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Supreme Court: PMLA accused exempt from S.45 Conditions when furnishing bonds as per summons

CASE TITLE – Tarsem Lal v. Directorate of Enforcement

CASE NUMBER – CRIMINAL APPEAL NO.2608 OF 2024

DATED ON – 16.05.2024

QUORUM – Justice Abay S. Oka & Justice Ujjal Bhuyan

 

FACTS OF THE CASE

 The Appellants have been denied the benefit of anticipatory bail by the impugned orders. The Hon’ble Supreme Court was dealing with cases of the accused who were not arrested after registration of the Enforcement Case Information Report (ECIR) till the Special Court took cognizance under the PMLA of an offense punishable under Section 4 of the PMLA.  The cognizance was taken on the complaints filed under Section 44 (1)(b). These are the cases where the Appellants did not appear before the Special Court after summons were served to them. The Special Court issued warrants for procuring their presence.   After the warrants were issued, the Appellants applied for anticipatory bail before the Special Court. The applications were rejected. Unsuccessful accused have preferred these appeals since the High Court has turned down their prayers. And the Hon’ble Supreme Court, by interim orders, had protected the Appellants from arrest.

 

LEGAL PROVISIONS

Section 19 of the Prevention of Money Laundering Act (PMLA), 2002, prescribes the procedure to be followed by the arrest authority, the Enforcement Directorate (ED) in money laundering cases.

Section 65 of the Prevention of Money Laundering Act (PMLA), 2002, prescribes that the normal rules for criminal procedure, laid out in the Code of Criminal Procedure (CrPC), apply to investigations, arrests, seizures, and other legal actions taken under the PMLA.

Section 44 of the Criminal Procedure Code (CrPC), 1973, prescribes the powers vested in the Magistrate to make an arrest, and following that, can then decide on bail as per CrPC provisions.

Section 88 of the Criminal Procedure Code (CrPC), 1973, it empowers the court to take a bond for appearance from someone who could be issued a summons or warrant for their presence in court or from someone who is already present in court.

 

CONTENTIONS BY THE PETITIONER

The learned senior counsel, appearing for the Appellants in Criminal Appeal at Special Leave Petition (Crl.) No.121 of 2024 and the learned counsel representing other appellants have made detailed submissions that the power to arrest vesting in the officers of the Directorate of Enforcement (for short, ‘the ED’) under Section 19 of the PMLA cannot be exercised after the Special Court takes cognizance of the offense punishable under Section 4 of the PMLA, and that ff an accused appears according to the summons issued by the Special Court, there is no reason to issue a warrant of arrest against him or to take him into custody. They further stated that there is nothing inconsistent between Section 88 of the Code of Criminal Procedure, 1973 (for short, ‘the CrPC’) and the provisions of the PMLA. On a conjoint reading of Sections 4 and 5 of the CrPC with Section 65 of the PMLA, was of the view that it was apparent that all the provisions of the CrPC would apply to proceedings before the Special Court from the stage of filing a complaint under Section 44 (1)(b). Only those provisions of the CrPC that are inconsistent with the specific provisions of the PMLA will not apply. As there is no inconsistency between Section 88 of the CrPC and the provisions of the PMLA if, after service of summons, the accused offers to furnish bonds for appearance in terms of Section 88 of the CrPC, the Special Court should normally accept the bonds. After furnishing the bonds, if the accused fails to appear before the Special Court, recourse can always be taken by the Special Court to Section 89 by issuing a warrant for procuring the presence of the accused before the Special Court. And noted that once cognizance is taken based on a complaint, the Special Court cannot exercise the power of remand under Section 167 (2) of the CrPC.

CONTENTIONS BY THE RESPONDENT

The Respondent submitted that once an accused appears before the Special Court, he is deemed to be in it’s custody. Though an accused against whom an allegation of commission of an offense punishable under Section 4 of the PMLA is made can apply for the grant of anticipatory bail, such application shall also be governed by the conditions in Section 45 (1). They further contended that money laundering is an offence against the nation. Therefore, taking into consideration the gravity and severity of the offence under the   PMLA, mandatory compliance with the requirements of Section 45 (1) must always be ensured.

