2010 (8) TMI 1124 - HC - Money Laundering

Money Laundering - proceeds of crime - Earning of unprecedented amount of illicit money - sting operation said to have conducted - showing money bargaining being done - misuse of official position - huge investments in foreign countries - transferring investigation from the Enforcement Directorate (ED) to the CBI - Ex. Ministers, including Ex. Chief Minister, are involved - HELD THAT - In the present case where Ex. Ministers, including Ex. Chief Minister, are involved, investigation by the State Investigating Agency suffers from the same problem as in the case of Rubabbuddin Sheikh 2010 (1) TMI 1156 - SUPREME COURT . We, therefore, feel that for a proper investigation inspiring public confidence, it is necessary to hand over the investigation to an independent agency like CBI. Investigation by CBI where such a huge amount is alleged to have been misappropriated and massive wealth have been accumulated, will lead to exact and accurate charge-sheet in the offences. Innocent persons should not need to worry about accurate investigation. Ultimately, such an investigation is nothing but a good help to the Court conducting the trial. If proper investigation is carried out by well-equipped and unbiased investigating officers it will lead to precise and speedy trial. The type of allegations and the persons alleged to be involved make it necessary in the larger public interest that investigation is done by the CBI. Investigation by CBI is not a punishment. Therefore, the hue and cry made by the private Respondents is uncalled for and unwarranted at this stage. An attempt has been made on the part of some of the Respondents to give their defence in the form of counter affidavits. Firstly, this defence might have been capable of being examined if the investigation as well as the evidence at the trial was complete. At this stage, it cannot be said with certainty what other material will be uncovered during investigation. It also cannot be said with certainty as to which of the accused will turn approver thereby corroborating the other material collected during investigation and, therefore, the defence cannot be examined at this stage. More importantly, what is being transferred is investigation into an offence and not in respect of a particular accused. It is possible that during investigation some of the Respondents may not be found guilty and it is equally possible that during investigation some people, who are not the Respondents before us, may also be found involved. Therefore, we decline to consider the defence at this stage. So far as the defence about exclusive right of investigation of the Enforcement Directorate is concerned, suffice it to say that it is neither possible nor desirable at this stage to give a positive finding about how much of the crime proceeds have been projected as untainted . Therefore there is an area of overlap, and the same cannot be allowed to form a tool in the hands of the accused to scuttle investigation. Considering the time which has already elapsed, the nature of allegations which have been made and the larger public interest involved, we would expect the CBI to expedite the investigation into this matter to the extent to which it is possible having regard to the resources of the CBI.

Summary

Issues Involved:
1. Validity of the "sting operation" and the identity verification of the Petitioner.
2. Whether the investigation of the criminal cases should be referred to the Central Bureau of Investigation (CBI).
3. Allegations of illicit money earned by abuse of official positions.
4. Jurisdiction and responsibility of various investigating agencies including the Enforcement Directorate, State Investigating Agencies, and Income Tax Department.
5. Interpretation of "projecting it as untainted property" under the Prevention of Money Laundering Act (PML Act).
6. Necessity for a comprehensive and thorough investigation by an independent agency.
7. The role of media reports and preliminary investigation in deciding the transfer of investigation.
8. Defence arguments against the transfer of investigation to the CBI.
9. Overlap of jurisdiction between the Enforcement Directorate and the CBI.

Detailed Analysis:

1. Validity of the "sting operation" and the identity verification of the Petitioner:
The court initially required the Petitioner to appear in person with proof of identity to verify the authenticity of an alleged "sting operation" showing money bargaining between the Petitioner's counsel and a representative of the Respondents. Due to the hospitalization of the Petitioner's counsel, the case was adjourned to a later date.

2. Whether the investigation of the criminal cases should be referred to the Central Bureau of Investigation (CBI):
The court emphasized the necessity of examining whether the investigation should be referred to the CBI to prevent evidence from vanishing or being destroyed over time. The main issue was the investigation of criminal cases involving the alleged earning of illicit money by Respondents through abuse of official positions.

3. Allegations of illicit money earned by abuse of official positions:
The allegations involved unprecedented amounts of illicit money earned by some Respondents, including former Ministers and a former Chief Minister, by abusing their official positions. These actions amounted to offenses under various provisions of the Indian Penal Code and the Prevention of Corruption Act. Additionally, some private Respondents were alleged to have assisted in investing the illicit money.

4. Jurisdiction and responsibility of various investigating agencies:
Different agencies were investigating the matter, including the Enforcement Directorate under the PML Act, the State Vigilance Department, and the Income Tax Department. The court noted that acquiring money by misuse of official position is normally investigated by State Investigating Agencies, but if covered under Section 3 of the PML Act, the investigation should be done by the Enforcement Directorate.

5. Interpretation of "projecting it as untainted property" under the PML Act:
The court highlighted the need to interpret the phrase "projecting it as untainted property" under the PML Act. The statement of objects and reasons of the PML Act indicated that it aimed to prevent laundering of proceeds from specified crimes, making it appear as untainted money being invested back into the country.

6. Necessity for a comprehensive and thorough investigation by an independent agency:
Given the multi-State and multi-National nature of the alleged investments, the court stressed the need for a systematic, scientific, and analyzed investigation by an expert agency like the CBI. The State Investigating Agency lacked the expertise and experience for such an investigation, and there was a possibility of influence due to the high positions held by the accused.

7. The role of media reports and preliminary investigation in deciding the transfer of investigation:
While media reports alone may not be sufficient for ordering an investigation, the court found that the media reports in this case were corroborated by the preliminary investigation. This justified the need for a more comprehensive and thorough investigation by an independent agency like the CBI.

8. Defence arguments against the transfer of investigation to the CBI:
The court noted that the accused or probable accused have no right to be heard while ordering an investigation. The interest or apprehension of the accused can only relate to the arrest during the investigation. The court clarified that any prayer for bail or anticipatory bail would be considered on its own merits without being influenced by the pendency of this PIL.

9. Overlap of jurisdiction between the Enforcement Directorate and the CBI:
The court acknowledged the overlap in jurisdiction between the Enforcement Directorate and the CBI. It directed that any material found by the CBI during the investigation, leading to an inference of money laundering within the PML Act, should be shared with the Enforcement Directorate for necessary action.

Conclusion:
The court directed the transfer of investigation of the specified cases to the CBI, emphasizing the need for a comprehensive, proper, and thorough investigation by an independent agency. The CBI was expected to expedite the investigation, and the Central Government was given the option to transfer the investigation from the Enforcement Directorate to the CBI under Section 45(1A) of the PML Act.