TaxTMI 
TaxTMI 
2025 (2) TMI 1497
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.... (hereinafter referred to as "IPC") and Section 17, 18, 18B, 20, 38, 39 of the Unlawful Activities (Prevention) Act, 1967 (hereinafter referred to as "UAPA"). 2. It is submitted that the second Bail Application of the Applicant was dismissed by the Ld. Special Court on 28.08.2025. 3. The brief facts are that the Respondent/ED registered the ECIR No. ECIR/02/HIU/2018 dated 02.05.2018 on the basis of basis of National Investigation Agency (hereinafter referred to as "NIA") and other law enforcement Agencies invoking Scheduled offences under Sections 120-B, 121, 121A of IPC, Sections 3, 4 and 5 of the Explosive Substance Act, Sections 25 and 27 of the Arms Act and Sections 13, 16, 17, 18 and 18(A) of the UAPA. 4. The Respondent/ED filed a Main Prosecution Complaint dated 19.11.2022 before the Ld. Special Court, PMLA, Lucknow, U.P. against 5 Accused persons, in ECIR No. ECIR/02/HIU/2018 arraigning 17 witnesses and relying upon 60 documents, running into approximately 2000 pages. 5. Subsequently, the Respondent/ED filed the 1st Supplementary Prosecution Complaint dated 06.05.2022 against 4 Accused persons in ECIR/02/HIU/2018 dated 02.05.2018. The 2nd Supplementary Prosecutio....
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....t neither were any allegations of any manner whatsoever alleged against the Applicant herein, nor were any movable/immovable properties of the Applicant or Social Democratic Party of India ("SDPI") attached by the Respondent/ED. 14. The Respondent/ED filed an amended Main Prosecution Complaint dated 19.11.2022 in ECIR No. ECIR/STF/17/2022 against 4 accused persons arraigning 39 witnesses and relying upon 69 documents running into approximately 4000 pages. 15. The Respondent/ED filed the 1st Supplementary Prosecution Complaint dated 05.08.2023 in ECIR dated 21.09.2022 before the Ld. Special Court, Patiala House District Court, New Delhi against 1 Accused person, arraigning 12 witnesses and relying upon 50 documents and digital evidence running into approximately 8000 pages. 16. The 2nd Supplementary Prosecution Complaint dated 20.10.2023 was filed against 3 Accused persons, arraigning 15 witnesses and relying upon 42 documents and digital evidence running into approximately 10000 pages. 17. Provisional Attachment Order bearing PAO No. 25/2023 dated 02.11.2023, attaching 15 bank accounts totalling Rs.1,19,81,250/-. The Respondent/ED passed Provisional Attachment Order bea....
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....d. Special Court, and by observing that to invoke the provisions of Section 3 of PMLA, there must be proceeds of crime and these proceeds must result from a criminal activity. Furthermore, the case set up by the Respondent/ED that the funds which the Petitioners were generating, were used for committing a scheduled offence and hence were proceeds of crime, is not the scheme of PMLA. Furthermore, the offence committed by the collection of funds, may be an offence under any law including a scheduled offence, but cannot be termed as proceeds of crime to invoke Section 3 of PMLA. 26. The Ld. Special Court granted regular Bail to the Co-Accused namely B Sahul Hameed on grounds of parity, period of incarceration and considering that this Court has held that collection of funds in an illegal way to commit a scheduled offence in future, is not an offence under money laundering and that the conditions under Section 45 of PMLA have been met in the case of the co-Accused persons. 27. The Ld. Special Court granted regular Bail to the Co-Accused namely Firoz K on grounds of parity and the period of incarceration on 01.03.2025. 28. Thus, it is submitted that throughout all the aforesaid....
