HON'BLE SRI JUSTICE K.SURENDER
CRIMINAL PETITION No.6656 of 2022
ORDER:
1. This petition is filed for grant of anticipatory bail to the petitioner/A1 under Section 438 of Cr.P.C in ECIR No.5/HYZO/2014, dated 25.02.2014 of Joint Director, Enforcement Directorate, Government of India, Hyderabad Zonal Office, Hyderabad registered under Section 3 of the Prevention of Money Laundering Act, 2002 (for short 'the Act of 2002').
2. The petitioner is A1 in ECIR No.5/HYZO/2014, registered by Enforcement Directorate (ED) for the offence under Section 3 of the Act of 2002. Petitioner was issued summons on 20.07.2022 asking him to appear. The petitioner has appeared previously and provided the statements and also his statement was recorded during November, 2018. Since there was a provisional attachment order on 26.08.2021 under the Act of 2002, the petitioner is apprehending arrest. However, when the provisional attachment order was passed, this Court in Criminal Petition No.5196 of 2019 filed for quashing of 2 proceedings in ECIR No.5/HYZO/2014, by order dated 17.09.2019 directed not to take coercive steps. The said order was extended on 08.02.2022. However, by order dated 23.02.2022, quash petition was dismissed finding that there is a prima facie case for the ED to register the said crime against the petitioner.
3. Initially, the CBI registered First Information Report No.1(A)/2013, dated 03.01.2013. The complaint was given by the General Manager, MMTC Limited, Hyderabad stating that there was collusion in between this petitioner, who is the Director of M/s.MBS Group of companies. Both M/s.MBS Impex Private Limited and M/s.MBS Jewellers Private Limited obtained gold on credit basis. During the year 2005 to 2011, nearly Rs.20,000/- Crores worth of gold was purchased from MMTC. Gold was purchased by MMTC from foreign buyers and as per the bullion drill, MMTC was granted hedge its exposure, thereafter debiting expenses from the account of the purchaser. For every Rs.100/- paid by the purchaser, Rs.90/- worth of gold was to be supplied. MMTC agreed to reduce the 3 margin of 5% to increase the volume of business. According to the petitioner, MMTC started keeping the full upfront payment in the form of Fixed Deposit and interest earned on it which was kept as a margin. Petitioner company purchased gold of nearly Rs.20,000/- Crores without any dispute. In July, 2011, the rupee value depreciated against US dollar crashing up to 27% in the financial year, for which reason, the liability arose.
4. On 15.09.2011, the company issued a letter requesting that forex rates be kept open for the transaction. However, most of the 82 transactions in which forex losses took place were prior to the letter, which liability has also been put on the company. On 05.10.2012, MOU was signed in between MBS and MMTC wherein MMTC informed the liability of MBS at Rs.181.39 Crores. Complaint was lodged with CBI on 31.12.2012. MBS filed Arbitration Application No.5 of 2013 before this Court seeking nomination of an arbitrator to resolve the disputes with MMTC. MMTC in turn filed civil suit OS No.903 of 2013 before the City Civil Court for recovery of Rs.274 Crores. On 08.08.2013, KPMG submitted 'Flash 4 Report' wherein fraud of MMTC qua MBS was exposed, but said report was suppressed. The petitioner was arrested by CBI on 27.12.2013 and released on 15.12.2014. The ED registered present case on 25.02.2014. On 27.11.2014, the CBI filed charge sheet against the petitioner and other public servants of MMTC. The petitioner filed quash petition in Criminal Petition No.5196 of 2019 to quash the present crime and this Court by order dated 17.09.2019 ordered that 'no coercive steps shall be taken' against the petitioner.
5. Learned counsel for the petitioner would submit that the crime was registered in the year 2014. However, there was no arrest by the ED. Though, there is a clause for arbitration, MMTC has adverted to filing criminal cases. He further submits that the petitioner has assisted the investigation earlier and presently apprehends arrest since the ED had taken steps to attach the properties. He relied on the judgment of Hon'ble Supreme Court in the case of Satender Kumar Antil v. CBI1 and argued that the procedure under 1 2022 SCC Online SC 825 5 Sections 41 and 41-A of Cr.P.C has to be followed. In conclusion, the Hon'ble Supreme Court at para 73 held that the investigating agencies and their officers are duty bound to apply the mandate of Section 41 and 41-A of Cr.P.C and the directions issued by the Court in Satender Kumar Antil (supra). Since the offence under Section 3 of the Act of 2002 is punishable up to seven years, the procedure under Section 41-A of IPC has to be followed. He also relied upon the judgment of the Hon'ble Division Bench in the case of Vakamulla Chandrasekhar v. Enforcement Directorate and another2, in which it is held that the scheme of the Act of 2002 does not exclude the application of Section 41 and 41-A of the Code and the said provisions are made to safeguard the liberty of the citizens against the arbitrary and malafide exercise of power of arrest by the agencies. This Court in Criminal Petition Nos.9825, 9846 and 10021 of 2021 while passing common order held that the provisions of Section 41 and 41-A of Cr.P.C are not applicable since the procedure 2 2017 SCC OnLine Delhi 12810 6 prescribed under Section 19 of the Act of 2002 over rides the provisions of Section 41 and Section 41-A of Cr.P.C. The said order was questioned before the Hon'ble Supreme Court and the Hon'ble Supreme Court by order dated 24.02.2022 vide Special Leave to Appeal (Crl.) No(s). 1540 of 2022 directed that no coercive action shall be taken against the petitioners therein. Further, by order dated 04.04.2022, the Hon'ble Supreme Court held that the matter relating to PMLA where similar questions were raised, was reserved for judgment.
