DLI/2017, FPA-PMLA-1952/DLI/

[6] State of Maharashtra v. Wasudeo Ramchandra Kaidalwar, (1981) 3 SCC 199

[7] Jafar Mohammed Hasanfatta v. Deputy Director, 2017 SCC OnLine Guj 2476; Kavitha G. Pillai v. The Joint Director, 2017 SCC OnLine Ker 10118; Tech Mahindra Limited v. Joint Director, Directorate of Enforcement, Hyderabad, judgment dated 22.12.2014 passed by Andhra Pradesh High Court in WP No. 17525/2014

[8] 2017 SCC OnLine Ker 10118

[9] 1952 SCR 1112

[10] (1964) 1 SCR 371

[11] (2017) 2 SCC 629

[12] (2015) 16 SCC 1

[13] (2018) 11 SCC 46

[14] 2017 SCC OnLine Guj 1372

[15] 2015 SCCOnLine Guj 3507

[16] 2017 SCC OnLine Guj 1371

[17] 2016 SCC OnLine Bom 9938

[18] Judgment dated 05.05.2017 passed by  Madras High Court in Criminal Original Petitions Nos. 20423, 20454 and 20581 of 2016

[19] (2018) 11 SCC 1

[20] 2016 SCC OnLine Bom 9938

[21] 2017 SCC OnLine Guj 1371

[22] 2019 SCC OnLine Del 9086

[23] (2000) 2 SCC 513

[24] Section 35 NDPS states as follows-

“35. Presumption of culpable mental state.–?(1) In any prosecution for an offence under this Act which requires a culpable mental state of the accused, the Court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution. Explanation.?In this section culpable mental state? includes intention, motive knowledge of a fact and belief in, or reason to believe, a fact.

(2) For the purpose of this section, a fact is said to be proved only when the court believes it to exist beyond a reasonable doubt and not merely when its existence is established by a preponderance of probability.”

[25] P. Gopalkrishnan v. State of Kerala,  2019 SCC Online SC 1532; V.K. Sasikala v. State, (2012) 9 SCC 771; Shashi Bala v. State, Govt. NCT of Delhi, 2016 SCC OnLine Del 3791; Ashutosh Verma v. CBI, 2014 SCC OnLine Del 6931

[26] (2018) 17 SCC 627

Hot Off The PressNews

Supreme Court: The Bench comprising of  R Banumathi, A S Bopanna and Hrishikesh Roy, JJ., granted bail to P. Chidambaram in INX money Laundering Case registered by the Enforcement directorate.

Pointers to be noted:

  • P Chidambaram will not leave the country without prior permission of the court
  • He has been released on a personal bond of Rs 2 lakh with two surety of like amount
  • Delhi High Court’s November 15 verdict dismissing bail plea of P Chidambaram has been set aside.
  • Court has also restrained Chidambaram from giving any press interviews or making statements in the media

Background:

Chidambaram sought bail in a case pertaining to the Foreign Investment Promotion Board (FIPB) clearance given to INX Media to the tune of Rs 305 crore in 2007 by Chidambaram when he was the Finance Minister. He was arrested by the ED on October 16 and is currently in judicial custody. Denying bail to Chidambaram in the case, the High Court had stated that prima facie allegations against him are “serious in nature” and he played an “active and key role” in the offence.

Senior advocates Kapil Sibal and Abhishek Manu Singhvi, appearing on behalf of Chidambaram today, submitted before the top court that their client has been in jail for over 90 days and has cleared the triple test criterion to avail the bail. Chidambaram had sought bail on the health grounds. The Congress leader also asserted that no part of the triple test, which includes flight risk, influencing witnesses and tampering with evidence, has been made out against him. He stated that there was no allegation that he was a flight risk following the issuance of a Look out Circular (LOC).

On October 22, 2019, the bench had granted bail to former Finance Minister and senior Congress leader P Chidambaram in connection with the INX Media case registered by the Central Bureau of Investigation (CBI).

The Court noticed that Chidambaram was neither a “flight risk” nor there was possibility of his abscondence and said that Chidambaram

“being the Member of Parliament and a Senior Member of the Bar has strong roots in society and his passport having been surrendered and “look out notice” issued against him, there is no likelihood of his fleeing away from the country or his abscondence from the trial.”

[Detailed Judgment to be Updated] Stay tuned in!

Hot Off The PressNews

The Financial Action Task Force (FATF) has called on its members and other jurisdictions to apply counter-measures to protect the international financial system from the ongoing and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdiction of Democratic People’s Republic of Korea (DPRK).

