money laundering

Case BriefsForeign Courts

Westminster Magistrates’ Court: Marking a significant development in the Punjab National Bank fraud case, District Judge Sam Goozée while deliberating upon request submitted by the Government of India for the extradition of Nirav Modi held that, Modi’s extradition to India is compatible with his ECHR Convention rights within the meaning of Human Rights Act, 1998, therefore for further processes as per Section 87(3) of Extradition Act, 2003, the case shall be sent to the Secretary of State for a decision as to whether Nirav Modi is to be extradited. The Court also notified Mr Modi that he has the right to appeal to the High Court (on a point of law or fact or both) against the Judge’s decision to send the matter to the Secretary of State. However, it was clarified that in case Mr Modi chooses to exercise his right to appeal, the appeal will not be heard until the Secretary of State has reached a decision on the matter.

Background

CBI and Enforcement Directorate Cases: In January 2018, CBI received a complaint by the Deputy General Manager of the Punjab National Bank alleging large-scale fraud perpetrated by Nirav Modi. It was alleged that a number of Modi’s firms had fraudulently used the credit facility offered by PNB known as ‘Letters of Undertaking’ [a form of bank guarantee to facilitate foreign transactions]. Post investigating the matter, CBI charged Mr Modi with offences under Section 120B (IPC) (Criminal Conspiracy) read with Section 420 of the IPC (Cheating and Dishonestly Inducing Delivery of Property), Section 409 of IPC (criminal breach of trust by a public servant or by banker, merchant or agent) and Section 13 of the Prevention of Corruption Act 1988 (Criminal Misconduct by a Public Servant).

As a result of the CBI investigation, the Enforcement Directorate (ED) launched a parallel investigation into offences of suspected money laundering of the proceeds of the fraud reported by PNB. As a consequence, as a result, Nirav Modi was charged with an offence contrary to Section 3 of the Prevention of Money Laundering Act 2002.

Evidence Tampering: It was also alleged that, Modi conspired to remove the original documents relating to the LOU applications from PNB bank premises to the offices of a law firm. The firm was misled into accepting the documents as they were informed that the documents they were receiving were not original documents.

Subsequent disappearance and Extradition attempts by India: Owing to the uproar following the revelation of the bank fraud, Nirav Modi absconded. He was later reported to be sighted in the United Kingdom. Once his presence in the UK was confirmed, the Government of India put forth the extraction request in July 2018, to seek Modi’s return for the purposes prosecution. Post-certification of the requests by the Home Office in February 2019, the Secretary of State issued a  certificate in accordance with s.70(1) of the  Extradition Act, 2003, certifying the requests were valid and had been made in the approved way. Nirav Modi was arrested on 19th March 2019 and has remained in custody throughout the extradition proceedings.

Issues

The primary issue that concerned the Court was that Section 78(4)(b) of Extradition Act, 2003 required the Judge to decide whether the offences specified in the request are extradition offences or not.

Contentions  

Nirav Modi, via his counsels Clare Montgomery and Ben Watson challenged the extradition requests on the following grounds-

  • Whether the offences stated in the requests are extradition offences as per S. 137 of Extradition Act, 2003. Whether there is a prima facie case and evidence which would be sufficient to make a case requiring an answer by Nirav Modi if the proceedings were the summary trial of information against him.
  • Whether extradition is compatible with Modi’s ECHR Convention rights,  especially Articles 3 and 6 (as per the requirement in S. 87 of Extradition Act)
  • It was further contended that granting the extradition request will be oppressive to Mr. Modi’s mental health (S. 91 of Extradition Act).

Court’s Observations

Perusing the facts, the contentions of the case, evidences produced and issues of human rights, the Court deemed it fit to categorize its discussion and observations under the following heads-

Prima facie case (CBI, ED): After perusing “16 volumes of evidence and information from the GOI and 16 bundles of expert reports and defence evidence and a total of 32 lever arch folders of documents”, the Court concluded that, “On one possible view of the evidence, I am satisfied that there is evidence upon which NDM could be convicted in relation the conspiracy to defraud the PNB. A prima face case is established”. Similarly, the Court observed that there is a prima facie case of money laundering as well. The conclusions were based on a detailed scrutiny of the facts and evidences adduced, based on which the Court was satisfied that the LOUs issued to Modi’s firms without appropriate cash margins and without being recorded on the bank’s systems. The concerned LOUs were also issued in direct contravention to the Circular issued by the Bank. The Court was also satisfied that the evidences had clearly established the links between Nirav Modi and the co- conspirators. The CBI investigation also demonstrated that Nirav Modi had retained control of the Nirav Modi Firms but had sought to disguise the control of the firms through the use of dummy partners recruited at his behest in order to sustain the LOU scheme.

