2024 (3) TMI 598 - HC - Money Laundering

Seeking grant of Regular Bail - Money Laundering - proceeds of crime - predicate offence - subsidy fraud in IFFCO by opening Kisan International Trading - exchange of illegal commissions in import of raw materials and fertilizers - manipulation of sales data of fertilizers for claiming higher subsidy etc. - specific allegation against the petitioner is that he along with the co-accused acted as intermediaries who channelized the ill-gotten money through various firms and companies registered either in their names or in the names of the sons of the Managing Directors of IFFCO and IPL. CBI's Jurisdiction to register the RC - HELD THAT - The first submission of the learned Senior Counsel for the petitioner is that since IFFCO and IPL are no longer government entities and it is not yet clear whether the co-accused namely, P.S. Gahlaut and U.S. Awasthi are public servants , hence, no offence under the provisions of the Prevention of Corruption Act is made out. It was further elaborated that even an inquiry by CBI in respect of IPL was closed stating that it has no jurisdiction over IPL since it is not a public authority. The said submission cannot be gone into at this stage as a co-ordinate Bench of this Court is stated to be seized of the specific issue with regard to the jurisdiction of the CBI to register the RC, in the writ petitions filed by the co-accused - Both offences under Section 120-B and Section 420 IPC find mention in Schedule-A of the PMLA, therefore, such offences by themselves can be a predicate offence to trigger the offence of money laundering under the PMLA. To what extent reliance could be placed on the statement under section 50 of PMLA at the stage of considering bail application - HELD THAT - The principle that emerges from Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT as regards the statement recorded under Section 50 of the Act is that such statements are recorded in a proceeding which is deemed to be a judicial proceeding within the meaning of Section 193 and Section 228 of the Indian Penal Code and is admissible in evidence. The said statements are to be meticulously appreciated only by the Trial Court during the course of the trial and there cannot be a mini-trial at the stage of bail. However, when the statements recorded under Section 50 of PMLA are part of the material collected during investigation, such statements can certainly be looked into at the stage of considering bail application albeit for the limited purpose of ascertaining whether there are broad probabilities, or reasons to believe, that the bail applicant is not guilty. Whether the confessional statement of co-accused u/s 50 of PMLA can be used against other accused - HELD THAT - It is trite that the court cannot start with the confession of the co-accused to arrive at a finding of guilt but rather after considering all other evidence placed on record and arriving at the guilt of the accused, can the court look at the statement of the co-accused to receive assurance to the conclusion of guilt - In Surinder Kumar Khanna vs. DRI 2019 (1) TMI 828 - SUPREME COURT the Hon ble Supreme Court tracing the law as regards the general application of a confession of a co-accused as against other accused under Section 30 of the Evidence Act, laid down that the Court cannot start with the confession of a co-accused person; it must begin with other evidence adduced by the prosecution and after it has formed its opinion with regard to the quality and effect of the said evidence, then it is permissible to turn to the confession in order to receive assurance to the conclusion of guilt which the judicial mind is about to reach on the said other evidence. Thus, the confessional statement of a co-accused under Section 50 of the PMLA is not a substantive piece of evidence and can be used only for the purpose of corroboration in support of other evidence to lend assurance to the Court in arriving at a conclusion of guilt. Money trail should remain unbroken to hold the petitioner guilty - HELD THAT - For an offence of money laundering, there should be generation of proceeds of crime from the scheduled offence and the person sought to be prosecuted should be directly or indirectly involved in any process or activity connected with the said proceeds of crime. Thus, the existence of proceeds of crime is essential for initiation of prosecution under the PMLA. It is the case of the respondent/ED that the petitioner has received proceeds of crime through two routes which before reaching the petitioner passed through the hands of various individuals/entities. Thus, there are two money trails which have been referred to hereinabove. To hold the petitioner guilty there has to be an unbroken money trail i.e., generation of proceeds of crime which eventually leads to the petitioner and in case there is a break in the trail, the said break shall enure to the benefit of the petitioner. Before proceeding to examine the two money trails/routes, it is required to be noticed that the first two steps viz., (i) payment of inflated prices inclusive of commission/bribe money by IFFCO/IPL to Uralkali Trading for the import of fertilizers from it, and (ii) payment of commission/bribe money by Uralkali to Rajeev Saxena, are common to both the trails/routes, therefore, apt would it be advert to the same at the outset - The two steps are Step 1 Inflation of prices and Step 2 Flow of proceeds of crime from Uralkali Trading to Rajiv Saxena. The lack of evidence at Step 1 , as well as, the conflicting stand of Rajeev Saxena in Step 2 , are circumstances, which cannot be ignored altogether at this stage. Direct route through Ratul Puri - HELD THAT - It is the case of the respondent that thereafter the proceeds of crime were collected by one Puneet Banthia (employee of Sanjay Jain) from Ratul Puri/Rajiv Aggarwal. However, neither Rajiv Aggarwal (employee of Ratul Puri) nor Ratul Puri, has admitted to dealing with Puneet Banthia for the purpose of handing over cash to him to transport the same to the petitioner - Thus, it is only Puneet Banthia who has supported the case of the prosecution in his statement dated 10.10.2022 recorded under Section 50 of PMLA to the effect that he was asked by the petitioner to pick up some cash from the office of Moser bear and have it delivered at the office of Sh. Sanjay Jain in Defence Colony. He has also stated that he carried cash in the year 2016, whereas the transactions in Rajeev Saxena s ledgers connected with Uralkali are up to the year 2014. In this backdrop, the contention of the learned Senior Counsel for the petitioner that even if the statement of Puneet Banthia is taken on face value, the cash carried by him has no connection with the import by IPL / IFFCO from Uralkali, cannot be said to be wholly without substance. Indirect route through Alankit Group - HELD THAT - It is the case of the respondent that thereafter the proceeds of crime from Rayon Trading have come to Alankit Group. At this stage, suffice it to note that Alok Aggarwal in his statement dated 28.11.2022 under Section 50 has made it clear that the money received from Rayon Trading is for genuine purposes/transaction. Therefore, Alok Kumar Aggarwal has not supported the case of the prosecution. Further, Alok Kumar Aggarwal is a co-accused in the present matter, therefore, as already noted above, his statement can only be used for the purpose of corroboration and is not a substantive piece of evidence - It is further case of the respondent that the proceeds of crime from Alankit Group to Sanjay Jain/petitioner have come through cash/bank transfer and for this purpose, the respondent has relied upon the ledger maintained by one employee of Alok/Ankit Aggarwal namely, Sunil Kumar Gupta, but said Sunil Kumar Gupta in his statement recorded under Section 50 of PMLA has admitted that he has no knowledge whether the said payment was actually made to the petitioner as he was merely noting the entries at the instructions of Alok/Ankit Aggarwal. Therefore, his statement at best is hearsay as he has not witnessed the transaction himself. Claim of higher subsidy on inflated prices - HELD THAT - There is no document to indicate that IFFCO / IPL are industry leaders. Assuming arguendo, that the said entities are market leaders and they could manipulate the average industry prices, but there is not an iota of evidence to demonstrate that the average industry price was actually manipulated by IFFCO and IPL. Further, in this regard the observations of this Court under the heading Step 1 may be referred to - On the other hand, it can be seen that after 01.04.2010, the Nutrient Based Subsidy Scheme NBS Scheme became applicable whereunder the cost of production/import price of the fertilizers has no relevance to the amount of subsidy which could be claimed by the importer. Therefore, there seems to be some merit in the contention of the learned Senior Counsel for the petitioner that post introduction of the NBS Scheme the case set up by the CBI and the Respondent itself appears to have become improbable. Examination of the predicate offence - HELD THAT - As this Court has prima facie observed that there is no material showing imports at inflated prices by IFFCO/IPL and consequent payment of higher subsidy and there appears to be a break in the money trails, therefore, the evidence to prove conspiracy or wrongful loss to IFFCO/IPL, its shareholder and to the Public Exchequer and the resultant wrongful gain to the petitioner, is lacking. Thus, at this stage based upon the material produced before the Court, it can be said that prima facie the predicate offence appears to be weak in nature and the petitioner is entitled to the benefit of the same. Bail on the ground of parity - HELD THAT - There is merit in the contention of the learned Senior Counsel for the petitioner that non-arrest of co-accused is a relevant factor which can be taken into account in addition to other surrounding factors to grant the concession of bail to the petitioner - the petitioner is also entitled to the benefit of the fact that the main accused, as well as, some other accused have not been arrested and bail has already been granted to other co-accused - On the basis of the material available on record, this Court is satisfied that there are reasonable grounds for believing that the petitioner is not guilty of the offence and that he is not likely to commit any offence while on bail. Thus, the petitioner has made out a case for grant of regular bail. Accordingly, the petitioner is enlarged on bail subject to fulfilment of conditions imposed - bail application allowed.

