TaxTMI 
TaxTMI 
2023 (9) TMI 660
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....ounsel for the petitioner in W.P. No. 20835 of 2023 and respondent No. 3 in Crl. R.C. No. 378 of 2023. COMMON ORDER: Heard Mr. A.R.L. Sundareshan, learned Additional Solicitor General of India representing learned Deputy Solicitor General of India for the petitioner in Crl.R.C. No. 378 of 2023 and the respondents in the writ petitions, Mr. T. Niranjan Reddy, learned Senior Counsel representing Mr. S. Ram Reddy, learned counsel for the petitioner in W.P. Nos. 21448 of 2023 and Crl. R.C. No. 509 of 2023 and respondent No. 2 in Crl. R.C. No. 378 of 2023, Mr. S. Niranjan Reddy, learned Senior Counsel representing Mr. N. Naveen Kumar, learned counsel for the petitioner in W.P. No. 19163 of 2023 and respondent No. 1 in Crl. R.C. No. 378 of 2023 and Mr. A. Venkatesh, learned Senior Counsel representing Mr. V. Surender Rao and Mr. P. Gautham Rao, learned counsel for the petitioner in W.P. No. 20835 of 2023 and respondent No. 3 in Crl. R.C. No. 378 of 2023. 2. Criminal Revision Case No. 378 of 2023 is filed by the Directorate of Enforcement (for short 'ED'), challenging the impugned remand rejection order dated 14.06.2023 passed by learned Metropolitan Sessions Judge, Hyderabad, in....
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....mon, therefore, the same were heard together and are being decided by way of this common order. 4. For the sake of convenience, the parties arrayed in Crl.R.C. No. 378 of 2023 will be hereinafter referred. 5. CONTENTIONS OF THE E.D. ARE AS FOLLOWS: i) The following charge sheets were filed by the Predicate Agencies against M/s. Deccan Chronicle Holdings Limited (for short 'DCHL') and others. The details of the same are as under: Sl. No. Name of complainant FIR No. & Date Charge Sheet No. & Date Amount of loss caused to bank (Rs. in Crores) Scheduled offence Charge sheet filed before the Court 01 Canara Bank, Sec.bad. RC-3(E)13, dt. 06.07.13 by CBI, BS & FC 01/2015, 14.04.15 357.77 Sec. 120B r/w 420 IPC XIV ACM 02. Andhra Bank, Hyd. RC-2(E)/14, 29.03.14 by CBI, BS&FC 04/2015, 28.09.15 225.77 Sec. 120B r/w 420 & 471 IPC Magistrate, Hyderabad 03. Indian Overseas Bank, Large Corporate Branch, Hyd. RC-3(E)/14, 29.03.14 by CBI, BS&FC 03/2015, 03.08.15 72.61 -do- -do- 04. Central Bank of India, Mid Corporate Branch, Hyd. RC-1(E)/15, 13.01.15 by CBI, BS&FC 06/2015, 13.11.15 72.03 ....
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....gains obtained through defrauding and duping the banks. The same are also specifically mentioned under the following heads: (a) Cyclical repayment of already existing loans; (b) Declaring the dividends by the management of M/s. DCHL; (c) Share Buy-back by M/s. DCHL; (d) Diversion of Funds to Subsidiaries/Associates and related parties; (e) Funds transferred to proprietary and related party concerns; (f) Suspicious donation made to Charitable Trusts; (g) Re-purchase of stressed assets through benami company M/s. VRT Infra Pvt. Ltd.; vii) The role played by each of the respondents i.e., Directors of M/s. DCHL as identified during investigation conducted by the ED is also specifically mentioned; viii) Thus, according to the ED, investigation conducted by it would reveal that the respondents along with other Promoters of M/s. DCHL created large number of subsidiary companies. The subsidiary/associated entities were not involved in any genuine business activities. The bank accounts of these subsidiary/associated entities were used for rotation of funds with M/s. DCHL. Subsequently, most of the entities were amalgamated....