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....en any prima facie allegations against the Applicant. 35. It is submitted that the Applicant is a respected public figure, Islamic scholar, political observer and social worker, having deep roots in society and no criminal antecedents. The Applicant was illegally arrested by the Respondent/ED on 03.03.2025 at IGI Airport, New Delhi, based on purported and uncorroborated statements, without any material linking him with the alleged offence. 36. It is further submitted that the Applicant's name surfaced for the first time only in the 7th Supplementary Prosecution Complaint dated 15.06.2025, despite several earlier Prosecution Complaints and Supplementary Complaints filed since 2018, wherein no allegations were made against him. The Applicant has been falsely implicated on the allegation that SDPI is a political front of the banned Popular Front of India (PFI). However, SDPI has never been declared as an unlawful association under UAPA. 37. It is submitted that the Government of India through The Gazette of India: Extraordinary bearing Notification No. S.O. 4559 (E) dated 27.09.2022, after thorough investigation, banned PFI and all its associates/affiliates, but SDPI was neit....
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....that mere act of raising or collecting funds, even if it constitutes an offence under another law, it does not ipso facto amount to generation of proceeds of crime under Section 3 of PMLA, unless the funds are shown to have arisen from a scheduled offence. 44. It is also contended that Bail is the rule and Jail the exception, and arrest under Section 19(1) of PMLA must be founded on cogent, admissible evidence of guilt rather than suspicion. Reliance is also placed on K. Kavitha vs. Directorate of Enforcement, 2024 INSC 632, Arvind Kejriwal vs. Directorate of Enforcement, 2024 INSC 512, and Manish Sisodia vs. Directorate of Enforcement, 2024 SCC OnLine SC 1920 which reaffirmed that prolonged incarceration amounts to pre-trial punishment. 45. It is submitted that the Applicant has been in custody since 03.03.2025. The Prosecution has filed voluminous Complaints running into approximately 90,000 pages, arraigning over 240 witnesses and the case is still at the compliance stage under Section 207 CrPC. Early conclusion of trial is non-existent and continued detention amounts to denial of fundamental right to liberty under Article 21 of the Constitution. All documentary evidence h....
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....t No. 1 (19.10.2013) were filed by the NIA, Kochi, alleging that certain PFI/SDPI activists conspired to train cadres in the use of explosives and arms and organised a camp at Narath, Kannur District, with the alleged objective of promoting religious enmity and preparing individuals for terrorist activities. The case was registered under Section 120B IPC, Sections 4 & 5 of the Explosive Substances Act, Sections 25 & 27 of the Arms Act, and Sections 18 & 18A of the UAPA, 1967, which were treated as scheduled offences under the PMLA. b. FIR No. 0199/2020 (07.10.2020) was registered by the U.P. Police under Sections 153A, 295A and 124A IPC; Sections 14 and 17 of the UAPA; and Sections 65, 72 and 76 of the Information Technology Act against four members of PFI/CFI. It was alleged that they were travelling to Hathras to disturb communal harmony and incite violence. The PMLA investigation alleged that K.A. Rauf Sherif, a PFI member and National General Secretary of CFI, fraudulently transferred approximately Rs. 1.36 crore through bogus international trade transactions to fund unlawful activities, including anti-CAA protests and other alleged terrorist activities. c. FI....
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....ganisations had an organised presence in Gulf countries and raised funds abroad, which were transferred to India through circuitous banking routes and illegal hawala channels, without statutory compliance. e. PFI did not deposit its entire fund collections into bank accounts and retained substantial amounts in cash, which were spent without reflection in bank statements, thereby leaving no identifiable money trail. f. In his statement dated 05.02.2020, Jaseer K.P., an accountant of PFI, allegedly stated that a significant portion of cash collected by PFI was retained at its offices and not deposited in bank accounts, resulting in misrepresentation before government authorities. g. Hence, the overlapping membership of cadres of PFI-SDPI, involvement of PFI office bearers in the founding of SDPI, utilization of each other's assets and their statements under Section 50 of PMLA evidences the deep rooted nexus between these two organizations and that SDPI is a front organization of PFI through which PFI has been carrying out its political activities even while overtly taking a stand that PFI is a non-political organization. 55. It is further submitted t....
