TaxTMI 
TaxTMI 
2026 (2) TMI 1158
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.... dated 16.09.2021 passed by the City Civil Court & Additional Sessions Judge, Greater Bombay (the Designated Court for the Prevention of Money Laundering Act, 2002) (for short "Designated Court"), issuing process against the Applicant in PMLA Special Case No. 1089 of 2021 and quashing the complaint in PMLA Special Case No. 1089 of 2021 filed against the Applicant for the offence under Section 3 punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (for short "PMLA, 2002"). 3. The facts of the case are that, on 21.04.2021, a First Information Report ("FIR") was registered against Anil Deshmukh and other unknown persons for the offence under Sections 7 of the Prevention of Corruption Act, 1988, and 120-B of the Indian Penal Code, 1980. Column 3(b) of the FIR states that the subject offence was committed "During the period 2020-2021". 4. Pursuant to the investigation carried out in connection with the FIR, a complaint under the second proviso to Section 45 of the PMLA, 2002, was filed. ECIR No. ECIR/MBZO-1/66/2021, dated 11.05.2021, was recorded under the provisions of PM.L.A. The Applicant is shown as "Accused No. 11" in the complaint. The predicate offence....
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....transactions indicate that Rs. 1.71 Crore transferred from November, 2020 to March, 2021 and total Rs. 4.18 Crore transferred in the account of Shri Sai Shikshan Sanstha since 2013. In this way the said amount which was laundered through shell companies prima-facie indicates the proceeds of crime pointing out involvement of accused No. 1 to 14 in the said money trail. Hence, there are prima-facie sufficient grounds to proceed against accused No. 1 to 14 as per section 3 punishable under section 4 of P.M.L.A. Hence, following order is passed. ORDER (a) Issue process against accused Nos. 1 to 14 as mentioned in the title, in P.M.L.A. Spl. Case No. 1089 of 2021 arising out of ECIR No. ECIR/MBZO-I/66/2021 for the offence under Section 3 punishable under Section 4 of The Prevention of Money Laundering Act, 2002. (b) Issue summons to all accused including accused persons who are in the jail presently." 7. Mr. Sunil Manohar, learned Senior Advocate for the Applicant, has placed on record a brief synopsis of the arguments and canvassed the oral arguments. He submits that the prosecution's case is that the proceeds of crime were generated between December 2020 and Fe....
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....icant's role in permitting and facilitating financial transactions through Corporate Entities under his control, including transactions used for layering and routing of tainted funds, is specifically brought out in the complaint, which, according to Mr. Mishra, was sufficient to prima facie initiate process against the Applicant. He submits that the Designated Court has rightly issued the process. He relies on the decision of the Hon'ble Supreme Court in Vijay Madanlal Choudhary v/s. Union of India 2022 SCC OnLine SC 929. 9. Ms. Pallavi Dabholkar, learned A.P.P. for the State/Respondent No. 2, submits that the State is a formal party to the present proceedings. 10. Arguments heard. Records perused with the assistance of the learned Advocates. The rival contentions fall for consideration. 11. The prosecution's case is that proceeds of crime were generated between December 2020 and February 2021. Material on record suggests that moneys were also transferred into the Trust account of the principal accused, Anil Deshmukh, from 2013. 12. FIR bearing no. RC2232021A0003, dated 21.04.2021, registered with the Central Bureau of Investigation, Anti-Corruption V, New Delhi, for of....
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....ar owners/managers for smooth functioning of their orchestra bars. 7.5 Investigation further revealed that Shri Hrishikesh Deshmukh, son of Shri Anil Deshmukh was regularly transferring cash money to Shri Surendra Kumar Jain and Shri Virendra Jain through Hawala who further infused the cash into the banking channel upon layering through their various paper companies namely M/s Reliable finance corporation Pvt. Ltd., M/s VA Realcon Pvt. Ltd., M/s Utsav Securities Pvt. Ltd. and M/s SITAL Leasing and Finance Pvt. ltd. 7.6 The total cash amounting to Rs.4.18 Crore of was received by Trust from said Delhi based companies in the garb of donations. Out of that Rs 1.71 crore was transferred in February and March 2021. The details of donation received from Delhi based shell companies of Shri Surendra Jain and Shri Virendra Jain in the account no. 442402010051625 with Union Bank of India pertaining to Shri Sai Shikshan Sanstha is as under:- A/C HOLDER Transaction Date Narration Credit in Rs. Shri Sai Shikshan Sanstha 24-04-2019 RTGS:VA REALCON PVT LTD 2500000 Shri Sai Shikshan Sanstha 09-03-2021 RTGS:VA REALCON PVT LTD 1500000 Shri Sai....
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....son of Shri Anil Deshmukh, was indirectly controlling M/s Flourish Properties Pvt. Ltd. through his close associates and infused capital which was used for giving loan amounting to approx. Rs. 2.20 Crore to M/s Premier Port Links Pvt. Ltd. and subsequently purchase of land in the name of M/s Premier Port Links Pvt. Ltd. Shri Kishore Dewani, 50% owner, has categorically stated that this amount of Rs. 2.2 Crore was the investment of Deshmukh's towards the purchase of the land. It can be noticed that Deshmukh family later acquired the M/s Flourish Properties Pvt. Ltd. at a mere value of approx. Rs. 11 lakhs by way of purchasing the shares from close associates and also became 50% shareholder in M/s Premier Port Links Pvt. Ltd. which was acquired in mere Rs.17.95 lakh only. Thus, Deshmukh family have infused their funds by way of raising share capital through various dummy companies and upon layering the same funds were utilized through another company which purchased land and later by way of transfer of shares in nominal amount again established their control over both the companies including their assets i.e. land & building. The entire transaction was done with ulterior motive a....
