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2024 (10) TMI 389 - CALCUTTA HIGH COURT Money Laundering

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Issues: (i) Whether proceedings under the Prevention of Money Laundering Act, 2002 could be quashed where the petitioner was not shown as an accused in the predicate offence and a separate disproportionate-assets proceeding had been closed; (ii) whether the facts disclosed a case fit for quashing at the threshold.

Issue (i): Whether proceedings under the Prevention of Money Laundering Act, 2002 could be quashed where the petitioner was not shown as an accused in the predicate offence and a separate disproportionate-assets proceeding had been closed.

Analysis: The governing principle was that a person need not necessarily be arraigned as an accused in the scheduled offence to face proceedings under the Prevention of Money Laundering Act, 2002. At the same time, if the predicate offence itself is quashed, discharged, or results in acquittal, the benefit may extend to the person concerned in the money-laundering case. Here, the first predicate case was still pending and had not been quashed or dropped. The later disproportionate-assets case was independent and its closure did not control the present money-laundering proceeding, which arose from the earlier predicate offence.

Conclusion: The ground for quashing based on absence of the petitioner as an accused in the predicate offence and the closure of the separate disproportionate-assets case was rejected.

Issue (ii): Whether the facts disclosed a case fit for quashing at the threshold.

Analysis: The material collected indicated alleged involvement of the petitioner in the underlying racket, including random inspections, demand of illegal gratification, and accumulation of unexplained assets. The controversy turned on disputed questions of fact and the sufficiency of the material was a matter for trial, not for exercise of quashing jurisdiction at this stage.

Conclusion: No ground for interference at the threshold was made out.

Final Conclusion: The application for quashing failed, and the money-laundering proceeding was allowed to continue before the trial court.

Ratio Decidendi: Proceedings under the Prevention of Money Laundering Act, 2002 may continue even against a person not named as an accused in the scheduled offence, unless the predicate offence itself has been quashed, discharged, or ended in acquittal, and disputed questions of fact are not to be resolved in quashing jurisdiction.

PMLA proceedings may continue despite absence from the predicate offence when the underlying case remains pending and facts are disputed.
Proceedings under the Prevention of Money Laundering Act, 2002 may continue against a person even if that person is not shown as an accused in the scheduled offence, unless the predicate offence itself has been quashed, discharged, or ended in acquittal. A separate disproportionate-assets proceeding, if independently closed, does not control a money-laundering case arising from an earlier predicate offence. Where the allegations involve disputed factual questions and the material suggests participation in the underlying racket, quashing at the threshold is inappropriate and the matter must proceed to trial.

Offence of money laundering - predicate offence - standalone offence under PMLA - benefit of acquittal or quash of predicate offence - quashing of proceedings - disputed questions of fact not amenable to quashingOffence of money laundering - predicate offence - benefit of acquittal or quash of predicate offence - quashing of proceedings - Maintainability of ECIR No. KLZO/16/2017 and the PMLA proceedings against the petitioner where the petitioner was not an accused in the predicate CBI FIR RC0102017A0021 but was only a witness and the predicate case remained pending. - HELD THAT: - The Court examined the ratio in Vijay Madanlal Choudhary and subsequent decisions and recognised the established propositions that (a) a person proceeded against under the PMLA need not be an accused in the predicate offence, (b) the PMLA offence is distinct and standalone from the predicate offence, and (c) if the predicate offence is finally quashed or the accused is acquitted, the accused in the PMLA may derive the same benefit. Applying these principles, the Court found that the predicate CBI case RC0102017A0021 had neither been quashed nor closed and therefore the line of authority relied upon by the petitioner (to the extent it applies when predicate proceedings are quashed or accused are acquitted) did not afford him relief. The Court further observed that material collected by the Enforcement Directorate (including seizures and alleged disproportionate assets) and the existence of an investigation linking the petitioner to the alleged racket present matters of substance for trial. Given these facts and the distinctiveness of PMLA offences, the petition for quashing could not be allowed at the interlocutory stage. [Paras 7, 8, 10, 11, 12]Application for quashing of ECIR No. KLZO/16/2017 and related PMLA proceedings dismissed for lack of merit.Standalone offence under PMLA - predicate offence - quashing of proceedings - Effect of closure/quashing of a subsequent CBI investigation (RC0102018A0012) concerning disproportionate assets on the continuance of the PMLA proceedings arising from the earlier predicate case. - HELD THAT: - The Court noted that a separate CBI inquiry into disproportionate assets (RC0102018A0012) had been closed, but held that such subsequent dropping of an independent proceeding against the petitioner did not automatically affect the PMLA proceeding that originated from the earlier predicate CBI FIR RC0102017A0021. The PMLA proceeding under ECIR KLZO/16/2017 was tied to the first predicate investigation which remained pending; therefore the closure of a later, independent CBI inquiry would have little bearing on the PMLA case. The Court observed that the precise roles, money trail and connections alleged were matters for the trial court to determine, and could not be resolved by quashing at this stage. [Paras 9]Closure of the subsequent CBI case did not justify quashing the PMLA proceedings arising from the earlier predicate case.Final Conclusion: The petition for quashing of ECIR No. KLZO/16/2017 and related PMLA proceedings was dismissed; the petitioner's objections may be agitated before the trial court at the appropriate stage.

2024 (10) TMI 60 - MADRAS HIGH COURT Money Laundering

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Issues: (i) Whether the complaint under the Prevention of Money Laundering Act, 2002 could be quashed in exercise of inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 when an appellate remedy was available against the attachment order. (ii) Whether properties acquired before the scheduled offence could still be treated as proceeds of crime or be attached under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002. (iii) Whether a company could be prosecuted under Section 70 of the Prevention of Money Laundering Act, 2002 and whether the plea of absence of vicarious liability was available.

Issue (i): Whether the complaint under the Prevention of Money Laundering Act, 2002 could be quashed in exercise of inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 when an appellate remedy was available against the attachment order.

Analysis: The availability of a statutory appeal under Section 26 of the Prevention of Money Laundering Act, 2002 against the provisional attachment order weighed against interference at the stage of a petition under Section 482 of the Code of Criminal Procedure, 1973. The challenge to the attachment and the merits of the attachment order were held to be matters for the appellate forum, while the complaint itself disclosed a prima facie case for proceeding further.

Conclusion: The challenge was rejected and the petitions were not entertained on this ground.

Issue (ii): Whether properties acquired before the scheduled offence could still be treated as proceeds of crime or be attached under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002.

Analysis: The expression "proceeds of crime" was construed broadly to include not only property derived from criminal activity but also the value of such property, including equivalent value held within the country or abroad. On that construction, prior acquisition of the attached properties did not by itself defeat attachment where the statutory conditions were otherwise satisfied.

Conclusion: The objection to attachment on the basis of prior acquisition was rejected.

Issue (iii): Whether a company could be prosecuted under Section 70 of the Prevention of Money Laundering Act, 2002 and whether the plea of absence of vicarious liability was available.

Analysis: Section 70 of the Prevention of Money Laundering Act, 2002, including its explanation, was read as expressly permitting prosecution of a company notwithstanding the prosecution or conviction of individuals connected with it. The argument that a company could not be fastened with liability for the alleged laundering activity was held to be inconsistent with the statutory scheme.

Conclusion: The company prosecution objection failed and the plea of no vicarious liability was rejected.

Final Conclusion: The complaint and the connected proceedings were allowed to continue, and the inherent criminal petitions were dismissed for want of merit.

Ratio Decidendi: Under the Prevention of Money Laundering Act, 2002, a company can be prosecuted for money-laundering offences, and the definition of proceeds of crime is broad enough to include equivalent value held within India, so prior acquisition of the attached property does not by itself bar attachment or prosecution.

PMLA attachment and company prosecution: broad proceeds of crime definition and statutory appeal limited Section 482 interference
The Prevention of Money Laundering Act, 2002 was discussed on three points: the availability of an inherent-jurisdiction challenge under Section 482 CrPC despite a statutory appeal against provisional attachment, the scope of "proceeds of crime" under Section 2(1)(u), and corporate prosecution under Section 70. The text states that the statutory appeal weighed against interference at the Section 482 stage, that "proceeds of crime" extends broadly to equivalent value and is not defeated merely because property was acquired before the scheduled offence, and that a company can be prosecuted under the Act notwithstanding objections based on absence of vicarious liability.

Company prosecution under PMLA - proceeds of crime - property equivalent in value held within the country - Explanation (2) to Section 70 of PMLA - prima facie case for prosecution under PMLA - remedies under PMLA and Section 26 appellate remedyCompany prosecution under PMLA - Explanation (2) to Section 70 of PMLA - Companies can be prosecuted under PMLA independent of prosecution or conviction of individuals. - HELD THAT: - The Court relied on Explanation (2) to Section 70 to hold that a company may be prosecuted notwithstanding whether prosecution or conviction of any legal juridical person is contingent on prosecution or conviction of any individual. That provision removes doubt about vicarious-immunity arguments and permits prosecution of corporate entities under PMLA on the material placed by the Enforcement Directorate. [Paras 14, 15]A company may be prosecuted under PMLA; the petitioners' contention that companies cannot be held liable is rejected.Proceeds of crime - property equivalent in value held within the country - Section 2(1)(u) of PMLA - Properties acquired prior to the commission of a scheduled offence can be subject to attachment where the criminal activity resulted in property held outside the country and the equivalent value in India is attachable under Section 2(1)(u). - HELD THAT: - The Court interpreted Section 2(1)(u) to include the value of property equivalent in India where the property derived from criminal activity is taken or held outside the country. The object is to protect the economic interest of the country; therefore, properties within India need not necessarily have been purchased from proceeds of crime if they represent the domestic equivalent of assets derived or held abroad by reason of the scheduled offence. [Paras 13]Attachment of properties within India is permissible under Section 2(1)(u) as property equivalent in value where proceeds are taken or held outside the country; the petitioners' plea that attached properties were purchased before the scheduled offence is insufficient to defeat attachment on that ground.Remedies under PMLA and Section 26 appellate remedy - Challenges to the provisional attachment order must be pursued before the Appellate Tribunal under Section 26 of PMLA; a Section 482 Cr.P.C. petition is not the appropriate forum to adjudicate the merits of the provisional attachment order. - HELD THAT: - The Court declined to adjudicate the merits of the provisional attachment made under PMLA in these petitions under Section 482 Cr.P.C., noting that the proper remedy for contesting provisional attachment is to approach the Appellate Tribunal constituted under Section 26. Consequently, the provisional attachment's merits were not decided in these proceedings. [Paras 16]Petitioners must approach the Appellate Tribunal under Section 26 for grievances against provisional attachment; the trial court proceedings on the complaint may proceed.Prima facie case for prosecution under PMLA - Enforcement Directorate has made out a prima facie case to prosecute the accused persons and companies under PMLA. - HELD THAT: - On consideration of the material placed by the respondent and theRegistro of ECIR based on the scheduled offence, the Court found that a prima facie case exists for prosecuting the individual persons and the companies under Section 70 of PMLA. The petitioners must raise their defence on merits before the trial court with supporting documents and evidence; the High Court will not quash the complaint at this stage. [Paras 16]The complaint is not liable to be quashed; the petitioners' challenge is dismissed and the prosecution may proceed.Final Conclusion: The criminal original petitions under Section 482 Cr.P.C. are dismissed. The Court holds that companies are prosecutable under PMLA, that Section 2(1)(u) permits attachment of equivalent property in India where proceeds are held abroad, the Enforcement Directorate has made out a prima facie case, and challenges to provisional attachment must be pursued before the Appellate Tribunal under Section 26; the trial shall proceed uninfluenced by the observations in this order.

