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Rakesh Manekchand Kothari Versus Union of India

2015 (1) TMI 1310 - GUJARAT HIGH COURT

Money Laundering - Offence under PML Act - bail application - Held that:- Assistant Director of Directorate of Enforcement – respondent No.3 is competent and authorized officer under PML Act to order arrest under Section 19(1) of PML Act, and therefore, again there is no scope to read down, lay down, expound, interpret and deliberate upon the scope and perspective of Section 19 of PML Act in light of Section 49(3) read with the Rules notified under Notification GSR 446(E) dated 01.07.2005. - .....

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he involvement under Section 3 of the PML Act by Directorate of Enforcement. - The grounds of arrest was communicated to the accused after due medical check up as undertaken and he was also produced within the stipulated time before the designated Judge under PML Act at Ahmedabad and no complaint or grievance was ever made by the petitioners about any kind of ill­treatment or coercion by the offices of Directorate of Enforcement. That in execution of arrest, all procedural requirements were .....

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st the petitioner and competency of the Assistant Director – respondent No.3 to order arrest in compliance of Section 19(1) of PML Act surface on record, which is again in consonance with the safeguards enshrined under Article 22(1) of the Constitution of India and we find no breach of any procedural enumerated either under Article 19(1)of the PML Act or under Article 22(1) of the Constitution of India. - It cannot be said that order of arrest suffers from vice of any illegality on the groun .....

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t under Section 19(1) of the PML Act and no case is made out to issue writ of quo warranto as prayed for. - Special Criminal Application (Direction) No. 4496 of 2014 With Special Criminal Application No. 4672 of 2014 - Dated:- 16-1-2015 - ANANT S. DAVE AND G.B. SHAH JJ. Mr. Vikram Chaudhary Senior Advocate with Mr. Sanjay Agarwal with Mr. Chetan K Pandya, Advocate Mr. Sunit Shah for Mr. Ishan Mihir Patel with Mr. Omkar Dave and Mr. RJ Goswami, Advocate for the Applicants. Mr. Devang Vyas, ASG an .....

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dering Act, 2002 [hereinafter referred to as PMLA'] [as inserted / substituted by Amendment Act 2005 [20 of 2005] dt. 21.5.2005, as the said provision does not bear any reasonable and rational nexus with variety of Scheduled offences mentioned in the Schedule under the Act which may even be non­cognizable, bailable and on much lighter pedestal, for being unreasonable and ultra vires, and consequently unconstitutional, illegal, arbitrary, discriminatory, and thus being violative of Articl .....

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d harmony with settled constitutional mandate of Articles 14, 21 and 22 of Constitution of India as also in the context of various provisions under the Code of Criminal Procedure, 1973, as amended from to time and the Guidelines laid down by the Hon'ble Apex Court in D.K.Basu vs State of West Bengal 1997(1) SCC 416, [c] For issuance of an appropriate writ of quo warranto, calling upon Respondent No.3, who being an Assistant Director, Enforcement Directorate, appointed under Foreign Exchange .....

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19 and Section 49 of PMLA, 2002, read with Rules notified by GSR 446(E), dt.1.7.2005, authorizing him to be an Arresting Officer and to exercise power to arrest under section 19, [ii]any notification issued by Central Government for his appointment a Assistant Director under section 49 of PMLA, [iii] any records to show compliance of Rules notified by GSR 446(E) dated 1.7.2005, and [iv] any Criminal Proceedings against the Petitioner in the alleged Scheduled offence showing the Petitioner as an .....

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e of West Bengal, 1997 (1) SCC 416 [more particularly those prescribed in sub­para (2), (9) and (10) of Para 35 thereof], [ii]The provision of PMLA including amongst others of Section 19(1) of PMLA, which mandatorily prescribe the arrest to be made on the basis of such material in possession , on the basis of which there exists reason to believe that person is guilty of an offence under the PMLA; which shall be recorded in writing ; and pursuant to arrest to inform him of the Grounds' fo .....

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se in ECIR/01/SRT/2014, [f] Dispense with filing of affidavit in support to this Petition as the Petitioner is in judicial custody; [g] For such other or further order/s in the peculiar facts of the case. 1.2 The petitioner of Special Criminal Application No.4672 of 2014 has filed this petition under Articles 226 and 227 of the Constitution of India, with the following prayers: [A]To strike down Section 45 of the Prevention of Money­Laundering Act, 2002 [hereinafter referred to as PMLA'] .....

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s Hon'ble Court may read down, lay down, expound, interpret and deliberate upon the scope and perspective of Section 45 of PML Act so as to harmonize the same in juxtaposition with various scheduled offences [under amended Part A of the Schedule], [B] If the Hon'ble Court finds that provision of Section 45 is not ultra vires of the Article 14, 19, 21 and 22 of the Constitution of India, then to read down, expound, deliberate and interpret the scope and perspective of Section 45 of the PM .....

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us provisions under the Code of Criminal Procedure, 1973, as amended from time to time and the Guidelines laid down by the Hon'ble Apex Court in D.K.Basu v. State of West Bengal 1997(1) SCC 416, [D] For issuance of an appropriate writ of quo warranto, calling upon respondent No.3, who being an Assistant Director, Enforcement Directorate, appointed under Foreign Exchange Management Act, 1999, can under Section 54 of PMLA only assist any officer investigating under PMLA, to show cause as to ho .....

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section 19, [ii] any notification issued by Central Government for his appointment a Assistant Director under section 49 of PML Act, [iii] records to show compliance of Rules notified by GSR 446(E) dated 1.7.2005, and [d] For issuance of an appropriate writ of Habeas corpus, or order or direction under Article 226 of the Constitution of India, directing forthwith release of the Petitioner from custody, by setting aside the Impugned Arrest Order dated 1.9.2014 and the consequent remand proceedin .....

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, on the basis of which there exists reason to believe that person is guilty' or an offence under the PML Act; which shall be recorded in writing'; and pursuant to arrest to inform him of the Grounds' for such arrest, [iii] Rules notified by Central Government vide GSR 446[E], dt.1.7.2005. [iv]Notification GSR 441(E) dated 1.7.2005 issued by the Central Government appointing Director to exercise the exclusive' power conferred under section 19 of PML Act. [v] Articles 14, 21 and .....

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the petitions are almost similar, however, for the purpose of deciding the issues involved in these petitions, facts of Special Criminal Application No.4496 of 2014 are taken up. The facts of Special Criminal Application No.4496 of 2014, as per the petitioner of that petition, are as under: 2.1 On 11.04.2014, FIR No.5/16/2014 dated 11.4.2014 was registered by the District Crime Branch, Surat, alleging various offences under IPC against one M/s R.A. Distributors Pvt. Ltd., Surat and its Director .....

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ances to various parties in Dubai and Hong Kong. The petitioner herein is not amongst the accused persons even in the said FIR dated13.4.2014. 2.3 On 17.4.2014, Enforcement Case Information Report (ECIR)/01/Surat­Sub­Zonal /2014­15 was registered by the Directorate of Enforcement of Ahmedabad, Surat­Zone Surat against the persons accused in the aforesaid FIRs dated 11.4.2014 and 13.4.2014. This Fir (termed as ECIR), was registered by respondent No.3 and the case was taken up for .....

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qua the persons accused there under, the Deputy Director of the Directorate of Enforcement filed a complaint before Trial Court against 79 accused, including natural persons and legal entities. The petitioner herein is not named as accused in this exhaustive complaint filed by the Enforcement Directorate against 79 accused, which relief on plethora of statements. 2.5 On 01.09.2014, the petitioner on being summoned appeared before the respondent NO.3. He was coerced to give a confession. He was .....

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GSR 446 (E), dt. 1.7.2005, Notification GSR 441(E) dated 1.7.2005, also in violation of the Guidelines framed by the Hon'ble Apex Court in D.K.Basu Vs. State of West Bengal, 1997 (1) SCC 416, and in derogation of fundamental rights conferred under the Constitution of India vide Articles 14, 21 and 22. Whereas the petitioner was coerced to give an endorsement of having been informed of the Grounds of Arrest and having understood the same, no such Grounds of Arrest were either shown or suppli .....

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etitioner were handed over by the respondent no.3. It is not even the claim of the Respondents that at the time of Arrest or purported oral communication of the Grounds of Arrest, this friend was present and had witnessed the same. 2.7 On 2.9.2014, the Application for seeking Enforcement custody was filed by respondent No.3 before the Designated Judge under PMLA Principal District Judge Ahmedabad (Rural). In this Remand Application it was, inter alia, claimed by the Respondent No.3 that the arre .....

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f Respondent No.3. The petitioner has truthfully narrated in his oral interrogation, all the requisite details and answers to all the questions orally put to him. However, instead of permitting the petitioner to record his statements as per his version and in his own handwriting, he was coerced to sign typed statements prepared by the officers of Respondent No.3 without knowing the contents thereof. By use of coercive measures, various such statements and endorsements were obtained from the peti .....

