2025 (2) TMI 144 - HC - Money Laundering

Prayer for conducting preliminary investigation/inquiry into the fraudulent activities undertaken - misappropriation of public monies for personal enrichment - defrauding investors - round tripping of funds through shell companies based in tax havens - making unsecured advances to subsidiaries with the intention to launder public money - creation of dubious and fictitious invoices all of which are predicate offences under the Indian Penal Code 1860 and the Prevention of Money Laundering Act 2002 - HELD THAT - Admittedly detailed statement of the petitioner came to be recorded by the EOW on 28th October 2024. Looking to the enormity of the offences and the fact that it involves thousands of crores of rupees spans multiple jurisdictions and implicate nationalized Banks as well as foreign entities based in Mauritius USA Australia and UAE involving substantial financial implications at both national and international levels the D.C.P EOW Mumbai requested the aforesaid Authorities for taking appropriate action. Both the EOW as well as the CBI for the reasons best known to these Agencies are reluctant to inquire/investigate into the complaints made by the petitioner having such large scale alleged misappropriation of public funds as well as laundering by Mr. Anand Jaikumar Jain who is the Promoter and Director of Jai Corp Ltd along with its subsidiary companies and others. There are no words to demonstrate the conduct of the Investigating Agencies viz EOW as well as CBI. There will be no fair and impartial investigation into the alleged crimes either by the EOW or by the Superintendent of Police CBI EOW and hence a special team needs to be constituted by the Zonal Director CBI to ensure efficient investigation into the offences of such magnitude. The need to instill confidence in the investigations and consequently in the administration of justice is of utmost concern. The case in question has national and international ramifications. No doubt the EOW in its internal notings which were placed for perusal observed that considering the magnitude of the alleged scam which runs into thousands of crores of rupees multiplicity of jurisdictions the role of nationalized Banks (Union Bank IDBI Bank IDFC Bank) and Mauritius based private equity fund plus trans-border transactions with USA Australia and UAE it is in the best interests of investigation that the matter be handled by CBI SFIO. This is the noting by the Joint Commissioner of Police EOW on 4th November 2024. The reluctance to inquire/investigate was writ large during the hearing of the petition. Conclusion - The High Court has the jurisdiction to direct an investigation by the CBI without State consent when necessary to ensure a fair and impartial inquiry particularly in cases with national and international implications. The Court directed the formation of a Special Investigation Team (SIT) under the supervision of the CBI s Zonal Director to investigate the allegations. Zonal Director CBI Mumbai shall form a Special Investigation Team comprising of officers as are required for conducting thorough investigation into the two complaints dated 22nd December 2021 and 3rd April 2023 of the petitioner - Joint Director of the Central Bureau of Investigation Mumbai (Anti Corruption Bureau) shall supervise the investigation - Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

(i) Whether the complaints filed by the petitioner alleging large-scale financial fraud and misappropriation of public funds by Jai Corp Ltd and its subsidiaries, under the direction of Anand Jaikumar Jain, warrant a thorough investigation by a competent authority.

(ii) Whether the investigation into the alleged offences should be transferred from the Economic Offences Wing (EOW) and the Central Bureau of Investigation (CBI) to a Special Investigation Team (SIT) due to the alleged reluctance and inefficiency of the aforementioned agencies.

(iii) Whether the High Court has the jurisdiction under Article 226 of the Constitution of India to direct the CBI to investigate a cognizable offence without the consent of the State Government.

2. ISSUE-WISE DETAILED ANALYSIS

(i) Investigation of Alleged Financial Fraud

Relevant Legal Framework and Precedents: The petitioner invoked the writ jurisdiction under Article 226 of the Constitution of India, seeking a writ of mandamus to compel the respondent agencies to investigate the alleged financial fraud. The allegations pertain to violations of the Indian Penal Code (IPC) and the Prevention of Money Laundering Act (PMLA).

Court's Interpretation and Reasoning: The Court recognized the gravity of the allegations, which involve significant sums of money and cross-border transactions, necessitating a thorough investigation. It noted the apparent reluctance of the EOW and CBI to conduct a comprehensive inquiry despite the substantial evidence presented by the petitioner.

Key Evidence and Findings: The petitioner provided detailed documentation and analysis of the alleged fraud, including the misuse of funds, creation of shell companies, and manipulation of stock futures. The Court took note of the petitioner's previous successful public interest litigations and the detailed evidence submitted.

Application of Law to Facts: The Court applied the principles of fair investigation and the need for an impartial inquiry to the facts presented. It emphasized the importance of investigating the allegations given their potential national and international ramifications.

Treatment of Competing Arguments: The Court addressed the arguments of the respondent agencies, which claimed jurisdictional limitations and procedural constraints. However, it found these arguments insufficient to justify the lack of action on the part of the agencies.

Conclusions: The Court concluded that the allegations warranted an investigation by a Special Investigation Team (SIT) to ensure an unbiased and thorough inquiry.

(ii) Transfer of Investigation to a Special Investigation Team (SIT)

Relevant Legal Framework and Precedents: The Court referred to precedents such as the State of West Bengal vs. Committee for Protection of Democratic Rights, which established the High Court's power to direct the CBI to investigate without State consent under Article 226.

Court's Interpretation and Reasoning: The Court expressed dissatisfaction with the EOW and CBI's handling of the investigation, citing their reluctance and inefficiency. It emphasized the need for a credible and confidence-inspiring investigation.

Key Evidence and Findings: Internal notings from the EOW and communications from the CBI highlighted the complexity and scale of the alleged fraud, involving multiple jurisdictions and significant financial implications.

Conclusions: The Court concluded that the allegations warranted an investigation by a Special Investigation Team (SIT) to ensure an unbiased and thorough inquiry.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The judgment reinforced the principle that the High Court has the jurisdiction to direct an investigation by the CBI without State consent when necessary to ensure a fair and impartial inquiry, particularly in cases with national and international implications.

Final Determinations on Each Issue: The Court directed the formation of a Special Investigation Team (SIT) under the supervision of the CBI's Zonal Director to investigate the allegations. It ordered the EOW to hand over all relevant documents to the SIT within a week.

Verbatim Quotes of Crucial Legal Reasoning: "Our justice system will acquire credibility only when the people at large will be convinced that the justice is based on the foundation of truth, provided the investigation is carried out impartially, fairly and in an unbiased manner."

The Court emphasized the need for a fair investigation to maintain public confidence in the justice system and highlighted the importance of addressing crimes that affect society at large.

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