2019 (12) TMI 396 - HC - Money Laundering

Petition for grant of regular bail - Money Laundering - siphoning of funds - when the account of the above said 70 CUI of Adarsh Group of Companies were investigated; it was found that these Companies were having an amount of ₹ 90.03Crores as Cash-in-Hand on 31-03-2016. However, by the end of the financial year on 31-03-2017, this Cash-in-Hand was reduced to ₹ 1.15Crores - during this relevant time, Demonetization of currency notes of denomination of ₹ 1000/- and ₹ 500/-. HELD THAT - Referring to the provision of the section 212 the counsel for the petitioner has laid stress on the argument that the Investigating Officer has vast powers to arrest the accused if he had the valid reasons and material with him to justify the arrest. If during the investigation he had the material and he did not find the arrest of the petitioner to be justified then there is no reason for the court to take the petitioner into custody on the basis of the same material which the investigation officer had placed on record before the Court. In effect, the argument of the counsel is that the same material cannot be interpreted in two different manners, one by the Investigating Officer and the other by the Trial Court. However, this court does not find any substance in this argument as well. The provision regarding arrest of a person during investigation under the new Companies Act is contained in section 212(8). The perusal of this provision shows that under the new Companies Act, the investigating officer does not have unbridled or as much liberal powers to arrest a person, as are available under Cr.P.C. Under the new Companies Act, 2013; before arresting a person, investigating officer is required to have material in his possession and on the basis of that material, is required to record reasons in writing that a person has been guilty of offence punishable under sections, which are mentioned in section 212 (6) of this Act. Therefore despite having the material in his possession justifying the arrest of a person, the investigating officer under the Companies Act may not choose to arrest a person, so as to avoid onerous duty of recording reasons. The trial court is under a mandatory duty to appreciate the said material in the manner a judicially trained minds should appreciate, while considering the matter for grant of bail to such an accused. Otherwise also, provision of section 212(6), if read as it is, requires consideration for grant of bail by much higher standards as compared to the standards prescribed for consideration for arrest by the investigating officer. Therefore in a given case, investigating officer may think that despite the availability of the material with him, since the accused has been cooperating during the investigation, therefore, he need not arrest such a person and that this job would be better left to be done by the court. This Court does not find any force in the other argument of the counsel for the petitioner as well, that since the investigating officer had not obtained prior approval from Central Government for investigating the petitioner or his companies separately, therefore, the investigation qua him is unauthorised and, hence, even the cognizance by the Court taken upon such investigation stands vitiated. Since, as per the provisions of Section 212 (14), on receipt of investigation report the Central Government can order initiation of prosecution; not only against the officers and employees etc. of the Company under investigation; but also against 'any person' directly or indirectly connected with affairs of the company under investigation as well, therefore, if a person, not otherwise the employee or officer etc. of the Company under investigation, is also found colluding or conspiring in perpetuation of serious fraud; in relation to the affairs of the Company under investigation, then prosecution can be initiated against such person as well, despite the fact that the affairs of his own company were not directly under investigation for serious fraud in relation to their own affairs. A person can, very well, be prosecuted as a person abetting or as a conspirator or perpetrator of fraud in relation to a company not owned or controlled by him. Hence this Court finds that the investigation, the complaint or the cognizance of the offences against the petitioner are not vitiated in any manner. This court finds substance in the argument of the learned Counsel for the SFIO that since, as per the charge-sheet the petitioner is given to manipulations, for earning commissions, therefore, it cannot be denied that by nature, the petitioner could be manipulative. Hence, this court has no reason to believe that if the petitioner is released on bail, he is not likely to influence the witnesses of the case and also not likely to destroy the evidence against him. The past conduct of the petitioner has also not been exemplary - Also the argument of the counsel for the SFIO that since the vocation of the petitioner and his Companies is only to commit crimes to earn money, therefore, by any means, it cannot be said that if the petitioner is released on bail, he would not commit any offence again, also finds favor with this court. Petition dismissed.

Summary

Issues Involved:
1. Legality of the petitioner's arrest and investigation.
2. Application of Section 88 of the Cr.P.C. for bail.
3. Application of twin conditions under Section 212(6) of the Companies Act, 2013.
4. Material evidence against the petitioner.
5. Risk of the petitioner influencing witnesses or fleeing.

Detailed Analysis:

1. Legality of the Petitioner's Arrest and Investigation:
The petitioner argued that since he was not arrested during the investigation, he should not be taken into custody based on the same material. The court dismissed this argument, stating that the discretion to arrest lies with the investigating officer, and the court must independently assess the material presented. The court emphasized that the investigating officer's decision not to arrest does not imply a lack of material evidence. The court found that the investigation was conducted under appropriate legal provisions, and the petitioner could be prosecuted as a conspirator or abettor even if his own company's affairs were not directly under investigation.

2. Application of Section 88 of the Cr.P.C. for Bail:
The petitioner contended that appearing before the court pursuant to summons entitles him to bail under Section 88 of the Cr.P.C. The court rejected this argument, clarifying that Chapter VI of the Cr.P.C. deals with ensuring the presence of a person before the court and does not automatically grant bail. The court explained that the provisions of Sections 436 and 437 of the Cr.P.C. apply to bail considerations, regardless of whether the person was arrested during the investigation or appeared voluntarily.

3. Application of Twin Conditions under Section 212(6) of the Companies Act, 2013:
The petitioner argued that the twin conditions under Section 212(6) should not apply, citing the Supreme Court's decision in Nikesh Tarachand Shah, which declared similar conditions under the Prevention of Money Laundering Act as ultra vires. The court agreed, noting that the language of the twin conditions is irrational and conflicts with Articles 14 and 21 of the Constitution. The court held that these conditions are not mandatory and cannot be the sole basis for denying bail.

4. Material Evidence Against the Petitioner:
The court found substantial material against the petitioner, including fake bills and invoices, statements from co-accused and independent witnesses, and the petitioner's own admissions. The court noted that the petitioner was allegedly involved in swindling approximately ?90 Crores through fake transactions and had received commissions for his role. The court emphasized that the evidence collected, including electronic records and statements, was sufficient to establish the petitioner's involvement in the alleged offences.

5. Risk of the Petitioner Influencing Witnesses or Fleeing:
The court considered the petitioner's potential to influence witnesses or flee if granted bail. It noted that the petitioner's past conduct and the nature of the allegations indicated a risk of manipulation. The court found that the petitioner's behavior during the investigation did not guarantee his future conduct, especially now that he was aware of the charges against him. The court concluded that releasing the petitioner on bail could jeopardize the integrity of the trial process.

Conclusion:
The court dismissed the petition for bail, emphasizing the seriousness of the economic offences involved, the substantial evidence against the petitioner, and the potential risks associated with granting bail. The court held that the twin conditions under Section 212(6) of the Companies Act are not mandatory and that the petitioner's arguments regarding Section 88 of the Cr.P.C. and the legality of the investigation were without merit.