2024 (3) TMI 1342 - HC - Money Laundering

Grant of anticipatory bail - Money Laundering - proceeds of crime - complaint filed under Section 447 of the Companies Act - allegation of recurring cause - responsibility of Directors of the Company for the offence committed by the Company - HELD THAT - It is apparent that there is still outstanding of loan, which is to be recovered and the said outstanding of loan is offshoot of Joint Venture Agreement as well as supplementary Agreement as per the allegations levelled in the complaint. Such outstanding of loan has caused recurring loss to shareholders of the Company. A perusal of Explanation (ii) to Section 3, reflects that the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime. The aforesaid section covers all the activities within its scope till the person is being directly or indirectly benefitted by the proceeds of crime. This aspect has been taken into consideration by the Apex Court i n Vijay Madanlal Choudhary and others Vs. Union of India and others 2022 (7) TMI 1316 - SUPREME COURT wherein the Apex Court held that ' The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word and preceding the expression projecting or claiming as or ; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise.' Hence, the complaint prima facie discloses recurring cause and hence the contention as regards prosecution being based on Ex Post Facto amendment, is unsustainable. Section 45 of the PMLA specifically provides that the offences under the Act are non-bailable and cognizable and no person accused of an offence under the Act is entitled for bail unless the Public Prosecutor is given a liberty to oppose the application and the Court is satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and he is not likely to commit any offence while on bail - The Apex Court in the case of Vijay Madanlal Choudhary and others Vs. Union of India and others 2022 (7) TMI 1316 - SUPREME COURT has also held that provision of Section 45 are applicable to the bail applications under Sections 438 and 439 of Cr.P.C. The Apex Court in Paragraph 187 (xiii)(d) as under - (xiii)(d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying principles and rigours of Section 45 may apply. The complaint prima facie discloses commission of aforesaid offence and it is also undisputed that the offence in question is a continuing offence. Investigation is still going on and on account of act in question, losses of colossal amount have been sustained by the shareholders of the Company. Even the foreign investors have also sustained loss, which is evident from Paragraph 7 of the complaint. In the present case, the complaint prima facie discloses commission of offence by the applicant as well as co-accused, therefore, this Court does not find any reasonable ground to believe that the present applicant is not guilty of crime. Application dismissed.

Summary

Issues Involved:
1. Entitlement to anticipatory bail under Section 438 of Cr.P.C.
2. Allegations under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA).
3. Allegations under Section 447 of the Companies Act, 2013.
4. Applicability of Section 186 of the Companies Act, 2013.
5. Age and health considerations for bail.
6. Continuing offence and ongoing investigation.
7. Parity with co-accused granted bail.

Issue-wise Detailed Analysis:

1. Entitlement to anticipatory bail under Section 438 of Cr.P.C.:
The applicant filed for anticipatory bail under Section 438 of the Code of Criminal Procedure, apprehending arrest in connection with the case registered by the Directorate of Enforcement under the PMLA. The applicant contended that he is entitled to anticipatory bail considering his age (85 years) and health condition, supported by a medical certificate.

2. Allegations under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA):
The prosecution alleged that the applicant, in his capacity as a Director of various companies, was involved in money laundering activities. The applicant's role included signing agreements and overseeing transactions that resulted in the transfer of large sums of money to co-accused individuals. The court noted that Section 3 of the PMLA defines the offence of money laundering, covering activities such as concealment, possession, acquisition, and use of proceeds of crime.

3. Allegations under Section 447 of the Companies Act, 2013:
The case against the applicant stemmed from a complaint filed under Section 447 of the Companies Act, which deals with fraud. The complaint alleged that the applicant, as a Director, facilitated loans and financial transactions that were not in the interest of the shareholders and amounted to fraud. The court observed that the allegations prima facie disclosed a case of money laundering under the PMLA.

4. Applicability of Section 186 of the Companies Act, 2013:
The applicant argued that the allegations should be considered under Section 186 of the Companies Act, which deals with loans and investments by companies. The applicant contended that any violation of Section 186 is punishable with a fine and does not constitute a scheduled offence under the PMLA. However, the court noted that the offence under Section 447 of the Companies Act was included in the schedule to the PMLA, making the prosecution under the PMLA valid.

5. Age and health considerations for bail:
The applicant cited his age and health condition as grounds for anticipatory bail, drawing a parallel with co-accused S.N. Vijaywargiya, who was granted bail due to his health issues. However, the court noted that the applicant's health condition was brought up only after filing the bail application and did not find sufficient grounds to extend the same benefit to the applicant.

6. Continuing offence and ongoing investigation:
The court emphasized that the offence in question is a continuing offence, as defined under Section 3 of the PMLA. The investigation was still ongoing, and there were outstanding loans causing recurring losses to the shareholders. The court referred to the Supreme Court's decision in Vijay Madanlal Choudhary and others Vs. Union of India and others, which clarified that the process connected with proceeds of crime is a continuing activity.

7. Parity with co-accused granted bail:
The applicant sought parity with co-accused S.N. Vijaywargiya, who was granted anticipatory bail. However, the court distinguished the applicant's case, noting that the co-accused had appeared before the investigating agency and had a detailed medical report supporting his bail application. The court did not find the applicant's case on a better footing to grant anticipatory bail.

Conclusion:
The court dismissed the application for anticipatory bail, concluding that the complaint prima facie disclosed the commission of offences under the PMLA and the Companies Act. The court found no reasonable grounds to believe that the applicant was not guilty of the crime and emphasized the continuing nature of the offence and the ongoing investigation.