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....rms the foundation for the charges of money laundering against the Applicant under Section 3 of PMLA. 60. During his statement under Section 50 of PMLA dated 05.01.2024, M.K. Faizy is stated to have identified the "organization" mentioned in the document as PFI and the "party" as SDPI. 61. A Letter addressed to "Faizy Sahab," recovered from an external hard drive, pertains to organizational matters including the selection of candidates for state elections. This Letter outlines a detailed and structured framework for candidate selection, involving multiple levels of the organization. Notably, the name "Jinnasahab" mentioned in the document refers to M. Mohd. Ali Jinnah, who served as PFI's National General Secretary from 2018 to 2020 and was a member of PFI's National Executive Council at the time when PFI was declared an unlawful association by the Government of India, through a Notification dated 27.09.2022, effective for five years from its publication in the Official Gazette on 28.09.2022. 62. Investigation revealed that PFI and SDPI also maintained similar party-organization relationship in Gulf Countries by the name of 'IFF - ISF'. 'IFF' stands for 'Indian Fraternity ....
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....al bank account. g. His failure to comply with 12 ED summons and the subsequent issuance of warrants (17.12.2024, 17.01.2025) suggests intentional interference with the investigation. h. M.K. Faizy knowingly enabled the acquisition, possession, and portrayal of proceeds of crime as legitimate funds, supporting PFI's plan to finance riots, terrorist training, and anti-national demonstrations. He actively participated in processes involving proceeds of crime totalling Rs.32,94,43,117/-, including concealment, possession, acquisition, use, and subsequent projection as legitimate funds. Therefore, the Applicant knowingly committed the offence of money laundering under Section 3 of PMLA and is liable for punishment under Section 4 of PMLA. As a PFI National Executive Council member and SDPI National President, the Applicant bears vicarious liability for the activities of both organizations under Section 70 of PMLA. i. Further, investigations have revealed that between October, 2010 and March 2025, SDPI's bank accounts across 07 states and UTs received Rs.32,94,43,117/-, with 68% of the amount deposited in cash, indicating a deliberate strategy to obscure s....
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.... money trail, thereby leading to frustration of proceedings under PMLA. 70. Furthermore, the filing of the 7th Supplementary Prosecution Complaint dated 01.05.2025 and the issuance of process against the Applicant/Accused by the Special Court on 20.05.2025, establishes that a prima facie case exists against the Applicant, indicating guilt for the offence of money laundering under the PMLA. 71. In support of this contention, reference is made to the Supreme Court's decision in Manharibhai Muljibhai Kakadia & Anr vs. Shaileshbhai Mohanbhai Patel & Ors, (2012) 10 SCC 517, which held that cognizance involves the application of judicial mind to determine whether an offence has been committed, based on a Complaint, First Information Report, or other information. 72. It is submitted that the Applicant's reliance on delay of trial is misplaced, given that the complexity of the offence, involving multiple institutions, extensive records, and ongoing investigation, inherently requires substantial time. The Applicant cannot benefit from their own actions or seek comparison with cases having different factual circumstances. 73. Furthermore, the Applicant's claim of suffering ov....
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....10.2024 in Vipin Kumar Sharma vs. Directorate of Enforcement, SLP (Crl.) No. 9540/2024, the Supreme Court denied bail after 1 year 3 months and 22 days. c. Order dated 27.02.2023 in Bimal Kumar Jain vs. Directorate of Enforcement, SLP (Crl.) No. 9656/2022, the Supreme Court denied bail after 2 years 5 months and 26 days. d. Order dated 03.02.2025 in Banmeet Singh vs. Directorate of Enforcement, SLP (Crl.) No. 1685/2025, the Supreme Court denied bail after 8 months and 5 days. e. Order dated 25.03.2025 in Hitesh Gandhi vs. Enforcement Directorate, SLP (Crl.) No. 16555/2024, the Supreme Court denied bail after 1 year 6 months and 26 days. f. Order dated 25.03.2025 in Arvind Rajta vs. Enforcement Directorate, SLP (Crl.) No. 16263/2024 (co-accused in the present ECIR), the Supreme Court denied bail after 1 year 6 months and 26 days. g. Order dated 25.03.2025 in Krishan Kumar vs. Enforcement Directorate, SLP (Crl.) No. 17355/2024 (co-accused in the present ECIR), the Supreme Court denied bail after 1 year 6 months and 26 days. h. Order dated 25.03.2025 in Rajdeep Singh vs. Enforcement Directorate, SLP (Crl.) No. 16807/2024 (co-accuse....
