2025 (5) TMI 654 - HC - Money Laundering

Money Laundering - seeking grant of regular bail - predicate/scheduled offence - Diversion and siphoning of loan amount - present applicant was guiding main beneficiary in diverting the funds to various companies in order to finally acquire the accused company through the process of NCLT - HELD THAT - Reliance is placed on the judgment of Hon ble Supreme Court in V. Senthil Balaji 2024 (9) TMI 1497 - SUPREME COURT wherein it has been held that the existence of scheduled offence is a sine qua non for alleging existence of proceeds of crime. The said existence of proceeds of crime at the time of trial of offence punishable under Sections 3 of the PMLA can be proved only if the predicate/scheduled offence is established in the prosecution of said offence. It was submitted that in view of the fact that the trial in case under PMLA cannot be finally decided unless the trial of predicate/scheduled offence concludes. It has been pointed out that the chargesheet in the scheduled offence has been filed and the case is still at the stage of Section 207 of the CrPC (for supply of documents). The role of the present applicant was that he being a Chartered Accountant and external statutory auditor of the accused company M/s Sunstar Overseas Pvt. Ltd. as well as M/s Shivakriti Agro and related entities had advised and facilitated the diversion of proceeds of crime through various entities including M/s Shivakriti Agro and finally acquiring the stakes of the accused company through Umaiza while it was under CIRP in his professional capacity. It is relevant to note that the alleged main beneficiary of the proceeds of crime Rohit Aggarwal has not since been arrested in the present case. The trial in the predicate/scheduled offence has not been started and is at the preliminary stage. The prosecution therein has cited 98 witnesses and the trial is not likely to be completed in a reasonable time. There are nearly 8000 documents in the predicate/scheduled offence registered with CBI and around 6000 documents in the present complaint case filed by the respondent/ED. Even as per the reply of the respondent/ED investigation is still continuing with respect to identification and location of the remaining proceeds of crime and determining the role of other persons/entities involved in the present case. The applicant is in judicial custody since 01.07.2024 and has undergone incarceration for more than 10 months. Keeping in mind the mandate of the Hon ble Supreme Court in V. Senthil Balaji 2024 (9) TMI 1497 - SUPREME COURT trial in the present complaint case is yet to commence and would take some time to conclude. The continued incarceration of the applicant with no possibility of trial being completed in near future restrictions provided under Section 45 of the PMLA would not come in way of ensuring the right to personal liberty and speedy trial under Article 21 of the Constitution of India. Conclusion - i) The applicant as external statutory auditor is not prima facie shown to have gone beyond professional capacity to the extent required to deny bail at this stage. ii) The twin conditions under Section 45 of the PMLA for denial of bail are not satisfied on the material before the Court. iii) Prolonged incarceration without trial would violate Article 21 given the early stage and anticipated delay in trial of both the predicate offence and PMLA complaint. This Court is inclined to allow the present application. The applicant is directed to be released on bail subject to fulfilment of conditions imposed - bail application allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

(a) Whether the applicant, a Chartered Accountant and external statutory auditor of the accused company and related entities, is prima facie guilty of the offence of money laundering under Section 3/4 of the Prevention of Money Laundering Act, 2002 (PMLA), read with Section 45 of the PMLA and Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS)?

(b) Whether the applicant's role as an external auditor, without managerial control or key personnel status, amounts to active involvement in the generation, acquisition, concealment, and projection of proceeds of crime?

(c) Whether the twin conditions under Section 45 of the PMLA for grant of bail-absence of reasonable grounds to believe the accused is guilty and that the accused is not likely to commit any offence while on bail-are satisfied in the applicant's case?

(d) Whether the prolonged incarceration of the applicant without trial violates the right to personal liberty under Article 21 of the Constitution of India, especially given the pendency and anticipated delay in trial of both the predicate offence and the PMLA complaint?

(e) Whether the applicant is a flight risk or likely to tamper with evidence or influence witnesses if enlarged on bail?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Prima facie guilt and role of the applicant as external auditor

The legal framework involves Section 3 and 4 of the PMLA, which criminalize money laundering activities including generation, acquisition, possession, concealment, or use of proceeds of crime. Section 45 of the PMLA imposes stringent conditions for grant of bail, requiring the accused to satisfy twin conditions relating to absence of reasonable grounds for believing guilt and no likelihood of committing offences while on bail.

The prosecution case, based on investigation by the Enforcement Directorate (ED), alleges that the applicant, as Chartered Accountant and auditor of the accused company and related entities such as M/s Shivakriti Agro Pvt. Ltd. and M/s Star Global Multi Ventures Pvt. Ltd., knowingly assisted in the diversion and siphoning off of funds amounting to approximately Rs. 539 Crores, which constituted proceeds of crime. The applicant is alleged to have acted beyond professional capacity by facilitating sham transactions, controlling dummy entities, and enabling the acquisition of the accused company through a resolution plan during the Corporate Insolvency Resolution Process (CIRP).

Key evidence includes statements under Section 50 of the PMLA by Ajay Soni, ex-director and shareholder of Shivakriti Agro Pvt. Ltd., who stated that the applicant directed operational control of the company to others and signed documents without knowledge of their contents. Email correspondence also implicates the applicant as a "deal maker" involved in fraudulent activities. Further, statements by other witnesses and seized digital records suggest the applicant's active role in arranging meetings and facilitating diversion of funds to entities such as Kalptaru Fincap Ltd. and Umaiza Infracon LLP.

