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TMI Blog2024 (3) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ) GOVT. OF INDIA [ 2015 (12) TMI 1133 - SUPREME COURT] , while holding that the conditions specified under Section 45 of PMLA are mandatory, it was observed the conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 CrPC. That coupled with the provisions of Section 24 provides that unless the contrary is proved, the authority or the Court shall presume that proceeds of crime are involved in money-laundering and the burden to prove that the proceeds of crime are not involved, lies on the appellant. The offence of money laundering as contemplated in Section 3 of the PMLA has been elaborately dealt with by the three Judge Bench in VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] , in which it has been observed that Section 3 has a wider reach. The offence as defined captures every process and activity in dealing with the proceeds of crime, directly or indirectly, and is not limited to the happening of the final act of integration of tainted property in the formal economy to constitute an act of money laundering. Of course, the authority of the Authorised Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of corporate veil is permissible when such corporate structures have been used for committing fraud or economic offences or have been used as a facade or a sham for carrying out illegal activities. The appellants have miserably failed to satisfy us that there are reasonable grounds for believing that they are not guilty of the alleged offences. On the contrary, there is sufficient material collected by the respondent-ED to show that they are prima facie guilty of the alleged offences - it is not possible to hold that appellants had complied with the twin mandatory conditions laid down in Section 45 of PMLA. The High Court also in the impugned judgment after discussing the material on record had prima facie found the appellants guilty of the alleged offences under the PMLA, which judgment does not suffer from any illegality or infirmity. Appeal dismissed. - HON'BLE MS. JUSTICE BELA M. TRIVEDI And HON'BLE MR. JUSTICE PANKAJ MITHAL For the Petitioner : Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. N. Hariharan, Sr. Adv. Mr. Vivek Jain, AOR Mr. Abhinav Jain, Adv. Mr. Amit Bhandari, Adv. Mr. Rajat Jain, Adv. Mr. Shariran Mukherjee, Adv. Mr. Umeed Shah, Adv. Mr. Siddhant Sahay, Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons had acquired disproportionate assets during the period from 14.02.2015 to 31.05.2017, while he was functioning as Minister of Govt. NCT of Delhi, and had laundered tainted cash amounts through Kolkata based shell companies, the Directorate of Enforcement had registered an ECIR bearing No. ECIR/HQ/14/2017 dated 30th August, 2017 against Satyendar Jain, Vaibhav Jain, Ankush Jain and others for investigation into the commission of the offence of Money laundering as defined under Section 3 and punishable under Section 4 of the PMLA. On the completion of the said investigation, the Prosecution Complaint came to be filed on 27.07.2022 by the Directorate of Enforcement in the Court of District and Sessions Judge, Rouse Avenue District Court, New Delhi, against the accused Sh. Satyendar Jain and others with a prayer to take cognizance of the offences of money laundering under Section 3 punishable under Section 4 of PMLA. The said Prosecution Complaint being CC No.23/2022 is now pending at the stage of framing of charge against the appellants accused. 6. During the course of investigation, the appellant- Satyendar Kumar Jain was arrested on 30th May, 2022 and the appellants-Vaibhav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired assets to the tune of Rs.4,81,16,435/- i.e. (sum of Rs.4,60,83,500/- + Rs.15,00,000/- received in J.J. Ideal Estate Pvt. Ltd. + Rs.5,16,135/- Rs.16,800/- commission paid to entry operators) - , as discussed in above paragraphs, in his name and in the name of his family member/ friends, with the help of his business associates, which are disproportionate to his known sources of income for which he has not satisfactorily accounted for and laundered the proceeds of crime through a complex web of companies controlled by him. Satyendar Kumar Jain has thus committed the offence of money laundering as defined under Section 3 of PMLA by actually acquiring, possessing, concealing and using the proceeds of crime to the tune of Rs.4,81,16,435/- and projecting and claiming the same as untainted in the mode and manner as provided in the preceding paragraphs in the present complaint. 2. Ankush Jain Ankush Jain has knowingly assisted Satyendar Kumar Jain by making declaration under IDS, 2016 for declaring undisclosed income of Rs.8.6 crore (including Rs.1,53,61,166/- during check period) for the period from 2010-11 to 2015-16 in order to save and shield Sh. Satyendar Kumar Jain. