TaxTMI 
TaxTMI 
2024 (3) TMI 862
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.... Mr. Samrat Goswami, Adv. Mr. Harsh Paul Singh, Adv. Ms. Sonali Sharma, Adv. Mr. Kartik Sabarwal, Adv. Mr. Vivek Gaurav, Adv. Mr. Kshitiz Agarwal, Adv. Ms. Ritumbhara Garg, Adv. Mr. Gaurav Sarkar, Adv. Mr. Gaurav Saini, Adv. JUDGMENT BELA M. TRIVEDI, J. 1. Leave granted. 2. All the three appeals arise out of the common impugned judgment and order dated 06.04.2023 passed by the High Court of Delhi at New Delhi, in the Bail Application Nos. 3590 of 2022, 3705 of 2022 and 3710 of 2022, whereby the High Court has rejected all the bail applications of the appellants. 3. Earlier the Special Judge (PC Act) (CBI) -23 (MPs/MLAs cases) vide the separate detailed orders dated 17.11.2022 had rejected the bail applications of all the appellants - accused. FACTUAL MATRIX 4. An FIR being case No.RC-AC-1-2017-A-0005 dated 24th August, 2017 came to be registered at the CBI AC-1, New Delhi against Shri Satyendar Kumar Jain, Minister in the Government of National Capital Territory of Delhi & Others, for the offences under Section 109 IPC and 13(2) read with Section 13(1)(e) of the PC Act, 1988 at the instance of the Dy. Superintendent of Police, CBI who had conducted a Preliminar....
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....on entries against cash. To get his idea implemented, he recommended appointing his old friend Sh. Jagdish Prasad Mohta, Chartered Accountant as the auditor of Akinchan Developers Pvt. Ltd., Paryas Infosolution Pvt. Ltd., Indo Metalimpex Pvt. Ltd. and Mangalayatan Projects Pvt. Ltd. He (Satyendar Kumar Jain) first approached Sh. Jagdish Prasad Mohta for taking accommodation entries in lieu of cash in his aforesaid four companies. Shri Mohta arranged a meeting between Satyendar Kumar Jain and Rajendra Bansal, Kolkata based accommodation entry provider. In this meeting all the nitty gritties of these entries was finalized like percentage of commission, process of cash transfer, documents to be maintained etc. In this way Satyendar Kumar Jain was the conceptualizer, initiator, and supervisor for the entire operation of these accommodation entries. By taking the accommodation entries in various companies, Satyendar Kumar Jain was hiding behind the Corporate Veil. Investigation into the transactions and facts prove that Satyendar Kumar Jain initiated, managed and controlled the companies in which these accommodations entries were received. Accordingly, the accommodation entries totallin....
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....as defined under Section 3 of PMLA by being actually involved in and knowingly assisting Satyendar Kumar Jain in projecting his proceeds of crime to the tune of Rs.4,81,16,435/- as untainted in the mode and manner as described in the preceding paragraphs in the present complaint and is therefore, liable for punishment under Section 4 of PMLA. 3. Vaibhav Jain Vaibhav Jain is involved in knowingly assisting Satyendar Kumar Jain by making declaration under IDS, 2016 for declaring undisclosed income of Rs.8.6 crore (including Rs.1,53,61,166/- during check period) for the period from 2010-11 to 2015-16 in order to save Sh. Satyendar Kumar Jain. He also prepared back dated documents with the help of Sunil Kumar Jain, Ankush Jain and Sh. Jagdish Prasad Mohta with regard to his directorship in Akinchan Developers Pvt. Ltd., Indo Metalimpex Pvt. Ltd. and Mangalayatan Projects Pvt. Ltd. by becoming directors of aforesaid companies from back date for showing his IDS declaration as genuine. Vaibhav Jain has thus committed the offence of money laundering as defined under Section 3 of PMLA by being actually involved in and knowingly assisting Satyendar Kumar Jain in project....
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....bhav Jain and Ankush Jain. Through the quashing of the provisional attachment order by the Delhi High Court, the allegation against the appellant being the beneficial owner had stood refuted. (vii) The alleged proceeds of crime through accommodation entries were directed to the families of Vaibhav Jain and Ankush Jain, and the fresh shares issued to the Kolkata based Shell Companies were promptly transferred to Vaibhav Jain and Ankush Jain during the check period. The appellant therefore was not in possession of any proceeds of crime. (viii) The appellant could not be held to be in constructive possession of the property, if there was no dominion or control of the appellant over the said property. As per the ED's complaint also the appellant was not in possession of the proceeds of crime and therefore also the appellant could not be said to be in constructive possession of the same. (ix) There was no shred of evidence collected by the ED to show that the appellant had provided cash to Kolkata companies during the check period. It was Vaibhav Jain and Ankush Jain who had explained on their Fragrance business as the legitimate source of the cash during thei....
