TaxTMI 
TaxTMI 
2023 (6) TMI 67
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.... 471, 477A and 120B of the Indian Penal Code, 1860 ('IPC' for short). The FIR was registered on the complaint of one Mr. Vinod Rajagopalan in his capacity as the Authorised Signatory of M/s. Malav Holdings Private Limited ('MHL' for short), alleging that the accused persons had siphoned-off an amount of Rs. 18.88 crores from one M/s. Ligare Aviation Limited ('Ligare Aviation' for short) in 2014-15 on the basis of fake/fictitious invoices. 3. The complainant company is stated to be aggrieved since it is an indirect shareholder in Ligare Aviation, in that the complainant company statedly holds 50% shares in RHC Holding Pvt. Ltd., which in turn holds a 30% stake in Ligare Aviation. Further, RHC Holding Pvt. Ltd. also holds 67.27% in RHC Finance Pvt. Ltd., which in turn holds the rest 70% in Ligare Aviation. 4. The petitioner, who is admittedly a resident of Dubai, arrived in India on 02.04.2022, when he was intimated by the immigration authorities about a look-out-circular issued against him. The petitioner was summonsed by the ED on 05.04.2022 to join investigation. He joined investigation on 07.04.2022. The petitioner was subsequently arrested by the investigating agency on 03....
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....subsequently, Darshana Manglani became the owner of Phoenix FZC, whereupon the company became M/s. Phoenix International FZE ('Phoenix FZE' for short). 6.7. Shorn of unnecessary detail, based on its investigation, the ED has alleged the following against Phoenix FZC; and it is alleged in the prosecution complaint that since the petitioner exercised ultimate control over Phoenix FZC, he is implicated in the offending transactions that are subject matter of the complaint: "21.6 Phoenix International FZC: It is established that M/s Phoenix International FZC had assisted and conduit for laundering USD 1.3 million. It transferred USD 1.3 million to Eximius Business Middle East FZC which ultimately vested with Sanjay Godhwani and Sandeep Bhatt. It siphoned off money to the tune of Rs. 1.85 million USD which was derived out of the criminal activities relating to scheduled offence and assisted in projecting it as untainted on the strength of fictitious invoices knowingly fully well that they neither had the capability nor did they supply such product/services. Therefore, M/s Phoenix International is involved in assisting and utilization of proceeds of crime generated out ....
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....on Limited Account no. 13458640000054, HDFC Bank, India Phoenix International FZC Account no. 019100017356, Mashreq Bank, Dubai, UAE 04.12.2014 USD 954,751 Metal & steel Solution FZC Account no. 1102565580901 Bank name - Emirates NBD Bank PJSC, United Arab Emirates Phoenix International FZC Account no. 019100017356, Mashreq Bank, Dubai, UAE 13.01.2015 USD 299,995 Eximius Business Aviation Pvt Ltd Account no. 16652560000463, HDFC Bank, India Phoenix International FZC Account no. 019100017356, Mashreq Bank, Dubai, UAE 11.01.2015 USD 300,000 Phoenix International FZC Account no. 019100017356, Mashreq Bank, Dubai, UAE Eximius Business Middle East FZC AE520260001024956166102 Bank name - Emirates NBD Bank PJSC, Beniyas Street, Deira (SWIFT EBILAEAD) 14.01.2015 USD 500,000 19.01.2015 USD 500,000 Role Ascribed to the Petitioner 8. The role ascribed to the petitioner in the prosecution complaint is extracted below : "21.1. Ramesh Manglani: * Investigation so far has established that the accused Ramesh Manglani has complete control over Phoenix International FZC and was handling all the financial transactions and bank....