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been granted interim bail on the medical ground. (ii) No shares of companies as alleged by the ED were acquired by the appellant within the check period and even otherwise the assets held by the company could not be attributed to its shareholders. (iii) Even if the accommodation entries amounting to Rs. 4.61 crores are attributed to the appellant through his wife s shareholdings, it would come only to Rs. 59,32,122/- which is less than 1 crore, and therefore the appellant is entitled to bail under the proviso to Section 45 of the PMLA. (iv) There is gross discrepancy in the amount of proceeds of crime calculated by the ED and the amount mentioned in the Chargesheet of the CBI in as much as the alleged disproportionate amount is Rs.1,62,50,294/- as per the FIR whereas as per the ED the amount is Rs. 4,81,16,435/-. (v) The appellant had neither served as a Director nor had signed any financial document during the check period, and the appellant had already resigned from the directorship of the allegedly involved Companies two years before the commission of the alleged offence. It was Vaibhav Jain and Ankush Jain and their family members who had a significant influence and control o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers 2022 SCC OnLine SC 929 . Such allegation could be a tax violation but could not be considered as proceeds of crime. (xiii) The Prosecution Complaint is silent as to when the scheduled offence was committed and as to how and in what manner the proceeds of crime was laundered within the meaning of Section 3 of the PMLA. (xiv) As regards the Income Disclosure Scheme (IDS) declaration made by Vaibhav Jain and Ankush Jain for about Rs.16 crores for the period 2010-2016, it has been submitted that the said IDS declarations were rejected by the PCIT vide the order dated 09.06.2017, on the ground of misrepresentation/suppression of facts. The said order of PCIT was challenged by Vaibhav Jain and Ankush Jain before the Delhi High Court, however the High Court had also rejected that petition vide the order dated 01.08.2019. Neither the PCIT nor the High Court had given any finding that the said amount of Rs. 16 crores belonged to the appellant. (xv) The reliance placed by the ED on the appellant s letter dated 27.06.2018 was misleading and incorrect, in as much as the appellant vide the said letter had explicitly denied the appellant being the beneficial owner. Since Vaibhav Jain and An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wned by the appellant, and agricultural lands were purchased from the said funds. (iv) From the documents obtained from the Income Tax Department it was revealed that the appellant had submitted the application before the income tax authorities requesting that the income tax paid by Vaibhav Jain and Ankush Jain under IDS, 2016 be adjusted against the demands raised in his individual assessments by the IT authorities, which established that the IDS declaration made by Vaibhav Jain and Ankush Jain were made for the appellant and that the amount paid in IDS as well as the tax paid thereon belonged to the appellant Satyendar Kumar Jain. (v) The Special Court having taken the cognizance of the PMLA case vide the order dated 29.07.2022 and having held that there was prima facie evidence incriminating about the involvement of the appellant Satyendar Kumar Jain was sufficient to show the existence of the scheduled offence and also the existence of proceeds of crime. (vi) The appellant Satyendar Kumar Jain was the main person behind the bogus shell companies based in Kolkata, which never did any real business. He had either incorporated them or was having majority shareholdings alongwith hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oudhary (supra), the proceeds of crime is indicative of criminal activity related to a scheduled offence already accomplished, and therefore the offence of money laundering can be initiated only after the Scheduled Offence is accomplished. However, in the instant case, the appellants have been roped in for benami transactions from 2015-2016 which was well before the end of check period i.e 31.05.2017. (ii) The offence of money laundering against the appellants is attributed to their act of filing IDS on 27.09.2016 much before the end of check period i.e. 31.05.2017. Hence, the same cannot be considered as an act of assisting someone in the offence of money laundering as the proceeds of crime could have been generated after the end of the check period and not before that. (iii) The act of declaring IDS by the appellants in respect of undisclosed income for the period from 2010-2011 to 2015- 