2020 (12) TMI 1128 - HC - Money Laundering

Grant of Bail - Money laundering - fraud with home/flat buyers - siphoning off/diversion of funds - conspiracy and huge loss of public funds - HELD THAT - But for the Supreme Court's intervention and undertaking painful and strenuous exercise to secure and protect the interest of innocent home/flat buyers, the fraud played by the accused-applicant and other accused in cheating and defrauding thousands innocent home/flat buyers of their hard earned money, could not have been unearthed - The Supreme Court is monitoring the investigation. The Supreme Court had been in pain to note the conduct of the accused-applicant and other accused. They had even violated the Supreme Court orders and did not comply the directions issued on several occasions. The forensic auditors appointed by the Supreme Court had meticulously flagged the fraud and cheating by the accused-applicant and other coaccused in creating bogus and sham companies and diversion of funds of the flat buyers money and creating assets etc. PMLA is a special statute enacted by Parliament for dealing with money laundering. Section 5 of the Cr.P.C. clearly lays down that the provisions of Cr.P.C. will not affect any special statute or any local law. In other words, the provisions of the special statute will prevail over the general provisions of the Cr.P.C. in case of any conflict - The economic crime of such scale and magnitude are carefully and meticulously planned and executed. It is well settled that economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. While granting bail, the court has to keep in mind the nature of accusations, magnitude and gravity of offence and nature of evidence in support of the accusations. The object of PMLA is to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering. Section 44 of the PMLA confers jurisdiction on special court to deal with the offences under PMLA. Section 45 of the PMLA makes the offence of money laundering cognizable and nonbailable notwithstanding anything contained in Code of criminal Procedure, 1973. Money laundering is a serious economic offence and serious threat to the national economy and national interest and, these offences are committed with cool calculation with the motive of personal gain regardless of the consequences on the society. The plea for bail is refused and the bail application is rejected.

Summary

Issues Involved:
1. Bail application under Section 439 CrPC and Section 45 PMLA.
2. Role of the accused-applicant as Statutory Auditor.
3. Diversion of funds and fraudulent activities.
4. Supreme Court's observations and directives.
5. Legal principles regarding bail in economic offences.

Issue-wise Detailed Analysis:

1. Bail Application under Section 439 CrPC and Section 45 PMLA:
The accused-applicant filed a bail application under Section 439 of the CrPC read with Section 45 of the PMLA after the Special Judge, PMLA/Sessions Judge, Lucknow, rejected his bail application. The court noted that PMLA is a special statute, and its provisions prevail over CrPC in case of conflict. The conditions under Section 45 PMLA, including the prosecutor’s opportunity to oppose bail and the court's satisfaction that the accused is not guilty and unlikely to commit an offence while on bail, were emphasized.

2. Role of the Accused-Applicant as Statutory Auditor:
The accused-applicant, as the Statutory Auditor of M/s Amrapali Group of Companies, was involved in the diversion of funds and fraudulent activities. The Supreme Court found that he failed to discharge his duties and was part of the fraudulent activities, including creating bogus companies and siphoning off funds. The forensic audit revealed his active role in manipulating accounts and diverting funds, implicating him in the criminal conspiracy.

3. Diversion of Funds and Fraudulent Activities:
The accused-applicant admitted to siphoning ?2,765 Crores from six projects. The forensic audit disclosed diversion of more than ?100 Crores to shell companies. The Supreme Court noted that 23 more companies were created for fund diversion with the accused-applicant’s connivance. The funds were diverted through various sham transactions, including booking bogus bills and selling flats at undervalued prices. The accused-applicant also received monetary gains and acquired properties from the proceeds of crime.

4. Supreme Court's Observations and Directives:
The Supreme Court, monitoring the investigation, noted the accused-applicant’s non-compliance with its orders and his involvement in fraudulent activities. It directed the Enforcement Directorate to investigate money laundering and submit quarterly reports. The court emphasized the need for stringent measures to prevent such frauds in the real estate sector. The Supreme Court's detailed orders highlighted the massive fraud and the accused-applicant's role in it, leading to the rejection of his bail application.

5. Legal Principles Regarding Bail in Economic Offences:
The court referenced several Supreme Court judgments, emphasizing that economic offences constitute a class apart and need a different approach in bail matters. The seriousness of the offence, the magnitude of the fraud, and the potential impact on the economy were considered. The court cited cases like Y.S. Jagan Mohan Reddy vs CBI and Nimmagadda Prasad vs CBI, which held that economic offences with deep-rooted conspiracies and significant public fund loss should be viewed seriously. The court concluded that the accused-applicant’s involvement in the offence and ongoing investigation warranted the rejection of his bail application.

Conclusion:
The bail application was rejected considering the accused-applicant’s significant role in the fraudulent activities, the ongoing investigation, and the Supreme Court's stringent observations and directives. The court upheld the principles that economic offences require a different approach in bail matters due to their severe impact on the economy and public trust.