2025 (12) TMI 645 - HC - Money Laundering

Bail Denied u/s 483 BNSS and Section 45 PMLA in Alleged Money Laundering Shell Account Scam

The HC dismissed the applicant's bail plea under Section 483 BNSS r/w Section 45 PMLA, holding that stringent twin conditions under PMLA were not ... Rejection of the application for bail filed by the Applicant before the trial Court invoking Section 483 of Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) r/w Section 45 of the Prevention of Money Laundering Act, 2002 - proceeds of crime - prima facie case of the offences of Sections 318, 336 and 338 (2) BNS or not - existence of material to attract and establish against the applicant the ingredients of the alleged scheduled offences under Sections 318 (4), 338 and 340 (2) of the BNS, 2023 or not. HELD THAT:- Section 2 (v) of the PMLA defines the word ‘property’ which means any property or asset and includes intangible property. Bank accounts are intangible property because they represent a right to receive money rather than a physical object. To support this conclusion it is apt to refer the decision in State of Maharashtra vs. Tapas D. Neogy [1999 (9) TMI 960 - SUPREME COURT], it is held by the Apex Court that the bank account of the accused or any of his relations is “property” within the meaning of Section 102 of Cr.P.C. and police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence. In the case on hand, first, the accused persons deceived the individual victims of the crime, then made them to open their bank accounts and lastly, caused them to allow the accused to take complete control and operations of the bank accounts in their hands. This was a clear wrongful loss of documents and right to operate the bank account by the individuals and wrongful gain of property by the accused persons. The money accumulated/credited in the bank accounts of the shell companies including M/s Hardik and M/s Haresh, were not withdrawn by the actual account holders but by Ritesh Shah, Sharifmiya, the applicant and others. However, without showing any of these three accused and their co-accused as ‘payee’ in the said cheques, the withdrawal by cheque was not possible. Therefore, the conclusion is inevitable that when the accused concerned wrote his name as ‘payee’ in the blank signed cheques to encash it, he did it falsely and without any authority, to derive or obtain the money from the bank account concerned. Considering the facts and circumstances of the case, it appears that, APMC accounts, integral to agricultural trade, are routinely involved in large-scale cash transactions. APMCs often handle high-value transactions due to the nature of their operations, including the trading of agricultural commodities. However, such accounts are vulnerable to misuse due to absence of strict oversight and regulatory mechanisms - Looking at the design of the offence, it appears that, the mastermind behind the money laundering operation and his co-accused were keenly aware of the inherent difficulty in tracing the purpose and end-use of the funds. At the cost of repetition, since the originally credited money was generated illegally, it was difficult for the accused persons to show it as a money legally earned. There is a strong case against the applicant of having committed the alleged offences. Secondly, looking at the nature of the offence, there is strong possibility of the applicant causing disappearance of the evidence of this offence. In addition, it cannot be said that the applicant is not likely to commit any offence while on bail. Bail application dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the materials on record disclose a prima facie commission of offences of cheating and forgery under Sections 318(4), 336, 338 and 340(2) of the Bharatiya Nyaya Sanhita, 2023. 1.2 Whether, notwithstanding that gambling/online betting is not a scheduled offence under the Prevention of Money Laundering Act, 2002, the funds routed through the shell entities constitute 'proceeds of crime' under Section 2(1)(u) PMLA. 1.3 Whether, on the basis of the above, a prima facie case of the offence of money-laundering under Section 3 PMLA is made out against the applicant. 1.4 Whether, having regard to the nature of accusations and material available, the applicant is entitled to bail under Section 483 BNSS read with Section 45 PMLA. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Prima facie commission of offences under Sections 318(4), 336, 338 and 340(2) BNS Legal framework 2.1 The Court considered the statutory definitions in Sections 2(7) 'dishonestly', 2(9) 'fraudulently', 2(14) 'injury', 2(15) 'illegal', 2(31) 'valuable security', 2(36) 'wrongful gain', 2(37) 'wrongful loss', 2(38) 'gaining wrongfully and losing wrongfully' of BNS, and the text of Sections 318 (cheating and its aggravated form under sub-section (4)), 335 (making a false document), 336 (forgery), 338 (forgery of valuable security, etc.) and 340(2) (using a forged document as genuine). Interpretation and reasoning 2.2 On perusal of the FIR, statements and material, the Court found that the applicant and co-accused induced innocent individuals to part with their identity/KYC documents and to open bank accounts or shell entities on the false promise of employment in APMC. These documents and accounts were then used, without disclosure of the true purpose, to establish and operate shell entities (including M/s Hardik Enterprises and M/s Haresh Trading Co.). 2.3 The Court held that if such deception had not been practised, the concerned individuals would not have opened accounts nor handed over signed cheque-books and debit cards. Thus, there was clear 'deception' and 'dishonest' inducement within the meaning of Section 318 BNS. 2.4 Bank accounts were treated as 'property' and the right to operate them as an asset, the wrongful transfer of control over which constituted 'wrongful loss' to the account-holders and 'wrongful gain' to the accused, within Sections 2(36)-(38) BNS. Reference was made to the Supreme Court's view that bank accounts are 'property' in the context of seizure (State of Maharashtra v. Tapas D. Neogy). 2.5 The Court inferred that, for effecting withdrawals, the accused must have filled in their own names or beneficiaries' names as payees in blank, pre-signed cheques. Writing the payee's name without authority on such cheques amounted to making a 'false document' and thereby 'forgery' of a 'valuable security' (cheques being bills of exchange and 'valuable security'), attracting Sections 335, 336 and 338 BNS. 2.6 Use of those cheques and related documents for encashment and transfers, with knowledge that they were so created/altered, constituted 'using as genuine' forged documents under Section 340(2) BNS. The deception extended to the banks, which were induced to honour such instruments as genuine. 