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TMI Blog2024 (9) TMI 1551X X X X Extracts X X X X X X X X Extracts X X X X ..... second and third layer entities. It is to be kept in mind that even as per Vijay Madan Lal Chaudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] it has categorically been held that ingredients constituting the offence of money laundering needs to be construed strictly. It is also no longer a matter of debate that the probative value of statement under section 50 of PMLA is to be considered at the stage of trial. The bail cannot be denied merely on the assumption that the property recovered from the respondent must be proceed of crime. The ED has also sought cancellation of bail on the ground of certain WhatsApp chat of Mr. Saurin Shah another director in M/s Sagar Diamond Ltd. indicates that he was in touch of Vaibhav Shah for preparing legal declaration/affidavit of Akash Corporation. The criminality regarding transfer of funds is something which is to be considered at the stage of trial. The least discussion at the time on the merits of the case is desirable so as not to prejudice either of the parties. The apprehension of the ED that if the petitioner is allowed to be remain on bail he may derail the investigation or is a flight risk are mere apprehension and no substantial reason ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 419, 420, 468, 471, 34, and 120-B of the IPC and Section 66D of the IT Act. FIR No. 8/2021 dated 01.06.2021 was registered for the commission of offences under Section 420 of the IPC and Section 66D of the IT Act by the CID, Cybercrime PS, Karnataka State Police, regarding similar cases of cheating and fraud nationwide, amounting to approximately Rs. 250-300 crores. 3. The preliminary investigation revealed that this was a case of large-scale money laundering, wherein public money was looted through apps such as Power Bank App, Tesla Power Bank App, Ezplan, etc., by luring people with the promise of doubling their money in a short period. Initially, the public received 10-15% of the deposited amount as interest; however, after some time, they stopped receiving any money, and the executives of these apps became inaccessible. Allegedly, the money deposited by the public was further transferred to the bank accounts of various shell entities through payment gateways such as PayU and Razorpay, as well as through regular banking channels. The Special Cell, Delhi Police, also filed a chargesheet on 29.07.2021 in FIR No. 141/2021 dated 29.05.2021. It was stated that the proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these accounts were subsequently transferred to various other bank accounts, including the IndusInd Bank accounts of M/s. Akash Corporation (Account No. 259023954406) and M/s. Haresh Corporation (Account No. 201004377970) (second-layer entities). The ED s investigation also uncovered that these funds were further layered and laundered through additional accounts, including the ICICI Bank account of M/s. Sagar Diamonds Ltd. (Account No. 123805005479) and the IndusInd Bank account of M/s. Patel Rushabh Co. (Account No. 201007176105) (third-layer entities). It was submitted that M/s. Sagar Diamonds Ltd. further transferred these funds either to its own SBI account (Account No. 039392347980) for outward remittances under the guise of imports or to the IDFC Bank account (Account No. 100055588628) and SBI account (Account No. 39583280574) of M/s. RHC Global Exports Pvt Ltd (fourth-layer entities), which further remitted the funds outward under the pretense of imports from Hong Kong and Dubai. 6. During the investigation, summons were issued to M/s. Akash Corporation on 19.04.2022, but they were returned with the remark Left. Summons were also issued to Mr. Vaibhav Dipak Shah, Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions executed abroad. 8. The respondent was arrested on 19.09.2022 at 23.40 hours at New Delhi. 9. Vide the impugned order dated 19.10.2022, learned Sessions Judge after noting the submissions of the parties and the relevant laws, admitted the respondent on bail on the following terms; A. There is no reference in the response/reply of the ED regarding any connection of respondent or his company with shell companies like M/s. Diyabati Technology Pvt Ltd, M/s. Maojaza Technology Pvt Ltd, M/s. Sumyth Technologies Pvt Ltd, etc. (first layer entities). B. There is no evidence shown on the record reflecting any connection of respondent with M/s. Akash Corporation, M/s. Haresh Corporation, M/s. Balaji Traders, M/s. Dynamic Fab World, M/s. Jitender Enterprises, etc. (second layer entities) and therefore mere acquisition of transfer of funds from account of first layer entities to second, third, fourth layer entities in itself does not show required knowledge of those funds being proceeds of crime. C. The allegations made by the ED regarding transfer of huge amount from the account to first layer entities to successive layer entities are without any establishing any connection of respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities concerning to the respondent with the first and second layer entitites is wrong on the face of it. In this regard ED has also submitted that M/s. RHC Global Exports Pvt Ltd has shown purchases of approx. Rs.40.20 crores from M/s. Akash Corporation during the period from November, 2020 to March, 2021. (ii) The bail is also liable to the cancelled as the respondent in his