2016 cannot be considered as an act of assisting Satyendar Jain in committing the offence of money laundering, in as much as the possession of unaccounted property acquired by legal means may be actionable for tax violation, but cannot be regarded as the proceeds of crime unless the concerned tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x) The appellants are in custody since 30.06.2022 except for the period when they were released on the interim bail (Vaibhav Jain on 18.08.2023 to 27.12.2023 and Ankush Jain on 12.09.2023 to 27.12.2023). (x) The appellants have not violated any conditions imposed by the Court when on interim bail, and have also not tried to delay the proceedings before the trial court in any manner. 10. The learned ASG Mr. S.V. Raju appearing on behalf of the respondent-Directorate of Enforcement made his submissions in the appeals preferred by the appellants- Ankush Jain and Vaibhav Jain as under: - (i) The appellants-Ankush Jain and Vaibhav Jain were actively involved in the commission of the offence of money laundering by assisting the accused-Satyendar Kumar Jain. The appellant Ankush Jain was the Director of M/s. Mangalayatan Projects Pvt. Ltd. during the check period. The said company is one of the accused in the Prosecution Complaint filed on 27.07.2022. The said company had received the proceeds of crime amounting to Rs.1,90,00,000/- during the check period in the form of accommodation entries from Kolkata based shell companies. The said appellant-Ankush Jain transferred the land possessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declarations were made by the said appellants, was the relevant fact for the purposes of the alleged offence under the PMLA, as both the appellants are being prosecuted in their individual capacities for allegedly actively assisting the appellant- Satyendar Jain in concealing the proceeds of crime and projecting the proceeds of crime as untainted. (viii) Section 13(1)(e) and Section 13(2) are both scheduled offences under the PMLA, and Section 3 of PMLA ropes in any person who may or may not have any role to play in the scheduled offence but has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party involved in any process or activity connected with the proceeds of crime. (ix) The money laundering need not commence only after the check period, inasmuch as the offence under Section 13(1) (e) of the PC Act contemplates that at any time the assets of the public servant could be disproportionate to his income, which could have been acquired by the public servant either at the beginning or in the middle of the check period also. (x) From the statements of bank accounts of the four companies and various other Kolkata based shell companies controlled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with which they were allegedly involved, specifically in respect of the figures mentioned in the Prosecution Complaint against them. Pursuant to the same, the Deputy Director, Directorate of Enforcement has filed his affidavit clarifying the role of the appellants Ankush Jain and Vaibhav Jain and further stating inter alia that the figure of Rs.1,53,61,166/- was inadvertently mentioned at page no.-248, as it was the amount attributed by the CBI in its Chargesheet to Satyendar Jain, Ankush Jain and Vaibhav Jain individually for the purpose of receiving total accommodation entries in lieu of cash of Rs.4.61 Crores, however respondent s investigation has revealed that the entire Rs.4.81 Crores (Rs.4.61 Crores plus commission plus Rs.15 lakhs in J.J. Ideal Estates Pvt. Ltd.) was entirely the property of Satyendar Jain received in his companies as accommodation entries in lieu of cash and this entire sum was sought to be declared by the appellants Ankush Jain and Vaibhav Jain in the IDS as their own income. 12. In the light of the said clarification, the Learned Senior Advocate Ms. Arora had further submitted that the so-called inadvertent error was not pointed out before the trial cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Act), Government of India (2015) 16 SCC 1 , while holding that the conditions specified under Section 45 of PMLA are mandatory, it was observed as under: - 30. The conditions specified under Section 45 of PMLA are mandatory and need to be complied with, which is further strengthened by the provisions of Section 65 and also Section 71 of PMLA. Section 65 requires that the provisions of CrPC shall apply insofar as they are not inconsistent with the provisions of this Act and Section 71 provides that the provisions of PMLA shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. PMLA has an overriding effect and the provisions of CrPC would apply only if they are not inconsistent with the provisions of this Act. Therefore, the conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 CrPC. That coupled with the provisions of Section 24 provides that unless the contrary is proved, the authority or the Court shall presume that proceeds of crime are involved in money-laundering and the burden to prove that the proceeds of crime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... combat the menace of money-laundering. 