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....wever from the said letter it could not be assumed that the appellant had accepted the additions made in the assessment order. (xvi) As held in Vijay Madanlal Choudhary (supra), the courts ought not to conduct mini trial and should consider only the broad probability of the matter. The appellant is not a flight risk, there is no risk of tampering of documents or witnesses. The jail violation as alleged by the ED has not been accepted by the concerned Jail visiting Judge and the Jail authorities. The appellant being sick and infirm, having undergone a spine surgery, is entitled to bail as per the proviso to Section 45 of PMLA. 8. The learned ASG Mr. SV Raju made the following submissions in the appeal preferred by the appellant Shri Satyendar Kumar Jain : (i) It was revealed during the course of investigation that the appellant Satyendar Kumar Jain while posted and functioning as the Minister in the Government of National Capital Territory of Delhi, during the period from 2015 to 2017 had acquired assets in the form of movable and immovable properties in his name and in the name of his family members, which were disproportionate to his known source of income. ....
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....with the modus operandi as revealed from the statements of the Auditor/Chartered Accountant Shri J.P. Mohta as well as the accommodation entry provider Shri Rajendra Bansal and also from the statement of Vaibhav Jain. (vii) Though the principle of company being a separate legal entity from its shareholders is an established principle of Company law, the lifting of corporate veil has been upheld in the cases where the corporate structures have been used for committing fraud, economic offences or have been used as a facade or a sham for carrying out illegal activities. (viii) The bogus nature of IDS declarations was substantiated by the fact that the entire amount of Rs.16.50 Crores received as accommodation entry was split between Vaibhav Jain and Ankush Jain. The said declarations showed their modus operandi to shield Satyendar Jain and his family members, and assume the entire liability upon themselves to give it a colour of a tax evasion simplicitor, rather than a criminal activity relating to disproportionate assets. This modus operandi also showed that the appellants themselves had disregarded the corporate entities of these companies. (ix) The dispro....
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....uded in the Schedule of the PML Act. In the instant case, the total amount of 16 crores has not been considered as the proceeds of crime as the ED is relying on the accommodation entries received during the check period. (iv) The IDS filed u/s 183 of the Finance Act, 2013 was declared void u/s 193 of the said Act by the Income Tax authorities. Hence, the said act of the appellants filing the IDS cannot be construed as basis for levelling charges under Section 3 of PMLA. Reliance is placed on Karnail Singh vs. State of Haryana and Another (1995) Supp (3) SCC 376 for understanding the meaning of "void." (v) It is not made clear by the ED as to the declaration of which IDS, whether the one filed by Vaibhav Jain or that filed by Ankush Jain has led to the assistance of Satyendar Jain for making out the offence under PMLA. Since the allegations are vague, the benefit of the same should go to the accused. In this regard, reliance is placed on Neelu Chopra and Another vs. Bharti (2009) 10 SCC 184 and Myakala Dharmarajam & Ors. Vs. State of Telangana & Anr. (2020) 2 SCC 743. (vi) Since, the generation of proceeds of crime is not an offence under Section 3 of PMLA....
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....by M/s. Mangalayatan Projects Pvt. Ltd. in the name of his mother Indu Jain to frustrate the proceeds of crime. (ii) Similarly, the appellant-Vaibhav Jain was the Director of M/s. Paryas Infosolution Pvt. Ltd. during the check period. The said company is also one of the accused in the Prosecution Complaint filed on 27.07.2022. The said company had received proceeds of crime amounting to Rs.69,00,300/- during the check period in the form of accommodation entries from the Kolkata based shell companies. The said appellant-Vaibhav Jain had transferred the land possessed by M/s. Mangalayatan Projects Pvt. Ltd. in the name of his mother Sushila Jain and wife-Swati Jain to frustrate the proceeds of crime. He also took back the shares without consideration from shell companies and thus both the appellants helped Satyendar Kumar Jain in projecting the tainted money as untainted in the process of money laundering. (iii) Both the appellants had made declarations in their individual capacity under the IDS, 2016 for declaring undisclosed income of Rs.8.6 Crores during check period i.e. from 2010- 11 to 2015-16, in order to shield Satyendar Kumar Jain for concealing the true na....
