2017 (11) TMI 779 - SC - Money Laundering

Bail application - offence u/Sections 3 4 of the Prevention of Money Laundering Act, 2002 - mmunity to the appellant from prosecution for an offence of money laundering - nature of offence - Held that - The fact that no limit for deposit was specified, would not extricate the appellant from explaining the source from where such huge amount has been acquired, possessed or used by him. The volume of demonetized currency recovered from the office and residential premises of the appellant, including the bank drafts in favour of fictitious persons and also the new currency notes for huge amount, leave no manner of doubt that it was the outcome of some process or activity connected with the proceeds of crime projecting the property as untainted property. No explanation has been offered by the appellant to dispel the legal presumption of the property being proceeds of crime. Similarly, the fact that the appellant has made declaration in the Income Tax Returns and paid tax as per law does not extricate the appellant from disclosing the source of its receipt. No provision in the taxation laws has been brought to our notice which grants immunity to the appellant from prosecution for an offence of moneylaundering. The argument of the appellant that there is no allegation in the chargesheet filed in the scheduled offence case or in the prosecution complaint that the unaccounted cash deposited by the appellant is the result of criminal activity, will not come to the aid of the appellant. That will have to be negatived in light of the materials already on record. The possession of such huge quantum of demonetized currency and new currency in the form of ₹ 2000/notes, without disclosing the source from where it is received and the purpose for which it is received, the appellant has failed to dispel the legal presumption that he was involved in moneylaundering and the property was proceeds of crime. Therefore, we are not inclined to interfere with the well considered opinion of the Sessions Court and the High Court rejecting the prayer for grant of regular bail to the appellant. However, considering the fact that the appellant is in custody since 28th December, 2016 and the offence is punishable with imprisonment for a term extending to seven years only, but not less than three years, the Trial Court will be well advised to proceed with the trial on day today basis expeditiously. We clarify that the Trial Court must examine the evidence/material brought on record during the trial on its own merit and not be influenced by the observations in this decision which are limited for considering the prayer for grant of regular bail.

Summary

Issues Involved:
1. Rejection of Bail Application by the High Court.
2. Investigation by the Enforcement Directorate.
3. Applicability and interpretation of Section 45 of the Prevention of Money Laundering Act, 2002.
4. Allegations and evidence against the appellant.
5. Constitutional validity of Section 45 of the Act of 2002.

Detailed Analysis:

1. Rejection of Bail Application by the High Court:
The appellant's bail application was rejected by the High Court of Delhi on 5th May 2017. The High Court independently considered the merits of the arguments and rejected the prayer for bail. The appellant was arrested on 28th December 2016 in connection with ECIR/18/DZII/2016/AD(RV) registered under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002. The High Court noted that the Enforcement Directorate is not debarred from conducting an investigation in relation to the offences under Sections 3 and 4 of the Act of 2002 unless the Crime Branch concludes its investigation in relation to FIR No.205/2016. The High Court emphasized that both investigations can continue independently.

2. Investigation by the Enforcement Directorate:
The Enforcement Directorate registered the ECIR against the appellant based on information from the predicate offence registered by the Crime Branch, Delhi. The predicate offence involved allegations of criminal conspiracy, forgery, and cheating, among other charges under the IPC. The Sessions Court noted that the investigation revealed a conspiracy involving the appellant, bank officials, and others to convert demonetized currency into monetized currency through fraudulent means. The Court found that the Enforcement Directorate had reasonable grounds to arrest the appellant based on the material in its possession.

3. Applicability and Interpretation of Section 45 of the Prevention of Money Laundering Act, 2002:
Section 45 of the Act imposes stringent conditions for granting bail, requiring the Court to be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offence and that he is not likely to commit any offence while on bail. The Supreme Court reiterated that the conditions specified under Section 45 are mandatory and must be complied with. The Court emphasized that economic offences involving deep-rooted conspiracies and significant public funds need to be viewed seriously and considered as grave offences affecting the economy of the country.

4. Allegations and Evidence Against the Appellant:
The allegations against the appellant involved a conspiracy to convert demonetized currency into monetized currency through fraudulent means. The investigation revealed that the appellant, along with associates, deposited huge amounts of demonetized currency into various bank accounts and obtained demand drafts in fictitious names. The Sessions Court and the High Court found that the material on record indicated the appellant's involvement in the commission of the offence under Section 3/4 of the Act of 2002. The Courts noted that the appellant failed to provide a plausible explanation for the source of the huge amounts of demonetized currency and new currency recovered from his possession.

5. Constitutional Validity of Section 45 of the Act of 2002:
The appellant challenged the validity of Section 45 of the Act of 2002, arguing that it imposes unreasonable restrictions on the grant of bail. However, the Supreme Court deferred the consideration of this challenge, noting that the appellant's counsel stated that the grounds urged in the writ petition need not be considered at this stage. The Court emphasized that the challenge to the impugned judgment would be examined based on the prevailing statutory provisions, including the rigors of Section 45 of the Act of 2002.

Conclusion:
The Supreme Court upheld the rejection of the appellant's bail application, noting that the appellant failed to overcome the threshold stipulation under Section 45 of the Act of 2002. The Court emphasized that the material on record indicated the appellant's involvement in a serious offence of money laundering and that the appellant failed to provide a plausible explanation for the source of the huge amounts of demonetized and new currency recovered from his possession. The Court also noted that the constitutional validity of Section 45 of the Act of 2002 would be examined in the writ petition on its own merits.