 

COURT ANALYSIS AND JUDGEMENT

As the punishment for an offence punishable under Section 4 of the PMLA is of imprisonment for more than three years, in view of clause (x) of Section 2 of the CrPC, the complaint will be treated as a warrant case. Under Section 204(1)(b), the Court can issue either a warrant or summons in a warrant case. Therefore, while taking cognizance, the Special Court has the discretion to issue either a summons or warrant. The Hon’ble Supreme Court also referred to on of it’s previous Judgement, Inder Mohan Goswami & Anr. v. State of Uttaranchal & Ors where it held that as a general rule, unless an accused is charged with an offence of heinous crime and it is feared that he is likely to tamper with or destroy the evidence or evade the process of law, the issue of summons is the rule. This Court held that in a complaint case, at the first instance, the Court should directly serve the summons along with the copy of the complaint. If service is avoided by the accused, initially, a bailable warrant should be issued. If that is not effective, a non­bailable warrant should be issued. The Hon’ble Supreme Court stated that it failed to understand the basis of the submission of the learned ASG that after an accused appears before a Special Court in compliance with the summons, he shall be deemed to be in custody. And noted the object of issuing a summons is to secure the accused’s presence before the Court.  It is not issued for taking an accused in custody. if a bond is not furnished under Section 88 by an accused and if the accused remains absent after that, the Court can always issue a warrant under Section 70 (1) of the CrPC for procuring the presence of the accused before the Court. In both contingencies, when the Court issues a warrant, it is only for securing the accused’s presence before the Court. When a warrant is issued in such a contingency, the accused don’t need to apply for bail. The Hon’ble Supreme Court stated that after cognizance is taken of the offence punishable under Section 4 of the PMLA based on a complaint under Section 44 (1)(b), the ED and its officers are powerless to exercise power under Section 19 to arrest a person shown as an accused in the complaint. And since the Appellants were not arrested by the ED until the complaint was filed, the appeals succeed, subject to some conditions The appellants shall appear before the concerned Special Court within one month from the date of the Judgement and shall file an undertaking before the Special Court that they shall regularly and punctually appear before the Special Court. And further stated that warrants issued against the Appellants shall be cancelled only after one month and held that the grant of the Anticipatory Bail is unnecessary.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Supreme Court Holds NewsClick Founder Prabir Purkayastha’s Arrest Invalid; Orders Release In UAPA Case

Supreme Court Holds NewsClick Founder Prabir Purkayastha’s Arrest Invalid; Orders Release In UAPA Case

Case title: PRABIR PURKAYASTHA VS STATE(NCT OF DELHI)
Case no.: CRIMINAL WRIT PETITION NO. OF 2024 (D.No. 42896/2023)
Dated on: 15TH May 2024
Quorum: Justice Hon’ble Mr. Justice B.R. GAVAI and Mr. Justice SANDEEP MEHTA. 

FACTS OF THE CASE
The officers of the PS Special Cell, Lodhi Colony, New Delhi carried out extensive raids at the residential and official premises of the appellant and the company, namely, M/s. PPK Newsclick Studio Pvt. Ltd.(“said company”) of which the appellant is the Director in connection with FIR No. 224 of 2023 dated 17th August, 2023 registered at PS Special Cell, Lodhi Colony, New Delhi for the offences punishable under Sections 13, 16, 17, 18, 22C of the Unlawful Activities(Prevention) Act, 1967(for short “UAPA”) read with Section 153A, 120B of the Indian Penal Code, 1860(hereinafter being referred to as the ‘IPC’). During the course of the search and seizure proceedings, numerous documents and digital devices belonging to the appellant, the company and other employees of the company were seized. The appellant was arrested in connection with the said FIR on 3rd October, 2023 vide arrest memo (Annexure P-7) prepared at PS Special Cell, Lodhi Colony, New Delhi. It is relevant to mention here that the said arrest memo is in a computerised format and does not contain any column regarding the ‘grounds of arrest’ of the appellant. This very issue is primarily the bone of contention between the parties to the appeal. The proceedings of remand have been seriously criticized as being manipulated by Shri Kapil Sibal, learned senior counsel for the appellant and aspersions of subsequent insertions in the remand order have been made The appellant was presented in the Court of Learned Additional Sessions Judge-02, Patiala House Courts, New Delhi(hereinafter being referred to as the ‘Remand Judge’) on 4th October, 2023, sometime before 6:00 a.m. which fact is manifested from the remand order(Annexure P-1) placed on record of appeal with I.A. No. 217857 of 2023. The appellant was presented in the Court of Learned Additional Sessions Judge-02, Patiala House Courts, New Delhi (hereinafter being referred to as the ‘Remand Judge’) on 4th October, 2023, sometime before 6:00 a.m. which fact is manifested from the remand order (Annexure P-1) placed on record of appeal with I.A. No. 217857 of 2023. The appellant promptly questioned his arrest and the police custody remand granted by the learned Remand Judge vide order dated 4th October, 2023 by preferring Criminal Miscellaneous Case No. 7278 of 2023 in the High Court of Delhi which stands rejected by the learned Single Judge of the High Court of Delhi vide judgment dated 13th October, 2023. The said order is subjected to challenge in this appeal by special leave.

