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2021 (7) TMI 1256 - HC - Money LaunderingMoney Laundering - Proceeds of crime - scheduled offences - cheating more than 13, 000 investors who are the members of the Society - mis-used of funds of the public and re-investment of the money - diversion of deposits from the Financial Institutions to other businesses - Section 420 of IPC - HELD THAT - The ED produced the documents and also the petitioner counsel has produced an Observation Report which reveals that the petitioner is one of the Directors; one Harish was the President; Siddegowda was the Vice President and there were other 13 Directors. All other Directors and President were not arrested by the ED except this petitioner. The observation report reveals that the total investment was 650, 41, 68, 190/-. The reserved amount is 12, 93, 42, 844/-; the share investment is 24, 74, 89, 000/-; the loan obtained for an amount of 6, 09, 73, 928/-. The investment is 6, 35, 12, 658/-. The Property is 7, 68, 69, 008 and the loan lent is 702, 28, 44, 385/-. As per the report of the petitioner the Society was running under profit but not under loss. But the contention of the respondent is that the accused himself has borrowed huge loan without security and has reinvested in various businesses like Kanva Fashion Kanva Developers Kanva Health Care Kanva Resorts and other businesses - Looking to the entire facts reveals that the petitioner was involved in reinvesting the money by borrowing it from the Society out of the deposits which is nothing but proceeds of the crime is nothing but Money Laundering which attracts the offence under the PML Act. On merits absolutely there is no case for the petitioner. Looking to the entire medical documents it reveal that the petitioner is in danger due to various ailments and therefore he require proper treatment in the good multi-Specialty Hospital at Bengaluru. It is not possible to provide proper treatment by the Jail Authorities which requires more expenses which cannot be borne by the Government. The Government cannot spend tax payers money. The Court will not grant bail to the accused where economic offences are involved and huge public money is involved. But only on the ground for the purpose of providing medical treatment this Court is required to consider medical ground but not on merits of the case. Therefore by looking to the facts and circumstances of the case in order to provide proper medical care and protection to the petitioner if bail is granted to the petitioner no prejudice would be caused to the prosecution case - the petitioner is required to be released on bail on medical ground. Both the criminal petitions are allowed.
Issues Involved:
1. Bail application under Section 439 of Cr.P.C. for offences under Section 4 of the Prevention of Money Laundering Act, 2002 (PML Act). 2. Bail application under Section 439 of Cr.P.C. for offences under Sections 409 and 420 of the Indian Penal Code, 1860 (IPC) and Section 9 of the Karnataka Protection of Interest of Depositors in Financial Establishment Act, 2004 (KPID Act). Detailed Analysis: Issue 1: Bail Application under Section 439 of Cr.P.C. for Offences under PML Act The petitioner, accused No.1, sought bail in Special Criminal Case No.846/2020 registered by the Directorate of Enforcement (ED) for offences under Section 4 of the PML Act. The prosecution alleged that the petitioner, as the Founder/Director of Kanva Souhardha Co-operative Credit Limited, collected ?650 crores from members and the public, promising high interest rates without maintaining required liquidity and issued prepaid instruments without RBI's permission. The petitioner allegedly advanced ?702 crores to 13 associated companies without security, resulting in significant defaults. Multiple FIRs were registered against him for cheating (Section 420 IPC), which is a scheduled offence under the PML Act. The ED arrested the petitioner and he was remanded to judicial custody. Issue 2: Bail Application under Section 439 of Cr.P.C. for Offences under IPC and KPID Act The petitioner also sought bail in Crime No.304/2020 registered by Hosakote Police Station for offences under Sections 409 and 420 IPC and Section 9 of the KPID Act. The complaint was filed by an investor who alleged that the petitioner’s Society had collected deposits and shares, promising double returns but failed to repay, resulting in cheating. The investigation revealed that the Society cheated over 600 people, involving ?39.08 crores, and 111 properties worth ?426 crores were seized. The Sessions Court rejected the bail application, leading the petitioner to approach the High Court. Arguments by Petitioner’s Counsel: The petitioner’s counsel argued that the petitioner was innocent, merely acting as the Founder/Director, and had no intention to cheat. The funds collected were reinvested in businesses, and losses led to complaints. The petitioner was willing to sell properties to repay investors and assist in a forensic audit. Additionally, the petitioner was suffering from serious health issues, including first-stage cancer, diabetes, hypertension, and depression, requiring proper medical treatment. Arguments by Respondent’s Counsel: The ED’s counsel opposed the bail, highlighting that the petitioner cheated over 13,000 investors, misused funds, and reinvested in other businesses. A public interest litigation was pending, and an Administrator was appointed by the High Court. If released on bail, the petitioner might tamper with evidence, sell properties, and not cooperate with the administrators. The High Court Government Pleader and assisting counsel also objected, emphasizing ongoing investigations and potential witness tampering. Court’s Observations: The Court noted the petitioner’s role as Founder/Director and the significant financial irregularities and defaults. The petitioner’s reinvestment of funds in other businesses constituted money laundering under the PML Act. However, the Court acknowledged the petitioner’s severe health issues, requiring proper medical treatment not feasible in jail. Judgment: The Court granted bail on medical grounds, not on the merits of the case, recognizing the need for proper treatment. Conditions for bail included executing a personal bond of ?10 lakhs with two sureties, regular court appearances, no tampering with evidence, surrendering the passport, not leaving jurisdiction without permission, and cooperating with the appointed Administrator and Competent Authority. The petitions were allowed, and the petitioner was directed to be released on bail with specified conditions. Order: The petitioner-accused No.1 was granted bail in both Special Criminal Case No.846/2020 and Crime No.304/2020, subject to conditions ensuring his cooperation with ongoing investigations and preventing tampering with evidence or alienation of properties. The main petitions were disposed of, and pending applications were also disposed of accordingly.
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