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....d the Bail Orders granted by this Court before the Apex Court, contending that there was no parity, but, the Order of this Court granting Bail to the co-accused was not cancelled. Furthermore, that there is no material distinction between the role attributed to the Applicant and the roles attributed to the Co-accused who have been granted bail, and therefore, the principle of parity mandates that the Applicant must also be entitled to Bail. 86. On the issue of alleged non-cooperation with the investigation, Ld. Counsel submitted that from March 2024 onwards, summons were issued to the Applicant and the Applicant responded to all summons and appeared. It was submitted that there were valid reasons for any delay in appearance, including the Applicant's participation in election-related activities as the National President of a political party and genuine health concerns that prevented immediate compliance. Ld. Counsel emphasized that the Applicant is a resident of Kerala and was arrested in Delhi on 03.03.2025. It was further submitted that proceedings under Section 174 IPC were initiated against the Applicant, which is an offence punishable with a maximum sentence of only one mon....
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....not guilty of the offence alleged, and that he is not likely to commit any offence while on Bail. The grant of Bail to similarly placed Co-accused persons, the lack of evidence against the Applicant, and the fact that SDPI is not a banned organization, the Applicant be granted Bail. 92. Ld. Counsel for the Respondent, ED, Mr. Zoheb Hossain along with Mr. Vivek Gurnani has vehemently opposed the present Bail Application. Detailed Written Submissions have also been filed by the Respondent/ED. 93. Ld. Counsel emphasized that the Applicant has been in custody since 03.03.2025, and this period of incarceration, while acknowledged, cannot be the sole ground for grant of Bail in a case of this gravity and nature. Ld. Counsel emphasized that Section 120B IPC (criminal conspiracy) read with other offences constitutes a predicate offence under PMLA, and the present case involves a deep-rooted conspiracy to raise, layer, and deploy proceeds of crime for terrorist activities and anti-national purposes. 94. Moreover, the Applicant is not merely a member or office bearer of PFI but is a founding member of PFI, which establishes his involvement from the very inception of the criminal ent....
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....ses, the ED is duty-bound to proceed against the actual beneficiary or controller of such proceeds. 99. Ld. Counsel submitted that in June 2025, the ED had shared all material and evidence in its possession with the predicate agency (NIA), and the fact that the Applicant has not been named as an accused in the predicate offence by the NIA does not mean that he is exonerated or absolved of liability under PMLA. Reliance was placed on the judgment in Anil Tuteja, (supra) wherein it has been held that it is the statutory duty of the ED under Section 66(2) of PMLA is to investigate and prosecute persons involved in money laundering regardless of whether they are accused in the predicate offence ECIR or not. It is submitted that money laundering is an independent offence distinct from the predicate offence, and a person not accused in the scheduled offence can nevertheless be guilty of money laundering if he is involved in any process or activity connected with proceeds of crime. 100. Ld. Counsel emphasized that in the present case, the applicable threshold for grant of Bail is Section 45 of PMLA. It was submitted that both these conditions are mandatory and cumulative in nature, ....
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....nically applied, and that each case must be decided on its own facts considering the specific role, position, and degree of involvement of each accused. The Applicant was also a direct recipient of Rs. 15,40,000/- in his personal account is materially different from and far more culpable than the roles attributed to the Co-accused. 105. To sum up, Ld. Counsel for the ED submitted that the Applicant has failed to satisfy either of the twin conditions under Section 45 of PMLA. There exist overwhelming reasonable grounds to believe that the Applicant is guilty of the serious offence of money laundering linked to terrorist financing and activities threatening national security. Furthermore, given the Applicant's influential position, evasion of 12 summons, his international connections through cross-border fundraising, and the risk of tampering with evidence and influencing witnesses, there are substantial grounds to believe that the Applicant is likely to commit offences while on Bail. Submissions heard and record perused. 106. The Applicant herein, seeks grant of regular Bail in ECIR dated 21.09.2022. The Applicant was arrested on 03.03.2025 and has been in custody since the....
