2025 (1) TMI 1544 - HC - Money Laundering

Seeking grant of bail - Money Laundering - scheduled offences - illegal sand/mineral mining operations conducted by the present applicant - HELD THAT - From the perusal of the grounds of arrest and the reasons to believe appended along with petition as Annexure P-34 and P-35 respectively it is evident that the Enforcement Directorate had received formal complaints and intelligence inputs indicating illegal sand/mineral mining being done by the applicant in the case at hand. Based on the aforesaid discreet inquiries were got conducted details whereof are contained in the panchnama report dated 17.06.2024. By virtue of an amendment made in the year 2019 proviso in Sub-Section1 of Section 17 of the 2002 Act which required that no search shall be conducted unless in relation to the scheduled offence a report has been forwarded to a Magistrate under Section 157 of the 1973 Code or a complaint has been filed before a Magistrate in regard of such offence stands omitted. The argument raised on behalf of the applicant that relevant material has been ignored i.e. out of six FIRs mentioned in the grounds of arrest four stand cancelled the 5th does not pertain to the applicant and the 6th FIR does not deal with any scheduled offence prima facie is of no consequence at this stage. The aforesaid FIRs were only indicative of the fact that there is rampant illegal mining in the area in question. Besides the aforesaid quashing of the order of stoppage of one of the stone crushers of the National Green Tribunal (NGT) by the Hon ble High Court is also of no avail to the applicant at this stage. The facts in the case at hand made out from the grounds of arrest and reasons to believe prima facie reflect that the officer in the case at hand had material in his possession on the basis of which in writing reasons to believe were recorded that the applicant who is to be arrested is guilty of the offence under the Act. As is the requirement of law grounds of arrest and reasons to believe were supplied to the applicant upon his arrest. The conclusion drawn prima facie appears to logically flow from the facts. Prima facie neither there exists any error of nor there appears to be any improper exercise of power. Conclusion - No case for grant of bail has been made out in terms of Section 45 of the PML Act as there exist reasonable grounds for believing that the applicant is guilty of such offence. Moreover taking into account the antecedent of the applicant his propensities the way and manner in which the applicant is alleged to have committed the offence the applicant is likely to commit similar offences if enlarged on bail in the future. Bail application dismissed.

Summary

The core legal questions considered in this judgment revolve around the maintainability of the writ petition challenging arrest and remand orders under the Prevention of Money Laundering Act (PMLA), the validity and legality of the arrest under Section 19 of the PMLA, and the applicability of relevant legal principles concerning jurisdiction and procedural safeguards in money laundering cases.

One primary issue was whether the High Court had jurisdiction to entertain the petition under Article 226 of the Constitution, given that part of the cause of action arose within its territorial jurisdiction. This raised a question on the scope of jurisdiction of High Courts in writ petitions challenging arrests and remand orders in PMLA cases.

A related issue was the legal validity of the arrest and remand orders under the PMLA, particularly whether an illegal arrest can be validated by subsequent remand orders, and the extent to which the Court can examine the sufficiency of material or correctness of the opinion formed by the Enforcement Directorate (ED) at the bail stage.

Another significant issue concerned the foundational facts required to raise a presumption under Section 24 of the PMLA, specifically whether the elements of criminal activity relating to scheduled offences, proceeds of crime, and involvement of the accused in the process or activity connected with such property were established.

Further, the Court examined the impact of legislative amendments to Section 17 of the PMLA, particularly the omission of the proviso requiring a Magistrate's report or complaint before conducting searches, and its effect on the investigation and arrest procedures.

Lastly, the Court considered the relevance and effect of multiple FIRs, some of which were cancelled or unrelated to the applicant, on the maintainability of the arrest and the merits of the bail application under Section 45 of the PMLA.

Regarding jurisdiction, the Court analyzed Article 226(2) of the Constitution, which empowers a High Court to issue writs even if the seat of the Government or residence of the person is outside its territory, provided the cause of action arises wholly or partly within its jurisdiction. The petitioner relied on precedents affirming this principle, notably two Supreme Court decisions that allowed writ petitions on this basis.

However, the Enforcement Directorate cited a Supreme Court ruling where the High Court at Delhi was held not to have jurisdiction to entertain a writ petition challenging arrest and remand orders when the accused was produced before a competent court within that jurisdiction. The Court noted that judicial functions such as remand orders should be challenged through appropriate appellate or revisional forums rather than writ petitions under Article 226. The Court emphasized that even if the arrest occurred within the High Court's territorial jurisdiction, the existence of valid remand orders before competent courts limits the High Court's jurisdiction to entertain writ challenges to such detention.

