TaxTMI 
TaxTMI 
2023 (9) TMI 1473
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....er is the accused in Crime No. ECIR No. KCZO/32/2020 on the files of the Directorate of Enforcement, Kochi, alleging offences punishable under section 4 of the Prevention of Money Laundering Act, 2002 (for short 'PML Act'). Petitioner seeks regular bail under section 45 of the PML Act. 3. Prosecution alleges that petitioner and the other accused had cheated many depositors by collecting fixed deposits without authority, after promising to pay interest and failed to pay either the interest or repay the amounts collected and thereby committed the offence of breach of trust and cheating. The amounts so collected were allegedly used as untainted money for the acquisition of property and has thus committed an offence under section 3 of the PML Act. 4. Crime No. 1740 of 2020 of Konni Police Station was initially registered, and petitioner was arrested on 29.08.2020. Later, as many as 1368 crimes were registered against the accused. Those crimes form the basis for the predicate offences. Petitioner continued in custody till 11-03-2021. Thereafter, based on the directions of this Court, the crimes were transferred to the Central Bureau of Investigation, which registered Crime....
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....ccused have either been frozen or attached by the competent authority and therefore, there is no possibility of the petitioner fleeing from the country or conducting any further business. Petitioner has also alleged that discussions are going on with other potential business concerns to restructure the business and to repay the deposits of the investors under a settlement scheme to be worked out, and therefore petitioner's presence is extremely essential for the negotiations. 8. Arguments were addressed by various counsels spread over several months. Due to the inconvenience of the respective counsel and the Court holidays, the arguments could not be completed. Attempts to hold hearings during court vacations also did not fructify. 9. Sri. C.S.Manu, the learned counsel for the petitioner, contended that the continued detention of the petitioner is unauthorised and illegal for various reasons. The learned counsel based his arguments on the following points: (i) The complaint filed under section 44 of the PML Act on 07.10.2021 is only for the purpose of defeating the provisions of section 167(2) of the Cr.P.C and to deny the default bail to the petitioner. ....
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.... circumstances. (viii) The only predicate offence that can be charged against the petitioner is under section 420 IPC but the ECIR was registered for offences which were not even predicate offences. (ix) The offence under section 420 IPC is not at all made out as there was never any intention to cheat from the inception, and therefore, the petitioner can never be guilty of the predicate offence under any circumstances. The ingredients of the offence of cheating are totally absent, and none of the alleged predicate offences are supported by any material. (x) The offence of accepting deposits without a license under section 45S of the Reserve Bank of India Act 1934 or under the BUDS Act or even under the Kerala Protection of Interests of Depositors in Financial Establishments Act, 2013, are not scheduled offences, and hence the complaint registered under the PML Act is malafide. (xi) The statement purported to have been obtained under section 50 of the PML Act cannot strictly be treated as a statement under the said provision. The precautions required to be followed under section 50 of the PML Act was not observed and further, a reading of the stat....
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....e Statute, that, under section 45 of the Act, twin conditions are required to be satisfied before a court can grant bail. Referring to the decision in Vijay Madanlal Choudhary and Others v. Union of India and Others 2022 SCC OnLine SC 929, it was argued that in the instant case, both the twin conditions are not satisfied since there are explicit materials to come to the conclusion that the petitioner is guilty of the offences alleged. The learned counsel further argued, referring to the statements given under section 50 of the PML Act, that petitioner had practically admitted the commission of offence under the said statute and therefore he deserves no lenient approach. 12. Sri. Manoj V. George, learned counsel, appearing for the second respondent-defacto complainant and Sri. G. Harikumar learned counsel, appearing on behalf of the third respondent depositors association, also addressed the court exhaustively. The learned Counsel contended that the petitioner ought not to be released on bail and submitted that the total amount defrauded by the petitioner and laundered by him runs into a few thousand crores, and therefore, the intention of the legislature, which is evident from s....
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....uestion of resorting to a supplementary charge sheet u/s 173(8) of the Cr.P.C only arises after the main charge sheet has been filed, and as such, a supplementary charge sheet, wherein it is explicitly stated that the investigation is still pending, cannot under any circumstances be used to scuttle the right of default bail, for then the entire purpose of default bail is defeated and the purpose of filing of a charge sheet or a supplementary charge sheet becomes a mere formality and a tool to ensure that the right of default bail is scuttled." 18. Though the above observations may have relevance in the instant case, considering the nature of the order that is being rendered and taking into reckoning the period of 19 months of custody already undergone by the petitioner, the said question has become academic and is therefore not being adverted to. 19. Petitioner was initially arrested on 29-08-2020 and continued in custody until 11-03-2021 for cheating and criminal breach of trust alleged in Crime No. 1740/2020 of Konni Police Station and other connected crimes. Later, under the direction of this Court, the investigation into the crimes registered with the local police was tra....
