2022 (4) TMI 650 - HC - Money Laundering

Smuggling - gold jewellery - Constitutional Validity of Section 45 of the PMLA - Section 135 of the Customs Act, Section 12 of the Passport Act and also under the penal provision of Prevention of Money Laundering Act - HELD THAT - It is needless to say that for registration of a crime under the PMLA, the only prerequisite is registration of a predicate/scheduled offence as prescribed in various paragraphs of the schedule appended to the Act nothing more than it. In other words, for initiating or setting the criminal law in motion under the PMLA, it is only that requirement of having a predicate/scheduled crime registered prior to it. Once an offence under the PMLA is registered on the basis of a scheduled offence, then it stands on its own and it thereafter does not require support of predicate/scheduled offence. It further does not depend upon the ultimate result of the predicate/scheduled offence. Even if the predicate/scheduled offence is compromised, compounded, quashed or the accused therein is/are acquitted, the investigation of ED does not get affected, wiped away or ceased to continue. It may continue till the ED concludes investigation and either files a complaint or closure report before the Court of competent jurisdiction. Besides the bar imposed in Section 45(1)(ii) of the PMLA, it is the bounden duty of the court to decide while disposing of an application for bail the prima facie material available to fortify commission of offence, gravity of offence, severity of punishment, opportunity of the petitioner of fleeing away and tempering with the evidence if the bail is granted to him. The complaint under the PMLA was registered on 5th May, 2021 vide ML Case No.1 of 2021. The petitioner was not found in his residence at Hyderabad. Finally he was apprehended from Lonavala on 28th November, 2021 - there is always a possibility that the petitioner may flee away in order to evade trial of the case. The petitioner having financial influence, there is every chance that the witnesses may be influenced by the petitioner. Therefore, the established tests for granting or refusal of a application for bail under Section 439 of the Cr.P.C also runs against the petitioner. Section 2(p) of the PMLA defines money laundering which has the meaning assigned to it in Section 3. Section 3 States that a person is guilty of the offence of money laundering, if he directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property - The petitioner with the help of his son, wife and brother adopted the procedure contained in 113(k) of the Customs Act to divert gold jewellery schedule for exportation in domestic market. The petitioner is not inclined to be released on bail - bail application dismissed.

Issues Involved:
1. Legality of the diversion of gold meant for export to the domestic market.
2. Applicability of Section 45 of the Prevention of Money Laundering Act (PMLA) for bail.
3. Prima facie evidence against the petitioner for the alleged offenses.
4. Petitioner's involvement in smuggling and money laundering.

Detailed Analysis:

1. Legality of the Diversion of Gold Meant for Export to the Domestic Market:
The case originated from the accusation that the petitioner diverted 54.096 kg of gold jewelry meant for export from Kolkata to the domestic market. The shipping bill was filed under the name of Shri Ganesh Jewels, Hyderabad, for export to Dubai. The gold was handed over to the petitioner's son, who then gave it to the petitioner. The petitioner broke the customs seals and booked the gold for domestic delivery. The petitioner argued that the gold was legally purchased, and the only allegation was selling it domestically without exporting it, for which duties and penalties were already paid.

2. Applicability of Section 45 of the PMLA for Bail:
The petitioner argued that Section 45 of the PMLA, which imposes twin conditions for bail, was declared unconstitutional by the Supreme Court in Nikesh Tarachand Shah vs. UOI. However, the Enforcement Directorate (ED) contended that the amendment to the Finance Act, 2018, revived these conditions. The court referred to various judgments, including those from the Bombay High Court and the Supreme Court, affirming that the twin conditions of Section 45(1)(ii) of the PMLA are applicable post-amendment.

3. Prima Facie Evidence Against the Petitioner:
The ED's investigation revealed that the petitioner diverted 2717 kg of gold, valued at over ?650 crores, meant for export to the domestic market. The petitioner and his associates used multiple bank accounts to launder money. The court noted the gravity of the offense, the petitioner's use of a fake passport, and the potential risk of absconding and tampering with evidence.

4. Petitioner's Involvement in Smuggling and Money Laundering:
The court examined the definitions and provisions related to smuggling and money laundering under the Customs Act and PMLA. The petitioner's actions, including the diversion of gold and subsequent financial transactions, were found to fit the definition of money laundering, involving proceeds of crime and projecting them as untainted property. The court emphasized that the PMLA is a standalone statute and its proceedings are independent of the outcome of the predicate offense.

Conclusion:
The court concluded that the twin conditions of Section 45(1)(ii) of the PMLA are applicable and that the prima facie evidence supports the allegations against the petitioner. Given the gravity of the offense, the risk of absconding, and the potential to influence witnesses, the court rejected the petitioner's bail application. The petitioner's prayer for bail was thus denied, and the case was disposed of accordingly.

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