Jurisdiction of Iran is subject to a FATF call on its members and other jurisdictions to apply in line with Recommendation 19:

1. Increased supervisory examination for branches and subsidiaries of financial institutions based in Iran;
2. Enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and
3. Increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.

Specific attention is brought to extract from Public Statement on Iran as follows:

“The FATF decided in June 2019 to call upon its members and urge all jurisdictions to require an increased supervisory examination for branches and subsidiaries of financial institutions based in Iran. In line with the June 2019 Public Statement, the FATF decided this week to call upon its members and urge all jurisdictions to introduce enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.

If before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will fully lift the suspension of counter-measures and call on its members and urge all jurisdictions to apply effective counter-measures, in line with recommendation 19.

The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran, consistent with FATF Recommendation 19, including: (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.”

Similarly, on DPRK, the FATF Public Statement states that:

” FATF has serious concerns with the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing.

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions, and those acting on their behalf. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures, and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions, to protect their financial sectors from money laundering, financing of terrorism and WMD proliferation financing (ML/FT/PF) risks emanating from the DPRK. Jurisdictions should take necessary measures to close existing branches, subsidiaries and representative offices of DPRK banks within their territories and terminate correspondent relationships with DPRK banks, where required by relevant UNSC resolutions.”

Further, FATF has identified the following jurisdictions as having strategic deficiencies which have developed an action plan with the FATF to deal with them. These jurisdictions are: The Bahamas, Botswana, Cambodia, Ghana, Iceland, Mongolia, Pakistan, Panama, Syria, Trinidad and Tobago, Yemen and Zimbabwe. FATF has also identified Ethiopia, Sri Lanka and Tunisia as jurisdictions which are no longer subject to monitoring.

About FATF

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally. The FATF’s decision-making body, the FATF Plenary, meets three times a year and updates these statements, which may be noted. India became Observer at FATF in the year 2006 and became 34th member country of FATF on 25th June 2010.

Securities Exchange Board of India

[Press Release dt. 21-11-2019]

Hot Off The PressNews

Supreme Court: The bench of R Banumathi, A S Bopanna and Hrishikesh Roy, JJ has  sought a response from the Enforcement Directorate (ED) on an appeal filed by former union finance minister P Chidambaram challenging the Delhi High Court ‘s order dismissing his bail petition in the INX Media money laundering case. The Court issued a notice to the probe agency and posted the matter for hearing to November 26.

Chidambaram sought bail in a case pertaining to the Foreign Investment Promotion Board (FIPB) clearance given to INX Media to the tune of Rs 305 crore in 2007 by Chidambaram when he was the Finance Minister. He was arrested by the ED on October 16 and is currently in judicial custody. Denying bail  to Chidambaram in the case, the High Court had stated that prima facie allegations against him are “serious in nature” and he played an “active and key role” in the offence.

Senior advocates Kapil Sibal and Abhishek Manu Singhvi, appearing on behalf of Chidambaram today, submitted before the top court that their client has been in jail for over 90 days and has cleared the triple test criterion to avail the bail. Chidambaram had sought bail on the health grounds. The Congress leader also asserted that no part of the triple test, which includes flight risk, influencing witnesses and tampering with evidence, has been made out against him. He stated that there was no allegation that he was a flight risk following the issuance of a Look out Circular (LOC).

On October 22, 2019, the bench had granted bail to former Finance Minister and senior Congress leader P Chidambaram in connection with the INX Media case registered by the Central Bureau of Investigation (CBI).

The Court noticed that Chidambaram was neither a “flight risk” nor there was possibility of his abscondence and said that Chidambaram

“being the Member of Parliament and a Senior Member of the Bar has strong roots in society and his passport having been surrendered and “look out notice” issued against him, there is no likelihood of his fleeing away from the country or his abscondence from the trial.”

(Source: ANI)

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of R Banumathi, AS Bopanna and Hrishikesh Roy, JJ has granted bail to former Finance Minister and senior Congress leader P Chidambaram in connection with the INX Media case registered by the Central Bureau of Investigation (CBI).

Chidambaram is currently in the custody of Enforcement Directorate (ED) till October 24 in the INX Media money laundering case. Chidambaram, who is currently in judicial custody in Tihar jail, had filed a Special Leave Petition (SLP) in the apex court days after the High Court dismissed his bail plea contending that he might influence the witnesses in the case.