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.... by the petitioner is a period of seven years imprisonment, along with fine as per section 4 of the PML Act. 22. In this context, it is apposite to bear in mind the observations of the Supreme Court in Vijay Madanlal Choudhary's case (supra) that "the 2002 Act (PML Act) is intended to initiate action in respect of money laundering activity which necessarily is associated with the property derived or obtained by any person, directly or indirectly, as a result of specified criminal activity. The prosecution under this Act is not in relation to the criminal activity per se but limited to property derived or obtained from specified criminal activity." 23. As far as the claim for regular bail is concerned, this Court bears in mind the rigour of the twin conditions under section 45, which stares at the face of the petitioner. However, the said provision stipulates that if the court is satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and that there is no possibility of the accused committing similar offences again, then the court will be justified in granting bail. The Supreme Court, in Vijay Madanlal Choudhary's case (....
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....ey laundering, which becomes relevant only after establishing three basic or foundational facts. The foundational facts are: (i) The criminal activity relating to a scheduled offence has been committed, (ii) the property in question has been derived or obtained directly or indirectly, by any person as a result of that criminal activity, and (iii) the person concerned is directly or indirectly involved in any process or activity connected with the said property being proceeds of crime. Therefore, section 24 of PML Act cannot be utilized to presume the guilt of the accused for the predicate offences alleged. 27. Thus, in the absence of any presumption of guilt for the predicate offences, this Court has to consider whether there are reasonable grounds to believe that petitioner is not guilty of the offence of money laundering as alleged. 28. For the last three and a half years, the predicate offence has been under investigation. No charge sheet has been filed for the predicate offences. Neither the local police nor the CBI has been able to file a final report regarding the predicate offences alleged. The said circumstance assumes significance while considering the bail applicati....
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....ention at the time of making the promise with an intention to retain the property. .........It is settled law, by catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making the promise or representation. From his mere failure to keep promise subsequently, such a culpable intention right at the beginning, that is, at the time when the promise was made, cannot be presumed." 32. Thus, to attract the offence under section 420 IPC, the dishonest intention must exist from the very beginning. The principles stated in the aforesaid decision are applicable in the instant case. 33. As mentioned earlier, the offences under the BUDS Act and the Kerala Protection of Interests of Depositors in Financial Establishments Act, 2013 may all be attracted since the accused as a financial establishment had collected money from the public and failed to repay the deposit or pay interest after Covid-19 pandemic rocked the economy of the country. However, the same is not a reason to assume that the offence of cheating under section 420 IPC was committed. The only materials collecte....
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....e could not cater to the interest due to the Covid-19 pandemic assumes relevance. His further contention that failure to pay interest for one depositor triggered a chaotic situation when all the depositors started demanding immediate repayment, resulting in the crimes being registered, also cannot be shrugged aside as irrelevant. The materials collected by the ED itself show that amounts as interest or under other terminologies have already been received by the defacto complainant and other depositors till March 2020-the month the nation went into a lockdown. Thus, though the failure to repay the deposits may attract offences under various statutes, however, the offence of cheating under section 420 cannot be attracted, atleast prima facie. 37. The aforestated principle applies equally to the offence under section 421 IPC. The said predicate offence has not been charge sheeted yet. There is nothing to indicate at present that there was any dishonest or fraudulent removal, concealment or delivery of any property without adequate consideration to prevent the distribution of property to creditors. 38. The contention of the counsel for the respondents that the findings in B.A. No....
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....be considered a punishment, unless it is required to ensure that an accused person will stand his trial when called upon. The courts owe more than verbal respect to the principle that punishment begins after conviction, and that every man is deemed to be innocent until duly tried and duly found guilty. ........ In this country, it would be quite contrary to the concept of personal liberty enshrined in the Constitution that any person should be punished in respect of any matter, upon which, he has not been convicted or that in any circumstances, he should be deprived of his liberty upon only the belief that he will tamper with the witnesses if left at liberty, save in the most extraordinary circumstances. Apart from the question of prevention being the object of a refusal of bail, one must not lose sight of the fact that any imprisonment before conviction has a substantial punitive content and it would be improper for any court to refuse bail as a mark of disapproval of former conduct whether the accused has been convicted for it or not or to refuse bail to an unconvicted person for the purpose of giving him a taste of imprisonment as a lesson." 41. As noticed earlier, the petiti....