2011 (8) TMI 1247 - HC - Money Laundering

Issues Involved:
1. Allegations under Section 4 of the Prevention of Money-Laundering Act (PML Act).
2. Applicant's arrest and subsequent bail proceedings.
3. Evidence and material supporting the allegations.
4. Legal contentions and interpretations of the PML Act.
5. Scheduled offences and their relevance to the case.
6. Applicant's possession of foreign bank accounts and large sums of money.
7. Provisions of the PML Act and their application.
8. Applicant's bail conditions and potential flight risk.

Detailed Analysis:

1. Allegations under Section 4 of the PML Act:
The Applicant is accused of committing an offence punishable under Section 4 of the PML Act. The case is based on a complaint filed by the Deputy Director, Directorate of Enforcement, Ministry of Finance, Department of Revenue, Government of India.

2. Applicant's Arrest and Subsequent Bail Proceedings:
The Applicant was arrested on 7th March 2011 and initially remanded in custody by the Special Court, which later released him on bail. The Supreme Court of India stayed the bail order and authorized the Applicant's detention for a period, allowing the Directorate of Enforcement to seek further remand. The Applicant's bail application before the Special Court was rejected, leading to the current bail application in the High Court.

3. Evidence and Material Supporting the Allegations:
The Directorate of Enforcement's case is based on information and documents from the Income Tax Department, which indicated the Applicant's involvement in foreign exchange dealings and possession of large sums of money. Documents included transfer instructions for billions of dollars and a notarized document from London. Investigations under FEMA revealed violations involving US $8000453000 in a Swiss bank account. The Applicant had also obtained multiple passports using false documents.

4. Legal Contentions and Interpretations of the PML Act:
The Applicant's counsel argued that there is no material to justify the allegations and that the documents and admissions have no evidentiary value. The Additional Solicitor General contended that there is overwhelming evidence of the Applicant's involvement. The Court noted the need to consider the value of statements made under Section 50(3) of the PML Act during the trial.

5. Scheduled Offences and Their Relevance to the Case:
The prosecution alleged scheduled offences under the Passports Act and theft of a diamond from the Nizam's jewelry. The Applicant's counsel argued that offences under the Passports Act were included in the Schedule only in 2009 and cannot be applied retrospectively. The Court observed that the essence of the offence under Section 3 of the PML Act is projecting proceeds of crime as untainted property.

6. Applicant's Possession of Foreign Bank Accounts and Large Sums of Money:
The Court noted that the Applicant had several foreign bank accounts with large sums of money, indicating violations of the Income Tax Act and FEMA. However, the crucial question was whether these amounts were proceeds of crime. The Court found no satisfactory material linking the amounts to scheduled offences.

7. Provisions of the PML Act and Their Application:
The Court highlighted the need for a scheduled offence to generate the money being laundered. The prosecution's reliance on offences under the Passports Act and the theft of a diamond was insufficient to establish a prima facie case of money laundering. The Court also discussed the burden of proof under Section 24 of the PML Act and the requirement to allege specific scheduled offences.

8. Applicant's Bail Conditions and Potential Flight Risk:
The Court considered the Applicant's potential flight risk but imposed conditions to mitigate this risk. The Applicant was ordered to be released on bail with conditions, including reporting to the Directorate of Enforcement and restrictions on leaving Mumbai or Pune without prior intimation.

Conclusion:
The Court allowed the Applicant's bail application, noting the lack of sufficient material to establish a prima facie case of money laundering and the prosecution's inability to proceed with the trial. The Court imposed conditions to ensure the Applicant's availability for the investigation and trial. The request to stay the bail order was rejected, and the Applicant was not allowed to deposit cash in lieu of surety.

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