statements recorded u/s 50 of the PMLA, falsely stated that he does not know any Mr. Akash Panchal (M/s. Akash Corporation), Mr. Rushabh Patel (M/s. Patel Rushabh Co.) and Mr. Haresh Panchal (M/s. Haresh Corporation) whereas the whatsapp chats of Mr.Saurin Shah another Director in M/s. Sagar Diamonds Ltd on 05.09.2022, indicates that Mr. Vaibhav Shah Mr. Saurin Shah are in contact with the aforesaid persons of M/s Akash Corporation for preparing legal Declarations/Affidavits with regard to the sham transactions carried out involving the respondent and his associated persons and entities. (iii) The analysis of these documents has revealed that all the said persons have executed such legal documents on 22.08.2022 mentioning the same addresses at which the Summons were issued. The ED alleged that these person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent in its counter affidavit denied all the averments and submitted that well reasoned order for bail has been passed. It has been submitted that the respondent had appeared the ED as and when summoned and illegally arrested on 19.09.2022. The respondent submitted that even after grant of bail he had appeared as and when directed by the ED. The respondent submitted that the present petition is devoid of any substance or spirit but merely a browbeating, harassing and intimidating tactics with the sole motive and aim being to coerce, compel and force him to toe the line of the ED to make a confessional statement. The respondent submitted that the learned Sessions Judge has passed a detailed order on the basis of the material on the record. It has also been submitted that the learned Sessions Judge has followed the well settled principle bail is a right and jail is an exception. 12. The respondent submitted that he is well qualified person being certified trader from Gemological Institute of America and over the few years. It has been submitted that the respondent is the Director of M/s RHC Global Exports Pvt. Ltd which is a diamond trading company based in the city of Mumbai a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Haryana, (1995) 1 SCC 349; ii. Abdul Basit v. Mohd. Abdul Kadir Chaudhary, (2014) 10 SCC 754; iii. Myakala Dharmarajam v. State of Telangana, (2020) 2 SCC 74; iv. Air Customs Versus Shail Anand and Another 2022 SCC OnLine Del 114. 15. The respondent submitted that there are no supervening circumstances for cancelling of the bail nor is there any allegation that the respondent has misused or interfered in the course of the investigation. There is also no any allegation of tampering with the evidence or witnesses or threatening. The respondent submitted that he always complied with the conditions of the bail. 16. ED has filed the rejoinder to the counter affidavit filed by the respondent denying all the averments made in the counter affidavit and reiterated the averments made in the petition. 17. In the rejoinder, the ED submitted that an analysis of Mr. Akash Panchal's bank account showed a significant and frequent rotation of funds, disproportionate to the nature of his business and its terms. The ED further submitted that Mr. Akash Panchal, in his statement under Section 50 of the PMLA dated 18.11.2022, admitted to providing bogus accommodation entries to M/s Sagar Dia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by Mr. Saurin Shah regarding engaging him in various activities by Mr. Vaibhav Dipak Shah. 20. In the rejoinder, the ED brought to the notice of the Courts to the following submissions/facts pertinent to the issue at hand: a) SDL Directors were in contact of Akash Panchal, however, he neither produced Akash Panchal during investigation as committed by Rahil Chovatia in his statement on 13.07.2022 nor provided present whereabouts of Akash Panchal. b) Legal Counsel of Vaibhav Dipak Shah and Rahil Chovatia instructed Akash Panchal not to join investigation in compliance of summons dated 25.07.2022 with an intention to derail the investigation. c) SDL Directors Rahil Chovatia, Saurin Shah and Vaibhav Shah got prepared false affidavits from Akash Panchal on 23.08.2022 in respect of sham transactions with Akash Corporation with an intention to falsely explain the same. d) SDL. Director Rahil Chovatia, being aware of the line of investigation and of the fact that mobile of codirector Mr. Saurin Shah has been impounded by the Directorate, deleted his whatsapp account data from his phone after impounding of mobile of Saurin Shah on 05.09.2022 by Directorate. e) Legal Counsel of Vaibhav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concept of canceling bail due to an unjustified or illegal order differs from canceling bail due to misconduct or new facts, as clarified in Gurcharan Singh v. State (Delhi Admn.) (1978) 1 SCC 118 under Section 439(2), the focus should be on whether the bail order had serious infirmities, justifying High Court interference in the interest of justice. 