Summary

Issues Involved:
1. Jurisdiction of CBI to register the FIR.
2. Reliance on statements under Section 50 of PMLA.
3. Use of co-accused's confessional statements.
4. Existence of unbroken money trail.
5. Claim of higher subsidy on inflated prices.
6. Examination of predicate offence.
7. Bail on the ground of parity.

Summary:

Jurisdiction of CBI to Register the FIR:
The petitioner argued that IFFCO and IPL are private entities, thus CBI lacks jurisdiction under the Prevention of Corruption Act. The court noted that the predicate offence also includes Sections 420 and 120B IPC, which are scheduled offences under PMLA, making the registration valid.

Reliance on Statements under Section 50 of PMLA:
The court observed that statements under Section 50 of PMLA are admissible but their probative value is to be weighed during the trial. Inconsistencies in Rajeev Saxena's statements were noted, impacting the broad probabilities at the bail stage.

Use of Co-Accused's Confessional Statements:
The court held that a co-accused's confession under Section 50 of PMLA is not substantive evidence and can only be used for corroboration. The confessional statement of Rajeev Saxena was considered in this light.

Existence of Unbroken Money Trail:
The court found a lack of evidence to prove inflated prices by IFFCO/IPL and conflicting statements from Rajeev Saxena. The alleged money trails through both direct and indirect routes showed breaks, benefiting the petitioner.

Claim of Higher Subsidy on Inflated Prices:
The court referred to an Office Memorandum indicating that subsidy was based on industry average prices or fixed nutrient-based subsidy, making manipulation by IFFCO/IPL improbable. This weakened the prosecution's case of subsidy fraud.

Examination of Predicate Offence:
The court noted that if the predicate offence appears weak, it benefits the petitioner. The lack of evidence for inflated prices and breaks in money trails suggested a weak predicate offence, favoring bail.

Bail on the Ground of Parity:
The court acknowledged that other accused were either not arrested or granted bail. This, along with the petitioner's cooperation in the investigation and lack of criminal record, supported the grant of bail.

Conclusion:
The petitioner was granted bail with conditions, including not leaving the country without permission, appearing before the court as required, and not disposing of property without court permission. The court clarified that the observations were limited to the bail application and not on the merits of the case.