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2023 (2) TMI 374 - HC - Money LaunderingSeeking grant of bail - financial irregularity and siphoning of funds in relation to credit facilities obtained by SBFL from a consortium of banks led by the SBI and thereby causing a loss of Rs. 3269.42 crores - Applicant not named in FIR - compliance with the twin conditions of Section 45 of PMLA - HELD THAT - The three Judge Bench decision of the Hon ble Supreme Court in its recent decision in the case of Vijay Madanlal Chaudhary 2022 (7) TMI 1316 - SUPREME COURT and connected matters, has upheld the mandatory twin conditions u/s 45 of the PMLA. The twin conditions, are independent of each other and require the Court to weigh each one of them and adjudicate on the potential guilt of the offender based on the material relied upon by the accused and the opposition made to the same by the prosecution - Hence the Hon'ble Court is not required to render a finding of guilt or acquittal at this stage, nor is it required to conduct a mini trial or meticulously examine the evidence but rather is to examine whether the applicant has made out reasonable grounds for believing that he is not guilty. Prima Facie no reasonable grounds for believing that the applicant is guilty - HELD THAT - The applicant is not named in the FIR. The applicant is also not named as an accused in the ECIR registered by the ED, as the same is simply a replica of the FIR registered by the CBI - the role assigned to the Applicant is that since he was an Internal Auditor of SBFL and statutory auditor of several sister concerns of SBFL, it was through his aid and assistance that Shakti Bhog Foods Limited, borrowed, layered and siphoned off the loan funds using the platform of about 24 known group companies and several shell entities. It is clear from timeline of the applicant with SBFL, that the applicant was not the statutory auditor at the time of the commission of offence i.e., the period between 2013 and 2017. The ED has alleged that the applicant was the mastermind of the whole operation and to prove the same the ED has produced evidence in form of some emails and statements of management and employees of SBFL given u/s 50 of the PMLA - the documents do not support the contention of the ED that the applicant is guilty. Heavy reliance has been placed on section 50 of PMLA statements made by the employees of the SBFL. The only relevant document remaining that prima facie may establish the guilt are the statements u/s 50 of the PMLA. The investigation of the ED is hinged on the statements made u/s 50 of the employees of the SBFL. Reliability of retracted statements - HELD THAT - In the present case as well, the question is not regarding the admissibility but the reliability. The statements had concretely named the applicant. However, in their subsequent retraction the reliability of the statements themselves become doubtful. Statements of Employees of SBFL, Accommodation Entry Operators (Devki Nandan Garg Ashok Kumar Goel) are a cut copy paste job with even the punctation marks of commas, full stops not differing - Prima facie in view of the retraction, the reliability of these statements is questionable. The retracted statements cannot form the basis of the guilt of the applicant of the offences as alleged. Prima facie, it is found difficult to place the guilt of the offence under PMLA on the applicant, based on these statements. Further, the questions as to why the statements were retracted are questions of trial. In the present case, there is no relevant document to support the allegations. Admittedly the applicant has the 15-year association with SBFL, but despite the allegation that he was the mastermind of the whole operation the ED has relied on 5 documents to show the applicant s complicity. For the reasons as noted, the documents do not show that the applicant is guilty of offences as alleged against him. In addition, there is not satisfactory explanation given by the ED for the lack of documents that directly point to the applicant as the mastermind. Delay in filing chargesheet - Investigating still continuing - HELD THAT - In the present case, out of a possible 7-year sentence, the applicant in case has already served more than 17 months of pre-trial detention (as of 23.01.2023). It is also important to state that the applicant has been interrogated only once on 13.11.2021 in entire judicial custody of more than 1 year - there can be no arguments on framing charges or initiation of a trial because the investigation is still ongoing. The ED has listed 109 witnesses till date and the Prosecution Complaints run into lakhs of pages in multiple trunks. Without a completion of investigation, no charges can be framed nor can trial cannot begin. In the light of this, the court cannot let the applicant undergo long period of detention. If this court allows the continuing pre-trial incarceration, the same will amount to deprivation of personal liberty as well as travesty of justice as the same is equivalent to punishment without trial. In the present case, although the applicant, has not undergone half of the period, the offence with which the applicant is charged with is punishable with imprisonment upto 7 years but not with life or death. There are no criminal antecedents reported against the applicant. Out of this sentence, the applicant has already undergone 17 months of incarceration - Even though the allegations are serious but the chargesheet is yet to be filed. Assuming that the applicant was the mastermind, the respondent did not name him in the original FIR. The applicant had conducted audit of the company and had certified the fictitious accounting entries in the books of accounts of the company to inflate financials of SBFL, even then during his entire custody he has been interrogated only on one occasion on 13.11.2021. The period of incarceration as well as the delay in investigation along with any reliable material which directly involved the Applicant justifies a prima facie release on bail. The only substantial evidence which is produced are the statements u/s 50 PMLA which too have been retracted - The standing counsel for the ED has been given the opportunity to oppose the bail. Hence the twin conditions as enumerated u/s 45 of PMLA have been met. The applicant should be released on bail. The application is allowed subject to conditions imposed.
