2022 (10) TMI 634 - HC - Money Laundering

Money Laundering - proceeds of crime - seeking enlargement on Bail - fudging its debtors list with inflated receivables from non-existing entities or related parties or companies floated by its own employees to avail loan facility fraudulently - diversion of funds without actual trade/sales - HELD THAT - As on the date of expiry of 90th day, no report under Section 173 Cr.P.C. was on record with the Magistrate. On expiry of 90 days, the accused filed an application for bail invoking Section 167(2) Cr.P.C. The Judicial Magistrate rejected to extend the benefit under Section 167(2) Cr.P.C. Article 21 of the Constitution of India says that no person shall be deprived of his life or personal liberty except according to procedure established by law. Referring this provision, it is time and again enunciated by the Hon ble Apex Court in series of decisions that it is the heart of the Constitution of India and that it is one of the prominent provisions which safeguards the life and personal liberty of the citizens of the country. One may not dispute the fact that the indefeasible right to default bail under Section 167(2) Cr.P.C. is an integral part of right to personal liberty under Article 21 of the Constitution of India. It is clear that in a case, which relates to an offence punishable with death, imprisonment for life or imprisonment for a term of not less than ten years, the investigation is required to be completed within 90 days, and in all other offences within 60 days. It is specifically mentioned that on expiry of the said period i.e., 90 days or 60 days as the case may be, the accused shall be released on bail - There is no provision in the entire Code of Criminal Procedure authorizing any of the Courts to extend such period. The above provisions in the Code of Criminal Procedure are aimed at ensuring expeditious investigation, fair trial and more so, to safeguard the life and personal liberty of the citizens against whom accusation is made. This Court is of the view that the investigating agency has not completed its investigation within the statutory period i.e., within 60 days as required under Section 167(2) Cr.P.C. Filing of some set of papers by giving a title charge sheet does not mean that the same is filed as a final report on completion of investigation. The mandate of law is that on completion of investigation, the final report/charge sheet has to be filed within the statutory period in the format as laid down under Section 173 Cr.P.C. - it is clearly brought on record that only to get over the obligation of filing of the charge sheet within the statutory period so that the accused would not raise plea of grant of statutory bail under Section 167(2) Cr.P.C., it appears that the respondent has filed a formal charge sheet without any material. The order that is rendered by the Court of Metropolitan Sessions Judge-cum-Special Court under the Prevention of Money Laundering Act, Hyderabad is hereby set aside - Petition allowed.

Issues Involved:
1. Allegations of fraudulent credit facility availed by M/s Servomax India Private Limited.
2. Specific allegations against the petitioner/accused No.1.
3. Entitlement to bail under Section 167(2) Cr.P.C.
4. Compliance with the statutory period for filing the charge sheet.
5. Indefeasible right to default bail under Section 167(2) Cr.P.C.

Detailed Analysis:

1. Allegations of Fraudulent Credit Facility:
The prosecution case revolves around M/s Servomax India Private Limited fraudulently availing a credit facility of Rs.402 crores from banks using bogus bills/invoices. The funds were then transferred to group companies and later back to M/s Servomax India Private Limited via dummy bills. A forensic audit by M/s Deloitte revealed fudged debtor lists with inflated receivables from non-existing entities or related parties. The company used LC facilities through entities floated by its employees, diverting and siphoning funds without actual trade/sales.

2. Specific Allegations Against the Petitioner/Accused No.1:
The petitioner, holding the position of Managing Director and CEO of M/s Servomax India Private Limited, was alleged to have been responsible for the divergence of proceeds of crime. The allegations include his active involvement in acquiring, using, possessing, and claiming the proceeds as untainted property. Under his instructions, bogus invoices were issued, and funds were encashed through LC discounting. The petitioner allegedly created and concealed proceeds of crime by rotating funds between entities floated in the names of employees.

3. Entitlement to Bail Under Section 167(2) Cr.P.C.:
The learned Standing Counsel for the Enforcement Directorate argued that the investigation was largely completed by the time the bail application was filed. The charge sheet was submitted within the stipulated period, but additional/supplementary charge sheets were pending due to the accused's non-cooperation. The petitioner contended that the final report was not before the Court on the date of the bail application, and thus, statutory bail should have been granted.

4. Compliance with the Statutory Period for Filing the Charge Sheet:
The petitioner was arrested on 18.01.2022, and the charge sheet was filed on 17.03.2022 (58th day) but returned on the same day. The bail petition was filed on the 60th day and disposed of on 30.05.2022, while the charge sheet was re-presented on 31.05.2022. The petitioner argued that the charge sheet's return and delayed re-submission indicated incomplete investigation within the statutory period.

5. Indefeasible Right to Default Bail Under Section 167(2) Cr.P.C.:
The petitioner emphasized his right to statutory bail after 60 days, citing the Supreme Court's decisions in Achpal @ Ramswaroop Vs. State of Rajasthan and M. Ravindran Vs. Intelligence Officer, Directorate of Revenue Intelligence. The Court noted that the investigating agency failed to complete the investigation within the statutory period, and the charge sheet's return due to formal defects did not justify the delay. The Court concluded that the petitioner was entitled to statutory bail, as the investigation was not completed within the prescribed period.

Conclusion:
The Court allowed the Criminal Petition, setting aside the order of the Metropolitan Sessions Judge-cum-Special Court under the Prevention of Money Laundering Act, Hyderabad. The petitioner/accused No.1 was directed to be enlarged on bail upon executing a bond, with conditions regarding appearance before the trial Court and surrender of his passport. Pending miscellaneous applications were closed.

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