TMI Blog2023 (9) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... o an arrest made under the PMLA. The said judgment was rendered by the Apex Court on 07.08.2023, whereas the impugned order is dated 14.06.2023. Therefore, the Designated Court is not having benefit of going through the said order, and consider the said aspect. Reasons for arrest of the accused are not supported with any justifiable material - HELD THAT:- There is dispute with regard to furnishing of documents by the ED along with remand application. According to the respondents, ED has filed copies of FIR, grounds of arrest and medical certificates, whereas according to the ED, it has filed all the supporting material in support of the reasons for arrest of the accused. However, the Designated Court did not refer the said aspects in its order dated 14.06.2023. It is for the Designated Court to consider the material filed by the ED in support of the reasons for arrest of the accused. The Designated Court is not having the benefit of going through the judgment of the Apex Court in Senthil Balaji - impugned order set aside - matter is remanded back to the learned Metropolitan Sessions Judge/Designated Court under PMLA, Nampally, Hyderabad, with a direction to consider the rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accused Nso. 1 to 3, for the offence committed under Section - 3 read with 4 of the Prevention of Money-Laundering Act, 2002 (for short PMLA ). i) W.P. No. 19163 of 2023 is filed by Mr. T. Venkatram Reddy, accused No. 1 (Respondent No. 1 in Crl.R.C. No. 378 of 2023), seeking a writ of mandamus declaring his arrest in furtherance to ECIR/02/HYZO/15, Zone - Hyd. as illegal and in violation of Section - 19 of the PMLA and to set aside the same and for a consequential direction to respondent Nos. 2 to 4 to pay compensation of Re. 1/- or any such amount and also to direct respondent Nos. 2 and 3 to initiate appropriate enquiry and disciplinary proceedings against all the delinquent officers, who have indulged in causing his unlawful arrest. ii) W.P. No. 21448 of 2023 is filed by Mr. Parasuraman Karthik Iyer, accused No. 2 (respondent No. 2 in Crl. R.C. No. 378 of 2023) seeking a writ of mandamus declaring the action of official the respondents in arresting him without complying with mandatory requirement under Section - 41-A of the Code of Criminal Procedure, 1973 (for short Cr.P.C. ) as illegal and for a consequential direction to take necessary disciplinary action against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03/2015, 03.08.15 72.61 -do- -do- 04. Central Bank of India, Mid Corporate Branch, Hyd. RC-1(E)/15, 13.01.15 by CBI, BS FC 06/2015, 13.11.15 72.03 -do- 05. Corporation Bank, Bangalore RC-5(E)/14, 22.05.14 by CBI, BS FC 05/2015, 14.11.15 116.35 -do- XVII ACMM, Bangalore 06 IDBI Bank, Mumbai RCBSM 2015 E0005, 02.07.2015 by CBI, BS FC -- 29.12.16 317.40 Sec. 120B r/w 420 IPC XVII ACMM, Esplanade, Mumbai 07 Axis Bank, Green Lands, Hyd. 95/2015, 04.04.15 by CCS, DD, Telangana Police 507/2017, 31.08.17 409.50 -do- XII ACMM, Hyderabad 08 SEBI NA Prosecution Compalinant No.MA 42/16 NA Sec.12A r/w 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table Trusts; (g) Re-purchase of stressed assets through benami company M/s. VRT Infra Pvt. Ltd.; vii) The role played by each of the respondents i.e., Directors of M/s. DCHL as identified during investigation conducted by the ED is also specifically mentioned; viii) Thus, according to the ED, investigation conducted by it would reveal that the respondents along with other Promoters of M/s. DCHL created large number of subsidiary companies. The subsidiary/associated entities were not involved in any genuine business activities. The bank accounts of these subsidiary/associated entities were used for rotation of funds with M/s. DCHL. Subsequently, most of the entities were amalgamated into M/s. DCHL. During the course of investigation, summons were issued to the respondents and others to find out the details of funds diverted to subsidiaries/associated entities and to trace the proceeds of crime. However, the respondents and other Promoters/Directors of M/s. DCHL remained completely evasive about these entities and did not furnish any details and purpose of transfer of funds to the subsidiary and associated entities. ix) Therefore, the respondents and Directors of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i challenging the first PAO No. 03/2017 and the Delhi High Court granted stay of proceedings arising out of the said PAO. The said writ petition was disposed of on 11.04.2019 granting liberty to the petitioners therein to approach appropriate High Court. He filed a writ petition vide W.P. No. 9319 of 2019, and this Court vide order dated 29.04.2019 granted stay of proceedings arising out of PAO No. 03 of 2017, dated 28.03.2017. Summons were issued to the respondents to appear on 20.03.2023 and they have appeared. Though the ED has recorded statements of the respondents - accused, without there-being proper reasons to believe, arrested the respondents on 13.06.2023. Thus, all of them referring to the principle laid down by the Apex Court in several judgments including V. Senthil Balaji v. The State represented by Deputy Director 2023 SCC OnLine SC 934 [Crl.A. Nos. 2284-2285 of 2023, decided on 07.08.2023], interim orders in M/s. Satyam Computer Services Limited v. Directorate of Enforcement W.P. M.P. No. 47572 of 2012 in W.P. No. 37487 of 2012, dated 11.12.2012; Directorate of Enforcement v. M/s. Satyam Computer Services Limited W.A. No. 133 of 2013 (DB), decided on 31.12.2014; Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of laundering would not suffice; k) Reasons to believe should be based on material in Officer s possession; l) Arrest can only be made if material exists that justifies the arrest; m) Procedure under Section - 19 of the PMLA including reason to believe is to ensure sufficient safeguard. Therefore, compliance of the same is mandatory; n) Power must be exercised on objective facts of commission of offence and Officer has reason to believe that person is guilty of such offence. Power of arrest is circumscribed by objective considerations and cannot be exercised on whims, caprice or fancy of the Officer; o) Reason to believe , must be held in good faith, and it cannot be merely pretence. It is open for the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of belief and are not extraneous or irrelevant to the purpose of the said Section; p) Reasons to believe means that belief must have been arrived at judicially after considering the material and on prima facie satisfaction of