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Former Maharashtra Minister Nawab Malik’s Interim Bail Extends by Six Months in Money Laundering case: Supreme Court

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Case Title:   Mohammed Nawab Malik v. the State of Maharashtra

Case No: Criminal Appeal No. 2415 of 2023

Decided on:  11th January, 2024

CORAM: THE HON’BLE MS. JUSTICE BELA M TRIVEDI AND HON’BLE MR. JUSTICE PANKAJ MITHAL

Facts of the Case

On February 23, 2023, Nawab Malik was arrested by the Enforcement Directorate in connection with a money laundering case related to the notorious underworld figure Dawood Ibrahim and his associates. According to the investigative agency, Malik collaborated with a member of the D-gang, Haseena Parker (Ibrahim’s sister), and two others to fraudulently acquire a property in Mumbai’s Kurla area between 1999 and 2006. The agency asserts that since Parkar managed the illicit operations of the notorious gangster and global terrorist, the funds allegedly paid by Malik to her were ultimately utilized for terrorist financing. Consequently, charges under the Prevention of Money Laundering Act were imposed on the former legislator.

In November, 2023, Malik sought bail from a special court, but his request was denied. Due to his worsening health, Malik has been under custody in a private hospital for ongoing medical monitoring. In a subsequent appeal to the Bombay High Court, concerns were raised about the possibility of granting bail in light of the stringent provisions of Section 45 of the Prevention of Money Laundering Act. Ultimately, on July 13, Justice Anuja Prabhudessai, presiding over a single-judge bench, declined to provide temporary bail to Malik. The court decided to revisit the matter on its merits after a two-week interval.

Dissatisfied with the decision of the high court, the leader of the Nationalist Congress Party has appealed to the Supreme Court.

Issue

Whether the Former Maharashtra Minister Nawab Malik’s interim bail can be extended on medical grounds in Money Laundering case?

Court’s analysis and decision

The Supreme Court has prolonged the temporary release initially granted to former Maharashtra minister Nawab Malik by an additional six months. Malik, arrested by the Directorate of Enforcement (ED) on February 23, 2022, in a money laundering case, had been granted interim bail in August of the same year. Justices Bela M Trivedi and Pankaj Mithal presided over the hearing of a special leave petition filed by Malik against a July 2023 Bombay High Court order that denied the Nationalist Congress Party (NCP) legislator’s plea for interim bail on medical grounds.

Initially, the senior NCP leader had received a two-month interim bail on medical grounds in August. This period was subsequently extended by three months in October, following information that Malik’s health had not improved, and he was undergoing treatment for kidney-related and other ailments at a private hospital in Mumbai. On both occasions, the Enforcement Directorate did not oppose the court’s decision to grant relief.

During the hearing considering a further extension of interim relief, Additional Solicitor-General SV Raju, representing the central agency, stated,

“This request may be considered, and on medical grounds, an extension may be given.”

Granting Malik’s request for a six-month extension of interim bail, the bench declared,

“…Learned additional solicitor-general has no objection. The interim prayer is granted, and the application is allowed. Interim bail is extended for a further period of six months as prayed for. List the main matter after six months.”

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Written by- Afshan Ahmad

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India Resists the Rise of Money Laundering Cases and Economic Scams With Its Legal Provisions 

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Introduction

In the rat race to earn more and more money, few resort to unethical or illegal activities for financial gain. To give legality to their money obtained illegally different techniques are used and money laundering is one. Money laundering is an offence wherein an individual or establishment is involved in transfer of illegal funds through complex channels to give it a legal appearance. The finances pass through various phases of conversions and transfers to reach a legally accepted institution. Illegal money is disguised as legal money as such amounts are usually obtained by illegal means like corruption, fraud, cheating, tax evasion, etc. Till date around 4954 warrants are issued, 45 accused are convicted for money laundering and a total of 15623.665 crores has been confiscated by the Directorate of Enforcement in India[1].

Forms of money laundering

  • Structuring, also referred as smurfing
  • Cash-intensive businesses
  • Bulk cash smuggling
  • Trade-based laundering
  • Shell companies
  • Round tripping
  • Gambling
  • Black salaries
  • Tax amnesties
  • Transaction laundering

Steps Taken by Government of India to Prevent Money Laundering

Criminal Law Amendment Ordinance (XXXVIII of 1944) covers proceeds of specific wrongdoings such corruption, breach of trust and cheating.

