Landmark Judgments on PMLA by the Supreme Court and High Courts in 2023 Part II

Part I of this article released earlier covered the judgments delivered between January to April 2023. This part as a sequel to the 3 series article takes forward and covers judgments from June to December 2023 inclusive of all the judgments that showcased consideration, interpretation, and evolution of important prevention of money laundering law principles rendered by the Supreme Court and various High Courts. They are as follows:

(1) Enforcement Directorate v. Aditya Tripathi¹

(Delivered on 12-5-2023) (Supreme Court)

Coram: 2-Judge Bench of Justices M.R. Shah and C.T. Ravikumar

Authored by: Justice M.R. Shah

Challenge was made to the order of High Court through which bail application of the respondent-accused in connection with the offences under PMLA was allowed. The scheduled offences related to FIR registered under provisions of Sections 420, 468, 471 read with Section 120-B IPC and the provisions of the Prevention of Corruption Act, 1988. Various e-tenders amounting to Rs 1769 crores of the Government of Madhya Pradesh were tampered to change the bid price of the bidders to make them the lowest bidders. This tampering was investigated and on being discovered became the subject-matter of FIR registered by Economic Offences Wing, Bhopal, followed by filing of charge-sheet before the competent court on 4-7-2009. Thereafter Enforcement Case Information Report (ECIR) was registered by the Enforcement Directorate (ED), when the respondent accused was taken in custody. However, the accused was enlarged on bail by the High Court which was challenged before the Supreme Court. The High Court had enlarged respondent-accused on bail solely on the ground that investigation has been completed, charge-sheet having been filed in the scheduled offence and thus his custody was not required. The Supreme Court noted that enquiry/investigation under Sections 3 and 4 of the Prevention of Money-Laundering Act (PMLA), 2002 were still pending and ongoing post registration of the ECIR. However, despite this, the High Court did not consider the rigour of Section 45 and the twin conditions provided therein. The Court held that merely because the predicate offence charge- sheet might have been filed was not a good ground to release the accused on bail as both the set of offences viz. the predicate offence and the offences under PMLA are different and distinct. The High Court took irrelevant factors into consideration and ignored the relevant ones. For having failed to consider the rigours of Section 45, PMLA and the twin conditions contained therein, the order of the High Court was therefore bad in law and accordingly set aside. The appeals filed by the ED were allowed, directing Respondent 1 to surrender before the competent court within a time-bound period.

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(2) Pankaj Bansal v. State (Govt. of NCT of Delhi)²

(Delivered on 9-6- 2023) (Delhi High Court)

Coram: Single-Judge Bench of Justice Chandra Dhari Singh

Authored by: Chandra Dhari Singh

The applicant had approached the High Court seeking anticipatory bail apprehending his arrest in connection with ECIR lodged by ED. Certain FIRs of scheduled offences were registered at the behest of allottees of two separate residential projects being developed by the group companies alleged to be owned by the petitioners being the directors. The said FIRs were lodged alleging inordinate delay in handing over/delivery of possession of apartments/commercial units after taking the entire sale consideration from the said customers. However, in the said FIRs (of scheduled offences), no specific allegations against the applicant or his family members were there. Even the M3M Group of Companies, to which the companies belonged was not named in the said FIR. Even in the ECIR that was registered neither the applicant, nor the M3M Group of Companies were arraigned as accused and no allegations were levelled against them. The applicant was also never issued summons by the respondent till May 2023. Thereafter a raid was affected and carried out by the ED on the various offices of M3M Group of Companies, that led to precipitation of grave apprehension in the minds of the applicant that he may be arrested.

The primary contention as preliminary objection on behalf of the ED in reply was that anticipatory bail application under Section 438 CrPC was not maintainable directly before the High Court and that remedy of approaching the Sessions Court ought to have been exhausted first. Reference was made to the judgment of Full Bench of the Allahabad High Court in Ankit Bharti v. State of U.P.³ It was further argued on behalf of the ED that the 10 IREO Group companies that were framed in the FIR as well as the ECIR had diverted huge amounts received from customers to M3M Group of Companies after layering of funds. These amounts were diverted for procuring development rights of land of other projects. The divergence of funds took place in 17 companies, 10 of which M3M during investigation accepted to be its own related entities, whilst 7 were so denied being not associated with it. However later during investigation even the remaining 7 companies were also proven to be linked to M3M Group of Companies. Statements of various witnesses also demonstrated that huge amounts received by IREO Group of Companies were in some way or the other through multiple channels were transferred to M3M Group of Companies.

The Court rejected the preliminary objection to maintainability of the anticipatory bail application filed directly before the High Court holding that there is no bar on approaching the High Court directly under Section 438 CrPC, nor any restraint can be cast upon the applicant to approach the Sessions Court first. The High Court and the Sessions Court enjoy concurrent jurisdiction, and the beneficial provision under Section 438 must always be saved, not jettison. Thus, the Section 438 application was held to be maintainable, even when the applicant had not approached the Sessions Court. It was further held that to link any accused with the offences under the PMLA, the twin test must be satisfied. The ED was not able to show whether the applicant had even been charged with or even linked with the scheduled offences, which were under investigation on the date of consideration of the bail application.

The Court further held that since the applicant had never been summoned, rather on all the occasions representatives on their behalf had appeared and cooperated in the investigation. Therefore, it raised a strong presumption against custodial interrogation of the applicant. The applicant was not even implicated in any scheduled offence as provided under the PMLA and the ECIR did not ever mention the name of the applicant or any of M3M Group of Companies, therefore he was entitled to protection in view of the mandate of Article 21 of the Constitution of India. The applicant was accordingly granted interim protection from arrest till the next date of hearing.

(This is an interim order passed by the High Court, after passing of which he was immediately arrested in another ECIR lodged by the ED. Separate proceedings for grant of bail and challenging the order of remand were instituted at the behest of the applicant thereafter.)

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(3) Megala v. State of Madras⁴

(Delivered on 4-7-2023) (Madras High Court)

Coram: 2-Judge Bench of Justices Nisha Banu and D. Bharatha Chakravarthy

Authored by: Justice Nisha Banu

The petitioner being the wife of detenu Shri V. Senthil Balaji filed a habeas corpus petition (for short, “HCP”) under Article 226 of the Constitution of India praying for issuance of writ directing respondents to produce the body and corpus of her husband before the Court and set him free. Against the detenu cum accused, V. Senthil Balaji, predicate offences under Sections 406, 409, 420, 506 read with Section 34 IPC were registered, in relation of which the trial is pending. The allegation was that the accused had obtained money in large sums from third parties promising jobs in the Transport Department and thereafter cheated them. Post registration of the predicate offence, the ED registered ECIR and he was arrested on 14-6-2023. The petitioner (his wife) stated that procedure for arrest laid down under Section 41-A CrPC was not followed; grounds of arrest here were not communicated to him at the time of arrest and access to legal counsel was also denied, being resultantly violative of Article 22(1) of the Constitution of India. On the orders of the Court, post arrest he was transferred to hospital for treatment of various physical ailments.

The primary contention of the respondent ED was that procedure laid down under CrPC viz. Sections 41, 41-A, 50-A and 61-A CrPC will not be applicable to the case of the accused as PMLA is a special enactment, containing provisions for arrest and overriding the law for the time being in force.

Opinion of Ms Justice Nisha Banu — On the question of necessity of arrest, it was held that the accused was aware of the registration of the case, as also the facts of the case and allegations against him. However, he chose not to appear. There was total non-cooperation from the accused and thus he was rightly arrested by the ED. On the first contention of the petitioner that ED does not possess any power to seek custody on remand, as the officials of ED are not police officers to seek remand under Section 167 from the competent court. It was held relying on the judgment of Vijay Madanlal Choudhary v. Union of India⁵, to hold that ED officials under PMLA, 2002 are not police officers. It was held in this opinion that Parliament has consciously omitted to confer with ED officers the power of Station House Officer (SHO) which is a power of seeking remand under Section 167. The procedure post remand is established in Rule 637 of the Tamil Nadu Police Standing Orders titled as prisoners in police custody. These duties make it clear that police custody can be given only to an officer who is competent to function as an SHO, not to anybody else. Since ED officers are not vested with the power to Act as SHOs, unlike in Customs Act, Central Excise Act, even in Foreign Exchange Regulation Act (FERA), therefore they are not competent to obtain custody from the police. The absence of provisions conferring such powers to Act as SHO is not a careless omission but appears as a conscious bridle to obtain custody from the Magistrate. Referring to Section 2(o) CrPC, it was held that police custody to ED under PMLA is impermissible. Thus, the only recourse permissible for the ED post arrest of any person as an accused is to produce him before the competent court within 24 hours and seek only judicial remand. Thus, the ED cannot hold custody of any person beyond the first 24 hours of arrest.

On the question of maintainability of HCP, it was held that if the initial arrest is illegal and the subsequent order of remand is passed in a mechanical manner, then it can be challenged by way of an HCP. It was held that a failure to follow the procedural safeguard at the time of arrest will vitiate the proceedings in toto and HCP would be maintainable. Failure to follow the procedural safeguards violating Article 22 will vitiate the arrest and render the remand order if mechanically passed illegal. However, the test of legality of a remand order shall be on the date of hearing to entertain the HCP and not before. The order awarding police custody to the ED by the Magistrate ought not to have been passed. The order of custody therefore is not only without jurisdiction, but also without any authority of law and therefore illegal.

The period of police custody cannot by any stretch of imagination be extended beyond 15 days from the date of initial remand. Referring to the judgment of CBI v. Vikas Mishra⁶, it was held that the same was an extraordinary situation where accused by resorting to unscrupulous methods is deemed to have frustrated the investigation. The conclusions to various issues arising before it by Justice Nisha Banu were thus recorded as follows and the HCP was allowed in the following terms:

1. The writ of habeas corpus petition is maintainable.

2. Enforcement Directorate is not entrusted with the powers to seek police custody under the Prevention of Money-Laundering Act, 2002.