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.... 11. To substantiate this submission, attention has been drawn to the structure of Phoenix FZC, which was incorporated in the UAE on 08.04.2013 as a Free Zone Company (FZC) by Sahil Mehta and Sohan Mehta, who are the owners of the Sovika Group along with three de-jure directors and shareholders, viz. Rajesh Bhatia, Kunal Desai and Sandeepkumar Vipinchandra Maniar, who (latter) are stated to have had prior connection with Sahil Mehta/Sovika Group. It is argued, that Sahil Mehta closely managed the affairs of Phoenix FZC. 12. It is further submitted that the petitioner's wife was appointed as the General Manager of Phoenix FZC at the time of establishing the company, since a 'resident' of the UAE is required for purposes of setting-up a company in that country. The petitioner was only appointed as the Authorised Signatory for managing the banking operations of Phoenix FZC as he was residing in the UAE. However, it is argued that the petitioner was never involved in the affairs of Phoenix FZC, other than executing banking transactions through its bank account on instructions of the persons mentioned above. 13. It is also submitted that the petitioner's wife was not the owner ....
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....the basis of Invoice No. PHX/001/2014-15 dated 03.12.2014, pursuant to which the amount of USD 954,751.79 was transferred from M/s. Metal and Steel Solutions FZC to Phoenix FZC, it is submitted that this invoice was also issued on instructions of Sahil Mehta and that the petitioner was not involved in issuing the same. 19. In this regard, attention is drawn to e-mail dated 01.12.2014, by which Sahil Mehta had asked one Iqlaque Khan to get M/s. Metal and Steel Solutions FZC to transfer USD 300,000.00 to one M/s. Tumas Group Finance Company Limited and USD 960,000.00 to Phoenix FZC on an urgent basis. Attention is further drawn to statements dated 15.06.2022, 16.06.2022 and 13.09.2022 made by Sunil Mangelal Aggarwal (who was a director of M/s. Metal and Steel Solutions FZC), wherein he has unequivocally confirmed that he transferred the sum of USD 960,000.00 to Phoenix FZC on instructions of Iqlaque Khan and against an invoice received from him; which was the invoice earlier received from Sahil Mehta. It is argued that this shows that the petitioner had no role to play in the issuance of that invoice. Moreover, it is submitted, that the said transaction was a local transaction wit....
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....ve transactions were effectuated at the behest of Sandeep Bhatt and Sanjay Godhwani who had sought to transfer the amounts first to a local company in the UAE viz. Phoenix FZC; and once funds were received by Phoenix FZC, he further instructed the petitioner to make outward transfers; again upon instructions of the same persons viz. Sandeep Bhatt and Sanjay Godhwani. 26. Senior counsel submits that even before the questioned transactions were carried-out by the petitioner on instructions of other persons, ever since the institution of Phoenix FZC, from November 2013 till November 2014, regular instructions were issued to the petitioner inter-alia by the erstwhile directors and by Sahil Mehta to make transfers to various third parties on the basis of invoices shared by them. 27. Importantly, it is pointed-out that as per statements dated 04.08.2022 and 21.09.2022 made by Sahil Mehta, he has clearly stated that he had no knowledge as regards the real intentions and motives behind the incriminating transactions; and therefore, knowledge of the true nature of the transactions cannot possibly be imputed to the petitioner. 28. It is submitted that Sahil Mehta's statements dated ....
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....tead been cited only as a witness. 33. On the conduct of the ED not arresting similarly placed persons, or others involved with the offence, senior counsel has drawn the attention of this court to the judgment of the Supreme Court in State of Madhya Pradesh vs. Sheetla Sahai and Ors. (2009) 8 SCC 617 to submit that the investigating agency cannot arbitrarily choose persons against whom it wishes to proceed. It is stated that such exercise of power amounts to the investigating agency arrogating to itself the court's powers under sections 306 and 307 CrPC. Attention has specifically been drawn to the following observations in this judgment : "49. It is also interesting to notice that the prosecution had proceeded against the officials in a pick-and-choose manner. We may notice the following statements made in the counter-affidavit which had not been denied or disputed to show that not only those accused who were in office for a very short time but also those who had retired long back before the file was moved for the purpose of obtaining clearance for payment of additional amount from the Government viz. M.N. Nadkarni who worked as Chief Engineer till 24-3-1987 and S.W. M....
