TaxTMI 
TaxTMI 
2024 (7) TMI 1751
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.... a conspiracy with the borrowers to siphon off public money deposited with the Bank. Applicant Sagar Suryawanshi (A22) and Vinay Aranha (A12) were the principal confederates in the conspiracy. 4. In pursuance of the said conspiracy, Vinay (A12) and the applicant were sanctioned various loans from the Bank without having any creditworthiness and repayment capacity. The loans were advanced without submitting necessary documents and furnishing requisite security. Amar Mulchandani (A4) allowed Vinay (A12) and the applicant to become mutual guarantors to the said loans. New loans were advanced to pay off the earlier loans by resorting to the device of evergreening of loans. Amar Mulchandani (A4) would charge hefty commissions for advancing the loans. 5. Since the loans were advanced de hors creditworthiness and repayment capacity, eventually all the loans turned into Non Performing Assets ('NPAs') with an outstanding amount of Rs.429.57 crore. Resultantly, honest and unsuspecting depositors, who had placed deposits with the Bank were defrauded. The applicant and Vinay (A12) were major defaulters. The applicant and Vinay (A12) had diverted the loan amounts by not utilizing the same....
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....usly submitted that the predicate offence having ceased to exist with the filing and acceptance of 'C' Summary Report, proceedings in ECIR No.10/2021 came to an end by operation of law. The respondent, thus, could not have continued the investigation in the ECIR No.10/2021 and arrested the applicant in the said ECIR. A very strong reliance was placed by Mr. Bhise on a Three-Judge Bench decision of the Supreme Court in the case of Vijay Madanlal Choudhary and others vs. Union of India and others [2022 SCC OnLine SC 929] to buttress the submission that the predicate offence becoming non-est, the offence of money-laundering can not survive. 11. Mr. Bhise would further urge that the acceptance of 'C' Summary Report has the effect of closure of the prosecution and discharge of the accused and, resultantly, the continuation of investigation by ED and the detention of the applicant is wholly illegal. To this end, Mr. Bhise placed reliance on the decision of a Division Bench of this Court in the case of Nareseh Goyal vs. The Directorate of Enforcement [Criminal WP No.4037 of 2022] and decisions of Delhi High Court in the case of Harish Fabiani vs. Enforcement Directorate [2022 SCC OnLin....
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....n order dated 31 May 2023, passed in Revision Application No.330 of 2022. Once the test audit report is eschewed from consideration, the allegations of fraudulent transactions also fall through. Hence, the applicant be enlarged on bail. 16. Mr. Venegaonkar, Special PP for Respondent No.1 stoutly resisted the prayer for bail. Mr. Venegaonkar urged that, the principal ground on which the applicant seeks bail is that the ECIR does not survive as the predicate offence being C.R.No.163 of 2018 registered with Vimantal Police Station, Pune, has resulted in 'C' Summary. This very ground is the subject matter of the Writ Petition No.612 of 2023, awaiting adjudication before the Division Bench. Mr. Venegaonkar would urge that propriety would warrant that the said issue not be canvassed by the applicant in the instant bail application as there is a possibility of conflicting decisions. At any rate, according to Mr. Venegaonkar, the said ground is wholly misconceived. 17. Amplifying the submission, Mr. Venegaonkar would urge that there are only two modes in which ECIR in respect of an offence of money laundering punishable under Section 3 of the PMLA can be terminated otherwise than upo....
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....the offences of money laundering have been registered. As there is overwhelming material to show that the applicant was involved in the process or activity connected with the proceeds of crime, the interdict contained in Section 45(1)(ii) of the PMLA, comes into play with full force and rigour. Therefore, the applicant does not deserve to be enlarged on bail. 22. Mr. Venegaonkar joined the issue on the legality of arrest sought to be raised on behalf of the applicant. It was submitted that the threshold prescribed in Section 19 of the PMLA has been fully met. The Investigating officer had formed reasonable belief on the basis of objective material that the applicant is guilty of the offence of money laundering. Taking the court through the prosecution complaint, especially the nature of the alleged transactions and the consequent money trail, Mr. Venegaonkar would urge that a clear case of siphoning off the public deposits in pursuance of a well planned conspiracy has been made out. Emphasis was laid on the gross over-valuation of the properties and ever greening of the loans and the money trail, to bolster up the aforesaid submissions. 23. Mr. Kenjale, learned counsel for th....