22. Learned Special Counsel submitted that while the jurisdiction to grant bail is discretionary, it cannot be exercised in an arbitrary, capricious, or injudicious manner. It was argued that bail can be canceled not only due to supervening circumstances or misconduct by the accused but also if the bail order is unjustified. Counsel submitted that if the bail order fails to consider relevant factors or is granted based on irrelevant considerations, the superior courts can set it aside. In such cases, the violation of conditions by the accused or supervening circumstances becomes irrelevant. Reliance has been placed on Neeru Yadav v. State of U.P. (2014) 16 SCC 508, wherein the Supreme Courtinter aliaheld that while granting bail is discretionary, this discretion must be exercised with caution, especially in cases involving serious cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SBI account or in the guise of for making outward remittances in the guise of import or to the IDFC Bank account and SBI account of M/s. RHC Global Exports Pvt. Ltd. M/s. RHC Global Exports Pvt. Ltd. further remitted the said POC or Rs. 10.10 crores outward during the same period remittances in the guise of imports from Hongkong and Dubai. 26. Learned counsel further submitted that Mr. Akash Panchal and Mr. Haresh Panchal, who are relatives and actually involved in the business of trading vegetables, were in constant touch with the respondent and other directors of M/s Sagar Diamonds Pvt. Ltd., including Mr. Vaibhav Dipak Shah and Mr. Saurin Shah, for preparing legal declarations related to the sham transactions. 27. Learned counsel submitted that Mr. Vaibhav Dipak Shah did not join the investigation and fled to Dubai on 28.06.2022. It was further submitted that the respondent made a false statement claiming he did not know Mr. Akash Panchal, whereas M/s. RHC Global Exports Pvt. Ltd., in which the respondent is a Director and shareholder, showed purchases of approximately Rs. 40.20 crores from M/s Akash Corporation during the period from November 2020 to March 2021. It was also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anchal admitted that he used to provide accommodation entries on the instructions of/to the M/s Sagar Diamonds Ltd. and M/s RHC Global Pvt. Ltd. on instructions of the respondent. Learned counsel also submitted that Mr. Akash Panchal had also admitted that he had not done any business with the first layer entities and had provided only accommodation entries. 31. Learned special counsel submits that the discretion has been revealed that Mr. Akash Panchal was not involved in any real business activity and was only providing accommodation entries. An entry of 5.65 cores was given to M/s Sagar Diamonds Ltd. which establishes that the fund availed by his group entities (involved in accommodation entries) were used to the transfer into the bank account of M/s. Sagar Diamonds Ltd. Learned counsel also submitted that there is material on the record that Mr. Akash Panchal and the respondent were in constant touch with each other and this fact has also been incorporated by the statement of Mr. Sourin Shah recorded in the statement of Section 50 of PMLA. 32. Learned counsel for the ED submitted that this is very serious case and it was revealed during investigation in PMLA that Mr. Sourin Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es against exports to Mars Ind Comm Services Ltd, Hongkong as on 01.04.2021 which was increased to Rs. 5,374 crores as on 01.04.2022 and final the same was found increased to Rs. 11,684 crores as on date of search whereas M/s RHC Global Exports Pvt. Ltd had shown total outstanding payment of Rs.304 cores against exports to Mars Ind Comm Services Ltd. Hongkong as on 01.04.2021 which was increased to Rs. 4,630 crores as on 01.04.2022 and finally the same was found increased upto Rs.6754 crores as on date of search. Learned counsel submitted that such exponential increase in huge outstanding funds against the Exports as well as the overvaluation and misdeclaration of the goods imported/exported found during search without any rationale and explanation by Mr. Vaibhav Dipak Shah and is associates leaves no scope of doubt that such Indian and foreign entities are in control of Mr. Vaibhav Dipak Shah are being used by him with the sole motive to executive his illegal hawala activities and remitting funds outside the country. v. The search operation also revealed that out of the funds of approx. Rs. 97.17 crores received during the same period from 14.04.2021 to 24.05.2021 (power bank app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importing goods, and during the relevant time, amounts of Rs. 507,599 were transferred to Gem Star, and Rs. 50,535,188 was transferred to M/s Jiya Impex. It was submitted that these were genuine transactions, duly documented. Learned senior counsel further submitted that there is no material on record to connect the respondent even with the second-layer entities. 35. Learned senior counsel submitted that it has been rightly observed that the mere transfer of funds from the accounts of first-layer entities to second, third, or fourth-layer entities does not, by itself, indicate acquired knowledge that those funds were proceeds of crime. 36. Learned senior counsel submitted that the respondent has no connection with Mr. Akash Panchal, Mr. Haresh Panchal, and that the transactions between M/s Akash Corporation and M/s Sagar Diamonds Pvt. Ltd. are ordinary and regular business transactions. It was submitted that among the many customers of the petitioner's company, M/s Akash Corporation Pvt. Ltd. is just one of them. Learned senior counsel argued that the allegations of the respondent being in touch with Mr. Akash Panchal on WhatsApp are merely inferences drawn to harass the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression derived or obtained is indicative of criminal activity relating to a scheduled offence already accomplished: g. In the event the person named in the criminal activity relating to a scheduled offence is absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. 