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TMI Blog2023 (12) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... Sathe made an application to the Sub-Divisional Officer on 21/07/2017 for conversion of the said land to nonagricultural ('NA' for short) use and for building permission. The NA permission and building permission was granted on 12/09/2017. Shri Sathe sold the said land to Shri Anil Parab on 19/06/2019 under a duly registered sale deed for the consideration paid by cheque/bank transfer. It is alleged that to conceal the identity of Shri Anil Parab, the sale deed was executed in 2019 though the transaction took place in 2017. All permissions were at the behest of Shri Anil Parab. Since 2017, Shri Sathe was only a front. It is alleged that the applicant was organising all this. Shri Anil Parab sold the said land to the applicant under a duly registered sale deed for consideration paid by cheque/bank transfer on 29/12/2020. This was done to avoid public attention as per the allegation. A notice under the Maharashtra Regional and Town Planning Act (MRTP Act) was issued on 22/06/2021 to the construction made on the land which was in the nature of twin bungalows converted into a resort. Suit No. 57 of 2021 was filed before the Civil Judge, Khed where an injunction was granted. 3. The Min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Divisional Officer for making a fraudulent report based on which NA and building permissions were granted. It is already indicated that the applicant was arrested on 10/03/2023. The ECIR in respect of which complaint (chargesheet) bearing Special Case No. 634 of 2023 has been filed is pending before the Special PMLA Court, Mumbai. SUBMISSIONS OF SHRI DESAI, LEARNED SENIOR ADVOCATE (A) It is the contention of the learned senior advocate Shri Amit Desai that the ECIR was based on RCC No. 12 of 2022 (complaint filed by MoEF for violation of EP Act)and for offences under the IPC. However, without registering an ECIR respondent has also included the offences registered under FIR No. 177 of 2022 as predicated offences while filing the complaint before the Special Court. In the submission of Shri Desai, such a course is impermissible. According to Shri Desai, on the basis of FIR No. 177 of 2022, a separate ECIR ought to have been registered and the inclusion of the offences registered under the FIR No. 177 of 2022 as predicated offences when filing the complaint before the Special Court is illegal, contrary to the provisions of PMLA. (B) The private complaint (RCC No. 12 of 2022) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing added only post March- 2023, when the Sessions Court set aside the order issuing process in the MoEF complaint. Further, there is no material to show how the allegations in the said FIR relate to the applicant and the ECIR for which the applicant is being investigated. (D) The applicant is only named in the chargesheet as a witness in respect of the FIR No. 177 of 2022. Even in the chargesheet, the scheduled offences of IPC i.e. Sections 420, 467, 471, and 478 are invoked essentially for the alleged forgery of Circle Officer's Report. In so far as the present applicant or Shri Anil Parab is concerned, the allegations in the MoEF complaint and FIR No. 177 of 2022 are identical/overlapping and also rely upon the same documents. The comparative chart produced demonstrates how in the MoEF complaint and FIR No. 177 of 2022 the cause of action is the same. The applicant can not be vexed or prosecuted twice for the same cause of action. (E) The allegation of the forgery made by the respondent in the PMLA complaint against the applicant are not borne out in the chargesheet or even in the MoEF complaint. In fact, the report under Section 202 of the Cr.P.C. and the material on record i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor was his signature sent for any analysis etc. It trite that the evidentiary value of the statement under Section 50 of the PMLA is limited to the offence under PMLA and can not be used to prove the predicate offence itself. (F) Section 2(1)(u) of the PMLA i.e. definition of 'Proceeds of Crime', categorically specifies that the proceeds of crime so alleged should be a result of a criminal activity relatable to the scheduled offence. The scheduled offences in the present case are - (i) Section 7 read with Section 15 of the EP Act which has been set aside by the Revision Court. Even otherwise, this offence has not been proved and it is sufficiently established that the resort has never commenced operations, much less discharge any effluents. (ii) As regards Sections 420, 467, 471, 468 and 120-B of the IPC, no cognizance was taken in relation to the IPC offences in the MoEF complaint. Further, the allegations of forgery made in the PMLA complaint relating to the applicant are not borne out in the material collected during the investigation in the FIR. Furthermore, the proceeds out of the alleged crime in the hands of the applicant have not been established at all. There is, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 45(2) would not be applicable if the proceeds of crime are less than one crore. The applicant is liable to be released on bail. The entire complaint/chargesheet of ED to the extent that it cites proceeds of crime, cites the same to be the value of land and building. There is no