2021 (6) TMI 990 - HC - Money Laundering

Money Laundering - illegal diversion of funds - schedule offence - supply of Gold Bullion or there was only paper transaction - Section 33 of the Sale of Goods Act - HELD THAT - In the case at hand, the picture is totally different. The criminal Court can independently come to a conclusion that the 22 fixed deposits were proceeds of crime and they were projected as untainted money from MJPL (A3) and Suresh Khatri (A4). The other distinguishing feature in this case is that, the total proceeds of crime is ₹ 318.75crores, out of which, the 22 fixed deposits represent only ₹ 143crores and for the balance amount which has gone into the kitty of MJPL (A3), they can be prosecuted as abettors of the offence of money laundering committed by KGPL (A1). Lastly, the order of the Adjudicating Authority in this case, has not attained finality and the same is pending before the Tribunal and therefore, on this ground too, the criminal prosecution cannot be quashed. In a simple private complaint case, the Magistrate may not have any materials dehors the sworn statement of the complainant to take cognizance of the offences alleged in the complaint. In such cases, it will be desirable, if the Magistrate passes an order giving reasons for taking cognizance of the offence and issuing process. In this case, along with the complaint, the Enforcement Directorate has filed 56 documents and also the statements recorded under the PML Act, in support of the allegations in the complaint - The prosecution has to prove the offence, by adducing evidence and this opportunity has to be given to the prosecution in this case too. The prosecution of MJPL (A3) and Suresh Khatri (A4) cannot be said to be unfounded - Petition dismissed.

Summary

Issues Involved:
1. Allegations against KGPL and associated parties under IPC and PML Act.
2. Role and allegations against MJPL and Suresh Khatri.
3. Adjudicating Authority’s findings and their impact on criminal prosecution.
4. Validity of the Special Court's cognizance order.
5. Reliance on forensic audit report for prosecution.

Detailed Analysis:

1. Allegations against KGPL and Associated Parties:
The case originated from an FIR lodged by the CBI against M/s. Kanishk Gold Pvt. Ltd. (KGPL) and others for offenses under Sections 120-B, 420, 467, 468, and 471 IPC read with Sections 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988. The allegations included the diversion of working capital credit facilities sanctioned by a consortium of 14 banks, leading to a loss of ?824.15 crores. The Enforcement Directorate (ED) registered a case under the Prevention of Money Laundering Act, 2002 (PML Act) following the disclosure of a 'scheduled offense' in the FIR.

2. Role and Allegations against MJPL and Suresh Khatri:
MJPL (A3) and its Managing Director, Suresh Khatri (A4), were implicated for allegedly receiving ?318.75 crores from KGPL (A1) purportedly for the purchase of gold bullions, which were not actually supplied. The ED's investigation revealed that ?143 crores from this amount were parked in HDFC Bank as fixed deposits, considered proceeds of crime. The Adjudicating Authority initially set aside an interim attachment order of these deposits, leading to an appeal by the ED.

3. Adjudicating Authority’s Findings and Their Impact on Criminal Prosecution:
The Adjudicating Authority's findings, which were in favor of MJPL and Suresh Khatri, were contested. The court noted that the findings of the Adjudicating Authority under the PML Act do not bind the criminal court, especially when the matter is pending before the Appellate Tribunal. The criminal court can independently assess whether the fixed deposits are proceeds of crime. The court emphasized that the criminal prosecution cannot be quashed based on the Adjudicating Authority's interim findings.

4. Validity of the Special Court's Cognizance Order:
The petitioners challenged the cognizance order dated 13.07.2018, arguing it lacked application of mind. The court referenced various judgments, including Sunil Bharti Mittal Vs. CBI and Mehmood Ul Rehman Vs. Khazir Mohammad Tunda, to highlight the principles governing the issuance of summons. The court concluded that the cognizance order in this case did not require explicit reasons, as the materials filed with the complaint sufficed for taking cognizance. The court upheld the cognizance order, stating it does not deserve to be quashed.

5. Reliance on Forensic Audit Report for Prosecution:
The petitioners contended that the prosecution was based on a forensic audit report, which itself stated it was not for judicial purposes. The court dismissed this argument, noting that while the forensic audit report triggered the investigation, it cannot solely convict someone. The prosecution must prove the offense through evidence, and this opportunity must be given.

Conclusion:
The court dismissed the Criminal Original Petitions, stating that the prosecution of MJPL (A3) and Suresh Khatri (A4) is not unfounded. The connected criminal miscellaneous petitions were also closed.