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....ndirectly 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 and projecting it as untainted property shall be guilty of offence of money laundering." 114. The gravamen for commission of the offence of money laundering is 'proceeds of crime' which is defined under Section 2(1)(u) of PMLA as under: "(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;" 115. The term "proceeds of crime" was extensively explained in the case of Vijay Madanlal Choudhary vs. Union of India, (2023) 12 SCC 1 as under: "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 property in the case (crime) concerned, it may still not be proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession of una....
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....been shown as an accused in the scheduled offence. "The condition precedent for attracting offence Section 3 PMLA are that there must be a scheduled offence and that there must be proceeds of crime in relation to the scheduled offence as defined in Clause (u) of sub-section (1) of Section 3 of the PMLA." 118. In the present case, the entire case of the ED is that the Applicant has been a member of PFI since its formation in 2009, held important posts until he separated from PFI in the year 2018. Essentially, the allegation against the Petitioner is that he is the political face of PFI, the banned organization, and is facilitating bogus donations and disbursal of funds for unlawful activities and has personally received Rs. 15,40,000/- from SDPI. The Applicant is also the authorized signatory in SDPI's national bank account maintained with Canara Bank. 119. According to the ED, the Investigation have revealed that the Applicant knowingly facilitated the acquisition, possession and projection of proceeds of crime as untainted and supported PFI's conspiracy to fund riots, terrorist camps and anti-national protests. 120. Thus, what emerges is that, the ED's entire case against....
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....rmation, despite which the name of the Applicant has not been included in the Charge-Sheet in the predicate offence. 126. Section 66 of PMLA provides for disclosure of information. Section 66 is reproduced as under: "(1) The Director or any other authority specified by him by a general or special order in this behalf may furnish or cause to be furnished to-- (i) any officer, authority or body performing any functions under any law relating to imposition of any tax, duty or cess or to dealings in foreign exchange, or prevention of illicit traffic in the narcotic drugs and psychotropic substances under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or (ii) such other officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary so to do in the public interest, specify, by notification in the Official Gazette, in this behalf, any information received or obtained by such Director or any other authority, specified by him in the performance of their functions under this Act, as may, in the opinion of the Director or the other authority, so specified by him, be nece....
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....s not find any case with respect to the aspects pointed out by the ED, then the ED cannot suo motu proceed with the investigation and assume powers. The essential ingredient for the ED to seize jurisdiction is the presence of a predicate offence. It is like a limpet mine attached to a ship. If there is no ship, the limpet cannot work. The ship is the predicate offence and "proceeds of crime". The ED is not a loitering munition or drone to attack at will on any criminal activity." 129. Applying the ratio of the above judgments to the facts of the present case, the Applicant was neither named in the original FIR No. RC-14/2022/NIA/DLI dated 13.04.2022 registered by the NIA nor in the ECIR No. ECIR/STF/17/2022 dated 21.09.2022 registered by the ED based on the NIA FIR. There have been no prima facie allegations against the Applicant in the predicate offence. The NIA, after conducting extensive investigation spanning over three years from April 2022 till date, has filed its Chargesheet dated 18.03.2023 against 24 accused persons, arraigning 243 witnesses, but the Applicant's name does not figure anywhere in the said Chargesheet. Despite the ED sharing all its material with the NIA v....
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.... several years. The scale and nature of the evidence make it apparent that the trial is bound to take a considerable period of time before conclusion. 136. Although the 7th Supplementary Prosecution Complaint was filed on 15.06.2025 and cognizance taken on 20.05.2025, the proceedings are still at a nascent stage. Charges are also yet to be framed. In light of the sheer volume of evidence and number of witnesses, the trial is likely to take long. 137. The Applicant is in Jail since 03.03.2025 i.e. for more than 11 months. Continued incarceration without commencement and foreseeable completion of trial would amount to pre-trial punishment, which is impermissible under Article 21. 138. The rigours of Section 45 of PMLA cannot be permitted to operate so as to sanction indefinite detention of the Applicant. Conclusion: 139. In light of the foregoing reasons, the Bail Application is allowed. The Applicant be released on Regular Bail, subject to the following terms and conditions: a) The Applicant / Petitioner shall furnish a personal bond in the sum of Rs. 50,000/- (Rupees fifty thousand only) with 1 surety in the like amount, to the satisfaction of the concerned ....