Extradition Offences:  The Court observed that offences specified in the request are extradition offences as defined by Section 137(3) of Extradition Act. Nirav Modi is accused in a Category 2 territory of the commissions of offences constituted by the conduct set out in the request. The Court noted that the burden rests on the Requesting State (in this case India) to prove to the criminal standard pursuant to Section 206 Extradition Act that the offences within the request are extradition offences. “The approach is to look at the essentials of the conduct relied on and consider whether if it had occurred in England, at the time it was alleged to have occurred, it would have constituted an English offence” that is to say that the words “constitute an offence” in Section 137(2)(b) does not mean the Requesting State has to prove guilt of Nirav Modi in English law, it simply means that, if proved, it would constitute a comparable English offence. Examining the concerned provisions of the 2003 Act, the Court stated that, “A request need not identify the relevant mens rea of the equivalent English offence for the purposes of satisfying dual criminality. Instead it suffices that the necessary mental element can be inferred by the court from the conduct identified in the request documents or that the conduct alleged includes matters capable of sustaining the mental element necessary under English law”.

Analyzing the submissions of the Indian Government, the Court was satisfied that they had proved that ‘conduct’ in the requests is capable of satisfying the requirements of the notional English offences, thereby meeting the requirements of Section 137 of Extradition Act.

Human Rights (Articles 3 and 6 of ECHR and S. 91 of Extradition Act): The Court took note of the doubts raised by Nirav Modi’s counsels that he will not be tried fairly in India, citing evidences regarding the fragility of the independence of the judiciary. The District Judge observed that, Modi’s case has garnered huge media attention due to the allegations of defrauding a State-owned bank of significant sums of money, therefore it comes of no surprise that the case has garnered political interest and some commentary. “Sensationalist media reporting in high profile criminal cases is not unique to India and is not unknown in this jurisdiction. Courts are used to dealing with high profile cases which are subjected to ill-advised political commentary”. The Court concluded that irrespective of the media and political attention, there is no evidence which raises a doubt on the independence of judiciary and suggests that upon extradition, Nirav Modi will not be tried fairly.

Regarding the concerns directed towards deterioration of Nirav Modi’s mental health, the Court noted the Indian Government’s details about Barrack No 12, Arthur Road Jail, where Nirav Modi will be lodged upon his extradition; and also the comprehensive assurances vis-à-vis Modi’s physical and mental well-being during his time in prison. The Court also perused Nirav Modi’s psychiatric report, which states that Modi requires regular psychiatric support to review and adjust his medication as required. Based on the expert opinions and information furnished on the issue, Sam Goozée, J., concluded that “I have no doubt that Courts would ensure these assurances are upheld. There is no reliable evidence of the GOI breaching their solemn diplomatic assurance… the Indian authorities have capacity to cope properly with NDM’s mental health and suicidal risk, bolstered by NDM being able to access private treatments from clinicians. I also weigh up the strong public interest in giving effect to extradition treaty obligations”.

Other Remarks: Apart from the aforementioned observations, the Court also pointed gave a sharp critique on certain aspects that emerged during the course of the proceedings-   

  • In course of examining the numerous evidences adduced, the Judge noted that, “Unlike the evidence from the Defence, the evidence produced by the GOI in the case, through no fault of Counsel, was poorly presented and very difficult to navigate”.
  • The Judge also made some scathing remarks on the “ill-advised political commentary” and sensationalist approach of the media around the case.
  • The Judge particularly took note of the comments expressed by former Supreme Court Judge Shri Markandey Katju (expert opinion), stating that, “Despite having been a former Supreme Court judge in India until his retirement in 2011 his evidence was in my assessment less than objective and reliable. His evidence in Court appeared tinged with resentment towards former senior judicial colleagues. It had hallmarks of an outspoken critic with his own personal agenda. I found his evidence and behaviour in engaging the media the day before giving evidence to be questionable for someone who served the Indian Judiciary at such a high level appointed to guard and protect the rule of law”.

[Government of India v. Nirav Deepak Modi, decided on 25-02-2021]

Sucheta Sarkar, Editorial Assistant has put this story together.