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.... 2002 and is liable for punishment under Section 4 of PMLA, 2002." 20. Section 3 of the PMLA, 2002 reads thus :- "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 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 co....
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....ivity related to the scheduled offence already accomplished, constitutes proceeds of crime. The existence of proceeds of crime is a sine qua non of the offence under Section 3 of the PMLA, 2002. 23. Mr. Prashant Mishra has referred to paragraph 5.12.20 of the complaint to contend that the Applicant has a role in the crime. Said paragraph 5.12.20 is quoted below: "5.12.20 Statement of Shri Kishore Pesaulal Dewani was recorded on 08.06.2021 & 10.07.2021 under the Provisions of Sub-Section (2) & (3) of Section 50 of the Prevention of Money Laundering Act, 2002 wherein he inter alia stated that he is a Chartered Accountant and engaged in tax practice which includes advisory on tax matters; that his source of income is from profession, rent, interest & profit of companies owned by family. On being asked about M/s Premier Port Links Pvt. Ltd. he inter alia state that company was incorporated on dt. 07.09.2000; that the shareholders of the company till 28.03.2010 were Shri Hira Bhagchandani (100 shares with face value 10), Smt. Nisha Bhagchandani (100 shares with face value 10), Jitendra Motwani (4800 shares with face value 10), Jayesh Motwani (5000 shares with face v....
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....Deshmukh Family to invest in M/s. Premier Port Links Pvt. Ltd. by raising a loan of Rs. 2.20 crores. The charge-sheet reveals that the Applicant has also invested an equal amount. The supplementary charge-sheet does not refer to any further material qua the Applicant. 25. From the material on record, the property purchased by M/s. Premier Port Links Pvt. Ltd. in the years 2005-2007, unarguably, cannot be said to have any connection with the proceeds of crime, as the acts constituting the scheduled offence took place after its acquisition, i.e. after December 2020 and up to February 2021. Even assuming the prosecution's case that the moneys were transferred to the Trust account of the principal accused, Anil Deshmukh, from 2013, the property purchased in 2005-2007 would still have no connection to the proceeds of crime. 26. Mr. Prashant Mishra, Special Counsel for Respondent No. 1, in paragraph 8 of his written submissions, has contended as follows:- "8. It is submitted that in Vijay Madanlal Chaudhary v. Union of India (2022 SCC OnLine SC 929), the Hon'ble Supreme Court held that "270. ...In other words, the criminal activity may have been committed before the sa....
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....1]. In para 109 of the said decision [Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1], this Court held thus : (SCC p. 166) "109. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence that can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved 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 ....
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....ontinuing to possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The offence of money-laundering is not dependent on or linked to the date on which the scheduled offence, or if we may say so, the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime. These ingredients are intrinsic in the original provision (Section 3, as amended until 2013 and were in force till 31-7-2019); and the same has been merely explained and clarified by way of Explanation vide Finance (No. 2) Act, 2019. Thus understood, inclusion of clause (ii) in Explanation inserted in 2019 is of no consequence as it does not alter or enlarge the scope of Section 3 at all." (emphasis supplied) 17. Coming back to Section 3 PMLA, on its plain reading, an offence under Section 3 can be committed after a scheduled offence is committed. For example, let us take the case of a person who is unconnected with the scheduled offence, knowingly assists the concealment of the proceeds of crime or knowingly assists the use of....
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....in the charge-sheets filed in the scheduled offences deserves to be rejected. Acquisition of the first and second property 19. The allegation against the appellant in the complaint is that she purchased the property worth crores, though she did not have the source of income which would generate enough money to buy the subject properties. The allegation against the appellant is that she allowed and facilitated Accused 1 Madhukar Angur, to conceal the siphoned/misappropriated amounts by using her bank account. Another allegation is that she is shown to have purchased the second property from Accused 1, though she did not have the resources to pay the consideration. The allegation is that she allowed Accused 1 to use her bank accounts to facilitate siphoning the proceeds of the crime. Another allegation is that both the first and second properties have been acquired out of the proceeds of crime. The first property, ex facie, cannot be said to have any connection with the proceeds of crime as the acts constituting the scheduled offence took place after its acquisition. The case of the appellant is that she possessed a substantial amount, as can be seen from the declar....
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....sed merely because he thinks that it is unlikely to result in a conviction. 53. However, the words "sufficient ground for proceeding" appearing in Section 204 are of immense importance. It is these words which amply suggest that an opinion is to be formed only after due application of mind that there is sufficient basis for proceeding against the said accused and formation of such an opinion is to be stated in the order itself. The order is liable to be set aside if no reason is given therein while coming to the conclusion that there is prima facie case against the accused, though the order need not contain detailed reasons. A fortiori, the order would be bad in law if the reason given turns out to be ex facie incorrect." 31. The order dated 16.09.2021 passed by the Designated Court in PMLA Special Case No. 1089 of 2021 does not indicate that the Designated Court applied its mind to the material, if any, available against the Applicant. The said aspect has not been considered in the order dated 16.09.2021. The test of "sufficient ground for proceeding" against the Applicant is not satisfied. No reasons are found in the order dated 16.09.2021 to conclude that there is pr....