3. Miscellaneous petition filed by Respondent 1 seeking exclusion of the period is dismissed.

4. The detenu is ordered to be set at liberty forthwith.

Opinion of Justice D. Bharatha Chakravarthy — The Judge recorded dissenting opinion disagreeing with the reasoning and conclusion reached by the other Judge, Justice Nisha Banu.

The separate judgment noted following questions arising for consideration in the HCP:

(i) Whether or not a writ of habeas corpus would be maintainable after passing of judicial order of remand of the detenu and if so, on what premises?

(ii) Whether the petitioner herein had made out a case for exercise of powers under Article 226 of the Constitution of India to set the detenu free?

(iii) If the detenu is not be set free, then whether the period from the moment of his arrest on 14-6-2023, whereby, he is admitted in the hospital till his discharge is to be excluded while computing the time of initial 15 days from the date of remand to judicial custody under Section 167 CrPC, so as to entrust him for the custody of the respondents?

(iv) What reliefs are to be granted in the present habeas corpus petition?

Answering Question (i) Court held that the judgment of Madhu Limaye, In re⁷ and R. Gurusamy v. State of Madras⁸, laid down the importance of Article 22 of the Constitution of India, but however were not applicable in the fact situation. Both the judgments had laid down that if there was an illegality in the arrest, grave in nature, it has to be looked into in the HCP, making it maintainable, in spite of the remand.

The judgment of Supreme Court of India in Kanu Sanyal v. DM, Darjeeling⁹, was referred to hold that if there is a subsequent order making the detention illegal, the Court is to have regard to the legality and otherwise of the detention at the time of the hearing of the HCP, and not with reference to the date of institution of proceedings. HCP becomes non-maintainable once there is an order authorising judicial custody passed by the court of competent jurisdiction. Reference was made to the judgment of Serious Fraud Investigation Office v. Rahul Modi¹⁰, in the said regard. Referring further to the precedents of Manubhai Ratilal Patel v. State of Gujarat¹¹, and Gautam Navlakha v. NIA¹², it was held that if the remand is illegal or remand is afflicted with the vice of lack of jurisdiction, HCP would indeed lie and be maintainable. Equally if an order of remand is passed in a mechanically manner, then also remedy of HCP is available, barring which situations otherwise HCP will not lie.

Answering Question (ii) it was held that the averments of the petitioner about violation of Article 22(1) were not sustainable, pertaining to communication of the grounds of arrest and lack of legal consultation and legal aid. It was held by the Court that there was complete non-cooperation, threat and allegations of manhandling leading to a drama at the time of the arrest with the ED officers being held hostage at the instance of the accused person. The veracity of the statements and averments made on behalf of the respondent officials cannot be doubted in the said regard, who have throughout stated that accused has not cooperated with them at the time of arrest and offered strict resistance to his arrest and being taken into custody. Referring to Sections 65 and 71 of the PMLA, it was held that Section 41-A and other accompanying provisions pertaining to arrest as contained under CrPC shall not apply to arrests being affected under PMLA. The provisions of arrests enshrined under Section 19 of the PMLA, being special provisions, shall apply and prevail over the procedure laid down under CrPC, which shall not apply in the face of specific provisions of arrest under PMLA. Referring to the judgment of Vijay Madanlal Choudhary v. Union of India¹³, it was held that special provision of Section 19 contains adequate safeguards protecting the interests and liberty of the accused and thus the express application of Sections 41 and 41-A CrPC stood clearly negated. The petitioner thus intimidated the investigating officer who came to arrest him to such an extent that it became impossible to furnish the particulars to him. The arrest became all the more necessary in such circumstances, which is also otherwise mentioned in the grounds of arrest and non-communication is not fatal.

The Court also referred to the remand order passed by the Special Court to hold that remand order is reasoned and appropriately worded enough to reflect substantial compliance of consideration of the objections of the petitioner as also reasons for remanding the accused into custody. The Magistrate had offered sufficient reasons for remand of the accused, which reasons themselves are sufficient and can be treated as reasons enough to reject the accused’s remand application. Thus, the remand order could not be assailed as having been mechanically passed.

Answering Question (iii) it was held by the Court that in respect of the investigation of the offences under PMLA, since no other contrary or separate procedure is contained under the enactment, the provisions relating to investigation under CrPC would be applicable to PMLA. Referring to the judgment of Enforcement Directorate v. Deepak Mahajan¹⁴, it was held that Section 167 CrPC will apply in toto for the purposes of remand of the accused to custody. Section 167(2) CrPC does not employ the word “police custody” but authorises detention of the accused “in such custody as the Magistrate thinks fit”. Since the word “police” is not specifically used and that Magistrate has been authorised to permit detention of the accused “in such custody”, therefore it may refer to the custody of ED as well. Thus, ED was entitled to seek the custody of the accused for its investigation from the Magistrate. The Court thereafter considered the question whether remand to the ED is permissible after first 15 days of custody, whereafter only judicial remand is permissible. Referring to the judgments of CBI v. Anupam J. Kulkarni¹⁵ and Budh Singh v. State of Punjab¹⁶, the Court noted that police custody is permissible only for the first 15 days, whereafter if the remand is being made for further custody, then the same can only be judicial custody and not any other custody under Section 167(2) CrPC. However, referring to the recent judgment of the Supreme Court in CBI v. Vikas Mishra¹⁷, it was held that under exceptional circumstances, the rule of first 15 days is dispensable and that the rule of first 15 days only for police custody is not inviolable. The Court then proceeded to examine the facts of the case, wherein after arrest and production before the Special Judge, post remand not even for a minute the accused was available to the respondent ED for custodial interrogation, being unwell and hospitalised. Therefore, not permitting even the custody for interrogation or further investigation, when 15 days were spent on his own health condition in the hospital then the benefit of 15 days custodial interrogation cannot be denied to the respondent ED. It was thus held that the period which the accused had spent under treatment in hospital should be excluded from the 15 days period, for which he was remanded to the custody of ED and for the said period the ED shall be entitled to detain him for subjecting him to custodial interrogation. Accordingly, the Court answered the four questions as follows:

(i) The habeas corpus petition in HCP No. 1021 of 2023 shall stand dismissed.

(ii) The period from 14-6-2023 till such time the detenu/accused is fit for custody of the respondent shall be deducted from the initial period of 15 days under Section 167(2) of the Code of Criminal Procedure.

(iii) The detenu/accused shall continue the treatment at Cauvery Hospital until discharge or for a period of 10 days from today whichever is earlier and thereafter, if further treatment is necessary, it can be only at the prison/prison hospital as the case may be.

(iv) As and when he is medically fit, the respondents will be able to move the appropriate Court for custody and the same shall be considered on its own merits in accordance with law except not to be denied on the ground of expiry of 15 days from the date of remand.

Since the judgment resulted in a split verdict, therefore it was referred to a third Judge, Mr Justice C.V. Kartikeyan of the Madras High Court, which judgment is separately reported as Megala v. State of Madras¹⁸.

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(4) Megala v. State of Madras¹⁹

(Delivered on 14-7-2023) (Madras High Court)

Coram: 1-Judge Bench of Justice C.V. Karthikeyan

Authored by: Justice C.V. Karthikeyan

The present judgment is a judgment by the third Judge in view of the split verdict delivered by the Division Bench of the Madras High Court. Reference was made to the third Judge in view of Clause 36 of the Letters Patent of the Madras High Court, which provides that when the Division Bench is equally divided on the reasons with respect to reaching a conclusion of any aspect, then the matter must be decided post reference to the third Judge. The third Judge for resolving the difference of opinion in the split verdict framed three questions for resolution, which were as follows:

(i) Whether the Enforcement Directorate has the power to seek custody of a person arrested?

(ii) Whether the habeas corpus itself is maintainable after judicial order of remand has been passed by a court of competent jurisdiction?

(iii) Whether as a consequential issue, if Issue 1 is answered in favour of the respondents owing to the particular circumstances of this case, the Enforcement Directorate would be entitled to seek exclusion of time of the period of hospitalisation of the detenu which extended beyond the period of 15 days from the date of first remand and therefore, whether that period of hospitalisation could be excluded while taking into consideration their request for police custody?