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....the four companies and various other Kolkata based shell companies controlled by Kolkata based entry operators revealed that the amount totalling to Rs. 4,60,83,500/- was received in M/s. Akinchan Developers Pvt. Ltd., M/s. Mangalayatan Projects Pvt. Ltd. and M/s. Paryas Infosolution Pvt. Ltd. from Kolkata based shell companies during the period 01.04.2015 to 31.03.2016 (during the check period) despite no business activities were carried out by the said companies and the shares were purchased at a very high premium. (xi) The investigation revealed that the cash acquired by Satyendar Jain was given to the Kolkata entry operators for the purpose of accommodation entries contemporaneously during the check period as and when they were acquired and thereafter the same were concealed and projected as untainted and sought to be laundered in the form of share application money. The said amount was also used for repayment of loan and purchase of agricultural lands by the said companies. (xii) Though the CBI in their chargesheet dated 03.12.2018 filed in FIR No. RC-AC-I-2017-A 0005 (dated 24.08.2017) had quantified the proceeds of crime to be Rs.1,47,60,497.67, in view of ....
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....vocate Ms. Arora had further submitted that the so-called inadvertent error was not pointed out before the trial court and the High Court and it was only during the course of arguments before this Court, the said clarification/rectification was sought to be made, which is not permissible. According to her, ED attains jurisdiction to investigate only after the proceeds of crime is generated and when the same is subjected to any process or activity as mentioned in Section 3 of PMLA. Therefore, ED could not have increased the proceeds of crime beyond what was taken as disproportionate assets by the CBI i.e. 1,47,60,497/-. She further submitted that as per the FIR, the figure mentioned was Rs. 1,53,61,166/-, during the arguments and as per the written submissions the figure mentioned was Rs. 4,81,16,435/-, and the figure mentioned as per the affidavit is Rs.4,65,99,635/- which does not find mention in the complaint. Thus, the allegations made against the appellants being vague in nature, the benefit should go to the appellants. ANALYSIS : 13. We are well conscious of the fact that the chargesheet has already been filed in the predicate offence on 03.12.2018 for the offences under....
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....ty 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." 15. In Vijay Madanlal Choudhary (supra), a three-judge bench while upholding the validity of Section 45 had observed as under: - "387. Having said thus, we must now address the challenge to the twin conditions as applicable post amendment of 2018. That challenge will have to be tested on its own merits and not in reference to the reasons weighed with this Court in declaring the provision, (as it existed at the relevant time), applicable only to offences punishable for a term of imprisonment of more than three years under Part A of the Schedule to the 2002 Act. Now, the provision (Section 45) including twin conditions would apply to the offence(s) under the 2002 Act itself. The provision post 2018 amendment, is in the nature of no bail in relation to the offence of money-laundering unless the twin conditions are fulfilled. The twin conditions are that there are reasonable grounds for believing that the accused is not guilty of offence of money-laundering and that he is not likely to commit any o....
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....ssed by the Courts. The prayer for grant of bail even in respect of general offences, have to be considered on the basis of objective discernible judicial parameters as delineated by this Court from time to time, on case-to-case basis. 406. It was urged that the scheduled offence in a given case may be a non-cognizable offence and yet rigors of Section 45 of the 2002 Act would result in denial of bail even to such accused. This argument is founded on clear misunderstanding of the scheme of the 2002 Act. As we have repeatedly mentioned in the earlier part of this judgment that the offence of money-laundering is one wherein a person, 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. The fact that the proceeds of crime have been generated as a result of criminal activity relating to a scheduled offence, which incidentally happens to be a non-cognizable offence, would make no difference. The person is not prosecuted for the scheduled offence by invoking provisions of the 2002 Act, but only when he has derived or obtained property as a result of crimin....
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....n of Rs.16,800/-. Thus, it has been alleged that Satyendar Kumar Jain committed offence of money laundering under Section 3 of PMLA by actually acquiring, possessing, concealing and using the process of bank to tune of Rs.4,81,16,435/- and projecting and claiming the same as untainted. 18. The ED has also alleged against the appellants Ankush Jain and Vaibhav Jain inter alia that they had assisted Satyendar Kumar Jain in the commission of the alleged offence by making separate independent declarations under IDS 2016 for declaring undisclosed income of Rs.8.26 crores for period from 2010-11 to 2015-16 in order to protect Satyendar Kumar Jain. As per the case of ED, the appellants Ankush Jain and Vaibhav Jain had prepared ante dated documents with the help of Sunil Kumar Jain and Jagdish Prasad Mohta with regard to the Directorship in Akinchan Developers Pvt. Ltd. Paryas Infosolution Pvt. Ltd., Indo Metalimpex Pvt. Ltd., and Mangalayatan Projects Pvt. Ltd. by becoming the Directors of the said companies from the back date for showing their IDS declarations as genuine. Thus, the said appellants have also committed the offence of money laundering as defined under Section 3 of PMLA b....