400. It is important to note that the twin conditions provided under Section 45 of the 2002 Act, though restrict the right of the accused to grant of bail, but it cannot be said that the conditions provided under Section 45 impose absolute restraint on the grant of bail. The discretion vests in the Court which is not arbitrary or irrational but judicial, guided by the principles of law as provided under Section 45 of the 2002 Act. 404. As aforementioned, similar twin conditions have been provided in several other special legislations validity whereof has been upheld by this Court being reasonable and having nexus with the purposes and objects sought to be achieved by the concerned special legislations. Besides the special legislation, even the provisions in the general law, such as 1973 Code stipulate compliance of preconditions before releasing the accused on bail. The grant of bail, even though regarded as an important right of the accused, is not a mechanical order to be passed by the Courts. The prayer for grant of bail even in respect of general offences, have to be considered on the basis of objective discernible judicial parameters as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centage of commission, process of cash transfer and documents to be maintained etc. were finalized. Thus, according to the ED, Satyendar Kumar Jain was the conceptualizer, initiator and supervisor for the entire operation of the accommodation entries. It has been alleged that the accommodation entries totalling to Rs.4.81 crores were received during the period 2015-16 from Kolkata based entry operators in the bank accounts of the four companies Paryas Infosolution Pvt. Ltd., Indo Metalimpex Pvt. Ltd., Mangalayatan Projects Pvt. Ltd. and Akinchan Developers Pvt. Ltd., which companies were owned/controlled by him and his family members, and the cash totalling Rs.4,65,99,635/- approximately was paid to the said entry operators. It has been also alleged that the appellant Satyendar Kumar Jain received accommodation entries of Rs.15 lakhs in his company J.J. Ideal Estate Pvt. Ltd. during the year 2015-16 from the said Kolkata based entry operators by paying cash amounts of Rs.15 lakhs and commission of Rs.16,800/-. Thus, it has been alleged that Satyendar Kumar Jain committed offence of money laundering under Section 3 of PMLA by actually acquiring, possessing, concealing and using the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the companies involved in the case. 20. In order to appreciate the submissions of Mr. Singhvi, let us have a cursory glance over the definitions of the words beneficial owner as contained in Section 2(1)(fa), Money laundering as defined in Section 2(1)(p), Proceeds of Crime in section 2(1)(u) and Property in Section 2(1)(v), and the offence under Section 3 of the PMLA. The said definitions read as under: Section 2 (1) (fa) (fa) beneficial owner means an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person; Section 2 (1) (p) (p) money-laundering has the meaning assigned to it in section 3; Section 2 (1)(u) (u) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty in the formal economy to constitute an act of money laundering. Of course, the authority of the Authorised Officer under the Act to prosecute any person for the offence of money laundering gets triggered only if there exists proceeds of crime within the meaning of Section 2(1)(u) of the Act and further it is involved in any process or activity. Not even in case of existence of undisclosed income and irrespective of its volume, the definition of Proceeds of Crime under Section 2(1)(u) will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence. The property must qualify the definition of Proceeds of Crime under Section 2(1)(u) of the Act. As observed, in all or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of Proceeds of Crime under Section 2(1)(u) will necessarily be the crime properties. 