HONOURABLE SRI JUSTICE K. LAKSHMAN
CRIMINAL REVISION CASE No.378 OF 2023 ALONG WITH
WRIT PETITION Nos.19163, 21448 & 20835 OF 2023 AND
CRIMINAL REVISION CASE No.509 OF 2023
COMMON ORDER:
Heard Mr. A.R.L. Sundareshan, learned Additional Solicitor
General of India representing learned Deputy Solicitor General of India
for the petitioner in Crl.R.C. No.378 of 2023 and the respondents in the
writ petitions, Mr. T. Niranjan Reddy, learned Senior Counsel representing Mr. S. Ram Reddy, learned counsel for the petitioner in W.P. Nos.21448 of 2023 and Crl.R.C.No.509 of 2023 and respondent No.2 in Crl.R.C.No.378 of 2023, Mr. S. Niranjan Reddy, learned Senior Counsel representing Mr. N. Naveen Kumar, learned counsel for the petitioner in W.P. No.19163 of 2023 and respondent No.1 in Crl.R.C. No.378 of 2023 and Mr. A. Venkatesh, learned Senior Counsel representing Mr. V. Surender Rao and Mr. P. Gautham Rao, learned counsel for the petitioner in W.P. No.20835 of 2023 and respondent No.3 in Crl.R.C.No.378 of 2023.
2. Criminal Revision Case No.378 of 2023 is filed by the Directorate of Enforcement (for short 'ED'), challenging the impugned 2 KL,J Crl.R.C. No.378 of 2023 & batch remand rejection order dated 14.06.2023 passed by learned Metropolitan Sessions Judge, Hyderabad, in S.R. No.6506 of 2023, wherein the learned Sessions Judge illegally and erroneously refused to grant remand of respondent Nos.1 to 3, who are arraigned as accused Nso.1 to 3, for the offence committed under Section - 3 read with 4 of the Prevention of Money-Laundering Act, 2002 (for short 'PMLA').
i) W.P. No.19163 of 2023 is filed by Mr. T. Venkatram Reddy, accused No.1 (Respondent No.1 in Crl.R.C. No.378 of 2023), seeking a writ of mandamus declaring his arrest in furtherance to ECIR/02/HYZO/15, Zone - Hyd. as illegal and in violation of Section - 19 of the PMLA and to set aside the same and for a consequential direction to respondent Nos.2 to 4 to pay compensation of Re.1/- or any such amount and also to direct respondent Nos.2 and 3 to initiate appropriate enquiry and disciplinary proceedings against all the delinquent officers, who have indulged in causing his unlawful arrest.
ii) W.P.No.21448 of 2023 is filed by Mr. Parasuraman Karthik Iyer, accused No.2 (respondent No.2 in Crl.R.C.No.378 of 2023) seeking a writ of mandamus declaring the action of official the respondents in arresting him without complying with mandatory requirement under Section - 41-A of the Code of Criminal Procedure, 1973 (for short 3 KL,J Crl.R.C. No.378 of 2023 & batch 'Cr.P.C.') as illegal and for a consequential direction to take necessary disciplinary action against the erring official, who were responsible for effecting his arrest and also further direction to pay compensation of Rs.8.00 lakhs to the petitioner.
iii) He has also filed Crl.R.C. No.509 of 2023 challenging the impugned order 14.06.2023 to the extent of not initiating action against the arresting Officers under Section - 62 of the PMLA.
iv) W.P. No.20835 of 2023 is filed by Mr. Mani Oommen, accused No.3 (Respondent No.3 in Crl.R.C.No.378 of 2023) seeking a writ of mandamus declaring his arrest in furtherance to ECIR/02/HYZO/15, Zone - Hyd. as illegal and in violation of Section - 19 of the PMLA and to set aside the same, and for a consequential direction to the respondent Nos.2 to 4 to pay compensation of Re.1/- or any such amount and also to direct respondent Nos.2 and 3 to initiate appropriate enquiry and disciplinary proceedings against all the delinquent officers, who have indulged in causing his unlawful arrest.
3. The issue involved in the aforesaid matters and the parties are common, therefore, the same were heard together and are being decided by way of this common order.