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....to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad; Explanation. --For the removal of doubts, it is hereby clarified that "proceeds of crime" include 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; Section 2 (1)(v) (v) "property" means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located; Explanation. --For the removal of doubts, it is hereby clarified that the term property includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences; Section 3 Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity c....
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....to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of "Proceeds of Crime" under Section 2(1)(u) will necessarily be the crime properties. 22. So far as the facts of the present case are concerned, the respondent ED has placed heavy reliance on the statements of witnesses recorded and the documents produced by them under Section 50 of the said Act, to prima facie show the involvement of all the three appellants in the alleged offence of money laundering under Section 3 thereof. In Rohit Tandon vs. Directorate of Enforcement (2018) 11 SCC 46, a three Judge Bench has held that the statements of witnesses recorded by Prosecution - ED are admissible in evidence in view of Section 50. Such statements may make out a formidable case about the involvement of the accused in the commission of the offence of money laundering. 23. Again, the three Judge Bench in Vijay Madanlal Choudhary (supra) while examining the validity of the provisions contained in Section 50 held as under: - 431. In the context of the 2002 Act, it must be remembered that the summon is issued by the Authority under Section 50 in connection with the in....
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....eeding against such a person including for consequences under Section 63 of the 2002 Act on the basis of other tangible material to indicate the falsity of his claim. That would be a matter of rule of evidence. 24. In the instant case, it has been found during the course of investigation from the statements of witnesses recorded under Section 50 that the appellant Satyendar Jain and his family directly or indirectly were owning/controlling the companies - M/s. Akinchan Developers Pvt. Ltd., M/s. Paryas Infosolution Pvt. Ltd., M/s. Indo Metalimpex Pvt. Ltd. and M/s. Mangalayatan Projects Pvt. Ltd. He was the conceptualizer, initiator and supervisor of the accommodation entries totalling to Rs.4.81 Crores approximately, which were received from the Kolkata based entry operators in the Bank accounts of the said four companies. Shri J.P. Mohta in his statement had stated inter alia that Mr. Satyendar Jain had informed him in June/July, 2010 that he wanted to get investment/accommodation entries in his companies against cash payment and therefore he introduced Mr. Jain with his friend Mr. Rajendra Bansal who was in the business of providing accommodation entries against cash. Mr. Raj....
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....ultural lands and to develop the township. The said witnesses had clearly stated that Satyendar Kumar Jain was the conceptualizer, initiator, fund provider and supervisor for the entire operation to procure the accommodation, share capital/premium entries. Though, the shareholding patterns of the said four companies are quite intricate, they do show that Mr. Satyendar Kumar Jain through his family was controlling the said companies directly or indirectly and that Mr. Satyendar Kumar Jain was the "beneficial owner" within the definition of Section 2(1) (fa) of PMLA. 26. At this juncture, it is extremely pertinent to note that the appellants- Vaibhav Jain and Ankush Jain had sought to avail of the Income Declaration Scheme, 2016 (IDS) by filing separate declarations under Section 183 of the Finance Act, 2016 in Form-I on 27.09.2016, in which both of the said appellants had individually declared an income of Rs.8,26,91,750/- as investments in shares of various companies in the assessment years 2011-12, 2012-13 and 2016-17. The Principal Commissioner, Income Tax (IV), New Delhi vide the order dated 09.06.2017 passed under Section 183 of the Finance Act, 2016 held that the said decla....
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....e transaction was orchestrated. It was noted that neither of these two petitioners was either a director or shareholder in the said company. It was noted that the declarants had not provided the name of the "Benamidar" through whom the investment had been routed and that these facts were all completely within the knowledge of the two petitioners. These conclusions of the Principal Commissioner of Income-tax have not been convincingly countered by either of the petitioners. In the circumstances, the Principal Commissioner of Income-tax was right in concluding that neither of the petitioners had made a full and true disclosure of all material facts." 27. The said order of the High Court was challenged by the appellants- Ankush Jain and Vaibhav Jain before the Supreme Court by filing Special Leave Petitions being SLP(C)Nos. 27522 of 2019 and 27610 of 2019, however they came to be dismissed vide the order dated 29.11.2019. 28. From the above stated facts there remains no shadow of doubt that the appellant- Satyendar Kumar Jain had conceptualized idea of accommodation entries against cash and was responsible for the accommodation entries totalling to Rs. 4.81 crores (approx.) rece....