ED officials violated procedural requirements and adopted illegal investigation methods in money laundering case under Section 50 PML Act

The Telangana HC granted regular bail to petitioners in an ED case, finding that enforcement officials adopted illegal investigation methods and violated procedural requirements. The court held that ED authorities acted arbitrarily by restricting petitioners' movements and recording statements under Section 50 of PML Act before immediate arrest. Since all transactions dated to 2011 were already known to the investigating agency through another accused, no new evidence emerged during examination. The court noted evidence was circumstantial and petitioners' complicity could be determined during trial. Emphasizing that detention cannot serve as punishment during investigation and citing SC precedent that arrest is not mandatory in every case, the court granted bail with conditions to address flight risk concerns.

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Issues Involved:
1. Legality of the arrest and detention of the petitioners.
2. Compliance with procedural requirements under the PML Act.
3. Prima facie case against the petitioners.
4. Right to bail considering the nature and gravity of the offense.

Summary:

Legality of the Arrest and Detention:
The petitioners, Accused No. 1 (A1) and Accused No. 3 (A3), sought regular bail in connection with ECIR No. ECIR/HYZO/08/2023. They argued that the Enforcement Directorate (ED) adopted illegal methods during the investigation, detained them without basis, and violated the "reason to believe" requirement under the PMLA Act, 2002. They contended that they were illegally taken into custody and served notices under Section 50 of the PMLA Act. The Special Court's remand order was challenged for non-application of mind, as A1 and A3 were not shown as accused in the SEBI complaint.

Compliance with Procedural Requirements:
The ED argued that the procedure laid down under the PMLA Act, 2002 was scrupulously followed. The agency registered the case based on criminal offenses under the schedule and investigated those involved in generating and handling crime proceeds. The ED's grounds of arrest and remand report indicated the modus operandi adopted by the accused in generating crime proceeds. The ED officials conducted searches and recorded statements under Section 50 of the PMLA Act, 2002, following due procedure.

Prima Facie Case Against the Petitioners:
The ED's investigation revealed that Taksheel Solutions Limited (TSL) raised Rs. 82.50 crores through an IPO using fraudulent methods, which were considered proceeds of crime. A2, the MD & CEO of TSL, and others created entities in the USA to siphon off IPO proceeds, inflating the market value and misleading facts. The ED identified entities and persons who received the Inter Corporate Deposits (ICD) amount and found that A1 and A3 conspired to inflate TSL's revenue and siphon off IPO proceeds. The petitioners allegedly assisted in transferring proceeds of crime to entities within India and abroad.

Right to Bail Considering the Nature and Gravity of the Offense:
The court noted that the transactions in question were from 2011, and the evidence was circumstantial. The ED had information about the petitioners' involvement from A2's statements recorded in September. The petitioners argued that their statements were taken under duress and immediately retracted. The court emphasized that detention could not be by way of punishment at the investigation stage and that the apprehension of flight risk could be addressed by imposing conditions.

Conclusion:
The court granted regular bail to the petitioners, A1 and A3, with conditions including executing personal bonds, surrendering passports, not leaving Hyderabad without permission, and abiding by other conditions under Section 437(3) of Cr.P.C. The court found that the ED acted arbitrarily and that the petitioners' detention was not justified based on the available information.

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