2022 (9) TMI 1124 - HC - Money Laundering

Validity of Supplementary Complaint & Order Upheld under Prevention of Money Laundering Act

Sanjay Rungta, M/s Quantum Power Tech Private Limited, Soubhik Chyattopadhyay @ Saubhik Chattopadhyay, Khalari Cements Limited, Versus Union of India, through the Directorate of Enforcement, Ranchi (Jharkhand)

Sanjay Rungta, M/s Quantum Power Tech Private Limited, Soubhik Chyattopadhyay @ Saubhik Chattopadhyay, Khalari Cements Limited, Versus Union of India, ... Issues Involved:1. Challenge to the supplementary complaint under sections 44 and 45 of the Prevention of Money Laundering Act, 2002.2. Allegations regarding proceeds of crime and involvement of petitioners.3. Mens rea and the role of directors in the alleged crime.4. Presumption in interconnected transactions under section 23 and burden of proof under section 24 of the Prevention of Money Laundering Act, 2002.5. Validity of the supplementary complaint and the order taking cognizance.Issue-wise Detailed Analysis:1. Challenge to the Supplementary Complaint:The petitioners challenged the supplementary complaint dated 3.5.2019 under sections 44 and 45 of the Prevention of Money Laundering Act, 2002, and the order taking cognizance dated 3.5.2019, as well as the cognizance order regarding the supplementary complaint dated 17.7.2018. These complaints were connected to E.C.I.R 02/PAT/2009/AD, pending in the court of the Additional Judicial Commissioner XVI cum Special Judge, PMLA, Ranchi. The Enforcement Directorate alleged that illegally earned properties were converted into various assets, becoming proceeds of crime.2. Allegations Regarding Proceeds of Crime:The Enforcement Directorate's investigation revealed that proceeds of crime generated by an individual were concealed, transferred, and invested by accomplices in various companies. The modus operandi involved delivering cash to certain individuals who would then arrange accommodation entries through companies engaged in investment, trading, and non-banking financial transactions. These companies would issue cheques to other companies where investments were intended to be made, either as share capital or unsecured loans.3. Mens Rea and Role of Directors:The petitioners argued that there was no allegation that they knowingly participated in the proceeds of the crime, and thus the Prevention of Money Laundering Act was not applicable to them. They contended that there was no mens rea, and the role of the directors in the alleged crime was not specified. They relied on the case of Dayle De'souza v. Government of India, which emphasized that liability under similar provisions required the person to be in overall control of the company's day-to-day business.4. Presumption in Interconnected Transactions and Burden of Proof:The Enforcement Directorate countered that section 23 of the Prevention of Money Laundering Act prescribes a presumption in interconnected transactions, and the burden of proof lies on the accused under section 24 of the Act. This was supported by the Supreme Court's decision in Vijay Madanlal Choudhary v. Union of India, which upheld the legality of these sections. The court noted that the presumption and burden of proof would be addressed during the trial.5. Validity of the Supplementary Complaint and Cognizance Order:The court found that there were sufficient allegations against the petitioners, including the company and its directors. It was noted that intentionally, the proceeds of the crime were transferred in the form of shares to the petitioners. The court emphasized that at the stage of issuing process, it is not necessary to apply a strict standard of proof or examine the probable defense. The court concluded that the order taking cognizance was valid and did not suffer from any illegality.Conclusion:The court dismissed the petitions (Cr.M.P. No.2507 of 2019, Cr.M.P. No. 779 of 2019, Cr.M.P. No. 1861 of 2019, and Cr.M.P. No. 2503 of 2019), vacated the interim orders, and disposed of any I.A. The proceedings, including the order taking cognizance, were upheld.