2023 (4) TMI 265 - HC - Money Laundering

Seeking grant of bail - Money Laundering - proceeds of crime - mandatory twin conditions u/s 45 of the PMLA satisfied or not - HELD THAT - Section 3 (ii) of PMLA provides that the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. Bare perusal of the definition of beneficial owner as provided under Section 2 (1) (fa) of the Act makes it clear that it includes a person who exercises ultimate effective control over a juridical person. In the case of Vijay Madanlal Choudhary and others vs. Union of India 2022 (7) TMI 1316 - SUPREME COURT it was inter alia held that offence of money-laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. It was further held that the process or activity can be in any form be it one of concealment possession acquisition use of proceeds of crime as much as projecting it as untainted property or claiming it to be so. Therefore involvement in any one such process or activity connected with the proceeds of crime would constitute offence of money-laundering. Thus this offence has nothing to do with the criminal activity relating to a scheduled offence except that the proceeds of crime derived or obtained as a result of that crime - The intention of the legislature in enacting the PMLA is that money laundering poses a serious threat not only to the financial systems of countries but also to their integrity and sovereignty and therefore the legislature thought it fit to provide a comprehensive legislation for this purpose. Thus the courts while dealing with matters under PMLA have to take into account the object and purpose of legislation. The statements made under Section 50 of PMLA have been held to be an admissible piece of evidence. The term admissible evidence means that such evidence can be considered by the court at the time of appreciation of evidence. A statement recorded under Section 161 Cr.P.C. is not an admissible piece of evidence and can be used only for the limited purpose as provided under Section 162 Cr.P.C. - statements under Section 50 of PMLA carry much more weight than a statement recorded under Section 161 Cr.P.C. These are specific legislations enacted to handle specific crimes. The rejection of MOU by the learned trial court cannot be faulted as it has admittedly been never presented before any authority and moreover it is a self serving document. The petitioners took a plea that the companies were doing business but even a shred of document has not even been shown to reflect any business being undertaken by them - the constant changing pattern of the shareholding in the companies clearly indicates that Sh. Satyendar Kumar Jain was indirectly controlling the affairs of the companies. The evidence on record though speaks in volumes but has not been discussed or examined in detail so as to not cause prejudice to the petitioner. The order rejecting the bail applications are well-reasoned orders based on material on record - the bail applications are rejected.

Summary

Issues Involved:
1. Bail applications under Section 439 Cr.P.C. for offences under Section 4 of the Prevention of Money Laundering Act, 2002 (PMLA).
2. Allegations of money laundering and possession of disproportionate assets.
3. Compliance with twin conditions under Section 45 of the PMLA for granting bail.

Summary:

1. Bail Applications and Allegations:
The petitioners sought bail under Section 439 Cr.P.C. for offences punishable under Section 4 of the PMLA, linked to a CBI case alleging possession of disproportionate assets. The Special Judge had rejected the bail applications, citing the mandatory twin conditions under Section 45 of the PMLA. The court found prima facie evidence that the petitioners were involved in concealing proceeds of crime through Kolkata-based entry operators and projecting the income of certain companies as untainted.

2. Background Facts:
The CBI had registered an FIR against the petitioners for offences under the Prevention of Corruption Act and IPC, alleging that Satyendar Kumar Jain possessed assets disproportionate to his known sources of income. The ED initiated an investigation under the PMLA, alleging that the petitioners received accommodation entries from shell companies in Kolkata against cash payments, thereby laundering proceeds of crime.

3. Submissions on behalf of Satyendar Kumar Jain:
The petitioner argued that the Special Judge misapplied the provisions of the PMLA and that the proceeds of crime were identified solely based on accommodation entries. He contended that he had no control over the companies in question and that he was being tried twice for the same acts, contrary to Article 20(2) of the Constitution and Section 300(1) Cr.P.C. The petitioner also claimed that there was no apprehension of tampering with evidence or witnesses and that the investigation was complete.

4. Submissions on behalf of Vaibhav Jain and Ankush Jain:
The counsel for the applicants argued that the PMLA provisions could not be invoked as the CBI charge-sheeted them for an offence under Section 109 IPC, which is not a scheduled offence. They contended that the ED's case was based on assumptions and that the applicants had effective control over the companies, not Satyendar Kumar Jain. They also argued that the IDS declarations were made in an individual capacity and that there was no generation of proceeds of crime at the time of filing IDS.

5. Submissions on behalf of ED:
The ED argued that the Special Court had taken cognizance of both the CBI and PMLA cases, demonstrating the existence of a scheduled offence and proceeds of crime. The ED contended that the companies in question were controlled by Satyendar Kumar Jain and received accommodation entries from Kolkata-based shell companies. The ED emphasized the importance of statements recorded under Section 50 of the PMLA, which indicated that Satyendar Kumar Jain was the beneficial owner and had effective control over the companies.

6. Finding and Analysis:
The court referred to relevant provisions of the PMLA, emphasizing that the offence of money laundering is a continuing activity and includes any process connected with the proceeds of crime. The court noted that statements under Section 50 of the PMLA are admissible evidence and carry more weight than statements under Section 161 Cr.P.C. The court found that the petitioners had not demonstrated reasonable grounds to believe they were not guilty of the offence. The court also noted that Satyendar Kumar Jain's conduct in custody indicated a potential to tamper with evidence. The court concluded that the petitioners failed to meet the twin conditions under Section 45 of the PMLA and the conditions under Section 439 Cr.P.C., and thus, the bail applications were rejected.