TaxTMI 
TaxTMI 
2015 (11) TMI 131
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....ad (ED). 2. The facts giving rise to the present application are that a search came to be carried out under the provisions of the Foreign Exchange Management Act, 1999 (hereinafter referred to as "FEMA") at the registered office of M/s Nile Industries Pvt. Ltd. as well as the residence of the applicant at Surat, pursuant to which, certain documents were seized under FEMA. The statement of the applicant also came to be recorded by the officers of the Directorate of Enforcement under the provisions of FEMA. On 11.04.2014, a first information report being C.R. No.16/2014 came to be registered against M/s R.A. Distributors and its Directors by the Manager of ICICI Bank, Surat for the offences punishable under sections 420, 465, 467, 468, 471, 477A and 120B of the Indian Penal Code, wherein the applicant was not named as an accused. Subsequently, on 13.04.2014, another first information report came to be registered being C.R. No.17/2014 against M/s Harmony Diamonds Pvt. Ltd., M/s Agni Gems Pvt. Ltd. and its Directors by the Manager of ICICI Bank, Surat for the offences punishable under sections 420, 465, 467, 468, 471, 477A and 120B of the Indian Penal Code. Once again, the applicant....
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....eing Bail Application No.1072 of 2014 before the Designated Court. By an order dated 7.10.2014, the Designated Court rejected the bail application, pursuant to which the applicant has filed the present bail application. 3. It may also be pertinent to note certain other facts which have some bearing having regard to the case put forth on behalf of the applicant. On 20.08.2014, the applicant came to be arrested in connection with the first information report being C.R. No.16/2014 by the DCB, Surat and nine days remand of the applicant was granted. On 01.09.2014, another co-accused Rakesh Manekchand Kothari was arrested in connection with the ECIR No.1/2014. On 07.10.2014, the bail application filed by the applicant before the Special Court being Criminal Miscellaneous Application No.1072 of 2014 came to be rejected. On 29.10.2014, the Directorate of Enforcement filed supplementary complaint in the Special Court against eight persons and two companies, which came to be numbered as PML ACT No.4/2014. By an order dated 24.12.2014, the bail application filed by the applicant herein in connection with the first information report registered vide C.R. No.16/2014 came to be rejected by t....
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....t shall be cognizable, came to be deleted. Reference was made to the speech of the Minister of Finance made at the time of introducing the Bill to amend the Prevention of Money Laundering Act, 2002 wherein broadly the reasons for the amendment are the following: "Under the existing provisions in Section 45 of the Act, every offence 1s cognizable. If an offence is cognizable, then any police officer in India can arrest an offender without warrant. At the same time, under section 19 of the Act, only a Director or a Deputy Director or an Assistant Director or any other officer authorised, may arrest an offender, Clearly, there was a conflict between these two provisions. Under Section 45(1)(b) of the Act, the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint made in writing by the Director or any other officer authorised by the Central Government. So, what would happen to an arrest made by any police officer in the case of a cognizable offence? Which is the court that will try the offence? Clearly, there were inconsistencies in these provisions. They have not been removed. We have enabled only the Director or an officer aut....
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....nce provided that the amounts so received were proceeds of crime emanating from a scheduled offence. It was submitted that M/s Natural Trading Company or its partners are not shown to be accused in the scheduled offence in connection with the first information report registered vide C.R. No.I-16/2014 of DCB or C.R.No.I-17/2014 of DCB, Surat. It was submitted that there are no averments in the complaint under the PML Act, which if accepted at face value, would show that M/s Natural Trading Company had received any proceeds of crime as defined under section 2(u) of the PML Act from the scheduled offence being C.R. No.I-16/2014 of DCB or C.R.No.I- 17/2014 of DCB, Surat. It was contended that no material in the form of statements produced before the Special Court in Complaint Case No.3/2014 is produced by the Directorate of Enforcement, which if accepted at its face value would show that M/s Natural Trading Company and M/s Gangeshwar Mercantile Pvt. Ltd. had received any proceeds of crime from the scheduled offences being C.R. No.I-16/2014 of DCB or C.R.No.I-17/2014 of DCB, Surat. It was submitted that insofar as the complaint by the Directorate of Enforcement for the offence under the....
