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TaxTMI 
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TaxTMI 
2017 (11) TMI 779
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....nch of Delhi Police, New Delhi. The ECIR, however, has been registered at the instance of Assistant Director (PMLA), Directorate of Enforcement, empowered to investigate the offences punishable under the Act of 2002. 2. The appellant first approached the Additional Sessions Judge02, South East Saket Court, New Delhi for releasing him on bail by way of an application under Section 439 of the Code of Criminal Procedure, 1973 read with Section 45 of the Act of 2002. The said bail application came to be rejected vide judgment dated 7th January, 2017 by the said Court. The appellant thereafter approached the High Court of Delhi at New Delhi by way of Bail Application No.119 of 2017 and an interlocutory application filed therein, being Criminal M.B. No.121 of 2017. The High Court independently considered the merits of the arguments but eventually rejected the prayer for bail vide impugned judgment dated 5th May, 2017. 3. The ECIR has been registered against Ashish Kumar, Raj Kumar Goel and other unknown persons for offences punishable under Sections 3/4 of the Act of 2002 on the basis of information/material, as evident from the predicate offence registered by P.S. Crime Branch, De....
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....sted to bank/Govt officials and were supposed to be delivered to general public/guidelines issued by the Reserve Bank of India/Ministry of Finance and hand thus cheated the public at large. The accused persons have also caused monetary loss to the Govt. of India and thereby Committed offences u/s 420, 406, 409, 467, 468, 471, 188, 120B IPC." It is then noted that the offences under Sections 420, 468, 471 and 120B of IPC are scheduled offences under the Act of 2002 and that from the available facts, a reasonable inference is drawn that the named accused and unknown accused have made illegal earnings arising out of the said criminal conspiracy which might have undergone the process of laundering and thereby an offence under Section 3 of the Act of 2002 was made out. It is noted that prima facie case for commission of offence under Section 3 punishable under Section 4 of the Act of 2002 was made out and accordingly the case is being registered and taken up for investigation under the Act of 2002 and rules framed thereunder. 4. The learned Sessions Judge while considering the bail application adverted to the relevant materials including the CDR analysis of Mobile number of Ashish....
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....ered by the Delhi Police. It thus opined that the matter on hand must be examined only in reference to the registration of ECIR by the Enforcement Directorate. The fact that the investigation in FIR registered by the Crime Branch of Delhi Police, bearing FIR No.205/2016, had not commenced will also be of no avail to the appellant. The Sessions Court also found that as per Section 19 of the Act of 2002, the only condition to be satisfied for arrest of a person is the reasonable belief of the authority gathered on the basis of material in its possession. Further, in the present case, the accused was arrested by the competent authority on the basis of material in his possession giving rise to a reasonable belief about the complicity of the accused in the commission of offence punishable under the Act of 2002. As such the arrest of the appellant under the Act of 2002 cannot be termed as illegal. After having dealt with those contentions, the Sessions Court took note of the material pressed into service by the prosecution and analysed the same in the following words: "21. Pursuant to registration of FIR No.205/2016 under section 420, 406, 409, 468, 471, 188, 120B IPC by Crime B....
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....persons as mentioned in the FIR attract implications and as such the correct authority to investigate into the same is the Income Tax Department and not the ED. Per contra, learned Special Prosecutor for ED submitted that accused only cooperated in the investigation in ECIR No.14/16 and not in ECIR No. 18/16. He further submitted that as sufficient material surfaced on record against the present accused and he did not cooperate in the investigation in the present case, therefore, accused Rohit Tandon was arrested in this case. He submitted that he does not dispute the jurisdiction of Income Tax Department so far as other aspects of the matter are concerned. 24. As per section 45 of PMLA, while considering grant of bail to accused, the court has to satisfy that:i. There are reasonable grounds for believing that accused is not guilty of such offence and that ii. He is not likely to commit any offence, while on bail. 25. In the present case, accused has failed to satisfy this court that he is not guilty of alleged offence punishable under section 3 of PMLA. He has not been able to discharge the burden as contemplated under section 24 of the Act. 26. Accused ....