39. Learned senior counsel further submitted that, based on the principles laid down, even the offense under the PMLA is not attracted. Learned senior counsel also submitted that, to date, the respondent and the co-accused have furnished all the information, materials, and documents sought by the ED from time to time, as revealed in the chart annexed as Annexure R6 with the counter-affidavit filed by the respondent. 40. The Directorate of Enforcement has filed the present p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed on irrelevant materials, it can be annulled by the superior court. In Mayakala Dharmarajam and others vs. State of Telangana and Another (2020) 2 SCC 743, the petition was filed for cancellation of bail on ground of illegality of order passed by the Sessions Court and conduct of appellants subsequent to their release after bail was granted. The High court allowed the application for cancellation of bail. It was contended by the appellants that no specific overt act was attributed to any of the accused, except for omnibus allegations made against them. The apex court inter alia held that it must be remembered that rejection of bail stands on one footing but cancellation of bail is a harsh order because it interferes with the liberty of the individual and hence it must not be lightly resorted to. The apex court inter alia held that cancellation of bail can be done in cases where the order granting bail suffers from serious infirmities resulting in miscarriage of justice. It was further inter alia held that if the court granting bail ignores relevant material indicating prima facie involvement of the accused or takes into account irrelevant material, which has no relevance to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry under Section 45 of PMLA has inter alia held as under: 13. Coming back to the scope of inquiry under Section 45, Vijay Madanlal Choudhary (Supra), while reiterating and agreeing with the holding in Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra and Another reported in (2005) 5 SCC 294 , held that the Court while dealing with the application for grant of bail in PMLA need not delve deep into the merits of the case and only a view of the Court based on the available material available on record is required. It held that the Court is only required to place its view based on probability on the basis of reasonable material collected during investigation. The words used in Section 45 are reasonable grounds for believing which means that the Court has to see only if there is a genuine case against the accused and the prosecution is not required to prove the charge beyond reasonable doubt. We deem it fit to extract the relevant portion (Para 131) from Vijay Madanlal Choudhary (supra): 131. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accused during the investigation may not justify a judgment of conviction. The findings recorded by the court while granting or refusing bail undoubtedly would be tentative in nature, which may not have any bearing on the merit of the case and the trial court would, thus, be free to decide the case on the basis of evidence adduced at the trial, without in any manner being prejudiced thereby . We are in agreement with the observation made by the court in Ranjitsing Brahmajeetsing Sharma (supra). The court while dealing with the application for grant of bail need not delve deep into the merits of the case and only a view of the court based on available material on record is required. The court will not weigh the evidence to find the guilt of the accused which is, of course. the work of Trial Court. The court is only required to place its view based on probability on the basis of reasonable material collected during investigation and the said view will not be taken into consideration by the Trial court in recording its finding of the guilt or acquittal during trial which is based on the evidence adduced during the trial. As explained by this court in Nimmagadda Prasad (supra), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money laundering needs to be construed strictly. It is also no longer a matter of debate that the probative value of statement under section 50 of PMLA is to be considered at the stage of trial. The bail cannot be denied merely on the assumption that the property recovered from the respondent must be proceed of crime. 47. The ED has also sought cancellation of bail on the ground of certain WhatsApp chat of Mr. Saurin Shah another director in M/s Sagar Diamond Ltd. indicates that he was in touch of Vaibhav Shah for preparing legal declaration/affidavit of Akash Corporation. The criminality regarding transfer of funds is something which is to be considered at the stage of trial. The least discussion at the time on the merits of the case is desirable so as not to prejudice either of the parties. 48. The ED has alleged that the investigation enquiry revealed that Mr. Akash Panchal and Mr.Harish Panchal are not available at the given address and they were engaged in the business of trading of vegetables. The apprehension of the ED that if the petitioner is allowed to be remain on bail he may derail the investigation or is a flight risk are mere apprehension and no substantial reason has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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