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.... in the month of August 2021 on the strength of the test audit report can sustain ECIR No.10 of 2021 as those FIRs were subsumed in the investigation in the predicate offence, vide C.R.No.163 of 2018, as contended by ED? 26. For an answer, it is necessary to note the legal position as regards the offence of money laundering defined under Section 3 of the PMLA. Though the offence of money laundering punishable under Section 4 of the PMLA draws support and sustenance from a scheduled offence, yet it is an independent and standalone offence. Apart from the 'proceeds of crime' under the scheduled offence, the offence of money laundering has no causal connection with the scheduled offence. The existence of proceeds of crime is a sine qua non for the offence of money laundering. Absent proceeds of crime, there cannot be an offence of money laundering. Process or activity connected with the proceeds of crime in various forms and manifesations envisaged under Section 3 of the PMLA is the linchpin of the offence punishable under Section 4 of PMLA. It, therefore, implies that if the scheduled offence ceases to exist, it would be a contradiction in terms to contend that despite effacement ....
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....oceeds of crime as much as projecting it as untainted property or claiming it to be so. Thus, involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money-laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence - except the proceeds of crime derived or obtained as a result of that crime. ......... 280. We may also note that argument that removing the necessity of projection from the definition will render the predicate offence and money-laundering indistinguishable. This, in our view, is ill founded and fallacious. This plea cannot hold water for the simple reason that the scheduled offences in the 2002 Act as it stands (amended upto date) are independent criminal acts. It is only when money is generated as a result of such acts that the 2002 Act steps in as soon as proceeds of crime are involved in any process or activity. Dealing with such proceeds of crime can be in any form -being process or activity. Thus, even assisting in the process or activity is a part of the crime of money-laundering. We must keep in mind that for being liable to suffer l....
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....ome and irrespective of its volume, the definition of "proceeds of crime" under Section 2(1)(u) will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence. It is possible that in a given case after the discovery of huge volume of undisclosed property, the authorised officer may be advised to send information to the jurisdictional police (under Section 66(2) of the 2002 Act) for registration of a scheduled offence contemporaneously, including for further investigation in a pending case, if any. On receipt of such information, the jurisdictional police would be obliged to register the case by way of FIR if it is a cognizable offence or as a non-cognizable offence (Nc case), as the case may be. If the offence so reported is a scheduled offence, only in that eventuality, the property recovered by the authorised officer would partake the colour of proceeds of crime under Section 2(1)(u) of the 2002 Act, enabling him to take further action under the Act in that regard." (emphasis supplied) 28. The Supreme court summarized the conclusions in paragraph 467 of the said judgment. Clause (v)(d) of the conclusions....
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....9. It is well settled by a catena of judgments including the latest judgment of the Apex court in Vijay Madanlal choudhary (Surpa), that only if there is a predicate offence, that an EcIR will be maintainable. Thus, if the FIR stands closed, by a judicial process, the EcIR will not survive. Thus, the natural corollary would be that the Respondent No.1 - ED would not be able to continue with the investigation, there being no predicate offence. 10. This court in the case of State of Maharashtra V/s. Bhimrao Vithal Jadhav, decided on 21.09.1974 had observed that granting of 'C' Summary amounts to an acquittal. Similarly, in Vijay Madanlal choudhary (supra), the Apex court had observed that if a person is discharged or acquitted of a scheduled offence by a competent court, there can be no offence of money laundering against him. The relevant paragraph, reads thus : [paragraph No.253 extracted above.] ................ 13. As noted above, admittedly there is no scheduled offence as against the petitioner in both the petitions, in view of the closure report filed by the police, which was accepted by the courts as stated aforesaid. There being no predica....