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 covers punishment of unlawfully procured properties of runners and unfamiliar trade controllers and for issues associated therewith and coincidental thereto.

Narcotic Drugs and Psychotropic Substances Act, 1985 accommodates the punishment of property derived from, or used in illegal traffic in narcotic drugs.

Financial Intelligence Unit-IND, is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

Enforcement Directorate (ED), is a law enforcement agency and economic intelligence agency liable for upholding monetary regulations and battling monetary wrongdoing in India. One of the primary elements of ED is to Examine offenses of illegal tax avoidance under the arrangements of money laundering under the provisions of Prevention of Money Laundering Act, 2002. It can make moves like seizure of property if the same is determined to be proceeds of crime derived from a Scheduled Offence under PMLA and to prosecute the persons engaged in the offence of money laundering

Prevention of Money Laundering Act (PMLA)

The Prevention of Money Laundering Act, 2002 provides a comprehensive legal framework to investigate, prosecute and prevent money laundering, making it a powerful weapon against individuals and entities engaged in the unlawful process of money laundering. Indian legal system has witnessed a series of pivotal judicial decisions in 2023, that bring clarity and precision to the nuanced facets of money laundering and the PMLA.

Through Prevention of Money Laundering (Amendment) Act, 2012, the concept of reporting entity which would incorporate a banking company, financial institution, intermediary, etc., has been added. The 2002 Act had set a maximum fine of 5 lakhs for economic fraud, but the amendment has removed the limit. It contains a provision for the provisional attachment and confiscation of any individual involved in such illegal activities.

  • Vivo case

In July 2022, the ED raided Vivo in relation to money laundering offences. The ED alleged that Rs 62,476 crore was illegally transferred by Vivo to China to avoid payment of taxes in India. According to the ED, these transfers were made to show losses and avoid paying taxes in India.

Recently ED arrested four persons in connection with a money laundering probe against smartphone maker Vivo. In its remand application, the ED alleged that the accused had cheated the government by entering India in a “disguised and fraudulent manner to set up an elaborate Chinese-controlled network throughout the country, carrying out activities prejudicial to the economic sovereignty of India”[2]. Hari Om Rai, MD of Lava International Company, Chinese national Andrew Kuang, and chartered accountants Nitin Garg and Rajan Malik are the four persons arrested. They were charged with criminal conspiracy, cheating, using forged documents and money laundering. The accused were sent to ED custody for 3 days by Additional Sessions Judge Devender Kumar Jangala. 

ED blamed the four for covering Chinese command over Indian elements from the government of India. The Chinese control of the organization was uncovered through the [email protected], which China had given to its Vivo representatives. An organization called GPICPL was made to lead fraudulent exercises, according to the organization. GPICPL however not answered to be an auxiliary of Vivo in true records, projects itself openly to be an auxiliary of Vivo. The ED claimed infringement of FDI standards by Vivo from 2014 to 2018 and found out during its examination that settlements over Rs 1 lakh crore were supposedly moved out of India to Trading Organizations so that Vivo couldn’t be seen by the government of India. Zero profits were displayed from 2014 to 2020 and no annual taxes were paid in India by vivo. ED entered the test following a grievance by the Corporate Affairs Ministry charging that GPICPL and its investors utilized ‘forged’ identification proof records and false locations at the hour of its incorporation in 2014.

·       The National Herald case

In the year 2022, congress president Sonia Gandhi and party leader Rahul Gandhi along with others, were accused of financial irregularities under the PMLA. In 2012, a complaint was filed before the trial court by BJP leader and advocate Subramanian Swamy, that few leaders of the Congress party were involved in some fraud and breach of trust in the acquisition of Association Journals Ltd. by Young Indian Ltd. (YIL) and that YIL took over the assets of the National Herald in a malicious way. Rahul Gandhi and Sonia Gandhi were summoned by the ED in a probe in relation to this case and the ED is still carrying out investigation in this case.