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trial Court, inter alia seeking temporary bail till final disposal of the application. 3 The case of the respondent No.3, as stated on oath, against the petitioners, is as under: 3.1 That certain information was received from the Joint Commissioner of Customs, Customs Division, Surat that companies M/s. Harmony Diamonds Pvt. Ltd., M/s. Agni Gems Pvt. Ltd. and M/s. R. A. Distributors Pvt. Ltd. have made foreign remittance on the strength of fake bills of entry without having made any imports. It .....

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ames of the Directors who were dummy and name lenders. 3.2 Names of the companies involved in the fraudulent remittances from their bank accounts with ICICI Bank, their fake addresses and dummy directors: Sr. No. Name of the Company Directors Account No Amount illegally remitted Rs.in Crores 1 M/s. Agni Gems Pvt. ltd. 304, Shayona Hatfalia, Haripura, Surat Pankaj S. Jain and Deepak Mahadev Patil 005205500995 168.93 2 M/s. Harmony Diamonds Pvt. ltd. I Floor, Somnath Mahadev Street, Gurajara Faliy .....

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Ground Floor, Back side, Krishna Kunj Gundisheri, Laldarwaja, Mahidarpura, Surat Sagar Kamble and Manoj Kamble 624605501808. 446.4 6 M/s. Riddhi Exim Pvt. ltd. 101, I Floor, Krishna Kunj, Gundisheri, Laldarwaja, Mahidarpura, Surat Sitaram Salvi and Shailesh R. Patel 085005500829. 994.77 7 M/s. M.B. Offshore Distributors Pvt. ltd. 6/1943, Office No. 303, Cabin No. 1, 3rd Floor, Navakar Building, Opp. Kabir Mandir, Mahidarpura, Surat Sachin Sitaram Salvi and Aniket Ambekar 085005500828. 1013.18 8 .....

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iciaries of foreign remittances made and the following table shows the amount of rupees in crores were fraudulently remitted by the above said Indian firms. 3.4 Investigation as to who are the sources of such huge funds revealed that fake firms with dummy partners have made RTGS Credits from their respective bank accounts with Axis Bank to the ICICI Bank accounts of above mentioned companies. Sr No Name of the company Address Name of the partners 1 M/s. Aarzoo Enterprises 6/1854, PAI, Shop No. 4 .....

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tlar, Limbusheri, Mahidarpura, Surat Shahid M. Tamboli and Zahir Abbas M. Patel. 5 M/s. Jash Traders 7/3717, A, Cabin No. 1, 2nd floor, Rampura Mian road, Surat. Faisal Reza M Ali Patel and Ali Raza H. Bhojani 6 M/s. Natural Trading Co 6/2155, Cabin NO. 3, Basement, Gokul Bldg., Pipala Sheri, Mahidarpura, Surat Pukhraj Anandmal Mutha and Munnichand Shantilal Bhandari. 7 M/s. M.D. Enterprise 6/1766, Sainath Building, Ground floor, Cabin No. 1, Gundisheri, Mahidarpura, Surat Munnichand Shantilal B .....

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vi Gems Pvt. ltd M/s. M.B. Off shore Distributors Pvt. Ltd. M/s. Ram Shyam Exports Pvt. ltd. M/s. Trinetra Trading Pvt. ltd. Total M/s. Vandana & Co 233 113.6 45 54 139 65.99 13.56 664.15 M/s. Natural Trading Co 95 46.40 0 0 74 49 9 273.4 M/s. Jash Traders 349 124.56 57 126 175 79.45 11.78 922.79 M/s.GT Traders 270 154 54 66 202 87 6.33 839.33 M/s. M.D. Enterprise 88 27 0 0 92 44.85 13.65 265.5 M/s. Aarzoo Enterprise 272 64.85 47 95 155 71.66 7.35 712.86 M/s. Millennium & Co 26 4.4 0 0 2 .....

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13.04.2014 registered by the Detection of Crime Branch, Surat Police under Sections 420, 465, 467, 468, 471, 477 A of IPC upon the complaint of ICICI Bank investigations under the Prevention of Money Laundering Act, 2002 (PMLA) have been initiated as the Offences under Section 420, 467, 471 of IPC are scheduled offences in terms of Section 2(y) under the Prevention of Money Laundering Act, 2002, which have been registered against the above said companies and its directoRs.Upon scrutiny of the s .....

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ain created the fake companies with dummy directors and lent the same for Shri Afroz Mohamed Hasanfatta for import and export of diamonds. No such import and export of diamonds have been made from the said private limited companies and bills of entry of the year 2011 were allowed to be made and forged with the signatures of Customs Officials for illegal transfer of money by submitting the same before the ICICI Bank. The Police have arrested Shri Madanlal Jain on 7/7/2014 and the Directorate has .....

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shore Distributors Pvt. ltd., M/s. Ramshyam Exports Pvt. Ltd. and M/s. Trinetra Trading Company Pvt.ltd. He has also stated that Shri Rakesh Kothari of M/s. Riddhi Siddhi Bullion Ltd would ensure credits through RTGS were made in the firms namely, M/s. Vandana & Co., M/s. Aarzoo Enterprise, M/s. GT Traders, M/s. Jash Traders, M/s. Maruti Trading, M/s.M.D. Enterprise, M/s. Millennium & Co., and M/s. Natural Trading Co. from places like Mumbai, Surat and Delhi and would use the same for sm .....

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a firm, in his statement dtd. 26.6.2014 has named Shri Prithviraj Kothari (paternal uncle of Rakesh Kothari) would send cash to Surat from Mumbai through M/s. P. Umesh Chandra & Co. They would telephone from 022­23098745 to M/s. P. Umesh Chandra & Co for collecting the cash and during a period of time the cash amounting to ₹ 150 crore was stated to have been transferred. The said cash was delivered to various persons on the instructions of Shri Prafful Patel, Surat. Shri Madanl .....

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fraudulent remittances made to Hong Kong and Dubai for smuggling of Gold and Diamonds. To specific question on the names of the companies in which Shri Rakesh Kothari had ensured the RTGS transfers to which Shri Madanlal Jain stated that Shri Rakesh made RTGS to M/s.GT Traders and M/s. Vandana & Co. The forensic analysis of the computer seized from the Office of Shri Madanlal Jain has the messages sent from Shri Jayesh Desai regarding the debit advice of Shri Raju Kothari, Shri Rajesh Kotha .....

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i Amba Angadia firm) and Shri Praveen Kumar Jain (Commission agent from Mumbai) recorded under Section 50 of PMLA, 2002 and perused and put his dated signature on the above statements; that he had sent ₹ 750 Crore to Surat through various angadias for further RTGS and the money belonged to his paternal uncle Shri Prithviraj Kothari; that on being asked to elaborate the whole modus operandi of collecting cash and sending it for the procurement of RTGS he stated that the man of Shri Prithvir .....

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ual and they would complete the transaction by making the RTGS; that he would wait for 2 to 3 hours and in case if the phone did not come to him then it would be presumed that RTGS process was complete and in case it was not complete then the person would inform him citing the reason for non completion and it was being completed the following day; that ₹ 750 Crore in cash had been given by him to different RTGS arranging persons from the period during December 2013 to February/Mach 2014; t .....

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Office in Mumbai to Surat and would give it to the persons arranging RTGS in Surat; that the name of RTGS arranging persons were Shri Sagar and Shri Dharmendra; that those two were main persons who arranged RTGS and the total money given by him to the following angadias which was around ₹ 750 Crore were M/s. P. Umesh Chandra & Co, M/s. Gujarat Angadia, M/s. Jayantilal Ambalal Choksi, M/s. S. Babulal, Shri Arpit, Fofal wadi, Bhuleshwar, M/s. Soma Magan, Fofal wadi, Bhuleshwar and in add .....

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s. R.A.Distributors Pvt. Ltd., Surat and its directors for preparing bogus bills of entry and presenting the same for outward remittance to various parties in Dubai and Hong Kong. That another FIR came to be registered by District Crime Branch, Surat on 13.04.2014 for various offences under IPC against M/s. Agni Gems Pvt. Ltd., M/s. Harmony Diamonds Pvt. Ltd. and the directors for preparing bills of entry and presenting the same for outward remittance to various parties in Dubai and Hong Kong. H .....

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ing interested persons and legal entities, but the petitioners herein were not named. Later on, when the petitioner, who appeared on being summoned was arrested by respondent NO.3 purportedly in exercise of powers conferred by Section 19(1) of the PML Act. On reasonable belief that the petitioner has been guilty of offences punishable under Section 4 read with Section 3 of PML Act, on 02.09.2014 an application was filed by respondent No.3 before the designated Judge under PML Act viz. Principal .....

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r, by order dated 09.09.2014, learned Sessions Judge [PMLA] Designated Court was pleased to reject the prayers for interim relief and thereafter matter was kept for hearing on regular bail. An affidavit in reply was filed by respondent No.3 on 15.09.2014 and arguments were canvassed by both the learned advocate for the parties respectively and finally application filed by the petitioner for opposing remand and grant of bail came to be rejected by order dated 08.10.2014. 4.1 In the above mentione .....

