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of <h1>Delhi HC grants bail in money laundering case involving loan diversion and company takeover through NCLT</h1> Delhi HC granted bail to an applicant in a money laundering case involving loan diversion and siphoning. The court noted the applicant was not accused in ... Seeking grant of bail - Money Laundering - proceeds of crime - diversion/siphoning off the said loan amount, thereby failing to repay the said loan amounts to the banks - key member in the crime conspiracy - reasonable grounds to believe or not - applicability of the twin conditions for bail u/s 45 of the PMLA - HELD THAT:- Admittedly, the predicate offence registered by the CBI is against the SOL and its Directors and Promoters. It is also an admitted case that applicant is not an accused in the charge sheet filed in the predicate offence. Applicant is the successful resolution applicant of SOL, which has been taken over by the orders of NCLT after the resolution plan of Umaiza Infracon LLP was approved by the NCLT. The Facility Agreement, which is alleged to be a sham agreement, is already a subject matter of arbitration, which is pending adjudication, and therefore, imputations cannot be made till such time the arbitration is decided. In the case of V. Senthil Balaji Vs. State, [2024 (9) TMI 1497 - SUPREME COURT], it has been held that the existence of scheduled offence is a sine qua none for alleging existence of proceeds of crime and the existence of proceeds of crime at the time of trial of offence under Section 3 of PMLA can be proved only if the predicate/scheduled offence is established during trial of the said offence. The trial in case under the PMLA cannot be finally decided unless the trial of predicate/scheduled offence concludes. Similarly, in the case of Vijay Nair v. Directorate of Enforcement, [2024 (9) TMI 321 - SC ORDER], it was observed and held that 'The cardinal principle of bail being the rule and jail being the exception will be entirely defeated if the petitioner is kept in custody as an under-trial for such a long duration. This is particularly glaring since in the event of conviction, the maximum sentence prescribed is only 7 years for the offence of money laundering.' The whole case of the respondent is that applicant acted on the advice and instructions of the ex-promoters/Directors of SOL – Rohit Aggarwal and submitted the resolution plan in NCLT to acquire SOL with a view to facilitate the diversion of proceeds of crime to Rohit Aggarwal, who thus is stated to be the main beneficiary. However, the alleged main beneficiary of the proceeds of crime, Rohit Aggarwal has not been arrested - Even though, ED not having arrested the co-accused persons, against whom there are more serious allegations, would not be dispositive of a bail plea one way or the other, it will not be wholly irrelevant. The role of co-accused Paramjeet is that he being an ex-employee of SOL and close aide of ex-promoter of SOL i.e. Rohit Aggarwal, while acting as C.O.O./Director/ Shareholder/Controller of M/s. Shivakriti Agro Private Limited played a key role and facilitated the transfer of proceeds of crime through sham transactions of Shivakriti Agro Private Limited with SOL and other companies and facilitated the takeover of SOL indirectly via Umaiza. The role alleged against co-accused Paramjeet, already granted bail, is no lesser than the role of the present applicant - There is nothing on record to indicate the previous criminal antecedents of the applicant, no reasonable apprehension has been raised by the ED to demonstrate that applicant will commit similar offence while on bail. Conclusion - Considering the entirety of facts and circumstances, the Court is inclined to grant bail to the present applicant. The applicant is therefore directed to be released upon his furnishing a personal bond in the sum of Rs. 1 lakh with two sureties of the like amount each to the satisfaction of learned trial court/Duty Magistrate, subject to fulfilment of conditions imposed. Application allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the applicant, who is not named in the FIR or charge sheet of the predicate offence, can be held liable under the Prevention of Money Laundering Act, 2002 (PMLA) for alleged money laundering related to the corporate debtor's insolvency resolution process;The applicability and interpretation of the twin conditions for bail under Section 45 of the PMLA, specifically whether there are reasonable grounds to believe that the accused is not guilty and is unlikely to commit an offence while on bail;The effect of the ongoing arbitration proceedings challenging the Facility Agreement alleged to be a sham transaction and its impact on the prosecution's case;The relevance and application of the doctrine of parity in bail applications, especially when co-accused with allegedly graver charges have been granted bail or not arrested;The constitutional safeguards under Article 21 of the Constitution of India concerning liberty and speedy trial vis-`a-vis the stringent bail provisions under the PMLA;The assessment of risk factors such as flight risk, tampering with evidence, and influencing witnesses in the context of bail;The evidentiary threshold for bail under PMLA and the extent to which the court should delve into merits at the bail stage;The permissibility of bail where the trial of the predicate offence is pending or delayed indefinitely and the impact of such delay on the accused's right to liberty.