·       Emta Coal Limited & others v. The Deputy Director of Enforcement

An FIR was lodged against the petitioner (Emta Coal Limited & Ors.) along with the West Bengal State Electricity Board and West Bengal Power Development Corporation Ltd. based on discrepancies in the allocation of captive coal blocks. The FIR was filed under sections 120-B IPC read with Section 420 of the IPC and section 13(2) read with section 13(1)(d) of the PC Act. Subsequently, an ECIR was also lodged against the petitioner and other accused. A provisional attachment order was passed under section 5 of the PMLA, while the CBI had filed a closure report regarding the FIR against petitioner. The closure report essentially formed the basis of the ongoing money laundering proceedings, including the attachment order. The petitioner argued that since the CBI had filed a closure report, the money laundering proceeding couldn’t continue, as no scheduled case was established and relied on the Vijay Madan Lal Chaudhary v. Union of India case[3]. Court ruled that trial court had concluded, that the closure report should be accepted since no criminality could be ascertained due to the unavailability of documents. Based on the settled legal position established in the Vijay Madan Lal Choudhary case and subsequent decisions and orders, the court held that the impugned attachment orders and ECIRs should be quashed.

·       ED v. Aditya Tripathi

Aditya Tripathi was charged under sections 120-B, 420, 468, and 471 of the IPC, Section 66 of the Information Technology Act, 2000, and section 7(c) read with section 13(2) of the PC Act in the FIR lodged against them by the economic offense wing of Bhopal, Madhya Pradesh. The economic offense wing investigated and filed a charge sheet before the competent court. Based on the charge sheet, the Enforcement Directorate, Hyderabad initiated a money laundering investigation. During investigation, the respondent was arrested and later the High Court released him on bail on the grounds that the charge sheet had already been filed in relation to the predicate offense. The said bail order was challenged on appeal. Court held that Investigations for predicate offenses and investigations for scheduled offenses under the PMLA are distinct and separate. The mere fact that a charge sheet may have been filed for the predicate offenses cannot serve as a basis for releasing the accused on bail in connection with scheduled offenses under the PMLA. High Court’s consideration was held to be irrelevant. The High Court neither accounted for the severity of section 45 of the PMLA nor weighed the gravity of the alleged offenses for the scheduled offenses under the PMLA. Additionally, the High Court failed to recognize that the ED’s investigation for the scheduled offenses under the PMLA was ongoing. The impugned orders issued by the High Court granting bail to the respondent are unsustainable and matters need to be remitted back to the High Court for a fresh decision on the bail applications, considering the observations made[4].

Conclusion

Courts ruling maintain the standards of equity and decency despite monetary intricacies and underline the significance of the PMLA in the battle against money laundering. The two main drivers of financial scams and money laundering cases are corruption and greed. Despite the fact that our nation has explicit regulations to resolve this issue, the cases include crores showing that our regulations should be more severe and rapid.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- K R Bhuvanashri

[1] KEY DETAILS OF PMLA CASES UP TO 31.01.2023 ; enforcementdirectorate.gov.in

[2] CRL.M.C. 7488/2023 & CRL.M.A. 27920/2023

[3] W.P.(C) 3821/2022 and CM APPL. 11325/2022, 37473/2022

[4] CRIMINAL APPEAL NO. 1401 OF 2023

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Delhi High Court Navigates Quorum Quandaries and Remedies in PMLA Appeals 

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Case Title: Gold Croft Properties Pvt Ltd vs. Directorate of Enforcement 

Date of Decision: 19th September 2023 

Case Number: LPA 167/2023 

Coram: Hon’ble Chief Justice and Hon’ble Mr. Justice Subramonium Prasad 

 

Introduction 

 

This case involves an appeal against a judgment passed by a Single Judge in a writ petition. The appellant, Gold Croft Properties Pvt Ltd, challenged an order by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA), which denied their application for deferment of proceedings. The appellant contended that the Adjudicating Authority was not properly constituted at the time. This appeal aims to contest the Single Judge’s decision upholding the Adjudicating Authority’s order.  

   

Factual Background 

 

The case arose when the State Bank of India filed a complaint in August 2020 alleging the diversion of funds by the accused for purposes other than those the funds were availed for. An FIR was subsequently registered by the Central Bureau of Investigation (CBI) in February 2022 for various offenses. The appellant was not initially named as an accused in this FIR. The Enforcement Directorate (ED) registered an ECIR against the appellant and others, followed by a Provisional Attachment Order in September 2022. The ED filed a complaint before the Adjudicating Authority in October 2022 for the confirmation of the Provisional Attachment Order.  