2.7 The Court rejected the contention that the documents were 'genuine' merely because they belonged to real persons. It held that the critical factor was the deceptive manner in which the documents and accounts were obtained and used, and the unauthorised completion and use of signed cheque-leaves, which satisfied the elements of cheating and forgery. Conclusions 2.8 The Court concluded that there is a strong prima facie case that the applicant and co-accused cheated the individual account-holders and the banks, made false documents/forged valuable securities (cheques) and used them as genuine, thereby attracting Sections 318(4), 338 and 340(2) BNS (with the elements of forgery as per Section 336 being satisfied). Issue 2: Whether the funds constitute 'proceeds of crime' under Section 2(1)(u) PMLA, despite gambling not being a scheduled offence Legal framework 2.9 The Court referred to Section 2(1)(u) PMLA, including its Explanation, defining 'proceeds of crime' as any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, including property indirectly derived or obtained as a result of criminal activity 'relatable' to such scheduled offence. 2.10 The Court noted the exposition of 'proceeds of crime' in the Supreme Court decision in Vijay Madanlal Choudhary, emphasising: (i) strict construction; (ii) the requirement that property be derived/obtained 'as a result of' criminal activity relating to a scheduled offence; and (iii) the clarificatory nature of the 2019 Explanation. Interpretation and reasoning 2.11 The Court accepted that gambling or online betting per se is not a scheduled offence, and that mere proceeds of gambling would not, by themselves, constitute 'proceeds of crime' under PMLA. 2.12 However, on facts, the Court found that the criminal scheme did not merely involve gambling proceeds, but a layered process whereby: (a) individuals were cheated and their identities and accounts were misused; (b) shell-company bank accounts were opened and operated through deception and forgery; and (c) large sums, allegedly generated from illegal business/online gambling, were routed through these forged/cheated channels and withdrawn in cash. 2.13 The Court held that associating funds (allegedly from gambling/illegal business) with shell accounts opened through cheating and forgery, and projecting them as legitimate APMC/business transactions, created a direct nexus between the funds and the scheduled offences (cheating/forgery). The 'criminal overlay' of cheating/forgery turned the funds into property derived/obtained 'as a result of' criminal activity relating to scheduled offences. 2.14 The Court reasoned that the Explanation to Section 2(1)(u) PMLA covers property indirectly derived or obtained as a result of criminal activity relatable to a scheduled offence. Here, the scheduled offences (Sections 318(4), 338 and 340(2) BNS) were integral to routing, disguising and withdrawing the funds; thus, the funds withdrawn became 'tainted' as proceeds of those offences, even if they originally arose from non-scheduled gambling operations. 2.15 The Court distinguished the Supreme Court's illustration (in Vijay Madanlal Choudhary) concerning unaccounted property acquired by legal means, noting that the present case involves property associated with criminal activity of cheating and forgery (scheduled offences), not merely untaxed legal income. It observed that excluding such laundered funds from PMLA would defeat the Act's object and allow illegally accumulated money to be easily 'legalised'. Conclusions 2.16 The Court concluded that the money credited into and ultimately withdrawn from the shell-company bank accounts, operated through deception and forged instruments, constituted 'proceeds of crime' within Section 2(1)(u) PMLA, notwithstanding that gambling itself is not a scheduled offence. Issue 3: Prima facie existence of the offence of money-laundering under Section 3 PMLA Interpretation and reasoning 2.17 Having held that the funds routed through the shell accounts were 'proceeds of crime' arising from or relatable to scheduled offences of cheating and forgery, the Court examined the applicant's role in dealing with such proceeds. 2.18 The material, including statements under Section 50 PMLA and witnesses' accounts, indicated that: (a) the applicant worked in close concert with co-accused; (b) he participated in establishing shell entities and opening/operating their bank accounts; (c) he, along with others, effected cash withdrawals and other transactions from those accounts; and (d) he received commission for facilitating these withdrawals. 2.19 The Court inferred that the applicant knowingly assisted in the processes and activities connected with the projection, layering and withdrawal of the crime proceeds, thereby facilitating laundering and the appearance of legitimate business income, consistent with the mischief targeted by Section 3 PMLA. 2.20 The Court noted the applicant's arguments that his statement under Section 50 PMLA lacked corroboration and that custodial statements are of limited evidentiary value, but, at the bail stage, found there was sufficient additional material (including bank records, witness statements and the modus operandi) to show prima facie involvement. Conclusions 2.21 The Court held that a strong prima facie case exists that the applicant was actively involved in the process or activity connected with the proceeds of crime, thereby attracting Section 3 PMLA. Issue 4: Entitlement of the applicant to bail under Section 483 BNSS read with Section 45 PMLA Interpretation and reasoning 2.22 In light of the above findings, the Court assessed whether the twin conditions and the stringent standard under PMLA for grant of bail were satisfied. 2.23 The Court observed that the allegations involve a well-designed and sophisticated scheme of cheating and forgery, large-scale laundering of funds running into hundreds of crores, and exploitation of the vulnerabilities of APMC-related accounts and shell entities to disguise criminal proceeds. 2.24 Given the applicant's alleged central role in opening and operating the accounts, executing withdrawals, and receiving commission, the Court found there to be a 'strong case' of his involvement in the scheduled offences and in money-laundering. 2.25 The Court further held that, considering the nature and scale of the offence and the applicant's position in the operation, there existed: (i) a strong possibility of the applicant causing disappearance of evidence if released; and (ii) no assurance that he would not commit further offences while on bail. Conclusions 2.26 The Court concluded that the applicant failed to satisfy the requirements for bail under Section 45 PMLA and that the gravity of the offence, the strength of the material, and the likelihood of tampering and re-offending justified continued custody. The bail application was therefore rejected.