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2021 (7) TMI 1258 - HC - Money LaunderingSeeking grant of Bail - procedure under Section 19 PMLA was followed or not - Enforcement Directorate can be complainant and the Investigating Officer at the same time or not - effect of declaration of twin conditions under Section 45 of the PMLA have been declared unconstitutional and ultra virus. Non-compliance under Section 19 of the PMLA - HELD THAT - Admittedly, Bimal Jain was arrested in execution of the NBW by the learned Special Judge, PMLA while taking cognizance of prosecution complaint filed by the Enforcement Directorate and thus there was no occasion to comply with the requirement of Section 19 of the PMLA. The very fact the complaint was filed by the Enforcement Directorate arraying petitioner Bimal Jain as accused No.2, prima facie show there were reasons to believe the person was guilty of offence punishable under Section PMLA as the complaint is filed only against a person who is presumed to be guilty. Admittedly, the learned Special Judge, PMLA took cognizance of the complaint filed by the Enforcement Directorate as he reasonably believed petitioner Bimal Jain, being guilty of offence of money laundering. Whether the complainant and the Investigating Agency cannot be same? - HELD THAT - Issue decided in the case of MUKESH SINGH VERSUS STATE (NARCOTIC BRANCH OF DELHI) 2020 (9) TMI 419 - SUPREME COURT where it was held that merely because the informant is the investigator, by that itself the investigation would not suffer the vice of unfairness or bias and therefore on the sole ground that informant is the investigator, the accused is not entitled to acquittal. Twin conditions of 45 of the PMLA - HELD THAT - Admittedly the Hon ble Supreme Court in Nikesh Tarachand Shah (supra) declared the Section 45 of the PMLA as it stood then, as unconstitutional and violative of Articles 14 and 21 of the Constitution of India, but the defects pointed out by the Hon ble Supreme Court in NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. 2017 (11) TMI 1336 - SUPREME COURT were cured by the Legislature and an amendment to section 45(1) was made vide the Finance Act, 2018 (No.13 of 2018). Under the amendment Act, section 45(1) was revived and for the words punishable for a term of imprisonment of more than three years under part A of the Schedule , the words under this Act were substituted in section 45(1) of the PMLA. Therefore, merely because the entire section is not re-enacted would be of no consequence since the provision even after being declared unconstitutional, does not get repealed or wiped out from the statute book and it only becomes unenforceable. Therefore, once the Parliament steps in and cures the defect pointed out by a Constitutional Court, the defect appears to be cured and the presumption of constitutionality is to apply to such provision - there is a presumption in favour of constitutionality since the amended section 45(1) of the PMLA has not been struck down. If Section 45(1) of the PMLA is ignored, whether the petitioners are entitled to bail per parameter of Section 439 Cr P C.? - HELD THAT - The investigation conducted by the Directorate of Enforcement so far has revealed Naresh Jain along with his brother Bimal Jain and other accomplices hatched a criminal conspiracy to cause loss to the exchequer and banks by indulging in illegal foreign exchange transactions on the basis of forged/ fabricated documents. For the furtherance of conspiracy, documents like identity proof, birth and education certificate, voter ID, PAN Card and signatures were forged/fabricated to incorporate entities, operating bank accounts, facilitating bogus/over-invoiced/ under invoiced import and export transactions and rotation of the funds through web of shell companies to cause undue benefit to the parties involved and loss to the exchequer and banks. Naresh Jain also facilitated parking of funds abroad by Indian nationals through his international Hawala transaction structure created in India and in various other jurisdictions - During the investigation conducted so far, out of 450 shell companies, 603 bank accounts of 311 companies have been examined and it has been gathered that Naresh Jain and his accomplices including the Bimal Jain rotated funds approximately to the tune of ₹ 96,000 Crores for providing accommodation entries of approximately ₹ 18,679 Crores to 973 beneficiaries. Petitioner Bimal Jain was made a director in various companies in which proceeds of crime generated by Naresh Jain and his accomplices were projected as untainted properties and is in possession of proceeds of crime to the tune of ₹ 35,78,53,638/-. Even the allegations are the petitioners have forged their medical certificates and Naresh Jain continues the criminal activities while in Jail and the investigation in the case is still going on and a large number of activities/fact accounts/witnesses /employees and beneficiaries are involved - It is also alleged if enlarged on bail there is every likelihood the petitioners may flee to Dubai or elsewhere to avoid the process of law and they are flight risks. Bail cannot be granted to both the petitioners - petition dismissed.
Issues Involved:
1. Compliance with Section 19 of the PMLA. 2. Whether the Enforcement Directorate can act as both the complainant and the Investigating Officer. 3. The applicability of Section 45 of the PMLA post its amendment. Detailed Analysis: Compliance with Section 19 of the PMLA: The petitioners argued that the arrest of Bimal Jain was made without compliance with Section 19 of the PMLA and the relevant rules, making his custody illegal. Section 19(1) PMLA requires the Investigating Officer to have material in his possession and reasons to believe that the person is guilty of an offense under the Act, and to forward the order and material to the adjudicating authority in a sealed envelope. Court's Finding: The court noted that since Bimal Jain was arrested in execution of the Non-Bailable Warrants (NBWs) issued by the Special Judge, PMLA, the provisions of Section 19 could not be adhered to. The filing of the complaint by the Enforcement Directorate, which included Bimal Jain as an accused, indicated prima facie reasons to believe his guilt. The Special Judge took cognizance of the complaint, thereby reasonably believing Bimal Jain guilty of money laundering. Enforcement Directorate as Complainant and Investigating Officer: The petitioners contended that the Enforcement Directorate cannot be both the complainant and the Investigating Officer, citing potential bias and unfairness. Court's Finding: Referring to the Supreme Court's judgment in Mukesh Singh vs. State (NCT) of Delhi, the court held that merely because the informant is also the investigator does not vitiate the investigation on grounds of bias or unfairness. The matter should be decided on a case-to-case basis, and the investigation would not automatically suffer from unfairness or bias solely because the informant is the investigator. Applicability of Section 45 of the PMLA: The petitioners argued that the twin conditions under Section 45 of the PMLA for granting bail were declared unconstitutional in the case of Nikesh Tarachand Shah vs. Union of India. Court's Finding: The court acknowledged that the Supreme Court in Nikesh Tarachand Shah had declared the twin conditions of Section 45 as unconstitutional. However, the defects were cured by the Legislature through an amendment in the Finance Act, 2018, which revived Section 45(1). The Supreme Court in P. Chidambaram vs. E.D. took judicial note of this amendment. The Orissa High Court in Mohd. Arif vs. Govt. of India also held that the amended Section 45(1) must be applied while deciding bail applications. The Supreme Court dismissed the SLP against this judgment, and contrary views taken by other courts have been stayed by the Supreme Court. Therefore, the amended Section 45(1) is presumed constitutional. Additional Findings: The investigation revealed that Naresh Jain, along with his brother Bimal Jain and other accomplices, engaged in a criminal conspiracy involving illegal foreign exchange transactions and money laundering, causing significant losses to the exchequer and banks. They operated through a network of shell companies and forged documents. The petitioners were found to be well-connected both in India and abroad, with a high risk of fleeing the country if granted bail. Naresh Jain had a history of evading law enforcement, including fleeing from Dubai while on bail. Given the gravity of the offenses, the risk of flight, and the ongoing investigation involving numerous entities and individuals, the court was not inclined to grant bail to the petitioners. Conclusion: The bail applications of both petitioners were dismissed. The court emphasized that the observations made should not be treated as a determination on the merits of the case.
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