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2022 (12) TMI 454 - HC - Money LaunderingSeeking enlargement on regular bail - Bribery - scheduled offences - conspiracy with other accused illegally intercepted MTNL lines at National Stock Exchange - right to privacy - HELD THAT - ISEC is primarily involved in the business of cyber security consulting, which includes conducting audits, preparing policy design and evaluation of cyber security systems and processes - tapping phone lines or recording calls without consent is a breach of privacy. The right to privacy enshrined under Article 21 of the Constitution demands that phone calls not be recorded. Only with consent of the individuals concerned, can such activity be carried out otherwise it will amount to breach of the fundamental right to privacy. The Apex Court in K.S. Puttaswamy v. Union Of India 2017 (8) TMI 938 - SUPREME COURT holds right to privacy inheres in every individual as a natural right. It is inalienable and attached to every individual as a pre-condition for being able to exercise their freedom. In the present case, recording or tapping of phone lines by ISEC was not an action of the State. The facets of privacy include right of non-interference with the individual body, protection of personal information and autonomy over personal choices. Consent is essential when it comes to recording phone lines which aspect was disregarded by both NSE and ISEC. However, this aspect need not detain me any further as in the present application, I am only dealing with the bail application of the applicant and not the quashing petition - In the given case, NSE mandates to record conversations since SEBI has mandated brokers to execute trades only after maintaining inter alia telephonic recordings. The same is duly found in the SEBI circulars dated 26.09.2017 and 30.11.2017 which are detailed above. Hence, on one hand, the circulars mandate calls be recorded for the purposes of adjudication of disputes while on the other hand, it prosecutes for complying with the circulars. The act of tapping and recording phone calls without consent of the concerned person can be penalised under various sections of the Indian Telegraph Act and Indian Wireless Telegraphy Act but the offences under the said statutes are not scheduled offences. On the other hand, invocation of sec. 72 of the IT Act is only limited to breach of confidentiality and privacy, which offence has not been made out - prima facie the ingredients of the alleged offences are not made out in the present case. The offence under section 120-B IPC (which is also a PMLA scheduled offence) is also not made out in so far as the criminal intent i.e., agreement to do an illegal act as defined under sec.120-A IPC is not established. NSE has been involved in call-recording since 1997 through other vendors such as M/s Comtel, prior to ISEC being brought into the picture to analyse recorded calls. Since call recording was being done prior to the arrival of ISEC, there is no criminal conspiracy entered into between ISEC and NSE with the intention of committing an illegal act, namely, call recording. Thus, the element of criminal intent is not made out in the present case and no offence under section 120 B read with 409 and 420 IPC is established. Since none of the ingredients of the scheduled offences viz., Section 72 IT Act, Section 120B r/w 409 and 420 IPC, Section 13(2) read with 13(1)(d) PC Act are made out, there is no occasion to allege acquisition or retention of proceeds of crime , which under Section 2(u) of PMLA is defined to mean proceeds arising out of scheduled offences. - the Applicant cannot be held to have derived or obtained property as a result of criminal activity relating to or in relation to a scheduled offence. On the basis of the material collected and referenced by the ED, the ED has not substantiated that the Applicant has derived or obtained any property as a result of a scheduled offence or indulged in any activity or process relating to that property - according to section 45 PMLA, prima facie, there are reasonable grounds to believe that the Applicant is not guilty of the offence and he is not likely to commit any offence while on bail. the application is allowed and the applicant is granted bail subject to conditions imposed.
Issues Involved
1. Legality of phone call interception and recording by ISEC Services Pvt. Ltd. at NSE. 2. Applicability of various sections of the Indian Telegraph Act, Information Technology Act, Indian Penal Code, and Prevention of Corruption Act. 3. Determination of whether the actions constituted a scheduled offence under the Prevention of Money Laundering Act (PMLA). 4. Evaluation of the bail application of the applicant in light of the above issues. Detailed Analysis 1. Legality of Phone Call Interception and Recording by ISEC Services Pvt. Ltd. at NSE The case revolves around the allegation that ISEC Services Pvt. Ltd., in conspiracy with other accused, illegally intercepted MTNL lines at NSE between 2009 to 2017 and recorded calls without the consent of NSE employees. The Directorate of Enforcement registered an ECIR based on these allegations. The applicant argued that NSE had been monitoring calls since 1997 and that ISEC was merely analyzing pre-recorded call data provided by NSE. However, the court noted that tapping phone lines or recording calls without consent is a breach of privacy under Article 21 of the Constitution, as established in K.S. Puttaswamy v. Union Of India. 2. Applicability of Various Sections of Relevant Acts Telegraph Act: The applicant contended that Section 5 of the Telegraph Act, which allows the government to intercept messages, does not apply to private entities like NSE recording their own phone lines. The court found that the recording device does not constitute a 'telegraph' under the Act, and thus, Sections 20, 21, 24, and 26 of the Telegraph Act were not applicable. Information Technology Act: The applicant argued that Sections 72 and 72A of the IT Act, which penalize breach of confidentiality and privacy, were not applicable as ISEC was not acting under any powers conferred by the IT Act. The court agreed, noting that Section 72 specifically applies to persons acting under powers conferred by the Act, which was not the case here. Indian Penal Code: The court found that the ingredients for offences under Sections 120B (criminal conspiracy), 409 (criminal breach of trust), and 420 (cheating) IPC were not made out. There was no evidence of dishonest inducement or wrongful gain, and the prosecution failed to identify any victim who suffered a wrongful loss. Prevention of Corruption Act: The court noted that Section 13(1)(d) of the PC Act, which deals with criminal misconduct by a public servant, was not applicable as NSE is a private entity, and the applicant did not hold public office during the relevant period. 3. Determination of Whether Actions Constituted a Scheduled Offence Under PMLA The court examined whether the revenue generated by ISEC constituted 'proceeds of crime' under PMLA. Since none of the scheduled offences under the IT Act, IPC, or PC Act were made out, the provisions of PMLA were not attracted. The court relied on Vijay Madanlal Choudhary v. Union of India, which held that PMLA provisions apply only when property is derived from a scheduled offence. 4. Evaluation of the Bail Application The court considered the conditions under Section 45 of PMLA for granting bail, which include giving the public prosecutor an opportunity to oppose the bail and having reasonable grounds to believe that the accused is not guilty. The court found that none of the scheduled offences were prima facie made out, and thus, there were reasonable grounds to believe that the applicant was not guilty of the offence. Consequently, the applicant was granted bail with specific conditions, including furnishing a personal bond, appearing before the court as required, and not leaving the country during the bail period. Conclusion The court granted bail to the applicant, concluding that the allegations did not constitute scheduled offences under PMLA, and the actions of ISEC and the applicant did not meet the criteria for offences under the Telegraph Act, IT Act, IPC, or PC Act. The decision emphasized the importance of privacy rights and the specific requirements for invoking penal provisions under various statutes.
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