TaxTMI 
TaxTMI 
2026 (10) TMI 126
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....ain accused persons were responsible for looting an amount of Rs. 80 to Rs. 85 crores of funds allocated for the Scheduled Tribes by the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Limited including the respondent. Another crime comes to be registered in Crime No.118 of 2024 on 28-05-2024 for offences punishable under Sections 149, 409, 420, 467, 468 and 471 of the IPC. The CBI also files a FIR in RC0782024E0001, on 03-06-2024 for the offences punishable under Sections 120B, 409, 420, 467 and 468 of the IPC including the offences punishable under Sections 13(2) r/w 13(1)(a) of the Prevention of Corruption Act, 1988. The respondent/accused No.5 was taken into custody. The respondent after he was taken into custody was granted bail by the Special Court in terms of the impugned order. The Directorate of Enforcement has called in question the said order of the Special Court granting the bail to the respondent in the subject petition. 4. The learned counsel appearing for the petitioner / Directorate of Enforcement would submit that the Directorate of Enforcement has sought for setting aside of the bail granted to the petitioner primarily on the score that the ....
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....vailable to the Accused. Further, in the said case, the Hon'ble Apex Court has held that, when an accused is in custody under PMLA, irrespective of the case for which he is under custody, any statement U/s. 50 of PMLA to the investigating agency is inadmissible against the maker. The Hon'ble Apex Court has also held that it would be extremely unsafe to render such statements admissible against the maker as such a course of action would be contrary to all cannons of fair play and justice. 24. The aforesaid principles are required to be applied to the case on hand and at the first instance, it is to be made clear that a person who is arrayed as Accused in PMLA case need not be arrayed as Accused in predicate offence. All that it is required to be established by the prosecution is that he is the recipient of the proceeds of crime. Once again to appreciate the proceeds of crime, recourse is to be made to the provisions U/s. 2(1)(u) and Section 2(1) (v) of PMLA wherein it has been defined as follows:- (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 th....
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....e act committed by them were premeditated with an intent to divert funds and also multiple meetings were held outside the office premises wherein accused No.4 Sri J.G. Padmanabha, accused No.6 Nekkenti Nagaraj, accused No.5 Nageshwara Rao, accused No.2 Satyanarayana Verma had participated. Further investigation documents reveals that the Tribal Welfare Department which was headed by accused No.1 B. Nagendra and Finance Department had by-passed procedural cheques to disburse funds quickly before the model code of conduct had come into force. Their Department had failed to check mid-year utilization for disbursing the funds despite clear instructions that they may remain unused. It has been submitted in the charge sheet that after Commission of the incident, the accused No.1 B. Nagendra had tried to destroy the evidence by disposing of his three I-Phones and his Personal Assistant accused No.8 Vijaya Kumar Gowda, accused No.6 Nekkenti Nagaraj and his associate accused No.25 Edara Rudraiah had admitted of handling large sum of money with broader scheme of siphoning funds for electoral purpose. However, not much material is available against accused No.5. 27. The aforesaid all....
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....mitted to be continued. Therefore, if the allegations in the predicate offences are considered to be the flesh, the offences under the PMLA is the blood, they are impregnable. Therefore, if the predicate offences are not permitted to move forward, the impugned proceedings cannot. It would have been altogether different circumstance, if the petitioners were all 25 acquitted of the offences under the IPC or any other predicate offence to which the offence under the PMLA is linked. The situation in the case at hand is not with regard to acquittal, but the stay of the proceedings. Therefore, they are eclipsed and not extinguished. The Apex Court does not deal with a circumstance as to what should happen in a case, where it is eclipsed. The Apex Court only dealt with a situation where there is extinguishment of predicate offences. Therefore, it is necessary to consider taking cue from the findings of the Apex Court as to whether attachment order should be permitted to be confirmed or otherwise. 29. Though the aforesaid judgment was rendered by the Hon'ble High court with respect to attachment of property under PMLA, the correct legal position has been succinctly explai....