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....l Criminal Application No.4275 of 2015, to point out that the court has recorded prima facie findings at the admission stage that the offence under the PML Act is a non-cognizable offence and that the arrest had been made overlooking the provisions of section 155 of the Code. That any arrest in violation of section 155 of the Code would vitiate his continued detention. It was pointed out that the court has prima facie found that the investigation was neither commenced nor progressed in accordance with law and has, accordingly, found that the arrest and continued custody to be in violation of Article 21 of the Constitution of India. It was pointed out that the Division Bench has recorded that if the offence under the PML Act is held to be cognisable offence, it was mandatory to comply with sections 154 and 157 of the Code apart from sections 157(1) and 172 of the Code and if the offence under the PML Act is held to be noncognizable, it was mandatory to comply with section 155 of the Code apart from sections 167(1) and 172 of the Code. It was pointed out that the court had turned down the submission advanced on behalf of the respondent that the above provisions would not be applicabl....
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.... consequences provided under the Act; (ii) is capable of exercising influence or authority over a person from whom the confession is obtained. 4.8 Referring to the preamble of the PML Act, the learned counsel pointed out that the Act has been enacted only for the purpose of dealing with the proceeds of crime and nothing else. The applicant is in jail since fourteen months. The money is already attached and that the proceeds so attached are more than Rs. 16 crores. It was urged that all the accused, other than Madan Lal Jain, who has not approached the court for bail, have been released. Bilal Haroon, another co-accused, who is stated to be one of the main persons, has also been released. It was submitted that considering the fact that the material with which the complaint is supported consists entirely statements of co-accused, the evidentiary value of which is highly debatable, the applicant is required to be spared from the punishment without trial. It was submitted that even if the admissibility is accepted, it does not conclusively show that money received is definitely "proceeds of crime" and hence, an excellent prima facie case for grant of bail has been made out. 4.9 I....
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....e Magistrate is done away with. However, under PMLA, the Special Court does not act as a court of original jurisdiction. Referring to section 44(b) of the PML Act, it was submitted that a harmonious construction would be that arrest is made with the protection of examination made by the Magistrate. It was submitted that the statutory protection against arbitrary exercise of arrest has been given and that the production within twenty-four hours is a statutory safeguard which also gives the earliest opportunity to get bail. It was submitted that in the facts of the present case, section 19(3) of the PML Act has been violated and therefore also, the detention of the applicant is unauthorized because at no point of time, the court of competent jurisdiction before which he ought to have been produced, viz. the Magistrate, has authorized the detention of the applicant after the arrest. It was argued that in view of section 2(l) read with section 155 of the Code, the initial arrest of the applicant is itself bad as the same was effect without a warrant of arrest. It was urged that the present case is squarely covered by the above referred decision dated 3^rd August, 2015 of the Division B....
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....f the PML Act as well as the Code is concerned, while considering a bail application, this court is required to satisfy itself about the two conditions stipulated under section 45 of the PML Act. It was contended that if the court is not satisfied that the said two conditions are fulfilled, assuming without admitting that there is a procedural lapse in the initial arrest, the same would not be sufficient to enlarge the applicant on bail. In support of such submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of N. R. Mon v. Mohd. Nasimuddin, (2008) 6 SCC 721, wherein the court, in the context of section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (hereinafter referred to as "the NDPS Act"), placed reliance upon its earlier decision in the case of Collector of Customs, New Delhi v. Ahmadalieva Nodira, (2004) 3 SCC 549, and observed that the limitations on granting of bail come in only when the question of granting bail arises on merits. Apart from the grant of opportunity to the Public Prosecutor, the other twin conditions which really have relevance so far the accused therein is concerned, are the satisfaction of the ....
