2022 (1) TMI 1279 - HC - Money Laundering

Money Laundering - proceeds of crime - international Hawala transactions - Seeking proper investigation under Section 5 read with Section 3 of the PMLA and Section 83 of the CGST Act by a Special Investigating Team (SIT) etc. - HELD THAT - In the complaints referred in the present petition, investigations by the Income Tax Department, DDGI and DRI have been conducted, however, as regards SFIO there is no investigation carried out. As per the affidavit filed on behalf of the SFIO since under Sections 210, 212 and 213 of the Companies Act, the Central Government has to direct investigation into the affairs of the company and since no such direction has been received, the SFIO cannot investigate the affairs of the company. The Central Government, which has been impleaded as respondent no.1, Ministry of Corporate Affairs will treat the present petition as a representation and consider whether any direction is required to be issued to the SFIO for investigating the offences in terms of Sections 210 and 212 of the Companies Act and a report in this regard be filed before the next date of hearing. Status Report in sealed cover in respect of the inquiry being carried out by the ED be placed on the record of this Court before the next date of hearing. List on 30th March, 2022.

Summary

Issues:
1. Directions sought for proper investigation under PMLA and CGST Act by a Special Investigating Team (SIT).
2. Investigation findings related to income tax evasion, hawala transactions, over invoiced exports, money laundering, and fraudulent activities.
3. Assessment proceedings status and future actions against accused.
4. Investigation outcomes by Income Tax Department, Directorate General of GST Intelligence (DGSTI), and Directorate of Revenue Intelligence (DRI).
5. Lack of investigation by the Serious Fraud Investigation Office (SFIO) and Enforcement Directorate (ED).
6. Request for SFIO to investigate offenses under the Companies Act.
7. Status report request from ED and CBI action updates.

Analysis:

1. The petitioner sought directions for a proper investigation under the Prevention of Money Laundering Act (PMLA) and the Central Goods and Services Tax (CGST) Act by a Special Investigating Team (SIT). The petition highlighted the need for thorough investigation based on a complaint filed by the petitioner.

2. The investigation revealed various fraudulent activities, including income tax evasion, hawala transactions, over invoiced exports, trade-based money laundering, fictitious purchases, and fraudulent availing of export incentives. The findings implicated individuals like Vikas Chaudhary, Sudhir Gulati, and companies associated with them in illegal financial activities.

3. The Income Tax Department informed about ongoing assessment proceedings against Vikas Chaudhary and other co-accused. Further actions were stated to be dependent on the outcomes of these assessment proceedings.

4. Investigations by the Income Tax Department, Directorate General of GST Intelligence (DGSTI), and Directorate of Revenue Intelligence (DRI) uncovered instances of fraudulent activities, leading to arrests of several accused individuals involved in illegal financial transactions.

5. The Serious Fraud Investigation Office (SFIO) and Enforcement Directorate (ED) had varying levels of involvement in the investigations. While SFIO had not conducted any investigation due to lack of direction from the Central Government, the ED was inquiring into the matter and requested to file a status report.

6. The petitioner requested SFIO to investigate offenses under the Companies Act, emphasizing the need for government direction to initiate such an investigation. The Ministry of Corporate Affairs was urged to consider issuing directions to SFIO based on the petition.

7. Updates on actions by the Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) were awaited. The ED requested to file a status report, and the CBI's actions were pending due to the absence of their counsel. The court scheduled the next hearing and requested the Court Master to provide soft copies of the paper book to counsels for pagination.