TMI Blog2023 (2) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... he is not guilty. Prima Facie no reasonable grounds for believing that the applicant is guilty - HELD THAT:- The applicant is not named in the FIR. The applicant is also not named as an accused in the ECIR registered by the ED, as the same is simply a replica of the FIR registered by the CBI - the role assigned to the Applicant is that since he was an Internal Auditor of SBFL and statutory auditor of several sister concerns of SBFL, it was through his aid and assistance that Shakti Bhog Foods Limited, borrowed, layered and siphoned off the loan funds using the platform of about 24 known group companies and several shell entities. It is clear from timeline of the applicant with SBFL, that the applicant was not the statutory auditor at the time of the commission of offence i.e., the period between 2013 and 2017. The ED has alleged that the applicant was the mastermind of the whole operation and to prove the same the ED has produced evidence in form of some emails and statements of management and employees of SBFL given u/s 50 of the PMLA - the documents do not support the contention of the ED that the applicant is guilty. Heavy reliance has been placed on section 50 of PML ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be framed nor can trial cannot begin. In the light of this, the court cannot let the applicant undergo long period of detention. If this court allows the continuing pre-trial incarceration, the same will amount to deprivation of personal liberty as well as travesty of justice as the same is equivalent to punishment without trial. In the present case, although the applicant, has not undergone half of the period, the offence with which the applicant is charged with is punishable with imprisonment upto 7 years but not with life or death. There are no criminal antecedents reported against the applicant. Out of this sentence, the applicant has already undergone 17 months of incarceration - Even though the allegations are serious but the chargesheet is yet to be filed. Assuming that the applicant was the mastermind, the respondent did not name him in the original FIR. The applicant had conducted audit of the company and had certified the fictitious accounting entries in the books of accounts of the company to inflate financials of SBFL, even then during his entire custody he has been interrogated only on one occasion on 13.11.2021. The period of incarceration as well as the dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of Rs. 3269.42 crores. 8. The Ld counsel for the applicant states that the applicant was not named as an accused/ suspect in the FIR. As per the FIR, the review period/period under enquiry of offence was between 2013 and 2017. 9. The applicant was an internal auditor of the SBFL for the financial year 2008-09 till 2013-14, and a statutory auditor of SBFL for the financial year 2006-07. 10. In the column No.12 of the FIR, the observations of the I.O. read as under:- 12. Action taken by the bank against public servants including departmental proceedings initiated. If so, details thereof. I. The account turned NPA on account of inventory losses due to steep fall in paddy prices, underutilisation of Capex in rice/ paddy segment made in the last two years, Delay in tie up funds (PE investment) to tide over the losses. II. There is no apparent malafides in the monitoring of the account, though some minor omissions/ instances of negligence has been observed in Credit Audit Reports, these have not contributed in the account turning NPA. The company s operations were under considerable stress owing to various int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th during the course of arguments on behalf of the ED that 3 more persons have been summoned for questioning to understand role of the applicant in the alleged offence. I have perused the case diary. 2 of those 3 persons have also been questioned, on 11.11.2021 and 13.11.2021. More importantly, the line of questioning of these 2 persons was only to further confirm the (alleged) role of the applicant in SBFL, something which has already been highlighted by a number of other witnesses. Further, so far as the apprehension of danger to his life has been expressed by a witness who also happens to be a long-running close associate of the applicant, ld. Counsel for the applicant pointed out that the statement of the said witness was recorded on 21.9.2021 but strangely, was not highlighted by the ED while arguing against the first regular bail application of the applicant. This shows how much really was this apprehension a concern for the ED such that it was not even brought to the notice of the Court on the earlier occasion when it should and could have been. I would agree with the submission of ld. Counsel for the applicant. Additionally, Ld. Counsel for the applicant has correctly place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted to further shell companies. It is submitted that all the entities mentioned in the prosecution complaint do not name the applicant. The applicant had nothing to do with these accommodation entries made