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....of 4,954 search warrants. The total number of ECIRs recorded against ex-MPs, MLAs and MLCs was 176. The number of persons arrested is 513. Whereas the number of prosecution complaints filed is 1,142. The data raises a number of questions, including the question whether the DoE has formulated a policy, when they should arrest a person involved in offences committed under the PML Act. 79. We are conscious that the principle of parity or equality enshrined under Article 14 of the Constitution cannot be invoked for repeating or multiplying irregularity or illegality. If any advantage or benefit has been wrongly given, another person cannot claim the same advantage as a matter of right on account of the error or mistake. However, this principle may not apply where two or more courses are available to the authorities. The doctrine of need and necessity to arrest possibly accepts the said principle. Section 45 gives primacy to the opinion of the DoE when it comes to grant of bail. DoE should act uniformly, consistent in conduct, confirming one rule for all. 80. One of the developments in the last decade is acceptance of the principle of proportionality, especially when f....
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....ution, and it is clear that case will not be decided within a foreseeable time, the prayer for bail may be meritorious. While the prosecution may pertain to an economic offence, yet it may not be proper to equate these cases with those punishable with death, imprisonment for life, ten years or more like offences under the Narcotic Drugs and Psychotropic Substances Act, 1985, murder, cases of rape, dacoity, kidnaping for ransom, mass violence, etc. Neither is this a case where 100/1000s of depositors have been defrauded. The allegations have to be established and proven. The right to bail in cases of delay, coupled with incarceration for a long period, depending on the nature of the allegations, should be read into Section 439 of the Code and Section 45 of the PML Act. The reason is that the constitutional mandate is the higher law, and it is the basic right of the person charged of an offence and not convicted, that he be ensured and given a speedy trial. When the trial is not proceeding for reasons not attributable to the accused, the court, unless there are good reasons, may well be guided to exercise the power to grant bail. This would be truer where the trial would take years."....
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.... e) The accused No.5 shall not indulge in similar offence." (Emphasis added) The Special Court, while granting bail to the respondent, observed that there was no material on record to indicate that the respondent had received the proceeds of crime. Relying upon the judgment of the Apex Court in VIJAY MADANLAL CHOWDHURY & ORS. v. UNION OF INDIA & ORS. [2022 SCC OnLine SC 929], the Special Court held that Section 45 of the PMLA does not impose an absolute restraint on the grant of bail. The Special Court further took note of the fact that the trial in the predicate offence had not yet commenced and that the delay in the commencement of the trial was not attributable to the respondent. Therefore, on this score the respondent was directed to be released on bail, subject to the conditions stipulated in the aforesaid order. 8. What is sought by the Directorate of Enforcement is not cancellation of bail, but setting aside the order passed. The High Court of Delhi elucidates on what is the difference between cancellation of bail and setting aside of the bail order, by interpreting the provisions of the PMLA in the case of ENFORCEMENT DIRECTORATE v. RAHIL HITESHBHAI CHOVATI....
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....f grant of bail is perverse, the same can be set at naught only by the superior court. In Ranjit Singh v. State of M.P. it was inter alia held that there is a distinction between the concept of setting aside an unjustified, illegal or perverse order and cancellation of an order of bail on the ground that the accused has misconducted himself or certain supervening circumstances warrant such cancellation. Thus, if the order granting bail is found to be perverse one or passed on irrelevant materials, it can be annulled by the superior court. In MyakalaDharmarajam v. State of Telangana, the petition was filed for cancellation of bail on ground of illegality of order passed by the Sessions Court and conduct of appellants subsequent to their release after bail was granted. The High Court allowed the application for cancellation of bail. It was contended by the appellants that no specific overt act was attributed to any of the accused, except for omnibus allegations made against them. The Supreme Court inter alia held that it must be remembered that rejection of bail stands on one footing but cancellation of bail is a harsh order because it interferes with the liberty of the individual an....
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....owever, bail once granted should not be cancelled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial...." 43. Recently, the Supreme Court in Prem Prakash v. Union of India, while considering the scope of enquiry under Section 45 of the PMLA has inter alia held as under: (SCC OnLine SC para 13) "13. Coming back to the scope of inquiry under Section 45, Vijay Madanlal Choudhary case, while reiterating and agreeing with the holding in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra, held that the court while dealing with the application for grant of bail in PMLA need not delve deep into the merits of the case and only a view of the court based on the available material available on record is required. It held that the court is only required to place its view based on probability on the basis of reasonable material collected during investigation. The words used in Section 45 are 'reasonable grounds for believing' which means that the court has to see only if there is a genuine case ag....
