TaxTMI 
TaxTMI 
2024 (12) TMI 293
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....of the Prevention of Money Laundering Act, 2002 ("PMLA"). BRIEF FACTS 2. The said ECIR /STF/17/2022 dated 21.09.2022 is premised on RC-14/2022/NIA/DLI dated 13.04.2022 filed by the National Investigation Agency ("NIA") under section 120-B of Indian Penal Code ("IPC"), Sections 17, 18, 18B, 20, 22B, 38 and 39 of Unlawful Activities (Prevention) Act, 1967 ("UAPA") as the said offences are the scheduled offences under Part A of the Scheduled under section 2 (1) (y) of PMLA. 3. All the petitioners herein were arrested on 22.09.2022 under the said ECIR. After the completion of investigation, the Directorate of Enforcement ("ED") filed a Complaint before the concerned Court on 19.11.2022 against the petitioners herein. 4. As per the Complaint filed by the ED, the specific role of the petitioners are described as under:- Role of Parvez Ahmed * It is stated that he was the president of Delhi state unit of Popular Front of India ("PFI") for the term 2018-2020 and was actively involved in anti CAA-NRC protests held in Delhi. The anti-CAA protests in Delhi resulted in Delhi riots of February, 2020 in which he, along with other PFI members, was arrested. Parvez Ah....
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....ame of residents of Mullah Colony, Gharoli for PFI by Abdul Muqeet along with his associates. It was also revealed that donations made for a sum of Rs. 50-100 were incorrectly reflected as donations to the tune of Rs. 2000 - Rs. 4000. Further, Abdul Muqeet was actively involved in the collection of donations in his locality, i.e. Mullah Colony, Gharoli, Delhi-96. * His statement under section 50 of PMLA was recorded wherein he inter alia, stated that he joined PFI after meeting Parvez Ahmed and was made office secretary of PFI Delhi. Further as office secretary, his responsibility was to open and close PFI's office and to attend any PFI related person who came to the office. He used to attend office every day for 3-4 hours and it was his responsibility to collect Zakat in Mulla Colony and nearby areas and after collecting Zakat if anybody used to ask him for donation receipts, he would talk to Mohd Ilyas and arranged for receipts. 5. The petitioners were also members of the political front of PFI - Social Democratic Party of India ("SDPI") - and were actively involved in SDPI's activities. SDPI gave ticket to Mohd Ilyas for contesting Delhi Assembly elections, 2020 from....
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....ssociated with PFI) used to go to mosques in nearby areas to collect donations from the namaazis and thereafter they issued a receipt for the total amount collected to the concerned Imam of the mosque and deposited the collection with Parvez Ahmed. 10. Investigation has revealed that such fund collection exercise was a sham and was falsely projected to be received from PFI sympathizers and was further revealed that these transactions were bogus. Hence, cash from suspicious sources was nothing but proceeds of crime generated out of criminal conspiracy to disturb communal harmony, incite violence through riots and other unlawful activities for spreading terror across India. Thus, by concealing, possessing and acquiring proceeds of crime raised in India and abroad as part of criminal conspiracy and by thereafter projecting such funds as untainted money (by preparing bogus cash donations slip/receipts), the petitioners have been directly involved been knowingly a party to the various processes and activities connected with the proceeds of crime and thus committed the offence of money laundering as defined under Section 3 of PMLA. SUBMISSIONS ON BEHALF OF THE PETITIONERS On beh....
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....t its highest, this allegation links the petitioner to generation of 'proceeds of crime' which is not a crime under the PMLA. 16. He further argues that the phrase 'proceeds of crime' needs to be construed strictly as it is the core ingredient constituting the offence of money laundering. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person 'as a result of' criminal activity relating to the concerned scheduled offence. Hence, as per the complaint filed by the ED against the petitioner, no offence of money laundering under section 3 of PMLA is made out against the petitioner. B. Right to Liberty has been violated on account of Long Incarceration and Delay in Trial. 17. Learned senior counsel further submits that the petitioner has been in custody for more than 2 years 2 months and maximum punishment for an offence under section 4 of PMLA is 7 years. Trial is yet to begin as the charges have not been framed against the petitioner. Even if the trial commences, it is unlikely to conclude in the near future as there are 185 prosecution witnesses cited in the Complaint and Supplementary Complai....
