2020 (3) TMI 20 - HC - Money Laundering

Bail application - money laundering - Section 439, read with Section 436A of the Code of Criminal Procedure, 1973 - period of detention of an under trial prisoner - whether any delay has been caused by the said accused person and the offence is not punishable with death? - HELD THAT - The learned counsel has adverted to the provision of Section 436A of the Code of Criminal Procedure giving emphasis to the proviso clause that the Court may after hearing the public prosecutor and for reasons to be recorded by it in writing, order the continued detention of such person for a period longer than one-half of the said period or release him on bail instead of the personal bond with or without sureties; provided further that no such person shall in any case be detained during the period of investigation, inquiry or trial for more than the maximum period of imprisonment provided for the said offence under that law. Therefore, for the reasons to be noted the Court is well empowered to order continued detention in jail instead of releasing him on personal bond or on surety bond, however in no case the petitioner can be continued with the detention beyond the period of seven years. Whether delay in trial was caused by the petitioner and other accused person? - HELD THAT - It is evident from the charge sheet that the petitioner is responsible for the acts and affairs of the company as the Chairman of Rose Valley Group of Company who planned and designed the illegal schemes to mobilize deposits from the innocent investors including deposits under the scheme of issue of debenture with false assurance of high return and thereby generated huge sums and diverted and thereby laundered the money for different purposes by befooling the common public and has committed offence under Section 3 read with Section 70(1) and (2) of PMLA Act punishable under Section 4 of the Act. Thus, the petitioner is involved in a grave economic crime having serious social ramification and in the larger interest of the society - the learned trial Judge has rightly turned down his prayer for release under the provision of Section 436A of the Code of Criminal Procedure by taking in view the proviso clauses for his continued detention till the conclusion of the trial. The prayer for release of the petitioner Gautam Kundu is refused considering the enormity of the crime and his involvement in many other cases relating to Rose Valley cheat fund scam case - Application dismissed.

Summary

Issues Involved:
1. Application for bail under Section 439, read with Section 436A of the Code of Criminal Procedure, 1973.
2. Allegations under the Prevention of Money Laundering Act, 2002.
3. Compliance with SEBI regulations.
4. Delay in trial proceedings.
5. Applicability of Section 436A of the Code of Criminal Procedure.
6. Arguments regarding the gravity of economic offences.
7. Consideration of human rights under Article 21 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Application for Bail under Section 439, read with Section 436A of the Code of Criminal Procedure, 1973:
The petitioner applied for bail under Section 439, read with Section 436A of the Code of Criminal Procedure, 1973, requesting release on any condition. The petitioner had been in custody for over four years and eleven months, with previous bail applications either granted for short durations or rejected.

2. Allegations under the Prevention of Money Laundering Act, 2002:
The petitioner was accused under Section 4 of the Prevention of Money Laundering Act, 2002, for allegedly laundering money through the Rose Valley Group of Companies. The investigation revealed that the company issued secured non-convertible debentures without complying with SEBI regulations, diverted funds for other business purposes, and accumulated negative reserves, indicating siphoning of funds.

3. Compliance with SEBI Regulations:
The Rose Valley Group of Companies was found to have issued debentures to more than 49 persons without filing offer documents with the regulatory authority or following SEBI norms. SEBI imposed a penalty of ?1 crore on the company for violating Sections 11C(2) and 11C(3) of the SEBI Act, 1992. A complaint was also filed under Sections 24/27 of the SEBI Act, read with Section 11C(3) and Section 405 of the Indian Penal Code.

4. Delay in Trial Proceedings:
The trial had not commenced despite the petitioner being in custody for nearly five years. The court noted that the trial court was directed to frame charges within two months, but this had not been done. The petitioner argued that the delay in trial violated his right to a speedy trial under Article 21 of the Constitution of India.

5. Applicability of Section 436A of the Code of Criminal Procedure:
The petitioner invoked Section 436A, which mandates release on bail if an undertrial has been detained for a period extending up to one-half of the maximum period of imprisonment specified for the offence. The maximum punishment under Section 4 of the Prevention of Money Laundering Act, 2002, is seven years, and the petitioner had been in custody for more than half of this period.

6. Arguments Regarding the Gravity of Economic Offences:
The court considered the gravity of the economic offences involved, noting that the petitioner, as the Chairman of Rose Valley Group of Companies, was responsible for mobilizing deposits from the public through illegal schemes and laundering the money. The court emphasized that the nature of the offence had serious social ramifications and justified continued detention.

7. Consideration of Human Rights under Article 21 of the Constitution of India:
The petitioner cited the Supreme Court's judgment in Nikash Tarachand Shah vs. Union of India, which declared the twin conditions of Section 45 of the Prevention of Money Laundering Act, 2002, as unconstitutional. The petitioner also referred to Bhim Singh vs. Union of India, emphasizing that undertrial prisoners should not be detained beyond the maximum period provided by law. The court acknowledged the importance of a fair, just, and reasonable procedure implicit in Article 21 but ultimately decided that the gravity of the offence warranted continued detention.

Conclusion:
The court dismissed the petitioner's application for bail, considering the gravity of the economic offences and the petitioner's involvement in multiple cases related to the Rose Valley scam. The court directed the trial court to frame charges promptly and conclude the trial expeditiously, with a provision for the petitioner to renew his bail application if delays were caused by the Enforcement Directorate's failure to produce witnesses.