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....subject matter of FIR Nos.525, 526 and 527 of 2021 registered at Pimpri Police against the applicant and others was subsumed in the instant ECIR. Another ECIR MBZO No.II-32 of 2021, wherein the applicant and his wife Sheetal Tejwani were accused, has also been merged with the instant ECIR. It is thus contended that the fact that the C-Summary came to be filed in FIR No.163 of 2018 does not absolve the applicant of the offence of money laundering. It is further contended that ECIR is the internal reference number. It does not amount to an FIR. There is no prohibition in law in subsuming different FIRs in the same ECIR to avoid registration of multiple ECIRs on the basis of different FIRs. 35. In the backdrop of the aforesaid position in law and contentions of Respondent No.1, the rival submissions are required to be appreciated. The real crux of the matter is, whether the subsequent development in the form of registration of three FIRs Nos.525, 526 and 527 of 2001 in connection with Bank scam empowers the Enforcement Directorate to continue investigation into the offence of money laundering initially registered on the basis of FIR No. 163 of 2018? 36. As noted above, as on the....
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....o carry much conviction. The proviso to sub-section (b) of Section 44(1) reads as under: "44. Offences triable by Special Courts.-(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), ....... (b) a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take [cognizance of offence under section 3, without the accused being committed to it for trial] Provided that after conclusion of investigation, if no offence of money-laundering is made out requiring filing of such complaint, the said authority shall submit a closure report before the Special Court; or" 41. The aforesaid proviso was inserted by Act 23 of 2019. The endeavour of Mr. Venegaonkar to urge that de hors the filing of 'C' Summary in CR No.163 of 2018, the proceedings for the offence of money-laundering would not come to an end till the authorized authority files the report envisaged by the proviso to clause (b) of Section 44(1) of the PMLA is required to be stated to be repelled. Such a submission runs contrary to the well recognized position in law that if the predicate offence comes to an end, the offe....
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.... trial." 43. The aforesaid enunciation indicates that the said provision primarily comes into play after a prosecution complaint for money-laundering has already been filed. It is akin to the provisions in the Code enabling further investigation and filing of supplementary report. The question that wrenches to the fore is if it is permissible to file a supplementary complaint, post further investigation, can the authorised authority be precluded from taking note of the subsequent FIRs revealing the generation of proceeds of crime? If, in a given case, it is shown that the subsequent FIRs are inextricably linked with a prior FIR and cumulatively demonstrate the commission of the offence of money-laundering, in my view, it may be permissible to take note of the subsequent FIRs as well and proceed with the investigation into the offence of money-laundering on the basis of those FIRs. In fact in the case of Vijay Choudhary (supra) in paragraph 282 (extracted above) the Supreme Court adverted to such a possibility. It was observed that, it is possible that, in a given case, after the discovery of huge volume of undiscoverd property, the authorised officer may be adviced to send infor....
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....were covered by 124 accounts termed fraudulent by the Auditor. 48. In this context, I find substance in the submission of Mr. Venegaonkar that the Test Audit Report is not the sole basis of the prosecution complaint. The investigation has revealed, prima facie, siphoning of the funds of the Bank. In this view of the matter, the submission of Mr. Bhise that with the setting aside of the Test Audit Report, the allegations in the FIR and, resultantly, the prosecution complaint lose potency does not merit acceptance. 49. This leads me to the consideration of entitlement for bail on the merits of the proseuction case. To start with, Section 45 (1) contains an interdict against the grant of bail to a person accused of an offence under PMLA, unless the Public Prosecutor has been given an opportunity to oppose the application and the Court is satisfied that there are reasonable grounds for believing that such person is not guilty of such offence and that, if released on bail, is not likely to commit any offence, while on bail. Sub-Section (2) of Section 45 further provides that the limitation on granting bail under sub-Section (1), is in addition to the limitations under the Code or ....