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....ears for the petitioner i.e. Parvez Ahmed and submits that the allegation in the Complaint is that the petitioner facilitated in the collection of funds for the purpose of committing a crime and the funds so collected are therefore proceeds of crime. He states that 'proceeds of crime' must be derived or obtained as a result of any criminal activity, not merely for an offence intended to be committed. 23. The ED's stand in the Complaint is totally against the established legal principles of money laundering. By asserting that the collection of funds for the purpose of committing a crime constitutes 'proceeds of crime', the ED totally has failed to appreciate the settled law related to the proceeds of crime. Proceeds only become 'proceeds of crime' after they are generated as a direct result of a criminal offence. It is incorrect for the ED to presume that funds collected to commit a crime are proceeds of crime. 24. He states that ED presupposes that the money was collected with criminal intent and the same were used for illegal activities without any evidence to support the same. The petitioner is not charged under UAPA and is not even an accused in the predicate offence. Henc....
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.... to show that all important decisions regarding the affairs of PFI including operating the bank accounts were to be taken by the State President. He further submits that an individual only becomes a President when he is actively participating in the institution or based upon their performance over a number of years. Parvez Ahmed was involved in collection of donations for PFI and looked after the bank account. The total funds collected by Parvez Ahmed while being the President of PFI Delhi State during the period Jan 2018 - Dec 2020, amounted to Rs. 2.14 crore. 30. With regard to the role of Mohd Ilyas, Mr Hossain submits that till his arrest, he was the General Secretary of Delhi State Unit of PFI since November 2018. He was in charge of managing PFI operations in Trans-Yamuna Area of Delhi state, including the collection of funds on behalf of PFI for these areas. As a result, he is guilty under section 70 of PMLA. My attention is drawn to MOA and Constitution of PFI to show that the General Secretary had an important role in decision making including collections of funds. Mohd. Ilyas tried to legitimise bogus donations as legitimate and the incomplete details on receipts was i....
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..... Union of India, (2023) 12 SCC 1 has extensively interpreted 'proceeds of crime'. Relevant paras are extracted below:- "106. The "proceeds of crime" being the core of the ingredients constituting the offence of money laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2 (1) (u) of the 2002 Act-so long as the whole or some portion of the property has been derived or obtained by any person "as a result of" criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a result of" criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as pro....
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....ed by a court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2 (1) (u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of the definition clause "proceeds of crime", as it obtains as of now." (Emphasis added) 38. The Hon'ble Supreme Court has very categorically laid down the distinction with respect to 'proceeds of crime'. The above paras hold that any property derived or obtained directly or indirectly 'as a result of criminal activity' which is a scheduled offence under the PMLA is proceeds of crime. In other words, any property obtained following the commission of the scheduled offence or from the proceeds of the scheduled offence will be the proceeds of crime. Further, it is also appropriate to refer to the judgment of P....
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....ation from unknown sources, thereafter they provided fake receipts/showed the collections as legitimate donations to utilize those funds to commit terrorist activities (scheduled offences). Hence, the funds so collected by the petitioners are the proceeds of crime. 40. In order to invoke the provisions of section 3 of PMLA, there must be proceeds of crime as discussed above and these proceeds must be a result of a criminal activity. The case set up by the ED that the funds which the petitioners were generating were used for committing a scheduled offence, hence proceeds of crime, is not the scheme of PMLA. The offence committed by the collection of funds may be an offence under any law including a scheduled offence but cannot be termed as a proceeds of crime to invoke section 3 of PMLA. 41. On perusing the Complaint, there is no evidence to show that any scheduled offence has been committed, it is stated that the petitioners participated in the anti-CAA protests in Delhi which culminated in Delhi Riots. Learned counsels for the petitioners have rightly pointed out that in the present case i.e. collection of funds precedes the crime i.e. Delhi Riots. The proceeds of crime has ....