The applicant's defense emphasizes his role as an external statutory auditor without managerial control or key personnel status under Section 2(51) of the Companies Act, 2013. He contends that he was not involved in day-to-day affairs or decision-making and that no direct evidence exists showing his involvement beyond professional auditing duties. The applicant also highlights that he ceased to be auditor of the accused company and related entities in 2017, prior to the alleged money laundering activities.

The Court noted reliance on precedents such as Manish Kothari v. Director of Enforcement, where bail was granted to an external auditor accused under similar circumstances. The Court recognized that at the bail stage, only a preponderance of probability is to be considered, not a final determination of guilt. The Court acknowledged that professional persons generally act on client instructions, and whether the applicant exceeded professional limits requires trial scrutiny.

Issue (c): Satisfaction of twin conditions under Section 45 of the PMLA for bail

The Court examined whether the respondent/ED had demonstrated reasonable grounds to believe the applicant guilty and whether the applicant was likely to commit offences if released on bail. The prosecution argued the applicant's involvement was central to the conspiracy and that he misused his professional knowledge to facilitate money laundering.

Conversely, the applicant demonstrated that he was not a beneficiary of the proceeds of crime, had only received professional fees, and cooperated with the investigation prior to arrest. The Court noted that key accused had not been arrested and that the applicant was not shown to have influence over internal affairs. No evidence was presented of tampering with evidence or influencing witnesses.

The Court also considered the absence of any provisional attachment of property belonging to the applicant and the fact that the chargesheet in the predicate offence had not named the applicant as accused but only as a witness. The Court found that the twin conditions were not sufficiently satisfied to deny bail.

Issue (d): Right to personal liberty and delay in trial

The Court referred extensively to the Supreme Court's decision in V. Senthil Balaji v. Deputy Director, Directorate of Enforcement, which held that the existence of the predicate offence is a sine qua non for the PMLA offence and that prolonged incarceration without trial violates Article 21. The Court emphasized the principle that "bail is the rule and jail is the exception," and that stringent bail conditions under PMLA cannot be used to incarcerate accused indefinitely.

The Court noted that the trial in the predicate offence was at an early stage (Section 207 CrPC), with 98 witnesses cited and thousands of documents involved, making expeditious trial completion unlikely. The PMLA complaint trial had also not commenced, with 26 witnesses cited and ongoing investigation. The Court observed that the applicant had been in custody for over 10 months and that continued detention would infringe the right to speedy trial and personal liberty.

The Court also relied on other Supreme Court pronouncements, including Vijay Nair v. Directorate of Enforcement and Udhaw Singh v. Enforcement Directorate, reinforcing the principle that constitutional courts can grant bail despite stringent statutory provisions when trial delays are unreasonable.

Issue (e): Flight risk and tampering with evidence

The Court found no evidence that the applicant was a flight risk or likely to tamper with evidence or influence witnesses. The applicant had furnished personal details, cooperated with investigation, and no adverse incidents were reported. The Court imposed conditions on bail to prevent tampering or absconding, including furnishing personal bond and sureties, informing the Court of any change of address, not leaving India without permission, keeping mobile numbers operational, and refraining from interfering with evidence or witnesses.

3. SIGNIFICANT HOLDINGS

"The Court at this stage is not required to record the positive finding of acquittal. Such finding can be recorded only after recording and appreciation of the evidence by the learned trial court. The case of the petitioner that Anubrata Mondal is shifting his blame on the petitioner only to save himself has to be tested during the course of the trial. Generally speaking, the professional would act on the instructions of his client. However, whether he has gone beyond his professional duty is something which is required to be seen and examined during the trial."

"The existence of scheduled offence is a sine qua non for alleging existence of proceeds of crime. The said existence of proceeds of crime at the time of trial of offence punishable under Sections 3 of the PMLA can be proved only if the predicate/scheduled offence is established in the prosecution of said offence."

"Bail is the rule, and jail is the exception. These stringent provisions regarding the grant of bail, such as Section 45 (1) (iii) of the PMLA, cannot become a tool which can be used to incarcerate the accused without trial for an unreasonably long time."

"The Constitutional Courts cannot allow provisions like Section 45 (1) (ii) to become instruments in the hands of the ED to continue incarceration for a long time when there is no possibility of a trial of the scheduled offence and the PMLA offence concluding within a reasonable time."

"The right of liberty and speedy trial guaranteed under Article 21 is a sacrosanct right which needs to be protected and duly enforced even in cases where stringent provisions have been made applicable by way of special legislation."

Final determinations:

(i) The applicant, as external statutory auditor, is not prima facie shown to have gone beyond professional capacity to the extent required to deny bail at this stage.

(ii) The twin conditions under Section 45 of the PMLA for denial of bail are not satisfied on the material before the Court.

(iii) Prolonged incarceration without trial would violate Article 21, given the early stage and anticipated delay in trial of both the predicate offence and PMLA complaint.

(iv) The applicant is not a flight risk nor likely to tamper with evidence, subject to conditions imposed by the Court.

Accordingly, the application for regular bail is allowed on furnishing personal bond and sureties with conditions to safeguard the investigation and trial process. The observations are confined to the bail application and are without prejudice to the merits of the case pending trial.