authority concerned; q) If the Investigating Officer has no reason to believe that the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No. 2 in Crl.R.C. No. 378 of 2023, referring to an Award of Arbitral Tribunal between M/s. DCHL and Board of Control for Cricket in India (BCCI), would submit that the Arbitrator, a retired Judge of the Hon ble Supreme Court, passed a final award dated 17.07.2020 for an amount of Rs. 486,00,00,000/- (Rupees Four Thousand Eight Hundred and Sixteen Crores Only). However, an application under Section - 34 of the Arbitration and Conciliation Act, 1996, is also pending challenging the said Award. Therefore, the allegation made by the ED that the respondents have siphoned off the funds is baseless. The said aspects were not considered by the ED. iv) With the said submissions, all learned senior counsel would submit that the arrest of the respondents is illegal, in violation of the procedure laid down under law, also principle laid down by the Apex Court in the aforesaid judgments and, therefore, the Designated Court rightly rejected the remand of the respondents vide impugned order dated 14.06.2023. They are entitled for compensation and Authority concerned has to initiate action against the erring Officers under Section - 62 of the PMLA. 8. Mr. A.R.L. Sundareshan, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Section 41-A of CrPC notice was not complied and the reasons stated for arrest of accused is not supported with any justifiable material. Admittedly the offence alleged against the accused is under Sections 3 and 4 of PML Act attracting the punishment not less than 3 years and which may extend to 7 years. Therefore, in view of the law laid down by the Hon ble Apex Court in the decision in Satender Kumar Antil, dt: 11.7.2022, the submission of the learned Special Public Prosecutor would not sustain as the gravity is not a ground for remanding the accused to judicial custody. Therefore, following the directions in Satender Kumar Antil, dt: 1.7.2022 for failure to comply Sec. 41-A of CrPC, the accused cannot be remanded to judicial custody. However, for securing the presence of the accused before this court for further proceedings, the accused are directed to furnish personal bonds for Rs. 1,00,000/- with two sureties each for a like sum to the satisfaction of this court on or before 16.06.2023. ii) Thus, the Designated Court rejected the remand application on the following two (02) grounds: i. Non-compliance of Section - 41A of the Cr.P.C.; and ii. Reasons stated fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said criminal appeal is pending before the Hon ble Supreme Court. viii) As discussed above, the Apex Court in V. Senthil Balaji1 categorically held that there is no need of compliance of Section - 41A of the Cr.P.C. However, as on the date of the impugned order dated 14.06.2023, the Designated Court is not having benefit of going through the said judgment and relying on the principle laid down in Satender Kumar Antil , the Designated Court rejected the remand of the respondents vide impugned order dated 14.06.2023. ix) Section - 3 of the PMLA is relevant and the same are extracted hereunder: 3. Offence of money-laundering. Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering. x) In Y. Balaji, the Apex Court considered the scope of Section - 3 of the PMLA and the relevant paragraph Nos. 96, 97, 98 and 99 are relevant and the same are extracted as under: 96. If the main part of Section 3 is dissected with forensic precision, it will be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the three FIRs allege that the accused herein had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. In one case it is alleged that a sum of more than Rs. 2 crores had been collected and in another case a sum of Rs. 95 lakhs had been collected. It is this bribe money that constitutes the proceeds of crime within the meaning of Section 2 (1) (u). It is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. The argument that the mere generation of proceeds of crime is not sufficient to constitute the offence of money-laundering, is actually preposterous. As we could see from Section 3, there are six processes or activities identified therein. They are, (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; and (vi) claiming as untainted property. If a person takes a bribe, he acquires proceeds of crime. So, the activity of acquisition takes place. Even if he does not retain it but uses it, he will be guilty of the offence of money-laundering, since use is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n A.S. Krishnan, the Apex Court held as under: 26 - Reason to believe : A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise. In substance what it means is that a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. These two requirements i.e. knowledge and reason to believe have to be deduced from various circumstances in the case. (See Joti Parshad v. State of Haryana (AIR 1993 SC 1167 ) As noticed by the High Court in great detail, the factual position leaves no manner of doubt that the accused appellants had not only the knowledge, but also had reason to believe that the document was a forged one before they used it. Acquittal of some of the co-accused from the charge of conspiracy cannot reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd medical certificates, whereas according to the ED, it has filed all the supporting material in support of the reasons for arrest of the accused. However, the Designated Court did not refer the said aspects in its order dated 14.06.2023. It is for the Designated Court to consider the material filed by the ED in support of the reasons for arrest of the accused. xviii) As discussed above, Designated Court is not having the benefit of going through the judgment of the Apex Court in Senthil Balaji1. In the light of the same, the impugned order dated 14.06.2023 is liable to be set aside. 12. CONCLUSION: i) In the light of the aforesaid discussion, the impugned order dated 14.06.2023 is liable to be set aside and accordingly the same is set aside. The matter is remanded back to the learned Metropolitan Sessions Judge/Designated Court under PMLA, Nampally, Hyderabad, with a direction to consider the remand application submitted by the ED and pass appropriate orders strictly in accordance with law by putting the ED and the respondents - accused on notice and affording them an opportunity. The Designated Court is directed to consider the principle laid down by the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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