When the Solicitor General  Tushar Mehta submitted before the Court that “flight risk” of economic offenders should be looked at as a national phenomenon and be dealt with in that manner merely because certain other offenders have flown out of the country, the Court said that the same cannot, be put in a straight-jacket formula so as to deny bail to the one who is before the Court, due to the conduct of other offenders, if the person under consideration is otherwise entitled to bail on the merits of his own case. Hence, such consideration including as to “flight risk” is to be made on individual basis being uninfluenced by the unconnected cases, more so, when the personal liberty is involved.

The Court noticed that Chidambaram was neither a “flight risk” nor there was possibility of his abscondence and said that Chidambaram

“being the Member of Parliament and a Senior Member of the Bar has strong roots in society and his passport having been surrendered and “look out notice” issued against him, there is no likelihood of his fleeing away from the country or his abscondence from the trial.”

On the allegation of possibility of influencing the witnesses, the Court noticed,

“Till the date, there has been no allegation regarding influencing of any witness by the appellant or his men directly or indirectly. In the number of remand applications, there was no whisper that any material witness has been approached not to disclose information about the appellant and his son. It appears that only at the time of opposing the bail and in the counter affidavit filed by the CBI before the High Court, the averments were made.”

The Court observed that CBI has no direct evidence against Chidambaram regarding the allegation of appellant directly or indirectly influencing the witnesses. It further noticed that the conclusion of the learned Single Judge of Delhi High Court “…that it cannot be ruled out that the petitioner will not influence the witnesses directly or indirectly……” is not substantiated by any materials and is only a generalised apprehension and appears to be speculative. It, hence, held,

“Mere averments that the appellant approached the witnesses and the assertion that the appellant would further pressurize the witnesses, without any material basis cannot be the reason to deny regular bail to the appellant; more so, when the appellant has been in custody for nearly two months, co-operated with the investigating agency and the charge sheet is also filed.”

Setting aside the Delhi High Court judgment, the Court, hence, directed that Chidambaram be released on bail if not required in another case subject to the condition of his executing bail bonds for a sum of Rs.1,00,000/- with two sureties of like sum to the satisfaction of the Special CBI Judge. The Court further directed,

“The passport if already not deposited, shall be deposited with the Special Court and Chidambaram shall not leave the country without leave of the Special Court and subject to the order that may be passed by the Special Judge from time to time. He shall make himself available for interrogation as and when required.”

[P. Chidambaram v. Central Bureau of Investigation, 2019 SCC OnLine SC 1380, decided on 22.10.2019\

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Supreme Court: Senior Congress leader P Chidambaram on Thursday moved the Supreme Court against the order of the Delhi High Court that dismissed his bail plea in the INX Media case. Chidambaram, who is currently in judicial custody in Tihar jail, filed a Special Leave Petition (SLP) before the Supreme Court earlier today, days after the High Court dismissed his bail plea contending that he might influence the witnesses in the case.

Refuting the contentions put forth by the high court, Chidambaram asserted that he has not influenced any witness or accused in the case.

“A mere apprehension without there being substantial evidence and particulars of an accused approaching any witness is not enough to deny bail to an accused,”

Alluding to certain inputs submitted by the Central Bureau of Investigation (CBI) to the court in a sealed cover, the petition stated,

“The liberty has thus been denied on the basis of the baseless, anonymous and unverified allegation made behind the petitioner’s back.”

Chidambaram said that the submissions made by the agency in the sealed cover were “highly objectionable and against all canons of fair play and justice”. The petition also stated that the FIR registered in 2015, did not name Chidambaram. The plea asserted that there was no reference or allegation against him in the FIR.

Chidambaram is facing probe for alleged irregularities in the Foreign Investment Promotion Board (FIPB) clearance given to INX Media to the tune of Rs 305 crore in 2007 when he was the Union finance minister. While the CBI is probing the corruption allegations, the Enforcement Directorate (ED) is looking into money laundering allegations against him in the case. The CBI had arrested Chidambaram on August 21 following which he was sent to judicial custody, which is slated to end today.

(Source: ANI)

Case BriefsSupreme Court

Supreme Court: In a major blow to Senior Congress leader P Chidambaram, the Court has rejected his plea against the Delhi High Court order rejecting his anticipatory bail plea in the INX Media case being probed by Enforcement Directorate (ED). The bench of R Banumathi and AR Bopanna, JJ said,

“In a case of money-laundering where it involves many stages of “placement”, “layering i.e. funds moved to other institutions to conceal origin” and “interrogation i.e. funds used to acquire various assets”, it requires systematic and analysed investigation which would be of great advantage.”

