2014 (3) TMI 1069 - HC - Money Laundering

Court Dismisses Petition Alleging Disproportionate Wealth

Narendra Mohan Singh Versus Directorate of Enforcement

The court dismissed the petition, upholding the order taking cognizance of the offenses related to allegations of amassing wealth disproportionate to ... Money laundering - Non disclosure of loan taken - Maintainability of the supplementary complaint - Held that:- The petitioners were found to have been involved themselves in that process or activity of the proceeds of crime in the year 2008 when they are said to have advanced the money to Surya Sonal Singh, who has been found to have been involved in the activity connected with the proceeds of crime from the years 2008 to 2012, when he invested the proceeds of crime in the Real Estate at Gurgaon, but all of them have been found projecting it as untainted money much after incorporation of Section 13 as scheduled offence. Moreover, one may find there had been inter connected transaction of the proceeds of crime starting from the year 2008 to 2012. If the prosecution has found Surya Sonal Singh to have involved himself in the activity or process of the proceeds of crime, any transaction entered into in between petitioner nos. 1, 2 and Surya Sonal Singh would be presumed to be interconnected transaction in terms of the provisions as contained in Section 23 of PML Act.Under the circumstances, the submissions, which had been made on behalf of the petitioners that the transaction entered into by the petitioners in the year 2008, cannot be subject matter of the prosecution under Section 3 of the PML Act, is not worth acceptable. Enforcement Directorate seems to be that when the claim was laid by petitioner no. 1 that he had taken loan from M/s Bhawesh Metal and M/s Ketan Metal, the documents submitted by those firms never disclosed any loan being given to petitioner no. 1. However, subsequently, some documents were placed showing advancement of the loan to petitioner no. 1, but those documents in view of the case of the Enforcement Directorate become quite suspicious. In that event, any finding recorded by the Adjudicating Authority would not be binding and, thereby, order passed by the Adjudication Authority, would have no adverse effect upon the case of the Enforcement Directorate whereby the petitioners are being prosecuted for commission of the offence under Section 3 of the PML Act. Going further into the matter, it be stated that the question has been raised over the maintainability of the supplementary complaint on the premise that the provisions as contained in Section 44 (1)(b) and 45 of the PML Act, refers to 'a complaint'. Even if such reference is there of 'a complaint', it never prevents of filing of supplementary complaint as the reference of a complaint has been made in those provisions in the context that whenever a complaint filed by an authority authorized, court may take cognizance over it. We have already noted the circumstances, under which a supplementary complaint has been lodged. In such situation, it can be said that it has been lodged in the same manner in which supplementary charge sheet is submitted in a police case. If such a restricted meaning as has been sought to be advanced then the result would be that even if after filing of a complaint culpability of any other person is found during investigation, he will not be prosecuted. This can never be the intention of the legislature. Thus, we do not find any illegality with the order taking cognizance and, hence, this application stands dismissed. Issues Involved:1. Legitimacy of transactions and proceeds of crime under the Prevention of Money Laundering Act (PML Act).2. Retrospective application of Section 13 of the Prevention of Corruption Act.3. Validity of the supplementary complaint under the PML Act.4. Impact of adjudication authority's findings on criminal prosecution.Issue-Wise Detailed Analysis:1. Legitimacy of Transactions and Proceeds of Crime:A complaint was lodged alleging that Kamlesh Kumar Singh, while holding ministerial office, amassed wealth disproportionate to his known sources of income. The Vigilance Bureau investigated and found properties worth Rs. 1,75,15,918/-, leading to charges under various sections of the Indian Penal Code and the Prevention of Corruption Act. The CBI re-investigated and found assets worth Rs. 5,46,07,597/-, resulting in further charges. The Enforcement Directorate (ED) also investigated and filed a complaint under the PML Act, alleging that the properties were acquired through proceeds of crime. The court found that the petitioners projected a sum of Rs. 1 crore as untainted money, which was not reflected in their income tax returns (ITRs), thus supporting the prosecution's case.2. Retrospective Application of Section 13 of the Prevention of Corruption Act:The petitioners argued that the transactions in question occurred before Section 13 was added as a scheduled offense under the PML Act in 2009, and thus, prosecution under the PML Act was not maintainable. The court, however, noted that the relevant date for prosecution under the PML Act is when the proceeds of crime are projected as untainted property, not when the scheduled offense was committed. This interpretation was supported by previous judgments, including 'Hari Narayan Rai vs. Union of India & Others' and 'Sajjan Singh vs. State of Punjab.'3. Validity of the Supplementary Complaint:The petitioners contended that the PML Act does not allow for supplementary complaints. The court rejected this argument, stating that the law does not prevent filing supplementary complaints, especially when new facts come to light during the investigation. The court drew an analogy to the submission of supplementary charge sheets in police cases, emphasizing that the legislature did not intend to restrict further prosecution if additional culpability is discovered.4. Impact of Adjudication Authority's Findings:The petitioners argued that the Adjudicating Authority's decision, which found the Rs. 1 crore to be legitimate money, should quash the criminal prosecution. The court noted that the Adjudicating Authority's findings were based on documents and ITRs that the ED found suspicious. The court held that the adjudication findings do not bind the criminal prosecution, especially when the ED's investigation revealed inconsistencies and potential afterthoughts in the petitioners' claims. The court referenced 'Radheshyam Kejriwal vs. State of West Bengal and Another,' emphasizing that exoneration in adjudication proceedings does not necessarily preclude criminal prosecution.Conclusion:The court dismissed the petition, finding no illegality in the order taking cognizance of the offenses. The court emphasized that the findings in this order should not prejudice the merits of the case.