2024 (10) TMI 904 - PUNJAB AND HARYANA HIGH COURT Money Laundering

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ED arrest upheld in Rs 1530 crore money laundering case under Section 19 PMLA
Punjab and Haryana HC dismissed a petition challenging arrest under PMLA in a money laundering case involving diversion of Rs. 1530.99 crores from sanctioned loan amount. The court held that ED complied with Section 19 PMLA requirements by providing reasons to believe to the arrested person. Following SC precedent in Arvind Kejriwal case, the court found arrest grounds were self-sufficient, clearly conveying arresting officer's intention, reasons and belief. Non-recovery of massive proceeds of crime justified arrest. The arrest conformed to statutory mandates and constitutional requirements.

Compliance with Section 19 PMLA - reason to believe and grounds of arrest - judicial review of reasons to believe at remand stage - exercise of inherent jurisdiction under Section 482 CrPC in post-remand arrests - necessity of arrest and custodial interrogation in money laundering investigations - effect of non cooperation on validity of arrestCompliance with Section 19 PMLA - reason to believe and grounds of arrest - judicial review of reasons to believe at remand stage - Validity of the arrest under Section 19 PMLA in light of the requirement to record and furnish the 'reason to believe' and grounds of arrest, and whether the remand court lawfully satisfied itself before ordering judicial remand. - HELD THAT: - The Court examined whether the statutory preconditions in Section 19(1) - namely that the arresting officer must have material in his possession, record the reason to believe in writing and inform the arrested person of the grounds - were complied with. Relying on the arrest order and the grounds annexed thereto, the Court found that the arresting officer had recorded his reasons and communicated the grounds at the time of arrest. The Special Court was also supplied with similar material and the remand order indicates that the remand court perused the reasons and recorded satisfaction. The Court noted authorities emphasising that 'reasons to believe' are jurisdictional conditions (see Arvind Kejriwal) but applied those principles to the facts and concluded that there was no failure of compliance with Section 19 in this case. Consequently, the remand was not vitiated for lack of furnished reasons or for want of application of mind by the remand court. The Court further observed that an illegal arrest resulting from a fundamental breach of Section 19 would render the arrest void ab initio and preclude re arrest on the same grounds, but held that no such fundamental breach occurred on the facts before it. [Paras 14, 16, 17, 26, 28]The arrest and the remand orders satisfied the statutory requirements of Section 19 PMLA and the remand court lawfully reviewed the reasons; the arrest is not vitiated for failure to furnish reasons to believe.Necessity of arrest and custodial interrogation in money laundering investigations - effect of non cooperation on validity of arrest - Whether the necessity for arrest was established, and whether reliance on the petitioner's alleged non cooperation rendered the arrest impermissible. - HELD THAT: - The Court considered whether the need for custodial interrogation and recovery of proceeds of crime justified arrest. Having reviewed the grounds of arrest, the Court concluded that necessity was recorded and was not founded solely on alleged non cooperation. Given the magnitude of the alleged laundering and the material showing diversion of funds, the Court accepted that custodial interrogation was necessary to trace and recover proceeds. While recognising that non cooperation alone cannot be the sole ground for arrest if it contravenes precedent, the Court found on the facts that non cooperation formed one of several articulated reasons and did not by itself invalidate the arrest. [Paras 19, 23, 26, 27, 28]The necessity for arrest was adequately recorded and the reliance on non cooperation did not, on the facts, render the arrest invalid.Exercise of inherent jurisdiction under Section 482 CrPC in post-remand arrests - Whether the High Court should invoke its inherent jurisdiction under Section 482 CrPC to quash the arrest and remand orders in the present proceedings. - HELD THAT: - The Court addressed the petitioner's invocation of Section 482 CrPC to quash the arrest and remand orders. Noting the distinction between remedies under statutory bail provisions and extraordinary jurisdiction, the Court nevertheless proceeded to examine the statutory compliance. Because it found that Section 19 requirements were met and the remand court had applied its mind, there existed no constitutional infirmity or fundamental illegality warranting exercise of inherent jurisdiction. The Court also observed that the petitioner was not required to satisfy the twin conditions for bail under Section 45 PMLA in these proceedings, but that absence of such an application did not oblige the Court to grant relief under Section 482 when no illegality was shown. [Paras 7, 15, 21, 26, 29]Extraordinary relief under Section 482 CrPC is not warranted; the petition to quash the arrest and remand orders is dismissed.Final Conclusion: The petition under Section 482 CrPC challenging the arrest and remand was dismissed: the Court found the arresting officer had recorded and furnished reasons and grounds under Section 19 PMLA, the remand court lawfully considered those reasons, necessity for custodial interrogation was established on the facts and non cooperation did not alone vitiate the arrest.

2024 (10) TMI 228 - DELHI HIGH COURT Money Laundering

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Default bail under CrPC is not revived by later investigation once a complete complaint is filed in time.
Default bail under Section 167(2) CrPC was unavailable because the complaint was filed within the statutory period and contained the ingredients of the alleged offence. The Court held that once such a complaint is filed and cognizance is taken, continuing further or supplementary investigation under Section 173(8) does not make the complaint incomplete or revive the right to default bail. The enforceable right arises only when investigation remains pending and no charge-sheet or complaint is filed in time. The bail applications were therefore rejected.

Default bail under Section 167(2) Cr.P.C. - completeness of prosecution report/charge sheet under Section 173(2) Cr.P.C. - effect of further or supplementary investigation on the validity of a charge sheet - cognizance and its bearing on the right to default bail - power to undertake further investigation under Section 173(8) Cr.P.C. - right to personal liberty under Article 21 in relation to default bailDefault bail under Section 167(2) Cr.P.C. - completeness of prosecution report/charge sheet under Section 173(2) Cr.P.C. - right to personal liberty under Article 21 in relation to default bail - Whether the petitioners were entitled to default bail under Section 167(2) Cr.P.C. on the ground that the prosecution Complaint filed within 60 days was incomplete. - HELD THAT: - The Court held that the complaint filed by the Enforcement Directorate on 27.07.2022 was within the statutory 60 day period and, on its contents, disclosed all necessary ingredients of the offence. Reliance on precedents explaining Section 173(2) shows that a report is "complete" if it contains the prescribed details and accompanying materials sufficient to enable the Court to enquire into the offence. While the proviso to Section 167(2) entitles an accused to default bail where no charge sheet is filed and investigation is kept pending, that right ceases once a charge sheet/complaint disclosing the offence is filed. The petitioners' generalized allegation that investigations continued after filing did not demonstrate how the complaint failed to disclose the commission of offence against them. Incidental or supplementary investigations (for example, for forensic reports or production of additional documents) do not render a complaint incomplete where the material before the Court suffices to take cognizance. In view of these principles, the Court found no default in filing and declined to grant default bail. [Paras 23, 25, 33, 38, 39]Default bail under Section 167(2) Cr.P.C. was refused as the complaint filed within the statutory period was held to be complete in disclosing the ingredients of the offence.Effect of further or supplementary investigation on the validity of a charge sheet - power to undertake further investigation under Section 173(8) Cr.P.C. - cognizance and its bearing on the right to default bail - Whether the fact that further investigations (including summonses, F.S.L. reports or verification of documents) continued after filing of the complaint prevents the Court from treating the complaint/charge sheet as complete and thereby entitles the petitioners to default bail. - HELD THAT: - The Court reiterated that an investigating agency may, even after filing a charge sheet, undertake further investigation under Section 173(8) Cr.P.C.; such further or supplementary inquiries do not ipso facto vitiate the earlier charge sheet nor revive the right to default bail. Jurisprudence cited establishes that pendency of additional investigations relating to other facets or other accused, or the need to verify certain documents, does not convert a charge sheet into an incomplete report for the purpose of Section 167(2). The Court observed that cognizance is taken of the offence on the material produced and that cognizance itself does not deprive the investigating agency of the ability to carry out supplementary inquiries; but where the material produced is sufficient for cognizance, supplementary evidence intended only to support the main charge sheet will not make the complaint incomplete. Applying these principles to the facts, the Court found that ongoing supplementary investigations did not entitle the petitioners to default bail. [Paras 34, 35, 36, 37, 38]Continuation of supplementary or further investigations after filing of the complaint did not render the complaint incomplete and did not entitle petitioners to default bail.Final Conclusion: The petitions for grant of default bail were dismissed: the Court held that the ED's complaint filed within 60 days disclosed the ingredients of the offence, that supplementary/further investigations did not render the complaint incomplete, and therefore the petitioners were not entitled to default bail; their right to seek regular bail on merits remains open.

2024 (10) TMI 154 - DELHI HIGH COURT Money Laundering

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PMLA bail and prolonged custody: Delhi HC applied Article 21 and granted regular bail despite Section 45 rigour.
In a PMLA bail matter, the Delhi HC applied Article 21 and the principle that bail is the rule and jail the exception, while considering the twin conditions under Section 45. It noted that the investigation was complete, the complaint had been filed, the allegations were supported mainly by documentary material, diary entries and alleged bank transactions, and the applicant had been in custody for about two and a half years. As the applicant had deep roots in society, was not shown to be a flight risk, and release was unlikely to affect the evidence, the statutory rigour did not justify continued pre-trial incarceration. Regular bail was granted, subject to conditions.