6. The Bench was referring to the case of Vijay Madanlal Choudhary v Union of India (Special Leave Petition (Criminal) No.4634 of 2014). The said judgment was delivered on 27.07.2022. However, there is no discussion regarding the applicability of Section 41-A of Cr.P.C. The learned counsel submits that in view of judgment of Satender Kumar Antil v. CBI (supra), which was subsequent to the order of this Court in Criminal Petition Nos.9825, 9846 and 10021 of 2021 finding that the procedure under Section 41-A cannot be applied to PMLA is overruled on account of the judgment in 7 Vijay Madanlal Choudhary's case. Learned counsel also relied upon the judgment of Hon'ble Supreme Court in the case Ashok Munilal Jain v. Assistant Director, Director of Enforcement3, judgment of this Court in P.V.Ramana Reddy v. Union of India, rep. by Secretary4, Union of India v. Ashok Kumar Sharma5 and K.Ranjith v. State of A.P, through SHO, rep. By Public Prosecutor6. He prayed to grant relief to the petitioner and the petitioner undertakes to abide by any condition imposed by this Court.
7. Sri B.Narasimha Sharma, learned Standing Counsel for Enforcement Directorate would submit that the Court cannot intervene in economic offences cases, as the offences are serious in nature and affect the society as a whole. He further submits that the economic offences constitute class apart having serious ramifications and there is a prima facie case to show that the petitioner is involved in economic offence The 3 (2018) 16 SCC 158 4 2019 SCC OnLine TS 3332 5 2020 SCC OnLine SC 683 6 2021 SCC OnLine 3121 8 petitioner is a 'flight risk' i.e., if anticipatory bail is granted, he may run away from the country. Though the petitioner was summoned 16 times to appear in the office from the year 2015, he has appeared only once and given statement in part and by virtue of non cooperation of the petitioner, the investigation is pending. He further submits that the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary's case (supra) at paras 88 to 90 discussed the provision under Section 19 of the Act, where power to arrest is granted. The Hon'ble Supreme Court held that Section 19 of the Act cannot be held to unconstitutional and it is for the purpose of achieving the object of the act and also for confiscation of proceedings of crime in money laundering.
8. The learned Standing Counsel for the ED was asked as to why the agency has not taken steps to arrest the petitioner though crime was registered in the year 2014 and CBI has already filed charge sheet.
9. In reply, learned Standing Counsel for ED submits that the petitioner has to appear and after appearance and 9 recording of the statement of the petitioner, if the investigating officer finds that there is enough evidence to effect arrest only in such cases arrest would be effected. It is mandatory on the part of agency to fulfill the conditions under Section 19 of the Act which mandates that belief shall be recorded in writing that the person is guilty for the offence under the Act of 2002.
10. Admittedly, no attempt was made by the agency to arrest the petitioner for the last 8 years. It is not the case of the agency that he has evaded any arrest attempt made by the agency or absconded contrary to directions of any Court.
11. The attachment of the property was also not undertaken by the agency though it is admitted that no coercive action shall be taken against the petitioner, which was ordered by this Court in Criminal Petition No.5196 of 2019, would not cover any such attachment proceedings.
12. In general, the Court directing 'not to take coercive steps' would only mean that there shall not be detention or any physical abuse. However, the said order of 'not to take coercive steps' will not cover collection of evidence, examining the 10 accused and also proceeding under Chapter III to deal with attachment of property, adjudication and confiscation unless there are any specific directions by the Court restraining such action which can be taken during the course of investigation. The agency can also file its complaint under Section 45 of the Act of 2002 if the investigation is complete. The provision under Section 173(8) of Cr.P.C enables a police officer to file report and further such filing of report will not preclude any further investigation. A complaint under Section 45 of the Act for the offence punishable under the Act of 2002 can be made initially, if the situation warrants. Filing of such complaint will not preclude the agency from further investigation and also filing of further complaint to be tried along with first complaint before commencement of trial.
13. Learned Standing Counsel for ED submitted that the petitioner has only appeared once in spite of agency issuing notices 16 times. The investigation cannot proceed at the mercy of an accused, who has been summoned for the purpose of investigation. Section 50(1)(b) of the Act of 2002 11 empowers the agency to enforce appearance, which would include arrest for non appearance. Arrest under Section 19 of the Act of 2002 would require the reasonable assessment of the accused being guilty. However, in the absence of petitioner not assisting investigation, though summoned, would be a valid ground for the agency to arrest such accused and such arrest will not violate any of the provisions under the Act of 2002.