by SBFL through various shell companies. Accommodation entries through shell companies: 19. Mr Devki Nandan Garg and Mr Ashok Kumar Goel have been cited as accommodation entry operators. Mr Devki Nandan Garg and Mr Ashok Kumar Goel have named the accused in their statements on various dates. Mr Khurana has taken me through a chart wherein detailed comparison of the statement of Mr. Devki Nandan Garg and Mr Ashok Kumar Goel and the same reads as under: S.No. Devki Nandan Garg and Ashok Kumar Goel Previous Statements Devki Nandan Garg Ashok Kumar Goel 1 Devki Nandan Garg Statement dt. 05.07.2021, Statement dt. 21.09.2021 Statement dt. 21.09.2021 On being asked I further state that I know Mr. Kewal Krishan Kumar Managing Director of Shakti Bhog Food Ltd. since last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese firms used to provide accommodation entries by charging commission. I was aware of this fact because whenever I used toad more layers to any transactions by using their firms and buying and selling fake purchase sale and transport bills/invoices for Shakti Bhog Food ltd. Business. I had to rotate some money through their accounts and purchased some bills from them to complete cycle. Even, monument of Shakti Bhog Food Ltd. Sh. Kewal Krishan Kumar and Mr Tarun had also asked to rotate the funds some more channel Devki Nandan Garg Statement dt. 13.07.2021 On being asked I further state that in some cases on request of Mr Kewal Krishan Kumar I had also arranged funds in cash to Kewal Krishan Kumar towards the said RTGS and issued fictitious bills/bilities. I will also provide details of the said cash transactions. I had not business activity with Shakti Bhog Food Ltd. Devki Nandan Garg Statement dt.24.07.2021 It is further stated that I have prepared various fake transport invoices and bills raised by M/s Shri Shyam Road Lines on M/s Shakti Bhog Foods Limited. I have copies of few fake transport invoices prepared by me. These fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities to my dummy entities and these funds are further transferred into bank accounts of SBFL or into other dummy entities or into group companies of SBFL or withdrawn as cash as per directions received from Shri KK Kumar, Shri Siddharth Kumar, Shri Raman Bhuraria, Shri Tarun Kumar or Shri Sandeep Mishra. Statement dt. 22.09.2021, On being asked about commission charged by me for providing accommodation entries, I want to state that I used to charge commission ranging from .5% to 1.5% on fake invoice value provided to SBFL. On being asked about mode of receipt of this commission, I want to state that I used to deduct amount of commission from funds received from banks accounts of SBFL and remaining funds are transferred as per directions received from Shri KK Kumar, Shri Siddharth Kumar, Shri Raman Bhuraria, Shri Tarun Kumar or Shri Sandeep Mishra. Statement dt. 22.09.2021 On being asked about end use of these funds of SBFL received in my dummy entities, I want to state that I used to transfer funds received from SBFL into other bank accounts of SBFL or into other dummy entities or into group companies of SBFL or withdraw cash. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerns. He used to provide me details of bank accounts of SBFL and its sister concerns to transfer funds on strength of fake bills without actual movement of goods. 20. The Ld. Counsel for the applicant states that on bare perusal of the disclosure statements clearly demonstrate that they are pure cut, copy, paste job where even coma, inverted comas, exclamations are identical. Mr Khurana, also states that Mr Devki Nandan Garg has subsequently retracted from his statement. The statement of Mr Devki Nandan Garg reads as under: L. That on repeated query from the Investigating Agency, every time I have informed the Investigating Agency that I do not know Raman Bhuraria and I had never met him. The same was also confirmed by Raman Bhuraria himself, which is revealed from his Statement dated 07.07.2021. However, the Investigating Agency was not accepting the said fact and my statement as it is. 21. This statement has been taken on record by the Special Judge (PC Act), CBI-12, RADC, New Delhi in its order dated 15.12.2021. There is also an application moved on behalf of accused Devki Nandan for retraction from his statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Personnel and also Nephew of Promoter Kewal Krishan Kumar). (Arrested on 22.06.2022) E. Shri Sidharth Kumar has also filed Retraction dated 06.08.2022 (Key Managerial Personnel and also Son of Promoter Kewal Krishan Kumar). (Arrested on 22.06.2022). 