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of SA Bobde, CJ and AS Bopanna* and V. Ramasubramanian, JJ has held that  under the Prevention of Money ­Laundering Act, 2002, though the Directorate of Enforcement is vested with sufficient power to freeze the accounts; such power is circumscribed by a procedure laid down under the statute.

“It certainly is not the requirement that the communication addressed to the Bank itself should contain all the details. But what is necessary is an order in the file recording the belief as provided under Section 17(1) of PMLA before the communication is issued and thereafter the requirement of Section 17(2) of PMLA after the freezing is made is complied.”

Background

Enforcement Directorate in order to track the money trail relating to the predicate offence by the appellant company and prevent layering of the same had initiated the proceedings under the Prevention of Money ­Laundering Act, 2002 (PMLA). This led to the freezing of the accounts maintained by the appellant company.

It was Appellant Company’s case that the freezing of the accounts has prejudiced the appellant, inasmuch as, the amount in the account which belongs to the appellant is made unavailable to them due to which statutory payments to be made to the Competent Authorities under various enactments is withheld and the payment of salary which is due to the employees is also prevented. The limited issue before the Supreme Court, hence, is that of defreezing the bank account so as to enable the appellant to make the statutory payments.

Analysis

Scheme of PMLA

While PMLA seeks to achieve the object of preventing money laundering and bring to book the offenders, it also safeguards the rights of the persons who would be proceeded against under the Act by ensuring fairness in procedure. Hence a procedure, including timeline is provided so as to ensure that power is exercised for the purpose to which the officer is vested with such power and the Adjudicating Authority is also kept in the loop.

Section 17 of PMLA

The pre-requisite of Section 17 of PMLA is that the Director or such other Authorised Officer in order to exercise the power under the section, should on the basis of information in his possession, have reason to believe that such person has committed acts relating to money laundering and there is need to seize any record or property found in the search.  Such belief of the officer should be recorded in writing.

  • Sub-section (1A) to Section 17 of PMLA provides that the Officer Authorised under sub-section (1) may make an order to freeze such record or property where it is not practicable to seize such record or property.
  • Subsection (2) provides that after search and seizure or upon issuance of a freezing order the Authorised Officer shall forward a copy of the reasons recorded along with material in his possession to the Adjudicating Authority in a sealed envelope.
  • Sub-section (4) provides that the Authority seizing or freezing any record or property under sub-section (1) or (1A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application before the Adjudicating Authority requesting for retention of such record or properties seized.

The Court. Further, emphasised that the freezing of the account will also require the same procedure since a bank account having alleged ‘proceeds of crime’ would fall both under the ambit “property” and “records”.

Discussion on facts

The Directorate of Enforcement in their counter affidavit had taken contradictory stand inasmuch as, while explaining the need to freeze the account has stated that the ‘stop operation’ was requested to stop the further layering/diversion of proceeds of crime and to safeguard the proceeds of crime, which we notice is a power available under PMLA. But in the counter affidavit it is strangely stated that the same has not been done under Section 17(1) of the PMLA. However, in contrast it has been further averred with regard to the power available under PMLA and that PMLA being a stand-alone enactment and independent process whereunder Section 71 of PMLA has an overriding affect over other laws. Irrespective of the stand taken, the power exercised by the Competent Authority should be shown to be in the manner as has been provided in law, in this case under PMLA.

In the instant case, the procedure contemplated under Section 17 of PMLA to which reference is made above has not been followed by the Officer Authorised.

“Except issuing the impugned communication dated 15.05.2020 to AML Officer to seek freezing, no other procedure contemplated in law is followed. In fact, the impugned communication does not even refer to the belief of the Authorised Officer even if the same was recorded separately. It only states that the Officer is investigating the case and seeks for relevant documents, but in the tabular column abruptly states that the accounts have to be ‘debit freezed/stop operations’.”

Hence, the freezing or the continuation thereof is without due compliance of the legal requirement and, therefore, not sustainable.