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....ure of a condition precedent for the exercise of that power, so that, the accused shall not be released on bail unless the court is satisfied that there are reasonable grounds to believe that he is not guilty. The court observed that the provision in section 37 to the extent it is inconsistent with section 437 of the Code supersedes the corresponding provision in the Code and imposes limitation on granting of bail in addition to the limitations under the Code as expressly provided in subsection (2) of section 37. These limitations on granting of bail specified in sub-section (1) of section 37 are in addition to the limitations under section 437 of the Code and were enacted only for this purpose. Reliance was placed upon an unreported decision of this court in the case of Rakesh Manekchand Kothari v. Deputy Director, Enforcement Director and another rendered on 31.03.2015 in Criminal Miscellaneous Application No.3637 of 2015 wherein, the court in the context of section 45 of the PML Act, had observed that since the court was unable to record the first satisfaction as contemplated under section 45(1)(ii) of the PML Act, it would be immaterial as to whether the applicant meets with th....
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....r section 19 of the PML Act, an officer of the Directorate of Enforcement cannot arrest without warrant as the offence is now made noncognizable, the learned counsel submitted that section 19 of the Act nowhere speaks about the exercise of powers of arrest only after obtaining warrant from the Magistrate. It was urged that the title of section 45 still provides that it is a cognizable offence and that the legislative debate referred to by the learned counsel for the applicant has to be read only when the Act is ambiguous. It was contended that even if the parliamentary discussion produced by the applicant is to be seen, it goes to show that section 45(a) is deleted only to take away powers of the police and it did not intend to restrict the powers of the Directorate of Enforcement as contended by the applicant. It was submitted that the provisions of the PML Act have overriding effect and section 65 thereof provides that the Code of Criminal Procedure would only apply only so far as it is not inconsistent with the PML Act and hence, when the PML Act does not require the officer of the Directorate of Enforcement to obtain warrant from the court, the provisions of the Code cannot be ....
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....ut further investigation. It was submitted that section 65 of the PML Act provides that to the extent they are not inconsistent, the provisions of the Code apply. It was submitted that sub-section (1) of section 173 of the Code speaks about report to be filed after investigation without delay; but does not provide for any limitation for the same. Moreover, section 173(8) of the Code provides for further investigation and that there are no contrary provisions in the PML Act and hence, further investigation can be carried out by the Directorate of Enforcement even under the PML Act. 5.8 As regards the contention that the statements of coaccused cannot be relied upon, it was submitted that the statements recorded under section 50 of the PML Act can be relied upon not only at the interim stage of bail, but can even be made the basis for conviction of an accused. It was contended that the officers of the Directorate of Enforcement not being police officers, the provisions of sections 24 and 25 of the Evidence Act, which provide that no confession made to a police officer shall be proof as against a person accused of any offence, would not be attracted in the present case. It was subm....
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.... Aarzoo Enterprises, M/s Natural Trading Co., M/s Millennium & Co. and M/s M. D. Enterprises. The applicant would ensure that the funds credited in the above cited firms were transferred through RTGS to the "big seven" entities for siphoning the money out of India. The precious foreign exchange was thus illegally transferred to the firms in Hong Kong and Dubai and the end use of that money is nothing but money laundering. It was contended that investigations have established that the applicant was actually involved in the offence of money laundering under section 3 of the PML Act, as he had used the seven companies belonging to his accomplice Shri Madanlal Manekchand Jain for siphoning off precious foreign exchange out of India to the entities owned by him in Hong Kong and Dubai. It was contended that the entire remittances made by the seven companies had started from late December 2013 to the first week of March 2014 and during this period, the applicant and his brother have received Rs. 10 crores from a firm M/s Natural Trading Co., which was not physically existent at its given address in Surat. The receipt of Rs. 10 crores from the said firm which was under the control of Shri ....
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.... from the complaint lodged by the respondents to point out that there is sufficient material on the record to connect the applicant with the offence in question. It was, accordingly, urged that the applicant who is one of the main accused in the crime, has not been able to satisfy the twin requirements laid down under section 45(1) of the PML Act for grant of bail, and hence, this court may not exercise discretion in favour of the applicant. 6 This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record and proceedings of the case as produced before it as well as the decisions cited by the learned counsel for the respective parties. 7 As noticed hereinabove, several submissions have been advanced by the learned counsel for the applicant on the validity of the applicant's arrest as well as the order of remand made under section 167 of the Code; however, this court cannot be oblivious of the fact that it is considering a bail application under section 439 of the Code read with section 45 of the PML Act and not a habeas corpus or other application under Article 226 of the Constitution of India. As observed by the....