4
KL,J Crl.R.C. No.378 of 2023 & batch
4. For the sake of convenience, the parties arrayed in Crl.R.C. No.378 of 2023 will be hereinafter referred.
5. CONTENTIONS OF THE E.D. ARE AS FOLLOWS:
i) The following charge sheets were filed by the Predicate Agencies against M/s. Deccan Chronicle Holdings Limited (for short 'DCHL') and others. The details of the same are as under:
Amount of Charge
Charge loss caused Scheduled sheet filed
Sl. Name of FIR No. & to bank before the
No. Sheet No. offence
complainant Date (Rs. in Court
& Date
Crores)
01 Canara Bank, RC-3(E)13, 01/2015, 357.77 Sec.120B XIV ACM
Sec.bad. dt.06.07.13 14.04.15 r/w 420 IPC
by CBI, BS &
FC
02. Andhra Bank, Hyd. RC-2(E)/14 , 04/2015, 225.77 Sec.120B Magistrate,
29.03.14 by 28.09.15 r/w 420 & Hyderabad
CBI, BS&FC 471 IPC
03. Indian Overseas RC-3(E)/14, 03/2015, 72.61 -do- -do-
Bank, Large 29.03.14 by 03.08.15
Corporate Branch, CBI, BS&FC
Hyd.
04. Central Bank of RC-1(E)/15, 06/2015, 72.03 -do-
India, Mid Corporate 13.01.15 by 13.11.15
Branch, Hyd. CBI, BS&FC
05. Corporation Bank, RC-5(E)/14, 05/2015, 116.35 -do- XVII
Bangalore 22.05.14 by 14.11.15 ACMM,
CBI, BS&FC Bangalore
06 IDBI Bank, Mumbai RCBSM -- 317.40 Sec.120B XVII
2015 E0005, 29.12.16 r/w 420 IPC ACMM,
02.07.2015 Esplanade,
by CBI, Mumbai
BS&FC
07 Axis Bank, Green 95/2015, 507/2017, 409.50 -do- XII ACMM,
Lands, Hyd. 04.04.15 by 31.08.17 Hyderabad
CCS, DD,
Telangana
Police
08 SEBI NA Prosecution NA Sec.12A r/w Sessions
Compalinant
No.MA 24 Court for
42/16 SEBI Cases
at Greater
Mumbai
Total loss caused to the Banks as per the charge sheets. 1571.43
5
KL,J
Crl.R.C. No.378 of 2023 & batch
ii) Enforcement Case Information Report (ECIR) was registered vide F.No.ECIR/HYZO/02/2015, dated 11.03.2015 by the ED, Hyderabad Zonal Office in the case of M/s. DCHL and others for investigation under the provisions of the PMLA on the basis of FIR No.3 of 2013, dated 06.07.2013 registered by the CBI, BS & FC, Bangaluru since the offences committed under Section - 120B, 420 and 471 IPC invoked in the said FIR are part of the Scheduled Offences under the PMLA, 2002.
iii) Subsequently, multiple FIRs and charge sheets were registered and filed by the Law Enforcement Agencies (LEAs) i.e., CBI, BS & FC, Bengalore, Mumbai and Telangana Police, and the prosecution complaint was also filed by the Securities & Exchanges Board of India (SEBI). The same was also taken up for investigation under the provisions of the PMLA.
iv) The LEAs have cumulatively filed eight (08) charge sheets/complaints against M/s. DCHL and others for causing total loss of Rs.1571.43 Crores to the Public Sector Banks/Private Banks under Section 173 (2) of the Cr.P.C. before the Designated Courts. 6
KL,J Crl.R.C. No.378 of 2023 & batch
v) The SEBI has also filed prosecution complaint No.MA 42 of 2016 under Sections - 190 and 200 of the Cr.P.C. read with Section 12A
(a) to (c) and Sections 24 (1), 26A, 26B, 26C, 26D, 26E and 27 of the SEBI Act, 1992 before the Sessions Court for SEBI Cases at Greater Mumbai.