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such offences not only cognizable and non­bailable, but also put onerous restrictions on accused persons of such schedule offences while taking bail from the competent court of law and such accused persons have to undergo rigor of provisions of Section 45 of the PML Act which makes it impossible for them to get any relief unless the court is satisfied that there are reasonable grounds for believing such accused person is not guilty of such offence and that he is not likely to commit any offe .....

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procedure prescribed in the above Section itself read with directions issued by the Apex Court in the case of D.K.Basu [supra] and respondent No.3 is not competent enough to order such arrest of the petitioner and further mandatory procedure of rules notified by Central Government vide GSR 446[E] dated 01.07.2005 viz. The Prevention of Money Laundering [the Forms and the Manner of Forwarding a Copy of Order of Arrest of a Person along with the Material to the Adjudicating authority And Its perio .....

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aundering [the Forms and the Manner of Forwarding a Copy of Order of arrest of a Person Along with the Material to the Adjudicating Authority and its Period of Retention] Rules, 2005 and the second notification was issued by the Central Government in exercise of powers conferred by sub­section [1] of Section 49 of the PML Act whereby the Central Government appointed with effect from 1st day of July, 2005 Directorate of Enforcement holding office immediately before the said date under the For .....

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009] was amended and vide Section 38 of the said Amended Act, 2009, the Schedule was partly amended and the offences of lesser gravity remained in Part B of the said Schedule with monetary ceiling. That on 27.11.2011 the Directorate of Enforcement issued a circular Order bearing [Tech] No.03/2011 after cadre restructure of the Directorate and re­designation of posts at various levels. 4.5 On 03.01.2013, Prevention of Money Laundering [Amendment] Act, 2013 was amended further to amend the PML .....

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to certain officers empowered to assist in inquiry etc. and clause [g] of the said section 54 provide that officers of enforcement appointed under sub­section (1) of Section 36 and Foreign Exchange Management Act, 1999 along with other such officers of the Central Government institutions recognized under law and thus like any other officers of any other Department mentioned under Section 54, the respondent No.3 was empowered according to the petitioner to assist in inquiry and was not compet .....

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s which are even non­cognizable or bailable have been subjected to rigor in terms of Section 45 of the PML Act, even when a person is accused of such an offence and recourse to Section 3 of PML Act is attracted, the offence under the PML Act could necessary become cognizable and non­bailable. Such an anomalous situation would lead to disastrous consequences. On the one hand a person may be accused of non­cognizable and/or a bailable offence however, if applied rigors of PML Act, such .....

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Section 37 of the NDPS Act where in case of certain types of offences viz. under Sections 19 or Section 24 or Section 27A and for offences involving commercial quantity under NDPS Act where to undergo rigor of section 37 and not for lesser offences. 5.1 It is further submitted that a bare glance on the provisions of Section 45 of PMLA would show that irrespective of the nature of the accusation in scheduled offence, all offences under PMLA are cognizable as well as non­bailable, and if the .....

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etitioner for oblique purposes. In any event, such provisions are therefore certainly tantamount to transgressing into fundamental rights of life and liberty of persons guaranteed in Articles 14, 19, 21 and 22 of the Constitution of India. 5.2 It is further submitted that viewed from any perspective, the provisions relating to bail under PMLA as well as construction of nature of offences there under, cannot be made in such a manner which may render the very purpose thereof to be oppressive, hars .....

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t can refuse to take notice of it. The voidness of law is not a tangible thing which can be noticed as soon as it comes into existence, a declaration that it is void is necessary before it can be ignored. [ii]In the alternative to submission (i), dire necessity is to expound and interpret Section 45 of PMLA. It is however well nigh settled that even if a provision under penal statue is intra vires, the same may not stand the scrutiny of law in case there is basic difficulty on account of jurisdi .....

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eason to believe, (e) The reasons for such belief must be recorded in writing, (f) Reasons to believe must relate to any person to be 'guilty' of an offence punishable under PMLA, (g) Pursuant to such arrest, it is mandatory to inform the arrestee of the grounds for such arrest, (h) In terms of Rules notified vide GSR 446 (E), dated 1.7.2005, particularly Rule 2(1)(c), 2 (1) (e), 2 (1) (f), 2 (1) (g), 2 (1) (h), Rule 3, and Rule 6, arrest under PMLA can be made by an arresting officer as .....

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ct. The aforesaid rules are reproduced hereinafter for ready reference ­ 2 Definitions 1. In these rules, unless the context otherwise requires,­ (c) Arresting Officer means the Director, Deputy Director, Assistant Director or any other officer, authorized in this behalf by the Central Government by general or special order to exercise the power to arrest any person under sub­section (1) of Section 19 of the Act; (e) Director or Deputy Director or Assistant Director means a Director .....

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grounds for such arrest under sub­section (1) of Section 19 of the Act; (I) Rule 3 of the aforesaid Rules further prescribes that pursuant to the arrest, the Arresting Officer shall prepare an index of the copy of the order and the material in possession and sign each page of such index of the copy of the order and the material and shall also write a letter while forwarding such index, order and the material to the Adjudicating Authority in a sealed envelope. Rule 6 specifically provides th .....

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submitted that even if Section 45 of PMLA is taken on its face value, the same cannot override the mandate of Section 19 (1) read with Section 49(3) of PMLA and Rules thereunder (supra). Viewed from any perspective, Section 45 (1) of PMLA must be construed in a harmonious manner in order to give true meaning, effect of lack of authority, and mandatory provisions under the Act and rigors as contained in Section 45 (1) cannot be invoked unless the other mandatory procedural requirements are met w .....

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above contention of learned counsel are on the premise that the graver offences alleged stricter requirement to follow the procedure and in the instant case there is total breach of procedure prescribed by law while taking away liberty of the petitioner in illegal manner. 5.7 Section 49(3) permits the Central Government to impose such conditions and limitations on exercise of the powers and discharge of duty conferred or imposed on any authority under the PMLA. Thus, as a logical corollary it c .....

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It is further submitted that in exercise of powers conferred by sub­section (1) read with clause (b) of sub­section (2), of Section 73 of the PML Act, the Central Government has notified Rules. 5.9 It is further submitted that on 26.9.2013, the purported Grounds of Arrest were handed over to the counsel for the petitioner, after the arguments in the bail application were concluded by them on earlier date. Even these purported Grounds of Arrest contain the following manifest illegalities .....

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stration of the ECIR case are mentioned. [h] There is no reference to the Complainant already filed against 79 accused persons in the same case under PMLA. [i] The purported Grounds of Arrest do not bear endorsement of any witness to suggest that the same were actually informed to the petitioner. [j] The purported Grounds of Arrest do not bear any endorsement of the petitioner to suggest that these were the Grounds claimed as explained to the petitioner. [k] Although, the purported Grounds of Ar .....

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r PMLA. [n] In one paragraph the petitioner is alleged as connected with Real Time Gross Settlement RTGS received in about 8 second layer entities (Group C), in the very next paragraph it is restricted to 2 out of these 8 entities. [p] The purported Grounds of Arrest show that the petitioner had denied the allegations in interrogation. This however cannot be the reason for his arrest without there being any reasonable belief, on any material in possession, that he is guilty of offence under PMLA .....

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t the Grounds of Arrest on the basis of material in possession for reason to believe the applicant as guilty of offence under PML Act, have not even been served upon the applicant, though mandatory under the provisions of sub­section (1) of Section 19 of PML Act. The existence of such grounds for arriving at such reasonable belief is pre­requisite for arrest under PML Act and are required to be recorded in writing. Hence, non­supply of such Grounds of Arrest , at the time of arrest o .....

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an illustration Grounds of Arrest being served upon arrest under PML Act. Noncommunication of grounds of arrest to the applicant is thus in violation of Article 14, 21 and 22 of the Constitution of India. Along with the above emphasis is laid on para 30 guidelines in the case of D.K.Basu and directions are also equally binding to Revenue Intelligence, Directorate of Enforcement, etc. 5.13 That even Rule 2(1)(c) of the Rules notified vide GSR 446[E] dated 01.07.2005 defines duly authorize arrest .....

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7)1 SCC 416. [2] State of Punjab v. Baldev Singh - AIR 1999 SC 2378. [3] Harikishan v. State of Maharashtra - AIR 1962 SC 911. [4] K. Kuppuswamy & Anr. vs. State of T.N. ­ (1998)8 SCC 469. [5] Sunil Fulchand Shah v. Union of India - (2000)3 SCC 409. [6] Hema Mishra v. State of UP - (2014)4 SCC 453. [7] Madhu Limaye & ORs.­ 1969(1) SCC 292. [8] C.B.Gautam v. Union of India - (1993)1 SCC 1999. [9] Pragnasingh Thakore vs. State of Maharashtra (2011)10 SCC 445. [10]Hussein Ghandially .....