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....e, diverted the loan amounts to other purposes, including for ever-greening of the loans and thereby generated, acquired, layered and integrated the proceeds of crime. The applicant is thus arraigned in the capacity of a fraudulent borrower. 54. As noted above, the applicant allegedly led a group of borrowers (Suryawanshi Group), who were either family members or entities run by his family. 55. The investigation findings with regard to the loan accounts of Suryawanshi Group, pressed into service on behalf of the prosecution, are in paragraph No. 16.30 to 16.44 of the prosecution complaint (page 256 to 276). The total defrauded amount is quantified at Rs.60.67 Crores, covered by 10 loan accounts. The loan accounts are divided into two parts; (1) Property Mortgage Loans and (2) Car Loans. 56. The aforesaid material is required to be considered in conjunction with the specific roles attributed to the applicant and the co-accused, who were members of the Suryawanshi Group. The applicant is attributed with the role of obtaining 10 loan accounts to the tune of Rs.41.42 Crores in his name and in the name of family members/entities. It is alleged, the funds so availed were diverte....
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.... countered by canvassing a submission that the evidence collected during the course of investigation indicated that the applicant was the main character in the fraud. An endevour was made to take the Court through the gist of the statements of the witnesses recorded under Section 50 of the PMLA and the Money Trail, to draw home the point that the applicant was the principal offender alongwith Vinay Arhana (A12) and Amar Mulchandani (A4). 63. I have minutely perused the investigation findings, especially the money trail in respect of the 10 loan accounts at paragraph No.16.33 of the prosecution complaint, gist of the statements of the witnesses and the role attributed to the accused. As seen above, M/s. Renuka Lawns was the major borrower and defaulter. There does not appear any uncertainty about the character of the said firm. It is the proprietary firm of Sheetal Tejwani. In the prosecution complaint itself, the said character of M/s. Renuka Lawns and M/s. Paramount Infrastructure has been repetitively asserted. In the statement attributed to Sheetal Tejwani as well, it is stated that she is the proprietress of both the firms. 64. Out of the money trail, in respect of the si....
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....f the loan disbursed to him for purchase of a car, and a sum of Rs.10 Lakhs was transferred to the account of the applicant from the account of M/s. Paramount, which was, in turn, credited by Sheetal Tejwani (A23) out of the loan amount availed from the Bank for purchase of a used Rolls Royce Car. 69. In the context of the total loan exposure to M/s. Renuka Lawns, Paramount and Sheetal Tejwani (A23), which was alleged to be about Rs.50 Crores, can the applicant be attributed with the role of a key conspirator and beneficiary of the alleged fraud for having received a sum of Rs.10 Lakhs, would be a question for consideration. It is necessary to examine is there any material apart from the money trail to prima facie substantiate the role attributed to the applicant. 70. I have perused the gist of the allegations of the prosecution complaint under the caption "statements of Sagar Suryawanshi and his family members and associates and other related persons" (pages 206 to 217). Sheetal Tejwani (A23), as noted above, did not disown the fact that she was the proprietress of M/s. Renuka Lawns and M/s. Paramount. A part of her statement which can be said to have incriminating tendency ....
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....process or activity connected with the proceeds of crime, directly or indirectly. The court cannot lose sight of the fact that Sheetal Tejwani (A23), and her proprietorship firms M/s. Renuka Lawns, M/s. Paramount and Girish Tejwani (A24) have been arraigned as co-accused. 75. Prima facie, as noted above, apart from the credit of a sum of Rs.10 Lakhs to the account of the applicant, the money trail does not lead to the applicant. Thus, the accusation that the applicant was instrumental in the generation, acquisition, layering, placement and use of the proceeds of crime to the tune of Rs.60.67 Crores, prima facie, appears tenuous. The Court will have to presume that the default committed by Sheetal (A23), M/s. Renuka Lawns and M/s. Paramount in the repayment of the loan amount, is attributable to the applicant. For that purpose, prima facie, there is no objective material, except the fact that Sheetal (A23) is the wife of the accused. 76. At this juncture, the fact that the prosecution chose not to arrest Sheetal Tejwani (A23) assumes salience. Sheetal Tejwani (A23) was released under Section 88 of the Code by the learned Special Judge by an order dated 16th January 2024 for th....