Bail is the rule and jail is the exception - twin conditions under Section 45 PMLA - presumption of innocence - Article 21 right to personal liberty - economic offences and bail - investigation complete and chargesheet filed - risk of tampering and flight risk considerationsTwin conditions under Section 45 PMLA - Article 21 right to personal liberty - bail is the rule and jail is the exception - investigation complete and chargesheet filed - risk of tampering and flight risk considerations - Grant of regular bail to the applicant under Section 45 of the PMLA - HELD THAT: - The Court applied the special threshold under Section 45 PMLA requiring satisfaction of the mandatory twin conditions that the public prosecutor be given an opportunity to oppose and that the Court be satisfied there are reasonable grounds for believing the accused is not guilty and is not likely to commit an offence while on bail. Balancing the fundamental right under Article 21 and the presumption of innocence against the special nature of economic offences, the Court observed that investigations as to the petitioner were complete and a complaint/chargesheet had been filed, the applicant was not a flight risk, the evidence was essentially documentary and not likely to be tampered with, and the applicant had been in custody for a prolonged period. Reliance on recent authority affirming that prolonged pre-trial incarceration must be guarded against and that Article 21 remains a paramount consideration was noted. On these considerations the Court concluded that the twin conditions were met and that continued incarceration would cause grave injustice, warranting bail subject to conditions. [Paras 41, 42, 44, 45, 46]Applicant admitted to bail under terms and conditions imposed by the CourtFinal Conclusion: Bail application under Section 45 PMLA allowed; applicant released on furnishing bonds and compliance with specified conditions, Registry to communicate the order to the trial court and jail superintendent.

2024 (9) TMI 1867 - CHHATTISGARH HIGH COURT Money Laundering

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Regular bail refused in corruption and economic offences where prima facie material linked the applicant to alleged illegal financial transactions.
Regular bail under Section 439 CrPC was refused in a case involving conspiracy, corruption and serious economic offences because the investigation disclosed prima facie material linking the applicant to other accused, illegal financial transactions and diversion of unlawful proceeds. The Court treated the gravity of the allegations, the continuing investigation, and the fact that the trial had not commenced with further witnesses still to be examined as decisive against release. Despite the charge-sheet having been filed and pre-trial custody having continued, the seriousness of the accusations did not justify enlargement on bail.

2024 (9) TMI 1667 - BOMBAY HIGH COURT Money Laundering

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Issues:
1. Provisional freezing order under the Prevention of Money-Laundering Act, 2002.
2. Allegations of mala fides, arbitrariness, and violation of fundamental rights in freezing the accounts.
3. Compliance with procedural requirements under Section 17 of the PML Act.
4. Jurisdiction and powers of the Adjudicating Authority under the PML Act.
5. Nexus between the petitioners and the alleged criminal activities.
6. Request for interim relief to operate frozen accounts.

Analysis:

The judgment by the High Court of Bombay addresses several crucial issues arising from the provisional freezing order under the Prevention of Money-Laundering Act, 2002. The lead petitioner, a Company involved in share investment, challenged the freezing of its accounts under Section 17(1-A) of the PML Act following allegations of criminal activities by another entity. The petitioners argued that the freezing action lacked proper reasoning and unfairly impacted their business operations, violating their fundamental rights.

The petitioners contended that the freezing order was arbitrary and lacked a nexus between their activities and the alleged offenses. They emphasized the need for the Authority to establish both the characteristics of money laundering and the proceeds of crime before freezing accounts, citing relevant case laws such as Rashmi Metaliks Limited and others v. Enforcement Directorate. Additionally, they relied on the Supreme Court decision in Vijay Madanlal Choudhary v. Union of India to highlight the obligations on the Authority during search and seizure actions under the PML Act.

On the other hand, the Deputy Solicitor General of India argued that the PML Act provides a specific mechanism for seizure and adjudication, with the Adjudicating Authority empowered to hear claims of wrongful attachment. The DSGI highlighted statutory presumptions under the PML Act and asserted that the petitioners, characterized as shell companies facilitating fund siphoning, would have the opportunity to present their case before the Adjudicating Authority.

The Court considered the nature of the alleged offenses, including criminal conspiracy and fund diversion, and the substantial sums involved in the case. It opined that the petitioners should address their concerns through the Adjudicating Authority, which was already seized with the matter. The Court found no basis to grant interim relief at that stage, emphasizing the availability of an effective remedy through the statutory process outlined in the PML Act.

In conclusion, the Court deferred further consideration of the matter for six weeks to allow the parties to file their replies, highlighting the importance of engaging with the Adjudicating Authority for redressal under the PML Act.

Company denied interim relief against provisional freezing orders under Section 17 PML Act for Rs 4037 crores fund diversion
The Bombay HC declined to grant interim relief staying provisional freezing orders under Section 17 of the PML Act. The court found that the accused company allegedly diverted bank funds worth Rs. 4037.87 crores through shell entities and dummy companies related to directors. The Enforcement Directorate's freezing orders were properly issued following procedural requirements, with evidence of fund diversion and layering of proceeds of crime recovered during searches. The court held that petitioners must satisfy the Adjudicating Authority, which provides an effective remedy, and found no deficiency warranting writ jurisdiction. The matter was placed for further consideration after six weeks.

Provisional freezing of property under Section 17(1-A) of the PML Act - proceeds of crime and money laundering nexus - availability of remedy before the Adjudicating Authority under Section 8(2) of the PML Act - scope of interim relief by writ jurisdiction against statutory seizure - statutory presumption under Sections 22 and 23 of the PML ActProvisional freezing of property under Section 17(1-A) of the PML Act - scope of interim relief by writ jurisdiction against statutory seizure - Challenge to interim vacation or stay of the provisional freezing order dated 13.08.2024 - HELD THAT: - The Court considered petitions seeking interim relief from the provisional freezing of bank and demat accounts under Section 17(1 A) of the PML Act. Having regard to the magnitude of the alleged fraud, the preliminary investigation materials, the alleged diversion and layering of proceeds through related and dummy entities and the availability of the statutory remedy before the Adjudicating Authority, the Court found no propriety in granting the interim relief sought. The Court noted that the Adjudicating Authority had been furnished with the reasons in writing and had issued summons to the petitioners; an efficacious remedy therefore exists under the PML Act and the exercise of writ jurisdiction to override that mechanism was not warranted at this stage. [Paras 8]Interim relief in the nature of staying the provisional freezing order or permitting operation of the accounts was refused.Proceeds of crime and money laundering nexus - statutory presumption under Sections 22 and 23 of the PML Act - Sufficiency of prima facie material to justify invocation of powers under Section 17 - HELD THAT: - On the material placed before it the Court observed that preliminary investigation revealed recovery of documents and electronic records from the same premises, indications of diversion of funds from the accused company to related and dummy entities, and transactions suggestive of layering and accumulation of assets. In light of these prima facie findings and the scale of the alleged siphoning, the Court found no deficiency to invoke writ jurisdiction but accepted that the matter should be addressed through the statutory adjudicatory process; the seizure therefore stands pending adjudication. [Paras 7, 8]The provisional freezing was supported by prima facie material and is to be adjudicated under the statutory mechanism; no interference was directed.Availability of remedy before the Adjudicating Authority under Section 8(2) of the PML Act - scope of interim relief by writ jurisdiction against statutory seizure - Appropriate forum and procedural course to be followed for challenge to freezing and the direction to expedite proceedings - HELD THAT: - The Court emphasised that the PML Act provides a specific remedial scheme - the Adjudicating Authority under Section 8(2) and the Special Court under Section 8(8) - to test claims of wrongful attachment. Noting that the Adjudicating Authority had already been furnished the reasons and had issued summons, the Court declined to grant interim relief and directed the Authority to expedite the proceedings contemplated under Section 8(2). The Court hence left the primary adjudication to the statutory forum while retaining supervisory jurisdiction. [Paras 6, 8, 10]Petitioners to pursue remedy before the Adjudicating Authority; the Authority directed to expedite the proceedings and the matter was listed after six weeks.Final Conclusion: Writ petitions challenging the provisional freezing dated 13.08.2024 were refused interim relief; the Court found prima facie material supporting the freezing and directed the petitioners to seek redress before the Adjudicating Authority, which is to expedite the statutory proceedings, with further consideration listed after six weeks.

2024 (9) TMI 1664 - MADRAS HIGH COURT Money Laundering

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Issues: (i) Whether a revision lay against the order postponing commencement of trial under Section 309 of the Code of Criminal Procedure, 1973; (ii) Whether pendency of the criminal appeal in the scheduled offence justified postponement of the PMLA trial.

Issue (i): Whether a revision lay against the order postponing commencement of trial under Section 309 of the Code of Criminal Procedure, 1973.

Analysis: The order under challenge was one allowing an application to postpone commencement of trial. The revisional power under Section 397(1) extends to examination of the correctness, legality, or propriety of an order passed by the inferior criminal court. The bar under Section 397(2) applies only to purely interlocutory orders, and the order postponing trial was treated as amenable to revision on the facts of the case.

Conclusion: The revision petition was maintainable.

Issue (ii): Whether pendency of the criminal appeal in the scheduled offence justified postponement of the PMLA trial.

Analysis: The provisions of the Prevention of Money Laundering Act, 2002 operate as a special regime. Section 65 makes the Code of Criminal Procedure applicable only insofar as it is not inconsistent with the Act, and Section 71 gives the Act overriding effect. The Court treated PMLA proceedings, once initiated, as independent and distinct from the scheduled offence, and held that ECIR and the PMLA process cannot be equated with the FIR or trial in the predicate offence. Mere pendency of an appeal against conviction in the scheduled offence was not accepted as a sufficient ground to keep the PMLA trial in abeyance.

Conclusion: Postponement of the PMLA trial on the ground of pendency of the criminal appeal in the scheduled offence was not justified.

Final Conclusion: The order postponing the PMLA trial was set aside and the trial court was directed to proceed with the trial uninfluenced by observations on the facts of the case.

Ratio Decidendi: Proceedings under PMLA, being governed by a special statute with overriding effect, are independent of the scheduled offence, and pendency of an appeal in the predicate case does not by itself warrant postponement of the PMLA trial.

PMLA trial independence: pendency of appeal in the scheduled offence does not by itself justify postponement.
A revision against an order postponing commencement of trial under Section 309 CrPC was held maintainable because the challenge concerned the correctness and propriety of a criminal court order and was not treated as a purely interlocutory matter. On the PMLA issue, the Court held that the Act is a special regime with overriding effect, and that PMLA proceedings are independent of the scheduled offence; therefore, mere pendency of an appeal in the predicate case did not justify keeping the PMLA trial in abeyance. The order postponing the PMLA trial was set aside and the trial court was directed to proceed.