22. So far as the facts of the present case are concerned, the respondent ED has placed heavy reliance on the statements of witnesses recorded and the documents produced by them under Section 50 of the said Act, to prima fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be issued even to witnesses in the inquiry so conducted by the authorised officials. However, after further inquiry on the basis of other material and evidence, the involvement of such person (noticee) is revealed, the authorised officials can certainly proceed against him for his acts of commission or omission. In such a situation, at the stage of issue of summons, the person cannot claim protection under Article 20(3) of the Constitution. However, if his/her statement is recorded after a formal arrest by the ED official, the consequences of Article 20(3) or Section 25 of the Evidence Act may come into play to urge that the same being in the nature of confession, shall not be proved against him. Further, it would not preclude the prosecution from proceeding against such a person including for consequences under Section 63 of the 2002 Act on the basis of other tangible material to indicate the falsity of his claim. That would be a matter of rule of evidence. 24. In the instant case, it has been found during the course of investigation from the statements of witnesses recorded under Section 50 that the appellant Satyendar Jain and his family directly or indirectly were owning/con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in M/s. J.J. Ideal Estate Pvt. Ltd., he did nothing except signing of the documents and that the said company was controlled by Satyendar Kumar Jain and Poonam Jain, and that he was never informed about any business activity of the said company by them. The appellant-Vaibhav Jain himself in his statement recorded on 27.02.2018, had stated that the cash amount of Rs.16.50 crores (approx.) was paid by him, Sunil Kumar Jain, Ankush Jain and Satyendar Kumar Jain for taking accommodation entries in M/s. Akinchan Developers Pvt. Ltd., Paryas Infosolution Pvt. Ltd., Indo Metalimpex Pvt. Ltd. and Mangalayatan Projects Pvt. Ltd. through Kolkata based entry operators, and that the entire idea was mooted by Satyendar Kumar Jain to use it for purchasing agricultural lands and to develop the township. The said witnesses had clearly stated that Satyendar Kumar Jain was the conceptualizer, initiator, fund provider and supervisor for the entire operation to procure the accommodation, share capital/premium entries. Though, the shareholding patterns of the said four companies are quite intricate, they do show that Mr. Satyendar Kumar Jain through his family was controlling the said companies direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment had elaborately dealt with all these issues and while dismissing the said writ petitions held as under: 30. There are eight companies whose shares were purchased by the two petitioners, whose names have been included in the list. Admittedly, in respect of the shares in ADPL, proceedings under section 24(4) of the Prohibition of Benami Property Transaction Act, 1988 have been initiated. The petitioners have themselves enclosed a copy of the order dated May 24, 2017 passed in respect of the Benamidar , i.e., ADPL, which inter-alia notes that the cash that was routed through accommodation entries in the garb of share capital/premium in fact belonged to Mr. Satyender Kumar Jain and that it was at his direction that the entire transaction was orchestrated. It was noted that neither of these two petitioners was either a director or shareholder in the said company. It was noted that the declarants had not provided the name of the Benamidar through whom the investment had been routed and that these facts were all completely within the knowledge of the two petitioners. These conclusions of the Principal Commissioner of Income-tax have not been convincingly countered by either of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax authorities, and now to submit in the present proceedings under PMLA that the said declarations under the IDS were void. The declarations made by them under the IDS though were held to be void, the observations and proceedings recorded in the said orders passed by the Authorities and by the High Court cannot be brushed aside merely because the said declarations were deemed to be void under Section 193 of the Finance Act, 2016. The said proceedings clearly substantiates the case of the respondent ED as alleged in the Prosecution Complaint under the PMLA. 30. Having regard to the totality of the facts and circumstances of the case, we are of the opinion that the appellants have miserably failed to satisfy us that there are reasonable grounds for believing that they are not guilty of the alleged offences. On the contrary, there is sufficient material collected by the respondent-ED to show that they are prima facie guilty of the alleged offences. 31. Though Ms. Arora had faintly sought to submit that the so-called inadvertent mistake committed by the ED with regard to the figures mentioned in the Prosecution Complaint in respect of the role of the appellants Ankush Jain and Vai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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