2023 (11) TMI 1228 - HC - Money Laundering

Enforcement Directorate's Section 19 PMLA non-compliance leads to bail grant in money laundering case

The Jharkhand HC granted bail to a petitioner in a money laundering case, finding that the Enforcement Directorate failed to comply with Section 19 of ... Money Laundering - Non-compliance of section 19 of PMLA by the Enforcement Directorate - fulfilment of conditions of section 45(1)(ii) of the PMLA or not - petitioner had no knowledge that the accused Pradeep Bagchi committed forgery in order to impersonate himself as owner of the property in question - Company of which the petitioner is Director was the victim of cheating. Non-compliance of Section 19 of PMLA - HELD THAT:- At this stage it is pertinent to mention that reason to suspect and reason to believe are two different things and one of the conditions in Section 19 speaks of reason to believe. Reason to suspect is subordinate to reason to believe and cannot be equated with reason to believe. The expression reason to believe is made by two words i.e. reason and believe the word reason means cause or justification and the word believe means to accept as true or to have faith; thus, the officer has to have faith or accept a fact to exist and further there must be justification for such faith or acceptance - It is well settled that expression “reasons to believe” must be conditioned on the existence of tangible material and that reasons must have a live link with the formation of the belief. In the instant case, even if the allegations levelled against the petitioner in the Prosecution Complaint are accepted at its face value and in their entirety; prima facie, the same do not make out a case under Section 3, punishable under Section 4 of the PMLA, inasmuch as, such allegations fall short of the essential ingredients for offence of money-laundering under Section 3 of the PMLA Act. With regard to noncompliance of section 19 of PMLA by the Enforcement Directorate and also on merits of the case, prima facie with the available records produced before this court it does not transpire that the petitioner has committed the crime under the Act and/or is likely to commit any offence while on bail as the prosecution has not produced any material which would impress this Court that the petitioner might commit a similar offence. Conditions of section 45 of the PMLA fulfilled or not - HELD THAT:- It has not been disputed that the petitioner does not have any criminal antecedent and since it is difficult to predict the future conduct of the petitioner, the lack of criminal antecedent, his propensities and the nature and manner of his involvement as demonstrated have been considered by this court to decide on the second limb of section 45 (1)(ii) of the PMLA - It goes without saying that this is only stage of bail and this Court is not sitting under its inherent power under section 482 for quashing the entire proceeding; further there are 31 charge-sheeted witnesses and the petitioner is in custody since 07.06.23. Having regard to the number of oral and the documentary evidences and the present stage of trial and the period of custody undergone, this court is inclined to grant this petitioner on bail - the petitioner is directed to be released on bail subject to fulfilment of conditions imposed - application allowed. Issues Involved:1. Non-compliance of Section 19 of PMLA by the Enforcement Directorate.2. Satisfaction of conditions under Section 45(1)(ii) of PMLA by the petitioner.3. Knowledge of the petitioner regarding the forgery committed by accused Pradeep Bagchi.4. Victim status of the petitioner's company in the alleged cheating.5. Applicability of Section 3 and Section 4 of PMLA to the petitioner's case.Summary:Issue 1: Non-compliance of Section 19 of PMLA by the Enforcement DirectorateThe petitioner argued that the Enforcement Directorate (ED) failed to comply with Section 19 of PMLA, which mandates that the grounds of arrest must be furnished to the accused in writing. The court referred to the Supreme Court's judgment in Pankaj Bansal Vs. Union of India, which clarified that henceforth, a copy of the written grounds of arrest must be provided to the arrested person. The court concluded that the non-compliance of Section 19(1) by the ED warranted the petitioner being granted bail.Issue 2: Satisfaction of conditions under Section 45(1)(ii) of PMLA by the petitionerThe petitioner contended that he satisfied both conditions under Section 45(1)(ii) of PMLA, which require the court to be satisfied that there are reasonable grounds for believing that the accused is not guilty and that he is not likely to commit any offence while on bail. The court referred to the Supreme Court's judgment in Vijay Madanlal Choudhary & Ors versus Union of India, which clarified that only prima facie satisfaction of the court is required. The court found that the allegations against the petitioner were more of suspicion rather than belief, and thus, the conditions under Section 45(1)(ii) were satisfied.Issue 3: Knowledge of the petitioner regarding the forgery committed by accused Pradeep BagchiThe petitioner argued that there was no material on record to show that he had knowledge of the forgery committed by Pradeep Bagchi. The court noted that there was no document or material implicating the petitioner in the forgery or manipulation of the title deeds. The court also observed that the petitioner was not named as an accused in the FIR related to the forgery.Issue 4: Victim status of the petitioner's company in the alleged cheatingThe petitioner claimed that his company, M/s. Jagatbandhu Tea Estate Pvt. Ltd., was a victim of cheating by Pradeep Bagchi. The court found that the company had issued cheques for Rs. 7 crore to Pradeep Bagchi, out of which only Rs. 25 lakh was encashed. The remaining amount was to be paid upon handing over possession of the property. The court noted that the company had lodged complaints against Pradeep Bagchi for cheating, supporting the claim that the company was a victim.Issue 5: Applicability of Section 3 and Section 4 of PMLA to the petitioner's caseThe petitioner argued that even if the allegations were accepted at face value, no case under Section 3, punishable under Section 4 of PMLA, was made out. The court observed that there was no material on record to show that any proceeds of crime were generated by the petitioner. The amount paid by the company was out of the sale of tea leaves, and the account was duly audited. The court concluded that the allegations fell short of the essential ingredients for the offence of money laundering under Section 3 of PMLA.Conclusion:The court granted bail to the petitioner, directing him to furnish a bail bond of Rs. 100,000 with two sureties of the like amount. The petitioner was required to surrender his passport, not tamper with evidence, and appear before the trial court on each date unless exempted. The findings were deemed tentative and not to influence the trial's merits.