TaxTMI 
TaxTMI 
2023 (5) TMI 1198
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....xport transactions and rotation of the funds through web of shell companies to cause undue benefit to the parties involved and loss to the exchequer and banks. It has been alleged the Naresh Jain also facilitated parking of funds abroad by Indian nationals through his international Hawala transaction structure created in India and in various other jurisdictions. Investigation revealed that Naresh Jain incorporated and operated 450 Indian entities and 104 foreign entities. These entities were incorporated by using original identity proofs and documents of dummy shareholders and directors as well as by fabricating identity proofs and documents of these shareholders and directors. During the search 14 digital keys for operation of foreign bank accounts and other incriminating documents and data were seized from the secret office of Naresh Jain at 361, Vardhman Grand Plaza, Sector-3, Rohini, Delhi. It has been alleged that Naresh Jain and his accomplices were operating around 337 accounts in foreign banks in Dubai, Hongkong and Singapore in respect of 104 shell firms/ companies. The ED has alleged that during the investigation conducted so far, out of 450 shell companies, 603 bank acco....
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....ies. As the 100% shareholding of Graphic had been acquired at a price of Rs. 36 Crores, the value of 50% of the shares was around Rs. 18 Crores and therefore the shares had been acquired by Shri Agarwal at a Windfall gain of Rs. 17.95 Crores. Further since the shares of Graphic had been acquired by Jayna Infra / Naresh Jain out of Proceeds of Crime, the windfall gain of Rs. 17.95 Crores by Sh. Vijay Agarwal was nothing but an indirect transfer / acquisition of Proceeds of Crime. (ii.) Receipt of Substantial funds in the form of loans/ advances from companies/entities managed & controlled by Sh. Naresh Jain- 1. Sh.Vijay Agarwal had received huge sums of money amounting to around Rs. 41,35,71,231/- out of which around Rs. 19,71,26,301- was outstanding from companies /entities whose promoters / directors were not even known to Sh. Agarwal. The said amount of' Rs. 19,71,26,530/- remained outstanding as on the date of filing of the Supplementary Prosecution Complaint on 12.05.2022. The said loans had been advanced by the companies to Sh. Agarwal without entering into any kind of a loan agreement. 2. Further among the many advances of money, an amount of Rs. 5,90,45,503 had bee....
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....for the F.Y. 2017-18 2018-19 & 2019-20 also stated on similar lines as Sh. Ajay Sharma. In his statement dated 29.04.2022, Sh. Saxena stated that he had been come in contact with one Harish Agarwal in Dec /Jan 17-18 in the Income Tax dept office. Thereafter he was contacted by Harish Agarwal only through whatsapp or mail, documents handed over through peon etc. and that he never met any director / promoter of any of the companies. 10. It is therefore the clear that shell entities managed and controlled by Naresh Jain had been used to transfer / route proceeds of crime to entities of Vijay Agarwal in the form of loans. Since Sh. Agarwal had received loans / advances without knowing any of the partners/ directors / promoters of the said companies and without executing any agreement, it is clear that he has been an active participant in the entire scheme of Laundering of proceeds of crime. 3. Mr. Zoheb Hossain has further submitted that the conduct of the petitioner has also not remained clean during the investigation and he deliberately suppressed certain facts including opening of new bank account. 4. It was found that there has been deliberate suppression of newly opened bank a....
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.... meet the twin conditions as prescribed under Section 45 i.e. (i) that there are reasonable grounds for believing that he is not guilty of the offence of money laundering, and (ii) is unlikely to commit any offence while on bail. Mr. Zoheb Hossain has further submitted that the mandatory rigour of the twin condition has to be satisfied before grant of bail. It has been submitted that the investigation in the instant case has revealed the role of the petitioner in the commission of the offence of money laundering and on the basis of the evidence and material in possession with the department against the said petitioner, it can be safely concluded that petitioner is involved in the offence of money laundering. Mr. Zoheb Hossain has further submitted that at this stage Court is not required to render a finding of guilt, nor is it required to conduct a mini trial or meticulously examine the evidence. The court is only required to examine whether the petitioner has made out reasonable grounds for believing that he is not guilty. Reliance has been placed upon Union of India vs. Rattan Mallik (2009) 2 SCC 624. Mr. Zoheb Hossain has further submitted that in view of the vast material again....