illegality linked to the MoEF complaint or FIR No. 177 of 2022 qua purchase of land. Only qua the construction the ED complaint links it to CRZ violations alone. CRZ violations fall within Sections 5 read with 15 of the EP Act, none of which are a scheduled offence. Therefore, proceeds of crime, if any, are not from criminal activity of scheduled offence under MoEF complaint or FIR No. 177 of 2022. (I) The Delhi High Court in 2023 SCC Online Del 336 Prakash Industries Limited Vs. Union of India and Another by relying upon the observations in Vijay Madanlal Chaudhary vs. Union of India 2022 SCC Online SC 929 held that the offence created in terms of Section 3 of the PMLA is inextricably linked to the commission of the scheduled offence. The expression "derived or obtained" must be understood as being indicative of criminal activity relating to a scheduled offence "already accomplished". For initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is complete. There is therefore no purpose served in keeping the Applicant incarcerated any longer. SUBMISSIONS OF SENIOR ADVOCATE SHRI DEVANG VYAS, LEARNED ADDITIONAL SOLICITOR GENERAL:- (A) My attention is invited to the observations of the Special Court rejecting the bail application. It is submitted that the twin conditions for the grant of bail applicable under the PMLA are not satisfied. The PMLA investigations can proceed and lead to prosecution independently of the predicate offence. An individual can be implicated and prosecuted for money laundering under PMLA even without direct involvement in the predicate offence. Sections 44 and 45 of the PMLA establish high thresholds for bail, indicating the severity of money laundering offences. These provisions underscore the prioritization of public interest and the integrity of the financial system over the liberty of those accused of such serious economic offences. The Supreme Court by its order dated 30/10/2023 has directed this Court to decide this matter expeditiously, ensuring all rights and contentions of parties are left open on merits to be agitated before this Court. (B) The ECIR relates to two scheduled offences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts the scope for what is considered illegal gain in the context of money laundering. Section 2(1)(v) - "Property": Under PMLA, 'property' means any property or assets of any description, whether corporeal or incorporeal, movable or immovable, tangible or intangible, and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located. Section 2(1)(u) - "schedule Offences": This part of the Act provides a detailed list of offenses which, if committed, would result in the initiation of money laundering investigations. These are referred to as 'scheduled offenses' and form the basis for invoking the provisions of the PMLA. Section 3 - Offence of Money Laundering: This section lays down that whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of the offence of money laundering. Section 19 - Arrest: This gives the authority to the Director or any other officer not below the rank of Deputy Director authorized by the Director, to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CULARS PARA NO. Code" 311, 356, 359, 365, 455, 467 4 Arrest 322, IMP 324, 325, 326 5 Burden of Proof Check : Pg 375 - Whether relevant before filing of chargesheet/framing of charge ? 327 6 Proof : Definitions 335, 336 & 337 IMP 339, 341, 342, 343 7 "Shall Presume/May Presume" 347 8 Special Court 352 9 Bail IMP - NIKESH TARACHAND VIS A VIS AMENDMENT OF 2018 IMP - DEFECT REMOVED BY VALIDATING THE ACT RETROSPECTIVELY. CHALLENGE TO TWIN CONDITIONS POST AMENDMENT OF 2018 371 377-380 386 387 10 "Quantum of punishment cannot be the basis to determine the seriousness and gravity of this offence." 395 11 Relevant Judgments 395-397 IMP 401 12 Twin Conditions vis a vis Companies Act 402 13 Limitations under Section 45 are in addition to limitation under the 1973 404 SR. NO. PARTICULARS PARA NO. Code 14 TWIN CONDITIONS UPHELD 405 15 Re : Anticipatory Bail 411 & 412 16 Section : 50 422 and 431 17 Power to Issue Summons 425 18 Investigation 434 19 PMLA vis a vis Tofan Singh 446 & 447 20 "There is a stark distinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad; Explanation.-For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence." 12. Clause (v) of sub-section (1) of Section 2 of the PMLA defines "property" to mean any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible. To constitute any property as proceeds of crime, it must be derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. The explanation clarifies that the proceeds of crime include property, not only derived or obtained from scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. Clause (u) also clarifies that even the value of any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of now." (underline supplied) In paragraphs 269 and 270, this Court held thus: "269. From the bare language of Section 3 of the 2002 Act, it is amply clear that the offence of money- laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form be it one of concealment. possession. acquisition. proceeds of crime use of as much as projecting it as untainted property or claiming it to be so. Thus, Involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money- laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence = except the proceeds of crime derived or obtained as a result of that crime. 270. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money-laundering to indulge in or to assist or being party t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. In such a case, the person who assists the accused in the scheduled offence for concealing the proceeds of the crime of extortion can be guilty of the offence of money laundering. Therefore, it is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence. What is held in paragraph 270 of the decision of this Court in the case of Vijay Madanlal Choudhary' supports the above conclusion. The conditions precedent for attracting the offence under Section 3 of the PMLA are that there must be a scheduled offence and that there must be proceeds of crime in relation to the scheduled offence as defined in clause (u) of sub-section (1) of Section 3 of the PMLA. 16. In a given case, if the prosecution for the scheduled offence ends in the acquittal of all the accused or discharge of all the accused or the proceedings of the scheduled offence are quashed in its entirety, the scheduled offence will not exist, and therefore, no one can be prosecuted for the offence punishable under Section 3 of the PMLA as there will not be any proceeds of crime. Thus, in such a case, the accused against wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph Nos. 21, 29 to 33 and 39, it is observed thus: "21. This chronology of events speaks volumes and reflects rather poorly, if not negatively, on the ED's style of functioning. Being a premier investigating agency, charged with the onerous responsibility of curbing the debilitating economic offence of money laundering in our country, every action of the ED in the course of such exercise is expected to be transparent, above board and conforming to pristine standards of fair play in action. The ED, mantled with far-reaching powers under the stringent Act of 2002, is not expected to be vindictive in its conduct and must be seen to be acting with utmost probity and with the highest degree of dispassion and fairness. In the case on hand, the facts demonstrate that the ED failed to discharge its functions and exercise its powers as per these parameters. 29. The more important issue presently is as to how the ED is required to 'inform' the arrested person of the grounds for his/her arrest. Prayer (iii) in the writ petitions filed by the appellants pertained to this. Section 19 does not specify in clear terms as to how the arrested person is to be 'informed' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest. This being the fundamental right guaranteed to the arrested person, the mode of conveying information of the grounds of arrest must necessarily be meaningful so as to serve the intended purpose. It may be noted that Section 45 of the Act of 2002 enables the person arrested under Section 19 thereof to seek release on bail but It postulates that unless the twin conditions prescribed thereunder are satisfied, such a person would not be entitled to grant of bail. The twin conditions set out in the provision are that, firstly, the Court must be satisfied, after giving an opportunity to the public prosecutor to oppose the application for release, that there are reasonable grounds to believe that the arrested person is not guilty of the offence and, secondly, that he is not likely to commit any offence while on bail. To meet this requirement, it would be essential for the arrested person to be aware of the grounds on which the authorized officer arrested him/her under Section 19 and the basis for the officer's 'reason to believe' that he/she is guilty of an offence pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out or permitted reading of the grounds of arrest of the appellants and left it at that, which is also disputed by the appellants. As this form of communication is not found to be adequate to fulfil compliance with the mandate of Article 22(1) of the Constitution and Section 19(1) of the Act of 2002, we have no hesitation in holding that their arrest was not in keeping with the provisions of Section 19(1) of the Act of 2002. Further, as already noted supra, the clandestine conduct of the ED in proceeding against the appellants, by recording the second ECIR immediately after they secured interim protection in relation to the first ECIR, does not commend acceptance as it reeks of arbitrary exercise of power. In effect, the arrest of the appellants and, in consequence, their remand to the custody of the ED and, thereafter, to judicial custody, cannot be sustained." 