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....C OnLine SC 1862, Union of India vs. Varinder Singh alias Raja and Anr. (2018) 15 SCC 248, Union of India vs. Rattan Mallik (2009) 2 SCC 624, as also judgments of this Court in Bimal Kumar Jain and Anr. vs. Directorate of Enforcement 2021 SCC OnLine Del 3847, Gautam Thapar vs. Directorate of Enforcement 2022 SCC OnLine Del 642, Christian Michel James vs. Directorate of Enforcement 2022 SCC OnLine Del 731, Sajjan Kumar vs. Directorate of Enforcement 2022 SCC OnLine Del 1769 and Raj Singh Gehlot vs. Directorate of Enforcement 2022 SCC OnLine Del 643. 36. In particular, Mr. Hossain relies on Vijay Madanlal 2022 SCC OnLine SC 929 (para 263) (supra) to argue that the scope of section 3 of the PMLA is wide and far-reaching such that "... every process and activity in dealing with the proceeds of crime, directly or indirectly, and not limited to the happening of the final act of integration of tainted property in formal economy ..." would constitute the act of money laundering. It is thus submitted that there are reasonable grounds to believe that the petitioner is guilty of the offence under section 3 for the reasons stated hereunder. 37. It is argued that though Phoenix FZC was in....
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....y Godhwani and Sandeep Bhatt) via M/s. Phoenix FZC; and the petitioner's role in effectuating these transactions falls within the wide definition of the offence of money laundering under section 3 of the PMLA. 42. In fact, the ED argues, that Sahil Mehta was a mere messenger looped in to relay information from Sanjay Godhwani and Sandeep Bhatt to the petitioner. 43. It is the ED's submission that since the petitioner was given the mandate to manage the bank account of Phoenix FZC, he was involved in the day-to-day operations of the company, and was aware that money was being transferred to third parties (companies) for the benefit of co-accused Sanjay Godhwani and Sandeep Bhatt. 44. Furthermore, counsel argues that to test whether the accused was possessed of the requisite mens rea for commission of the offence under section 3 of the PMLA, the court may consider the following bundle of facts of the present case, which establish mens rea: 44.1. The petitioner is not an employee of Phoenix FZC. There exists no Board Resolution appointing him as an Authorized Signatory of Phoenix FZC or to authorize the payments made from, or received by him, into the bank account th....
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....enabling further investigation against any accused, whether named in the complaint or not. The investigating agency relies on Vijay Madanlal 2022 SCC OnLine SC 929 (para 398) (supra) and Tahir Hussain vs. Assistant Directorate of Enforcement 2022 SCC OnLine Del 4038 (para 62) to submit that a 'complaint' is deemed to include any subsequent 'complaint' in respect of which further investigation may be conducted. It is thus argued, that it is the prerogative of the investigating agency to file an additional complaint against any person who may not have been made an 'accused' in the 'complaint' previously filed. 47. The ED also seeks to draw attention to the petitioner's conduct, alleging that the petitioner has attempted to mislead and derail the investigation firstly, by not cooperating and making false medical excuses so as not to be available for investigation; secondly, by feigning ignorance as regards Phoenix FZC and its affairs; and thirdly, by asking his son to delete e-mails concerning transactions with Phoenix FZC from his e-mail ID [email protected] and forwarding the same to another e-mail ID [email protected]. It is submitted that this shows the petitioner's ....
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....ued only through Sahil Mehta. Moreover, it is submitted that the petitioner had no obligation to verify whether any services were extended by the company in consideration of the payments being received. Such obligation is not imposed by any law and the petitioner was only processing payments as directed. Discussion and Conclusions 50. In the prosecution complaint, the allegation against the petitioner is under section 3 of the PMLA, which provision is reproduced below for ease of reference: 3. Offence of money-laundering.-Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering. Explanation.-For the removal of doubts, it is hereby clarified that,- (i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of t....