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....g done by the Petitioner through his entity R.C. Warehousing. 9. Mr. Sidharth Aggarwal, learned senior counsel for the petitioner has submitted that admittedly petitioner has not been made an accused in the predicate offence. It has further been submitted that the petitioner is a renowned real estate developer and carries out its business activities in the State of Madhya Pradesh under the name and style "Empire". It has been submitted that Petitioner has successfully completed and delivered various projects in Indore such as Modi Tower Commercial Multistorey building, G.G. Tower, Empire Residency, Empire Estate, Empire Victoria Park, Empire Metro, Empire Victory, Empire Logipark. 10. It has further been submitted that the petitioner had no prior association with the co-accused in any manner. Learned senior counsel submits that there is no material on record to show that the petitioner had knowledge of the source of money by which the co-accused had purchased the land or otherwise and in absence of any such material, it cannot be said that the Applicant was aware about the alleged tainted nature of money. Mr. Sidharth Aggarwal, learned senior counsel for the petitioner has submit....
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.... a security at par value i.e., Rs. 5,00,000/- (Rupees Five Lakh). It was emphasized that these shares were given as security as duly recorded in clause 13 of the said MoU. 13. Learned senior counsel has further submitted that immediately upon sale of said 50 % plots and realization of sale proceeds of aforesaid plots, the petitioner was to resign from the directorship of the said companies and was also to return the shareholding of the said companies and these facts have been recorded in contemporaneous document i.e., MoU dated 19.03.2015 and at that time there was no FIR or ECIR even against the co-accused. Learned senior counsel has submitted that clause 13 of the MoU was also noted and accepted in the Arbitral award dated 17 July 2021 passed by the Ld. Sole Arbitrator in an arbitration proceeding instituted by the petitioner / his entities on account of the obstruction created for sale of plots by the two Companies. Mr. Sidharth Aggarwal, learned senior counsel has submitted that the estimated cost of the project was approximately Rs. 36,00,00,000/-(Thirty Six Crores) and the petitioner and his entities has till date spent about a total of Rs. 42,00,00,000/- Forty Two Crores Ru....
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....2015 in M/s R.C. Warehousing. It has been submitted that the agreement to sale of lands were entered into during Financial Year 2012-2013 between Mr. Saket Kumar and Glints Global Infrastructure Ltd., (later renamed as Jayna Infrastructure), and the other between Mr. Ajay Singh Chouhan and Glints Global Infrastructure Ltd., for a total value of Rs. 3.5 crores and 5.5 crores respectively, which makes it evident that the Applicant had no role in the agreement to sale executed between Mr. Saket Kumar and Jayna Infrastructure. 17. Learned senior counsel has submitted that it has further been alleged that during Financial Year 2012-2013, Mr. Saket Kumar and Mr. Ajay Singh Chauhan had forwarded unsecured loans worth Rs. 1,80,00,000/- and Rs. 3,05,00,000/- to RC Warehousing. Learned senior counsel has submitted that at that time the petitioner was not holding any position in RC Warehousing. Learned senior counsel has submitted that amount of Rs. 1.5 crores to Mr. Saket Kumar and Rs. 2.75 crores Mr. Ajay Singh were duly paid back to them by RC Warehousing, on account of the outstanding loan and the petitioner does not have any information as to the fact that the same amount has been trans....
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....t the numbness of limbs is a precursor to possible paralysis and thus requires urgent medical attention in view of his condition. Learned senior counsel further submitted that the petitioner meets the 'triple test' and deserves to be released on bail. It has been submitted that the petitioner cannot be said to be a flight risk as the he duly cooperated with the investigation and thus, there cannot be any basis of any apprehension regarding the petitioner being a flight risk. It was submitted that there was no allegation that the petitioner tried to flee or avoid process at any point of time. It has further been submitted petitioner is a well renowned builder and has deep roots in the society. Furthermore, the evidence has already been collected by the investigating agency and filed before the Special Court and thus, there is no possibility of tampering of evidence. Furthermore, statements of witnesses have been recorded and there is no allegation that during the investigation the Petitioner directly or indirectly attempted to influence any witness. There is no material placed by the investigating agency against the Petitioner to that effect. Learned senior counsel has submi....
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....sain has also placed on record a copy of the WhatsApp chat between the petitioner and Vikas Singh. 21. Mr. Zoheb Hossain has submitted that petitioner due to the above stated reasons, is not entitled to be admitted to bail. FINDING & ANALYSIS 22. The jurisprudence regarding bail is by now very well settled that rule has always been bail and its exception jail. It has also been stated time and again that such a principle has to be followed strictly. Right to bail is also essential for the reason that it provides the accused with an opportunity of securing fair trial. The right to bail is linked to Article 21 of the Constitution of India, which confers right to live with freedom and dignity. However, while protecting the right of an individual of freedom and liberty the court also has to consider the right of the society at large as well as the prosecuting agency. This is the reason that the gravity of the offence is required to be taken into account. The gravity of the offence is gathered from the attendant facts and circumstances of the case. It is a settled proposition that economic offences fall within the category of 'grave offences.' While dealing with the economic offence c....