On the issue of the validity of arrest and remand orders, the Court referred to a recent authoritative judgment which held that remand orders cannot validate an illegal arrest. The Court underscored that the legality of arrest is a separate question and must be examined independently. However, at the bail stage, the Court is limited to examining whether the statutory preconditions for arrest under Section 19 of the PMLA are met and whether there are reasonable grounds to believe that the accused is guilty of the offence.

Section 19 mandates three preconditions for arrest: possession of material by the authorized officer, recorded reasons to believe in writing that the person is guilty of an offence under the PMLA, and informing the arrested person of the grounds of arrest as soon as possible. The Court found that these conditions were satisfied in the present case, as the Enforcement Directorate had material, recorded reasons to believe, and supplied grounds of arrest to the applicant at the time of arrest.

Regarding the foundational facts for presumption under Section 24 of the PMLA, the Court reiterated the legal framework established in a recent Supreme Court decision. The three essential facts to be established are: (i) commission of criminal activity relating to a scheduled offence; (ii) the property in question being derived or obtained directly or indirectly from that criminal activity; and (iii) the person's involvement in any process or activity connected with the said property as proceeds of crime. Only upon establishing these facts can the offence of money laundering be said to have been committed.

In the instant case, the Court noted that the Enforcement Directorate had received formal complaints and intelligence inputs about illegal sand and mineral mining by the applicant in multiple districts, including mining from the Beas riverbed. Discreet inquiries and a panchnama report corroborated these allegations. The applicant was found to have purchased a stone crusher in Uttar Pradesh using proceeds from illegal mining operations. Documents seized during searches revealed discrepancies between recorded sales and official data, and statements were recorded from relevant persons. Further, an FIR was registered under multiple IPC sections and mining-related statutes, and merged into the Enforcement Case Information Report (ECIR) for money laundering offences.

The Court also discussed the legislative amendment in 2019 that omitted the proviso in Section 17(1) of the PMLA requiring a Magistrate's report or complaint before conducting searches. The Court referred to a Supreme Court judgment explaining that this amendment was intended to strengthen the mechanism for prevention of money laundering by removing procedural hurdles, emphasizing the special and self-contained nature of the PMLA.

Addressing the applicant's contention that several FIRs were cancelled or unrelated, the Court held that these FIRs only indicated the prevalence of illegal mining in the area and did not negate the material supporting the arrest. The quashing of an order of stoppage of a stone crusher by the National Green Tribunal was also held to be irrelevant at this stage.

The Court clarified that it was not the forum to assess the correctness or sufficiency of the evidence or the opinion formed by the Enforcement Directorate, except where the findings were unsupported by any evidence or were perverse. The facts on record, including the grounds of arrest and reasons to believe, were found to be supported by material and logically consistent.

On the bail application under Section 45 of the PMLA, the Court observed that no case for bail was made out, given the reasonable grounds to believe the applicant's guilt, his antecedents, and the manner in which the offences were committed. The Court expressed concern that the applicant was likely to commit similar offences if released on bail. The necessity of arrest was substantiated by the reasons to believe supplied at the time of arrest.

In conclusion, the Court held that the High Court had jurisdiction to entertain the petition to the extent of the cause of action arising within its territory but emphasized limitations on entertaining writ petitions challenging remand orders. The arrest under Section 19 of the PMLA was found to be valid, with all statutory preconditions satisfied. The foundational facts required to raise a presumption under Section 24 of the PMLA were prima facie established through material and investigation findings. Legislative amendments strengthening the PMLA's procedural framework were acknowledged. The Court declined bail under Section 45, finding sufficient grounds to believe the applicant's guilt and apprehending risk of reoffending.

Significant holdings include the Court's affirmation that:

"The authority of the Authorised Officer under the 2002 Act to prosecute any person for offence of money-laundering gets triggered only if there exists proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act and further it is involved in any process or activity."

Further, the Court emphasized the procedural safeguards under Section 19 of the PMLA, requiring recorded reasons to believe and informing the arrested person of grounds of arrest, and held that these were complied with.

The Court also reiterated that remand orders, being judicial functions, should be challenged through appropriate appellate mechanisms and cannot validate an illegal arrest, though the legality of arrest must be independently examined.

Finally, the Court underscored that the correctness or sufficiency of the material forming the basis of arrest cannot be probed at the bail stage unless the findings are wholly unsupported or perverse.