The Court was hearing Chidambaram’s plea against the Delhi High Court order rejecting his anticipatory bail plea in the INX Media case involving alleged irregularities in Foreign Investment Promotion Board (FIPB) clearance given to the INX Media for receiving foreign investment to the tune of Rs.305 crores against approved inflow of Rs.4.62 crores.

Delhi High Court had denied the bail on 2 factors, namely, (i) gravity of the offence; and (ii) the appellant was “evasive” to deny the anticipatory bail. Taking strong exception against the said grounds, Senior Advocate Abhishek Manu Singhvi, argued that,

  • the “gravity of the offence” cannot be the perception of the individual or the court and the test for “gravity of the offence” should be the punishment prescribed by the statute for the offence committed.
  • Insofar as the finding of the High Court that “the appellant was evasive to the questions”, the investigating agency Enforcement Directorate cannot expect an accused to give answers in the manner they want and that the accused is entitled to protection under Article 20(3) of the Constitution of India.

The Court, however, noticed that ordinarily, arrest is a part of the process of the investigation intended to secure several purposes. There may be circumstances in which the accused may provide information leading to discovery of material facts and relevant information. Grant of anticipatory bail may hamper the investigation.

“Pre-arrest bail is to strike a balance between the individual’s right to personal freedom and the right of the investigating agency to interrogate the accused as to the material so far collected and to collect more information which may lead to recovery of relevant information.”

Stating that Section 438 Cr.P.C. is to be invoked only in exceptional cases where the case alleged is frivolous or groundless, the Court noticed that in the case in hand, there are allegations of laundering the proceeds of the crime and that the Enforcement Directorate claims to have certain specific inputs from various sources, including overseas banks. It, hence, held that grant of anticipatory bail, particularly in economic offences would definitely hamper the effective investigation.

“Having regard to the materials said to have been collected by the respondent-Enforcement Directorate and considering the stage of the investigation, we are of the view that it is not a fit case to grant anticipatory bail.”

The Court, however, clarified that

“As and when the application for regular bail is filed, the same shall be considered by the learned trial court on its own merits and in accordance with law without being influenced by any of the observations made in this judgment and the impugned order of the High Court.”

Meanwhile, the CBI special court has sent former union minister P. Chidambaram to judicial custody till 19 September in the money-laundering and corruption case related to the INX Media scam.

[P. Chidambaram v. Directorate of Enforcement, 2019 SCC OnLine SC 1143, decided on 05.09.2019]

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Supreme Court: The Enforcement Directorate has told the Court that custodial interrogation of senior Congress leader P Chidambaram in the INX media case is required as if his plea for anticipatory bail is given it would affect cases involving Vijay Mallya, Mehul Choksi, Neerav Modi and Zakir Naik.

Disputing the contention of Chidambaram’s lawyers, the agency also argued that the offence of money laundering is against the society, nation and the economy. Solicitor General Tushar Mehta appearing for the probe agency told a Bench of Justice R Banumathi and Justice AS Bopanna,

“Money laundering is an offence against society, nation and economy. Economic offences are gravest offences irrespective of quantum of sentence,”

Countering the arguments of Chidambaram’s advocates Kapil Sibal and Abhishek Manu Singhvi that Prevention of Money Laundering Act (PMLA) offences with seven years of punishment is not a grave offence because as per the Code of Criminal Procedure grave offences entail death penalty and life, Mehta said money laundering offences are “grave”. He said,

“Chidambaram’s counsels have argued that gravity of an offence is subjective. PMLA offences may not be grave for them but the Courts have consistently held that economic offences are grave in nature. Gravity is a relative concept. Quantum of punishment is not relevant. What’s important is what will be the impact of your offence in society. Money laundering is an offence against the society, nation and economy. Economic offences are gravest offences irrespective of quantum of sentence,”

The Court was hearing Chidambaram’s plea against Delhi High Court’s order denying anticipatory bail to him in a case being probed by the ED.

SG also objected to the proposition made by Chidambaram’s counsel Kapil Sibal to confront him with evidence before presenting it in the court, saying it is “absurd” and would have “devastating results” and is “preposterous”. He added,

“Whether the accused’s reply was evasive or not is decided by investigating agency and not by the court”

SG also contended that if accused at large is confronted with the evidence collected, then the agency will have exposed its evidence and witnesses and it will give a chance to the accused to tamper with evidence and erase the money trail.

“The investigating agency has absolute discretion to what extent to reveal the evidence to the accused. It is best to confront the accused with evidence when he is in custody,”

He further said that investigation is an art where the agency brings the accused to divulge details and not a mere question and answer format or an interview. He also argued that if given an anticipatory bail, Chidambaram may erase the money trail, influence the witnesses and tamper with evidence.