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....only when the chargesheet is filed after completion of investigation in relation to FIR No.205/2016 and the case is committed to the concerned Court. The High Court held that Section 44 of the Act of 2002 does not envisage a joint investigation but is a provision stipulating that the trial of offence under Section 3/4 of the Act of 2002 and any scheduled offence connected to the offence under that section may be tried only by the Special Court constituted for the area in which the offence has been committed. While considering the merits of the allegations against the appellant, in particular, the materials on record, the High Court analysed the same in the following words: "14. In FIR No.205/2016 allegations are that Raj Kumar Goel; Ashish Kumar, Bank Manager, Kotak Mahindra Bank, K.G.Marg Branch and others conspired for illegal conversion of demonetized currency notes into monetized currency by way of depositing cash in various accounts of the firms and subsequently getting Demand Drafts issued in fictitious names. It is further alleged in the said FIR that accused therein opened bank accounts in the name of 'Group of Companies' in Kotak Mahindra Bank. In ECIR No.18, tran....
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....ounts of the 'Group of Companies' which were not owned by the petitioner and what was its purpose. It was further enquired as to why the Demand Drafts were got issued in the names of the persons referred above and what was its specific purpose. Learned Senior Counsel for the petitioner avoided to answer these queries stating that the defence of the petitioner could not be disclosed at this juncture to impact his case during trial. Apparently, no plausible explanation has been offered as to what forced the petitioner to deposit the old currency to the tune of `31.75 crores in eight accounts of the different 'Group of Companies' in Kotak Mahindra Bank during the short period from 15.11.2016 to 19.11.2016. There was no explanation as to why the Demand Drafts for the said amount were got issued in the name of sham people whose identity was not known. The purpose of all this exercise seemingly was to deposit the cash (old currency) first, get the Demand Drafts issued in fictitious names and obtain monetized currency by cancelling them subsequently. The petitioner also did not place on record any document whatsoever to show as to from which legal source, the cash was procured to deposit ....
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....t the question of granting bail did not arise, taking into consideration the serious allegations against the appellant and other facts including severity of the punishment prescribed by law. Accordingly, the bail application of the appellant came to be rejected. As a consequence, the pending application which was considered along with the bail application was also disposed of by the impugned judgment and order dated 5th May, 2017 passed by the High Court. 9. We have heard Mr. Mukul Rohatgi, learned senior counsel appearing for the appellant and Mr. Tushar Mehta, learned Additional Solicitor General for the Union of India. They have also filed written submissions. 10. Before we analyse the rival submissions, for the completion of record, we must mention that after the impugned judgment, the Crime Branch filed the chargesheet before the appropriate Court in relation to FIR No.205/2016 on 24th June, 2017. Similarly, the Enforcement Directorate has filed supplementary complaint CC No.700/2017 in relation to ECIR 18/2016, which refers to further material gathered during the investigation, indicating the complicity of the concerned accused in the crime for offence punishable under ....
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....It has been further submitted that the charge sheet in the main case has been submitted and that the petitioner has remained in jail for more than seven months by now. Opposing the aforesaid prayer for grant of interim bail, Mr. Mahajan, learned Sr. Standing Counsel submits that this is a case of serious fiscal impropriety of great magnitude and there is a possibility of the petitioner tampering with evidence if he comes out from the jail even for a short period. No definite reasons, however, have been assigned by Mr.Mahajan, for such a presumption that the petitioner would tamper with the evidence specially when charge sheet in the main case has already been submitted. Mr.Rohtagi, learned senior counsel has drawn the attention of this Court to the fact that whenever the petitioner was summoned to answer to the Queries, he had visited the office of the ED and in the past, had never tried to evade the process of investigation. Taking into account the aforesaid facts, specially the period of incarceration of the petitioner, submission of the charge sheet in the main case and the illness of the mother of the petitioner, this Court is inclined to grant interi....