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.... Since it is difficult to predict the future conduct of an accused, the court must necessarily consider this aspect of the matter having regard to the antecedents of the accused, his propensities and the nature and manner in which he is alleged to have committed the offence. "45. It is, furthermore, trite that for the purpose of considering an application for grant of bail, although detailed reasons are not necessary to be assigned, the order granting bail must demonstrate application of mind at least in serious cases as to why the applicant has been granted or denied the privilege of bail. "46. The duty of the court at this stage is not to weigh the evidence meticulously but to arrive at a finding on the basis of broad probabilities. However, while dealing with a special statute like MCOCA having regard to the provisions contained in sub-section (4) of Section 21 of the Act, the court may have to probe into the matter deeper so as to enable it to arrive at a finding that the materials collected against the accused during the investigation may not justify a judgment of conviction. The findings recorded by the court while granting or refusing bail undoubtedly would....
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....ns the Court has to see only if there is a genuine case against the accused and the prosecution is not required to prove the charge beyond reasonable doubt." (emphasis supplied) 51.3. Mohd. Muslim alias Hussain vs. State (NCT of Delhi) 2023 SCC OnLine SC 352 "19. The conditions which courts have to be cognizant of are that there are reasonable grounds for believing that the accused is "not guilty of such offence" and that he is not likely to commit any offence while on bail. What is meant by "not guilty" when all the evidence is not before the court ? It can only be a prima facie determination. That places the court's discretion within a very narrow margin. Given the mandate of the general law on bails (Sections 436, 437 and 439, CrPC) which classify offences based on their gravity, and instruct that certain serious crimes have to be dealt with differently while considering bail applications, the additional condition that the court should be satisfied that the accused (who is in law presumed to be innocent) is not guilty, has to be interpreted reasonably. Further the classification of offences under Special Acts (NDPS Act, etc.), which apply over and ....
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....tion 37 of the Act, given the imperative of Section 436A which is applicable to offences under the NDPS Act too (ref. Satender Kumar Antil supra). Having regard to these factors the court is of the opinion that in the facts of this case, the appellant deserves to be enlarged on bail. "22. Before parting, it would be important to reflect that laws which impose stringent conditions for grant of bail, may be necessary in public interest; yet, if trials are not concluded in time, the injustice wrecked on the individual is immeasurable. Jails are overcrowded and their living conditions, more often than not, appalling. According to the Union Home Ministry's response to Parliament, the National Crime Records Bureau had recorded that as on 31st December 2021, over 5,54,034 prisoners were lodged in jails against total capacity of 4,25,069 lakhs in the country. Of these 122,852 were convicts; the rest 4,27,165 were undertrials." (emphasis supplied) 52. Furthermore, in its recent decision in Ashish Mittal vs. Serious Fraud Investigation Office 2023 SCC OnLine Del 2484, in the context of section 212(6) of the Companies Act, 2013 which contains a provision in pari mater....
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....ffort has to be to assess, again on a prima-facie basis, if there is a genuine case against the accused^4; iii. That the court is also similarly to satisfy itself, whether or not the accused is likely to commit any offence under the PMLA while on bail; and since it is difficult to predict the future conduct of an accused, the court must necessarily consider this aspect of the matter having regard to the antecedents of the accused, his propensities and the nature and manner in which he is alleged to have committed the offence^5; iv. That the court is not required to return a positive finding^6 that the accused has not committed an offence; and must therefore maintain a delicate balance^7 i.e. a clear distance between a judgment of acquittal or conviction and an order granting or denying bail; and v. That since the assessment at the stage of granting or denying bail would be tentative in nature, such assessment may not have any bearing on the merits of the case^8; and the trial court would be free to decide the case on the basis of evidence adduced during trial, without in any manner being influenced by the decision of the court granting or denying bail. ....