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.1 Learned ASG appearing for the respondent No.3 submits that Section 45 of PMLA is a mandate duly provided by the legislature so as to make the offence of money laundering a cognizable and non bailable offence, the offence of money laundering is a distinct and separate offence which is exclusive of the schedule offence on the basis of which money laundering investigation under PMLA takes it course and hence the investigation of the offence punishable under section 4 of the Act has its own sanct .....

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erious threat not only to the financial systems of countries, but also to their integrity and sovereignty. 6.2 It is submitted that the nature and classification of schedule offence be it bailable or cognizable or non bailable or non cognizable has no bearing on offence under S.3 of PMLA as the mandate of the same provides for a distinct offence under Section 3 which is punishable under Section 4 of the statute and creates a new, different and a separate investigation under PML Act which is tota .....

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as defined in the law. It is submitted that due process of law was scrupulously followed and was within the jurisdiction as manifested in the PMLA. 6.4 It further submitted that the contention raised by the Petitioner in terms of Arresting Officer as defined in Rule 2(1)(C) of the rules notified vide GSR 446(E) dated 01.07.2005 has to be contrasted with the expression used in sub­section (1) of section 19 of the Act and hence the rules cannot control the provisions of the enactment and ther .....

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E) dated 01.07.2005, the words used in the notification do not show that the Director was to have powers under the Act to the exclusion of all other officeRs.It only reveals that the Director has the exclusive power but not necessarily to the exclusion of the others, who are empowered under the Act. The same contention was also settled by the Hon ble Bombay High Court in the matter of Syed Mohamed Masood Vs D. Shanmugam and others in Criminal Bail Application No. 71 of 2013. 6.6 It is further su .....

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Section 54 of the PML Act does not have any locus as the arresting officer is duly authorized under the provisions of statute and derives his authority from Section 19 of the Prevention of Money laundering Act, 2002 and as far as Directors, Deputy Directors, or Assistant Directors are concerned, no authorization of Central Government is required and that, as far as the contention of the petitioner in terms of the power to arrest has been conferred by Central Government exclusively upon the Dire .....

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uthorized powers under various Sections like 19, 17 etc. are also to assist the officers like Director, Joint Director, Deputy Director, Assistant Director who exercises the power to arrest etc. under provisions of PMLA and hence 54(g) provides just as the staff to assist the officer exercising and the Assistant Director was well within his powers to investigate the cases under PMLA and the execution of powers vested in him under the Section 19 was apposite. 6.9 It is further submitted that the .....

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ltogether a separate and a distinct offence which is investigated by Enforcement Directorate exclusive of the Schedule offence and persons found involved in the money laundering racket who may or may not have been named in offence registered by the predicate agency are been prosecuted for their alleged involvement in the offence as defined under S. 3 of the Act. 6.10 It is further submitted that the petitioner s involvement in the offence has come up during the process of investigation carried o .....

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mitted that the petitioner s role cropped up during the investigation and he was twice summoned under PMLA,2002. Since he was not forthcoming during the investigations his arrest under PMLA,2002 has been effected. 6.11 It is next submitted that the Prosecution Complaint dated 18.07.2014 has been filed before the Hon ble Designated Court Under PML Act against 79 accused and in the same case after further investigation a supplementary complaint has also been filed on 29.10.2014 against the said pe .....

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wers conferred upon him by Section 19 read with Rules notified vide GSR 446 (E) dated 1.7.2005 of Prevention of Money Laundering Act, 2002 and not in derogation with the fundamental rights enshrined by the Constitution of India as the said arrest comes under the purview and fulfills requirement of S. 19. It is also submitted to the Hon ble Court that as provided by S. 19 (1) grounds of arrest were communicated to the accused, and a due medical check up was under taken after which accused was pro .....

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by the petitioner on being produced on the very first day and thereafter before the Hon ble Designated Court. It is also respectfully submitted that this is ploy to abuse due process of law since the investigation has revealed his involvement and the complaint has already been filed before the Designated Court under PML Act, Ahmedabad. 6.13 It is submitted that in execution of arrest in compliance with the procedure followed above, relatives of accused were telephonically informed about his arr .....

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en told the reasons for handing over the belongings of the petitioner and had duly acknowledged of having received the belongings of the petitioner. 6.14 It is further submitted that along with the production of the accused, an application for Enforcement Custody was made before the Designated Judge and the learned Judge was pleased to grant custody of the petitioner for four days from 4/9/2014 to 8/9/2014. That the petitioner has been told the grounds of arrest and having learned about his grou .....

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y involuntary confession. It is also respectfully submitted that the statements were typed as per the version and say of the petitioner and he was allowed to read before he put his signature on all the occasions. That the petitioner has in his own handwriting made several corrections to the statements and hence there was no question of coercion or duress. The petitioner in his own handwriting has also mentioned that whatever was stated during the remand period was voluntarily, without any coerci .....

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f money laundering has been made clear by filing of a prosecution complaint dated 29.10.2014 against the petitioner and others in the Hon ble Designated Court. The proceeds derived from helping Shri Madanlal Jain and others in the illegal transfer of money to Hong Kong and Dubai are being investigated against the petitioner. 6.17 It is further submitted that the Arrest Memo was served to petitioner and the inventory of the belongings of the petitioner were handover to Shri Amit Solanki, a Charte .....

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available to them and as per the directions of the Hon ble Designated Judge, the copy of the grounds of arrest has been made available to the counsel of the petitioner. The said copy of grounds of arrest has also been seen by the Hon ble Designated Judge and confirmed that it was the same copy that was produced before them for seeking remand. It is pertinent to note that production memo submitted before the Designated Judge also contained detailed grounds of arrest. 6.18 It is further submitted .....

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ters / angadia firms known to the petitioner. The statement of the petitioner is quite evident as to how he helped in illegal transfer of money by various individuals without being connected to the companies mentioned under the Groups A, B, C and D either directly or indirectly. It is further submitted that investigations were initially started under FEMA and on receipt of the copies of FIRs from the Police authorities, investigations under PMLA have also been initiated. The investigation under .....

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adanlal Jain. Shri Rajesh Kothari is a beneficiary of the unlawful remittances to Dubai and his role has been evident by the summary of email messages sent from the computer of Shri Madanlal Jain wherein the summary reads as under: details of debit of Rajesh Kothari s account. It is submitted that the petitioner is guilty of offence under Money laundering in as much as he had financially helped Shri Madanlal Jain for making RTGS transfers to the companies owned by Shri Madanalal Jain. The Petiti .....

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eniable. That the petitioner having lent money to Shri Madanlal Jain for his fraudulent activities has also unquestionably received commission for helping in the Offence of Money Laundering. Since the petitioner has helped Shri Madanlal Jain in his criminal activities and the petitioner having derived proceeds from such criminal activities are nothing but proceeds of crime which is a matter of investigation being conducted by the Enforcement Directorate. The petitioner has been guilty of offence .....

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at the claim of the petitioner that the material possession with the Enforcement Directorate was vague or insufficient to be called the petitioner guilty of Offence under Money Laundering has reasonably been set aside by the Hon ble Designated Judge for PMLA,2002. 6.21 It is further submitted that mere mention of the words such as believe Incontrovertible and other phrases without the full sentences accompanying the above words do not give a complete understanding of the background in which the .....

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to the companies mentioned under the Group C is unquestionably substantiated. That the companies under Group C were of Shri Madanlal Jain and made RTGS transfer to Companies mentioned under Group A which used the same for illegal transfer of money to places like Hong Kong and Dubai on strength of fake documents. The investigation has also established the role of the petitioner beyond an iota of doubt to the extent of sourcing funds to the companies categorised as Group C and the petitioner himse .....

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further submitted that the petitioner s involvement in the offence of money laundering has been established by the statements of various persons and the investigation carried out by the Directorate of Enforcement following which a prosecution complaint has been duly filed against the accused before Designated Court on 29/10/2014. Shri Madanlal Jain for whom the petitioner lent ₹ 750 crore financial help for illegal transfer of money amounting to ₹ 5395.75 Crore has stated that the tw .....

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nown as Shri Rajesh Kothari who is an elder brother of the petitioner and details of transactions in PDF format. 6.23 It is further submitted that the Respondent has taken due care in making arrest of the said petitioner and the same has been executed after fulfilling the requites as laid under S. 19 of the prevention of Money Laundering Act, 2002, The material in possession and reasons to believe were also made explicit in the production memo at the time of production of the petitioner after ar .....

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R was registered following the receipt of FIR registered by the Police authorities. The investigations launched under PMLA,2002 after registering the ECIR for source and trail of this mammoth illegal transfer of money led to various individuals and companies. The financial sources to the companies categorised under Group C by the petitioner himself was used for RTGS transfers to the companies categorised under Group A which have made the fraudulent remittances made from Surat on the strength of .....