Postponement of trial under Section 309 Cr.P.C. - Maintainability of revision under Section 397 Cr.P.C. against orders under Section 309 Cr.P.C. - Independence of PMLA proceedings and application of Sections 65 and 71 of PMLA - ECIR as an internal document distinct from FIR - Pendency of criminal appeal in scheduled offence not an absolute bar to PMLA trial - Scope and limited application of Vijay Madanlal Choudhary precedentPostponement of trial under Section 309 Cr.P.C. - Maintainability of revision under Section 397 Cr.P.C. against orders under Section 309 Cr.P.C. - Whether the High Court can entertain a criminal revision under Section 397 Cr.P.C. against an order postponing commencement of trial passed under Section 309 Cr.P.C. - HELD THAT: - The Court examined Sub-section (2) to Section 309 Cr.P.C. (powers to postpone or adjourn proceedings) and the scope of Sections 397(1) and 397(2) Cr.P.C. While Section 397(2) bars exercise of revision in relation to interlocutory orders, the power conferred by Section 397(1) to call for and examine inferior court records to satisfy itself as to correctness, legality or propriety of any order is sufficiently wide to entertain a revision petition against an order under Section 309 Cr.P.C. The High Court held that the present order postponing commencement of trial was amenable to review under its revisional jurisdiction and that the maintainability objection based on Section 397(2) must be rejected in the factual and legal context of the case. [Paras 13, 14, 15, 16, 17]Revision under Section 397 Cr.P.C. is maintainable to examine the correctness and legality of an order passed under Section 309 Cr.P.C.Independence of PMLA proceedings and application of Sections 65 and 71 of PMLA - Whether proceedings under the Prevention of Money Laundering Act are independent and governed by PMLA provisions notwithstanding general provisions of the Cr.P.C. - HELD THAT: - Relying on Section 65 (Cr.P.C. to apply insofar as not inconsistent) and Section 71 (PMLA has overriding effect), the Court held that PMLA is a special enactment with its own procedural code. Once ECIR is recorded and money laundering investigation proceeds, the PMLA process becomes a standalone mechanism distinct from ordinary penal proceedings; the limited application of Cr.P.C. follows from the express statutory scheme of PMLA. Consequently, procedural or substantive rules under general criminal law cannot be read into PMLA where inconsistent. [Paras 19, 20, 21, 22]PMLA proceedings are independent and governed by the special code in PMLA; Sections 65 and 71 render Cr.P.C. applicable only to the extent not inconsistent.ECIR as an internal document distinct from FIR - Whether ECIR can be equated with FIR and whether ECIR's character bars independent PMLA prosecution. - HELD THAT: - The Court analysed precedent and statutory scheme and concluded that ECIR is an internal document created by the Enforcement Directorate and is not equivalent to an FIR. While the scheduled offence may be a prerequisite to initiate PMLA action, once ECIR is recorded and proceeds of crime are traced, ECIR operates independently for purposes of PMLA investigation and prosecution. The Court observed that ECOIR and FIR may originate from the same transaction but diverge in nature and purpose; ECIR therefore cannot be treated as identical to or substituted by FIR for stalling PMLA proceedings. [Paras 23, 24, 25, 26, 27]ECIR is an internal document distinct from an FIR and does not by itself preclude independent PMLA proceedings.Pendency of criminal appeal in scheduled offence not an absolute bar to PMLA trial - Scope and limited application of Vijay Madanlal Choudhary precedent - Whether pendency of a criminal appeal against conviction in the scheduled offence necessarily requires postponement of trial in a PMLA case. - HELD THAT: - The Court considered the submission that acquittal in the scheduled offence would automatically exonerate the accused in PMLA and the reliance on Vijay Madanlal Choudhary. It held that while Vijay Madanlal is binding, its observations cannot be applied as a blanket rule to stifle PMLA's object. Given the independent statutory scheme of PMLA and prima facie findings of proceeds of crime, pendency of a criminal appeal does not operate as an absolute bar to conducting the PMLA trial. The Court emphasised case specific analysis rather than automatic postponement and concluded that postponement of the PMLA trial on the sole ground of a pending appeal in the scheduled offence amounted to error in the facts of this case. [Paras 29, 30, 31, 32, 33]Pendency of a criminal appeal in the scheduled offence is not an absolute bar to proceeding with a PMLA trial; Vijay Madanlal Choudhary is to be applied with case specific analysis and not as a blanket prohibition.Final Conclusion: The order postponing commencement of the PMLA trial was quashed and the revision petition allowed; the Special Court is directed to proceed with the PMLA trial uninfluenced by observations in this order, while the High Court's revisional jurisdiction to examine the legality of the postponement was affirmed.

2024 (9) TMI 1602 - PUNJAB AND HARYANA HIGH COURT Money Laundering

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Issues: (i) whether the arrest of the petitioner under the Prevention of Money Laundering Act, 2002 was vitiated for want of sustainable material, reasons to believe and compliance with the statutory requirements governing arrest; (ii) whether allegations founded on illegal mining and environmental violations could sustain proceedings under the Prevention of Money Laundering Act, 2002 when the relevant environmental offence entry had been omitted from the Schedule; and (iii) whether the consequential remand orders could survive once the arrest itself was found unlawful.

Issue (i): whether the arrest of the petitioner under the Prevention of Money Laundering Act, 2002 was vitiated for want of sustainable material, reasons to believe and compliance with the statutory requirements governing arrest.

Analysis: The material placed for arrest was found to rest substantially on alleged illegal mining and fabricated e-rawana bills, but the petitioner was not named in the principal FIRs and had ceased to be a director of the company sought to be linked with him. The Court found no material showing his continuing role as director or person in charge of that company, and also found no reliable basis to connect him with the alleged syndicate entity relied upon by the investigating agency. In these circumstances, the foundational requirements for arrest under the money-laundering law, including a sustainable basis for reasons to believe, were not made out on the record.

Conclusion: The arrest was held unsustainable in law.

Issue (ii): whether allegations founded on illegal mining and environmental violations could sustain proceedings under the Prevention of Money Laundering Act, 2002 when the relevant environmental offence entry had been omitted from the Schedule.

Analysis: The Court held that illegal mining by itself is not a scheduled offence under the money-laundering law. It further noted that the entry in the Schedule relating to offences under the Environment Protection Act, 1986 had been omitted by the later amendment brought into force through the notified commencement date. On that basis, the environmental violation theory could not support the petitioner's prosecution under the Prevention of Money Laundering Act, 2002 in the manner asserted by the enforcement agency.

Conclusion: The scheduled-offence basis for proceeding against the petitioner was rejected.

Issue (iii): whether the consequential remand orders could survive once the arrest itself was found unlawful.

Analysis: The Court applied the principle that where the foundational action is illegal, consequential acts do not validate it. Since the arrest and the grounds supporting it were found indefensible, the judicial remand orders passed thereafter could not cure the original defect or sanctify the detention.

Conclusion: The remand orders were quashed as consequentially unsustainable.

Final Conclusion: The petitioner was held entitled to relief, with the arrest, grounds of arrest and remand orders set aside and immediate release directed if not required in any other case.

Ratio Decidendi: Where the material does not disclose a sustainable basis for arrest under the money-laundering law and the alleged predicate foundation cannot be linked to a surviving scheduled offence, the arrest and all consequential remand orders are liable to be quashed.

PMLA arrest requires sustainable material; illegal mining and omitted schedule entry could not support detention or remand.
Arrest under the Prevention of Money Laundering Act was found unsustainable because the record did not show a reliable basis for reasons to believe, nor any continuing role of the person in the linked company or syndicate. The Court also held that illegal mining was not a scheduled offence, and the omitted Environment Protection Act entry could not be used to sustain PMLA proceedings on the asserted basis. As the arrest was unlawful, the subsequent judicial remand orders could not cure the defect and were quashed as consequentially unsustainable, with immediate release directed if the person was not required in any other case.

Legality of arrest under the Prevention of Money Laundering Act, 2002 - requirement of recorded "reasons to believe" and communication of "grounds of arrest" - scheduled offence requirement for prosecution under the PMLA - effect of omission/deletion of an offence from the Schedule to the PMLA - judicial review of remand orders where foundational arrest is illegal - subsequent judicial validation cannot cure initial illegality (sublato fundamento cadit opus) - right to personal liberty and humane treatment during interrogation under Article 21Legality of arrest under the Prevention of Money Laundering Act, 2002 - requirement of recorded "reasons to believe" and communication of "grounds of arrest" - Whether the arrest of the petitioner under the PMLA was legally sustainable. - HELD THAT: - On scrutiny of the grounds of arrest and the materials placed on record the Court found no prima facie material linking the petitioner to the affairs of M/s Development Strategies India Pvt. Ltd. (DSPL) or to the alleged syndicate. The public document from the Ministry of Corporate Affairs (Director Master Information, P-8) showed that the petitioner ceased to be a director of DSPL w.e.f. 07.11.2013 and the ED produced no material to the contrary. The "grounds of arrest" and "reasons to believe" relied upon the narrative of "illegal mining" and beneficiary status, but did not establish that the petitioner was a person in charge or connected to the alleged G.M. Co.; nor was existence or registration of such an entity shown. In that factual matrix the Court concluded that there was no reason to believe, within the meaning of Section 19 PMLA, that the petitioner was guilty of an offence under the PMLA and that the arrest was therefore unsustainable. [Paras 6, 7, 8, 13]Arrest quashed as there was no material to justify reasons to believe that petitioner was guilty of an offence under the PMLA.Scheduled offence requirement for prosecution under the PMLA - effect of omission/deletion of an offence from the Schedule to the PMLA - Whether allegations rooted in "illegal mining" or offences under the Environment Protection Act, 1986 could sustain prosecution under the PMLA in the present case. - HELD THAT: - The Court observed that the core allegations concerned "illegal mining" and related environmental contraventions. The Mines and Minerals (Development and Regulation) Act offences are not part of the PMLA Schedule, and Paragraph 25 of the Schedule (offences under the Environment Protection Act, 1986) has been omitted by the Jan Vishwas (Amendment of Provisions) Act, 2023 with effect notified on 13.08.2024. In view of the amendment and notification, prosecution based on the deleted paragraph would be unwarranted. On the material before it, the Court held that the foundational predicate for invoking PMLA in respect of the environmental offences and the illegal mining narrative was not established against the petitioner. [Paras 9, 12]Prima facie prosecution under PMLA based on the environmental/illegal mining allegations was not sustainable; deletion of Paragraph 25 reinforced that such offences cannot serve as a valid scheduled predicate in this case.Judicial review of remand orders where foundational arrest is illegal - subsequent judicial validation cannot cure initial illegality (sublato fundamento cadit opus) - Whether the remand orders dated 20.07.2024 and 29.07.2024 could validate an arrest which the Court found to be illegal. - HELD THAT: - Applying the principle that if the foundational action is contrary to law the superstructure collapses (sublato fundamento cadit opus), the Court held that judicial orders of remand cannot cure an unlawful arrest. The Court examined the materials and concluded that the arrest and its recorded grounds lacked the necessary foundation; consequently, the subsequent remand orders based on that arrest were rendered indefensible in law. [Paras 14, 15]Remand orders issued on the basis of the illegal arrest were quashed and set aside.Right to personal liberty and humane treatment during interrogation under Article 21 - Whether the manner and duration of interrogation legitimately supported the necessity for arrest or custodial detention. - HELD THAT: - The Court noted that the petitioner had complied with summons under Section 50 PMLA and was interrogated for an extended period (about 14 hours 40 minutes) before arrest. While not converted into a determinative legal ground for release, the Court observed that prolonged interrogation in one stint is inimical to human dignity under Article 21 and recommended that the ED adopt reasonable time limits and humane practices during investigations. That observation formed part of the Court's evaluative context in concluding that arrest was unnecessary in the factual matrix before it. [Paras 10]Observation recorded regarding humane limits to interrogation; such treatment did not justify the arrest in the circumstances of this case.Legality of arrest under the Prevention of Money Laundering Act, 2002 - judicial review of remand orders where foundational arrest is illegal - Relief to be granted consequent to findings on illegality of arrest and remand. - HELD THAT: - Having found absence of material to constitute 'reasons to believe' and that the predicate offences relied upon were not sustainably within the PMLA Schedule for the present prosecution, the Court concluded that the arrest, the grounds of arrest and the remand orders were indefensible and must be set aside. The Court clarified its order should not be treated as an expression on the ultimate merits of the ED's complaint under Sections 44/45 PMLA. [Paras 13, 20, 21]Arrest order, grounds of arrest and the remand orders quashed; petitioner to be released forthwith if not required in any other case.Final Conclusion: Petition allowed. The arrest order and grounds of arrest dated 20.07.2024 and the remand orders dated 20.07.2024 and 29.07.2024 are quashed and set aside as legally indefensible; petitioner ordered to be released forthwith if not required in any other case. Observations on Article 21 and investigative conduct are recorded; no expression made on the merits of the ED's complaint under Sections 44/45 PMLA.

