2025 (1) TMI 1450 - HC - Money Laundering

Seeking grant of regular bail - Money Laundering - reasons to believe - compliance with the statutory requirements under Section 19 of the PMLA - whether the applicant s arrest was carried out in adherence to the statutory requirements under Section 19 of the PMLA which mandates that the authorized officer must have reason to believe based on material evidence before arresting an individual accused of money laundering? - HELD THAT - This Court is satisfied that the investigating authority followed due process and substantiated the reason to believe with concrete evidence rather than mere suspicion. Accordingly the challenge to the legality of the arrest is without merit and no relief is warranted to the applicant on this ground. The investigating authority did not rely solely on the statement of any one co-accused rather it relied upon the statement of the applicant as well as other co-accused persons namely Neeraj Chauhan Tushar Chauhan and Viphil Jain along with the documentary evidence including the Whatsapp chats etc. which shows the financial trail of the proceeds of crime in the instant matter. The same goes to show that the respondent ED has corroborating evidence on its record to justify the implication of the applicant herein - This Court is satisfied that the respondent ED has considered independent material including financial records digital evidence and the applicant s own communications which substantiate the applicant s involvement in the alleged offence. Whether the statements recorded under this provision are admissible as evidence and to what extent they can be relied upon to justify the applicant s arrest and continued detention? - HELD THAT - The statements recorded under Section 50 of the PMLA hold evidentiary value and are admissible in legal proceedings. The Hon ble Supreme Court in Rohit Tandon v. Directorate of Enforcement 2017 (11) TMI 779 - SUPREME COURT while emphasizing the legal sanctity of such statements observed that they constitute valid material upon which reliance can be placed to sustain allegations under the PMLA - this Court is of the considered view that statements recorded under Section 50 of the PMLA are admissible in evidence and can be relied upon to establish culpability in money laundering cases. It is observed by this Court that the respondent had sufficient material in its possession including financial records digital evidence and the applicant s communications to establish a valid reason to believe that the applicant was guilty of the offence of money laundering. The procedural safeguards under the Act were duly followed and the challenge to the legality of the arrest is without any merit - the contention that the applicant s arrest was solely based on the statement of co-accused persons under Section 50 of the PMLA is unfounded. Compliance with the twin conditions of bail under Section 45 of the PMLA or not - HELD HAT - Having considered the legislative intent behind Section 45 of the PMLA and the judicial precedents interpreting its application this Court shall now proceed to apply the established principles to the facts of the present case to assess whether the applicant has successfully satisfied this Court that he falls under the proviso to Section 45 of the PMLA and if not whether he has discharged the burden of proving that he is not guilty of the alleged offence and is unlikely to commit any offence while on bail - The material on record demonstrates that the accused persons operated in a highly coordinated and systematic manner with clear understanding and collaboration among them to facilitate the offence. The applicant has failed to discharge the burden placed upon him under Section 45(1)(ii) of the PMLA which requires him to that there are reasonable grounds for believing that he is not guilty of the offence. The material produced by the respondent including financial transactions linked to the proceeds of crime and the applicant s own admissions points to his direct and active involvement in the offence. Mere assertions that the applicant was a passive investor and was unaware of the illegality of the transactions do not satisfy the threshold required to overcome the presumption under the PMLA - Further the second limb of Section 45(1)(ii) of the PMLA which mandates that the applicant must satisfy the Court that he is not likely to commit any offence while on bail is also not met. This Court finds that the twin conditions prescribed under Section 45 of the PMLA have not been satisfied. The evidence on record the ongoing nature of the investigation and the applicant s alleged role in the broader financial and selling of spurious medicines syndicate indicate that the rigors of Section 45 of the PMLA continue to apply. This Court is of the view that considering the filing of the first supplementary prosecution complaint and the ongoing nature of the investigation it is not satisfied that the applicant has fulfilled the twin conditions under Section 45 of the PMLA. The respondent has presented sufficient material to warrant further investigation including financial records electronic evidence and statements of co-accused implicating the applicant. These materials suggest an active involvement in laundering proceeds of crime and a pattern of financial transactions that need further investigation. Conclusion - i) The applicant s arrest complied with the statutory requirements under Section 19 of the PMLA supported by concrete evidence rather than mere suspicion. ii) Statements recorded under Section 50 of the PMLA are admissible as evidence and can be relied upon to establish culpability in money laundering cases. iii) The applicant was not exempt from the twin conditions of bail under Section 45 of the PMLA given the organized nature of the offence and the broader context of the criminal conspiracy. iv) The applicant failed to satisfy the twin conditions for bail under Section 45 of the PMLA as well as the general considerations for bail under Section 439 of the CrPC. v) The Court emphasized the importance of maintaining the integrity of the ongoing investigation and preventing potential misuse of the judicial process. This Court is not inclined to release the applicant on bail and the instant application is hereby dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The Court considered several core legal issues in this judgment, primarily revolving around the applicant's bail application under the Prevention of Money Laundering Act, 2002 (PMLA). The key issues included:

• Whether the applicant's arrest complied with the statutory requirements under Section 19 of the PMLA, which mandates 'reasons to believe' before making an arrest.
• Whether the statements made by co-accused under Section 50 of the PMLA were sufficient to justify the applicant's arrest.
• Whether the applicant could be exempted from the twin conditions of bail under Section 45 of the PMLA based on the quantum of proceeds of crime attributed to him.
• Whether the applicant satisfied the twin conditions for bail under Section 45 of the PMLA.
• Whether the applicant met the general considerations for bail under Section 439 of the CrPC, including the 'triple test'.

ISSUE-WISE DETAILED ANALYSIS

The Court undertook a detailed analysis of each issue as follows:

1. Compliance with Section 19 of the PMLA:

• Legal Framework: Section 19 of the PMLA requires that an officer must have 'reason to believe' based on material evidence before arresting an individual accused of money laundering.
• Court's Interpretation: The Court examined the statutory framework and relevant precedents, emphasizing that compliance with procedural safeguards under Section 19 is mandatory.
• Evidence and Findings: The Court found that the arresting authority had sufficient material, including financial records and electronic evidence, to establish a 'reason to believe' that the applicant was guilty of money laundering.
• Conclusion: The Court concluded that the applicant's arrest was conducted in compliance with Section 19 of the PMLA.

2. Sufficiency of Statements under Section 50 of the PMLA:

• Legal Framework: Section 50 of the PMLA grants authorities the power to summon individuals and record their statements, which are deemed judicial proceedings.
• Court's Interpretation: The Court noted that statements recorded under Section 50 are admissible as evidence and hold evidentiary value.
• Evidence and Findings: The Court determined that the investigating authority relied on multiple sources of evidence, including financial records and digital communications, not solely on the statements of co-accused.
• Conclusion: The Court found that the statements under Section 50, corroborated by other evidence, justified the applicant's arrest.

3. Exemption from Twin Conditions under Section 45 of the PMLA:

• Legal Framework: Section 45 imposes stringent conditions on granting bail, with exceptions for certain categories, including cases involving less than one crore rupees.
• Court's Interpretation: The Court emphasized that the entire criminal enterprise must be considered, not just individual roles, and the applicant's involvement in a syndicate exceeded the monetary threshold.
• Conclusion: The Court held that the applicant was not exempt from the twin conditions under Section 45 due to the organized nature of the offence.

4. Satisfaction of Twin Conditions for Bail:

• Legal Framework: The twin conditions require the Court to be satisfied that the accused is not guilty and is unlikely to commit any offence while on bail.
• Court's Interpretation: The Court found that the applicant failed to demonstrate reasonable grounds for believing he was not guilty and posed a risk of reoffending.
• Conclusion: The Court concluded that the applicant did not satisfy the twin conditions for bail under Section 45 of the PMLA.

5. General Considerations for Bail under Section 439 of the CrPC:

• Legal Framework: The 'triple test' considers the likelihood of the accused absconding, influencing witnesses, or committing similar offences if released on bail.
• Court's Interpretation: The Court found that the applicant's financial dealings and involvement in a sophisticated network posed significant risks.
• Conclusion: The Court determined that the applicant failed to meet the general considerations for bail under Section 439 of the CrPC.

SIGNIFICANT HOLDINGS

The Court made several significant holdings in this judgment:

• The applicant's arrest complied with the statutory requirements under Section 19 of the PMLA, supported by concrete evidence rather than mere suspicion.
• Statements recorded under Section 50 of the PMLA are admissible as evidence and can be relied upon to establish culpability in money laundering cases.
• The applicant was not exempt from the twin conditions of bail under Section 45 of the PMLA, given the organized nature of the offence and the broader context of the criminal conspiracy.
• The applicant failed to satisfy the twin conditions for bail under Section 45 of the PMLA, as well as the general considerations for bail under Section 439 of the CrPC.
• The Court emphasized the importance of maintaining the integrity of the ongoing investigation and preventing potential misuse of the judicial process.