Power of seizure under Section 102 CrPC – Applicability

The Court rejected Additional Solicitor General S.V. Raju’s contention that the power of seizure is available under Section 102 of the Code of Criminal Procedure, which has been exercised and as such the freezing of the account would remain valid, on the following grounds:

  1. Directorate of Enforcement has contended that PMLA is a standalone enactment. If that be so and when such enactment contains a provision for seizure which includes freezing, the power available therein is to be exercised and the procedure contemplated therein is to be complied.
  2. When the power is available under the special enactment, the question of resorting to the power under the general law does not arise.
  3. The power under Section 102 CrPC is to the Police Officer during the course of investigation and the scheme of the provision is different from the scheme under PMLA. Further, even sub¬section (3) to Section 102 CrPC requires that the Police Officer shall forthwith report the seizure to the Magistrate having jurisdiction, the compliance of which is also not shown if the said provision was in fact invoked. The impugned communication dated 15.05.2020 does not refer to the power being exercised under the Code of Criminal Procedure.

The Court, hence, said that,

“The action sought to be sustained should be with reference to the contents of the impugned order/communication and the same cannot be justified by improving the same through the contention raised in the objection statement or affidavit filed before the Court.”

Conclusion

The Court noticed that in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law.

Finding fault with the Authorised Officer and declaring the action bad only in so far as not following the legal requirement before and after freezing the account, the Court directed the banks to defreeze the respective accounts and clear the cheques issued by the appellant, drawn in favour of the Competent Authority towards the ITDS, PF, ESI, Professional Tax, Gratuity and LIC employees’ deductions, subject to availability of the funds in the account concerned.

It further directed that if any further amount is available in the account after payment of the statutory dues and with regard to the same any action is to be taken by the Directorate of Enforcement within a reasonable time, it would open to them to do so subject to compliance of the required procedure afresh, as contemplated in law.

[OPTO Circuit India Ltd. v. Axis Bank, 2021 SCC OnLine SC 55, decided on 03.02.2021]

*Justice AS Bopanna has penned this judgment

Appearances before the Court

For the appellant company: Senior Advocate Mukul Rohatgi,

For Directorate of Enforcement: Additional Solicitor General S.V. Raju

Op EdsOP. ED.

Introduction

The Prevention of Money-Laundering Act, 2002[1] (PMLA) is a pro-active legislation keen on curbing money-laundering and bringing violators to justice. Such a legislation is definitely the need of the hour considering the number of scams this country has seen in its past and a strong law securing the 4 walls of justice for offenders is welcomed by the people at large. However, off-late, criminal law practitioners (defense lawyers) have found it challenging to deal with PMLA for the fact that the 4 ends securing the 4 walls of ‘presumed’ justice is far too airtight even for genuine non-offenders to escape its clutches, if caught by sheer happenstance. This article deals with one such scenario.

PMLA punishes an individual for the offence of money-laundering under Sections 3 and 4 which read as follows:

“3. Offence of money-laundering.— Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the [proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money-laundering. 

[Explanation. – For the removal of doubts, it is hereby clarified that,

(i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely,

(a) concealment; or

(b) possession; or

(c) acquisition; or

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property, in any manner whatsoever;

 (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever].

  1. Punishment for money-laundering.— Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine:

Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words which may extend to seven years, the words which may extend to ten years had been substituted.”

On a bare reading of these two provisions, any money that is construed to be ‘proceeds of crime’ is liable to be punished under PMLA. ‘Proceeds of crime’ is defined under Section 2(1)(u) as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence[2]. It is my contention that an offence under the PMLA cannot be a stand-alone offence, as an offence is required to be committed (under the Schedule) for the monies/properties to be deemed ‘proceeds of crime’. Without commission of a crime, there exists no proceeds from crime.

The Karnataka High Court in K. Sowbaghya v. Union of India[3] has observed that:

“having regard to the meaning attributed to ‘proceeds of crime’ under PMLA, whereby crime contemplated is the alleged scheduled offence, the ‘proceeds of crime’ contemplated under Sections 3 and 4 are clearly and inextricably linked to the scheduled offence and it is not possible to envision an offence under PMLA as a stand-alone offence without the guilt of the offender in the scheduled offence being established.”

Therefore, on a logical reasoning of the said proposition, only if an offence under the Schedule to PMLA is committed, then the question of proceeds of crime arises.

Coming to the thesis or central question for discussion in this article, there are various offences under various statutes that have been adduced as scheduled offences under the PMLA, and for the major part of the Schedule, I have no quarrel with the intention of the legislature. For example, an offence under Section 25 of the Arms Act (which is a scheduled offence under the PMLA) punishes the individual who possesses or sells unlicensed arms and ammunition. The PMLA, rightly so, punishes the individual for the proceeds he/she has made or property acquired through such possession or sale. Taking another example, certain offences under the Penal Code, 1860 such as Sections 364-A (kidnapping for ransom), 384 to 389 (extortion), 392 to 402 (robbery and dacoity) etc are also scheduled offences under the PMLA. Similar to the previous example, IPC punishes the accused for the offences of kidnapping, extortion or robbery/dacoity whereas the PMLA punishes the accused for the money made or property acquired from the commission of such crimes.