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Liability of Applicant under PMLA despite not being named in Predicate OffenceThe predicate offence registered by the CBI pertains to fraud, criminal breach of trust, and siphoning off funds by the corporate debtor and its promoters. The applicant was not named in the FIR or the charge sheet of the predicate offence. The applicant's role is as a partner in Umaiza Infracon LLP, the successful resolution applicant under the Corporate Insolvency Resolution Process (CIRP) approved by the National Company Law Tribunal (NCLT).The Court considered whether the applicant's involvement in the CIRP and the alleged Facility Agreement, which is challenged in arbitration, can be the basis for money laundering charges under the PMLA. The respondent alleged that the applicant acted on directions of ex-promoters to regain control of the company using proceeds of crime. However, the applicant denied knowledge of any proceeds of crime or involvement in sham transactions.The Court noted that the Facility Agreement is under arbitration and thus the allegations based solely on this document cannot be conclusively accepted at this stage. The Court emphasized that the existence of proceeds of crime under the PMLA is contingent upon establishing the predicate offence, which is still at a preliminary stage and has not commenced trial. The Court relied on precedent holding that trial under PMLA cannot be decided unless the trial of the predicate offence concludes.Issue 2: Interpretation of Bail Conditions under Section 45 of PMLAThe Court examined the twin conditions under Section 45 of the PMLA requiring reasonable grounds to believe that the accused is not guilty and is unlikely to commit the offence again if released on bail. The Court relied heavily on Supreme Court precedents, including Vijay Madanlal Choudhary and Mohd. Muslim cases, which clarify that the court's role at bail stage is to consider broad probabilities rather than weigh evidence meticulously. The satisfaction of 'not guilty' is prima facie and based on reasonable material on record.The Court reiterated that stringent bail conditions under special statutes like PMLA must be balanced with the constitutional right to personal liberty under Article 21. It recognized the need to prevent punitive or preventive detention through prolonged incarceration without trial. The Court also noted that delay in trial and the maximum sentence prescribed (usually seven years under PMLA) are relevant factors in bail consideration.Issue 3: Impact of Delay in Trial and Constitutional SafeguardsThe Court highlighted the significant delay in commencement and likely conclusion of the trial, with thousands of documents and numerous witnesses involved in both predicate and PMLA cases. It referred to authoritative judgments emphasizing that prolonged detention without trial violates Article 21 and that bail is the rule, jail the exception.The Court observed that the applicant had been in custody for about eleven months, had cooperated fully with investigations, and there was no evidence of flight risk or tampering with evidence. The Court also noted that co-accused with similar or graver allegations had been granted bail, reinforcing the principle that statutory restrictions cannot override constitutional rights indefinitely.Issue 4: Doctrine of Parity and Selective ArrestsThe Court acknowledged the respondent's submission that parity is not a ground for bail under PMLA but held that selective arrests and non-arrest of main beneficiaries can be a relevant consideration. It cited precedents where bail was granted due to the non-arrest of masterminds or principal accused, emphasizing fairness and non-arbitrariness in enforcement actions.The Court found that the applicant's role was not materially different from co-accused who had been granted bail, and the non-arrest of key ex-promoters weakened the prosecution's case for continued custody.Issue 5: Application of Law to Facts and Treatment of Competing ArgumentsThe applicant's counsel argued that the CIRP and takeover of SOL by Umaiza were lawful and judicially approved, and that the applicant had no knowledge of proceeds of crime. The respondent contended that the applicant was part of a conspiracy to launder proceeds of crime through sham entities and transactions.The Court carefully balanced these contentions, noting that the allegations against the applicant were primarily based on circumstantial evidence and disputed documents under arbitration. The Court emphasized the need to protect the applicant's liberty in the absence of conclusive proof and in light of procedural safeguards.3. SIGNIFICANT HOLDINGSThe Court held:'The trial in case under the PMLA cannot be finally decided unless the trial of predicate/scheduled offence concludes.''The court at the stage of considering the application for grant of bail, is expected to consider the question from the angle as to whether the accused was possessed of the requisite mens rea. The court is not required to record a positive finding that the accused had not committed an offence under the act.''The stringent provisions regarding the grant of bail, such as Section 45 (1) of the PMLA, cannot become a tool which can be used to incarcerate the accused without trial for an unreasonably long time.''The Constitutional Courts can always exercise their powers to grant bail on the grounds of violation of Part III of the Constitution of India and stringent provisions for the grant of bail such as those provided in Section 45 of the PMLA do not take away the power of Constitutional Courts to do so.''The continued detention of the applicant cannot be justified on the sole ground of statutory bar under Section 45.''No evidence has been led to show that the present applicants are a flight risk. In fact, records would show that both the applicants have joined investigation on multiple occasions. There is no incident alleged by the respondent wherein the applicants have tried to tamper with evidence or influence witnesses.'Core principles established include:The necessity of a prima facie assessment of guilt and risk at the bail stage under PMLA, without delving into trial merits;The constitutional primacy of personal liberty and speedy trial over statutory bail restrictions when trials are unreasonably delayed;The relevance of parity and fairness in enforcement actions, especially when key accused remain at large;The recognition that CIRP processes approved by NCLT cannot be lightly disregarded in criminal proceedings without proper adjudication;The requirement that bail conditions must be balanced with the realities of trial delays and the nature of offences.Final determination on the bail application was to grant bail to the applicant subject to furnishing of personal bond and sureties, surrender of passport, restrictions on travel, communication with investigation, and non-interference with witnesses or evidence.
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