2024 (9) TMI 1303 - BOMBAY HIGH COURT Money Laundering

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PMLA bail and prolonged pre-trial custody can outweigh Section 45 restrictions where trial delay threatens personal liberty.
In a PMLA bail matter, prolonged incarceration and delay in trial were treated as sufficient to relax the rigours of Section 45 in light of Article 21 and Section 436A CrPC. The applicant had spent more than half of the maximum sentence in custody, the trial had not begun, and many witnesses remained to be examined, making further detention excessive. The court also noted substantial recoveries and no shown flight risk. Bail was therefore granted subject to conditions.

Section 45 of the PMLA - offences cognizable and non-bailable - Section 436A of the Cr.P.C. - maximum period for which an undertrial prisoner can be detained/right to speedy trial - Article 21 - right to speedy trial and personal liberty - Primacy of constitutional protection over restrictive statutory bail provisions where trial delay infringes fundamental rightsSection 436A of the Cr.P.C. - maximum period for which an undertrial prisoner can be detained/right to speedy trial - Section 45 of the PMLA - offences cognizable and non-bailable - Article 21 - right to speedy trial and personal liberty - Whether the applicant, having undergone detention equal to one-half of the maximum prescribed sentence and where trial is unlikely to conclude within a reasonable time, is entitled to bail despite the non-bailable rigours of Section 45 of the PMLA. - HELD THAT: - The Court applied the principle that Section 436A of the Cr.P.C., being a subsequent and beneficial statutory provision, applies to accused under the PMLA and can operate notwithstanding the restrictive bail framework of Section 45 of the PMLA. The Court relied on the Supreme Court's exposition that where an undertrial has suffered detention up to one-half of the maximum sentence and there is no prospect of trial concluding within a reasonable time, the constitutional right to speedy trial under Article 21 and the statutory relief in Section 436A can justify release on bail. The affidavit and record show the applicant was arrested on 05.03.2021 in the PMLA case and had completed 3 years and 6 months (half of the 7-year maximum) as of 05.09.2024; the prosecution proposed 9 witnesses in the PMLA matter and the connected scheduled offence involved 256 proposed witnesses and voluminous material, with simultaneous trial unlikely to conclude soon. The Public Prosecutor opposed bail and opportunity to oppose was given, but the twin conditions of Section 45 (satisfaction that accused is not guilty and not likely to commit offence on bail) yield to the necessity of protecting Article 21 where continued detention would amount to punishment without trial. The Court found no indication that delay was attributable to the accused or that the applicant posed a flight risk, and noted mitigating factors including substantial attachment/recovery of properties and the applicant's age and health, supporting that bail could be granted with conditions. [Paras 11, 12, 16, 17, 18]The applicant, having undergone detention equal to one-half of the maximum sentence and facing trial unlikely to conclude soon, is entitled to the benefit of Section 436A of the Cr.P.C. and may be released on bail notwithstanding the non-bailable rigours of Section 45 of the PMLA.Conditions for bail and supervisory safeguards - Protection against tampering with prosecution evidence and witness intimidation - On what terms and conditions bail should be granted to the applicant in the ECIR registered by the Enforcement Directorate. - HELD THAT: - Having reached satisfaction that statutory and constitutional prerequisites for release under Section 436A are met, the Court formulated specific bail conditions to address prosecution concerns and ensure attendance and non-interference with the trial. Conditions include furnishing a personal bond with solvent sureties, restrictions on entering District Pune except for court/ED requirements, weekly reporting to a specified police station, disclosure and upkeep of contact and residential particulars, prohibition on tampering with evidence or influencing witnesses or the complainant, surrender of passport, and an undertaking to attend trial and cooperate with the trial court without seeking unnecessary adjournments. These conditions are tailored to mitigate risk of flight, tampering, or obstruction while preserving the applicant's liberty pending trial. [Paras 21, 22, 23, 24]Bail granted on terms: personal bond with one or two solvent sureties, territorial and reporting restrictions, prohibition on interference with prosecution witnesses/evidence, surrender of passport, disclosure of contact details, and obligation to attend trial and cooperate with the court.Final Conclusion: Bail granted to the applicant in ECIR/MB/ZO-II/03/2020: the Court held that Section 436A Cr.P.C. and Article 21 justify release after detention equal to one-half of the maximum sentence where trial delay is excessive; bail was ordered with specified conditions, and the trial court is to decide the case on merits uninfluenced by these observations.

2024 (9) TMI 1551 - DELHI HIGH COURT Money Laundering

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Cancellation of bail requires perversity or misuse of liberty; prima facie review governs money-laundering bail decisions.
Cancellation of bail already granted is distinct from refusal of bail at the initial stage, and interference is justified only where the order is perverse, based on irrelevant material, or affected by supervening misuse of liberty. In a preventive money-laundering context, the court is concerned only with a prima facie assessment on broad probabilities, not a detailed appraisal of evidence or a final finding on guilt. The material cited by the prosecution, including alleged fund layering and investigation statements, is treated as insufficient at this stage unless it shows serious infirmity in the bail order or compelling grounds for withdrawal of the concession.

Cancellation of bail for perversity or illegality - scope of interference by superior court with grant of bail - prima facie assessment on bail under special statutes (Section 45, PMLA) - probative value of statements recorded under Section 50, PMLA - requirement of application of mind and broad probabilities at bail stage - distinction between cancellation of bail for misconduct/supervening circumstances and setting aside an unjustified bail orderCancellation of bail for perversity or illegality - scope of interference by superior court with grant of bail - Whether the High Court should cancel the bail granted to the respondent - HELD THAT: - The Court examined the ED's challenge to the Sessions Court's bail order and the legal principles governing cancellation of bail. It noted the well established distinction between cancelling bail on account of the accused's subsequent misconduct or supervening circumstances and setting aside an order of bail that is perverse or founded on irrelevant material. The High Court reviewed the material relied upon by the ED (including bank analyses, statements under Section 50 PMLA, WhatsApp chats and search findings) and observed that the Sessions Judge's order constituted a prima facie view taken at the bail stage. Applying the jurisprudence that a court at the bail stage need only form a view on broad probabilities and must demonstrate application of mind, the Court found that the Sessions Judge had not acted on irrelevant considerations nor committed a perverse error warranting interference. The Court emphasised that detailed evaluation of evidence, the probative weight of Section 50 statements, and contested factual contentions (such as the nature of transactions and alleged layering) are matters for trial. Having regard to the material on record and the settled legal tests for cancelling bail, the Court concluded there was no justification to annul the bail order. [Paras 41, 43, 46, 49, 50]The petition for cancellation of bail was dismissed and the bail granted to the respondent was retained.Prima facie assessment on bail under special statutes (Section 45, PMLA) - probative value of statements recorded under Section 50, PMLA - requirement of application of mind and broad probabilities at bail stage - Appropriate legal standard and approach to be applied by courts while considering bail under PMLA and weight to be given to investigative materials at that stage - HELD THAT: - The Court reiterated that under Section 45 of the PMLA the court at the bail stage is not required to undertake a deep merits inquiry but to form a view based on reasonable material and broad probabilities; the twin conditions in Section 45 must be applied judicially and not mechanically. The judgment relied on recent authoritative pronouncements holding that statements under Section 50 of PMLA have probative value that is to be considered at trial and that material alleged by prosecution (bank rotations, search findings, retractions, or WhatsApp communications) require detailed scrutiny during trial. The Court held that absent clear perversity or reliance on irrelevant material, a superior court should not cancel bail merely because the prosecution advances contentions that require trial level appreciation. [Paras 43, 46, 47]The High Court confirmed the correct legal standard: tentative prima facie conclusions on broad probabilities at bail stage, with detailed assessment and probative evaluation reserved for trial; no error found in the Sessions Court's approach to grant bail under Section 45, PMLA.Final Conclusion: The petition by the Directorate of Enforcement for cancellation of the respondent's bail was dismissed; the High Court found no perversity or illegality in the Sessions Court's bail order and held that contested evidentiary matters and the probative weight of investigative material must be examined at trial.

2024 (9) TMI 1177 - DELHI HIGH COURT Money Laundering

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Medical grounds can justify regular bail in money-laundering cases when Section 45 conditions are met and liberty can be secured by safeguards.
In a money-laundering prosecution, regular bail was considered on medical grounds under the proviso to Section 45 of the Prevention of Money Laundering Act, 2002. The Court noted that the investigation was complete, the complaint had been filed, the applicant's role was crystallised, and the case was largely documentary. It further relied on the applicant's prolonged custody, cooperation with the investigation, and serious medical ailments requiring continuing care, including morbid obesity and related comorbidities. On that basis, the applicant was treated as sick or infirm, and the statutory restriction was not regarded as an absolute bar where liberty could be protected by conditions. Regular bail was granted.