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ction 3 of PMLA,2002. The proceeds thus derived from the illegal transfer of money are nothing but proceeds of crime as has been defined under Section 2 (1) (u) of PMLA,2002. 6.25 It is further submitted that it has been held by the Hon ble Designated Judge under PML Act, Ahmedabad that the Respondent No. 3 i.e. Assistant Director of Enforcement has been authorized to execute arrest and arrest is not invalid in law vide their order dated 09.09.2014 and Hon ble Designated Court was also pleased t .....

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n to the normal bail procedure provided under code of criminal procedure, furthermore the mandate of the Act is intended to make money laundering an offence and provide for its punishment thereof so as to deprive the offender to enjoy fruits of money which has ill gotten source, henceforth creating an altogether separate and distinct offence which is purely exclusive of the schedule offence, so contention as to nature of the schedule offence with respect to bailable or non cognizable does not ha .....

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itted that offences which come within the purview of the S.45 are the offence under the Prevention of Money Laundering Act and hence applicability of the said section is over the offence under PMLA, 2002 and not over the investigation or trial under the schedule offence on basis of which the independent investigation under PMLA takes it course. 6.27 It is further submitted requisites of S.19 have been complied while executing arrest under PMLA and hence no such breach and violation of Fundamenta .....

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the rules were, therefore, framed in order to prescribe forms in which records were to be maintained and the manner in which order and material referred to in sub section (2) of Section 19 was to be maintained. The term arresting officer was defined for the purpose of those rules only and definition of Arresting Officer in these rules cannot be held to control provisions of Section 19 of the Act or require that the Central Government has to issue notification under those rules for authorising a .....

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r the petitioner of Special Civil Application No.4672 of 2014 adopted the arguments canvassed by learned Senior Advocate Shri Vikram Chaudhary appearing for the petitioner in Special Civil Application No.4496 of 2014. He further relied on debate in the Rajya Sabha [Council of States] when the Prevention of Money Laundering Bill, 1999 was presented after it was passed by Lok Sabha [House of Representatives]. He further submitted that under Section 24 of the Act burden of proof is shifted upon acc .....

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eriod of Retention] Rules, 2005, are reproduced, as under: THE PREVENTION OF MONEY­LAUNDERING ACT, 2002 [A] The enacting history of the Act including International commitment and convention, resolutions of the General Assembly of the United Nations, the statement of objects and reasons accompanying the Bill which was eventually enacted by the Parliament; the preamble of the Act; and its several provisions disclosing a policy to address the scourge of Laundering of Money which destabilizes Na .....

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The placement stage: The malfeasant places the crime money into the normal financial system; [ii]The Layering state: The money induced into the financial system is layered­spread out into several transactions within the financial system with a view to concealing the origin or original identity of the money and to make this origin/identity virtually disappear; and [iii] The integration stage: The money is thereafter integrated into the financial system in such a way that its original associat .....

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earned out of crime committed abroad are either laundered [place] abroad or within the country and are ultimately integrated into the country; [iv]Out bound funds: Typically constitute illicit capital flight from a country and do not return back to the country; and [v] Flow­through: The funds enter a country as part of the laundering process and largely depart for integration elsewhere. [D] The Act is a special Law and a self contained code intended to address the increasing scourge of money .....

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in force. [E] The provisions of the Act are fair, reasonable and have sufficient safeguards, checks and balances to prevent arbitrary exercise of power and/or abuse by the authorities and provide several layers of scrutiny at various stages of the proceedings. [F] A person accused of money laundering is subject to broadly two parallel actions: [i] prosecution for punishment under section 4, for the offence of money­laundering defined in Section 3; [ii]attachment of the property involved in m .....

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8 was introduced in the Parliament. The Bill was referred to the Standing Committee on Finance, which presented its report on 4th March, 1999 to the Lok Sabha. The Central Government broadly accepted the recommendation of the Standing Committee and incorporated them in the said Bill along with some other desired changes. STATEMENT OF OBJECTS AND REASONS It is being realized, would over, that moneylaundering poses a serious threat not only to the financial systems of countries, but also to their .....

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nd procedures that banks should follow in order to assist the law enforcement agencies in tackling the problem on moneylaundering. [c] the Financial Action Task Force established at the summit of seven major industrial nations, held in Paris from 14th to 16th July, 1989, to examine the problem of money­laundering has made forty recommendations, which provide the foundation material for comprehensive legislation to combat the problem of money­laundering. The recommendations were classifie .....

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ramme of Action adopted by United Nations General Assembly but its Resolution No.S­17/2 of 23rd February, 1990, inter alia, calls upon the member States to develop mechanism to prevent financial institutions from being used for laundering of drug related money and enactment of legislation to prevent such laundering. [e] the United Nations in the Special Sessions on countering World Drug Problem Together concluded on the 8th to the 10th June, 1998 has made another declaration regarding the ne .....

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tanding Committee on Finance, which presented its report on the 4th March, 1999 to the Lok Sabha. The recommendations of the Standing committee accepted by the Central Government are that (a) the expressions banking company and person may be defined; (b) in Part I of the Schedule under Indian Penal Code the work offence under section 477 A relating to falsification of accounts should be omitted; (c) 'knowingly' be inserted in clause 3 (b) relating to the definition of money­launderin .....

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e; (g) the words unless otherwise proved to the satisfaction of the authority concerned may be inserted in clause 22 relating to presumption on inter­connected transactions; (h) vacancy in the office of the Chairperson of an Appellate Tribunal, by reason of his death, resignation or otherwise, the senior­most member shall act as the Chairperson till the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill the vacancy, enters upon his office; (i) .....

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rnment have broadly accepted the above recommendations and made provisions of the said recommendations in the Bill. 3 In addition to above recommendations of the standing committee the Central Government proposes to (a) relax the conditions prescribed for grant of bail so that the Court may grant bail to a person who is below sixteen years of age, or woman, or sick or infirm, (b) levy of fine for default of non­compliance of the issue of summons, etc. (c) make provisions for having reciproca .....

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ook as THE PREVENTION OF MONEYLAUNDERING ACT, 2002 (15 of 2003). Section 2 contains definitions. [c] "Assistant Director" means an Assistant Director appointed under sub­section (1) of section 49; [d] "attachment" means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III; [da] authorised person means an authorised person as defined in clause (c) of section 2 of the Foreign exchange Management Act, 1999 [42 of (1991 .....

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llection of evidence. v] an association of persons or a body of individuals, whether incorporated or not, [vi] every artificial juridical person not falling within any of the preceding subclauses, and [vii] any agency, office or branch owned or controlled by any of the above persons mentioned in the preceding sub­clauses; [u] "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled off .....

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ces is thirty lakh rupees or more [iii] the offences specified under Part C of the Schedule [z] Special Court means a Court of Sessions designated as Special Court under sub­section (1) of Section 43; [za] transfer includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer of right, title, possessions or lien; [zb] value means the fair market value of any property on the date of its acquisition by an persons, or if such date cannot be determined, the date on which su .....

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aundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees: Provided that where the proceeds of crime involved in money­laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "w .....

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m of the grounds for such arrest. 2 The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub­section (1), forward a copy of the order along with the material in his possession, referred to in that sub­section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed. 3 Every person ar .....

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are proved to be involved in money­laundering, then for the purposes of adjudication or confiscation under section 8f or for the trial of the money­laundering offence, it shall unless otherwise provided to the satisfaction of the Adjudicating authority or the Special Court, be presumed that the remaining transactions form part of such inter­connected transactions. 24 Burden of Proof - In any proceeding relating to proceedings of crime under this Act, [a] in the case of a person char .....

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3 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless­ [i] the Public Prosecutor has been given an opportunity to oppose the application for such release; and [ii]where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commi .....

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ral or special order made in this behalf by that Government. [1A] Notwithstanding anything contained in the Code of Criminal Procedure, 1973, [1973 (2 of 1974], or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorized, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed. [2] The limitation on granting of bail specified in sub­section (1) is in addition to the .....

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icers.­ [1] The Central Government may appoint such persons as it thinks fit to be authorities for the purposes of this Act. [2] Without prejudice to the provisions of subsection (1), the Central Government may authorise the Director or an Additional Director or a Joint Director or a Deputy Director or an Assistant Director appointed under that sub­section to appoint other authorities below the rank of an Assistant Director. [3] Subject to such conditions and limitations as the Central G .....

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ch directions as the Central Government may issue for the exercise of powers and performance of the functions by all or any of the authorities. [2] In issuing the directions or orders referred to in sub­section (1), the Central Government may have regard to any one or more of the following criteria, namely:­ [a] territorial area; [b] classes of persons; [c] classes of cases; and [d] any other criterion specified by the Central Government in this behalf. 52 Power of Central Government to .....

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ticular case in a particular manner; or [b] interfere with the discretion of the Adjudicating Authority in exercise of his functions. 53 Empowerment of certain officers.­ The Central Government may, by a special or general order, empower an officer not below the rank of Director of the Central Government or of a State Government to act as an authority under this Act: Provided that the Central Government may empower an officer below the rank of Director if the officer of the rank of the Direc .....

