2024 (9) TMI 1088 - HC - Money Laundering

Seeking grant of regular bail - Indian National, has committed an offence under Foreign law - scheduled offence - stealing cryptocurrencies - MLA request and powers of the authority under the Act - non-compliance of procedural requirements - Judicial notice of corresponding law - Benefit of the first proviso to Section 45(1) of PMLA - Incriminating material. MLA request and powers of the authority under the Act - HELD THAT - The offences having cross border implications contemplated are of two categories. First, when any offence has been committed at a place outside India which would have constituted an offence specified in Part A, Part B or Part C of the Schedule had it been committed in India, and the proceeds have been transferred to India; and second when the Scheduled offence has occurred in India and the proceeds have travelled to a place outside India. For the purpose of present case, first category defined in sub-clause (i) of Section 2 (1) (ra) is of relevance, since the case of ED is that proceeds of crime have been transferred from the account of victim in U.S. to the account of petitioner/accused Vishal Moral in India. In the second category described under sub-clause (ii) of Section 2 (1) (ra) there is no confusion as the predicate offence occurs inside the territory of India, therefore, the laws mentioned in the Schedule would directly be applicable. However, the conundrum needs to be resolved in case of first category specified under sub-clause (i) of Section 2 (1) (ra) as neither the offences enumerated under Part A, nor the IPC are globally enacted provisions, rather each foreign country has its own laws inside its territory, albeit they may have similarities with the laws in other jurisdictions. There appears to be substance in the submission of respondent that the request of the U.S. Authorities in the MLA is to obtain evidence and when such a request is received, the ED is empowered to do everything required including arrest of accused post lodging of a case under section 3 and 4 of the PMLA, to gather all evidence that may be available. Non-compliance of procedural requirements - HELD THAT - The predicate offence has been committed in U.S. and the same is being tried there though it has cross border implications. It is only the offence under PMLA that is being tried in India. Since the proceeds of crime related to the predicate offence have travelled to India, the offence under PMLA being a standalone offence, has been committed in India in its entirety, therefore, no sanction as mandated under proviso to Section 188 CrPC is required for the said offence. Judicial notice of corresponding law - HELD THAT - Assuming that the MLA request is a certified copy as required under Section 78 (6) of the Evidence Act, 1872, the same is not a substitute for the statute or provision of a corresponding law (United States Code) enacted in the United States of America, which will have to be proved as a question of fact during the course of trial by examining experts on the subject. At this stage no judicial notice can be taken of corresponding law of U.S., therefore, in the absence of material on record in the form of a relevant statute supported by the opinion of experts, there is nothing to establish even prima facie that the alleged predicate offence corresponds to the offences mentioned in the Schedule of the PMLA. Incidentally, in the absence of commission of scheduled offence, there cannot be any proceeds of crime. In the present case, the foundational facts that the alleged crime committed in U.S. is a scheduled offence and consequently the amount which has come to the account of petitioner/accused Vishal Moral is proceeds of crime have not been established even prima facie, therefore, the burden will not shift on petitioners/accused to convince the Court in terms of Section 45 that they are not guilty of an offence of money-laundering under the Act. Non-speaking order of cognizance - HELD THAT - In the present bail petitions, there is no challenge to the order vide which cognizance was taken by the learned Special Court, therefore, this Court need not delve deep into this submission, but certainly the absence of material to establish commission of scheduled offence in the United States of America, will enure to the benefit of the petitioners in the scheme of broad probabilities. Benefit of the first proviso to Section 45(1) of PMLA - HELD THAT - Without going into the question as to whether the proceeds from the second transaction have been obtained by way of fraud or theft or by commission of any other offence, suffice it to state that all the offences against the property under Chapter XVII of the IPC, which includes theft as well, are scheduled offences under Part C, if the same have cross border implications. Therefore, prima facie there is no force in petitioner's submission that twin conditions envisaged under Section 45 for grant of bail will not be applicable as the laundered amount is only to the extent of Rs. 80,000/- - Insofar as the contention that in the complaint the ED has not provided the basis of calculating the value of the subject matter, it may be observed that basis of calculation is a matter of trial and the same cannot be gone into while deciding the bail plea of the petitioners. Incriminating material - HELD THAT - In view of the prima facie opinion of this Court that there is a missing link to establish that the seized amount from WazirX account of petitioner/Vishal Moral are proceeds of crime from an offence committed in U.S. which corresponds to the scheduled offence(s), merely seizure of amount pursuant an MLA request is not sufficient for the petitioner/accused Vishal Moral to assume the burden to convince the Court in terms of Section 45 of the Act that there are reasonable grounds to believe that he is not guilty of an offence under the Act. Delay in trial - HELD THAT - It is an admitted position that the petitioner/Vishal Moral is in custody since 26.04.2023, therefore, he has been incarcerated for more than 16 months, whereas co-accused/petitioners namely Adnan Nisar and Shivang Malkoti are in custody since 09.05.2023 and have likewise spent more than 16 months in custody, whereas the maximum sentence which can be awarded for the offence under the PMLA is 07 years in the event the petitioners are found guilty. The documents to be proved in the present case also runs into 2500 pages and there are various witnesses to be examined by the ED. However, the present status of the proceedings is that the trial has not commenced, inasmuch as, the charges have not yet been framed. On behalf of the petitioners, it is submitted that further investigations are pending which position was not disputed by the learned Special Counsel for the ED. This Court is satisfied that there are reasonable grounds for believing that the petitioners are not guilty of the offence. Further, on a conspectus of the custody period, the delay in commencement of trial and no likelihood of conclusion of trial anytime in near future, the rigors of Section 45 of the Act deserve to be relaxed - the petitioners have made out a case for grant of regular bail, subject to fulfilment of conditions imposed. Bail application allowed.