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....of Phoenix FZC resigned from their positions and transferred their shares in the company to the petitioner's wife, Darshana Manglani, who became the owner of the company, which now came to be known as Phoenix International FZE. To effectuate the transfer of shareholding of Phoenix FZC to Darshana Manglani, the petitioner was appointed as a power of attorney holder vide Power of Attorney dated 19.12.2014 by the three directors. After the company changed from Phoenix International FZC to Phoenix International FZE and Darshana Manglani became its owner, no offending transaction has been alleged. 55.4. The allegedly offending transactions were all conducted during the period when the three aforementioned persons were directors/shareholders of Phoenix FZC. Of these transactions, 03 were inward remittances, and there were 03 outward remittances to the same company. These transactions are summarised in a table appearing at page 84 of the prosecution complaint, as extracted hereinbefore. 55.5. As is seen from the table, the 03 inward remittances happened on 04.12.2014, 24.12.2014 and 13.01.2015. Since for an inward remittance, no action is required on the part of the bene....
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....ired to 'conduct' the transaction as Authorised Signatory for the bank account of the company. The outward remittances were made on 11.01.2015, 14.01.2015 and 19.01.2015. In this behalf, instructions were received by the petitioner from Sahil Mehta by e-mail instructing the petitioner to conduct a specific remittance. E-mails dated 09.01.2015, 14.01.2015 and 16.01.2015 for the three remittances respectively, are cited in evidence thereof. It is seen that each of these e-mails was sent to the petitioner from the e-mail address of Sahil Mehta. 55.11. The essence of the allegation made by the ED is that at the time that the petitioner undertook the transactions as Authorised Signatory for the bank account of the company, he knew that the transactions were bogus, in that the money was being remitted-out of the company without any genuine services having been provided by Eximius Business Middle Ease FZC to Phoenix FZC. On the other hand, the petitioner contends that he was neither a director, nor a shareholder, nor did he have any financial interest in the company; and as such he had no reason or business to enquire as to whether any services had been rendered by Eximius Busine....
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....he allegedly offending transactions had been completed, the three original directors/shareholders of Phoenix FZC transferred their shareholding to the petitioner's wife and simply stepped-out of the company. It may be noted that nothing has been shown to the court to indicate the reason for the erstwhile directors leaving the company. Yet again, if the petitioner had knowledge that the transactions conducted through Phoenix FZC were unlawful or even suspect, it is counter-intuitive that he would facilitate the transfer of shareholding in that very company to his own wife, thereby converting the company to Phoenix FZE and putting his wife in a legally controversial position. 56. Insofar as the ED not having arrested similarly placed co-accused persons; and not even having arraigned some other persons evidently connected with the offending transactions as accused in the prosecution complaint, though these aspects would not be dispositive of a bail plea one way or the other, they are also not wholly irrelevant and the 'doctrine of parity' is not immaterial^10. As held by this court in Ashish Mittal (supra) considering the nature of the offence, where the gravamen of the offence is ....
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....ng regard to the above, this court is of the view that the petitioner deserves to be granted relief; and is hereby admitted to regular bail pending trial, subject to the following conditions: 60.1. The petitioner shall furnish a personal bond in the sum of Rs. 25,00,000/- (Rs. Twenty-five lacs Only) with 01 surety in the like amount from a family member, to the satisfaction of the learned trial court; 60.2. The petitioner shall furnish to the Investigating Officer/S.H.O. a cell-phone number on which the petitioner may be contacted at any time and shall ensure that the number is kept active and switched-on at all times; 60.3. The petitioner shall surrender his passport(s) to the learned trial court and shall not travel out of India without prior permission of the learned trial court; 60.4. The petitioner shall ordinarily reside at his place of residence in Mumbai, India as per records; and shall inform the Investigating Officer in writing at least 07 days in advance if he proposes to change his place of ordinary residence; 60.5. The petitioner shall co-operate in any further investigation or proceedings by the Investigating Officer, as and when required; 60.6. In a....