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of this Act. [2] In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:­ [p] the manner in which the order and the material referred to in sub­section (2) of section 19 shall be maintained. The Prevention of Money­Laundering [The Forms and the Manner of Forwarding a copy of Order of Arrest of a Person Along With The Material to the Adjudicating Authority and its period of Retention] Rules .....

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ct, 1999 The Director of Enforcement holding office immediately before the 1st day of July, 2005 under the Foreign Exchange Management Act, 1999 [42 of 1999] shall be entitled to exercise the exclusive powers conferred under the following provisions: [1] Under section 5 i.e attachment of property involved in money­laundering. [2] Under section 8 i.e. power of adjudication. [3] Under section 16 i.e. power power of survey. [4] Under section 17 i.e. power to search and seizure. [5] Under sectio .....

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ntracting state. [13] Under section 60 i.e. power of attachment, seizure and confiscation in contracting State or in India. [14 ]Under section 63 i.e. to impose penalty in respect of failure to give information. 36. Directorate of Enforcement - [1] The Central Government shall establish a Directorate of Enforcement with a Director and such other officers or class of officers as it think fit, who shall be called officers of Enforcement, for the purposes of this Act. [2] Without prejudice to provi .....

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ct. Relevant notifications / Orders / Circular, are reproduced hereinbelow: Notification New Delhi, the 1st July, 2005 G.S.R.440[E] - In exercise of the powers conferred by sub­section (1) of Section 49 of the Prevention of Money­laundering Act, 2002 [15 of 2003], the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Director, Financial Intelligence Unit, India, under the Ministry of Finance, Department of Revenue, as the Director to exercise the exclusi .....

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[Notification No.5/2005/F.No.6/2/2005­E.S.] V.P.ARORA, Under Secy. Notification New Delhi, the 1st July, 2005 G.S.R.441[E] - In exercise of the powers conferred by sub­section (1) of Section 49 of the Prevention of Money­laundering Act, 2002 [15 of 2003], the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Director of Enforcement holding office immediately before the said ate under the Foreign Exchange Management Act, 1999 [42 of 1999], as the Dire .....

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and section 69 of the aforesaid­said Act. [Notification No.6/2005/F.No.6/2/2005­E.S.] V.P. ARORA, Under Secy. ORDER NO. S.O. 906[E] DATED 21.04.2010, ISSUED BY MINISTRY OF FINANCE [DEPARTMENT OF REVENUE] In exercise of powers conferred by sub­section (1) of section 49 of the Prevention of MoneyLaundering Act, 2002 (15 of 2003), the Central Government hereby appoints the Enforcement Officer in the Directorate of Enforcement appointed under subsection (2) of section 36 of the Foreign .....

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d date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Additional Director for the purpose of the Prevention of Money­laundering Act, 2002. [F.No.6/2/2005­E.S.] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1274[E] - In exercise of the powers conferred by Sub­section (1) of Section 49 of the Prevention of Money­laundering Act, 2002 (15 of 2003) the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Deput .....

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effect from the 1st day of July, 2005, the Assistant Director holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Assistant Director for the purpose of the Prevention of Money­laundering Act, 2002. [F.No.6/2/2005­E.S.] ANUJ SARANGI, Director Ref. No. A­3/1/2011 Date:27/08/2011 CIRCULAR ORDER (TECH) NO.03/2011 The cadre restructuring of the Directorate and redesignation of posts of Deputy Director, Assistant Director Gr .....

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zed Conditions of Authorization 5 Provisional Attachment of Property Joint Director Nil 8(4) Taking possession of attached property Deputy Director Subject to approval of Joint Director 16 Survey Assistant Director Subject to approval of Joint Director 17 Search and Seizure Assistant Director/Deputy Director Subject to approval of Joint Director 18 Search of persons Assistant Director Subject to approval of Joint Director 19 Power of arrest Assistant Director Subject to approval of Special Direc .....

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ies shall also perform other works/functions, as may be specifically assigned to them from time to time by the Director of Enforcement/their supervisory officers. 9 The Apex Court in the case of Ram Jethmalani & ORs. vs. Union of India & ORs.reported in (2011)8 SCC 1, extensively considered unaccounted / black money generated in India by Indians and transferred and accumulated in foreign banks and about prevention of money­laundering and Part­I of the above order begins as under: .....

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ansactions has been viewed as potentially problematic for the social order, in as much as it signifies a move to evaluating value, and ethical desirability, of most areas of social interaction only in terms of price obtained in the market place. 9.1 That other paragraphs before Part­II of the order speak volume about state of affairs about incidence of crime, petty and grand, like any other social phenomena is often linked to transfers of monies, small or large, the Apex Court clearly notice .....

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erspective. This is so in two respects. The quantum of such monies by itself, along with the numbers of individuals or other legal entities who hold such monies, may indicate in the first instance that a large volume of activities, in the social and the economic spheres within the country are unlawful and causing great social damage, both at the individual and the collective levels. Secondly, large quanta of monies stashed abroad, would also indicate a substantial weakness in the capacity of the .....

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e of declining moral authority, thereby causing the incidence of unlawful activities in which wealth is sought to be generated, as well as instances of tax evasion, to increase in volume and in intensity. 14. When a catchall word like "crimes" is used, it is common for people, and the popular culture to assume that it is "petty crime," or crimes of passion committed by individuals. That would be a gross mis­characterization of the seriousness of the issues involved. Far m .....

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wful and unlawful mechanisms of transfer of monies across boundaries of nationstates. They work in the interstices of the micro­structures of financial transfers across the globe, and thrive in the lacunae, the gaps in law and of effort. The loosening of control over those mechanisms of transfers, guided by an extreme neo­liberal thirst to create a global market that is free of the friction of law and its enforcement, by nation­states, may have also contributed to an increase in the .....

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in the context of subject petition for which investigation is carried out ­ Follow the Money by the Directorate of Enforcement upon registering on offence under Section 3 of the PML Act to the tune of ₹ 5395.75 crores is to be considered. 10 It is to be noted that no specific challenge is made to omission of Part B containing paras 1 to 25 by amendment Act 2 of 2013 with effect from 15.02.2013 and also substitution of Part A by the very Act. That only effect and consequence of the abo .....

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constitutionality of the enactment is otherwise not ultra vires meaning thereby such an enactment is enacted in exercise of powers conferred upon the Central Government or State Government, as the case may be, keeping in mind various entries in Schedule VII read with Articles 245 and 246 of the Constitution of India. There is no dispute about legality, validity and constitutionality of the PML Act, 2002 and subsequent amendments except Section 45 of the Act, which is subject matter of the petit .....

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nifest itself in four ways : in the requirement of express language for the creation of an offence; in interpreting strictly words settling out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction. 10.4 In Craies and Statute Law [7th Edn. At P.529] it is said that penal statutes must be construed stri .....

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hts of individuals, and on the plain principles that the power of punishment is vested in the Legislature, and not in the juridical department, for it is the Legislature, not the Court, which is to define a crime and ordain its punishment . 10.5 Even the Apex Court interpreted provisions of Penal statute containing strict provisions. In the case of Kartar Singh vs. state of Punjab reported in (1994)3 SCC 569, the Apex Court held that The conditions imposed under section 20(8)(b), as rightly poin .....

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f, has got reason to believe that any person in India or within the Indian Customs water has been guilty of an offence punishable under the respective Act, may arrest such person. Therefore, the condition that there are grounds for believing that he is not guilty of an offence , which condition in different form is incorporated in other Acts such as clause [I] of Section 437(1) of the Code and Section 35(1) of FERA and 104(1) of the Customs Act, cannot be said to be an unreasonable condition inf .....

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ted the identical provisions regarding granting of bail while dealing with section 21[4] of Maharashtra Control or Organised Crime Act, 1999 (MCOCA) and held that the said wordings does not lead to the conclusion that the Court must arrive at a positive finding that the applicant has not committed offence under the Act. It must be so construed that the Court is able to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail much before commencement o .....

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hat Section 2 of Chapter I contains various definitions and money laundering is defined under Section 2(p) makes a reference that money laundering' means the meaning assigned to it in section 3 of Chapter II under the head Offences of Money­Laundering is wide and extensive. 10.8 It is worth noting that Section 3 is again amended and earlier words with the proceeds of crime and projecting came to be substituted by Act 2 of 2013 with effect from 15.02.2013 vide S.O. 343(E), dated 8.2.2013, .....

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ing or claiming it as untainted property shall be guilty of offence of money­laundering read with definitions of proceeds of crime under Section 2[u], property' under Section 2[v] and value under Section [zb] of the PML Act. In the present case, not only direct or indirect attempt to indulge, but the petitioners have knowingly assisted various persons and companies viz. legal entities and actually involved in process and also activity connected with proceeds of crime, which include its c .....

