2024 (9) TMI 1551 - HC - Money Laundering

Delhi HC rejects ED plea to cancel bail in money laundering case involving fraudulent investment apps

Directorate Of Enforcement Versus Rahil Hiteshbhai Chovatia

Delhi HC dismissed ED's petition seeking cancellation of bail granted to respondent in money laundering case involving fraudulent apps promising doubled ... Legality of the bail granted to the respondent - Large-scale money laundering - public money was looted through apps such as Power Bank App, Tesla Power Bank App, Ezplan, etc., by luring people with the promise of doubling their money in a short period - proceeds of crime - Petitioner have emphatically argued that the learned trial court has not discussed the entire material on record and has made certain observations which are contrary to the facts - violation of principles of natural justice. HELD THAT:- To start with the order granting bail is only a prima facie view being expressed by the court and such observations are not taken into consideration while deciding the matter finally. Generally, any observations made at the stage of bail are not taken into account after the parties lead their evidence and the matter is appreciated by the learned trial court. The case of the ED is based on the fact that the entity of the respondent has received the funds from the first, second and third layer entities. It is to be kept in mind that even as per Vijay Madan Lal Chaudhary [2022 (7) TMI 1316 - SUPREME COURT] it has categorically been held that ingredients constituting the offence of money laundering needs to be construed strictly. It is also no longer a matter of debate that the probative value of statement under section 50 of PMLA is to be considered at the stage of trial. The bail cannot be denied merely on the assumption that the property recovered from the respondent must be proceed of crime. The ED has also sought cancellation of bail on the ground of certain WhatsApp chat of Mr. Saurin Shah another director in M/s Sagar Diamond Ltd. indicates that he was in touch of Vaibhav Shah for preparing legal declaration/affidavit of Akash Corporation. The criminality regarding transfer of funds is something which is to be considered at the stage of trial. The least discussion at the time on the merits of the case is desirable so as not to prejudice either of the parties. The apprehension of the ED that if the petitioner is allowed to be remain on bail he may derail the investigation or is a flight risk are mere apprehension and no substantial reason has been given. The E.D. may always move the court for imposing more stringent condition. The facts of the case may be very serious in nature but that has to be tested and examined during the course of trial. The defence being put up is that all the transactions between the firm of the respondent with other entities are the genuine sale transactions in the normal course of business. It is also a matter of record that alleged proceeds of crime of Rs.7.10 crore has already been deposited by Mr. Vaibhav Deepak Shah. The frequent rotation of funds disproportionate to the nature of business of Mr. Akash Panchal and the authenticity of statement under Section 50 of PMLA is required to be examined during the trial. The investigation has already been completed and the complaint has already been filed - there is no material on record to allow the application of ED for cancellation of bail. This Court considers that there is nothing on record to indicate that the bail has been granted on the irrelevant considerations. Petition dismissed. Issues Involved:1. Legality of the bail granted to the respondent.2. Connection of the respondent with shell companies and money laundering.3. Compliance with the conditions of bail.4. Allegations of non-cooperation and flight risk.5. Relevance of evidence and material on record.Detailed Analysis:1. Legality of the Bail Granted to the Respondent:The present petition under Section 439(2) read with Section 482 of the Code of Criminal Procedure, 1973, challenges the bail granted to the respondent by the learned ASJ, Patiala House Courts, New Delhi, on 19.10.2022. The Directorate of Enforcement (ED) argued that the order granting bail was unjustified, illegal, and perverse. The court noted that the bail order must demonstrate the application of mind, especially in serious cases, and should not be based on irrelevant considerations. The court emphasized that the rejection of bail at the initial stage and the cancellation of already granted bail require different considerations, with the latter demanding very cogent circumstances.2. Connection of the Respondent with Shell Companies and Money Laundering:The ED's investigation revealed large-scale money laundering involving shell companies such as M/s. Diyabati Technology Pvt Ltd, M/s. Maojaza Technology Pvt Ltd, and M/s. Sumyth Technologies Pvt Ltd. The respondent was alleged to be involved in transactions executed abroad and was connected to various entities that laundered money. However, the learned Sessions Judge found no evidence directly linking the respondent to the first and second-layer entities. The court noted that the mere transfer of funds through multiple layers does not, by itself, indicate knowledge that those funds were proceeds of crime.3. Compliance with the Conditions of Bail:The respondent complied with the conditions of bail and appeared before the ED as and when summoned. The court noted that there were no allegations of the respondent misusing or interfering with the investigation, tampering with evidence, or threatening witnesses. The court emphasized that bail should not be canceled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial.4. Allegations of Non-Cooperation and Flight Risk:The ED alleged that the respondent was non-cooperative during the investigation and attempted to flee to Dubai. The respondent denied these allegations, stating that he was traveling for business and was unaware of the Look Out Circular (LOC). The court found no substantial reason to believe that the respondent was a flight risk or would derail the investigation. The court noted that the alleged proceeds of crime of Rs. 7.10 crores had already been deposited by Mr. Vaibhav Dipak Shah.5. Relevance of Evidence and Material on Record:The court emphasized that the probative value of the statement under Section 50 of PMLA is to be considered at the trial stage. The court found that the learned Sessions Judge had not taken irrelevant materials into consideration while granting bail. The court reiterated that the bail order is a prima facie view and should not be taken into account during the final appreciation of evidence. The defense argued that all transactions were genuine business transactions, supported by proper documentation.Conclusion:The court dismissed the petition for the cancellation of bail, finding no material on record to indicate that the bail was granted on irrelevant considerations. The court reiterated that the observations made in the bail order should not influence the final decision, which should be based on the material available on record.