The problem arises when considering offences under the Prevention of Corruption Act, 1988[4] (the PC Act), particularly Section 13. Offences under Section 13 (criminal misconduct by a public servant), also a scheduled offence under PMLA, punishes a public servant for receiving illegal gratification by using his/her public office, misappropriating property or owning/possessing property worth beyond known sources of income or illicit enrichment of wealth (general overview). Contrary to the argument that the PC Act only punishes a person for being corrupt or misusing his public office and PMLA punishes the monies made or properties acquired from such misconduct, I argue that the PC Act collectively performs the functions of the PMLA as well.

The object of PMLA is to prevent money-laundering and to provide for confiscation of property derived from money-laundering. Therefore, the function of PMLA is to seize/confiscate the properties so enjoyed by individuals who have acquired such property by commission of one or more offences which can be acted upon under the Act, apart from punishment for holding such property. The PC Act on the other hand, not only punishes an individual for being corrupt and holding tainted property, it also takes away any property/money derived from such abuse of power/criminal misconduct for the same reason that such property was acquired through illegal means.

The Supreme Court while dealing with a case under the PC Act in Yogendra Kumar Jaiswal v. State of Bihar[5] held that:

“If a person acquires property by means which are not legally approved, the State would be perfectly justified to deprive such person of the enjoyment of such ill-gotten wealth. There is a public interest in ensuring that persons who cannot establish that they have legitimate sources to acquire the assets held by them, do not enjoy such wealth.  Such a deprivation would certainly be consistent with the requirement of Articles 300-A and 14 of the Constitution which prevent the State from arbitrarily depriving a person of his property.”

When the PC Act inclusively curbs and confiscates “proceeds of crime”, would prosecution for the same under PMLA not amount to double jeopardy?

Provisions of the PC Act examined

An analysis of Section 13 of the PC Act will shed further light on this theory. Section 13 reads as follows:

“13. Criminal Misconduct by a Public Servant. — [(1) A public servant is said to commit the offence of criminal misconduct,

(a) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or any property under his control as a public servant or allows any other person so to do; or

(b) if he intentionally enriches himself illicitly during the period of his office.

Explanation 1.- A person shall be presumed to have intentionally enriched himself illicitly if he or any person on his behalf, is in possession of or has, at any time during the period of his office, been in possession of pecuniary resources or property disproportionate to his known sources of income which the public servant cannot satisfactorily account for.

Explanation 2.- The expression known sources of income means income received from any lawful sources.]

(2) Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than [four years] but which may extend to [ten years] and shall also be liable to fine.”[6]

Most cases pending or newly charged are predominantly under the provisions prior to the 2018 amendment due to the check period and hence, emphasis will also be placed on Sections 13(1)(a) to (e), as they were, prior to the amendment. However, the following explanation would be squarely applicable to Section 13 as it is subsequent to the amendment also.

Provision

(Before Amendment)

 Key Word/Phrase
13(1)(a) Gratification other than legal remuneration
13(1)(b) Valuable thing
13(1)(c) Misappropriates property entrusted to him or under his control
13(1)(d) Valuable thing or pecuniary advantage
13(1)(e) Pecuniary resources or property disproportionate to known sources of income
(After amendment) Key Word/Phrase
13(1)(a) Misappropriates property entrusted to him or under his control
13(1)(b) Intentionally enriches himself illicitly

All these provisions have a key word or a phrase within which the alleged actions have to fit into for them to be charged with one of the above offences (all of which are scheduled offences under PMLA). At this point, it is also pertinent to examine the definition of ‘property’ as under Section 2(1)(v) of PMLA:

“(v) “property” means any property or asset of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located;

Explanation.– For the removal of doubts, it is hereby clarified that the term “property” includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences;”

A bare reading of this definition would show that all keywords/phrases for making one liable under Section 13 of the PC Act also (on interpretation) fall under the definition of Section 2(1)(v) of PMLA. Apart from jail time, the objective of Sections 3 and 4 of PMLA are to confiscate any property that is construed to be from proceeds of crime as the person holding the said property has not obtained and enjoyed them through legal means. This, in its very essence is what Section 13 is also trying to accomplish. The Oxford English Dictionary defines the word “pecuniary” as “of or in money”, thereby making construction of the term ‘pecuniary advantage’ to also fall under the definition of property under Section 2(1)(v) of PMLA. This comparison is only to show that cumulatively, Section 13 of the PC Act and Sections 3 and 4 of PMLA are trying to achieve the same goal and have the same objectives. Therefore, initiating action against an individual under both the provisions of law for the same offence or transaction, would amount to double jeopardy.

