2017 (9) TMI 1268 - HC - Money Laundering

Court denies bail to petitioners under PMLA, citing seriousness of economic offenses

Virendra Jain, Surendera Kumar Jain Versus Enforcement Directorate Delhi Zonal Office Zone II New Delhi

The court rejected the bail applications of the petitioners, emphasizing the overriding effect of the conditions under Section 45 of the Prevention of ... Bail under Section 439 Cr.P.C. - offence under Sections 3 & 4 of PMLA - Held that:- In the instant petitions the petitioners, i.e. (1) Virendra Jain and (2) Surendra Kumar Jain, are involved in illegal activities of money laundering by way of share subscription with the help of a skilled person Rajesh Aggarwal, Chartered Accountant and the petitioners succeeded in receiving proceeds of crime amounting to ₹ 1,11,96,000/-, which is a Schedule Offence under Sections 3 & 4 of PMLA. The aforesaid activities of the petitioners is illegal and not permissible under the law. Therefore, the conditions laid down under Section 45 of PMLA will have an overriding effect on the general provisions of the Cr.P.C. Consequently, this Court find no merit in the present petitions and the bail applications, i.e. BAIL APPLN. 1113/2017 & BAIL APPLN. 1114/2017, of the present petitioners, i.e. (1) Virendra Jain and (2) Surendra Kumar Jain are rejected. Issues Involved:1. Legality of the petitioners' arrest and the procedure followed.2. Compliance with Section 45 of the Prevention of Money Laundering Act (PMLA).3. Validity of the initiation of PMLA proceedings without cognizance of the scheduled offense.4. Petitioners' cooperation with the investigation and the necessity of their continued detention.5. Applicability of the twin conditions for bail under Section 45 of PMLA.Detailed Analysis:1. Legality of the Petitioners' Arrest and Procedure Followed:The petitioners argued that their arrest and the summons issued to them violated the mandate of law and their Fundamental Rights under Article 21 of the Constitution of India. They contended that the arrest was actuated with malice and did not fulfill the prerequisites of Section 19 of PMLA, which requires material possession, reasons to believe in writing, and reasons to believe that the person is guilty of money laundering. They also highlighted that they had cooperated with the investigation by appearing in response to the summons.2. Compliance with Section 45 of PMLA:The petitioners' counsel argued that the twin limitations under Section 45(1) PMLA do not apply to their case, as the scheduled offenses were incorporated into PMLA in 2009 and amended in 2013 to remove the monetary threshold. They cited the judgment in Gorav Kathuria vs. Union of India, which held that the limitations under Section 45 do not apply to Part B offenses prior to the 2013 amendment. The petitioners also referenced the Supreme Court's dismissal of an appeal against this judgment, asserting that it now stands as binding law.3. Validity of the Initiation of PMLA Proceedings Without Cognizance of the Scheduled Offense:The petitioners argued that no PMLA proceedings could exist without a scheduled offense from which proceeds of crime are derived. They claimed that when the Enforcement Case Information Report (ECIR) was registered, no court had taken cognizance of the scheduled offense. They emphasized that the trial in both cases must go simultaneously as per Section 44 of PMLA.4. Petitioners' Cooperation with the Investigation and Necessity of Continued Detention:The petitioners highlighted their cooperation with the investigation and argued that their continued detention would prevent them from contesting various proceedings, including those before the Income Tax Authority and the Adjudicating Authority. They stressed that they have deep roots in society, and the risk of absconding or evading the process of law does not arise.5. Applicability of the Twin Conditions for Bail under Section 45 of PMLA:The respondent's counsel contended that the conditions under Section 45 of PMLA are mandatory and must be complied with before granting bail. They cited the Supreme Court's judgment in Gautam Kundu vs. Directorate of Enforcement, which held that the conditions under Section 45 have an overriding effect on the general provisions of the Code of Criminal Procedure (Cr.P.C.). The respondent argued that the petitioners are involved in serious economic offenses with deep-rooted conspiracies, posing a threat to the financial health of the country.Court's Conclusion:The court found no merit in the petitioners' arguments and emphasized the seriousness of economic offenses. It held that the conditions under Section 45 of PMLA have an overriding effect on the general provisions of Cr.P.C. and must be complied with. The court noted that the petitioners are involved in illegal activities of money laundering and have received proceeds of crime amounting to Rs. 1,11,96,000/-. Consequently, the court rejected the bail applications of the petitioners, Virendra Jain and Surendra Kumar Jain.Final Order:The bail applications, BAIL APPLN. 1113/2017 and BAIL APPLN. 1114/2017, were rejected. The court's observations in this order were stated to have no effect on the merit of the case.