The Court recorded that the respondents had specifically averred that there was complete non-cooperation by the detenu/accused when the statement under Section 50 of the PMLA was sought to be recorded. The accused started throwing up tantrums, the moment he was informed that he would be arrested and threatened, intimidated the officials. He refused to acknowledge the receipt of either the grounds of arrest or document whatsoever from the officials who proceeded to arrest him. The entire proceedings were conducted in the presence of two witnesses. Immediately after the arrest, he was hospitalised and admitted owing to his heart problems. Thereafter, the remand order was passed after production of the accused before the Special Judge. Post remand, his nomenclature changed from “detenu” to the“accused”. The Court recorded that respondent ED was established in May 1956 and is thus, is an entity which has been in the public field for more than half a century. The Court scanned the autonomy of Sections 16, 17 and 19 of the PMLA and held that the object of the PMLA is twofold. One is to determine the trail of the tainted amount and to confiscate it and if possible, return it back to the victim. The other is to punish the accused for the offence of money laundering. Then Sections 3 and 4 comes into play. That is a penal procedure. The investigation process includes both the exercise of forensic accounting as also interrogation techniques to discover financial crimes. Answering the first issue of the three issues framed above, it was held that ED officers are not police officers, nor have they been categorised anywhere as such under the PMLA. The nomenclature accorded to various officers under the enactment is entirely different than that accorded to police authorities under penal enactments. Referring to Section 167(2), it was stated that the phrase “such custody” occurring thereunder vests very wide discretion with the Magistrate to whosoever the custody has to be entrusted with. It cannot be restricted only to police officers. The argument of the petitioner was held to be fallacious and self-contradictory, wherein it was argued that though the Magistrate under Section 167 at the time of remand can examine the legality and validity of arrest under Section 19, but cannot remand it further to the officers of ED. If the legality of the arrest can be examined by the Magistrate under Section 167, then automatically application of CrPC kicks-in and ED officials even though not police officials are entitled to take advantage of every provision and procedure laid down under CrPC to obtain the custody of the accused and take the trial process through the logical conclusion. Investigation leads to punishment of an offence, whilst enquiry leads to discovery of proceeds of crime, its confiscation and restoration. However, once CrPC becomes applicable, especially Section 167, then the provisions relating to all aspects of investigation would become applicable automatically. Referring to the judgment of Vijay Madanlal Choudhary case²⁰, it was held that expression “investigation” occurring under various provisions of PMLA must be regarded as interchangeable and synonymous with the functions of enquiry to be undertaken by the authorities for procuring and submitting such evidence before the adjudicatory authority. The ED officials possess the power during the enquiry or investigation to arrest the accused concerned. There are inbuilt safeguards against abuse of powers by the officers of ED, viz. “recording reasons to believe in writing”; “forwarding of the said reasons to the adjudicatory authority” as also the Magistrate at the time of production of the accused within 24 hours and other such safeguards. They all clearly act upon as the check on wide powers of arrest conferred on the ED officials. Therefore, provisions of PMLA, being comprehensive and end all in themselves, pertaining to arrest shall prevail over all other divisions of CrPC. However, after arrest, the provisions of CrPC alone are applicable, including the powers of remand such custody by the Magistrate. This would mean that respondents have a right to seek custody on remand and the arrest has to be justified on the anvil of the existing material produced before the Magistrate. If there is a further necessity, the respondents have every right to seek custody from the Magistrate intercepted by production of the accused as prescribed under Section 167 before him. Nowhere, in the judgment of Vijay Madanlal Choudhary case²¹, has it been stated that ED does not have any right to take custody, if investigation requires custody of the accused with the ED. The right of the accused to face the charges, to face trial, to question every witness and to establish his innocence during the course of trial is a constitutionally vested right, but at the same time no accused has a right to frustrate investigation or inquiry leading to the said trial.

Therefore, the fact that grounds of arrest were not communicated to him, cannot be considered by the Court, more so when there is substantial material that he refused to receive the grounds of arrest from the arresting officers. Arrest is a step-in investigation, which is an ongoing process till the filing of charge-sheet/complaint by the investigatory authority. Resultantly, if arrest is possible and investigation is permissible, then seeking custody for further investigation is also by necessary implications permissible. There cannot be foreclosure of investigation of further enquiry merely because a person has been arrested. The High Court in a habeas corpus petition (HCP) cannot sit as an appellate court to examine the reasons stated in the order granting custody (of remand) passed by the Magistrate, for which there are other remedies available.

Answering the third issue, Court held that days spent in hospitalisation by the detenu accused must be excluded whilst calculating the 15 days from the date of initial remand to the ED. Referring to the circumstances in which the accused came to be arrested, followed by his immediate hospitalisation, it was held that everything was done towards the benefit and interest of the accused person. The accused required medical treatment is obvious and that he was in ICU immediately after custody. Whether the period of 15 days owing to non-taking of custody and owing to circumstances and situation beyond the control of the respondent was an issue which was not examined in any of the judgments relied upon by the petitioner, viz. CBI v. Anupam J. Kulkarni²² and Budh Singh v. State of Punjab²³. The said issue fell for examination in CBI v. Vikas Mishra²⁴, wherein the accused was admitted in the hospital and the Court held that period of hospitalisation must not be included in the overall period of judicial custody. Besides, the accused had left no stone unturned to scuttle his arrest by the ED officials. Therefore, this judgment concurred with the opinion and view of Justice D. Bharatha Chakravarthy that there should be exclusion of the period of hospitalisation. The period of hospitalisation was rightly excluded.

Reverting back and answering the second issue, as to whether HCP is maintainable after judicial order of remand, it was held that it has to be first examined whether order of remand withstands scrutiny or not, whether it has been passed in manner known to law and whether it should be interfered by High Court. It was observed by the Court that competency of the Special Judge/Court to remand the accused had not been questioned, but the only grievance was that application seeking rejection or what may be called objection for remand had not been considered at all. The Court held that if there were probable reasons for remand, outweighing the reasons given to reject such remand, then naturally an order of remand follows, and it is such order of remand which stands and cannot be interfered in writ proceedings by the High Court. The custody of the accused was clearly taken away from the respondents and stood vested with the Court granting remand. It is the Court which has now the custody of the accused, consequent to an order of remand. Therefore, once arrest is legal, remand is legal, and if the remand is legal, then HCP becomes non-maintainable and cannot be entertained. Accordingly, it was held that since the detenu accused had refused to receive the copy of the grounds of arrest, which was then informed and communicated to his family members, the presumption arises that all the efforts were made to communicate the grounds of arrest to the petitioner. There was no illegality in the arrest; no illegality in the registration of the Enforcement Case Information Report (ECIR) by the ED; no illegality in the investigation or enquiry being undertaken by the ED; and therefore, if post arrest the accused was produced before the Special Judge, the order of remand was also not illegal. Accordingly, the High Court held the petition as non-maintainable, answered the points of difference between both the Judges of this previously passed split verdict as follows:

“(i) Whether the Enforcement Directorate has the power to seek custody of a person arrested?

The answer given by this Court is ‘yes’ in alignment with the views/opinion expressed by the Justice Mr D. Bharatha Chakravarthy.

(ii) Whether the habeas corpus petition itself is maintainable after a judicial order of remand is passed by a court of competent jurisdiction?

The petition would be maintainable in exceptional circumstances, but this case does not attract any exceptional circumstance and consequently since an order of remand had been passed by a court of competent jurisdiction, the relief sought in the petition cannot be granted. I would align with the view expressed by the Justice Mr D. Bharatha Chakravarthy, with respect to this issue.

(iii) The consequential issue is as to whether Enforcement Directorate would be entitled to seek exclusion of time for the period of hospitalisation beyond the first 15 days from the date of initial remand.”

Accordingly, the matter was remitted back to the Division Bench for resolution on the precise calculation of the number of days the accused had spent into custody.

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(5) V. Senthil Balaji v. State²⁵

(Delivered on 7-8-2023) (Supreme Court)

Coram: 2-Judge Bench of A.S. Bopanna and M.M. Sundresh

Authored by: Justice M.M. Sundresh

The challenge was laid to judgment²⁶ passed by majority of the Judges (2 out of 3) of the Madras High Court, whilst dealing with the writ petition filed seeking writ of habeas corpus petition (for short, “HCP”) in pursuance of the arrest made followed by remand to the judicial custody and then to the authority concerned. The principal issue related to validity and legality of the remand in favour of investigating agency by the Magistrate Court, without seeking any specific prayer challenging remand orders.

The petitioner was the Cabinet Minister of the State of Tamil Nadu. His name cropped up and first information report (FIR) in relation to scheduled offences were registered, when during his tenure as the Transport Minister, a bribe was taken on the pretext of effecting appointment of certain aspiring candidates to various posts. He was arrested by the ED under Section 19 of the PMLA on 14-6-2021. The arrest memo was stated to have been prepared and grounds of arrest were also furnished to the petitioner. However, he offered strict resistance to reception of both, owing to which formal communication of both by the ED to the petitioner was hotly contested. The appellant having suffered from chest pain was immediately taken to hospital and hospitalised, when on very next day the HCP at the instance of his wife came to be filed. During the pendency of the HCP, he was first sent for judicial custody under remand. Thereafter, on an application moved by the ED the custody/police remand was granted for a period of 8 days, whilst dismissal of the bail application. It was pleaded in the HCP on behalf of the accused by his wife that police remand/custody to ED could not have been granted for 8 days after he was originally granted judicial custody for 15 days. It was argued that after grant of judicial custody, orders of police remand could not be passed. The matter was placed before the Division Bench of the High Court, both the Judges on which differed from each other. While one Judge allowed the HCP, the other one recorded a differing opinion affirming the remand orders and dismissing the HCP. Justice Nisha Banu allowing the HCP held broadly as follows:

“116. In the result, the habeas corpus petition is allowed in the following terms:

1. The writ of habeas corpus petition is maintainable.

2. Enforcement Directorate is not entrusted with the powers to seek police custody under the Prevention of Money-Laundering Act, 2002.

3. Miscellaneous petition filed by Respondent 1 seeking exclusion of the period is dismissed”.²⁷

Justice D. Bharatha Chakravarthy charting a different course, disagreeing with the opinion of the other Judge, held as follows:

“179. (i) The habeas corpus petition in HCP No. 1021 of 2023 shall stand dismissed.

(ii) The period from 14-6-2023 till such time the detenu/accused is fit for custody of the respondent shall be deducted from the initial period of 15 days under Section 167(2) of the Code of Criminal Procedure.

(iii) The detenu/accused shall continue the treatment at Cauvery Hospital until discharge or for a period of 10 days from today whichever is earlier and thereafter, if further treatment is necessary, it can be only at the prison/prison hospital as the case may be.

(iv) As and when he is medically fit, the respondents will be able to move the appropriate court for custody and the same shall be considered on its own merits in accordance with law except not to be denied on the ground of expiry of 15 days from the date of remand.”²⁸

Accordingly, the matter was referred to the 3rd Judge, who affirmed the view taken by Justice D. Bharatha Chakravarthy in his judgment.

The Court examined the various submissions issue-wise. On the first issue of “maintainability of writ of habeas corpus through HCP”, it was held that where the mandate of Section 167 CrPC along with Section 19 of the PMLA is totally ignored by a cryptic order, HCP may be entertained provided a challenge is specifically made. As a matter of rule, an order of remand by a judicial officer culminating into a judicial function cannot be challenged by way of HCP, for which there are other statutory remedies to be resorted to. HCP may be entertained, when there is a total non-compliance of the mandatory provisions along with the total non-application of mind. Referring to the judgment of State of Maharashtra v. Tasneem Rizwan Siddiquee²⁹, it was held that no writ would be maintainable, when there is no specific/express challenge to a remand order passed in exercise of judicial function by the Magistrate. It cannot be a case of continued illegal detention, for a person who has been sent to judicial remand for which powers and remedies before the writ court cannot be invoked.

