2015 (12) TMI 1133 - SC - Money Laundering

SC upholds bail refusal under Section 439 CrPC in money laundering case, enforcing strict PMLA provisions and burden of proof rules

Gautam Kundu Versus Manoj Kumar, Assistant Director, Eastern Region, Directorate of Enforcement (Prevention of Money Laundering Act) Govt. of India

The SC upheld the High Court's refusal to grant bail under Section 439 CrPC in a money laundering case under Section 3 PMLA. It emphasized the mandatory ... Rejection of Bail Application under Section 439 of the Code of Criminal Procedure, 1973 - offence alleged to have been committed under Section 3 of the Prevention of Money Laundering Act, 2002 - A complaint was filed by the respondent authorities, being C/14214 of 2013, alleging that the Rose Valley transferred the money raised by issue of debentures from the account of one company to that of another company. It is also alleged that the money collected by issuing the debentures for the purpose of one business has been invested in some other business. Held that:- Conditions specified under Section 45 of the PMLA are mandatory and needs to be complied with which is further strengthened by the provisions of Section 65 and also Section 71 of the PMLA. Section 65 requires that the provisions of Cr.P.C. shall apply in so far as they are not inconsistent with the provisions of this Act and Section 71 provides that the provisions of the PMLA shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. PMLA has an overriding effect and the provisions of Cr.P.C. would apply only if they are not inconsistent with the provisions of this Act. Therefore, the conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 of Cr.P.C. That coupled with the provisions of Sect ion 24 provides that unless the contrary is proved, the Authority or the Court shall presume that proceeds of crime are involved in money laundering and the burden to prove that the proceeds of crime are not involved, lies on the appellant. There is no denying the fact that Section 24 of the SEBI Act is a penal provision of inclusive nature and thus it clearly reflects the legislative intent of a scheduled offence under PMLA. Admittedly, the complaint was filed by SEBI against the appellant on the allegation of committing offence punishable under Section 4 of PMLA. The complaint reveals that SEBI received a letter from the Ministry of Corporate Affairs, Office of the Registrar of Companies, West Bengal, with reference to Rose Valley in which the ROC had stated that Rose Val ley has repeatedly issued debentures in the years 2001-2002, 2004-2005, 2005-2006 and 2007-2008 to more than 49 persons in each financial year without filing offer documents with either the ROC or the SEBI and requested SEBI to investigate into the matter. - case is relating to “Money Laundering” which we feel is a serious threat to the national economy and national interest. We cannot brush aside the fact that the schemes have been prepared in a calculative manner with a deliberative design and motive of personal gain, regardless of the consequence to the members of the society. Appellant floated as many as 27 companies to allure the investors to invest in their different companies on a promise of high returns and funds were collected from the public at large which were subsequently laundered in associated companies of Rose Valley Group and were used for purchasing moveable and immoveable properties. - allegations may not ultimately be established, but having been made, the burden of proof that the monies were not the proceeds of crime and were not, therefore, tainted shifted on the accused persons under Section 24 of the PML Act, 2002. The same proposition of law is reiterated and followed by the Orissa High Court in the unreported decision of Smt. Janata Jha v. Assistant Director, Directorate of Enforcement (CRLMC No. 114 of 2011 decided on December 16, 2013). Therefore, taking into account all these propositions of law, we feel that the application for bail of the appellant should be seen at this stage while the appellant is involved in the economic offence, in general, and for the offence punishable under Section 4 of the PMLA, in particular. High Court has not committed any wrong in refusing bail in the given circumstances. Accordingly, we do not find any reason to interfere with the impugned order so passed by the High Court and the bail, as prayed before us, challenging the said order is refused - Decided against the appellant. Issues Involved:1. Rejection of bail application under Section 439 of the Code of Criminal Procedure.2. Alleged offences under Section 3 and Section 4 of the Prevention of Money Laundering Act, 2002 (PMLA).3. Alleged violations of the Securities and Exchange Board of India Act, 1992 (SEBI Act).4. Interpretation of Section 24 of the SEBI Act as a scheduled offence under the PMLA.5. Applicability of Section 45 of the PMLA in bail matters.Detailed Analysis:1. Rejection of Bail Application under Section 439 of the Code of Criminal Procedure:The appellant's bail application was rejected by the High Court of Calcutta under Section 439 of the Code of Criminal Procedure. The High Court held that no competent court had yet ruled that no offence was made out against the appellant under Section 24 of the SEBI Act. The appellant's criminal revision for quashing the proceedings under Section 24 of the SEBI Act was still pending. The Supreme Court noted that Section 45 of the PMLA imposes stringent conditions for granting bail, which the High Court considered while rejecting the bail application.2. Alleged Offences under Section 3 and Section 4 of the PMLA:The appellant was arrested on suspicion of committing offences punishable under Section 3 of the PMLA, which deals with money laundering. The complaint filed by the respondent authorities alleged that the appellant laundered money collected through debentures issued by Rose Valley Real Estate Construction Ltd. The Supreme Court emphasized the seriousness of money laundering offences, which pose a significant threat to the national economy and interest.3. Alleged Violations of the SEBI Act:The appellant's company, Rose Valley, was penalized by SEBI for violating provisions of Sections 11(C) and 24 of the SEBI Act. SEBI's investigation revealed that Rose Valley issued debentures without complying with public issue norms, violating the SEBI (Disclosure and Investor Protection) Guidelines, 2000, and other provisions of the SEBI Act. The appellant's appeal before the Securities Appellate Tribunal resulted in a reduction of the penalty, but the issues of compliance and legality remained contentious.4. Interpretation of Section 24 of the SEBI Act as a Scheduled Offence under the PMLA:The appellant argued that Section 24 of the SEBI Act was not a separate scheduled offence under the PMLA. Instead, Section 12A read with Section 24 of the SEBI Act should be considered the scheduled offence. The appellant contended that the inclusion of Section 24 alone in the PMLA schedule was a typographical error. The Supreme Court did not resolve this issue in the bail application, as it was pending before a Division Bench of the High Court. The Court noted that the legislative intent and the plain language of the PMLA schedule should guide the interpretation.5. Applicability of Section 45 of the PMLA in Bail Matters:Section 45 of the PMLA imposes two conditions for granting bail: (i) the prosecutor must be given an opportunity to oppose the bail application, and (ii) the court must be satisfied that the accused is not guilty of the offence and is unlikely to commit any offence while on bail. The Supreme Court affirmed that these conditions are mandatory and have an overriding effect on the general provisions of the Code of Criminal Procedure. The High Court's refusal to grant bail was based on these stringent conditions and the seriousness of the allegations against the appellant.Conclusion:The Supreme Court upheld the High Court's decision to reject the appellant's bail application. The Court emphasized the gravity of money laundering offences and the mandatory conditions under Section 45 of the PMLA. The interpretation of Section 24 of the SEBI Act as a scheduled offence under the PMLA was left unresolved, pending a decision by the High Court. The appeal was dismissed, affirming the High Court's discretion in denying bail based on the materials collected during the investigation and the legislative framework of the PMLA.