2023 (4) TMI 152 - HC - Money Laundering

Seeking issuance of Writ of Mandamus directing the respondents to remove the petitioner's name from the data base maintained by them, pertaining to those individuals, who are not allowed to travel abroad - seeking revocation of Look Out Circular (LOC) erroneously issued qua the petitioner - HELD THAT - It is true that the petitioner is the defacto complainant in the FIR in Crime No.39/2019 for the offences under Sections 420, 465, 468, 471 and 120B IPC and Crime No.282/2019 for the offences under Sections 409, 420, 465, 468, 471 and 120B IPC registered against the accused. The FIR allegations in Crime No.39/2019 shows that petitioner owns 92,00,000 shares in M/s. 8K Miles Software Services Ltd. He is the promoter of this Company. It is a listed company in BSE and NSE. To meet his business financial requirements, Shri.R.S.Ramani, the Whole time Director introduced one Mr. Rohit Arora (Loan Broker) and he assured that he can arrange loan against his shares being provided as 'collateral security' - The accused criminally conspired with an illegal intention to cheat and without his knowledge, illegally and fraudulently fabricated the documents and forged his signature on various Delivery Instruction Slip and criminally breached the trust and transferred 23,00,000 shares from his DP Account to their DP account and sold their shares in the open market for a sum of 144crores and criminally misappropriated the same. Section 12A deals with Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. Section 12A (c) prohibits engagement in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder - it is too early for the petitioner to contend that there is no offence made out against him for prosecuting him under Section 12A r/w Section 24 of SEBI Act. Prima facie as per the orders of the SEBI, commission of offence under Section 12 A (c) of the SEBI Act, 1992 is made out against the petitioner. Therefore, petitioner cannot contend that Enforcement Directorate has no jurisdiction to investigate the case against him for violating/committing the offences under the SEBI Act, 1992. This Court is of the considered view that as of now, petitioner is not entitled to seek for removal of his name from the database maintained in respect of the persons, who are not allowed to travel abroad on account of the Look Out Circular issued against them and to revoke the Look Out Circular issued against the petitioner until the completion of investigation. The first respondent is directed to complete the investigation in ECIR bearing reference No. ECIR/CEZO-1/17/2020 as early as possible and file the complaint before the competent Court within a period of three months from the date of receipt of the copy of this order. This Writ Petition is dismissed with a direction to the first respondent to complete the investigation and file the complaint before the competent Court within a period of three months from the date of receipt of the copy of this order.

Summary

Issues Involved:
1. Legality of the Look Out Circular (LOC) issued against the petitioner.
2. Jurisdiction of the Enforcement Directorate to investigate the petitioner under the Prevention of Money Laundering Act (PMLA).
3. Petitioner's right to travel abroad amidst ongoing investigations.

Summary:

1. Legality of the Look Out Circular (LOC):
The petitioner, a Singapore Citizen and promoter of M/s. Securekloud Technologies Limited, sought the removal of his name from the database of individuals barred from traveling abroad and the revocation of the Look Out Circular (LOC) issued against him. The petitioner argued that the LOC was issued without any basis and violated his freedom of movement. He cited several precedents, including the case of Rahul Surana vs. The Serious Fraud Investigation Office, which emphasized that LOCs should only be issued in exceptional circumstances where the accused evades arrest or trial. The petitioner contended that he had fully cooperated with the investigation and there was no material to suggest he was a flight risk.

2. Jurisdiction of the Enforcement Directorate:
The respondent, represented by the Additional Solicitor General of India, argued that the petitioner was involved in manipulating share transactions and transferring illegal money to his business establishments in the USA. The investigation revealed that the petitioner had enriched himself through fraudulent activities, including inflating the revenue of his company and manipulating share prices. The respondent submitted that the petitioner was involved in money laundering under Section 3 of the PMLA, punishable under Section 4 of the Act. The investigation also indicated that the petitioner had not effectively cooperated, providing evasive replies and concealing evidence. The court noted that the petitioner was found to have violated Section 12A (c) of the SEBI Act, 1992, making it an offence punishable under Section 24 of the SEBI Act, thereby giving the Enforcement Directorate jurisdiction to investigate.

3. Petitioner's Right to Travel Abroad:
The petitioner argued that the LOC violated his freedom of movement and was contrary to law. However, the court observed that the petitioner was a party to the conspiracy in share manipulation and had not effectively cooperated with the investigation. The court emphasized the necessity of the petitioner's presence in India to complete the investigation, considering the volume of money involved and the potential risk of evidence being destroyed if the petitioner were allowed to leave the country. The court directed the Enforcement Directorate to complete the investigation and file the complaint within three months.

Conclusion:
The court dismissed the writ petition, upholding the LOC issued against the petitioner until the completion of the investigation. The Enforcement Directorate was directed to complete the investigation and file the complaint within three months.