The Court further held that provisions under Section 41-A CrPC containing safeguards against arrest cannot be termed as a supplement to Section 19 of the PMLA. PMLA being a sui generis legislation has its own mechanism in dealing with arrests considering its objectives. A comprehensive procedure for summons, searches and seizures has been clearly postulated and arrest shall only be made after due compliance of the relevant provision including Section 19. Thus, there is absolutely no need to follow and adopt Section 41-A CrPC, 1973, especially in the teeth of Section 65 of the PMLA, 2002. It would only defeat and destroy the very enquiry/investigation under the PMLA. Referring to the judgment of Vijay Madanlal Choudhary case³⁰, the Court held that since there is an exhaustive procedure contemplated under the PMLA containing inbuilt sufficient safeguards in favour of the person arrested, any other additional condition cannot be read from other enactments. To effect an arrest, an officer authorised has to assess and evaluate the materials in his possession, through which he is expected to form a “reason to believe that person has been guilty of offences under PMLA”. Not only the reasons have to be recorded, but it should be followed by way of an information being served on the arrestee on the grounds of arrest, non-compliance of which vitiates the very arrest itself. Compliance of Section 19(2) is also solemn and mandatory of forwarding the reasons on arrest together with the material in his custody to the adjudicating authority in a sealed envelope. Thus, there are necessary safeguards for an arrestee, protecting his liberty and rights enshrined under Articles 21 and 22(2) of the Constitution of India (COI).

The Court further held that powers under Section 19(1) of the PMLA of arrest can be exercised only during investigation, not otherwise. It is well open to the authority to file a closure report before the special court after conclusion if it finds that there are no sufficient materials to proceed further.

Whilst examining the extent of applicability of Section 167 CrPC to arrests made under PMLA Court compared after juxtaposing Section 167 under the erstwhile CrPC, 1898 and as contained under currently applicable of 1973. It was observed that there is no difference between both the provisions except by way of an addition of a proviso pertaining to maximum extent of police remand which could be authorised post arrest of any accused person. The phrase “time to time” occurring under Section 167 held that power to grant custody vested in the Magistrate is not restricted to the first 15 days of remand, but during the whole period of investigation. Referring to the judgment of State of Rajasthan v. Basant Agrotech (India) Ltd.³¹, the phrase “time to time” was elaborated and explained to mean as the occasion may arise. It means that once after acting, the donee of the power may Act again, either independently of or in addition to or in complete derogation of his previously executed act. However, whenever the Magistrate authorises detention of any accused, reasoned order indicating application of mind is necessarily warranted. Therefore, the need for police custody and an order of Magistrate remanding the accused to such custody has to be by a reasoned order rendering his authorisation for so. Interpreting the phrase “such custody as such Magistrate thinks fit”, it was held that it is always on the Magistrate concerned to decide the question of custody, either be it judicial or to an investigating agency or to any other entity in a given case. Referring to the 37th Report of the Law Commission of India, it was observed that a Magistrate possesses wide powers, without any express restrictions under Section 167(2). The remand can be given to any investigating agency and therefore not meant to have a narrow interpretation by restricting it to the police alone. The interpretation must be in accord with the larger objective of enacting Section 167 of ensuring conclusion of investigation in a fair and truthful manner.

It was further held that the phrase “term not exceeding 15 days in the whole” occurring under Section 167(2) implies that custody to the investigating agency may be given in portions/parcels also, which as a whole must not exceed 15 days. The word “custody” does not mean a formal one but can be construed only when an arrestee is given in physical custody. Referring to the judgment of Sundeep Kumar Bafna v. State of Maharashtra³², it was held that custody is synonymous with restraint of liberty and cannot mean a deemed custody. It was further held that Section 167(2) omits to mention the word “police custody”, but leaves it on the Magistrate which custody has to be preferred for the accused.

For counting 15 days, there has to be physical custody with express restraint on liberty. In a case where custody shifted from judicial to an investigating agency by an order of the Court, the starting point will be from the actual custody. Any interdiction for any reason in the execution of order granting police custody passed by the Magistrate would not kickstart the period of custody. Referring to the judgment of Bharat Damodar Kale v. State of A.P.³³, it was held that taking of cognizance is an Act of the Court, over which the prosecuting agency or the complainant has no control. Therefore, the complaint filed within the period of limitation under the Court cannot be made infructuous by an Act of the Court as the Act of the Court should not prejudice any man, including even an investigating authority. Thus, under Section 167(2) (proviso), Magistrate may authorise the detention beyond the period of 15 days, other than in the custody of the police. The proviso merely reiterates the maximum period of 15 days of police custody, whereas in the whole provision of Section 167 there is no mention whether such 15 days has to be necessarily the first 15 days alone for the police custody or may be spread over the entire span of the total permissible period of 60 days or 90 days of the custody, as the case may be. Referring to the judgement of M. Ravindran v. Revenue Intelligence Directorate³⁴, it was held that the right vested by statute cannot be taken away even during the pandemic and thus many accused persons were set at large, when the maximum permissible period of custody under Section 167 had expired due to inability of the investigating authorities to complete the investigation.

On the question of interplay between Section 19 of the PMLA and Section 167 CrPC, it was held that it is for investigatory authority to satisfy the Magistrate with adequate material on the need of its custody, police or otherwise. However, the Magistrate has a distinct role to play when the remand is made of an accused or sought by the authority under PMLA. The Magistrate is under a duty to ensure compliance of conditions under Section 19, failure of which entitles the arrestee to be released. The Magistrate is obligated to peruse the order passed by the authority under Section 19(1) whilst effecting arrest, and be satisfied about its due compliance. Referring to the judgment of Satyajit Ballubhai Desai v. State of Gujarat³⁵, it was held that detention/police remand can be allowed only in special circumstances granted by the Magistrate for reasons to be recorded under Section 167 at the same time protects the accused from the illegal arrest affected by overzealous and unscrupulous police officers. However, it cannot be argued that Section 167(2) CrPC is applicable to an authority effecting arrest but will not be applicable when it comes to remanding an accused to custody. If the accused person argues for application of Section 167(2) for examining the validity of the arrest and the subsequent remand, then the argument cannot be made in piecemeal. The application of the provision cannot be made only for an arrest, but not for custody. There is no expression “police officer” defined under Section 167, nor does it appear in any part of Section 167. The authority detaining a person under Section 167(2) is always in need of the investigation being carried out by any prosecuting agency invested with such powers. The word “investigation” cannot be limited only to police investigation, but it is of a wider connotation and flexible as to include investigation carried on by any agency, be it a police officer or empowered or authorised officer or a person not being a police officer. In the absence of any specific provision under PMLA excluding the applicability of Section 167 and the power of the Magistrate to authorise detention for the purposes of investigation under the provisions of PMLA, it could not be argued that Section 167(2) cannot be exercised by the Magistrate to grant remand to ED in PMLA offences.

Referring to the judgment of Chaganti Satyanarayana v. State of A.P.³⁶, it was held that remand to police custody should be for such a period, as is commensurate to the requirements of a case with provision for further extension for restricted periods, but in no case should the total period of remand to police custody exceed 15 days. The aforesaid view has been followed by the Supreme Court in CBI v. Vikas Mishra³⁷. The Court thus held that the issue of calculation of 15 days must be put at rest and decided by a larger Bench as to whether it would be only for the first 15 days or spanning over the entire period of investigation — 60 days/90 days as the case may be, as a whole.

Applying the law laid down in interpretation of various provisions in the aforementioned paragraphs to the facts of the case, it was held that remand orders passed by the Magistrate Court depicted a clear application of mind. Thus, HCP was not maintainable as the remand order was a reasoned and speaking one, which could have been questioned only before the appropriate forum under the remedies available under the statute and not by way of HCP. The word “custody” is different from “detention”, the former can only be physical. Admission of the petitioner-appellant to the hospital of his choice cannot be termed as physical custody in favour of the respondents, nor custody could have been taken on the basis of interim orders passed by the High Court. The respondent ED could not have been asked to examine the appellant in the hospital, that too with the permission of the doctors and thus it could not be treated as a physical custody in the hands of the ED. The doctrine actus curiae neminem gravabit would certainly apply in calculating the period of 15 days and curtailment of 15 days of police custody by any extraneous circumstances, Act of God, an order of the Court not being the handiwork of investigating agency would not Act as a restriction, nor would cut short the maximum period of remand available to it of 15 days.

The Court also held that the decision of the Court in CBI v. Anupam J. Kulkarni³⁸, as also in Budh Singh v. State of Punjab³⁹, requires consideration by the larger Bench. Accordingly, all the special leave petitions were dismissed by the Supreme Court.

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(6) Gold Croft Properties (P) Ltd. v. Enforcement Directorate⁴⁰

(Delivered on 19-9-2023) (Delhi High Court)

Coram: 2-Judge Bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad.

