2022 (4) TMI 650 - HC - Money Laundering

Court denies bail under Section 45(1)(ii) of Money Laundering Act citing gold diversion, money laundering allegations.

Sanjay Agarwal Versus The Directorate of Enforcement

Sanjay Agarwal Versus The Directorate of Enforcement - 2022 (381) E.L.T. 27 (Cal.) Issues Involved:1. Legality of the diversion of gold meant for export to the domestic market.2. Applicability of Section 45 of the Prevention of Money Laundering Act (PMLA) for bail.3. Prima facie evidence against the petitioner for the alleged offenses.4. Petitioner's involvement in smuggling and money laundering.Detailed Analysis:1. Legality of the Diversion of Gold Meant for Export to the Domestic Market:The case originated from the accusation that the petitioner diverted 54.096 kg of gold jewelry meant for export from Kolkata to the domestic market. The shipping bill was filed under the name of Shri Ganesh Jewels, Hyderabad, for export to Dubai. The gold was handed over to the petitioner's son, who then gave it to the petitioner. The petitioner broke the customs seals and booked the gold for domestic delivery. The petitioner argued that the gold was legally purchased, and the only allegation was selling it domestically without exporting it, for which duties and penalties were already paid.2. Applicability of Section 45 of the PMLA for Bail:The petitioner argued that Section 45 of the PMLA, which imposes twin conditions for bail, was declared unconstitutional by the Supreme Court in Nikesh Tarachand Shah vs. UOI. However, the Enforcement Directorate (ED) contended that the amendment to the Finance Act, 2018, revived these conditions. The court referred to various judgments, including those from the Bombay High Court and the Supreme Court, affirming that the twin conditions of Section 45(1)(ii) of the PMLA are applicable post-amendment.3. Prima Facie Evidence Against the Petitioner:The ED's investigation revealed that the petitioner diverted 2717 kg of gold, valued at over Rs. 650 crores, meant for export to the domestic market. The petitioner and his associates used multiple bank accounts to launder money. The court noted the gravity of the offense, the petitioner's use of a fake passport, and the potential risk of absconding and tampering with evidence.4. Petitioner's Involvement in Smuggling and Money Laundering:The court examined the definitions and provisions related to smuggling and money laundering under the Customs Act and PMLA. The petitioner's actions, including the diversion of gold and subsequent financial transactions, were found to fit the definition of money laundering, involving proceeds of crime and projecting them as untainted property. The court emphasized that the PMLA is a standalone statute and its proceedings are independent of the outcome of the predicate offense.Conclusion:The court concluded that the twin conditions of Section 45(1)(ii) of the PMLA are applicable and that the prima facie evidence supports the allegations against the petitioner. Given the gravity of the offense, the risk of absconding, and the potential to influence witnesses, the court rejected the petitioner's bail application. The petitioner's prayer for bail was thus denied, and the case was disposed of accordingly.