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.... as well as prosecution or criminal action. The original provision prior to amendment vide Finance Act, 2015 and Finance (No. 2) Act, 2019, took within its sweep any property (mentioned in Section 2(1)(v) of the Act) derived or obtained, directly or indirectly, by any person "as a result of" criminal activity "relating to" a scheduled offence (mentioned in Section 201) (y) read with Schedule to the Act) or the value of any such property. Vide Finance Act, 2015, it further included such property (being proceeds of crime) which is taken or held outside the country, then the property equivalent in value held within the country and by further amendment vide Act 13 of 2018, it also added property which is abroad. By further amendment vide Finance (No. 2) Act, 2019, Explanation has been added which is obviously a clarificatory amendment. That is evident from the plain language of the inserted Explanation itself. The fact that it also includes any property which may, directly or indirectly, be derived as a result of any criminal activity relatable to scheduled offence does not transcend beyond the original provision. In that, the word "relating to" (associated with/has to do with) used in....
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.... criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act. 252. Be it noted that the definition clause includes any property derived or obtained "indirectly" as well. This would include property derived or obtained from the sale proceeds or in a given case in lieu of or in exchange of the "property" which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence. In the context of Explanation added in 2019 to the definition of expression "proceeds of crime", it would inevitably include other property which may not have been derived or obtained as a result of any criminal activity relatable to the scheduled offence. As noticed from the definition, it essentially refers to "any property" including abroad derived or obtained directly or indirectly. The Explanation added in 2019 in no way travels beyond that intent of tracking and reaching upto the....
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.... other view would be rewriting of these provisions and disregarding the express language of definition clause "proceeds of crime", as it obtains as of now." 25. The bare perusal of these paragraphs would indicate that any property which is derived or obtained directly or indirectly as a result of criminal activity concerning the scheduled offence, is regarded as proceeds of crime. If any property which can be linked to criminal activity relating to or relatable to the scheduled offence, it has to be regarded as proceeds of crime. However, It has also been stated that all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. The property which has been derived must be directly or indirectly related to the criminal activity relating to the concerned scheduled offence. It is not necessary that the property must have been directly acquired or derived, if the property has been derived in lieu of or in exchange of the 'property' which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence, such prop....
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....fence that this 50% shares had to go back to the company from where it had come. In regard to the obtaining of loans the case of the defence is that these were merely loan transactions and there is nothing on record to suggest that the petitioner knew that the money was proceeds of crime or tainted money. Similarly, in regard to the RC Warehousing, the petitioner stated that when the so-called tainted money came, he was not holding any position. 27. It is a settled proposition that at the stage of bail, the court is only required to see a prima facie case and is not required to look into the test of guilt. The court is required to maintain a delicate balance between the judgment of acquittal and conviction and an order granting bail before commencement of trial. It is also a settled proposition that the court cannot meticulously examine the evidence and cannot hold a mini trial at this stage. The court is only required to examine the case on the basis of broad probabilities. 28. The department has opposed the bail on the ground that if the petitioner is released on bail, he may tamper with the prosecution evidence. However, it is matter of record that the entire evidence in the p....
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....tion for grant of bail shall consider the question from the angle as to whether he was possessed of the requisite mens rea. Every little omission or commission, negligence or dereliction may not lead to a possibility of his having culpability in the matter which is not the sine qua non for attracting the provisions of MCOCA. A person in a given situation may not do that which he ought to have done. The Court may in a situation of this nature keep in mind the broad principles of law that some acts of omission and commission on the part of a public servant may attract disciplinary proceedings but may not attract a penal provision." 32. This Court is conscious of the fact that Ranjit Singh Brahamjeet Singh Sharma was a judgment on Section 21 (4) MCOCA but the proposition as laid down the Apex Court is squarely applicable on the facts of the present case. 33. It is an admitted case that the petitioner was not an accused in the predicate offence. The petitioner's name also did not appear in the ECIR and in the first complaint filed by the E.D the name or role of the accused was not mentioned. It may again be reiterated even at the cost of the brevity that even as per the Vijay Madanla....