It is agreed as stated by the Andhra Pradesh High Court in B. Rama Raju v. Union of India[7] that punishment under Sections 3 and 4 of PMLA are distinct proceedings from Section 5 which is attachment of property and subsequent confiscation. However, in a PC Act case, the trial court (CBI Court in most jurisdictions) passes an order of attachment of tainted property or property under presumption that it is through illegal gratifications during the pendency of trial. This is where Section 5 of PMLA comes in conflict with the proceedings already pending before the trial court. Once the properties are already attached and since the PMLA also permits an order of attachment under Section 5, the Enforcement Directorate making an application to transfer all properties from CBI to ED is prima facie posing a direct threat to the investigation conducted by CBI.[8] Both the agencies are looking into the same properties for offences committed and further, only if an offence is established by CBI can it be treated as ‘proceeds of crime’ by ED.

The Supreme Court in Kanhaiyalal v. D.R. Banaji[9] had held that:

 “If a court has exercised its power to appoint a receiver of a certain property, it has done so with a view to preserving the property for the benefit of the rightful owner as judicially determined. If other courts or tribunals of coordinate or exclusive jurisdiction were to permit proceedings to go independently of the court which was placed the custody of the property in the hands of the receiver, there was a likelihood of confusion in the administration of justice and possible conflict of jurisdiction.”

Even though the observations made therein were in a civil case, the same principles are to be applied to criminal cases also, as attachment of property in these matters are quasi civil in nature. If the Enforcement Directorate were to interfere with pending proceedings conducted by CBI, then there would arise a conflict of jurisdiction since both are on the basis of the same offence and properties possessed therein.

The most essential ingredient for an offence under Section 3 of PMLA is the existence of property that is deemed to be a proceed of crime and Section 13 of the PC Act, quintessentially performs the twin function by making the accused public servant liable for abusing his/her office, possessing such property as well as confiscating the said property since it is a proceed of a ‘crime’ committed by the public servant. To makes things more convincing, punishment under Section 13(2) of the PC Act is much more severe than Section 4 of PMLA, thereby justifying its twin purpose.

Double Jeopardy explained

The concept of double jeopardy has been known to mankind from time immemorial. Dating back to 355 BC in Athens, Greece, the law forbids the same man to be tried twice on the same issue. Double jeopardy or non bis in idem is a procedural defense that prevents a person from being tried again on the same or similar charges following a valid conviction or acquittal. The principle of double jeopardy in India existed prior to the drafting and enforcement of the Constitution. It was first enacted in Section 403(1) of the Criminal Procedure Code, 1898 which is now Section 300 of the amended Criminal Procedure Code, 1973. A partial protection against double jeopardy is a Fundamental Right guaranteed under Article 20 (2) of the Constitution of India, which states “No person shall be prosecuted and punished for the same offence more than once”.

In Thomas Dana v. State of Punjab[10], a Constitutional Bench of 5 Judges laid down 3 requirements for double jeopardy i.e. prosecution, punishment and same offence. If these 3 are complied with, then the protection under Article 20(2) is guaranteed.

Section 300 of the Code of Criminal Procedure also protects a person from being tried again where he/she has already been tried and acquitted/convicted for the same offence. Section 26 of the General Clauses Act states that:

 “Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence.”

This is further enumerated by the Supreme Court in Manipur Administration v. Thokchom Bira Singh[11], that for Article 20(2) and Section 26 of the General Clauses Act to act as a bar for second prosecution and its consequential punishment thereunder, it must be for the same offence that is, an offence whose ingredients are the same. Applying the principles of Section 26 of the General Clauses Act, Article 20(2) and the above decision of the  Supreme Court to the present question at hand, it can be stated that since the offence for which PMLA is invoked is essentially the same offence as under the PC Act, the above provisions will get attracted. Therefore, ingredients, occurrences and circumstances are the same for an offence under Section 13 of the PC Act and Sections 3 and 4 of PMLA (including evidence, both oral and documentary) i.e. money/properties acquired through commission of an offence, it is to be concluded that prosecution under PMLA is a second trial for the same offence when the PC Act proceedings are pending or have attained finality.