   

The appellant also mentioned that a chargesheet related to the predicate offense had been filed by the CBI. The appellant then filed an application before the Adjudicating Authority, which is the subject of this appeal, arguing that the Adjudicating Authority lacked a proper quorum as required under the PMLA and that they had not been supplied with a copy of ‘Reasons to Believe’ by the ED, which led to the Provisional Attachment Order.  

   

Legal Issues 

 

  1. Whether the Adjudicating Authority had the required quorum under the PMLA. 
  2. Whether the appellant should have approached the Appellate Tribunal instead of filing a writ petition. 
  3. Whether the application for deferment of proceedings was maintainable. 
  4. Whether the Provisional Attachment Order was justified under the PMLA. 

   

Contentions 

 

  • Appellant’s Argument: The appellant argued that the Adjudicating Authority lacked the required quorum as specified under the PMLA. They also contended that their application should not have been rejected without a proper hearing, and a single-member bench was not in accordance with the PMLA.  
  • Respondent’s Argument: The ED argued that the application was not maintainable, as the Appellate Tribunal provided an alternative remedy. They also defended the validity of the Provisional Attachment Order and the composition of the Adjudicating Authority.  

   

Observation and Analysis 

 

The court reviewed the Provisional Attachment Order and the complaint, finding that the Order was based on a detailed analysis of various documents and materials. It concluded that the Adjudicating Authority had sufficient grounds to believe that the appellant possessed proceeds of crime.  

   

The court also clarified that the PMLA allows for the formation of single-member benches, citing precedent from an earlier case (J Sekar vs. Union of India & Ors). The application filed by the appellant requesting a two-member bench was deemed not maintainable.  

   

Decision of the Court 

 

The court dismissed the appeal, upholding the judgment of the Single Judge, and found that the writ petition filed by the appellant was not maintainable. It held that the appellant should have pursued the statutory remedies provided by the PMLA, including the option to appeal before the Appellate Tribunal. 

 

 

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Written by – Ananya Chaudhary 

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Delhi High Court Grants Bail to Chartered Accountant Accused of Money Laundering 

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Case Title: Manish Kothari (Presently in JC) v. Director of Enforcement, Ministry of Finance, Dept. of Revenue Headquarter Investigation Unit 

Date of Decision: 22nd September 2023 

Case Number: Bail Application 2341 of 2023 

Coram: Hon’ble Mr. Justice Dinesh Kumar Sharma 

 

Introduction 

   

This case revolved around a bail application filed under Section 439 read with Section 167(2) and Section 482 of the Criminal Procedure Code (Cr.P.C.) by Manish Kothari, the petitioner, who was in judicial custody. The petitioner sought bail in connection with CT Case No. 13/2022-ECR/KLZ0/41/2020 dated 25/09/20 under the Prevention of Money Laundering Act, 2002 (PMLA). 

 

Factual Background 

  

The petitioner’s bail application had been previously dismissed by the Special Judge on 09.06.2023. The dismissal was primarily based on the ground that the petitioner failed to meet the threshold of Section 45 of the PMLA. The trial court had held that the petitioner actively assisted co-accused individuals in converting illicit funds into legitimate money and was involved in money laundering. 

 

Additionally, the trial court considered the case a serious economic offense, emphasizing that the petitioner could not be treated differently under the proviso clause of Section 45 of the PMLA, which deals with the share of an accused in the tainted money. The trial court was of the opinion that the petitioner’s role was connected to a substantial amount, approximately Rs. 48 Crores, attributed to the co-accused Anubrata Mondal and his daughter Sukanya Mondal. 

 

Legal Issues 

   

  1. Whether the petitioner meets the criteria for bail under Section 45 of the PMLA? 
  2. Is there sufficient evidence to establish the petitioner’s involvement in money laundering? 
  3. Are the statements recorded under Section 50 of the PMLA admissible as evidence?