25. Lastly and most importantly it is submitted that besides the two statements of Ashok Kumar Goel and Devki Nandan Garg there is nothing else that links the applicant with the allegations made by the ED. 26. The next allegation is that fictitious stock damage report was got prepared at the applicant s instance and he attended the meeting as a special invitee where decision for disposal for damage stock was taken. It is stated by the applicant that the stock damage report dated 01.02.2016 is prepared by HUMS Associates. Vide Board Resolution, HUMS Associates were appointed as Internal Auditors and therefore when the report of 01.02.2016 was prepared, the applicant was not an Internal Auditor of SBFL. The only way by which the applicant is connected with this report is one unsigned minutes of meeting dated 10.02.2016 wherein the applicant was a special invitee. Assuming unsigned minutes can be relied upon, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceiving cash in the amount of Rs. 6.14 Crore, the applicant, his firm, and company also received proceeds of crime (PoC) worth Rs. 8.47 Crore, which are PoC obtained by aiding SBFL and its directors in commission of offence. 30. Additionally, the applicant was involved in the projection of a fictitious and false stock position as well as other SBFL financial data to consortium banks. He managed bank officials' visits for stock verification. Email correspondence from the applicant, dated 20.10.2011, which was discovered during the investigation, showed that he was involved in stock and related bank verification/audit matters. In this email, the Applicant has stated : As discussed with Mr. Tarun yesterday is not stock audit. It is just quarterly visit of bank to be conducted by outside agency, assigned to a CA firm on panel. Not Full Stock Audit. Nothing to vary (worry) and to be complied till November. 31. The respondent submits that this email clearly shows the involvement of applicant in stocks of SBFL. This email when was confronted with employee of SBFL in his statement recorded u/s 50 of PMLA, 2002, stated that SBFL did not have the stock that it had claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge to the said provision i.e., Section 50 of the PMLA has been dismissed by the Hon ble Supreme Court upholding the validity of the said provision in its latest decision in the case of Vijay Madanlal Chaudhary Ors. vs. Union of India Ors. 2022 SCC OnLine SC 929. D. Other material alleging the role of the applicant 35. The respondent also submits that the averment of the applicant accused that there is no material apart from statements in the present case is incorrect. There is also other material recovered against the applicant. This material placed on record is sufficient to persuade this Hon ble Court that no satisfaction, as required u/s 45 of the PMLA, can be reached i. The statement of Sh. Abdul Hasan Ansari is corroborated by the email correspondence dated 02.12.2015 between applicant and Abdul Hasan Ansari (with copy to CMD and Siddharth Kumar) by which applicant had demanded documents of the group companies. ii. Evidences show that applicant was directly involved in arranging fake bills from entry operators like Devki Nandan Garg. While analysing the seized material, an email had been recovered from email correspondence between applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax, 2016 SCC OnLine Del 5772 has held as under: 19. The nature of the books included katchaparchas, papers containing calculations and amounts routed to bank accounts of various members of the family, sums receivable towards business, etc. They also included documents relating to purchase of property. The statements were made under oath on 18-04-2006 and 03-05-2006. No doubt, they were not during the course of search. Yet, they were made voluntarily. There was no allegation ever that the assessee or any of her family members, including Abhay and Varun Gupta, who made the main statements under oath, were pressurized to do so; there was in fact no contemporaneous retraction. Indeed, the assessee appears to have resiled from the statement, only through the returns, filed after receipt of notice under Section 153A. The probative value of these statements is to be seen not from only whether it was allowed to stand, or whether it was resiled from. The stage when such statement is resiled, whether the assessee was able to give any explanation for the statement, its connection with the material seized, all are relevant, in the opinion of the court, to judge if it is to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads as under: (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 commit any offence while on bail: Provided that a person who is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the special court so directs: Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by- (i) the Director; or (ii) any officer of the Central Government or State Government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government. 43. The twin conditions, are independent of each other and require the Court to weigh each one of them and adjudicate on the potential guilt of the offender based on the material relied upon by the accused and the opposition made to the same by the prosecution. 