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....hough various contentions have been raised with regard to the powers of arrest and non production of the applicant before the magistrate at the stage of his arrest, in the opinion of this court, it is not necessary to enter into the merits of the same, as they are beyond the scope of the present application. Besides, it may be noted that the order of remand was passed after hearing the learned counsel for the applicant. When the order of remand came to be passed by the Designated Court, the applicant was represented by a reputed Senior Advocate, but at that stage no contention was raised with regard to the arrest being without authority of law, or that the said court was not empowered to make an order of remand. Therefore, at this stage, and more particularly, in an application for bail, the question of entering into the merits of such contentions does not arise. 10. Since strong reliance has been placed on behalf of the applicant on the order dated 03.08.2015 passed by a Division Bench of this court in the case of Rakesh Manekchand Kothari v. Union of India (supra), it may be noted that in the said case apart from the fact that the Division Bench was exercising writ jurisdictio....
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....t. 12. Assuming for the sake of argument that the above order passed by the Division Bench, despite being an interlocutory order, is to be treated as a precedent, as noticed hereinabove, on facts, the case of the applicant and the petitioner in the said case are different. Whereas in the facts of the said case, the rigours of section 45 were not attracted, that is not so in the case at hand, where the applicant is an accused in the scheduled offence also. It may also be noted that the Division Bench has repelled the contention raised on behalf of the Directorate of Enforcement that the provisions of the Code are inapplicable merely because provisions of the Code used the word "police officer" and they are officers of Enforcement Directorate. The court observed that such interpretation as proposed by the respondents would render section 165 (sic. 65) of PMLA meaningless and thus cannot be accepted as contrary to the ratio laid down in Om Prakash v. Union of India, (2011) 14 SCC 1 where Central Excise Officer was held to have no authority to arrest without warrant in noncognizable offence under Central Excise Act, 1944 in light of section 155 of the Code. In this regard it may be ....
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....sion and therefore, constitutes a binding precedent, held that it cannot be said that the order of arrest suffers from vice of any illegality on the ground that it is ordered by an incompetent or unauthorized authority and there is no failure in adhering to the procedure laid down under section 19(1) of the PML Act and it cannot be said that the petitioners are detained or confined illegally warranting issuance of writ of Habeas Corpus. Thus, in the said petition, it was open for the applicant to raise all grounds as regards the validity of his detention as well as the order of remand; however, the applicant having not raised those grounds in the said petition, cannot now seek to urge such grounds before this court in an application under section 439 of the Code. 14. For the purpose of present case, the bail application has to be decided within the framework of section 439 of the Code read with section 45 of the PML Act. The applicant being an accused in the scheduled offence, the rigours of section 45 of the PML Act would clearly be applicable. Sub-section (2) of section 45 of the PML Act provides that the limitation in granting bail specified in sub-section (1) thereof is in a....
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....hat he is not likely to commit any offence while on bail. Reasonable grounds have to be something more than prima facie grounds. The facts of the case are required to be examined keeping in mind the above statutory provisions. 16. It may, therefore, be apposite to briefly refer to the facts of the case. An information was received from the Joint Commissioner of Customs, Customs Division, Surat, that two Surat based companies M/s Harmony Diamonds Pvt. Ltd. and M/s Agni Gems Pvt. Ltd. had recently opened bank accounts with ICICI Bank, Surat. Further a letter dated 06.03.2014 of the Joint Commissioner of Customs, Surat, also forwarded 18 bills of entry relating to M/s R. A. Distributors Pvt. Ltd. informing that the bills of entry submitted by the said entity before the ICICI Bank for making foreign remittance, were fake. On the basis of the inputs received, it was gathered that within a span of two months, that is, January and February 2014, remittances to foreign shores worth more than Rs. 1000 crores against fake import documents, viz., bills of entry and invoices were made from the said accounts. The Customs Department verified the 25 bills of entry (total value of Rs. 100 crore....