Authored by: Justice Satish Chandra Sharma

The challenge was made to the order passed by adjudicating authority under PMLA disposing of application filed by the appellant, wherein appellant prayed for deferment of proceedings before adjudicating authority on the ground that Bench at the relevant point of time suffered from “coram non judice” as no adjudicating authority had been constituted under law in terms of Section 2(a) read with Sections 6(1) and (2) of the PMLA, 2002. Necessary facts were that SBI lodged a complaint against the accused alleging diversion of funds for the purposes other than for which the funds were availed as loan from the SBI. Accordingly, predicate offences were registered by the CBI under Sections 409, 420 read with Section 120-B and the provisions of the Prevention of Corruption Act, 1988. The appellant was not named as an accused in the aforesaid FIR related to predicate offence, but in the ECIR that came to be registered by the ED, name of the appellant and other accused persons was mentioned. Accordingly, a provisional attachment order (for short, “PAO”) came to be passed, followed by a complaint being filed before a competent authority. The proceedings being pending before the adjudicating authority, petitioner filed an application before the adjudicating authorities raising essentially two contentions, which were as follows:

1. The quorum of the adjudicating authority is not functional in terms of Section 2 of the PMLA, 2002.

2. That the petitioner has not been supplied with a copy of “reasons to believe” by the respondent/Enforcement Directorate because of which the provisional attachment order has been passed under Section 5(1) of the PMLA. The said application was rejected by the adjudicating authority by an order dated 25-1-2023.

The said objection was rejected by the authority, which was taken further in challenge before the Single Bench of the Delhi High Court, which also affirmed order of the authority. The sheet anchor of the submission made by the petitioner was that the application could not have been heard by the Chairman sitting singly as the Bench was not in consonance with the provisions of the PMLA, 2002. There cannot be a Single Member Bench, but there must be a two-member Bench of the authority deciding upon taking any decisions in the proceedings pending before it.

The Court referring to Section 5, PMLA held that the director or deputy director is vested with the power of provisionally attaching the property on having reasons to believe that person is in possession of the POC. The provisional attachment order (for short “PAO”) passed by the competent authority meticulously contains the details of diversion of funds made by the accused which are the POC and the said order also brings out the details of the property purchased on the name of the appellant by using the said funds of the accused. Thus detailed “reasons to believe” that the appellant being in possession of POC and such POC having been conceived, transferred or dealt with in the manner for frustrating the proceeding under PMLA were made out resulting in passing of order of PAO by the competent authority were made out. The PAO thus contains all the reasons and therefore the substantive satisfaction arrived at by the authority does not want any interference under Article 226 of the COI. PMLA does not postulate and envisage separate reasons to believe for each of the properties individually, which stands attached whilst passing the PAO under Section 5(1) of the PMLA.

Then coming to the next contention of lack of quorum being not in terms of Section 6 of the PMLA, it was held that it is not necessary that all the members of the adjudicating authority should be judicial members. Referring to the Coordinate Division Bench judgment in J. Sekar v. Union of India⁴¹, it was held that the word “Bench” occurring under Section 6(5)(b) does not connote plurality. There could even be under Section 6(5)(b), PMLA be a “single member Bench”. When Section 6(6), PMLA states that a Chairperson can transfer a member from one Bench to another Bench, it has to be understood in the above context of there also being single member Benches. Thus, there was no statutory requirement or prescription of having minimum two members on the Bench as contended by the petitioner was so held by the Court. It was further held that it is a discretion of the Chairperson under Sections 6 and 7 of the PMLA to have as number of the members on the Bench as a Chairperson may deem fit. The appellant did not indicate any reason in the application that would have warranted constitution of a Bench comprising more than one member or requiring the Chairperson to have a Bench comprising more than one member for deciding the proceedings. Section 6 clearly does not postulates filing of any application for reference to a larger Bench, rather under Section 8, during the course of hearing of the matter if the Chairperson sees that the matter is of such a nature that it should be heard by a Bench of two members, then Chairperson may do so in his own self discretion. Thus, the application itself so preferred by the petitioner was not maintainable.

Further the petitioner had an effective remedy of an appeal before the Appellate Tribunal as provided under Section 26 of the PMLA. Referring to the judgement of CIT v. Chhabil Dass Agarwal⁴², it was held that the appropriate remedy for the petitioner was to have approached the Appellate Tribunal instead of directly approaching the High Court by way of the writ petition. Accordingly, the Division Bench affirmed the judgment of the Single Bench, which in turn affirmed the view taken by the adjudicating authority rejecting the application of the petitioner.

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(7) Mehul Choksi v. State of Maharashtra⁴³

(Delivered on 21-9-2023) (Bombay High Court)

Coram: Single Judge Bench of Justice Sarang V. Kotwal

Authored by: Justice Sarang V. Kotwal

The applicant had laid challenge to orders passed on their application opposing proceedings under the provisions of Fugitive Economic Offenders Act, 2018 (for short, “FEO Act”). Earlier FIR under the provisions of IPC and Prevention of Corruption Act, 1988 were registered and scheduled offences against the applicant, followed by registration of ECIR by the ED. The ED thereafter filed an application under Section 4 r/w Section 12 of the FEO Act praying that applicant be declared as fugitive economic offender and properties be confiscated under FEO Act. The primary contention of the applicant opposing the said application seeking application moved by the ED was that it was not accompanied by any affidavit as contemplated under Section 297 CrPC. The objection to the maintainability of the application moved by ED so lodged on behalf of the applicant came to be rejected through the impugned order, assailed before the High Court.

The primary contention of the applicant was that the director had not discharged the primary onus or burden of proof of demonstrating that the individual concerned is FEO or that the property in question was POC. There were no proper averments in the application, being supported by proper affidavit. The filing of an affidavit is not an empty formality, but that the affidavit should clearly state what portion of the statement is made on the declarant’s knowledge and what portion is made on information and belief. The said disclosures properly were not made in the affidavit and thus application was not maintainable. Referring to the judgment of Jitender Kumar v. State of Bihar⁴⁴ and Yogesh Waman Athavale v. Vikram Abasaheb Jadhav⁴⁵, it was argued relying on the law laid down by the Supreme Court that if no reasoning on the submissions urged by the counsel for the parties was offered by the Court, the order passed by the High Court was not proper and liable to be set aside. The lack of reasoning in the impugned order to the submissions of the applicant made the order suspect and again the judgments of the Supreme Court in Jitendra Kumar case⁴⁶ and Yogesh Waman Athavale case⁴⁷.

The Court referring to Sections 5 and 297 CrPC held that the affidavit filed, and the verification made in the application on behalf of ED was not defective. The verification categorically mentioned that the application was filed to the best of the deponent’s knowledge derived from the records and that it was nowhere stated that he was filing the application based on his own knowledge or belief. The knowledge was clearly derived from the records and thus there cannot be any infirmity in this type of verification where the application is based on the records. It sufficiently complied with the requirements of Clauses 4 and 5 of the Criminal Manual as the source of the knowledge was clearly specified to be the records. The application was held to have been properly instituted under Section 4 of the FEO Act, more so when Section 21 of the FEO Act gave an overriding effect to it. The special procedure prescribed under the FEO Act will not get affected by any provision under CrPC, in light of the saving provisions provided and enshrined under Section 5 CrPC. Referring to the Preamble of the FEO Act, the Court held that the Act was enacted with the laudable objective of deterring fugitive economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts. Therefore Section 4 of the FEO Act and Rule 3 of the FEO Rules having been made to further the objective of the Act cannot be bypassed by taking recourse to other provisions of CrPC to contend that the affidavit was not proper. Accordingly, the application filed on behalf of the applicant before the High Court was rejected, holding that there was no conformity in the verification or in the affidavit filed before the trial court on behalf of the ED.

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(8) Manish Kothari v. Enforcement Directorate⁴⁸

(Delivered on 22-9-2023) (Delhi High Court)

Coram: Single Judge Bench of Justice Dinesh Kumar Sharma

Authored by: Justice Dinesh Kumar Sharma

The petitioner had filed a regular bail application under Section 439 r/w Sections 167(2) and 482 CrPC for grant of bail in relation to ECIR registered under PMLA. In the bail application the primary contention raised was that the share of the applicant/accused out of the alleged tainted money was only to the extent of Rs 27-28 lakhs. Thus he was to be treated on a different footing in terms of proviso clause appended to Section 45 of the PMLA. The trial court rejected the application holding that Court cannot segregate the share of the individual person, which is to be seen in a wholesome manner, and thus the role of applicant/accused was constitutive of the cumulative figure of Rs 48 crores also attributed allegedly to the co-accused persons, namely, Anubrata Mondal and his daughter. The further contention of the petitioner was that, as a Chartered Accountants and Audit preparing company he prepared the tax audit reports before the cut-off date of 30th September. He had received his professional fee against the discharge of his service and under Section 145 of the Companies Act, 2013 r/w Section 44-AB of the IT Act, 1961, these reports were required to be submitted within the time period as prescribed under Section 145 of the Companies Act, 2013 r/w Section 44-AB of the IT Act, 1961 for the purposes of tax audit.

The ED on the other hand contended that the investigation of income tax returns (ITRs) had revealed huge tax evasions and income from business. However, the source of such income could not be explained or justified. The petitioner had been responsible for projecting this income without any small sources in the ITRs of both the co-accused, the mastermind being Anubrata Mondal. The petitioner thus was an active accomplice of the accused persons in preparation of misleading audit reports and ITRs. He has assisted the co-accused persons in planning for laundering of the proceeds of crime.

The Court referred to the judgments of Sanjay Pandey v. Enforcement Directorate⁴⁹ and Ranjitsing Brahamjeetsing Sharma v. State of Maharashtra⁵⁰, held that at the stage of grant of bail, Court is expected to consider the question from the perspective of whether the accused possess the requisite mens rea. No definite finding is required whether the accused has committed an offence under the Act or not and that liberty of the person should not be interfered with exception cases. Thus, on the scale of broad probability the case is to be examining about the role of the accused.

The Court further held that the petitioner was a Chartered Accountant of the main accused, and the principal case of the ED was that petitioner was instrumental in projecting the tainted money as untainted money by filing misleading and false ITRs. Being a professional, thus he was supposed to be acting on the instructions of his client and whether he has gone beyond his professional duty or not is something to be seen, examined and tested during the trial. The allegation against the petitioner that he has done something which was beyond the scope of his profession, viz. indulging in some activity which is totally unconnected with the Chartered Accountancy are facets which requires scrutiny during the trial. The Court thus held that it was a case fit for grant of bail since the accused had stated to have acted on the instructions of his client and thus claimed exoneration from criminal prosecution.