13. Turning to the next decision dealing with Section 45 of PMLA, when it comes to the question of grant or refusal of bail, the Supreme Court in Tarun Kumar Vs. Assistant Director Directorate of Enforcement 2023 SCC OnLine SC 1486 in paragraph Nos. 13, 14, 15 and 17 observed thus: "13. Keeping in view of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity connected with the proceeds of crime. Thus, the involvement of the person in any of the criminal activities like concealment, possession, acquisition, use of proceeds of crime as much as projecting it as untainted property or claiming it to be so, would constitute the offence of money laundering under Section 3 of the Act. 17. As well settled by now, the conditions specified under Section 45 are mandatory. They need to be complied with. The Court is required to be satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and he is not likely to commit any offence while on bail. It is needless to say that as per the statutory presumption permitted under Section 24 of the Act, the Court or the Authority is entitled to presume unless the contrary is proved, that in any proceedings relating to proceeds of crime under the Act, in the case of a person charged with the offence of money laundering under Section 3, such proceeds of crime are involved in money laundering. Such conditions enumerated in Section 45 of PML Act will have to be complied with even in respect of an application for bail made under Section 439 Cr.P.C. in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CRZ rules. Though the transaction between Mr. Sathe and Shri Anil Parab was of the year 2017, it is only in the year 2019 that the sale deed came to be executed. Hence, it is alleged that this is to conceal the identity by Shri Anil Parab. Shri Anil Parab later executed the sale deed in respect of the said land in favour of the present applicant. The applicant was always involved right from the inception in the transaction on behalf of Shri Anil Parab and in respect of all building permissions and other permissions. The sale in favour of the applicant by Shri Anl Parab was to protect Anil Parab as per the allegations as he was actively associated with politics. 17. In the complaint filed by the respondent under Section 45 of the PMLA against various persons, wherein the applicant is arraigned as the accused No.1. In paragraph No.3.5 of the ECIR, it is clarified that in the instant PMLA case, there are two scheduled offences viz. complaint bearing no. 12 of 2022 dated 10/03/2022 for violations of Section 19 and Section 15 read with Section 7 of EP Act (being the schedule offence) against Shri Anil Dattatray Parab, M/s Sai Resort & others and FIR bearing No.177 of 2022 dated.08/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unauthorized and illegal resort and to make entries in Gram Panchayat Form No.S, therefore, tax was levied on the incomplete structure due to pressure and influence of Shri Anil Parab used by Sadanand Kadam. Accused Sadanand Kadam has also manipulated the balance sheets and invoices in order to show expenses made for the construction of Sai Resort NX on his account and further falsified the ledger so that to justify the construction cost and hide the actual expenses made in cash by Shri Anil Parab. In furtherance to this, when various complaints regarding the illegal construction of Sai Resort NX transpired, Accused Sadanand Kadam helped Shri Anil Parab to shift the onus and to conceal the illegalities and irregularities vis a vis construction of the said resort within CRZIII i.e. No Development Zone, made a makebelieve arrangement with Sadanand Kadam and sold the said land to him on paper, however, the fact that there was a structure over the said land was once again not brought into light in the said sale deed. Thus, accused Sadanand Kadam by acts of using, utilizing and projecting the said property viz. Sai Resort NX (proceeds of crime), as untainted, has indulged in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ungalow. Further, in order to legitimize the said illegal resort accused Sadanand Kadam with the help of Shri Anil Parab deceived Gram Panchayat, Murud by stating that he had purchased land and structure from Shri Vibhas Sathe. Further, without completion of the construction, accused Sadanand Kadam pressurized and influenced Sarpanch & Gram Sevak of Murud Gram Panchayat and asked them to asses and levy tax on the illegal structure and transfer the title in the name of Shri Anil Parab and accordingly paid tax of Rs.46806/- in 2019. Shri Anil Parab while acquiring electricity connection through his application dated.02.03.2020, himself admitted that construction is under progress over the said land. 9.3 Throughout the construction period of Sai Resort NX, Accused Sadanand Kadam helped Shri Anil Parab, to conceal the fact that the said resort was being constructed by him. Both the said deed in r/o land located at Gut No.446, Murud, Dapoli, Ratnagiri i.e. Sale deed dated. 19.06.2019 between Shri Vibhas Sathe and Shri Anil Parab & Sale deed dated. 30.12.2020 between Shri Anil Parab and accused Sadanand Kadam does not have any mention of construction over the said land parcel. This wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted on 03.06.2022 by M/s L B M Valuers & Engineers and as per the valuation report value of land is Rs.2,73,91,000 and the Resort was valued at Rs.7,46,47,000/-. 9.8 Thus, in the instant case, total proceeds of crime in terms of section 2(1)(u) of PMLA, 2002, r/w explanation to Section 2 (1)(v) of the Act, 2002, is value of land i.e. Rs. 2,73,91,000 for which illegal permission was acquired for conversion into Non-Agricultural and used in commission of offence and value of resort i.e. Rs. 7,46,47,000 which has been generated out of criminal activities i.e. cheating the government authorities. Thus, total proceeds of crime in the instant case is Rs. 10,20,38,000/-". 