Issues Involved:
1. Bail application under Section 439 IPC read with Section 482 CrPC. 2. Allegations of financial irregularity and siphoning of funds by SBFL. 3. Role and involvement of the applicant in the alleged offenses. 4. Reliability of statements made under Section 50 PMLA. 5. Delay in investigation and filing of chargesheet. 6. Applicability of Section 45 of the PMLA. Issue-wise Detailed Analysis: 1. Bail Application under Section 439 IPC read with Section 482 CrPC: The applicant sought bail in ECIR/12/DLZO-I/2021, having been in judicial custody since 12/13.08.2021. Previous bail applications were rejected by the Trial Court. The applicant argued that he was not named in the FIR or ECIR and had no involvement in the alleged offenses during the review period (2013-2017). 2. Allegations of Financial Irregularity and Siphoning of Funds by SBFL: The CBI registered an FIR against SBFL and its Director for causing a loss of Rs. 3269.42 crores to a consortium of banks led by SBI. The applicant was an internal auditor for SBFL from 2008-09 to 2013-14 and a statutory auditor for 2006-07. The ED filed an ECIR based on the FIR, alleging that the applicant designed the plan for laundering loan funds through dummy entities, inflating the company's turnover and stock. 3. Role and Involvement of the Applicant in the Alleged Offenses: The applicant was accused of aiding SBFL in financial irregularities, including preparing false stock reports and inflating financials. The ED argued that the applicant was actively involved in the creation and projection of inflated financials, managed bank officials' visits for stock verification, and received proceeds of crime worth Rs. 8.47 Crores. However, the applicant contended that he was not involved in creating false documents or routing funds and that the professional fees received were legitimate. 4. Reliability of Statements Made Under Section 50 PMLA: The ED relied heavily on statements made under Section 50 PMLA by SBFL employees and accommodation entry operators, which were later retracted. The court noted that while these statements are admissible, their reliability is questionable due to the retractions and the identical nature of the statements, suggesting they were tutored. 5. Delay in Investigation and Filing of Chargesheet: The applicant had been in custody for over 17 months, and the investigation was still ongoing. The ED sought additional time to file further complaints and documents. The court emphasized that continued pre-trial incarceration without progress in the investigation amounts to deprivation of personal liberty and a travesty of justice. 6. Applicability of Section 45 of the PMLA: The court observed that the applicant must overcome the twin conditions of Section 45(1)(ii) of the PMLA, which requires the court to be satisfied that there are reasonable grounds for believing that the applicant is not guilty and is not likely to commit any offense while on bail. The court found that the evidence presented by the ED did not prima facie establish the applicant's guilt. The court also considered the applicant's long association with SBFL, the lack of direct involvement in the creation of false documents, and the retracted statements. Conclusion: The court granted bail to the applicant, noting that the evidence presented did not prima facie establish his guilt, the investigation was still ongoing, and continued pre-trial incarceration would amount to punishment without trial. The bail was granted with conditions to ensure the applicant's availability for investigation and trial.
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