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2022 (8) TMI 1410 - HC - Money LaunderingSeeking grant of bail - Money Laundering - misappropriation of the funds of the Bank and cheating the Bank - shell entities - requirement of twin conditions of Section 45 of the Act of 2002 or not - HELD THAT - The Hon ble Supreme Court in the case P.Chidambaram s case 2019 (12) TMI 186 - SUPREME COURT held that the powers of bail in a economic offence have to be exercised sparingly as such offences are of a different class and affect the economic fabric of the society. The three Judge Bench of the Hon ble Supreme Court in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra s case 2005 (4) TMI 566 - SUPREME COURT discussed the provisions of Maharashtra Control of Organized Crime Act 1999 wherein the provisions for granting of bail are similar. The Hon ble Supreme Court while interpreting word guilty held that such findings regarding guilty or otherwise have to be recorded for the purpose of arriving at an objective finding on the basis of material on record for the grant of bail and for not any other purpose. The intention of the legislature in introducing the criteria of reasonable grounds for believing that a person is guilty or not guilty of such an offence has to be construed with the attending facts and circumstances of a particular case. Since the bail is normally urged during the course of investigation the Court has to come to a prima facie conclusion whether or not to grant bail on the basis of the material provided by the investigating agency - The twin conditions under section 45 are regulatory and not to deny bail to an accused. No specific conditions can be laid down to apply for grant of bail and each case has to be determined based on its peculiar facts. In the present case petitioner was taken into police custody for 8 days and the agency has yet to collect some more information and evidence before finalizing and filing the complaint as evident from the counter. CBI though investigated the alleged shell companies of petitioner has not arrayed petitioner as accused. Apparently the agency does not have material to file a complaint against accused at this juncture and it depends upon the other evidence and facts yet to be collected. Section 19(1) requires reasonable satisfaction/belief of the agency on the basis of material collected that the accused is guilty of the offence before effecting arrest and not mere assertion. Not having enough material would imply that the condition of reasonable belief on the available material under section 19 is not met. It is not out of place to mention that all investigations do not end in filing complaints or charge sheets to prosecute an accused and the conviction rates in such cases are abysmally low. The petitioner is entitled to be released on bail for (i) arrest of the petitioner is not in compliance of the condition under section 19(1) of having material in possession to summarily conclude guilt (ii) Though role of Petitioner was investigated by CBI the Petitioner not being arrayed as accused in the CBI case after concluding investigation and filing charge sheet - the Criminal Petition is allowed and the petitioner/A1 is granted bail subject to the conditions fulfilled.
Issues Involved:
1. Legality of the Petitioner's arrest under Section 19(1) of the Prevention of Money-Laundering Act, 2002. 2. Applicability of Section 41-A of Cr.P.C. in proceedings under the Act of 2002. 3. Whether the Petitioner is guilty of an offence under Section 3 of the Act of 2002. 4. Entitlement of the Petitioner to bail under Section 45 of the Act of 2002. Detailed Analysis: 1. Legality of the Petitioner's arrest under Section 19(1) of the Prevention of Money-Laundering Act, 2002: The Petitioner was arrested on 25.06.2022 in connection with ECIR/HYZO/03/2021 registered by the Directorate of Enforcement. The Enforcement Directorate's case is based on an FIR registered by the CBI against RE Cables & Conductors Private Limited (RECC) for misappropriation of funds and cheating the bank. The Petitioner allegedly assisted RECC in diverting loan funds through shell entities, thus committing money laundering. The Petitioner's counsel argued that the arrest violated Section 19(1) of the Act of 2002, as there was no mention by the Enforcement Directorate stating that the Petitioner is 'guilty'. The court noted that the satisfaction for arrest under Section 19(1) requires that the arresting authority has reason to believe, based on material in possession, that the person is guilty of an offence under the Act. The court found that the agency did not have enough material to file a complaint against the accused at this juncture, implying that the condition of 'reasonable belief on the available material' under Section 19 was not met. 2. Applicability of Section 41-A of Cr.P.C. in proceedings under the Act of 2002: The Petitioner's counsel relied on the judgment in Satender Kumar Antil v. Central Bureau of Investigation, arguing that compliance with Section 41-A of Cr.P.C. is mandatory. However, the Special Public Prosecutor contended that this court in Criminal Petition No.9825 of 2021 & batch held that Section 41-A of Cr.P.C. is not applicable to proceedings under the Act of 2002, as Section 19 of the Act prescribes the procedure for arrest. The court upheld this view, stating that by virtue of Section 65 of the Act of 2002, Cr.P.C. provisions are applicable only if they are not inconsistent with the provisions of the Act of 2002. 3. Whether the Petitioner is guilty of an offence under Section 3 of the Act of 2002: The Enforcement Directorate claimed that the Petitioner admitted to floating shell entities and providing bogus entries to RECC and other companies, charging a commission for these transactions. The Petitioner's counsel argued that the Petitioner was in the business of providing short-term finance and was not involved in any illegal transactions. The court noted that the Petitioner's role was investigated by the CBI, which did not array the Petitioner as an accused in the charge sheet. The court found that the evidence collected at the time of arrest should suggest a high probability of culpability, which was not met in this case. 4. Entitlement of the Petitioner to bail under Section 45 of the Act of 2002: The Special Public Prosecutor argued that the Petitioner is not entitled to bail under Section 45 of the Act of 2002, as the court must be satisfied that there are reasonable grounds for believing that the Petitioner is not guilty of the offence. The court referred to the Supreme Court's judgment in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra, which held that such findings are required for the purpose of arriving at an objective finding on the basis of material on record for the grant of bail. The court also considered the Supreme Court's judgment in P. Chidambaram's case, which stated that the powers of bail in economic offences have to be exercised sparingly. However, the court concluded that the Petitioner is entitled to bail because the arrest was not in compliance with Section 19(1) and the Petitioner was not arrayed as an accused in the CBI case after concluding the investigation. Conclusion: The court granted bail to the Petitioner subject to the following conditions: - The Petitioner shall execute a personal bond for Rs.2,00,000/- with two sureties for a like sum each. - The Petitioner shall appear before the Assistant Director, Directorate of Enforcement, Hyderabad Zonal Office, every Monday between 10.30 AM and 01.00 PM for three months or till the filing of the charge sheet, whichever is earlier. - The Petitioner shall abide by the other conditions stipulated in Section 437(3) of Cr.P.C. Miscellaneous applications, if any, were closed.
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