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(9) Nitesh Purohit v. Enforcement Directorate⁵¹

(Delivered on 6-10-2023) (Chhattisgarh High Court)

Coram: Single Judge Bench of Justice Goutam Bhaduri

Authored by: Justice Goutam Bhaduri

All the bail applications were arising out of the common ECIR registered by the ED. The bail applications were preferred under Section 439 CrPC as the accused persons were arrested in connection with the complaint filed before the jurisdictional court.

The gravamen of the allegations was essentially that Mr Arun Pati Tripathi as an officer of Excise Department along with Mr Tuteja and one Ms Saumya Chaurasia, conspired, in collusion with each other through the accused and other co-accused persons, acting as collection agents collected bribes, illegal commissions and unaccounted money, etc. for awarding of liquor contracts in the State of Chhattisgarh. The Chhattisgarh State Marketing Corporation Limited (for short, “CSMCL”) was entrusted with the responsibility of retailing liquor in the State of Chhattisgarh through its vending stores. However, CSMCL became a tool in the hands of the syndicate that started and ran a parallel Excise Department. Necessary arrangements were made for the sale of non-duty paid liquor in all CSMCL run shops, with the use of duplicate and spurious holograms in the State of Chhattisgarh. The money was distributed in three categories, viz. Commission (Part A), Unaccounted Liquor (Part B) and Percentage (Part C), whereby all the shareholders and members of the syndicate got the benefit. Thus within 4 years, illegal earning to the tune of 2000 crores was generated from the sale of this non-duty paid liquor and tainted money received in cash was converted into untainted by generating and showing it as the same consideration of various FMCG goods received from marketing agents, rice mills, and other consumer courts. Around 19.2 crore bottles of illicit liquor with the active connivance of distillers, hologram makers, bottle suppliers, transporters were being run in the whole State, which was faulted only in June 2022 with the rates by the IT Department and subsequent action by the ED.

It was contended on behalf of the petitioner/applicants as follows:

(a) The complaint filed after income tax raid by the IT Department was stayed by the Supreme Court, which stayed the taking of cognizance by the complaint court.

(b) The provisions of IT Act under which criminal complaints were filed for tax evasion by the IT Department, are not scheduled offences and therefore, the only offence left other than the IT offence is Section 120-B IPC, which cannot stand alone in isolation, even though it being a scheduled offence to the PMLA.

(c) The co-accused are on bail and as on date no offence can be said to be pending except the complaint relatable to offences under the IT Act.

It was argued on behalf of Nitesh Purohit that his name was not there in the FIR and that nowhere his role has been mentioned, without which he has been roped and framed in by the ED.

The Court held that in Section 50 statements of one of the witnesses, the role of all the members of the whole syndicate had clearly been elaborated along with the modus operandi of all the stakeholders. Money of the commission amount was distributed by the 9 shareholders, which shows that all the persons are influential one, with few of them being part of the system itself (Excise Department).

The Court then analysing Section 45 of the PMLA held that the expression appearing under Section 3 of “and” has to be construed as “or” to give full play to the said provision so as to include “every process” or activity indulged into by anyone. Projecting or claiming the property as untainted property would constitute an offence of money laundering on its own, being an independent process or activity. The Court thus relying on the judgment of Vijay Madanlal Choudhary case⁵², held that the argument and interpretation suggested by the petitioners that upon projecting and claiming the property in question as untainted property only that the offence of Section 3 would be complete, deserves rejection and is so rejected. The offence under Section 3 of the 2002 Act is dependent on the illegal gain of property as a result of the criminal activity and it concerns the process or activity connected with such property which in itself is the offence of money laundering (ML). Though rightly under PMLA, authorities cannot prosecute any person on notional basis or on assumptions that scheduled offence has been committed, but however if out of the scheduled offence, generation of money as POC has taken place, then that said process or activity attracts Section 3 of the PMLA.

The Court further held that the process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the POC, and not investigation in the strict sense of the term for initiating prosecution. In the present case, it is not a case of defence that a scheduled offence has not been registered with the jurisdictional police. The complaint filed by the IT Department was not dismissed at the threshold, but liberty was given by the Court to file it before the competent jurisdictional court, which can entertain the same within its jurisdiction. Referring to Sections 23 and 24 of the PMLA, it was held that where the offence of ML involves two or more interconnected transactions and one or more such transaction is or are proved to be involved in ML, then for the purpose of adjudication or confiscation or for trial of the ML offence, it shall be presumed that remaining transactions (of which there is not a proof) from part of such interconnected transactions. There is a reverse burden of proof under Section 24 that qua the person charged with the offence of ML under Section 3, the authority of court shall unless the contrary proves presumes that such POC are involved in ML. Accordingly the High Court declined grant of bail to all the applicants holding that inquiry under Section 50 by the ED is like a judicial proceeding and since the complaint had already been filed before the court of competent jurisdiction, the Court can safely draw presumption about involvement of the applicants in money laundering and possession of the POC. The bail application was accordingly rejected.

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(10) Guangwen Kuang v. Enforcement Directorate⁵³

(Delivered on 13-10-2023) (Delhi High Court)

Coram: Single Judge Bench of Justice Swarana Kanta Sharma

Authored by: Justice Swarana Kanta Sharma

The petitioner had filed a Section 482 CrPC petition challenging the remand order passed by the Patiala House Court, New Delhi remanding the petitioner to custody for offences punishable under Sections 3 and 4 of the PMLA. Consequential relief was also sought of releasing the petitioner. The gravamen of the allegations were that an FIR came to be registered by the Ministry of Corporate Affairs (for short “MCA”) against one M/s Grand Prospect International Communication Pvt. Ltd. (for short, “GPICPL”) based on the complaint lodged by the MCA. The allegations in the said FIR were that certain Chinese shareholders of GPICPL used forged identification documents, falsified addresses and other such self-identity documents for projecting GPICPL as the subsidiary company of Vivo, China, a mobile making company. The said company was incorporated to conduct fraudulent businesses for which professionals who had certified and filed e-forms knew that the same contained false information and false documents about the directors. The company was actually not a subsidiary of Vivo in official records whereas it publicly projected itself to be so. Thus, ECIR under Sections 3 and 4 of the PMLA came to be registered in February 2022. The petitioner was arrested by the ED, and thereafter was remanded in police custody to ED for 10 days along with other arrested individuals. The primary defence of the petitioner was that he was never arraigned as an accused in the FIR lodged at the instance of MCA, nor any allegations were levelled against him. No reasonable grounds to believe that he had committed the offence of ML under Section 19 were existing and that the Magistrate without examining the said essential aspect remanded him to police custody of ED.

The Court after analysing the facts found that the said company GPICPL was engaged in the business of distribution and providing after sale services of Vivo mobiles and accessories in the various States of North India and thus within 7 years an amount of Rs 1500 crores was generated in its bank account through various business activities. False, forge and fabricated identity documents like driving licences were used for obtaining the DIN number and opening of accounts in various banks by the said company GPICPL. The petitioner was the mastermind and the kingpin of the whole web of companies, which all without disclosing correct information before the government authorities, had generated false documents and audit reports/statements. The Court summarised the role of the petitioner after perusing the complaint along with the details furnished along with the remand application before the Sessions Court, and summarised the same broadly as under:

(a) He is an office-bearer of Vivo Mobile India Private Limited and was formerly with mobile communication China. He had played a pivotal role in incorporation of the entire setup of Vivo group companies in India.

(b) On the basis of investigation, it had come to light that he was prima facie one of the main conspirators who, in collusion with other Chinese individuals and entities, had helped in creating a mesh of companies all over the country with a strategic move to have their presence over the country in the garb of business enterprises.

(c) 17 out of 20 companies had provided the email id of the present petitioner in the foreign currency gross provisional return (FC-GPR) filing before Reserve Bank of India (RBI) which proves that he was well aware about the mesh of companies being incorporated throughout the country.

(d) He was a part of larger criminal conspiracy and was therefore prima facie connected with the proceeds of crime acquired by Vivo Mobile India Private Limited and its State distributor companies through Commission of various schedule offences.

Thus, the Court found that the petitioner was designated as a prime conspirator in the grounds of arrest supplied to the petitioner at the time of his arrest by the ED. The amount and the acquisition of POC by the web of companies in India showing themselves to be subsidiaries of Vivo, China had entirely been siphoned off. It was stated that the remand application further spelled out the basis for investigation and how petitioner was considered to be the mastermind of the entire offence and chain of transactions that took place in India. The arrest order of October 2023 even mentioned that the arresting officer had communicated the said reasons to the accused.

Accordingly, after comparing the law laid down in the judgment of Pankaj Bansal v. Union of India⁵⁴, Court held that the present case was different from the dictum of Pankaj Bansal case⁵⁵, as the accused herein was not only supplied the ground of arrests, but also there was no violation of Section 19. The investigating officer from the material collected so far had formed an opinion that the accused person will be guilty of offence of ML, followed by which only the arrest was affected. The grounds of arrest were stated to have been duly furnished/supplied to the accused person in writing in compliance of the judgment of the Supreme Court in Pankaj Bansal case⁵⁶. The judgment of Pankaj Bansal case⁵⁷ was distinguished holding that in the said case concerned, Sessions Judge had failed even to record the finding that he had perused the ground of arrest to ascertain whether ED had recorded reasons to belief that the accused therein were guilty of offence under the PMLA, but merely recorded that custodial interrogation of the accused was required at the stage of investigation. The grounds of arrest supplied by the ED under remand application clearly mentioned the involvement of the present petitioner from the very inception and from the initial stage, viz. incorporation of the companies in question throughout the country that ultimately resulted in acquisition of POC and siphoning off the same. Accordingly, Section 482 petition challenging the remand came to be rejected by the High Court.