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.... evidences have been recovered (i) Madanlal Jain had sent a WhatsApp message to Afroz Fatta wherein mention of "Arzoo Enterprise, Vandana & Co., M. D. Enterprises, Millennium & Co., Maruti Trading" has been found. These Companies are connected to this case, as referred to hereinabove. (ii) In one of the WhatsApp message, someone has sent full address of AL Mignas FZE Ltd., Hong Kong, to Afroz Fatta. This was sent on request of Afroz Fatta, wherein he had typed "bhai almegnas ka poora name address phone number saath bejana". As noticed hereinabove, Al Mignas is one of the Hong Kong based companies where foreign remittances have gone. 17. Out of the two first information reports related to the scheduled offences, an offence under sections 120B, 420, 467 and 471 of the Indian penal Code has been registered against the companies, M/s R A Distributors, M/s Agni Gems Pvt. Ltd., M/s Harmony Diamonds Pvt. Ltd. and its directors which are also scheduled offences in terms of section 2(y) of the PML Act. Further investigation revealed that the applicant, his brotherin-law and his sister and brother have received money from M/s Natural Trading Co., which is one of the companies thr....
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....Pvt. Ltd. has received RTGS credits amounting to Rs. 27,10,000/-, Rs. 13,60,000/- and Rs. 22,35,000/- from M/s Natural Trading Co. on 08.01.2014, 09.01.2014 and 13.01.2014 respectively. Scrutiny of the said statement revealed that RTGS transfer was made to the account of M/s Nile Trading Corporation on 17.02.2014 in the following manner Sr. No. Date Amount in Rs. 1 17/02/2014 1,71,90,517 2 17/02/2014 1,44,36,831 3 17/02/2014 1,44,98,627 4 17/02/2014 1,69,93,966 19. Investigation carried out led to the tracing of the account number 00672320013409 of M/s Nile Trading Corporation to the HDFC Bank, Ghod Dod Road Branch, Surat. Further scrutiny of its account and account form revealed that the applicant Shri Afroz Mohamed Hasan Fatta was the proprietor of M/s Nile Trading Corporation which was into the declared business of trading in utensils. The statement of the applicant was recorded under section 50 of the PML Act wherein, he had, inter alia, stated that in the year 2011, he came in contact with Shri Madanlal Jain who was engaged in sale and purchase of diamonds. That in the year 2014, he had talked to Shri Madanlal Jain and ....
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....ted through criminal activities relating to scheduled offences under investigation by the Surat District Crime Branch. The applicant Shri Afroz Fatta is one of the main players in the nefarious deals of submitting forged/bogus bills of entry, invoices etc. on the strength of which, precious foreign exchange amounting to Rs. 5395.75 crores were remitted outside India without any actual imports. 21. Reliance was also placed by the respondents on the statement of Urvish Shah recorded by the Directorate of Enforcement under section 50 of the PML Act as well as the statements of other persons including the co-accused Shri Madanlal Jain. Some of the persons whose statements have been recorded under section 50 of the PML Act have stated that Shri Bilal Haroon who was released on bail would often visit them and threaten them not to go before the Directorate of Enforcement till the applicant comes out on bail. 22. In the aforesaid backdrop, the question that arises for consideration is as to whether the conditions precedent for grant of bail under section 45(1) of the PML Act, are satisfied. Section 45 of the PML Act, requires the court to record satisfaction that (i) there are reason....
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.... sets of provisions. Insofar as section 108 of the Customs Act is concerned, it gives power to the customs officer to summon persons to give evidence and produce the documents. However, the wording of section 67 of the NDPS Act is altogether different. 25. In this regard, it may be germane to refer to the provisions of section 50 of the PML Act. A conjoint reading of section 50 of the PML Act and section 108 of the Customs Act reveals that section 50 of the PML Act is in pari materia with section 108 of the Customs Act. Therefore, prima facie, the decisions of the Supreme Court interpreting the provisions of section 108 of the Customs Act or section 14 of the Excise Act from time to time could be applicable to statements recorded under section 50 of the PML Act. However, at this stage while considering the question of grant of bail, it is not permissible for this court to record a finding one way or the other as regards the evidentiary value of the statements recorded under section 50 of the PML Act, which can be gone into only at the stage of trial. 26. From the facts noted hereinabove it is evident that the allegation against the applicant is that the amount of Rs. 13 crore....