Summary

Issues Involved
1. Offence under foreign law as a scheduled offence.
2. MLA request and powers of the authority under the Act.
3. Non-compliance of procedural requirements.
4. Judicial notice of corresponding law.
5. Non-speaking order of cognizance.
6. Benefit of the first proviso to Section 45(1) of PMLA.
7. Incriminating material.
8. Delay in trial.

Issue-wise Detailed Analysis

Offence under Foreign Law as Scheduled Offence
The court examined whether offences committed under U.S. statutes could be treated as scheduled offences under the Prevention of Money Laundering Act (PMLA). It was noted that the PMLA includes offences with cross-border implications under Section 2(1)(ra) and that corresponding laws of foreign countries can be treated as scheduled offences under the PMLA if they align with offences listed in Part A or Part C of the Schedule. The court concluded that the offences under U.S. law could be considered as scheduled offences under the PMLA, provided they correspond to the offences listed in the Schedule and have cross-border implications.

MLA Request & Powers of the Authority under the Act
The court addressed the argument that the Enforcement Directorate (ED) exceeded the mandate of the MLA request by initiating a separate investigation in India. The court referred to the preamble of the PMLA and the Treaty on Mutual Legal Assistance in Criminal Matters between India and the USA, which allows for extensive cooperation in criminal matters. The court held that the ED was within its rights to register an offence under Sections 3 and 4 of the PMLA based on the MLA request and other collected material, as the offence of money laundering is an independent offence under the PMLA.

Non-compliance of Procedural Requirements
The court examined the argument that the Central Government should have forwarded the MLA request to the concerned court as per Section 61 of the PMLA. It was held that the Central Government has the discretion to forward such requests to any authority under the Act or the Special Court, and in this case, forwarding the request directly to the ED was within its powers. The court also dismissed the argument that sanction under Section 188 of CrPC was required, as the offence of money laundering was committed in India in its entirety.

Judicial Notice of Corresponding Law
The court addressed the issue of whether it could take judicial notice of foreign laws. It was held that foreign laws must be pleaded like any other fact and cannot be taken judicial notice of by Indian courts. The court noted that the provisions of the U.S. statutes under which the offences were alleged had not been adequately presented or proved, and thus, there was no prima facie establishment of the predicate offence corresponding to the scheduled offences under the PMLA.

Non-speaking Order of Cognizance
The court noted that the order taking cognizance by the Special Court did not reflect any application of mind and lacked material to establish the commission of a predicate offence in the U.S. However, since the order was not challenged in the present bail petitions, the court did not delve deeper into this issue but acknowledged that the absence of material would benefit the petitioners in the scheme of broad probabilities.

Benefit of First Proviso to Section 45(1) of PMLA
The court examined the argument that the laundered amount was less than one crore rupees, and thus, the twin conditions for bail under Section 45 of the PMLA should not apply. The court noted that all offences against property under Chapter XVII of the IPC, including theft, are scheduled offences under Part C if they have cross-border implications. Therefore, the court held that the twin conditions for bail were applicable in this case.

Incriminating Material
The court analyzed the incriminating material against the accused:
- Vishal Moral: The court found that the statements recorded under Section 50 of the PMLA post-arrest were inadmissible under Section 25 of the Evidence Act. The WhatsApp/Telegram chats could not establish a live link without scientific reports, and the seizure of cryptocurrency alone was insufficient to establish proceeds of crime.
- Adnan Nisar and Shivang Malkoti: The court found that the retracted statements under Section 50 of the PMLA were unreliable without corroborative evidence. The WhatsApp/Telegram chats could not be used against them without further proof, and there was no evidence of their involvement in the alleged activities.

Delay in Trial
The court considered the prolonged custody of the accused and the delay in the commencement of the trial. It was noted that the accused had been in custody for over 16 months, and the trial had not yet started. The court emphasized that bail is the rule and jail is the exception, and prolonged pre-trial incarceration would violate the fundamental right to liberty under Article 21 of the Constitution.

Conclusion
The court granted bail to the petitioners, noting that there were reasonable grounds to believe that they were not guilty of the offence and that further incarceration was not justified. The court imposed specific conditions for bail to ensure compliance and prevent any interference with the investigation.