Bail under Section 439 Cr.P.C. read with Section 45 PMLA - proviso to Section 45(1) PMLA - sick or infirm exception - medical bail and Article 21 right to health and dignity - triple test for grant of bail in economic offences (non-framing of threats to prosecution, attendance at trial, and no likelihood of tampering/evasion) - risk of tampering with evidence and flight risk as grounds for denial of bail - prosecutorial reliance on documentary evidenceProviso to Section 45(1) PMLA - sick or infirm exception - medical bail and Article 21 right to health and dignity - Entitlement to bail on medical grounds under the proviso to Section 45(1) PMLA and Article 21 where the accused is 'sick' or 'infirm'. - HELD THAT: - The Court noted that the applicant had cooperated with investigation, had undergone bariatric surgery and suffered from multiple serious illnesses as reflected in medical records, and that interim medical relief had earlier been granted. While recognising that sickness as an exception under the proviso is to be exercised cautiously, the Court observed that Article 21 protects the right to life and health and that medical treatment which cannot be effectively provided in custody is a relevant consideration. Having considered the applicant's medical condition, prior interim orders, and the medical care he received, the Court granted bail on medical grounds subject to conditions. Any observations were expressly made without prejudice to the trial. [Paras 46, 48, 51]Applicant entitled to bail on medical grounds and Article 21 considerations; admitted to bail subject to conditions.Bail under Section 439 Cr.P.C. read with Section 45 PMLA - triple test for grant of bail in economic offences (non-framing of threats to prosecution, attendance at trial, and no likelihood of tampering/evasion) - risk of tampering with evidence and flight risk as grounds for denial of bail - prosecutorial reliance on documentary evidence - Whether the triple test for grant of bail in a PMLA prosecution is satisfied despite the gravity of allegations and prosecution's contentions regarding proceeds of crime, tampering and flight risk. - HELD THAT: - The Court assessed the prosecution's case and material: the ED had filed prosecution complaints, extensive documents and witness list exist, and allegations of involvement in handling proceeds of crime were placed against the applicant. Noting precedents emphasising that prolonged incarceration should not become punishment and that bail is ordinarily the rule, the Court found that (i) the applicant had deep societal roots and businesses in India reducing flight risk, (ii) investigations qua the applicant were complete and much of the case depended on documentary evidence already seized, diminishing the risk of tampering, and (iii) conditions could be imposed to secure attendance and prevent interference. The Court therefore concluded that the triple test was satisfied and bail could be granted subject to stringent conditions to allay prosecutorial concerns. [Paras 51, 54, 55, 56, 57]Triple test satisfied; bail granted subject to conditions to allay risk of tampering, ensure attendance and prevent flight.Final Conclusion: Bail under Section 439 Cr.P.C. read with Section 45 PMLA granted to the applicant: the Court balanced medical/Article 21 considerations and the triple test, found cooperation, completed investigation qua the applicant and documentary dependence of the case, and therefore admitted the applicant to bail on specified conditions to secure attendance and prevent tampering or flight.

2024 (9) TMI 1176 - DELHI HIGH COURT Money Laundering

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Regular bail granted in money laundering case involving excise policy corruption after noting completed investigations and no flight risk
Delhi HC granted regular bail to applicant in money laundering case involving excise policy corruption for 2021-22. Court noted prosecution complaint filed, investigations complete, and applicant summoned. Applicant, a 50-year-old educated businessman running family alcohol distribution business for 55 years, has deep societal roots and poses no flight risk. Evidence being documentary, no witness tampering likelihood exists. Citing Manish Sisodia case, court emphasized prolonged incarceration shouldn't become punishment without trial, and Article 21 liberty rights supersede statutory restrictions. Bail granted with conditions, noting applicant's better position compared to co-accused who received bail.

Grant of bail under Section 45 of PMLA - Presumption of innocence and Article 21 - Triple test for bail (no flight risk, no tampering, documentary nature of evidence) - Reliance on statements of co-accused and need for corroboration - Delay/prolonged pre-trial incarceration as a ground for bailGrant of bail under Section 45 of PMLA - Triple test for bail (no flight risk, no tampering, documentary nature of evidence) - Presumption of innocence and Article 21 - Whether the petitioner is entitled to regular bail in the ED prosecution under Section 45 of the PMLA having regard to the nature of evidence, risk of tampering, and period of pre-trial incarceration. - HELD THAT: - The Court found that investigations qua the petitioner are complete and a prosecution complaint has been filed and the petitioner has been summoned (paragraph 68). The petitioner is a long-standing resident with deep societal and business roots and is not a flight risk; other co-accused in similar circumstances have been granted bail (paragraphs 69-71, 74). The ED case is largely dependent on documentary material already seized by the prosecution and the Court observed that the documentary nature of evidence reduces the likelihood of tampering; moreover conditions can be imposed to assuage any residual risk (paragraphs 70, 76). The Court noted the principle that prolonged incarceration before conviction should not become punishment without trial and emphasised the primacy of Article 21 and the presumption that bail is the rule and refusal the exception, as reiterated by the Supreme Court in recent authorities (paragraphs 72-73). The Court also observed that much of the prosecution material consists of statements of accomplices and co-accused, many retracted, and that such statements require corroboration at trial rather than forming a sole basis to deny bail (paragraph 67). Applying these considerations and the triple test, the Court concluded that the petitioner satisfies the conditions for bail and that appropriate bail conditions can mitigate concerns about tampering or absconding (paragraphs 74, 76). [Paras 72, 73, 74, 76, 77]Bail granted to the petitioner in ECIR No. ECIR/HIU-II/14/2022, subject to specified conditions.Final Conclusion: The petition succeeds. The High Court admitted the petitioner to regular bail in the ED case, recording that investigations qua the petitioner are complete, that the prosecution case is largely documentary with statements of co-accused requiring trial scrutiny, that the petitioner is not a flight risk and that conditions can obviate tampering concerns; bail was ordered on specified bonds and conditions.

2024 (9) TMI 1088 - DELHI HIGH COURT Money Laundering

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Issues: Whether the petitioners were entitled to regular bail under the Prevention of Money Laundering Act, 2002, including whether the material on record prima facie established a scheduled offence with cross-border implications, the existence of proceeds of crime, and satisfaction of the conditions for bail.

Analysis: The Court held that for prosecution under the Prevention of Money Laundering Act, 2002, the prosecution must prima facie establish the foundational facts that a scheduled offence has been committed, that property was derived or obtained from that criminal activity, and that the accused was involved in a process or activity connected with such proceeds. It held that foreign law relied upon as the predicate offence cannot be taken judicial notice of and must be proved as a fact during trial; in the absence of the relevant foreign statute and expert proof, there was no prima facie basis to treat the alleged foreign conduct as a corresponding scheduled offence. The Court further held that the statutory scheme permits investigation and enforcement on receipt of mutual legal assistance material, and that the complaint and recoveries did not by themselves establish the requisite link between the foreign offence and proceeds of crime in India. The Court also noted that several incriminating statements were recorded after arrest, that retracted statements had limited reliability, and that WhatsApp or Telegram chats without corroboration could not, at the bail stage, establish the alleged live link or mens rea. In view of the prolonged custody and the delay in commencement of trial, the Court applied the principle that bail is the rule and jail is the exception while considering the twin conditions under Section 45.

Conclusion: The petitioners satisfied the bail threshold and the rigour of Section 45 was relaxed; regular bail was granted.

Ratio Decidendi: Where the prosecution relies on a foreign predicate offence to invoke the Prevention of Money Laundering Act, 2002, it must prima facie prove the corresponding foreign law and the foundational link between that offence, the proceeds of crime, and the accused's involvement before the burden under Section 45 can arise.

Foreign predicate offence under PMLA requires proof of foreign law and nexus before bail restrictions apply.
Where PMLA prosecution rests on a foreign predicate offence, the prosecution must prima facie prove the foreign law, the scheduled offence link, the proceeds of crime, and the accused's involvement before Section 45 rigour can apply. The Court held that foreign law cannot be judicially noticed and must be proved by evidence; without the relevant statute and expert proof, the alleged foreign conduct did not establish a corresponding scheduled offence at the bail stage. It also found that mutual legal assistance material, recoveries, and uncorroborated electronic chats or retracted statements did not by themselves show the requisite nexus. Given prolonged custody and delayed trial, regular bail was granted.

