2024 (1) TMI 1454 - HC - Money Laundering

Seeking grant of bail - Money Laundering - proceeds of crime - wrongfully claiming the scholarship of the students belonging to certain class who without completing the concerned course left the institute - twin conditions as per Section 45 of the PMLA satisfied or not - HELD THAT - As per record the Assistant Director Directorate of Enforcement had issued summons bearing No. ECIR/SHSZO/04/ 2019-521 on 29th August 2023 directing applicant-Hitesh Gandhi to appear before him forthwith. On the same day this notice was received by applicant-Hitesh Gandhi. Thereafter the statement of applicant-Hitesh Gandhi was recorded under Sections 50 (2) and 50 (3) of PMLA on 29th August 2023. The said statement was duly signed by applicant-Hitesh Gandhi. Thereafter the grounds of arrest were served upon him on 30th August 2023. Applicant-Hitesh Gandhi not only put his signatures over it but he has written read and understood over it. Thereafter he was arrested on 30th August 2023. It is not the case of the applicant that he was forced by the ED to put his signatures and date over the arrest memo which does not contain the actual date. The Hon ble Supreme Court in a case titled as Vikram Singh and others versus State of Punjab 2010 (1) TMI 1316 - SUPREME COURT has distinguished between the words arrest and custody . Although in the said case the Hon ble Supreme Court has discussed the above terms in relation to the provisions of Section 27 of the Evidence Act however the said decision has bearing on the merits of the present case as the applicant was associated in the investigation by the ED prior to his arrest on 30th August 2023. So far as the arguments of the learned senior counsel appearing for the applicant that only the applicant has been arrested in the present case whereas the other persons against whom the allegations have been levelled have not been arrested are concerned considering the stand of the ED that the investigation is still going on no benefit could be derived from the said fact as such the case law relied upon by the learned senior counsel for the applicant in case titled as State of Madhya Pradesh versus Sheetle Sahai and others reported in (2009) 8 Supreme Court Cases 617 in no way helps the case of the applicant. Conclusion - In the present case the twin conditions as enumerated in Section 45 of the PMLA cannot be said to be existing in favour of the applicant as at this stage there are no reasonable grounds for believing that the accused (applicant) is not guilty of such offence and it cannot be said that in case he is ordered to be released on bail he is not likely to commit any offence. The applicant is not able to make out a case for grant of bail at this stage. Consequently the bail application is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment include:

- Whether the arrest of the applicant under the Prevention of Money Laundering Act, 2002 (PMLA) complied with the statutory requirements, particularly Section 19 of the PMLA.

- Whether the applicant is entitled to bail under Section 439 of the Code of Criminal Procedure (CrPC), given the allegations of involvement in a scholarship scam and the provisions of Section 45 of the PMLA.

- Whether the applicant's arrest and subsequent detention were justified based on the evidence and the ongoing investigation by the Directorate of Enforcement (ED).

2. ISSUE-WISE DETAILED ANALYSIS

Compliance with Section 19 of the PMLA:

- Relevant legal framework and precedents: Section 19 of the PMLA outlines the conditions under which an arrest can be made, requiring the authorized officer to have a reason to believe that an individual is guilty of an offense under the PMLA. The reasons must be recorded in writing, and the arrested individual must be informed of the grounds for arrest.

- Court's interpretation and reasoning: The Court examined whether the ED complied with the procedural requirements of Section 19. It noted that the applicant was informed of the grounds of arrest and had acknowledged understanding them by signing the document.

- Key evidence and findings: The ED had recorded the reasons to believe and obtained approval from a senior officer before arresting the applicant. The arrest memo was duly signed by the applicant, indicating compliance with Section 19.

- Application of law to facts: The Court found that the ED had adhered to the procedural safeguards outlined in Section 19, as the applicant was informed of the grounds for arrest and the reasons were documented.

- Treatment of competing arguments: The applicant argued that the arrest was in violation of statutory requirements, but the Court concluded that the procedural requirements were met.

- Conclusions: The Court held that the arrest was conducted in compliance with Section 19 of the PMLA.

Entitlement to Bail under Section 439 CrPC and Section 45 of the PMLA:

- Relevant legal framework and precedents: Section 45 of the PMLA imposes stringent conditions for granting bail, requiring the Court to be satisfied that the accused is not guilty and is unlikely to commit an offense while on bail. The Court referenced several Supreme Court decisions, including Vijay Madanlal Choudhary and others versus Union of India, to elucidate these conditions.

- Court's interpretation and reasoning: The Court considered the allegations against the applicant, including his role in the misappropriation of scholarship funds and the ongoing investigation. It emphasized the seriousness of the allegations and the need for a thorough investigation.

- Key evidence and findings: The ED presented evidence of the applicant's involvement in the fraudulent scheme, including the diversion of scholarship funds and the manipulation of student records.

- Application of law to facts: The Court applied the twin conditions under Section 45 of the PMLA and determined that the applicant did not satisfy these conditions, as there were no reasonable grounds to believe he was not guilty.

- Treatment of competing arguments: The applicant argued for bail, citing compliance with investigation procedures and lack of evidence tampering. However, the Court prioritized the need for continued investigation and the potential risk of granting bail.

- Conclusions: The Court concluded that the applicant was not entitled to bail under the stringent conditions of Section 45 of the PMLA.

3. SIGNIFICANT HOLDINGS

- The Court held that the arrest of the applicant was conducted in compliance with Section 19 of the PMLA, as the procedural requirements were met, including informing the applicant of the grounds for arrest.

- The Court established that the applicant did not meet the twin conditions for bail under Section 45 of the PMLA, as there were no reasonable grounds to believe he was not guilty, and granting bail could impede the ongoing investigation.

- The judgment reinforced the principle that in cases under the PMLA, "jail is the rule and bail is an exception," emphasizing the seriousness of money laundering offenses and the need for stringent scrutiny in bail applications.

- The Court dismissed the bail application, concluding that the applicant failed to make a case for bail at this stage, given the ongoing investigation and the evidence presented by the ED.