44. Hence the Hon'ble Court is not required to render a finding of guilt or acquittal at this stage, nor is it required to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shell entities. It is also alleged that he was directly involved in paper sale purchase transactions of SBFL without conducting any actual business transactions which resulted in inflation of their financials. It was on the strength of these audited but falsely inflated financials that SBFL was able to obtain loans from banks. The borrowed funds were then channelized through the bank accounts of several Shakti Bhog group entities which had actually provided a platform for changing the colour of the borrowed funds from liabilities to assets and then, for siphoning off the same by creating a web of complex transactions leading to commission of the offence of money laundering. The applicant was auditor of several group companies during the period when offence took place. For this purpose, he received the commission in form of fees and hence is involved in the offence of money laundering. 49. The timeline of the applicant with SBFL is reproduced hereinbelow: 3. Applicant s timeline in M/s. Shakti Bog Food Limited: FY 2006-07 Conducted Statutory audit (Appointed on 20.04.2007) FY 2007-08 to 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 07.09.2015 for appointment of M/s HUMS Associates as internal auditor. Lastly, and most importantly, even if it is assumed that the applicant was a part of the said meeting, the minutes do not show that any decision was taken with regards to the stocks. B. There is an email dated 08.01.2016 which underlines the role of the Applicant in arranging fake bills from entry operators and banks made payments for devolved LCs directly to the entry operators. Applicant was confronted with the Email dt. 08.01.2016. A perusal of the concerned Mail shows that it was sent by Mr. Anshu Gautam (SBFL Employee) to AH Ansari @ Pathak. Applicant was only copied along with other persons. The email does not again not directly or indirectly point to the guilt of the applicant as he was only copied in the email. The applicant was neither the originator not the original primary recipient. C. Applicant used to operate shell companies from his office building. Prima facie no documentary material on record to show that Applicant was involved in creation or operation of these companies. D. Applicant used to stock the godown in such a manner that it could not be accessed which made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant and signed on 15.08.2021 during investigation, however, the attachments pertain to some different email confronted to the Applicant on 12.08.2021. Further, the actual email attachments would pertain to bank advices for LC Discounting in September, 2015 (as can be seen from the email), however, the attachments shown by the ED relate to Lakshmi Vilas Bank for the FY 2012-13. Since the veracity of the contents of these emails have been denied and there is a plausible explanation given by the applicant, these emails cannot be the factum which cliches the guilt of the applicant. Moreover, the veracity of these emails and their relevance can only be examined after detailed evidence is led. G. The other documents relied by the ED are the relevant parts of the books of accounts of SBFL viz-a-viz the relevant Bank Account Statement. SBFL booked some fake transactions in its books of accounts. From a perusal of the bank account no. 010100063801 of Indraprastha Sehkari Bank Ltd., it has been observed that the said bank account was made only on 20.12.2011. But, SBFL falsely reflected cheque payments through this bank account w.e.f. 03.04.2011 i.e., several months prior to ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54. In Vijay Madanlal (supra), the Hon ble Supreme Court has observed as follows: 431. In the context of the 2002 Act, it must be remembered that the summon is issued by the Authority under Section 50 in connection with the inquiry regarding proceeds of crime which may have been attached and pending adjudication before the Adjudicating Authority. In respect of such action, the designated officials have been empowered to summon any person for collection of information and evidence to be presented before the Adjudicating Authority. It is not necessarily for initiating a prosecution against the noticee as such. The power entrusted to the designated officials under this Act, though couched as investigation in real sense, is to undertake inquiry to ascertain relevant facts to facilitate initiation of or pursuing with an action regarding proceeds of crime, if the situation so warrants and for being presented before the Adjudicating Authority. It is a different matter that the information and evidence so collated during the inquiry made, may disclose commission of offence of money-laundering and the involvement of the person, who has been summoned for making disclosures pursua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whereas, the 2002 Act clearly authorises only the authorities under the 2002 Act referred to in Section 48 to step in and summon the person when occasion arises and proceed to record the statement and take relevant documents on record. For that, express provision has been made authorising them to do so and by a legal fiction, deemed it to be a statement recorded in a judicial proceeding by virtue of Section 50(4) of the 2002 Act. A regular police officer will neither be in a position to take cognizance of the offence of money-laundering, much less be permitted