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....proceeds of crime which is generated as a result of criminal activity related to the scheduled offence..." 16. In Mohan Lal (supra), the expression 'possession', it is held, consists of two elements. First, it refers to corpus of physical control and second it refers to the animus or intent which has reference to exercise of self-control. In the context of narcotics laws, a person is said to possess control over the substance when he knows the substance is immediately accessible and exercises dominion or control over the substance. The power and dominion over the substance is, therefore, fundamental. The stand of the DoE as to the constructive possession, will be satisfied only if the dominion and control criteria is satisfied. If the proceeds of crime are in dominion and control of a third person, and not in the dominion and control of the person charged under Section 3, the accused is not in possession of the proceeds of the crime. It would be a different matter, when an accused, though not in possession, is charged for use, concealment or acquisition of the proceeds of the crime, or projects or claims the proceeds of crime as untainted property. The involvement of an ac....
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....and trial. Our Courts have adopted the principle i.e. Bail is the rule and Jail is an exception. Liberty of an accused is paramount and should be curtailed only by a procedure established by law which should be both fair and reasonable. The offences in the special statutes like Narcotic Drugs and Psychotropic Substances Act, 1985, UAPA and PMLA imposes additional stringent conditions for grant of bail which are to be tested on the facts and circumstances of each case but these stringent conditions do not take away the fundamental rights guaranteed under Article 21. 48. The Hon'ble Supreme Court in Union of India v. K.A. Najeeb, (2021) 3 SCC 713 upholding the Constitutional rights of the accused despite the rigors of section 43-D(5) of UAPA, observed as under:- "17. It is thus clear to us that the presence of statutory restrictions like Section 43-D(5) of the UAPA per se does not oust the ability of the constitutional courts to grant bail on grounds of violation of Part III of the Constitution. Indeed, both the restrictions under a statute as well as the powers exercisable under constitutional jurisdiction can be well harmonised. Whereas at commencement of proceedings, t....
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....Section 45(1)(iii) of the PMLA, cannot become a tool which can be used to incarcerate the accused without trial for an unreasonably long time. 26. There are a series of decisions of this Court starting from the decision in the case of K.A. Najeeb, which hold that such stringent provisions for the grant of bail do not take away the power of Constitutional Courts to grant bail on the grounds of violation of Part III of the Constitution of India. We have already referred to paragraph 17 of the said decision, which lays down that the rigours of such provisions will melt down where there is no likelihood of trial being completed in a reasonable time and the period of incarceration already undergone has exceeded a substantial part of the prescribed sentence. One of the reasons is that if, because of such provisions, incarceration of an undertrial accused is continued for an unreasonably long time, the provisions may be exposed to the vice of being violative of Article 21 of the Constitution of India. 27. Under the Statutes like PMLA, the minimum sentence is three years, and the maximum is seven years. The minimum sentence is higher when the scheduled offence is under th....
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....e in a case where, considering the antecedents of the accused, there is every possibility of the accused becoming a real threat to society if enlarged on bail. The jurisdiction to issue prerogative writs is always discretionary." 51. Further, the Hon'ble Supreme Court in Prem Prakash (supra) observed as under:- "13. Independently and as has been emphatically reiterated in Manish Sisodia [Manish Sisodia v. Enforcement Directorate, (2024) 12 SCC 660 : 2024 SCC OnLine SC 1920] relying on Ramkripal Meena v. Enforcement Directorate [Ramkripal Meena v. Enforcement Directorate, (2024) 12 SCC 684 : 2024 SCC OnLine SC 2276] and Javed Gulam Nabi Shaikh v. State of Maharashtra [Javed Gulam Nabi Shaikh v. State of Maharashtra, (2024) 9 SCC 813], where the accused has already been in custody for a considerable number of months and there being no likelihood of conclusion of trial within a short span, the rigours of Section 45 PMLA can be suitably relaxed to afford conditional liberty. Further, Manish Sisodia [Manish Sisodia v. Enforcement Directorate, (2024) 12 SCC 660 : 2024 SCC OnLine SC 1920] reiterated the holding in Javed Gulam Nabi Sheikh [Javed Gulam Nabi Shaikh v. State of Ma....