TaxTMI 
TaxTMI 
2024 (10) TMI 904
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.... Dated Sections ECIR/JLZO/36/2020 08.10.2020 3 & 4 of Prevention of Money Laundering Act, 2002 [PMLA] 1. An industrialist incarcerated on the allegations of illegally diverting Rs. 1530.99 crores from the loan amount for a purpose other than it was sanctioned, and subsequently, the above-captioned complaint was registered under PMLA for proceeds of crime based on the predicate offense, instead of filing a bail petition under Section 439 CrPC/483 BNSS had come up before this under Section 482 CrPC for quashing of arrest order and subsequent remand orders being illegal and contrary to judicial precedents. 2. The facts of the case are taken from the reply filed by the respondent- ED. The CBI registered the above-captioned predicate offense against the petitioner and some of his family members for causing wrongful loss to a consortium of banks led by the Central Bank of India to the tune of Rs.1530.99 crores by illegally diverting the loan amount for purposes other than it was sanctioned. As per para 3 (C) of the reply, the investigation conducted by ED pointed towards loan disbursement to a company 'SEL Textiles Ltd' for manufacturing plants and working ca....
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....ufacturers were in Japan, and the payments were made in the bank account maintained by firms in Switzerland and the fraud which was committed was SELT had made advance money to entities mentioned above to the tune of Rs. 45 crores whereas the said machinery was yet to be manufactured and ten years have passed which again shows that all this was to siphon off the money. As per para 3 (I) of the reply, the investigation led to the recovery of Rs. 60 lacs in cash, which was proceeds of crime, and based on that, the petitioner was arrested on 18.01.2024 at 6.45 PM and was subsequently sent to judicial custody. It would be appropriate to refer to para no. 3 (K) of the reply, which reads as follows: - "K. Role of Neeraj Saluja: SELT was a family-owned concern being controlled by Late Ram Saran Saluja (expired on 23.05.2023), Neeraj Saluja & Dhiraj Saluja. Neeraj Saluja was one of the directors of SELT and he was responsible for managing/controlling day to day affaires of the company along with his father, Late Ram Saran Saluja. Further, the credit facilities availed by SELT were illegally diverted / siphoned off, as explained above, by Neeraj Saluja and other accused persons cau....
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...., 2022, the CBI arrested the petitioner in the predicate offense. e) On May 03, 2023, based on the bail granted by this Court, he was released on bail after six months and six days (188 days) of custody. Notably, the Petitioner has complied with all conditions for bail. f) On Dec 26, 2022, a chargesheet was filed against the petitioner under sections 420, 477 A, and 120-B IPC, and since then, the trial has been at the stage of 207 CrPC. g) On Jan 18, 2024, when the petitioner appeared before ED, he was suddenly arrested at 6:45 PM, four years after the registration of the ECIR. h) On Jan 19, 2024, the Special Court issued a 'Remand Order' without satisfying the mandatory compliance of Section 19 PMLA, which is blatant non-compliance qua 'Grounds of arrest' and 'Reasons to Believe.' i) On Feb 09, 2024, a division bench of the High Court of Punjab and Haryana, vide order dated 09.02.2024, passed in CWP No. 2771 of 2024, stayed all pending proceedings arising from the predicate offense. j) On Mar 15, 2024, the ED filed a complaint against the petitioner and others. k) Firstly, the petitioner was adm....
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....e violates the mandate of Section 19 of PMLA and Constitutional safeguards under Art. 21 and 22 of the Constitution of India because the reasons to believe as mandated under the Act were admittedly not provided; the grounds of arrest were a mere reproduction of the CBI Challan; there was no satisfaction recorded regarding the necessity to arrest of the Petitioner; No independent application of mind by ED and the Trial Court; No formulation of reasons to believe by the ED using the material in their possession; Arrest having been done citing non-cooperation by the Petitioner in violation of the judgment of the Supreme Court in Pankaj Bansal. Reasons to believe should be shown to the Special Court for judicial review before the Remand order is passed. However, the perusal of the Remand order clarifies that Reasons to believe were never brought to the notice of the Sp. Court. Hence, the mandatory provisions of Section 19 of the 2002 Act have been violated, rendering the Petitioner's impugned arrest illegal and entitling him to release immediately. The Petitioner's custody in this ECIR (around eight months) and the previous custody in CBI's FIR of over six months is suffici....
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....refore supplying written Grounds of Arrest was sufficient compliance. There is no consequence, even in Arvind Kejriwal for non-supply of Reason to Believe, unlike in Pankaj Bansal where non-compliance about supply written Grounds of Arrest has been held to lead to the release of the person straight away. The same would be evident from the Judgment in V. Senthil Balaji. Moreover, the obligation to supply Reason to Believe would naturally have to be prospective for even the arrest of Sh. Kejriwal was not held to be illegal for non-supply of Reason to Believe. Therefore, the same yardstick or standard would apply to the obligation of supplying Reason to Believe. (c) The petitioner has argued that the Grounds of Arrest is vitiated because of the mention of the fact that there is non-cooperation. However, the argument fails to consider that the grounds of arrest are based on several other materials unearthed during the investigation, and the need or necessity for custodial interrogation, which was to trace the public money siphoned off by the petitioner, has also been recorded. It is held that non-cooperation is the sole prerogative of the Investigating Agency, and it is also h....