to record the statement which is to be made part of the proceeding before the Adjudicating Authority under the 2002 Act for confirmation of the provisional attachment order and confiscation of the proceeds of crime for eventual vesting in the Central Government. That may entail in civil consequences. It is a different matter that some material or evidence is made part of the complaint if required to be filed against the person involved in the process or activity connected with money-laundering so as to prosecute him for offence punishable under Section 3 of the 2002 Act. The next point which has been reckoned by this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its reliability . It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard. 58. In the present case as well, the question is not regarding the admissibility but the reliability. The statements had concretely named the applicant. However, in their subsequent retraction the reliability of the statements themselves become doubtful. Statements of Employees of SBFL, Accommodation Entry Operators (Devki Nandan Garg Ashok Kumar Goel) are a cut copy paste job with even the punctation marks of commas, full stops not differing. 59. Prima facie in view of the retraction, the reliability of these statements is questionable. The retracted statements cannot form the basis of the guilt of the applicant of the offences as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible in evidence have already been recorded under Section 50 of PMLA. Further corroborative evidence in the form of CCTV footage and call detail records is also documentary in nature. Moreover as per the requirement of Section 44 of PMLA trials in FIR No. 205/2016 for the scheduled offence as well as Section 4 PMLA in ECIR No. 18/DLZOII/2016 are required to be held together. Hence the trial is likely to take some time. Thus, this Court deems it fit to grant bail to the petitioners. 62. In the present case, there is no relevant document to support the allegations. Admittedly the applicant has the 15-year association with SBFL, but despite the allegation that he was the mastermind of the whole operation the ED has relied on 5 documents to show the applicant s complicity. For the reasons as noted, the documents do not show that the applicant is guilty of offences as alleged against him. In addition, there is not satisfactory explanation given by the ED for the lack of documents that directly point to the applicant as the mastermind. 63. In addition, the observation of the IO also assumes importance in determining whether the applicant is prima facie not guilty. The IO in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the investigating agency to file the chargesheet within the statutory period and, in the context of the 2002 Act, complaint within the specified period after arrest of the person concerned. In the case of Section 167 of the 1973 Code, an indefeasible right is triggered in favour of the accused the moment the investigating agency commits default in filing the chargesheet/complaint within the statutory period. The provision in the form of Section 436A of the 1973 Code, as has now come into being is in recognition of the constitutional right of the accused regarding speedy trial under Article 21 of the Constitution. For, it is a sanguine hope of every accused, who is in custody in particular, that he/she should be tried expeditiously - so as to uphold the tenets of speedy justice. If the trial cannot proceed even after the accused has undergone one-half of the maximum period of imprisonment provided by law, there is no reason to deny him this lesser relief of considering his prayer for release on bail or bond, as the case may be, with appropriate conditions, including to secure his/her presence during the trial. 418. Learned Solicitor General was at pains to persuade us th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 73. The standing counsel for the ED has been given the opportunity to oppose the bail. Hence the twin conditions as enumerated u/s 45 of PMLA have been met. 74. Having regard to the totality of the circumstances, in my opinion, the applicant should be released on bail. The application is, therefore, allowed in terms of the following conditions: (a) The applicant shall furnish a personal bond in the sum of Rs. 50,000/- (Rupees fifty Thousand Only) each with 01 surety in the like amount, to the satisfaction of the trial Court; (b) The applicant shall not leave the country and if the applicant has a passport, he shall surrender the same to the trial Court; (c) The applicant shall furnish to the IO/SHO concerned his cellphone number on which the applicant may be contacted at any time and shall ensure that the number is kept active and switched-on at all times; (d) The applicant shall drop a Google pin location from his mobile phone to the IO concerned which shall be kept operational throughout his bail; (e) The applicant shall not indulge in any act or omission that is unlawful, illegal or that would prejudice the proceedings in pending cases, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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