 

Contentions of the Petitioner 

   

  • The petitioner’s counsel argued that the petitioner is a law-abiding citizen and a qualified chartered accountant with no prior criminal record.  
  • The petitioner provided professional services to Anubrata Mondal and his family, primarily related to income tax filing.  
  • The petitioner’s role was limited to filing income tax returns and was not involved in any illegal activities.  
  • The prosecution’s case is based mainly on statements of co-accused individuals, which contain contradictions and should not be relied upon.  
  • The petitioner’s arrest grounds were not supplied to him, violating his rights. 

 

Arguments by the Prosecution 

   

  • The prosecution argued that the petitioner played a significant role in managing the finances of Anubrata Mondal and his family in connection with the proceeds of crime generated from illegal activities like cross-border cattle smuggling.  
  • They alleged that the petitioner helped in projecting tainted money as untainted and participated in the creation of benami assets and companies for laundering the proceeds of crime.  
  • The prosecution emphasized the seriousness of economic offenses and the need to treat them differently. 

 

Observation and Analysis 

   

The court observed that at the bail stage, it should consider the probability of the accused’s guilt and whether they are likely to commit further offenses while on bail. The court should not conduct a detailed examination of evidence or make definitive findings of innocence.  

   

The petitioner’s role as a chartered accountant primarily involved tax-related services. The court noted that the allegations against the petitioner did not involve activities beyond the scope of his profession. The veracity of the prosecution’s case and the shifting of blame by co-accused should be evaluated during the trial. 

 

Decision of the Court 

   

The court granted bail to the petitioner, considering the principles of broad probabilities and the prima facie nature of the case. The bail was granted with specific conditions, including surrendering the passport, providing contact information, and refraining from tampering with witnesses or engaging in criminal activities. 

 

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.” 

 

Written by – Ananya Chaudhary 

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Delhi High Court’s Verdict: Denied! British Director’s Travel Plea Amid Money Laundering Charges 

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Case Title: Mandhir Singh Todd v. Directorate of Enforcement 

Date of Decision: 21st September 2023 

Case Number: CRL.M.C. 289/2023 

Coram: Hon’ble Mr. Justice Dinesh Kumar Sharma 

 

 

Introduction 

   

This case involves a petition filed by Mandhir Singh Todd, a British citizen of Indian origin, seeking the setting aside of an impugned order dated 11th October 2022 issued by the Central District Court Tis Hazari. The order had declined Todd’s application to set aside a Look Out Circular (LOC) issued against him and to permit him to travel to London for medical treatment related to his rare eye condition. 

 

Factual Background 

   

Mandhir Singh Todd is a director in two Indian companies dealing with luxury cars. HDFC bank had provided credit facilities to these companies based on financial documents provided by Todd, and a Deed of Hypothecation was executed. Subsequently, it was discovered that Todd had submitted forged documents to obtain these facilities, leading to substantial losses for the bank. Further investigation revealed several fraudulent practices, including misrepresentation of stock, diversion of sale proceeds, and acquiring proceeds of crime amounting to 115 crores. 

 

Legal Issues 

 

  1. Whether the petitioner should be granted permission to travel to London for medical treatment? 
  2. Should the Look Out Circular (LOC) issued against the petitioner be set aside or suspended?

 

Contentions of the Parties 

   

Petitioner (Todd’s Arguments): 

  • Todd argued that he needed to travel to London for rare medical treatment unavailable in India.  
  • He had already undergone eye surgery twice for his condition.  
  • He was willing to provide additional sureties, surrender family passports, and appear via video conference when needed.  

     

Respondent (ED’s Arguments): 

  • The accused is involved in a money laundering case with substantial proceeds of crime.  
  • There is a risk of him fleeing the country, and India does not have extradition treaties with certain countries where he has properties.  
  • The treatment sought was available in India. 

 

Observation and Analysis 

   

The court considered the seriousness of the allegations, the availability of treatment in India, and the risk of the accused fleeing the country. It referenced previous judgments and upheld the lower court’s decision, emphasizing the importance of balancing an individual’s right to travel with the prosecution’s right to ensure trial attendance. 

 

 

Decision and Conclusion 

   

The High Court of Delhi upheld the lower court’s decision, dismissing Todd’s petition. It concluded that the treatment he sought was available in India, and there were serious allegations against him, making it crucial for him to attend trial. Todd’s request to set aside the Look Out Circular and travel to London was denied. 

 

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.” 

 

Written by – Ananya Chaudhary 

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