2023 (6) TMI 1487 - HC - Money Laundering

Money Laundering - proceeds of crime - fraudulent transfers /misappropriation of huge sums of government money under a conspiracy between government officials and employees Bank officials and employees office bearers and members of Srijan Mahila Vikash Sahyog Samiti Limited and other accused persons popularly known as Srijan Scam - applicability of Section 45 of the PMLA - HELD THAT - In view of existence of material in the complaint this Court would find that there is no reasonable ground to believe that the petitioner is not guilty of offence as alleged in the complaint though the Court is conscious of the fact that materials are yet to be considered at the trial. The instant case therefore does not satisfy the first test as per Section 45 of the PMLA for lifting the bar to grant of bail. Insofar as the second test regarding propensity of the petitioner to commit any offence while on bail this Court would observe that it is trite law that such propensity can be ascertained only with reference to the past conduct antecedents as well as nature of material emerging in the course of investigation. In view of the petitioner s antecedent and material in the complaint as noted above there is no scope for this Court to record a satisfaction that the petitioner is not likely to commit any offence while on bail. The existence of 17 number of cases against the petitioner since before and on examination of material emerged in the complaint this Court would also observe that there is no grounds for concluding that the petitioner is not likely to commit any offence on bail. Having regard to decision of Hon ble Apex Court in the case of Vijay Madanlal Choudhary and Others versus Union of India and Others 2022 (7) TMI 1316 - SUPREME COURT (LB) upholding the requirements of satisfying the twin test for lifting statutory bar to grant bail under Section 45 of PMLA this Court would find that the petitioner s case having failed on the twin test the prayer for bail is fit to be rejected. Petitioner s prayer for bail is rejected.

Summary

The core legal questions considered by the Court in this matter include:

1. Whether the petitioner, accused under the Prevention of Money Laundering Act, 2002 (PMLA), is entitled to bail despite the statutory bar under Section 45(1)(ii) of the PMLA.

2. Whether the petitioner satisfies the twin tests mandated by Section 45 of the PMLA for lifting the bar on bail, namely:

• Whether there are reasonable grounds to believe that the accused is not guilty of the offence alleged; and
• Whether there is reasonable ground to believe that the accused is not likely to commit any offence while on bail.

3. The applicability and interpretation of the statutory provisions of the PMLA, particularly Section 3 (offence of money laundering), Section 8 (attachment of property), and Section 45 (bar on grant of bail), in the context of the facts of the case.

4. The evidentiary sufficiency and material on record to establish the petitioner's involvement in the alleged money laundering and related offences.

5. The relevance of the petitioner's antecedents, health, and other personal circumstances in the consideration of bail.

Issue-wise Detailed Analysis

Issue 1: Entitlement to Bail under PMLA and Section 45 Bar

The legal framework governing bail in PMLA cases is stringent, as Section 45(1) of the Act bars bail unless the Court is satisfied on two specific tests: that the accused is not guilty and is unlikely to commit any offence while on bail. The Court referred to the binding precedent laid down by the Supreme Court in Vijay Madanlal Choudhary and Others versus Union of India and Others, which upheld the twin-test requirement for lifting the statutory bar on bail under the PMLA.

The Court noted that the offences under investigation are scheduled offences under the PMLA, and the investigation was undertaken by the Enforcement Directorate (ED) following registration of an ECIR. The petitioner is implicated in multiple cases connected to a large-scale fraud known as the "Srijan Scam," involving misappropriation of government funds through a conspiracy among government officials, bank employees, and members of SMVSSL.

Applying the law to the facts, the Court found that the petitioner's involvement in acquisition of property through proceeds of crime, including flats purchased in the name of his wife, was supported by material on record, including bank transactions and property documents. The petitioner's role as a bank clerk and close associate of the prime accused, late Manorma Devi, further strengthened the prosecution's case.

The Court rejected the petitioner's argument that he was falsely implicated and that the property transactions were at the behest of the deceased prime accused, noting that the original deed and keys were with her but the petitioner had no documentary evidence to support his claim. The Court also considered the petitioner's retirement and health conditions but found these insufficient to override the statutory bar.

Issue 2: Sufficiency of Material and Reasonable Grounds to Believe Guilt

The Court examined the complaint and supporting documents, which revealed large-scale financial transactions involving the petitioner, including the use of his wife's and daughter's bank accounts to channel proceeds of crime. The Court observed that the petitioner was named in seventeen separate cases related to the scam, indicating a pattern of involvement.

The Court emphasized that the test under Section 45 is not to determine guilt conclusively but whether there are reasonable grounds to believe the accused is not guilty. Given the volume and nature of the material, the Court found no reasonable ground to believe the petitioner was not guilty of the offences alleged.

The Court also noted that the trial was yet to commence, and therefore, the material on record was sufficient at the bail stage to deny bail under the statutory bar.

Issue 3: Likelihood of Committing Offence While on Bail

The Court considered the petitioner's antecedents and past conduct, noting the existence of multiple cases and the nature of the offences. The Court held that propensity to commit an offence while on bail is to be assessed based on past conduct and material emerging from the investigation.

Despite the petitioner's advanced age and health issues, the Court found no basis to conclude that he would not commit an offence if released on bail. The multiplicity of cases and the ongoing investigation indicated a continuing risk.

Issue 4: Application of Section 8 and Attachment of Property

The Court noted the provisional attachment of the flat acquired by the petitioner's wife under Section 8(1) of the PMLA, which was confirmed by the Adjudicating Authority. This attachment was integral to the investigation into proceeds of crime and supported the prosecution's case that the property was acquired through illicit means.

The Court's analysis recognized the importance of the attachment proceedings in establishing the nexus between the petitioner's assets and the proceeds of crime.

Issue 5: Treatment of Competing Arguments

The petitioner's counsel argued that the petitioner had an unblemished service record, was a senior citizen with chronic health issues, and was falsely implicated. The petitioner also contended that the property was purchased at the request of the deceased prime accused and that he had no direct involvement.

The Court carefully weighed these arguments but found them insufficient to overcome the statutory bar on bail under the PMLA. The Court highlighted the substantial material implicating the petitioner and the serious nature of the offences.

The prosecution's arguments, supported by documentary evidence and the findings of the Adjudicating Authority, were held to be credible and persuasive.

Significant Holdings

"In view of existence of material in the complaint, this Court would find that there is no reasonable ground to believe that the petitioner is not guilty of offence as alleged in the complaint, though the Court is conscious of the fact that materials are yet to be considered at the trial."

"Insofar as the second test regarding propensity of the petitioner to commit any offence while on bail, this Court would observe that it is trite law that such propensity can be ascertained only with reference to the past conduct, antecedents as well as nature of material emerging in the course of investigation."

"Having regard to decision of Hon'ble Apex Court in the case of Vijay Madanlal Choudhary and Others versus Union of India and Others reported in 2022 SCC Online SC 929, upholding the requirements of satisfying the twin test for lifting statutory bar to grant bail under Section 45 of PMLA, this Court would find that the petitioner's case having failed on the twin test, the prayer for bail is fit to be rejected."

Core principles established include the strict application of the twin tests under Section 45 of the PMLA for bail in money laundering cases, the significance of material on record at the bail stage, and the consideration of antecedents and likelihood of reoffending in bail determinations.

Final determinations were that the petitioner's prayer for bail was rejected due to failure to satisfy either of the twin tests under Section 45 of the PMLA, supported by substantial material indicating guilt and risk of offence if released.