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(11) Amit Chakraborty v. State (NCT of Delhi)⁵⁸

(Delivered on 13-10-2023) (Delhi High Court)

Coram: Single Judge Bench of Justice Tushar Rao Gedela

Authored by: Justice Tushar Rao Gedela

The petitioner approached the Delhi High Court seeking declaration of his arrest was illegal and violative of Articles 21 and 22 of the Constitution of India. Challenge was also laid to the remand order passed by the Special Judge, Patiala Court on various grounds. The reliefs as aforementioned were sought in relation to the arrest made in relation to the offences committed under the provisions of the Unlawful Activities (Prevention) Act, 1967 (for short “UAPA”) of the petitioners on the allegations that the news company in which they were working had received funding from China for carrying out anti-national activities in the country. Essential grounds claiming the aforementioned relief has based on behalf of the petitioners were as follows:

(a) That no grounds of arrest were communicated to the petitioner either orally or in writing at the time of arrest, till the time of the filing of instant petition. They were asked to sign the blank documents, without giving any opportunity or time to read them and in fact those documents were never provided to either the petitioner or their counsel.

(b) The petitioner was not allowed to meet their counsel or have sufficient legal assistance or aid for opposing the arrest so affected for opposing the remand order passed on the next date during court hours.

(c) Even the Legal Aid Counsel (for short “LAC”) was not effectively enabled to appear on behalf of the petitioners; their family members were not informed, and thus entire remand proceedings took place in the absence of the petitioner’s counsel and family members. Thus, not only the arrest was illegal, but also the manner and procedure through which the remand order came to be passed also was violative of various constitutional protections available to the petitioner.

The solitary legal issue for adjudication which the Court framed was:

(a) Whether ratio laid down by the Supreme Court in Union of India v. Pankaj Bansal⁵⁹ can be made applicable to the present case?

The substratum of the arguments of the petitioner was that language of Section 19 of the PMLA being pari materia with Section 43-B of the UAPA, the ratio laid down in the judgment of Pankaj Bansal case⁶⁰, by the Supreme Court shall be squarely applicable to arrests made under the UAPA.

Referring to Article 22(1) of the Constitution of India, referring to the judgment of K.M. Abdulla Kunhi v. Union of India⁶¹, it was held that no period is prescribed under Article 22(1) of the Constitution or any detention law, fixing a time-limit, duration or specific period within which representation of the arrested accused, detenue must be dealt with. The expression “as soon as may be” occurring under Article 22(5) of the COI has to be interpreted to mean that the arrestee must be informed within a reasonable period from the time of his arrest. The rights of the arrestee to be informed of such reasons is fundamental and intertwined with his right to life and personal liberty and freedom, as the arrestee is likely to be detained and deprived of both the rights. Since, the arrestee is to be produced before the Magistrate within a period of 24 hours, vide Sections 56 and 57 CrPC, 1973, therefore communication of grounds of detention/arrest must also happen within 24 hours, lest it would not serve the purpose for which it is designed and enacted. The Magistrate is to be informed of the grounds of remand as also the grounds of arrest to enable him/her to remand the arrestee further to custody under Section 167 CrPC. Thus, the phrase “as soon as may be” ought to be construed as not beyond 24 hours from the time of such arrest of any person. Referring to Sections 41-D and 50 CrPC, the right of the arrestee/detainee to meet/consult an advocate of his choice has been mandated. Thus, the right to consult and be defended by an advocate of his choice is also a facet of fundamental right. Referring further to Part E of the Delhi High Court Rules, specially, Rule 12 of Part B of Chapter 11, it was argued that right to be defended by the accused at the time of remand proceeding is inalienable.

The Court further held that a juxtaposition and comparison of Section 19(1) of the PMLA with Section 43-B of the UAPA appears to be pari materia, except the phrase “material in his possession” and “recorded in writing”. These two phrases appear to have been deliberately omitted and not inserted by the legislature. Therefore, there is no mandate upon any officer under Section 43-A of the UAPA to record in writing the reasons for such belief on the basis of material in his possession, as in the situation applicable whilst affecting arrest under Section 19 of the PMLA. The Court further observed that the phrase “reasons to belief” does not exist under Section 43-B of the UAPA, as existing in case of Section 19(2) of the PMLA, implying that the conscious legislative omission of the said phrase “reasons to belief” is for the purpose and that therefore both the provisions, viz. Sections 19 and 43-A & 43-B of the UAPA cannot be treated to be pari materia. There is no such obligation corresponding to Section 19 of the PMLA existing under Sections 43-A and 43-B of the UAPA, which requires communication of grounds of arrest to the accused at the time of arrest by the arresting authority. No such obligation is cast upon the authorities to follow a similar procedure as has been laid down by the Supreme Court in Pankaj Bansal case⁶².

The Court compared the Preamble of both the enactments to state that the UAPA specially deals with external internal threats, stability, sovereignty and integrity of the country and effectively counter such threats. Whereas the PMLA on the other hand is an enactment for maintaining the internal law and order in relation to financial crimes, it may or may not have relation to threats to the stability, sovereignty and integrity of the country. Therefore, the ratio laid down by the Supreme Court in Pankaj Bansal case⁶³ and V. Senthil Balaji case⁶⁴ was held to be fairly applicable in relation to the provisions of the PMLA, which cannot by any stretch of imagination made applicable mutatis mutandis to the cases arising under the UAPA.

The Court further held that the judgments by courts are not Euclid’s theorem to be applied to all cases without considering the facts in the case. Referring to the judgment of the CCE v. Srikumar Agencies⁶⁵, and Goan Real Estate and Construction Ltd. v. Union of India⁶⁶, it was held that the factual situation as also the legal proposition propounded in the judgment of Pankaj Bansal case⁶⁷, was entirely distinct from that of the present case, with the former dealing with an altogether separate enactment.

On the other contentions of the petitioner that the grounds of arrest were not provided, and that legal aid sufficiently was not provided, it was held that the averments of the petitioner himself revealed that he was informed of having been arrested at 7.00 p.m. on 3-10-2023 and having briefly shown certain documents at the time of arrest. The petitioner also averred that he was allowed to meet his counsel briefly at the time of arrest but was not permitted to sign any vakalatnama. There are contradictory pleadings about information being given to his family members, however there is an admission that the remand application was received by his counsel through WhatsApp, whereafter again he met his counsel in the later hours of the same day of arrest. Thus, the submissions of petitioner are completely self-contradictory and are mutually at variance as pleaded in writ petition. The remand application filed before the Magistrate’s Court and served upon the petitioner’s counsel contained all the allegations as also reasons for arrest. The said application was furnished to the counsel for the petitioner within 24 hours of the arrest, which has been mentioned specifically in the remand order. An application raising objections against the remand was also stated to have been filed on record prior to passing of the remand order by the Magistrate. Thus, the timelines as averred in the writ petition are factually incorrect and mutually contradictory. The Court distinguished the judgment of Madhu Limaye, In re⁶⁸, holding that in the said matter grounds of arrest were never communicated to the arrestee and the offence was not that serious. Referring to the judgment of Ayya v. State of U.P.⁶⁹, it was held that the serious offences falling within the ambit of the UAPA, directly impacting the stability, integrity and sovereignty of the country should not be lost sight of by emphasising upon scrupulous adherence to the written law. The quote of Thomas Jefferson was referred to stating, “to lose our country by a scrupulous adherence to the written law would be to lose the law itself, with life, liberty and all those who are enjoying with us; thus, absurdly sacrificing the end to the means”. Accordingly, after examining the facts in their entirety, it was held that grounds of arrest were indeed conveyed to the petitioner and thus there was no procedural infirmity and the violation of the provisions of the Sections 43-A and 43-B of the UAPA. The remand order is thus sustainable in law in the given circumstances.

On another application titled as Amit Chakraborty case⁷⁰, it was argued by the petitioner that the remand order was passed mechanically without considering the physical condition of the petitioner who was suffering from 59% disability. The petitioner had simply been tagged along, clubbed together and roped in the FIR, arrested without providing any legal basis by the prosecuting agency.

The Court rejected this application also holding that the petitioner never took any efforts on his family members to assail or raise objections against the arrest or oppose the remand by the Magistrate, nor ever made any effort for procuring any copy of the FIR. Referring to the law laid down in Moti Lal Songara v. Prem Prakash⁷¹, it was held that lack of material particulars on facts in the writ petition disentitles the petitioner from getting any relief from the Court. Reference was also made to the judgment of K.D. Sharma v. SAIL⁷². Accordingly, both the writ petitions were dismissed by the High Court.

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(12) Ashish Mittal v. Enforcement Directorate⁷³

(Delivered on 19-10-2023) (Delhi High Court)

Coram: Single Judge Bench of Justice Anup Jairam Bhambhani

Authored by: Justice Anup Jairam Bhambhani

The writ petition was filed under Article 226 r/w Section 482 CrPC seeking quashing of ECIR registered by the ED against the petitioners. As an interim measure, stay of the entire proceedings emanating from the ECIR was also sought from the Court, restraining ED from taking any coercive steps against the petitioner curtailing his personal liberty. The petitioner approached the Court in response to summons issued by ED under Section 50 of the PMLA requiring the petitioner to appear before it. Copy of the ECIR was not supplied to the petitioner. The petitioner was not named in the FIR as an accused registered under the provisions of Sections 420, 467, 468 and 471 of the Penal Code (IPC) along with the provisions of the Prevention of Corruption Act by the Central Bureau of Investigation (CBI). The petitioner was associated with Educomp Solutions Limited (ESL) on various executive posts and was engaged as Chief Financial Officer for implementing a corporate debt restructuring scheme. He was never a member of the Board of Directors of the company, nor part of the Statutory Committee including the Audit Committee, nor a shareholder and had resigned in February 2018. All the transactions during his tenure with the company happened with the consent of the Monitoring Committee of the lender banks as also the resolution professional appointed by the National Company Law Tribunal (NCLT) under the provisions of Insolvency and Bankruptcy Code, 2016.