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PML Act and activity relating to schedule offence or value of any property and scheduled offence is defined under Section 2[y] which after amendment Act 2 of 2013 remained all those offences specified under part A of the schedule since part B is omitted and part A is substituted accordingly by shifting offences in Part B enblock to Part A. 10.11 That reference to criminal activity relating to a schedule offence is again a wider connotation and even may extend to a person, who is connected with .....

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h tainted property under sections 5, 8, etc. subject to outcome at the end of trial before the special court. In the above context, section 24 of PML Act cast burden of proof upon an accused person to prove that proceeds of crime are untainted property. 10.12 A bare perusal of section 45 of the PML Act reveals that it is pertaining to offences to be cognizable and non­bailable and begins with nonobstinate clause notwithstanding anything contained in the Code of Criminal Procedure, 1973 and m .....

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to commit such offences while on bail. The above two conditions are of course subject to two un­numbered provisos viz. that a person under the age of sixteen years or is a women or is sick or infirm, may be released on bail, if the special court so directs and further that Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by authorized person. Thus, when the situation arises about legality and validity of the complaint .....

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hat the accused person is not guilty of such offence and while on bail he is not likely to commit any offence in spite of opposition by the public prosecutor, no restriction is put upon orders of Special Court to release such accused person on bail. When money laundering is a distinct offence under Section 3 of PML Act read with Section 2[p], 2[u], 2[v] and 2[zb], which comprise one or more clear and simple financial transactions, which may involve and comprise a complex web of financial and oth .....

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proceeds of crime meaning thereby as defined in Section 2[u] and property as per Section 2[v] derived as a criminal activity relating to erstwhile part B offences prior to omission and subjecting to rigor of Section 45 of PML Act is adequate remedy to secure bail by a person accused of Section 3 of PML Act before designate court. That offences under penal statue or statutes included in Part B prior to omission having lesser or negligible consequences or infraction on liberty of an individual af .....

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That such offences of lesser gravity having negligible consequences if related or connected with criminal activities of offenders of Section 3 of PML Act viz. money laundering transactions having interstate and/or cross border implications become menace to humankind. Even to trace out its source, transfer and ultimate use even by terrorists group or outlaws jeopardize integrity and sovereignty of nations and having far reaching consequences on financial system / economies of such sovereign state .....

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on 19 of the PML Act which takes care of clauses 1 and 2 of Article 22 of the Constitution of India and facts stated on oath by the deponent ­ respondent No.3 about following the above safeguards are discerning from the record that the accused person was informed about the grounds for such arrest as signed by him and was also produced within a period of 24 hours of such arrest before the nearest Magistrate. That other provisions of Article 22 of the Constitution of India are about preventive .....

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followed by respondent No.3 and other officers while arresting the petitioners it cannot be said that the arrest is violative of Article 22 of the Constitution of India or guidelines / directions of D.K.Basu [supra] warranting any interference of this court in exercise of jurisdiction under Article 226 of the Constitution of India issuing writ of habeas corpus. 10.16 The next contention is based on Section 19 read with Sections 48 and 49 of the PML Act that the respondent No.3 is not authorized .....

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ection (1) of Section 19 after the words any other officer . Section 48 defines authority under the Act and Section 49 is about appointment and powers of authorities and other officers, Section 50 is about powers of authorities regarding summons, production of documents and to give evidence etc. Section 51 is for jurisdiction of authorities. Section 52 is for powers of Central Government to issue directions and Section 53 is for empowerment of certain officers and Section 54 is for certain offic .....

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section 2 and Section 19 shall be maintained and precisely for this purpose. Clause [a] provides for form in which records referred to in the Act to be maintained. 10.14 The Rules, 2005 defines Arresting Officer as per definition under rule 2(c) and contains, , [coma] after Any other officer , which is missing in Section 19 of the Act, and therefore, contention of learned counsel for the petitioners that unless there is special notification empowering Assistant director of Enforcement Directorat .....

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07.2005. That reference is also made to GSR 440(E) and GSR 441(E) both dated 01.07.2005 issued in exercise of powers conferred by sub­section (1) of Section 49 of the PML Act, which specifically conferred exclusive power upon designated officers for the purpose of sections mentioned therein. It is contended that vide GSR 440 [E], no power is conferred upon the Director, Financial Intelligence Unit, under the Ministry of India, Department of Revenue though designated as the Director to exerci .....

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s illegal and unconstitutional and accordingly arrest order is to be set aside. 10.15 That Section 19 postulates the following pre­conditions viz. that the competent authority under the Act empowered to arrest must have material in possession before exercising such powers and rule 2[g] of Order of Arrest Rules, 2005 define the term material . 10.16 That on the basis of such material in possession, the competent authority must have reason to belief recorded in writing that any person has been .....

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ed before the learned Magistrate or the Metropolitan Magistrate, as the case may be, having jurisdiction, within a period of 24 houRs.The above provisions are in consonance with Article 22(1) of the constitution of India. 10.18 That the Ministry of Finance, Department of Revenue has appointed the Enforcement Officer in the Directorate of Enforcement appointed under sub­section (2) of Section 36 of FEMA as Assistant Director for the purpose of PML Act and such order is issued in exercise of p .....

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exercise of powers under Section 19(1) of the PML Act. That subsection (2) of Section 49 will come into play only when Director, Deputy Director or Assistant Director, as the case may be, would like to appoint any other officer for the purpose of exercising powers and discharge the duties conferred or imposed under the PML Act. However, that does not preclude the Ministry of Finance, Department of Revenue to issue order appointing Assistant Director of FEMA to function under PML Act. 10.19 Unde .....

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(a)(p) and definition clause 2(1)(c) makes it clear that as far as the Directors, Deputy Directors or Assistant Directors are concerned, no specific or general authorization of the Central Government is necessary and such authorization will be required only when any other officer viz. officers other than the above are to be appointed to carry out purpose of the Act, a notification by the Central Government may be necessary. Therefore, contention raised by learned counsel for the petitioners that .....

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a person who was arrested by the enforcement directorate for his involvement in offence under Section 3 of PML Act, 2002 came to be decided where similar contention was raised by the applicant therein that the Assistant Director was not authorized to affect arrest under Section 19(1) of the PML Act, in which reliance was placed on Scheme of the Act viz. Sections 19, 45, 49, 73, etc came into consideration along with SR 441(E) dated 01.07.2005 and other such notifications. The learned Single Jud .....

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ntained. 14. The rules were, thus, framed in order to prescribe forms in which records were to be maintained and the manner in which order and material referred to in sub­section (2) of section 19 was to be maintained. The term Arresting Officer was defined for the purpose of those rules only. Inserting in clause (c) (1) of Rule (2) of those Rules, a subsequent comma, [,] after the words, or any other officer , may be an error of the draftsman. In any case it is not necessary to go into that .....

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ions of Section 19 of the Act and the most appropriate interpretation may be that as far as Directors, Deputy Directors, or Assistance Directors are concerned, no authorization of the Central Government is required, and while any other officer could also be authorised by the Central Government, if such other officers has to be authorised, a notification by the Central Government would be required. Thus, there is no substance in the contention that the Assistant Director who effected arrest lacke .....

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no violation of Articles 21 and 22 of the Constitution of India, in effecting the arrest of the applicant, even judgment of this Court in Suaibo Ibow Casamma ­vs­ Union of India, reported in 1995 (80) E.L.T. 762 (Bom.), does not help the applicant. 16. Learned Senior Counsel for the applicant next submitted that the power to arrest has been conferred by the Government exclusively upon the Director of the Enforcement Directorate. He drew my attention tot he notification dated 1st July, 20 .....

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conferred under Section 5, section 8, section 17, section 18, section 19, section 20, section 21, sub­section (1) of section 26, section 45, section 50, section 57, section 60, section 62, and section 63, of the said Act and the said Director shall also concurrently exercise powers conferred by sub­section (3) sub­section (4) and subsection (5), of section 26, section 39, section 40, section 41, section 42, section 48, section 49, section 66 and section 69 of the aforesaid Act . 17. .....

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statutorily conferred on the authorities under the Act, there can be no question of the Central Government issuing notification the Assistant director from the authorities who are exercising power of arrest. Therefore, , this notification too does not help the applicant in contending that he has been arrested by the officer who had no authority. 10.21 Thus, with amended Section 3 and Schedule under Section 2[y] by Amendment Act 2 of 2013 the above reasonings persuade us to take similar view upo .....

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d in view of Section 49 the Central Government appoints such persons as it thinks fit to be authorized for the purposes of this Act. Therefore, the appointment of Director, Department of Enforcement is not exclusion of other authorities viz. Additional Director, Joint Director, Deputy Director, Assistant Director, who are otherwise empowered by PML Act, 2002. 10.22 Thus, what emerges from the discussion and findings as above, our conclusions are as under: That Section 45 of PML Act, 2002 [as sub .....

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rent orders viz. [i] S.O. 1273[E], [ii] S.O. 1274[E] and [iii] S.O. 1275/E all dated 13.09.2005 in exercise of powers under sub­section (1) of Section 49 of PML Act whereby the Special Director, Deputy Director and Assistant Director, who held office immediately before 01.07.2005 under The Foreign Exchange Management Act, 1999 as Additional Director, Deputy Director and Assistant Director for exercise of powers under PML Act. This is further evident from the fact that in continuation of orde .....