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....nconstitutional being violative of the fundamental rights of the Petitioner guaranteed and protected under Articles 14 and 21 of the Constitution of India; (ii) In the alternative to prayer (i) above, issue a writ of mandamus or any other appropriate writ, order or direction reading down the scope and ambit of Section 45(1) of the Prevention of Money Laundering Act, 2002 (Act 15 of 2003), so that the rigors in grant of bail are not applicable in the case of the Petitioner, where the alleged scheduled offences in CC No. 41 of 2017 arising out of chargesheet No. 1 dated 24.06.2017 filed by the Crime Branch, New Delhi alleging commission of offences under Sections 420/188/109/120B/34 IPC and Section 12 of the Prevention of Corruption Act, 1988 (none of which were under Part A of the Schedule prior to the Prevention of Money Laundering (Amendment) Act, 2012 (Act 2 of 2013) and formed part of Part B of the Schedule; (iii) Issue a writ of mandamus or any other appropriate writ, order or direction declaring the continued incarceration of the Petitioner since 28.12.2016 in ECIR/18/DZII/ 2016/AD dated 26.12.2016 under Section 3/4 of the Prevention of Money Laundering Act, ....
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....rence to the challenge regarding the validity thereof. 15. Reverting to the first contention of the appellant, that the reasons which weighed with the learned Single Judge of the High Court while directing interim release of the appellant, would apply proprio vigore for considering the regular bail. In that, the learned Single Judge vide order dated 10th August, 2017 noted the following circumstances: i) Petitioner never tried to evade the investigation; ii) The period of incarceration (7 ½ months); iii) Submission of chargesheet in the main case on 24/6/17; iv) Illness of the mother of the Petitioner; v) No definite reasons assigned by the Counsel for the Respondent to substantiate allegation that Petitioner would tamper with evidence especially when chargesheet in the main case has been submitted. 16. The argument though attractive at the first blush deserves to be rejected. In our opinion, the order dated 10th August, 2017 passed by the High Court directing interim release of the appellant was primarily on account of the illness of his mother. No more and no less. The other observations in the said order will have no bear....
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....e Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by- (i) the Director; or (ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government. (1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed. (2) The limitation on granting of bail specified in subsection (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail." (emphasis supplied) The sweep of Section 45 of the Act of 2002 is no more res intergra. In a recent decision of this Court in the case of Gautam Kundu Vs. Directorate of Enforcement (Prevention of MoneyLaundering Act), Government of....
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....d the provisions of Cr.P.C. would apply only if they are not inconsistent with the provisions of this Act. Therefore, the conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 of Cr.P.C. That coupled with the provisions of Section 24 provides that unless the contrary is proved, the Authority or the Court shall presume that proceeds of crime are involved in money laundering and the burden to prove that the proceeds of crime are not involved, lies on the appellant." (emphasis supplied) 17. In paragraph 34, this Court reiterated as follows: 34. "xxx xxx xxx We have noted that Section 45 of the PMLA will have overriding effect on the general provisions of the Code of Criminal Procedure in case of conflict between them. As mentioned earlier, Section 45 of the PMLA imposes two conditions for grant of bail, specified under the said Act. We have not missed the proviso to Section 45 of the said Act which indicates that the legislature has carved out an exception for grant of bail by a Special Court when any person is under the age of 16 years or is a woman or is a sick or infirm. Therefore, ....
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....broad probabilities. Further, the Court is required to record a finding as to the possibility of the accused committing a crime which is an offence under the Act after grant of bail. In Ranjitsing Brahmajeetsing Sharma (supra), in paragraphs 44 to 46 of the said decision, this Court observed thus: "44. The wording of Section 21(4), in our opinion, does not lead to the conclusion that the Court must arrive at a positive finding that the applicant for bail has not committed an offence under the Act. If such a construction is placed, the court intending to grant bail must arrive at a finding that the applicant has not committed such an offence. In such an event, it will be impossible for the prosecution to obtain a judgment of conviction of the applicant. Such cannot be the intention of the Legislature. Section 21(4) of MCOCA, therefore, must be construed reasonably. It must be so construed that the Court is able to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail much before commencement of trial. Similarly, the Court will be required to record a finding as to the possibility of his committing a crime after grant of bail. ....