Conclusions

I have, in this article, tried to give an outline that prima facie, Section 13 of the PC Act and Sections 3 and 4 of PMLA do not harmoniously gel with each other. On the one hand, only if the primary or scheduled crime is made out can a prosecution under PMLA be maintainable (there are certain lines of thought which state, offence under PMLA is stand-alone and is not dependent on any other offence being proved/committed) and on the other hand, even on the existence of an offence under Section 13 of PC Act, the PC Act is a self-sufficient Act which punishes the accused for both abusing the position of being a public servant, as well as having acquired or being in possession of illegal gratification or property that is either misappropriated or disproportionate to known sources of income. Hence, a subsequent action under  PMLA is nothing but a violation of the constitutionally protected fundamental right against double jeopardy. In concluding remarks, it would be pertinent to note that the Schedule to PMLA is to be revisited and pros and cons are to be considered by the Courts having jurisdiction as to whether the provisions of the PC Act (not restricted to Section 13) are to be considered scheduled offences under PMLA.

*Advocate, Madras High Court

[1] Prevention of Money Laundering Act, 2002

[2]Indian Bank v. Government of India, 2012 SCC Online Mad 2526  

[3] 2016 SCC Online Kar 282

[4] Prevention of Corruption Act, 1988

[5](2016) 3 SCC 183

[6]Prior to the 2018 amendment, Section 13(1) reads as follows;

  1. Criminal misconduct by a public servant.—(1) A public servant is said to commit the offence of criminal misconduct,—

(a) if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification other than legal remuneration as a motive or reward such as is mentioned in section 7; or

(b) if he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without consideration or for a consideration which he knows to be inadequate from any person whom he knows to have been, or to be, or to be likely to be concerned in any proceeding or business transacted or about to be transacted by him, or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so concerned; or

(c) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or under his control as a public servant or allows any other person so to do; or

(d) if he,—

(i) by corrupt or illegal means, obtains for himself or for any other person any valuable thing

or pecuniary advantage; or

(ii) by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or

(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or

(e) if he or any person on his behalf, is in possession or has, at any time during the period of his office, been in possession for which the public servant cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income.

Explanation.—For the purposes of this section, “known sources of income” means income received from any lawful source and such receipt has been intimated in accordance with the provisions of any law, rules or orders for the time being applicable to a public servant.

[7] 2011 SCC OnLine AP 152

[8] I take this stand being fully aware of the fact that Section 18-A of the PC Act, pursuant to the 2018 amendment, has paved way and given priority to provisions of PMLA (with respect to attachment) over the Criminal Law (Amendment) Ordinance, 1944 under provisions of which attachment and confiscation are usually made under the PC Act. This bereft of the fact that if attachment in PMLA takes precedence over the PC Act, then the whole idea of establishing proceeds of crime would become null as the procedure for trial are different under both Acts and trial under PMLA is much more accelerated due to its narrow scope for the offence of proceeds of crime.

[9] 1959 SCR 333

[10] 1959 Supp (1) SCR 274

[11] (1964) 7 SCR 123 

Hot Off The PressNews

IT Department conducts serach on Chinese Entities premises

Based on the credible information that few Chinese individuals and their Indian associates were involved in money laundering and hawala transactions through series of shell entities, a search action was mounted at various premises of these Chinese entities, their close confederates and couple of bank employees.

Search action revealed that at the behest of Chinese individuals, more than 40 bank accounts were created in various dummy entities, entering into credits of more than Rs 1,000 Crore over the period.

A subsidiary of Chinese company and its related concerns have taken over Rs 100 Crore bogus advances from shell entities for opening businesses of retail showrooms in India. Further, incriminating documents in respect of hawala transactions and laundering of money with the active involvement of bank employees and Chartered accountants has been found as a result of search action. Evidences of foreign hawala transactions involving Hongkong and US dollars have also been unearthed. Further investigations are under progress.

Ministry of Finance

[Press Release dt. 11-08-2020]

[Source: PIB]

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\

Hot Off The PressNews

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]

Hot Off The PressNews

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)

Hot Off The PressNews

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)

Hot Off The PressNews

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]