2021 (6) TMI 426 - HC - Money Laundering

Bank accounts were opened fraudulently - misuse of account without knowledge - shell companies where the cash deposits were transferred from the bank accounts of petitioner and other dummy accounts - HELD THAT - No allegation of any fraud with State Exchequer or affecting any Govt. policy like demonetization. Neither any allegation nor any material to suggest that money was acquired by cheating anyone, by defrauding anyone, being ransom for kidnapping, proceeds of any dacoity, obtained from any corrupt practice or embezzlement of Govt. fund-sets. The only allegation is that its source was not disclosed in income tax before the cash was deposited in Muzaffarpur. The money belonged to the clients for accommodation entry; petitioner has admitted this fact in the statement given under Section 50 of PML Act. The ED has not stated that the money was arranged or collected by commission of any Scheduled offence to become proceeds of crime. In the charge-sheet filed by the ED, it is stated that because all the unaccounted cash has been deposited / placed into normal banking channels by use of this criminal modus operandi through the bank accounts opened through fraudulent means, thus, the same became proceeds of crime . The ingredients of crime offence are based on fact and not an inference or interpretation - offences alleged, if proved, may jeopardize the economy of the country. At the same time, I could lose sight of the fact that the investigating agency has already completed the investigation agency has already completed investigation and the charge sheet has already been filed before the Special Judge, ED, Patna. Therefore, his presence in the custody may not be necessary for further investigation. The petitioner is entitled to the grant of bail pending trial on stringent condition in order to ally the apprehension expressed by the ED - bail granted subject to conditions imposed - application allowed.

Issues Involved:
1. Bail application under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Allegations of fraudulent bank account operations.
3. Income Tax implications and voluntary disclosure under Income Declaration Scheme (IDS), 2016.
4. Investigation and prosecution by Enforcement Directorate (ED).
5. Legal standards for granting bail under PMLA.

Issue-wise Detailed Analysis:

1. Bail Application under PMLA:
The petitioner sought bail in connection with a case under the Prevention of Money Laundering Act, 2002 (PMLA), specifically for offenses under Section 3, punishable under Section 4. The case arose from transactions linked to Mithanpura P.S. Case No. 298/2016, involving Sections 120(B), 420, 467, and 471 of the Indian Penal Code (IPC).

2. Allegations of Fraudulent Bank Account Operations:
The prosecution's case, as per the informant Kunal Kumar, alleged that the petitioner and his brother fraudulently opened bank accounts in Kunal's name without his knowledge and conducted transactions worth ?13 crores. The petitioner, however, claimed that these accounts were used to facilitate business transactions for his cousin Pankaj Agrawal's biscuit business, for which he received a commission.

3. Income Tax Implications and Voluntary Disclosure under IDS, 2016:
The petitioner argued that upon realizing the tax implications of the transactions, he ceased such activities and declared all transactions under the Income Declaration Scheme (IDS), 2016. He paid the necessary taxes and penalties before any investigation commenced. The petitioner emphasized that the Income Tax authorities accepted his disclosures and dropped further proceedings.

4. Investigation and Prosecution by ED:
The ED initiated an investigation based on the FIR and recorded an ECIR. The petitioner cooperated with the investigation, appearing multiple times before the ED and providing statements. Despite this, the petitioner was arrested and remained in custody for over seven months. The ED's investigation revealed that the petitioner deposited substantial amounts of cash into various bank accounts, which were then transferred to multiple companies, many of which were shell entities.

5. Legal Standards for Granting Bail under PMLA:
The petitioner argued that the preconditions for bail under Section 45(1) of PMLA, which were struck down by the Supreme Court in Nikesh Tarachand Shah vs. Union of India, should not apply. The petitioner also cited his medical conditions and lack of flight risk as grounds for bail. The court considered the petitioner's cooperation with the investigation, the completion of the ED's investigation, and the lack of any direct evidence of proceeds of crime from scheduled offenses. The court noted that economic offenses must be viewed seriously but also recognized the petitioner's right to a fair trial and the prolonged pre-trial detention.

Conclusion:
The court granted bail to the petitioner, imposing stringent conditions, including the surrender of his passport, making himself available for further investigation, and refraining from influencing witnesses. The court emphasized the petitioner's cooperation with the investigation and the lack of any criminal antecedents. The application was allowed, and the petitioner was released on bail upon furnishing a bond of ?10,00,000 with two sureties of the like amount.

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