CONTENTIONS OF THE APPELLANT
Shri Kapil Sibal, learned senior counsel representing the appellant canvassed the following submissions in order to question the proceedings of arrest and remand of the appellant That the FIR No. 224 of 2023(FIR in connection of which appellant was arrested) is virtually nothing but a second FIR on same facts because prior thereto, another FIR No. 116 of 2020 dated 26th August, 2020 had been registered by PS EOW, Delhi Police(“EOW FIR”) alleging violation of Foreign Direct Investment(FDI) regulations and other laws of the country by the appellant and the company, thereby causing loss to the exchequer. A copy of the said FIR was, however, not provided to the appellant. By treating the EOW FIR as disclosing predicate offences, the Directorate of Enforcement(for short “ED”) registered an Enforcement Case Information Report(for short ‘ECIR’) for the offences punishable under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002(for short ‘PMLA’). The ED carried out extensive search and seizure operations at various places including the office of the company-M/s. PPK Newsclick Studio Pvt. Ltd., of which the appellant is the Director. The company assailed the ECIR by filing Writ Petition(Crl.) Nos. 1129 of 2021 and 1130 of 2021 wherein interim protection against coercive steps was granted by High Court of Delhi on 21st June, 2021. The appellant was also provided interim protection in an application seeking anticipatory bail vide order dated 7th July, 2021. The FIR No. 224 of 2023 has been registered purely on conjectures and surmises without there being any substance in the allegations set out in the report. the copy of FIR No. 224 of 2023 was neither made available in the public domain nor a copy thereof supplied to the appellant until his arrest and remand which is in complete violation of the fundamental Right to Life and Personal Liberty enshrined in Articles 20, 21 and 22 of the Constitution of India. Further submitted that the grounds of arrest were not informed to the appellant either orally or in writing and that such action is in gross violation of the constitutional mandate under Article 22(1) of the Constitution of India and Section 50 of the Code of Criminal Procedure, 1973(hereinafter being referred to as the ‘CrPC’).
That the arrest of the appellant is in gross violation of the provisions contained in Article 22 of the Constitution of India, hence, the appellant is entitled to seek a direction for quashment of the remand order and release from custody forthwith. That the action of the Investigating Officer in arresting and in seeking remand of the appellant is not only mala fide but also fraught with fraud of the highest order. Shri Sibal implored the Court to accept the appeal, set aside the impugned orders and direct the release of the appellant from custody in connection with the above FIR.