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....the summons issued by it on 13.11.2015, 17.05.2016, 30.05.2016, 20.03.2023 and 13.06.2023, and on their appearance in the aforesaid ECIR, the ED has recorded their statements under Section - 50 of the PMLA. Thereafter, the First PAO orders dated 28.03.2017 was passed. ii) Mr. T. Vinayak Ravi Reddy, brother of Mr. T. Venkatram Reddy, the petitioner in W.P. No. 19163 of 2023, one of the Directors of M/s. DCHL, filed a writ petition vide W.P. (C) 7015 of 2017 before the High Court of Delhi challenging the first PAO No. 03/2017 and the Delhi High Court granted stay of proceedings arising out of the said PAO. The said writ petition was disposed of on 11.04.2019 granting liberty to the petitioners therein to approach appropriate High Court. He filed a writ petition vide W.P. No. 9319 of 2019, and this Court vide order dated 29.04.2019 granted stay of proceedings arising out of PAO No. 03 of 2017, dated 28.03.2017. Summons were issued to the respondents to appear on 20.03.2023 and they have appeared. Though the ED has recorded statements of the respondents - accused, without there-being proper reasons to believe, arrested the respondents on 13.06.2023. Thus, all of them referring to th....
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....he PMLA would enure to the benefit of the person arrested; g) Authorized Officer has to record reasons in writing regarding necessity to arrest; h) Safeguards under Section - 19 of the PMLA are stringent and of higher standard; i) Objective of arrest is to ensure that Proceeds of Crime are not dealt with in any manner which may result in frustrating any proceedings relating to confiscation thereof; j) Simply reproducing words that Agency is reasonably satisfied that accused is guilty of offence of laundering would not suffice; k) Reasons to believe should be based on material in Officer's possession; l) Arrest can only be made if material exists that justifies the arrest; m) Procedure under Section - 19 of the PMLA including 'reason to believe' is to ensure sufficient safeguard. Therefore, compliance of the same is mandatory; n) Power must be exercised on objective facts of commission of offence and Officer has reason to believe that person is guilty of such offence. Power of arrest is circumscribed by objective considerations and cannot be exercised on whims, caprice or fancy of the Officer; o) 'Reaso....
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....liability for the public wrong on the State which failed in the discharge of its public duty to protect the fundamental rights of the citizen. Reliance was placed in D.K. Basu v. State of West Bengal (1997) 1 SCC 416; and w) Deprivation of liberty even for a single day is too many. Reliance was placed on the principle laid down by the Apex Court in Arnab Manoranjan Goswami v. State of Maharashtra (2021) 2 SCC 427. iii) Mr. T. Niranjan Reddy, learned Senior Counsel representing Mr. S. Ram Reddy, learned counsel for the petitioner in W.P. No. 21448 of 2023 and respondent No. 2 in Crl.R.C. No. 378 of 2023, referring to an Award of Arbitral Tribunal between M/s. DCHL and Board of Control for Cricket in India (BCCI), would submit that the Arbitrator, a retired Judge of the Hon'ble Supreme Court, passed a final award dated 17.07.2020 for an amount of Rs. 486,00,00,000/- (Rupees Four Thousand Eight Hundred and Sixteen Crores Only). However, an application under Section - 34 of the Arbitration and Conciliation Act, 1996, is also pending challenging the said Award. Therefore, the allegation made by the ED that the respondents have siphoned off the funds is baseless. The said asp....
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....l the documents. 10. In the light of the same, it is relevant to note that as discussed above, the Designated Court rejected the remand of the respondents on the aforesaid two (02) grounds i.e., i) non-compliance of Section - 41A of the Cr.P.C. and ii) reasons stated for arrest of the accused are not supported with any justifiable material. 11. CONSIDERATION OF THE COURT: i) The learned Metropolitan Sessions Judge, Hyderabad, a designated Court under PML Cases, passed the following docket order dated 14.06.2023: "On perusal of the record, it discloses that Section 41-A of CrPC notice was not complied and the reasons stated for arrest of accused is not supported with any justifiable material. Admittedly the offence alleged against the accused is under Sections 3 and 4 of PML Act attracting the punishment not less than 3 years and which may extend to 7 years. Therefore, in view of the law laid down by the Hon'ble Apex Court in the decision in Satender Kumar Antil, dt: 11.7.2022, the submission of the learned Special Public Prosecutor would not sustain as the gravity is not a ground for remanding the accused to judicial custody. Therefore, following the directions in....