21. I, prima facie, do not find any substance in the submission of the learned senior advocate Shri Desai that the accusations in the present case of money laundering involve a sum of less than Rs. 1 Crore for enabling the applicant to claim the benefit of the first proviso to section 45 of the PMLA. It is for this reason that the estimation of proceeds of crime as set out in the complaint is reproduced hereinbefore. Though learned senior advocate Shri Desai was at pains to point out that the accusations of money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeds of crime in relation to the scheduled offence as defined in clause (u) of subsection( 1) of Section 3 of the PMLA. 25. Learned senior advocate Shri Desai submitted that the accusations in FIR No. 177 of 2022 is almost identical with those in RCC No. 12 of 2022 and hence the applicant can not be vexed twice for the same cause of action. I am afraid that this contention can not be accepted for more than one reason. FIR No. 177 of 2022 though may be in relation to the same property but is filed at the instance of a different entity and against so many accused who are not concerned with the private complaint of MoEF. FIR No. 177 of 2022 encompasses a range of offences under the IPC including sections pertaining to cheating (Section 420), forgery (Section 467 and 471) and criminal conspiracy (Section 120-B) coupled with offences under P.C. Act (Sections 12, 13 and 14). These offences apart from financial irregularity suggesting a deliberate attempt to misuse public office for personal gain, are regarding manipulating official documents and deceiving stakeholders. The offences in FIR No. 177 of 2022 suggest fraudulent activities and document falsification, key elements that poten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements recorded by the police under Section 161 of the Cr.P.C. The distinction as regards the statement made under Section 161 of Cr.P.C. with the evidentiary value of the statement made under the PMLA has to be kept in mind. 28. As regards the submission of learned senior advocate Shri Desai as to the legitimacy of the transaction in question, the same requires a detailed analysis and examination on the merits of the case. It is not possible to express any opinion as regards the legitimacy of the transactions at this stage which requires an indepth analysis. 29. The next contention of learned senior advocate Shri Desai is regarding the non-compliance of Section 19 of PMLA. A copy of the arrest memo tendered by the respondents during the hearing indicates that the grounds of arrest were explicitly read and explained to the applicant. The signature of the applicant on the memo, accompanied by the term "Dekha" (translated as "seen and read"), indicates that the applicant was made aware of and understood the reasons for the arrest. The applicant's son has also recorded a note in the arrest memo, stating that the grounds of arrest were read over and explained. From the materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake measures as may be necessary and specified in the 2002 Act including to attach the property for being dealt with as per the provisions of the 2002 Act. We have elaborately adverted to the procedure to be followed by the authorities for such attachment of the property being proceeds of crime and the follow-up steps of confiscation upon confirmation of the provisional attachment order by the Adjudicating Authority. For facilitating the Adjudicating Authority to confirm the provisional attachment order and direct confiscation, the authorities under the 2002 Act (i.e., Section 48) are expected to make an inquiry and investigate. Incidentally, when sufficient credible information is gathered by the authorities during such inquiry/investigation indicative of involvement of any person in any process or activity connected with the proceeds of crime, it is open to such authorities to file a formal complaint before the Special Court naming the concerned person for offence of moneylaundering under Section 3 of this Act. Considering the scheme of the 2002 Act, though the offence of money-laundering is otherwise regarded as cognizable offence (cognizance whereof can be taken only by the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 48 of the 2002 Act alone are competent to file such complaint. It is a different matter that the materials/evidence collected by the same authorities for the purpose of civil action of attachment of proceeds of crime and confiscation thereof may be used to prosecute the person involved in the process or activity connected with the proceeds of crime for offence of money-laundering. Considering the mechanism of inquiry/investigation for proceeding against the property (being proceeds of crime) under this Act by way of civil action (attachment and confiscation), there is no need to formally register an ECIR, unlike registration of an FIR by the jurisdictional police in respect of cognizable offence under the ordinary law. There is force in the stand taken by the ED that ECIR is an internal document created by the department before initiating penal action or prosecution against the person involved with process or activity connected with proceeds of crime. Thus, ECIR is not a statutory document, nor there is any provision in 2002 Act requiring Authority referred to in Section 48 to record ECIR or to furnish copy thereof to the accused unlike Section 154 of the 1973 Code. The fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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