CONTENTIONS OF THE RESPONDENTS
Shri Suryaprakash V. Raju, learned ASG, appearing for the respondent vehemently and fervently opposed the submissions advanced by the learned counsel for the appellant and made the following pertinent submissions He urged that the judgment in the case of Pankaj Bansal(supra) has been held to be prospective in operation by this Court in the case of Ram Kishor Arora(supra). The appellant was remanded to police custody on 4th October, 2023 whereas the judgment in the case of Pankaj Bansal(supra) was uploaded on the website of this Court in the late hours of 4th October, 2023 and hence, the arresting officer could not be expected to ensure compliance of the directions given in the said judgment. He thus urged that the alleged inaction of the Investigating Officer in furnishing the grounds of arrest in writing to the appellant cannot be called into question as the judgment in Pankaj Bansal(supra) was uploaded and brought in public domain after the remand order had been passed. Without prejudice to the above, learned ASG urged that as per the appellant’s version set out in the pleadings filed before the High Court of Delhi, he was actually remanded to the police custody after 7:00 a.m. With reference to these pleadings, Shri Raju contended that the appellant cannot be heard to urge that he was remanded to the police custody in an illegal manner and without the grounds of arrest having been conveyed to him in writing. Learned ASG referred to the provisions contained in Articles 22(1) and 22(5) of the Constitution of India and urged that there is no such mandate in either of the provisions that the grounds of arrest or detention should be conveyed in writing to the accused or the detenue, as the case may be. (v) He urged that the right conferred upon the appellant by Article 22(1) of the Constitution of India to consult and to be defended by a legal practitioner was complied with in letter and spirit because the relative of the appellant, namely, Shri Rishabh Bailey, was informed before producing the appellant before the learned Remand Judge. Admittedly, Shri Rishabh Bailey had intimated the appellant’s Advocate, Shri Arshdeep Khurana regarding the proposed proceedings of police custody remand of the appellant. He urged that the Advocate transmitted a written objection against the prayer for police custody remand over WhatsApp through the Head Constable Rajendra Singh and the learned Remand Judge has taken note of the said objection opposing remand in the remand order dated 4th October, 2023 and thus it would be futile to argue that the order granting remand is illegal in any manner.
He urged that the Advocate transmitted a written objection against the prayer for police custody remand over WhatsApp through the Head Constable Rajendra Singh and the learned Remand Judge has taken note of the said objection opposing remand in the remand order dated 4th October, 2023 and thus it would be futile to argue that the order granting remand is illegal in any manner. Learned ASG further contended that now the investigation has been completed and charge sheet has also already been filed and, thus, the illegality/irregularity, if any, in the arrest of the appellant and the grant of initial police custody remand stands cured and hence, the appellant cannot claim to be prejudiced by the same. Learned ASG further urged that there is a presumption regarding the correctness of acts performed in discharge of judicial functions and hence, the noting recorded in the remand order dated 4th October, 2023 that the Advocate for the appellant had been heard on the remand application and that the grounds of arrest had been conveyed to the appellant cannot be questioned or doubted. He thus implored the Court to dismiss the appeal and affirm the order passed by the High Court of Delhi.

LEGAL PROVISIONS
Article 141 of the Constitution of India: That the law declared by the Supreme Court shall be binding on all courts within the territory of India.
Article 22(1) of the Constitution of India: No person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice.
Section 43C of the UAPA: Any officer arresting a person under section 43A shall, as soon as may be, inform him of the grounds for such arrest.
Section 19(1) of the PMLA: Allows ED officers to arrest an individual “on the basis of material in possession (and) reason to believe (to be recorded in writing) that the person is guilty.

COURT’S ANALYSIS AND JUDGEMENT
Upon a careful perusal of the statutory provisions (reproduced supra), we find that there is no significant difference in the language employed in Section 19(1) of the PMLA and Section 43B(1) of the UAPA which can persuade us to take a view that the interpretation of the phrase ‘inform him of the grounds for such arrest’ made by this Court in the case of Pankaj Bansal(supra) should not be applied to an accused arrested under the provisions of the UAPA. We find that the provision regarding the communication of the grounds of arrest to a person arrested contained in Section 43B(1) of the UAPA is verbatim the same as that in Section 19(1) of the PMLA. The contention advanced by learned ASG that there are some variations in the overall provisions contained in Section 19 of the PMLA and Section 43A and 43B of the UAPA would not have any impact on the statutory mandate requiring the arresting officer to inform the grounds of arrest to the person arrested under Section 43B(1) of the UAPA at the earliest because as stated above, the requirement to communicate the grounds of arrest is the same in both the statutes. As a matter of fact, both the provisions find their source in the constitutional safeguard provided under Article 22(1) of the Constitution of India. Hence, applying the golden rules of interpretation, the provisions which lay down a very important constitutional safeguard to a person arrested on charges of committing an offence either under the PMLA or under the UAPA, have to be uniformly construed and applied. there is no doubt in the mind of the Court that any person arrested for allegation of commission of offences under the provisions of UAPA or for that matter any other offence(s) has a fundamental and a statutory right to be informed about the grounds of arrest in writing and a copy of such written grounds of arrest have to be furnished to the arrested person as a matter of course and without exception at the earliest. The purpose of informing to the arrested person the grounds of arrest is salutary and sacrosanct inasmuch as, this information would be the only effective means for the arrested person to consult his Advocate; oppose the police custody remand and to seek bail. Any other interpretation would tantamount to diluting the sanctity of the The Right to Life and Personal Liberty is the most sacrosanct fundamental right guaranteed under Articles 20, 21 and 22 of the Constitution of India. Any attempt to encroach upon this fundamental right has been frowned upon by this Court in a catena of decisions. Thus, any attempt to violate such fundamental right, guaranteed by Articles, 20, 21 and 22 of the Constitution of India, would have to be dealt with strictly. The right to be informed about the grounds of arrest flows from Article 22(1) of the Constitution of India and any infringement of this fundamental right would vitiate the process of arrest and remand. Mere fact that a charge sheet has been filed in the matter, would not validate the illegality and the unconstitutionality committed at the time of arresting the accused and the grant of initial police custody remand to the accused. we have no hesitation in reiterating that the requirement to communicate the grounds of arrest or the grounds of detention in writing to a person arrested in connection with an offence or a person placed under preventive detention as provided under Articles 22(1) and 22(5) of the Constitution of India is sacrosanct and cannot be breached under any situation. Non-compliance of this constitutional requirement and statutory mandate would lead to the custody or the detention being rendered illegal, as the case may be. the arrest of the appellant followed by remand order dated 4th October, 2023 and so also the impugned order passed by the High Court of Delhi dated 13th October, 2023 are hereby declared to be invalid in the eyes of law and are quashed and set aside. Though we would have been persuaded to direct the release of the appellant without requiring him to furnish bonds or security but since the charge sheet has been filed, we feel it appropriate to direct that the appellant shall be released from custody on furnishing bail and bonds to the satisfaction of the trial Court. We make it abundantly clear that none of the observations made above shall be treated as a comment on the merits of the case. The appeal is allowed in these terms. Pending application(s), if any, shall stand disposed of.