Corresponding law - offence of cross border implications - PMLA Section 45 twin conditions for bail - MLA and powers of Enforcement Directorate - judicial notice of foreign law - admissibility of statements under Section 50 PMLA and Section 25 Evidence Act - Central Government discretion under Chapter IX of PMLACorresponding law - judicial notice of foreign law - Whether an offence under foreign law can be treated as a scheduled offence under PMLA and whether Indian courts can take judicial notice of the foreign statute relied upon by ED. - HELD THAT: - A foreign offence can be read into the Schedule of the PMLA through the concept of a corresponding law and, when such foreign conduct has cross border implications and the proceeds travel to India, it may constitute a predicate offence under Part C. However, Indian courts cannot take judicial notice of foreign statutes; the foreign law (United States Code or provisions relied upon) must be pleaded and proved as a question of fact, ordinarily by production of the statute and expert opinion. Consequently, at the bail stage the prosecution must adduce prima facie material to show that the foreign offence corresponds to scheduled offences; a certified MLA alone does not substitute for proof of the foreign statutory ingredients. Until the foundational facts (commission of criminal activity, derivation of property as proceeds, and involvement of the person in processes connected with such property) are established prima facie, the onus does not shift to the accused under Section 24/Section 45. [Paras 82, 84, 85, 86, 88]Foreign offences may be treated as scheduled offences via the concept of corresponding law, but the foreign law must be pleaded and proved; judicial notice of foreign statute cannot be taken and the prosecution must establish foundational facts prima facie.MLA and powers of Enforcement Directorate - offence of cross border implications - Whether ED could register an ECIR and conduct investigation/arrests in India on the basis of an MLA requesting evidence in relation to an offence committed abroad. - HELD THAT: - Chapter IX of the PMLA and the Treaty envisage wide mutual assistance. Section 60(2) and related provisions contemplate that a letter of request for attachment/seizure may lead to steps including inquiry and investigation. Where ED, on the basis of an MLA and other material, is satisfied that the foreign offences correspond to scheduled offences and proceeds have reached India, it is within ED's powers to register a case under Sections 3 and 4 and take steps necessary for investigation, including arrest, as arrest may be an incident of investigation. The content or limited scope of the MLA (e.g., request to freeze accounts) does not preclude ED from registering and investigating an independent money laundering offence in India if foundational material exists. [Paras 71, 72, 73, 74, 75]ED was competent to register the ECIR and carry out investigation, including arrest, on the basis of the MLA and other material if satisfied that the foreign offence corresponds to scheduled offences and proceeds have entered India.Central Government discretion under Chapter IX of PMLA - Section 188 CrPC - Whether the Central Government's forwarding of the MLA to ED (rather than to the Special Court) and whether prior sanction under Section 188 CrPC was required for investigation/trial in India. - HELD THAT: - A conjoint reading of the relevant Chapter IX provisions shows that the Central Government has discretion to forward a letter of request to any authority under the Act or to the Special Court as it thinks fit; forwarding the MLA to ED therefore did not breach Chapter IX. Further, the proviso to Section 188 CrPC requiring previous sanction applies where the entirety of the substantive offence committed outside India is to be inquired into or tried in India; here the predicate offence is being prosecuted abroad, while PMLA (a standalone offence) arises in India because proceeds reached India. Accordingly, prior sanction under Section 188 CrPC is not required for proceeding under PMLA in India. [Paras 62, 76, 77, 78, 79]The Central Government acted within its discretion in forwarding the MLA to ED; sanction under Section 188 CrPC was not required for investigation under PMLA in India.Admissibility of statements under Section 50 PMLA and Section 25 Evidence Act - Whether statements recorded under Section 50 of PMLA after the accused's arrest are admissible and can be relied upon at the bail stage. - HELD THAT: - Statements recorded under Section 50 of PMLA which amount to incriminating statements made while the accused was in custody are susceptible to the bar in Section 25 of the Evidence Act and thereby inadmissible, as held in Prem Prakash. In the present case many statements of the main accused were recorded post arrest and thus are hit by Section 25. The evidentiary value of Section 50 statements generally must be weighed at trial; retracted statements and statements recorded in custody are of doubtful reliability and cannot form the sole basis for convicting or for denying bail absent corroboration. [Paras 101, 102, 103, 108, 109]Statements under Section 50 recorded while the accused was in custody are inadmissible under Section 25 Evidence Act and cannot be treated as decisive at the bail stage.WhatsApp/Telegram chats - retracted statements - Whether WhatsApp/Telegram chats and retracted statements of co-accused furnish sufficient material at the bail stage to deny bail. - HELD THAT: - WhatsApp/Telegram chats recovered from devices require scientific verification and proof of authorship to establish a live link; absent forensic reports they cannot be relied upon at the bail stage to attribute knowledge or mens rea. Retracted statements, while admissible, have questionable reliability; retraction undermines their probative value and they cannot form the sole basis for guilt without independent corroboration. In the present case the chats are under pseudo names and forensic reports are pending; co-accused statements have been retracted, diminishing their reliability. [Paras 112, 113, 114, 115, 116]WhatsApp/Telegram chats without forensic corroboration and retracted statements are insufficient, prima facie, to deny bail; independent corroborative evidence is necessary.PMLA Section 45 twin conditions for bail - Whether the petitioners satisfy the twin conditions of Section 45 of PMLA for grant of bail and whether delay/lengthy trial justifies relaxation of rigours of Section 45. - HELD THAT: - Section 45 imposes twin conditions (reasonable grounds to believe accused is not guilty; accused not likely to commit an offence on bail). The Court must apply the principle that bail is the rule and jail the exception. Considering (i) absence of prima facie proof that the foreign offence corresponds to scheduled offence and that seized amounts are proceeds of crime, (ii) inadmissibility/limited reliability of key statements and chats, (iii) retractions, (iv) seizure/freezing of material and absence of criminal antecedents, and (v) prolonged pre trial incarceration and unlikely early trial commencement, the Court found reasonable grounds to believe the petitioners not guilty and that they were not likely to offend on bail. Accordingly, the Court relaxed the rigours of Section 45 and granted bail on conditions. [Paras 120, 121, 122, 123, 124]Having regard to broad probabilities, delay in trial and lack of prima facie foundational proof, the petitioners satisfy the twin conditions of Section 45 and are enlarged on bail subject to conditions.Final Conclusion: The Court held that foreign offences may be treated as scheduled offences through the concept of corresponding law but foreign statutes cannot be judicially noticed and must be pleaded and proved; ED was competent to register and investigate under PMLA on the basis of the MLA and other material, the Central Government had discretion to forward the MLA to ED and no sanction under Section 188 CrPC was required for the PMLA offence in India; statements under Section 50 recorded while in custody are inadmissible and WhatsApp/Telegram chats and retracted statements lack sufficient probative value at the bail stage. On the totality of broad probabilities, prolonged custody and absence of prima facie foundational proof, the petitioners were granted regular bail subject to conditions.

2024 (9) TMI 937 - DELHI HIGH COURT Money Laundering

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Issues: (i) Whether the petitioner was entitled to bail under the proviso to Section 45 of the Prevention of Money Laundering Act, 2002 without satisfying the twin conditions. (ii) Whether the overall facts, including parity, medical condition and the test for grant of bail, justified release on bail.

Issue (i): Whether the petitioner was entitled to bail under the proviso to Section 45 of the Prevention of Money Laundering Act, 2002 without satisfying the twin conditions.

Analysis: The allegations attributed to the petitioner were confined to the acquisition and subsequent transfer of a land parcel stated to be worth Rs. 10.83 lakhs. The Court accepted that, on the respondent's own showing, the value attributed to the transaction remained below the threshold urged to attract the full rigour of the twin conditions. The Court also noted that the petitioner had been cited as a witness in the predicate case, that the predicate offence and the offence of money laundering are distinct, and that witness status in the scheduled offence does not by itself bar prosecution under the money-laundering law. Even so, on the specific factual matrix before it, the alleged value of the proceeds involved in the petitioner's role did not justify denial of the benefit of the proviso.

Conclusion: The petitioner was held entitled to the benefit of the proviso to Section 45 and was not required to satisfy the twin conditions for bail.

Issue (ii): Whether the overall facts, including parity, medical condition and the test for grant of bail, justified release on bail.

Analysis: The Court found that the petitioner had cooperated with the investigation, had joined the proceedings on multiple occasions, and had not been shown to be a flight risk or a person likely to tamper with evidence or influence witnesses. The Court also took note of the petitioner's chronic physical ailments and treated him as falling within the category of sick and infirm for bail purposes. The Court further considered the absence of arrest of other similarly placed persons and the limited role attributed to the petitioner in the alleged laundering chain. On these considerations, the triple test for bail was found satisfied.

Conclusion: Bail was granted to the petitioner.

Final Conclusion: The petition succeeded and the petitioner was directed to be released on bail, the Court holding that the statutory bail restriction under the money-laundering law did not defeat relief on the facts of the case.

Ratio Decidendi: Where the alleged role of the accused in a money-laundering case is confined to a transaction below the threshold relied upon for the statutory bail bar, and the accused satisfies the ordinary bail considerations of cooperation, non-flight risk and no likelihood of tampering, the benefit of the proviso to the bail restriction can be granted.

PMLA bail proviso applied where alleged laundering role was limited, threshold was not met, and ordinary bail factors favored release.
Bail under the proviso to Section 45 of the PMLA was found available where the petitioner's alleged role was limited to acquisition and transfer of land, with the attributed value below the threshold relied upon to invoke the statutory bar. The Court noted that witness status in the predicate offence does not by itself preclude prosecution for money laundering, but on the facts the alleged proceeds did not justify denial of the proviso. It also held that cooperation with investigation, absence of flight risk or tampering risk, limited role, parity, and chronic illness satisfied the ordinary bail test, and bail was granted.

Proviso to Section 45 of the Prevention of Money Laundering Act, 2002 exempting small-value proceeds from twin-test requirement - twin conditions for grant of bail under the PMLA, 2002 - triple test for grant of bail (no flight risk; no tampering with evidence; no influencing witnesses) - independence of offence under PMLA from predicate scheduled offence - medical/sick and infirm ground for bail - protection against self-incrimination under Article 20(3) and Section 132/Section 25 issues in relation to witness statementsProviso to Section 45 of the Prevention of Money Laundering Act, 2002 exempting small-value proceeds from twin-test requirement - twin conditions for grant of bail under the PMLA, 2002 - Application of the proviso to Section 45 PMLA - whether the petitioner was exempted from satisfying the twin conditions - HELD THAT: - The Court examined the allegations and the value attributed to the impugned transaction(s) and accepted the respondent's own case that the specific allegation against the petitioner relates to a single land parcel whose purchase consideration (even when adjusted upward as contended) remains below Rs. 1,00,00,000/-. On the respondent's framing of charges confined to that parcel, the case of the petitioner falls within the proviso to Section 45 PMLA and he therefore need not satisfy the twin conditions ordinarily required for grant of bail under Section 45. The Court also noted authorities emphasising that Article 21 cannot be arbitrarily subordinated to statutory bar and that medical and other exceptional grounds may permit relief under the proviso. Having accepted that the pleaded value falls within the proviso, the Court held the twin-test inapplicable to the petitioner for the purpose of bail in this ECIR. [Paras 114, 115, 116, 118]The proviso to Section 45 PMLA applies to the petitioner; he is not required to satisfy the twin conditions for bail.Triple test for grant of bail (no flight risk; no tampering with evidence; no influencing witnesses) - medical/sick and infirm ground for bail - Whether the petitioner satisfied the conditions for bail (including absence of flight risk, no likelihood of tampering/influencing and his medical/sick infirm status) - HELD THAT: - The Court found on the material that the petitioner had consistently joined investigations, had not evaded process, and there was no material to show likelihood of tampering with documentary evidence or influencing witnesses. The petitioner's chronic physical ailments and the documentary medical record were considered in the context of the proviso and the jurisprudence recognising serious medical infirmity as a permissible ground for bail. Taking the absence of risk on the three conventional factors together with his medical condition and the fact that prosecution/completion of investigation as to him was concluded, the Court held that the petitioner satisfied the tests required to warrant release on bail subject to stringent conditions. [Paras 117, 119, 120]The petitioner satisfies the triple test and his medical/sick infirm condition supports grant of bail subject to conditions.Independence of offence under PMLA from predicate scheduled offence - protection against self-incrimination under Article 20(3) and Section 132/Section 25 issues in relation to witness statements - Whether being a witness in the predicate offence precludes prosecution under the PMLA or bars arraying as an accused - HELD THAT: - The Court reiterated settled law that the offence under the PMLA is independent of the predicate scheduled offence and a person may be an accused under PMLA even if not accused in the predicate FIR. The petitioner's status as a witness in the CBI RC does not operate as a bar to his being charged under the PMLA. The Court observed that protections against self-incrimination (Article 20(3) and relevant Evidence Act provisions) do not immunise a witness from subsequent prosecution; statutory and precedential authorities were examined to reject the contention that prior witness status precludes PMLA proceedings. The Court also noted that the prosecution case in the PMLA relied on independent evidence and not solely on statements recorded in the predicate proceeding. [Paras 100, 102, 103, 105, 106]A person may be proceeded against under the PMLA notwithstanding his prior status as a witness in the predicate offence; that circumstance does not by itself bar prosecution under PMLA.Final Conclusion: Bail granted. The petitioner is directed to be released on furnishing specified bond and sureties and subject to enumerated conditions (appearance, reporting, surrender of passport, non-contact with witnesses, mobility and residence conditions), any observation being without prejudice to the trial.