“It’s impossible to investigate when he’s armed with anticipatory bail. It’s ED’s right and duty to unearth the truth. It would be difficult for the ED to catch him if he is under a protective umbrella and best way to elicit truth is when an accused is not under a protective umbrella,”

In 2017, the Central Bureau of Investigation  had registered an FIR alleging irregularities in the Foreign Investment Promotion Board (FIPB) clearance was given to INX Media to the tune of Rs 305 crore in 2007 when Chidambaram was the Union finance minister.

Following the FIR filed by CBI, ED had filed a case of money laundering against him.

(Source: ANI)

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Supreme Court: The bench of R Banumathi and A S Bopanna, JJ has extended till tomorrow the interim protection from arrest granted to senior Congress leader P Chidambaram in a money laundering case filed by the Enforcement Directorate in the alleged INX media scam.

The Court was hearing a Special Leave Petition (SLP) moved by Chidambaram against the Delhi High Court order denying him anticipatory bail in the ED case. The hearing in the case will continue tomorrow.

Solicitor General Tushar Mehta is likely to make submissions on the application filed by the Kapil Sibal, counsel of Chidambaram, seeking a direction to the Enforcement Directorate (ED) to produce his client’s statement recorded by them in the case.

A Special court had yesterday extended the CBI remand of the Congress leader by four days in a corruption case filed by the CBI in INX media scam. The agency had sought an extension contending that they have to “unravel the larger conspiracy”.

In 2017, the CBI had registered an FIR alleging irregularities in the Foreign Investment Promotion Board (FIPB) clearance given to INX Media to the tune of Rs 305 crore in 2007 when Chidambaram was the Union finance minister. Following the FIR filed by CBI, ED had filed a case of money laundering against him.

(Source: ANI)

Hot Off The PressNews

Supreme Court:  The bench of R Banumathi and A S Bopanna, JJ has extended the protection from arrest given to former finance minister P Chidambaram in the INX Media money laundering case lodged by the Enforcement Directorate till Tuesday. The bench also dismissed the petition filed by senior Congress leader P. Chidambaram for anticipatory bail in the corruption case lodged by the Central Bureau of Investigation (CBI), saying the plea has become “infructuous” as he had already been arrested.

The bench will continue hearing on Tuesday the petition of Chidambaram challenging the Delhi High Court order which had rejected his anticipatory bail plea in the money laundering case.

Senior advocate Kapil Sibal, appearing for Chidambaram completed his arguments and said he will file the rejoinder to the ED’s counter affidavit.

Solicitor General Tushar Mehta, appearing for ED, said he will advance his arguments Tuesday and the bench posted the matter for hearing at noon tomorrow.

During the pre-lunch session, Sibal said that fair trial and fair investigation were part of Article 21 and the court must protect the fundamental right of liberty of Chidambaram. He strongly objected to Mehta’s argument to place on record certain documents in sealed cover for the perusal of the bench.

He said that Chidambaram was examined thrice by the ED — on December 19, 2018, January 1, 2019 and January 21, 2019 — but the questions related to the allegations levelled by the ED against him were not put to him.

The CBI had registered an FIR on May 15, 2017, alleging irregularities in the Foreign Investment Promotion Board (FIPB) clearance granted to the INX Media group for receiving overseas funds of Rs 305 crore in 2007 during Chidambaram’s tenure as the finance minister.

Thereafter, the ED lodged a money laundering case against him in 2017.

Sibal said FIPB consisted of six secretaries of the government, and Chidambaram had only signed the approval as the then finance minister. He further argued,

“The ED has alleged the use of shell companies in the matter but no such firm is directly or indirectly connected to Chidambaram,”

He also said that Chidambaram was not named in the ED’s FIR and no allegations were levelled against him.

Chidambaram, 73, headed the ministries of finance and home during the UPA regime.

(Source: India Today)

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Supreme Court: The Court has said that it will hear the appeal filed by former union minister P Chidambaram against the Delhi High Court’s order rejecting his anticipatory bail plea in the INX media case being probed by the CBI on August 26.

During the hearing, when the Court asked litigant’s advocate Kapil Sibal if he wants to argue, he said, “Yes, I want to argue.” Citing the notice posted by the probe agency on Tuesday outside Chidambaram’s residence asking him to present himself within two hours of the receipt of the summon, Sibal said his client moved the Supreme Court soon after the development and also intimidated the CBI. Sibal added that his client’s right under Article 21 cannot be denied. He said,

“Chidambaram is in five days of police remand by the CBI. I challenge that order,”

Thereafter, Solicitor General Tushar Mehta, who argued for central probe agency said,

“Chidambaram’s plea doesn’t survive since he is in CBI’s custody”.