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....ous cases as to why the applicant has been granted or denied the privilege of bail. 46. The duty of the court at this stage is not to weigh the evidence meticulously but to arrive at a finding on the basis of broad probabilities. However, while dealing with a special statute like MCOCA having regard to the provisions contained in sub-section (4) of Section 21 of the Act, the court may have to probe into the matter deeper so as to enable it to arrive at a finding that the materials collected against the accused during the investigation may not justify a judgment of conviction. The findings recorded by the court while granting or refusing bail undoubtedly would be tentative in nature, which may not have any bearing on the merit of the case and the trial court would, thus, be free to decide the case on the basis of evidence adduced at the trial, without in any manner being prejudiced thereby." We are in agreement with the observation made by the court in Ranjitsing Brahmajeetsing Sharma case. The court while dealing with the application for grant of bail need not delve deep into the merits of the case and only a view of the court based on available material-on-record....
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....age of bail are not taken into account after the parties lead their evidence and the matter is appreciated by the learned trial court. The case of the ED is based on the fact that the entity of the respondent has received the funds from the first, second and third layer entities. It is to be kept in mind that even as per Vijay Madanlal Choudhary case it has categorically been held that ingredients constituting the offence of money laundering needs to be construed strictly. It is also no longer a matter of debate that the probative value of statement under Section 50 of the PMLA is to be considered at the stage of trial. The bail cannot be denied merely on the assumption that the property recovered from the respondent must be proceed of crime. 47. The ED has also sought cancellation of bail on the ground of certain WhatsApp chat of Mr Saurin Shah another Director in M/s Sagar Diamond Ltd. indicates that he was in touch of Vaibhav Shah for preparing legal declaration/affidavit of Akash Corporation. The criminality regarding transfer of funds is something which is to be considered at the stage of trial. The least discussion at the time on the merits of the case is desirable s....
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....erence between cancellation of bail and setting aside of the bail order in appeal and observes as follows: ".... .... .... Law on the issue 15. This Court in Jayaben v. TejasKanubhaiZala, while setting aside the order granting bail to the Accused therein, had expounded that different considerations must be applied while considering an order of releasing an Accused on bail and an application for cancellation (which would include breach of bail conditions). Moreover, the Court observed that the conduct of the accused subsequent to an order granting bail would not be relevant while considering an appeal against such order. 16. The discussion of this Court in Y v. State of Rajasthan underscored that an order granting bail can be tested on illegality, perversity, arbitrariness and being based on unjustified material. While setting aside the order granting bail, the Court made the following observations: "15. It is worth noting that what is being considered in this case relates to whether the High Court has exercised the discretionary power under Section 439CrPC in granting bail appropriately. Such an assessment is different from deciding whether ci....
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....not on the same footing when it comes to examining an application moved for cancellation of bail. The yardstick for testing the correctness of an order granting bail is whether the court below has exercised its discretion in an improper or arbitrary manner thereby vitiating the said order. When it comes to assessing an application seeking cancellation of bail, the appellate court looks out for, amongst others, supervening circumstances or any violation of the conditions of bail imposed on the person who has been accorded such a relief." (emphasis supplied) 18. More recently, this Court in State of Rajasthan v. Indraj Singh, while setting aside the bail granted to a person accused of an offence under Sections 419, 420, 467 of the IPC and Section 3 & 10 of the Rajasthan Public Examination (Prevention of Unfair Means) Act, 2022, placed reliance on an earlier decision of this Court in Ajwar v. Waseem and observed: "8.3 The discussion made in Ajwar v. Waseem3 by a coordinate Bench of this Court (which included one of us, i.e., Amanullah J.) is on point. The relevant paragraphs are as under:- "Relevant parameters for granting bail 26. While consider....
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....tion 439(1) CrPC in the following words: (SCC p. 224, para 24) "24. As can be discerned from the above decisions, for cancelling bail once granted, the court must consider whether any supervening circumstances have arisen or the conduct of the accused post grant of bail demonstrates that it is no longer conducive to a fair trial to permit him to retain his freedom by enjoying the concession of bail during trial [Dolat Ram v. State of Haryana, (1995) 1 SCC 349: 1995 SCC (Cri) 237]. To put it differently, in ordinary circumstances, this Court would be loathe to interfere with an order passed by the court below granting bail but if such an order is found to be illegal or perverse or premised on material that is irrelevant, then such an order is susceptible to scrutiny and interference by the appellate court." Considerations for setting aside bail orders 28. The considerations that weigh with the appellate court for setting aside the bail order on an application being moved by the aggrieved party include any supervening circumstances that may have occurred after granting relief to the accused, the conduct of the accused while on bail, any attempt on the part ....