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....ar v. State of Bihar (2014) 8 SCC 273 and K. Ranjith v. State of A.P. 2021 (2) ALD (Crl.) 768. vii) It is relevant to note that in Kamma Srinivas Rao, this Court eld that PMLA is a complete Code in itself. Therefore, there is no need to comply with Section - 41A of the Cr.P.C. Feeling aggrieved by the said judgment, the respondents therein filed SLP (Criminal) No. 1540 of 2022 before the Hon'ble Supreme Court, wherein the Apex Court stayed operation of the impugned order directing the petitioners therein to surrender in ten (10) days from the date of order. However, the said criminal appeal is pending before the Hon'ble Supreme Court. viii) As discussed above, the Apex Court in V. Senthil Balaji1 categorically held that there is no need of compliance of Section - 41A of the Cr.P.C. However, as on the date of the impugned order dated 14.06.2023, the Designated Court is not having benefit of going through the said judgment and relying on the principle laid down in Satender Kumar Antil, the Designated Court rejected the remand of the respondents vide impugned order dated 14.06.2023. ix) Section - 3 of the PMLA is relevant and the same are extracted hereunder: "3. Off....
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....me" including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;" 98. Keeping in mind these essential elements that make up the molecular structure of Section 3, if we go back to the case on hand, we will find (i) that the offences under Sections 120, 419, 420, 467 and 471 IPC are scheduled offences included in paragraph 1 of the Schedule; and (ii) that the offences under Section 7 and 13 of the PC Act are included in paragraph 8 of the Schedule. 99. All the three FIRs allege that the accused herein had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. In one case it is alleged that a sum of more than Rs. 2 crores had been collected and in another case a sum of Rs. 95 lakhs had been collected. It is this bribe money that constitutes the 'proceeds of crime' within the meaning of Section 2 (1) (u). It is no rocket science to know that a public servant receiving illegal gratification is in possessio....
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....eason for such application to be recorded in writing on the basis of the material in possession; and (c) accused has been guilty of an offence punishable under the provisions of the PMLA. xiii) The word used is "may". Therefore, despite satisfying the aforesaid three grounds, discretion is vested in the Authorized Officer to effect arrest is not compulsory. xiv) In Principal Director of Income Tax (Investigation) v. Laljibhai Kanjibhai Mandalia 2022 SCC OnLine SC 872, the Apex Court held the formation of opinion and the reasons to believe recorded is not a judicial or quasi-judicial function, but administrative in character. xv) In A.S. Krishnan, the Apex Court held as under: "26 - "Reason to believe": A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise." In substance what it means is that a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is suffic....
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....Apex Court in Senthil Balaji categorically held that Section - 41A of the Cr.P.C. has got no application to an arrest made under the PMLA. The said judgment was rendered by the Apex Court on 07.08.2023, whereas the impugned order is dated 14.06.2023. Therefore, the Designated Court is not having benefit of going through the said order, and consider the said aspect. xvii) With regard to other ground i.e., reasons for arrest of the accused are not supported with any justifiable material, there is dispute with regard to furnishing of documents by the ED along with remand application. According to the respondents, ED has filed copies of FIR, grounds of arrest and medical certificates, whereas according to the ED, it has filed all the supporting material in support of the reasons for arrest of the accused. However, the Designated Court did not refer the said aspects in its order dated 14.06.2023. It is for the Designated Court to consider the material filed by the ED in support of the reasons for arrest of the accused. xviii) As discussed above, Designated Court is not having the benefit of going through the judgment of the Apex Court in Senthil Balaji1. In the light of the same, ....