After hearing the arguments from both the sides, Justice R Banumathi said that the appeal filed by Chidambaram will be heard on August 26. “In ED matter Chidambaram has not been arrested,” she said.

On August 21, the Delhi High Court had dismissed Chidambaram’s plea for anticipatory bail. The Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) had issued look-out notices against him on Wednesday in the INX media case. A special anti-corruption court on Thursday sent the Congress leader to CBI custody till August 26.

In 2017, the CBI had registered an FIR alleging irregularities in the Foreign Investment Promotion Board (FIPB) clearance given to INX Media to the tune of Rs 305 crore in 2007 when Chidambaram was the Union Finance Minister.

(Source: ANI)

Case BriefsSupreme Court

Supreme Court: The bench of Arun Mishra and UU Lalit, JJ has cancelled the registration of Amrapali Group of Companies under RERA for defrauding homebuyers. The Court also cancelled the various lease deeds granted in favour of Amrapali Group of Companies by Noida and Greater Noida Authorities for projects in question.

“Because of their failure to fulfil the obligations towards the buyers and the serious kind of fraud which has been played by them upon the home buyers, the registration of Amrapali group of companies under the Real Estate Regulation and Development Act, 2016 deserves to be cancelled.”

The Court noticed that no accounts were prepared w.e.f. the years 2015-2018 and money withdrawn was diverted during the said period. The Statutory Auditor, Anil Mittal failed in duty and was part of fraudulent activities as found in the Forensic Report. The money obtained from banks was diverted to unapproved uses such as for the creation of personal assets of Directors, creation of assets in closely held companies by the Directors along with their partners and relatives, for personal expenses of Directors, to give advances without carrying interest for several years. There was total non-monitoring by the bankers.

“The Noida and Greater Noida Authorities were grossly negligent in reviewing and monitoring the progress of the projects and in collusion with leaseholders failed to take action concerning nonpayment of dues and illegally permitted the group to sub-lease the land without payment of dues. Bogus allotments of flats were made. There were other irregularities galore.”

Below are some of the important directions issued by the Court,

  • Noida and Greater Noida Authorities shall have no right to sell the flats of the home buyers or the land leased out for the realization of their dues. Their dues shall have to be recovered from the sale of other properties which have been attached. The direction holds good for the recovery of the dues of the various Banks also.
  • NBCC has been appointed to complete the various projects and hand over the possession to the buyers. The percentage of commission of NBCC is fixed at 8 percent.
  • The home buyers are directed to deposit the outstanding amount under the Agreement entered with the promoters within 3 months from today in the Bank account opened in UCO Bank in the Branch of this Court. The amount deposited by them shall be invested in the fixed deposit to be disbursed under the order of this Court on phase-wise completion of the projects/work by the NBCC.
  • Various Companies/ Directors and other incumbents in whose hands money of the home buyers is available as per the report of Forensic Auditors, should deposit the same in the Court within one month. The last opportunity of one month is granted to deposit the amount and to do the needful failing which appropriate action shall be taken against them.
  • Concerned Ministry of Central Government, as well as the State Government and the Secretary of Housing and Urban Development, should ensure that appropriate action is taken as against leaseholders concerning such similar projects at Noida and Greater Noida and other places in various States, where projects have not been completed.
  • Senior Advocate R. Venkataramani has been appointed as the Court Receiver. The right of the lessee shall vest in the Court Receiver and he shall execute through authorized person on his behalf, the tripartite agreement and do all other acts as may be necessary and also to ensure that title is passed on to home buyers and possession is handed over to them.
  • Noida and Greater Noida Authorities are also directed to execute the tripartite agreement within one month concerning the projects where homebuyers are residing and issue completion certificate notwithstanding that the dues are to be recovered under this order by the sale of the other attached properties. Registered conveyance deed shall also be executed in favour of homebuyers, they are to be placed in the possession and they shall continue to do so in future on completion of projects or in part as the case may be.

The Court also said,

“In view of the finding recorded by the Forensic Auditors and fraud unearthed, indicating prima facie violation of the FEMA and other fraudulent activities, money laundering, we direct Enforcement Directorate and concerned authorities to investigate and fix liability on persons responsible for such violation and submit the progress report in the Court and let the police also submit the report of the investigation made by them so far.”