2024 (9) TMI 1961 - HIMACHAL PRADESH HIGH COURT Money Laundering

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Interim bail for bank property proceedings granted with safeguards against absconding, evidence tampering, witness influence, and investigation interference.
Interim bail was granted to enable participation in bank proceedings concerning property already taken into the bank's possession. The applicant had previously complied with interim bail conditions, and retention of his passport by the investigating agency reduced the risk of leaving India. Release was subject to safeguards prohibiting evidence tampering, witness influence, interference with the investigation, and foreign travel without permission. The interim release was limited to the specified period required for the bank proceedings.

2024 (9) TMI 1029 - JHARKHAND HIGH COURT Money Laundering

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Petitioner granted regular bail in money laundering case as Rs. 29 crore amount not proceeds of crime under Section 2(1)(u) PMLA
HC granted regular bail to petitioner in money laundering case involving non-compliance and misuse of subsidized coal under Prevention of Money Laundering Act, 2002. Court found that amount of Rs. 29,50,36,622.79 was paid/purchased by petitioner, making it prima facie not proceeds of crime as defined under Section 2(1)(u). Relying on SC precedent in Vijay Madanlal Choudhary, court held property must be derived from criminal activity relating to scheduled offence. Petitioner released on bail of Rs. 50,000 with two sureties.

Regular bail in PMLA cases - proceeds of crime - requirement of being "derived or obtained as a result of" scheduled offence - prima facie assessment at bail stage - duty of ED under Section 66(2) to share material with scheduled-offence agency - conditions for grant of bail in socio-economic offencesRegular bail in PMLA cases - prima facie assessment at bail stage - conditions for grant of bail in socio-economic offences - Grant of regular bail to the petitioner in ECIR Case No. 01 of 2024 under the PML Act - HELD THAT: - The High Court evaluated the materials placed on record, the nature of allegations, the documentary material relied upon by the petitioner to show lawful establishment and functioning of units, and the prosecution's quantification of alleged proceeds. Applying established principles governing bail (including considerations of seriousness, nature of material, risk of tampering or absconding and the public interest in socio-economic offences), the Court found that the balance of convenience favoured release. The Court noted that certain apparent discrepancies in registers prima facie appeared to be human errors and that the prosecution's computation of proceeds included the petitioner's investment figure which, on the face of the complaint, was described as "paid and purchase" and thus could not be readily equated with proceeds of crime. The Court accordingly exercised its discretion to grant regular bail subject to specified conditions concerning bail bonds, surrender of passport and non-tampering and appearance obligations. [Paras 35, 36, 37, 38, 39]Petitioner released on regular bail on furnishing bond and sureties, with conditions including surrender of passport (unless released by trial court), prohibition on tampering with evidence or threatening witnesses, and attendance at trial.Proceeds of crime - requirement of being "derived or obtained as a result of" scheduled offence - duty of ED under Section 66(2) to share material with scheduled-offence agency - Prima facie rejection of prosecution's treatment of the purchase amount as proceeds of crime and reminder of ED's obligation when other offences are indicated - HELD THAT: - The Court examined the prosecution complaint (para 8.2) which treated the total amount paid for coal and the alleged illegal gain as "proceeds of crime" aggregating the two figures. Applying the legal principle from Vijay Madanlal Choudhary that property qualifies as "proceeds of crime" only if derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, the Court observed that the amount described as "paid and purchase" cannot prima facie be treated as proceeds of crime. The Court also adverted to Prakash Industries (para 91) to note the ED's obligation to forward material to the competent agency under Section 66(2) where in the course of investigation evidence of other cognizable offences emerges; the judgment was noticed but no direction to remit was made. The Court treated these legal considerations as relevant to its prima facie assessment at the bail stage. [Paras 29, 30, 31, 33, 34]On prima facie reading, the prosecution's characterisation of the purchase amount as proceeds of crime is unsustainable; the definition of "proceeds of crime" requires the property to be derived or obtained as a result of the scheduled offence, and the ED must share material with the scheduled offence agency where appropriate.Final Conclusion: Bail application allowed: petitioner released on regular bail subject to bond, sureties and conditions. The Court recorded that, on a prima facie review, the prosecution's computation treating the purchase/investment amount as proceeds of crime is doubtful under the settled definition of "proceeds of crime", and noted the ED's duty under Section 66(2) to share material with the agency competent to investigate any cognizable scheduled offence identified during enquiry.

2024 (9) TMI 936 - JHARKHAND HIGH COURT Money Laundering

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Strict bail scrutiny in money laundering matters: direct involvement in routing alleged proceeds of crime justified refusal of regular bail.
In a prosecution under the Prevention of Money Laundering Act, the Court found material showing the petitioner's direct and active role in routing alleged proceeds of crime through bank accounts arranged for bogus entries. Applying the settled bail approach in economic offences, it considered the nature and gravity of the accusations, supporting materials, risk of tampering or abscondence, and the wider public interest, noting that socio-economic offences call for a stricter approach. The petitioner's role was treated as distinguishable from cases involving health grounds or lack of direct involvement, and regular bail was declined.

Regular bail - prevention of money laundering - proceeds of crime - triple test under Section 439 of Cr.P.C. - rigors of Section 45 of the PMLA - socio-economic offences and bail - modus operandi and mastermind liability - nexus with predicate offenceRegular bail - triple test under Section 439 of Cr.P.C. - socio-economic offences and bail - rigors of Section 45 of the PMLA - Application for grant of regular bail to the petitioner is rejected. - HELD THAT: - The Court applied the established factors for bail in economic offences, including the triple test under Section 439 Cr.P.C., and noted that socio economic offences require a stricter approach. The Court found direct and material allegations against the petitioner indicating involvement in laundering proceeds of crime and functioning as a key person in the nexus that provided fictitious entries. Considerations included the nature and magnitude of the alleged offence, the materials relied upon in the complaint, the established modus operandi, and ongoing investigative and trial exigencies. In light of these factors and authorities emphasizing the rigours of Section 45 of the PMLA, the balance of competing considerations did not favour enlargement on bail. [Paras 6, 9, 16, 17, 18]Bail is declined and the regular bail application is dismissed.Proceeds of crime - modus operandi and mastermind liability - nexus with predicate offence - Whether the petitioner is connected with the predicate offence and involved in handling proceeds of crime. - HELD THAT: - The Court examined the materials in the complaint and found that the petitioner managed transactions, instructed associates to operate accounts, and procured bank accounts (some allegedly opened on forged identity documents) for making entries. The complaint and recorded statements attributed transfer of funds identified as proceeds of crime to bank accounts operated on the petitioner's instructions, and described a coordinated modus operandi involving the petitioner, entry providers and the principal accused. On this basis the Court concluded prima facie that the petitioner had nexus with the predicate offence and was a central figure in laundering the alleged proceeds. [Paras 5, 9, 10, 11]The petitioner is prima facie connected to the predicate offence and to proceeds of crime, forming a material basis for continued custody.Final Conclusion: The petition for regular bail is dismissed after the High Court, applying the triple test and PMLA jurisprudence, concluded that the petitioner is prima facie linked to laundering of proceeds of crime and that the balance of considerations disfavors bail.

2024 (9) TMI 1929 - JHARKHAND HIGH COURT Money Laundering

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Regular bail in money laundering case refused after material showed direct role in routing proceeds of crime through bank accounts
Regular bail was refused in a PMLA prosecution because the complaint and investigation materials disclosed a direct role in arranging cash, providing bank-account entries, and moving proceeds of crime through multiple accounts. Applying settled bail principles for economic offences, the Court considered the nature of the accusation, the gravity of the offence, the prosecution material, and the public interest, and found the allegations sufficient to deny release. The cases cited by the petitioner were distinguished on their facts, including health-related relief, absence of a direct role, or other statutory contexts. The bail application was dismissed.

2024 (10) TMI 59 - BOMBAY HIGH COURT Money Laundering

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PMLA arrest requires recorded reasons to believe and a real necessity for detention, not mere formal compliance.
Arrest under PMLA Section 19(1) must be supported by recorded reasons to believe, based on material in the officer's possession, with a real and rational connection to the facts. The belief cannot be a mere pretence or subjective satisfaction detached from the record, and the necessity to arrest must also be shown. On the material described, the Court noted that the respondents already possessed the relevant material before arrest and that the stated concerns did not prima facie establish a fresh necessity for detention. The arrest was therefore treated as lacking a sufficient rational basis, and interim bail was granted pending the petition.

Reasons to believe - power of arrest under Section 19(1) of the PMLA - need and necessity to arrest - higher threshold for arrest than Cr.P.C. - furnishing of grounds of arrest to the arrestee - rational connection between material and formation of belief - protection against self incrimination (Article 20(3))Power of arrest under Section 19(1) of the PMLA - reasons to believe - rational connection between material and formation of belief - need and necessity to arrest - Validity of the petitioner's arrest in view of the requirement of recorded 'reasons to believe' and the necessity to arrest under Section 19(1) of the PMLA. - HELD THAT: - The Court examined whether the authorised officers possessed sufficient material and whether the arrest satisfied the higher threshold under Section 19(1) of the PMLA as explained by the Supreme Court in Arvind Kejriwal and other precedents. Having regard to the material acknowledged to be in the respondents' possession prior to the arrest, and the chronology of searches, interrogations and release of the petitioner's father, the Court formed a prima facie view that the respondents' satisfaction appeared to be subjective and lacked a rational connection to the formation of belief required under Section 19(1). The Court observed that where material is already in the investigating agency's possession, the stated grounds such as preventing tampering or tracing funds must rationally connect to the need for custodial arrest; mere formal compliance without demonstrable necessity is insufficient. These are prima facie conclusions recorded without finally adjudicating the merits. [Paras 17, 21, 24]Prima facie held that the arrest lacked rational connection between the material and the formation of belief and that necessity for arrest was not demonstrated; interim relief was warranted.Furnishing of grounds of arrest to the arrestee - reasons to believe - higher threshold for arrest than Cr.P.C. - Whether production of 'reasons to believe' before the Special Court/magistrate satisfies the obligation to furnish grounds of arrest to the arrestee under the PMLA. - HELD THAT: - Relying on the ratio in Arvind Kejriwal and Vijay Madanlal Choudhary, the Court reiterated that production of the 'reasons to believe' to the Special Court or magistrate cannot be equated with furnishing those reasons to the arrestee. Section 19(1) mandates that the authorised officer record reasons in writing and inform the arrestee of the grounds of arrest so as to permit challenge; failure to provide the arrestee with those grounds vitiates the arrest. The Court noted that the formal requirement of recording cannot substitute for the substantive obligation to enable the arrestee to test the legality of detention. [Paras 19, 20]The Court accepted the legal proposition that the arrestee must be furnished with the written 'reasons to believe' and that mere production to the adjudicating authority does not discharge that obligation.Final Conclusion: Prima facie findings recorded that the arrest did not demonstrate a rationally connected 'reason to believe' or necessity for custody under Section 19(1) of the PMLA; accordingly the petitioner was granted interim bail on conditions, without prejudice to adjudication on merits.

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