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or Grade­I and Assistant Director, Grade­II and conferred power of arrest upon Assistant Director, subject to approval of Special Director. Therefore, harmonious reading of Sections 48 to 54 and definition of Assistant Director contained in Section 2[c] of PML Act reveal the Assistant Director - respondent No.3 in this case is duly empowered to order arrest under Section 19 of the PML Act. 10.23 That in view of our holding that the Assistant Director of Directorate of Enforcement - respo .....

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nexus is established between the criminal activity relating to schedule offence and the proceedings thereof for the offences of money laundering as defined under Section 3 read with Section 2(1)(u) of the PML Act. That during the process and investigation carried out by the Directorate of Enforcement, the petitioners are found to have been involved in money laundering racket and not naming the petitioners in the offences registered initially by investigating agency is now being prosecuted for t .....

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r made by the petitioners about any kind of ill­treatment or coercion by the offices of Directorate of Enforcement. That in execution of arrest, all procedural requirements were complied with and the accused has signed receipt of grounds for arrest and even a friend of the accused viz. Mr. . Amit Solanki, C.A. Was handed over the belongings and signed the inventory annexed to the arrest memo. That learned Designated Judge was pleased to grant custody of the petitioners for a period of 4 days .....

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r under Article 19(1)of the PML Act or under Article 22(1) of the Constitution of India. Further, since the subject matter is pending before the competent designated court and upon registering complaint, we do not further deliberate on the import of the nature of involvement of the petitioners for the offences under Section 3 of the PML Act, but the fact remains that affidavit filed by the respondent No.3 placing his version on the record remains undisputed till the matter was heard and kept for .....

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stant Director of Enforcement is competent and authorized to issue order of arrest under Section 19(1) of the PML Act and no case is made out to issue writ of quo warranto as prayed for. 10.27 That offence under Section 3 of PML Act is distinct and different, and therefore, omission of Part B from Schedule under Section 2[y] and substitution of Part A do not make any difference to the case of the petitioners, who are accused of offences under Section 3 of the PML Act, irrespective of absence of .....

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rd to Section 24 of the PML Act and we are in complete agreement with the reasons and conclusions qua sections 23 and 24 of the PML Act and we reject the contention of Shri Sunit Shah, leaned counsel for the petitioner that burden of proof is shifted at the stage of time of bail but not at the stage of trial. The relevant portion of issues [E] and [F] of the judgment in the case of B.Rama Raju, reads as under: ISSUE­E The challenge to Section 23 is projected on the ground that the presumptio .....

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th property, in reality involve a complex web of transactions that are processed through three stages ­ the placement, layering and integration stage. When laundering operations are pursued across State boundaries, flows of funds would involve several routes. Since the object of the Act is to seize or attach proceeds of crime involved in moneylaundering for eventual confiscation to the State, the enforcement strategy must be commensurate with, correspond to and complement the degree of camou .....

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sense as applied by the Act to attachment and confiscation processes as well. Such duality is achieved by the drafting technique of defining moneylaundering in Section 2 (p) by ascription of the definition of the offence of money­laundering in Section 3. This technique, though specific, is not unique. As observed in LIC of India Vs. Crown Life Insurance Co., the object of a definition clause in a statute is to avoid the necessity of frequent repetitions in describing all the subject matter t .....

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ition expressed in Section 3, where this expression is defined for the purpose of delineating the offence. In Section 2(1)(p), however, the expression money­laundering is defined for the generic purpose of describing the contours of the conduct; wherever the expression is employed in the several provisions of the Act, including in Chapter.III for attachment and confiscation. It is also well settled that the legislature has the power to define a word or an expression artificially Kishanlal Vs .....

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ual involvement in any process or activity connected with proceeds of crime and projecting such proceeds of crime as untainted property, constitutes money­laundering. The expression proceeds of crime means property derived or obtained, directly or indirectly by any person as a result of criminal activity relating to a scheduled offence or the value of any such property {Section 2 (u)}. Thus, a property acquires a taint on account of being a derivative of criminal activity relating to a sched .....

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ime. It is for this reason and to effectuate the purposes of the Act that Section 23 incorporates the presumption that where money­laundering involves two or more connected transactions and one or more such transactions is/are proved to be involved in money­laundering, then for the purposes of adjudication or confiscation under Section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such inte .....

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ubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted. Quoting with approval the statement of principle set out in the Principles of the Law of Evidence by Best, his Lordship observed that when the rules of evidence provide for the raising of a rebuttable or irrebuttable presumption, they are merely attempting to assist the judicial mind in the matter of weighing the probative or persuasive force of certain facts proved in relation to othe .....

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While inferring the existence of a fact from another, the Court is only applying a process of intelligent reasoning which the mind of a prudent man would do under similar circumstances. Presumption is not the final conclusion to be drawn from other facts, but it could as well be final, if it remains undisturbed later. Presumption in the law of evidence is a rule indicating the stage of shifting the burden of proof. From a certain fact or facts the Court can draw an inference and that would remai .....

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tions is enjoined by Section 23 of the Act, contingent upon one or more of interconnected transactions having to be proved to be involved in money­laundering. The legislatively enjoined presumption shifts the burden of proof to the person in the ownership, control or possession of a property comprising the interconnected transactions to rebut the statutory presumption that this property is not involved in money­laundering. Section 23 enacts a rule prescribing a rebuttable presumption and .....

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so, unless the contrary is established. As observed in Izhar Ahmad (supra), the rule of presumption enjoined by Section 23 takes away judicial discretion either to attach or not due probative value to the fact that one or more of the inter­connected transactions have been proved to be involved money­laundering; and requires prima facie due probative value to be attached and mandates an inference that the other transactions form part of the raft of interconnected transactions involved in .....

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o the social pathology it professes to regulate. Issue­E is answered accordingly. ISSUE­F Section 24 shifts the burden of proving that proceeds of crime are untainted property onto person(s) accused of having committed the offence under Section 3. This provision is challenged as arbitrary; is contended to be applicable only to the trial of an offence under Section 3 and not the proceedings for attachment and confiscation of property under Chapter­III; and alternatively as not applica .....

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ceeds of crime (Section 2 (u); property (Section 2 (v) and value (Section 2 (zb)} are inter­twined, delineate the provisions of each other and in tandem operate to effectuate one of the two substantial purposes of the Act viz., attachment for the purposes of eventual confiscation, of proceeds of crime involved in money­laundering, whether in the ownership, control or possession of a person accused of the offence under Section 3 or not. The offence of money­laundering as defined in Se .....

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of provisional attachment, confirmation of such attachment by the adjudicating authority and confiscation of the property attached is operative against property constituting the proceeds of crime involved in money­laundering whether in the ownership, control or possession of a person who has committed an offence under Section 3 or otherwise. Section 8 (1) while enjoining the adjudicating authority to issue a notice to a person in possession of proceeds of a crime, whether in his own right or .....

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it are strategies inherent and integral to money­laundering operations and may involve successive transactions relating to proceeds of crime and intent to project the layered proceeds as untainted property, effectuation of the legislative purposes is achieved only where the burden is imposed on the accused to establish that proceeds of crime are untainted property. This is the legislative purpose and the justification for Section 24 of the Act. In response to a notice issued under Section 8 .....

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is being the purpose, we are not satisfied that the provisions of Section 24 are arbitrary or unconstitutional. Section 24 is not confined to the trial of an offence under Section 3 but operates to attachment and confiscation proceedings under Chapter­III, as well. The legislative prescription that the burden of proof inheres on a person accused of having committed the offence under Section 3 is only to confine the inherence of the expressed burden to an accused. Where the property is in the .....

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cused of having committed the offence under Section 3 is not imposed the burden of proof enjoined by Section 24. On a person accused of an offence under Section 3 however, the burden applies, also for attachment and confiscation proceedings. Issue F is answered accordingly. 12.1 We are in complete agreement with declaration of law with regard to Sections 23 and 24 of the PML Act by the Division Bench of Andhra Pradesh High Court in the above decision, which gives complete answer to additional co .....

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of an individual in the context of Article 21 of the Constitution of India vis­a­vis custodial violence and deprecated naked violation of human dignity by custodial violence and found third degree methods are totally impermissible. While laying down mandatory guidelines in paras 35 and 36 of the said judgement mandated police authorities and likewise to follow such guidelines strictly and breach thereof would entail serious consequences, including proceedings to be taken up by the Court .....

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e case of Harikishan [supra] was in the context of order of detention passed under Section 3(1)(a)(ii) of the Preventive Detention Act in which no opportunity was given to the appellant - detenue to have sufficient knowledge of all the grounds on which the detention order was based and thus depriving him of making representation. The case of Harikishan [supra] again will not be applicable in the facts and circumstances of the case when the petitioners are arrested during the course of investigat .....

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