It also directed the Institute of Chartered Accountants of India to initiate the appropriate disciplinary action against Anil Mittal, CA for his conduct as reflected in various transactions and the findings recorded in the order and his overall conduct as found on Forensic Audit. The proceedings are to be completed within 6 months.

[Bikram Chatterjee v. Union of India, 2019 SCC OnLine SC 901, decided on 23.07.2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: The Coram of Manmohan Singh, J. (Chairman) and G.C. Mishra (Member) allowed the appeal of a person whose property, allegedly pertaining to a money laundering transaction, had been seized.

An FIR was registered by the CBI in 2017 under Section 13 of the Prevention of Corruption Act, 1988 and Sections 120B read with Sections 420, 467, 468 and 471 of the Penal Code, 1860 against a company Sterling Biotech Ltd. Sole allegation against appellant was that he was involved in erasing and taking a backup of certain digital data/records pertaining to one Ghanshyam Pandya, and that he was in possession of certain documents/records/property relating to money laundering. His residential premises were searched and the respondent sealed his 4 mobile phones, 2 pen drives, 2 mobile tablets, and 1 laptop. The Adjudicating Authority passed an order under Section 8(3) of Prevention of Money Laundering Act, 2002 confirming retention of the property. Hence, the present appeal.

Dr Shamsuddin, Advocate appearing on behalf of the appellant contended that Section 20(1) of PMLA mandates that the officer authorised by Director is under an obligation to record the ‘reason to believe’ in writing as to why the seized property is to be retained for adjudication under Section 8. Further, the authorised officer must forward a copy of the order for the retention of the property along with the material in his possession in a sealed envelope to the Adjudicating Authority. On the basis of the ‘reason to believe’ recorded under Section 20(1) and the order passed under Section 20(2), Adjudicating Authority must record a satisfaction under Section 20(4) that the property is prima facie involved in money laundering and is required for adjudication under Section 8. There was no compliance of the statutory mandates.

The Court noted that nothing had been brought on record to prove that the seized properties had any nexus or link whatsoever with money laundering. Settled law states that if a particular thing is to be done in a particular manner, it must be done in that manner only and none other. Reliance in this regard was placed on Dipak Babaria v. State of Gujarat, 2014 (3) SCC 502.

Counsel for the respondent Mr Nitish Rana admitted that appellant was not arrayed in the FIR nor any criminal complaint was pending against him. More than one and a half year had passed and still, nothing was revealed against the appellant.

It was opined that Section 8(3)(a) PMLA provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding 90 days. Since the said period had already elapsed, and no prosecution complaint had been filed against the appellant, therefore it was held that the seizure had lapsed. Accordingly, the respondent was directed to return the property retained by it to the appellant. [Arvind Gupta v. Deputy Director Directorate of Enforcement, Delhi, 2019 SCC OnLine ATPMLA 3, Order dated 25-03-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for PMLA Act: The Coram of Ananya Ray (Member) directed to keep an appeal filed against an order directing attachment of properties bought from proceeds of money laundering, till final disposal of the matter by Special Court.

The present appeal was filed against order vide which attachment of 14 immovable properties and 2 movable properties, which were alleged as having been acquired from the proceeds of scheduled offences under Prevention of Money Laundering Act, 2002, was confirmed.

Appellant’s main plea was that he had already been tried by the Sessions Court and been acquitted by it. Hence, once there was no scheduled offence, there could not be proceeds of crime, and therefore attachment of the properties was liable to be set aside.

The Tribunal noted that Section 43(1) of the PMLA empowers the Central Government to designate one or more Courts of Session as Special Court for the trial of offence punishable under Section 4 PMLA. Further, Section 43(2) of the Act prescribes that the Special Court shall also try an offence (other than the offence of money laundering) with which the accused may have been charged under the Code of Criminal Procedure, 1973. A joint reading of these provisions indicated that the Special Court has must try the offence of money laundering as well as the scheduled offence.

It was opined that the Session Courts had not examined Section 4 of PMLA along with the schedule offence as mandated under Section 44 of PMLA. Hence, it could not be said that appellant’s acquittal had attained finality. Since the appellant’s case had already been taken cognizance of by the Special Court, therefore the instant appeal was directed to be kept in abeyance until final disposal of the case by the Special Court.[Bharat Yadav v. Deputy Director, Directorate of Enforcement, Patna, 2019 SCC OnLine ATPMLA 2, decided on 03-04-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: The coram of Manmohan Singh, J. (Chairman) and G.C. Mishra (Member) ordered to keep an appeal filed before this Tribunal in abeyance until the Special Court, which had already taken cognizance of the matter at hand, finally disposed of the case.