ED raised a preliminary objection that the petition was not maintainable since it was triggered merely based on summons issued under Section 50 of the PMLA. It was premature, as the petitioner had not been named in the FIR registered by the CBI, nor in the ECIR registered by the ED.

On the issue of “maintainability, especially seeking interim relief against summons under Section 50 of the PMLA”, it was held that discretionary jurisdiction should not ordinarily be exercised challenging the show-cause notice, unless it is issued without any jurisdiction. Unless the High Court is satisfied that the show-cause notice (SCN) was totally non est in the eye of the law, the petition should not be entertained on a mere asking, as a matter of routine. Referring to the judgments of Director v. Mohd. Ghulam Ghouse⁷⁴ and Kirti Shrimankar v. Union of India⁷⁵, it was held that the writ petition, filed based on apprehensions arising from alleged threats of arrest extended by some officers in proceedings under the Customs Act, 1962, is premature and that such superficial averments cannot form the basis for an apprehension of arrest. Similarly, referring to the judgment of Coordinate Bench of the Delhi High Court in Virbhadra Singh v. Enforcement Directorate⁷⁶, it was held that summons under Section 5o can be issued to any person and that being an investigative process any person can be summoned, even the one who is not an accused. A person summoned by the ED is not an accused many times when he is so asked to appear before ED. No person in law is entitled to evade the command of the summons issued under Section 50 of the PMLA on the ground that he may possibly be prosecuted in the future. The issuance of summons by the ED is in exercise of and in aid of the statutory powers conferred upon it of investigation. Thus, the Court found that the petitioner was essentially aggrieved by the potential threat of being arrested on the basis of summons received from the ED for which reason he sought quashing of the ECIR. Since, the petitioner was nowhere named, neither by the CBI, nor by the ED, therefore the rare circumstances and grounds for exercising inherent jurisdiction under Section 482 as laid down in the judgment of State of Haryana v. Bhajan Lal⁷⁷, were not attracted. Since, the petitioner had sought holistic quashing of the proceeding registered vide ECIR against him, more so when he was never named as an accused in the ECIR, the apprehensions were clearly in air. The Court also found that petitioner was already issued summons earlier, but on entering appearance he was never arrested by the ED pursuant to such summons. Referring further to the provisions of Section 50, and examining them, it was held that power to arrest is conspicuously absent under Section 50 of the PMLA. Further, Section 19 of the PMLA empowers only designated officers of the ED to arrest any person subject to satisfaction of the conditions mentioned thereunder. The power to arrest does not reside under Section 50, nor does it arise as a natural colony of the summons issued thereunder. The powers vested under Section 50 pertains to production of documents and recording of statements, akin to the powers of a civil court, which is entirely different and distinct from the powers under Section 19 of arresting any person. They all are separate and distinct provisions and exercise of powers under one cannot be restrained on the apprehension that it could lead to the exercise of powers under the other provision, viz. Section 19. Otherwise any and every person summoned under Section 50 to produce documents or give statements on oath to resist such summons expressing mere apprehension that he may face arrest at the hands of the ED. Thus, the Court recorded its disagreement with the petitioner’s apprehension that he may be subjected to coercive measures and that it cannot interfere with the functioning of law enforcement agencies in investigating any offence. Superior courts should not mechanically use the inherent powers under inherent jurisdiction to interdict investigation and trial.

The Court thereafter held that remedy under Section 438 may be available to the petitioner of seeking anticipatory bail. Referring to the judgment of State of Gujarat v. Choodamani Parmeshwaran Iyer⁷⁸, it was held that remedy of Section 438 is available to him throughout if he harbours any apprehension of arrest at the hands of the ED. Section 438 CrPC does not require any formal accusation and the word “may” preceding the words “be arrested” and “on accusation” signifies that both the arrest and accusation are anticipatory. There is nothing in the PMLA which restricts the Court from granting relief under Section 438 CrPC in an appropriate case and that it cannot be held that there is any requirement in law for a prosecution complaint to have been filed for a person to approach the Court under Section 438 CrPC. Accordingly, the writ petition seeking quashing of the ECIR was dismissed holding the same to be premature. However, it was made clear that the decision should not be treated as holding that High Court under Article 226 is per se barred from entertaining the petition by any person not framed as accused in the scheduled offence or in the prosecution complaint filed by the ED. The writ petition was accordingly dismissed.

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(13) Manish Sisodia v. CBI⁷⁹

(Delivered on 30-10-2023) (Supreme Court of India)

Coram: 2-Judge Bench of Justice Sanjiv Khanna and S.V.N. Bhatti

Authored by: Justice Sanjiv Khanna

The present matter related to grant of bail in connection with various cases registered against the petitioners by the CBI and the ED under various provisions of the Prevention of Corruption Act (FIR registered by the CBI) and under Sections 3 and 4 of the PMLA (ECIR registered by the ED) respectively. The issues, which the Court after hearing the petitions found to be arising in the matter, for its consideration were as follows:

(a) What is the scope and the ambit of the constitutional protection under Articles 74 and 163 of the Constitution of India on the decisions taken by the Council of Ministers?

(b) Whether on interpretation of Section 3 of the PMLA, “the act/process of generation” or “the attempt to generate the proceeds of crime” falls within the ambit of the expressions “assist”, “acquisition”, “possession” or “use” under Section 3 of the PMLA? If the answer is in affirmative, what are the legal consequences as per the Constitution of India, under the Code of Criminal Procedure, 1973, the IPC, and the General Clauses Act, 1897?

(c) Whether a person can be prosecuted under the PMLA, only when there is material to show that he has indulged or assisted in any activity/process of money laundering, albeit an activity/process different and separate from the scheduled offence?

(d) Whether an accused, who allegedly has committed the scheduled offence, can be prosecuted under the PMLA, when the alleged prime accused and the beneficiary of the proceeds of crime, a juristic person, is not arrayed as an accused in the criminal complaint filed by the Directorate of Enforcement (DoE)?

(e) Whether Sections 45 and 50 of the PMLA should be read down in view of the constitutional scheme and mandate of Article 20 of the Constitution of India?

The principal contention of the petitioner was broadly as follows:

The POC is the core ingredient for the offence of money laundering, which is an offence of the PMLA and has nothing to do with criminal activity or the subject-matter of the scheduled offence. Allegations regarding receipt of kickbacks of Rs 100 crores, is a purely concocted story with the money trail having been unproven and false. The ED has relied entirely upon the statements made by co-accused or approvals, which are all hearsay. They do not implicate or connect the appellant with the allegations of generation of POC. These statements have been obtained by exerting coercion and pressure by the ED on all the witnesses and arrested co-accused persons.

The ED on the other hand contended that the new policy was completely at variance from the old excise policies, by introducing private wholesalers and creating their monopoly in the liquor business. The recommendations of the (RD) Committee Report of October 2020 were not at all followed, but only fake reference is being made to it. The Section 164 statements of various witnesses also buttressed the fact that RD Committee Report was never acted upon and the conspiracy was entered with the framing of the new excise policy for enabling supersize profits for wholesale distributors in return for kickbacks and bribes. The private wholesalers were given a minimum 5% commission on the landed price, which they could negotiate and settle for a higher commission. The appellant was unable to provide any rational explanation for increasing the commission from 5% to 12%. And in the whole process private liquor companies were favoured. The kickback of Rs 100 crores was used by the Aam Aadmi Party (AAP) and its various leaders.

The Court analysed the arguments and referring to the judgment of Vijay Madanlal Choudhary case⁸⁰, in the context of interpretation of Section 45 of the PMLA, held that the twin conditions obligate the Court to arrive at a positive finding that appellant has not committed an offence under the PMLA. A tentative finding should be recorded on the basis of broad probabilities and detailed reasons are not necessary to be assigned, nor evidence be weighed meticulously. It was further observed that the assertion of Rs 2.20 crores having been paid as bribe to the appellant as alleged by ED is neither a charge, nor an allegation made anywhere by the charge-sheet by the CBI and thus, the same may not be recorded as POC under the PMLA. The Court further held that since the POC were used by the AAP which is a trust and a juristic person, therefore in the absence of AAP being made an accused under Section 3, to what extent the appellant will be individually responsible is a question which may be debated during the trial. AAP, a political party and a juristic person is not being prosecuted on the date of consideration of the bail application.

The stand of the ED that appellant was in constructive possession of the money and the bribe amount will be satisfied only when the dominion and the control criteria both are satisfied, so as to infer possession on his part. An accused not in possession of the PoC, in the absence of specific allegation and the involvement of the appellant cannot be prosecuted.

However, certain material facts that lead to an inference of commission of offence under Section 3 of the PMLA and the POC were mentioned by the Court, which were as follows:

1. During the operation of the new excise policy (liquor policy), wholesale distributors earned windfall profits and gains of around Rs 581 crores.
2. The one-time licence fee collected from fourteen wholesale distributors was about Rs 70 crores. The difference between both would constitute the POC, that were therefore required, used and were in possession of the wholesale distributors who are lawfully benefited from illegal gain at the exposure of the Government exchequer and consumer buyers.

3. The essential allegation is also somewhat similar that unlawful gains accrued to private persons at the expense of the public exchequer.

Accordingly, the Court for the aforementioned reasons declined to grant bail to the appellant. The Court held that the consideration has to be made on a case-to-case basis, on the facts. However, the Court also held that when the trial is not proceeding for reasons not attributable to the accused, the Court unless there are good reasons may well be guided to exercise the power to grant bail. This would be truer where the trial would take years. Accordingly, though the bail was denied, however liberty was given to the appellant to move a fresh application for bail if the trial is protracted or proceeds at a snail’s pace in the next three months, which application must be considered on merits without being influenced by the dismissal of the earlier bail application, including the present judgment. The appellant was also given liberty to file an application for interim bail in case of ill-health and medical emergency due to illness of his wife. Such applications would be examined on its own merits.

Accordingly, the appeal was disposed of with aforesaid directions.