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....l for the respondent further argued that resorting to an extraordinary remedy cannot be exercised once the statute provides a specific remedy. It is not a case where the statute has not provided any remedy. On this preliminary objection alone, the petition deserves to be dismissed. The next contention is based on the evidence pointing towards proceeds of crime to demonstrate the necessity of the petitioner's arrest. It is a massive scam where the petitioner has siphoned off the bank money through various channels, and it is not a case where custody of 08 months can be termed prolonged custody. It is one of the most extensive banking scams, and this Court should not release the petitioner by declaring his arrest illegal and considering the massive fraud. The following argument is that there was a necessity to arrest the petitioner because of the amount involved, which was Rs.1580 crores, and there was ample evidence of his role, involvement, and strategy, which he deployed to siphon off the bank funds. Regarding the argument of judicial precedents, counsel for the respondent argued that Pankaj Bansal's judgment is prospective and not retrospective, and after analyzing material in....
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....iminal activity relatable to the scheduled offence;]^3 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]^4 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 the following processes or activities connected with proceeds of crime, namely:- (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time ....
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....ll, as soon as may be, inform him of the grounds for such arrest. (2) The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub-section (1), forward a copy of the order along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed. (3) Every person arrested under sub-section (1) shall, within twenty-four hours, be taken to a [Special Court or]^7 Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction: Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the [Special Court or]^8 Magistrate's Court. 12. The issue regarding providing 'reasons to believe' to the person being arrested by ED has been dealt with expansively by the Hon'ble Supreme Court in Arvind Kejriwal v. Directorate of Enforcement (Para 36), wherein it has been held that it is difficult to accept that the "reasons t....
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.... 2. You and Dhiraj Saluja along with your father, Mr. Ram Saran Saluja were the Directors of M/s SEL Textiles Limited during the relevant period of crime and all of you were involved in day to day affairs of the company. Shri Ram Saran Saluja was expired on 23.05.2021 and not available for joining ongoing investigation under PMLA, 2002. Dhiraj Saluja has moved to United Arab Emirates and he failed to cooperate in ongoing investigation even after multiple opportunities provided via summons, to him to do the same. Therefore, you are the only person available in India, at present, who was involved in day-to-day affairs of M/s SEL Textiles Limited and in possession of relevant information pertaining to ongoing investigation. 3. Investigation has disclosed that you in connivance with other accused persons illegally diverted 81,03 crores, which was part of loan amount sanctioned and disbursed to M/s SEL Textiles Limited, to two companies viz. M/s Silverline Corporation Limited and M/s Rhythm Textiles and Apparels Park Limited which are both owned and controlled by you and your family members. The said amount of Rs. 81.03 crores is the part of proceeds of crime of 1530.99 c....
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....s Private Limited had generated a total revenue of Rs. 2172.08 crores between F.Y. 2017-18 to F.Y. 2021- 22 and M/s Regnant Exim Private Limited had generated a total revenue of Rs. 2005.27 crores between F.Y. 2016-17 to F.Y. 2021- 22. In other words, you had caused a revenue loss of 24177.35 crores to M/s SEL Textiles Limited and ultimately to the consortium of banks. 8. Due to your non-cooperation in ongoing investigation under PMLA, 2002, the relevant facts related to generation, layering, integration and possession of proceeds of crime, a huge part of proceeds of crime is still remained to be identified, can only be revealed through detailed custodial interrogation. You have not cooperated with the investigation by resorting to withholding of relevant information which is within your exclusive knowledge. You have been given ample opportunities to reveal the complete truth by virtue of recording your statements under Section 50 & 17 of PMLA, 2002. You have willfully adopted an attitude of non- cooperation by either evading the queries or giving misleading and evasive replies. Thus, on the basis of investigation conducted so far and material in the possession, I....
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....he arrest and prevents the possibility of re-arrest based on the same justifications. This is because the violation infringed upon the individual's constitutional rights. 21. Any arrest shall be illegal when it directly contradicts the legal requirements mandated by the PMLA, especially under Section 19. This section requires material evidence and a well-documented 'reason to believe' that the individual is involved in money laundering activities. A breach of these requirements signifies a profound legal violation, rendering the arrest void ab initio. 22. The language of Section 19 suggests discretion; however, once an arrest is effected, it must strictly adhere to the outlined statutory requirements. Failure to do so shifts the nature of the action from a permissible discretionary act to a violation of mandatory legal protocols. 23. The concept of 'reason to believe' is not merely procedural but a substantive safeguard that underpins the legality of an arrest under the PMLA. It requires a qualitative assessment of evidence before depriving an individual of liberty. 24. The lack of a valid 'reason to believe' documented at the time of arrest,....