14. Admittedly, the case is of the year 2014. For five and half years i.e., till 17.09.2019, till petition was filed for quashing of the present crime and this Court ordered not to take coercive steps, no such attempt to arrest was made.
15. The crux of the case against the petitioner herein and others, who are involved is that the company of the petitioner received gold from MMTC on buyers credit loan basis by keeping forex position open without paying additional 5% margin money in collusion with the officials of MMTC and ultimately causing loss to the tune of over Rs.190.00 Crores according to complaint.
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16. The Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary's (supra) at para 89 held as follows:
"As noticed earlier, it is a comprehensive legislation, not limited to provide for prosecution of person involved in the offence of money-laundering, but mainly intended to prevent money-laundering activity and confiscate the proceeds of crime involved in money-laundering."
17. Admittedly, the agency has not taken steps since the date of registration of crime in the year 2014 either to arrest the petitioner under Sections 19 or 50(1)(b) of the Act of 2002. Learned Special Counsel contended that the Hon'ble Supreme Court in several judgments held that in economic offences, the Courts cannot grant anticipatory bail, unless exceptional circumstances are present and the Court has to reasonably find that the petitioner seeking anticipatory bail under the Act of 2002 is not guilty of offence.
18. As already stated, the petitioner was not arrested nor any attempt was made to arrest the petitioner Civil suits are filed for recovery of money and though the agency was prepared to attach the properties of the petitioner, no such action was taken.
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19. Counter filed by the Enforcement Directorate does not state that they have any evidence, which according to them can conclude reasonably that the petitioner is guilty of the offence under the said Act. Further, what is the additional material that is collected by the ED apart from the investigation conducted by CBI for filing the charge sheet in the present case is not mentioned. Except stating that there is a prima facie case made out, there are no averments in the counter, which in fact are specifically mentioned referring to oral and documentary evidence, the investigating officer of the agency could reasonably conclude that the petitioner is guilty of the offence under the Act.
20. Learned Special Counsel has also submitted that the reason for not arresting the petitioner was that a statement was not recorded and unless the criteria under Section 19 of the Act is fulfilled, the ED would not effect arrest. In the said scenario the Court cannot reasonably conclude that the petitioner is not guilty when no such specific statement is made by the ED that petitioner is believed to be guilty. Simply 14 reproducing the words that the agency is reasonably satisfied that the accused is guilty of the offence of money laundering would not suffice. Since the legislation has thought it fit to specifically mention the word guilty in the provision under Sections 19 and 45 of the Act, it is for the agency to produce before the Court not in the form of 'prima facie evidence' but reasonably conclude that the petitioner is 'guilty', which is a degree higher than the requirement of 'prima facie case'. Such assertion of the accused being guilty shall be by way of supporting oral and documentary evidence.
21. Conclusion:
i) The ED is empowered to arrest under Section 50 (1)(b) of the Act when an accused does not attend pursuant to notice in addition to the procedure prescribed under Section 63 of the Act. In such circumstances, the reasons required under Section 19 of the Act need not be stated. Similarly, if bail is sought when arrested under Section 50(1)(b) of the Act, the Court can grant bail without adverting to the restrictions 15 under Section 45 of the Act if not let off by the investigating officer after his arrest.
ii) A complaint can initially be made by the ED in a case and in the event of any additional information that is gathered in respect of the very same case, additionally another complaint can be filed to be tried along with the first complaint. The said additional complaints can be filed prior to commencing trial on the first complaint.
22. In view of the peculiar facts and circumstances of the case, when there is no improvement in the process of investigation for the last eight years, it is appropriate to direct as follows:
i) The petitioner shall appear before the concerned Investigating Officer, Enforcement Directorate, at Hyderabad for the purpose of questioning/interrogation on 26.09.2022 at 10.00 A.M and surrender his passport.
ii) He shall continue to appear from 27.09.2022 to 30.09.2022, 06.10.2022 and 07.10.2022 and from 10.10.2022 16 to 14.10.2022 for assisting investigation. Thereafter, the petitioner shall appear on every Monday to Wednesday for five weeks excluding public holidays. The petitioner shall assist investigation as required by the officer on every day from 10.00 A.M to 4.00 P.M. However, no third degree methods shall be adopted.
iii) On the date of surrender i.e., 26.09.2022 the petitioner shall furnish security for Rs.2.00 lakhs each for the likesum to the satisfaction of the Investigating Officer.
iv) In the event of any violation of conditions imposed, the ED is at liberty to seek cancellation of this order, for arresting the petitioner.
With the above directions, the Criminal Petition is disposed off.
_________________ K.SURENDER, J Date:20.09.2022 kvs 17 THE HON'BLE SRI JUSTICE K.SURENDER Crl.P.No.6656 of 2022 Dated:20.09.2022 kvs 18