2020 (11) TMI 27 - HC - Money Laundering

Money Laundering - proceeds of crime - submission of Shri Venegaonkar is that the applicant has failed to discharge the burden and has failed to produce even prima facie material in support of his contention. Shri Venegaonkar specifically deny the submission of Shri Ponda that the applicant was not a member of COD of IFIN at any point of time - HELD THAT - From the material placed by the respondent, it can be seen that the applicant was involved in the infrastructure projects and the documents from the Ministry of Corporate affairs rather corroborate the submission of the respondent. He was involved into various infrastructure projects and therefore, in various Special Purpose vehicles or various infrastructure Limited companies, his name feature as a Director. The submission of Mr.Ponda therefore thus require a mention, just for its rejection. The applicant has also received amounts towards PRP, deputation cost and sitting fee that is clearly reflective of the benefit being drawn by him from the dealings of IFIN as well as IL FS Financial Services. Reliance is placed on statements recorded during the course of investigation under the PMLA Act and the modus operandi of IL FS and its subsidiary companies has surfaced. The PMLA Act of 2002 which aim to prevent money laundering, it contain a provision which raises presumption as to records or property and into interconnected transactions. By virtue of Section 24 while dealing with proceedings relating to proceeds of crime unless the contrary is proved, a presumption exists that such proceeds of crime are involved, where a person is charged with offence of money laundering. The burden under Section 24 is cast on the accused to prove that proceeds of crime are not involved in purchasing the properties owned by the accused. The applicant who has been arraigned as an accused in the capacity as the Managing Director of ITNL and one of the members of the Committee of Directors of IFIN (for infrastructure projects) is attributed a key role. IFIN who was shouldering the responsibility of syndicating the debt and equity for ITNL and ITNL would post its requirement for the projects to IFIN, the RBI had advised IFIN to run down its exposure to group companies with no fresh lending. In spite of that, ITNL for whom the applicant was working as Managing Director received fund from IFIN. It is revealed during investigation that loans were sanctioned to various entities who were undertaking various projects and the applicant had given letter of assurance dated 29th March 2018 on behalf of ITNL. The CFO of one of the groups in his statement has admitted that he had meetings with K. Ramchand for obtaining fund from IFIN in favour of M/s.GHV Hotels Ltd which is running in loss for last few years which was entitled to be transferred to ITNL. Prima facie on the basis of the allegations levelled against him and on the basis of the statements of the co-accused, Arun Saha has described the applicant to be in executive management of ITNL as Managing Director and Chief Executive Officer and his response to the query whether ITNL had any control over the SPVs and the contractors to whom work was allotted, is that ITNL had control over those SPVs in which ITNL was one of the partners and holding majority stake and that the executive management of ITNL had a role to play by ascertaining the genuineness, working experience, good will etc for contractors and their companies. The applicant has played a pivotal role since in most of the SPVs, ITNL had 100% stake - The applicant who was working as Managing Director of ITNL, therefore, will have to answer the charge. It is a well settled position that the jurisdiction to grant bail has tobe exercised having regard to the facts and circumstances. The following factors are to be taken into consideration while considering an application for bail (a) The nature of accusastion and severity of the punishment in case of conviction and nature of material relied upon by the prosecution (b) reasonable apprehension of tampering with the witnesses or apprehension of threat to the complainant or the witnesses (c) reasonable possibility of securing the presence of accused at the time of trial or the likelihood of his abscondence (d) character, behaviour and standing of accused and circumstances peculiar to him. (e) larger interest of public of the State and similar other considerations. There is no hard and fast rule regarding grant or refusal to grant bail. The magnitude of the offence involving the applicant is enormous and the amount involved is huge. The effect of the conspiracy on behalf of the accused persons focusing on a desired result makes it a serious economic offence. The IL FS Financial Services which was facing a serious liquidity crisis leading to their inability to fulfil debt obligation and the investigation has revealed that those in helm of affairs played a hoax and in a disguised way duped the stakeholders and general public whose monies were at stake. The Committee of Directors failed to discharge their obligation and they were in hand-in-gloves with big corporate groups. They continued to refinance the big groups in connivance with their promoters, on the existing collateral or without sufficient security merely on personal guarantees being offered in order to avail the loans as also in re- financing - The default crisis in the IL FS has adversely impacted the growth of Non-banking Finance Companies. It has jeopardised hundreds of investors, banks and mutual funds associated with IL FS and sparked panic among equity investors, as several NBFC faced turmoil amid a default scare. The applicant is not entitled for being released on bail and the application deserves to be rejected - Application dismissed.

Summary

Issues Involved:
1. Bail application under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Applicant's involvement and role in the alleged money laundering activities.
3. Parity with co-accused who were granted bail.
4. Application of Section 24 and Section 45 of PMLA.
5. Economic offences and their impact on the economy.
6. Judicial discretion in granting bail for economic offences.

Detailed Analysis:

1. Bail Application under PMLA:
The applicant sought release on bail in connection with an offence under the Prevention of Money Laundering Act, 2002. The Directorate of Enforcement (ED) had registered an ECIR and filed a complaint under Sections 44 and 45 of the PMLA for the offence of Money Laundering as defined under Section 3 and punishable under Section 4 of the Act. The designated Court took cognizance of the complaint and issued summons to the accused, including the applicant.

2. Applicant's Involvement and Role:
The applicant, a qualified Civil Engineer and former Managing Director of IL&FS Transportation Networks Limited (ITNL), was alleged to have indulged in money laundering. The complaint stated that the Committee of Directors (COD) of IFIN sanctioned loans to financially stressed group companies to repay earlier loans, thereby committing scheduled offences. The applicant's counsel argued that he was not a member of COD of IFIN and thus had no role in the alleged offences. However, the ED's counsel countered that the applicant was indeed a member of COD for infrastructural projects and had signed relevant documents, making him complicit in the alleged activities.

3. Parity with Co-Accused:
The applicant's counsel claimed parity with other co-accused who were granted bail. The ED's counsel responded that the applicant, along with other COD members, was arrested and that other members were also in jail custody. The ED argued that the applicant's role was significant and distinct, justifying his continued detention.

4. Application of Section 24 and Section 45 of PMLA:
The ED's counsel emphasized the burden of proof under Section 24 of PMLA, which requires the accused to prove that the proceeds of crime are not involved. The applicant had failed to discharge this burden. Additionally, the amendment to Section 45(1) of PMLA post-2018 necessitates that the accused must discharge the burden of proof before seeking bail. The applicant's involvement in the alleged money laundering activities, as evidenced by various documents and statements, was substantial.

5. Economic Offences and Their Impact:
The judgment highlighted the serious nature of economic offences, which involve deep-rooted conspiracies and significant public funds. The magnitude of the offence involving the applicant was enormous, with substantial amounts of money involved. The IL&FS Financial Services faced a serious liquidity crisis, and the accused were alleged to have played a significant role in perpetuating the fraud, thereby impacting the economy and stakeholders.

6. Judicial Discretion in Granting Bail:
The court considered various factors, including the nature of accusations, severity of punishment, possibility of tampering with evidence, and the larger interest of the public. The court referred to precedents, emphasizing that economic offences require a different approach in bail matters due to their grave impact on the economy. The applicant's role in the alleged offences and the substantial evidence against him justified the denial of bail.

Conclusion:
The application for bail was rejected based on the prima facie incriminating material against the applicant, his significant role in the alleged money laundering activities, and the serious impact of the offences on the economy. The court emphasized that economic offences need to be viewed seriously and that the applicant had failed to discharge the burden of proof under PMLA. The observations made were prima facie and not final findings on the alleged offence.