Facts of the case were that one Mr Anup Prakash Garg who was a Director in Andhra Bank from had hatched a criminal conspiracy with Sterling Biotech Ltd. (SBL) and cheated Andhra Bank to the tune of Rs 5382 crores, which was received by him as gratification for favouring SBL group in his capacity as Director of Andhra Bank. The case of the Enforcement Directorate was that the said amount was received by Mr. Garg in cash, and was layered into the appellant company set up by him with his son, wife and his daughter-in-law who were Directors in the appellant company. Aggrieved by the ED’s case in Special Court, the instant appeal was filed.

The preliminary objection taken by counsel for the respondent Mr Nitesh Rana was that ED had filed a case in the Special Court under Prevention of Money Laundering Act, 2002 and the Special Court had already taken cognizance of the same. Therefore, it was pleaded that this case be kept pending till disposal by the Special Court.

The Court noted that the entire scheme of PMLA provides that only a Special Court can adjudge on the offence of money laundering. Section 44(1)(a) of PMLA specifically states that an offence punishable under Section 4 and any scheduled offence connected to the offence under that Section shall be triable by a Special Court. Reliance in this regard was placed on Nikesh Tarachand Shah v. Union of India, (2018) 11 SCC 1.

In view of the above, it was held that only the Special Court had the power to decide on the offence of money laundering.[RAG Buildtech (P) Ltd. v. Deputy Director, Directorate of Enforcement, Delhi, FPA-PMLA-2548/DLI/2018, decided on 26-03-2019]

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Westminster Court, United Kingdom:  A provisional arrest warrant has been issued against the fugitive diamond merchant, Nirav Modi for his extradition in a money laundering case.

He is the main accused in the Punjab National Bank scam case.

The Westminster Court has issued the arrest warrant against Nirav Modi as part of processing this extradition request. The warrant is provisional, and he is entitled to obtain bail.

Background of the scam:

As reported by Hindustan Times, Two PNB employees sent unauthorised letters of undertakings (LoUs), essentially bank guarantees, to foreign branches of Indian lenders, on behalf of firms related to Nirav Modi and the Gitanjali Group. The LoUs basically told these other lenders: Lend money to Nirav Modi firms so that they can pay for their imports. If they don’t pay up, we will make good this payment.

In the PNB fraud case, the bank employees had sent these guarantees in the absence of credit limits and collateral security (in Modi’s case). Secondly, they didn’t make an entry in the bank’s core banking system – the software used to support a bank’s most common transactions, which also acts as a record keeper.

Reported by Media

Legislation UpdatesRules & Regulations

G.S.R. 108(E)— In exercise of the powers conferred by sub-section (1), read with clauses (i), (j), (jj), (jjj) and (k) of sub-section (2) of Section 73 of the Prevention of Money-laundering Act, 2002 (15 of 2003), the Central Government hereby makes the following rules further to amend the Prevention of Money- laundering (Maintenance of Records) Rules, 2005, namely:—

1. (1) These rules may be called the Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2019.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (hereinafter referred to as the said rules), in rule 2, in sub-rule (1),-

  1. (i)  for clause (aaa), the following clause shall be substituted, namely:-‘(aaa) “Aadhaar number” shall have the meaning assigned to it in clause (a) of Section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016);’
  2. (ii)  clauses (aac) and (aad) shall be omitted;

  3. (iii)  in clause (d),

    1. (a)  after the words “driving licence,”, the words “proof of possession of Aadhaar number” shall be inserted;
    2. (b)  after the third proviso, the following proviso shall be inserted, namely:-“Provided also that where the client submits his proof of possession of Aadhaar number as an officially valid document, he may submit it in such form as are issued by the Unique Identification Authority of India;”Please refer the link for detailed notification: NOTIFICATION

Ministry of Finance

[F. No. P.12011/24/2017-ES Cell-DoR]

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As reported by the media, Sajid Javid the UK Home Secretary signed the extradition order of Vijay Mallya on 04-02-2019.

Westminster Magistrates’ Court had sent Vijay Mallya’s case to the Home Secretary for a decision on whether to order extradition.

Mallya said he intends to appeal the decision, “After the decision was handed down on December 10, 2018, by Westminster Magistrates Court, I stated my intention to appeal. I couldn’t initiate appeal process before a decision by Home Secretary. Now I’ll initiate the appeal process”.

Mallya has 14 days’ time to appeal against his extradition in a higher court.

Vijay Mallya was facing charges of fraud, money laundering and violation of Foreign Exchange Management Act (FEMA).

[Source: Economic Times]