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Judgement Reviewed by – HARIRAGHAVA JP

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The Supreme Court dismisses the Bail Plea of AAP Leader Satyendar Jain in Money Laundering Case and directs him to surrender without any delay

Case title – Satyendar Kumar Jain and Ors Vs Directorate of Enforcement

Case no. – Criminal Appeal Nos. 1638 of 2024, 1639 of 2024, 1640 of 2024

Decision on – March 18th, 2024

Quoram – Justice Bela M. Trivedi, Justice Pankaj Mithal

Facts of the case

Satyendar Jain was alleged to have acquired disproportionate assets with the help of his family members and other persons and further laundered tainted money through four Kolkata based shell companies while he was functioning as Minister of Govt. NCT of Delhi. An FIR was filed under Section 109 IPC and 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988 which were the offences under the Prevention of Money Laundering Act, 2002 (PMLA). The ED had arrested Satyendar Jain in the money laundering case based on a CBI’s FIR registered against him in 2017 under the Prevention of Corruption Act.

The Directorate of Enforcement further registered an ECIR against Satyendar Jain, Vaibhav Jain, Ankush Jain and others for investigation into the commission of the offence of Money laundering as defined under Section 3 and punishable under Section 4 of the PMLA.

On the completion of the said investigation, a Prosecution Complaint was filed by the ED before the Court of District and Sessions Judge. Subsequently, the trial court, in 2022 had taken cognizance of the prosecution complaint (charge sheet) filed by the ED against Satyendar Jain, his wife, and eight others, including the four firms, in connection with the money laundering case and dismissed the bail applications of the accused.

The Delhi High Court by its impugned judgement had observed that Jain is an influential person and may tamper with evidence. The High Court noted that there was no illegality or infirmity in the trial court’s order by which the bail pleas were dismissed. The Court while dismissing the bail plea held that Satyendar Jain had not satisfied the twin conditions for bail under the Prevention of Money Laundering Act (PMLA).

Court’s Analysis and Judgement

The Court examined the submissions of both the parties and observed that appellants had miserably failed to reasonably establish that they were not guilty of the alleged offences. Whereas, the Court found merit in the material collected by the respondent-ED to show that they are prima facie guilty of the alleged offences.

The Court allowed ED to correct its inadvertent mistakes in the affidavit and pointed out that it had no significance in the present case.

The Court noted that appellants had not complied with the twin mandatory conditions laid down in Section 45 of PMLA and thereby, upheld the decision of High Court.

The Court stated that the right to speedy trial and access to justice is a valuable right enshrined in the Constitution of India, and provisions of Section 436A of the Cr.P.C. would apply with full force to the cases of money laundering falling under Section 3 of the PMLA, subject to the Provisos and the Explanation contained therein.

The Court, therefore, denied the bail to the appellants and directed them to surrender before the Special Court without any delay.

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Judgement Reviewed by – Keerthi K

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

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.

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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 

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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