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....commission of crime punishable under Section 3/4 of the Act of 2002. The Courts have maintained the delicate balance between the judgment of acquittal and conviction and order granting bail before commencement of trial. The material on record does not commend us to take a contrary view. 22. Realizing this position, the learned counsel appearing for the appellant would contend that even if the allegations against the appellant are taken at its face value, the incriminating material recovered from the appellant or referred to in the complaint, by no stretch of imagination, would take the colour of proceeds of crime. In fact, there is no allegation in the chargesheet filed in the scheduled offence case or in the prosecution complaint that the unaccounted cash deposited by the appellant is as a result of criminal activity. Absent this basic ingredient, the property derived or obtained by the appellant would not become proceeds of crime. To examine this contention, it would be useful to advert to Sections 3 and 4 of the Act of 2002. The same read thus: "3. Offence of moneylaundering. Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a ....
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....as not been defined. By its very nature the alleged activities of the accused referred to in the predicate offence are criminal activities. The possession of demonetized currency in one sense, ostensibly, may appear to be only a facet of unaccounted money in reference to the provisions of the Income Tax Act or other taxation laws. However, the stated activity allegedly indulged into by the accused named in the commission of predicate offence is replete with mens rea. In that, the concealment, possession, acquisition or use of the property by projecting or claiming it as untainted property and converting the same by bank drafts, would certainly come within the sweep of criminal activity relating to a scheduled offence. That would come within the meaning of Section 3 and punishable under Section 4 of the Act, being a case of moneylaundering. The expression 'moneylaundering' is defined thus: "2(1)(p) "moneylaundering" has the meaning assigned to it in section 3; 24. The appellant then relies upon the decision in the case of Gorav Kathuria Vs. Union of India, (2016 SCC Online P & H 3428 of the Punjab and Haryana High Court which has taken the view that Section 45(1) of the Act of....
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.... 1 KHC 355 High Court of Kerala at Ernakulam (iv) Crl. Mic. Application (for Regular Bail) No.30674/16 Pradeep Nirankarnath Sharma vs Directorate of Enforcement 2017 (350) ELT 449 (GUJ) High Court Gujarat at Ahmedabad (v) Crl. Writ Petition No.3931/2016 Chhagan Chandrakant Bhujbal vs Union of India & Ors. 2016 SCC Online Bom 9983 High Court of Bombay 26. For the time being, it is not necessary for us to examine the issues arising from the decision of the Punjab and Haryana High Court or the rejection of criminal appeal by this Court against that decision. The constitutional validity of Section 45 of the Act of 2002 will have to be examined by this Court in the writ petition on its own merits. The summary dismissal of criminal appeal will not come in the way of considering the correctness of the decision of the Punjab and Haryana High Court in view of the conflict of opinion with the other High Courts. 27. Suffice it to observe that the appellant has not succeeded in persuading us about the inapplicability of the threshold stipulation under Section 45 of the Act. In the facts of the present case, we are in agreement with the view taken by the Ses....
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....es to be credited to the account maintained with the bank by a person, where the specified bank notes are tendered; however, where compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of specified bank notes as may be deposited shall be Rs. 50,000/; (vii) there shall be no restriction on the use of any noncash method of operating the account of a person including cheques, demand drafts, credit or debit cards, mobile wallets and electronic fund transfer mechanisms or the like;" We fail to understand as to how this argument can be countenanced. The fact that no limit for deposit was specified, would not extricate the appellant from explaining the source from where such huge amount has been acquired, possessed or used by him. The volume of demonetized currency recovered from the office and residential premises of the appellant, including the bank drafts in favour of fictitious persons and also the new currency notes for huge amount, leave no manner of doubt that it was the outcome of some process or activity connected with the proceeds of crime projecting the property as untainted property. No explanation has been offered b....