vi) Investigation conducted by the ED under the PMLA revealed that M/s. DCHL had availed credit facilities from both Public Sector Banks and Private Sector Banks, but did not utilize them for their intended purpose. The Company and its Promoter-Directors diverted and siphoned off the funds by employing various methods to launder the wrongful gains obtained through defrauding and duping the banks. The same are also specifically mentioned under the following heads:
(a) Cyclical repayment of already existing loans;
(b) Declaring the dividends by the management of M/s. DCHL;
(c) Share Buy-back by M/s. DCHL;
(d) Diversion of Funds to Subsidiaries/Associates and related parties;
(e) Funds transferred to proprietary and related party concerns;
(f) Suspicious donation made to Charitable Trusts;
(g) Re-purchase of stressed assets through benami company M/s. VRT Infra Pvt. Ltd.;
7
KL,J Crl.R.C. No.378 of 2023 & batch
vii) The role played by each of the respondents i.e., Directors of M/s. DCHL as identified during investigation conducted by the ED is also specifically mentioned;
viii) Thus, according to the ED, investigation conducted by it would reveal that the respondents along with other Promoters of M/s. DCHL created large number of subsidiary companies. The subsidiary/associated entities were not involved in any genuine business activities. The bank accounts of these subsidiary/associated entities were used for rotation of funds with M/s. DCHL. Subsequently, most of the entities were amalgamated into M/s. DCHL. During the course of investigation, summons were issued to the respondents and others to find out the details of funds diverted to subsidiaries/associated entities and to trace the proceeds of crime. However, the respondents and other Promoters/Directors of M/s. DCHL remained completely evasive about these entities and did not furnish any details and purpose of transfer of funds to the subsidiary and associated entities.
ix) Therefore, the respondents and Directors of M/s. DCHL are not co-operating with the ED during investigation. Summons were given to the respondents to appear on 13.06.2023, to give another opportunity to disclose the true facts of the case. Though they have appeared and their 8 KL,J Crl.R.C. No.378 of 2023 & batch statements were recorded, they maintained their non-cooperation and evasive reply and did not disclose the true facts of the case.
x) On 13.06.2023, the ED exercising its power under Section - 19 of the PMLA, after recording the reasons to believe and informing the grounds of arrest to respondents and after following due process of law, arrested the respondents.
xi) Subsequent to the arrest of the respondents, they were produced before the learned Metropolitan Sessions Judge, Hyderabad and sought the judicial custody of the respondents. But, learned Sessions Judge rejected the remand application of the ED on the ground that no notice under Section - 41A of the Cr.P.C. has been issued by the ED and rejected the remand petition vide order dated 14.06.2023. Challenging the said orders, the ED filed Crl.R.C. No.378 of 2023.
6. The respondents, Directors of the Company, filed the aforesaid writ petitions and Crl.R.C. No.509 of 2023, to declare their arrest as illegal and to set aside the same, and for a consequential direction to the ED to pay compensation and also to initiate action against the erring officers under Section - 62 of the PMLA.
9
KL,J Crl.R.C. No.378 of 2023 & batch
7. CONTENTIONS OF RESPONDENTS:
i) Mr. T. NIranjan Reddy, Mr. S. Niranjan Reddy and Mr. A. Venkatesh, learned senior counsel appearing on behalf of the respondents, referring to various proceedings including the first provisional attachment order (PAO) No.03 of 2017, dated 28.03.2017, second PAO No.1 of 2020, dated 15.10.2020 and the summons issued by the ED, would contend that there are no reasons to believe to arrest of the respondents. The respondents have appeared before the ED pursuant to the summons issued by it on 13.11.2015, 17.05.2016, 30.05.2016, 20.03.2023 and 13.06.2023, and on their appearance in the aforesaid ECIR, the ED has recorded their statements under Section - 50 of the PMLA. Thereafter, the First PAO orders dated 28.03.2017 was passed.
ii) Mr. T. Vinayak Ravi Reddy, brother of Mr. T. Venkatram Reddy, the petitioner in W.P. No.19163 of 2023, one of the Directors of M/s. DCHL, filed a writ petition vide W.P. (C) 7015 of 2017 before the High Court of Delhi challenging the first PAO No.03/2017 and the Delhi High Court granted stay of proceedings arising out of the said PAO. The said writ petition was disposed of on 11.04.2019 granting liberty to the petitioners therein to approach appropriate High Court. He filed a writ petition vide W.P. No.9319 of 2019, and this Court vide order dated 10 KL,J Crl.R.C. No.378 of 2023 & batch 29.04.2019 granted stay of proceedings arising out of PAO No.03 of 2017, dated 28.03.2017. Summons were issued to the respondents to appear on 20.03.2023 and they have appeared. Though the ED has recorded statements of the respondents - accused, without there-being proper reasons to believe, arrested the respondents on 13.06.2023. Thus, all of them referring to the principle laid down by the Apex Court in several judgments including V. Senthil Balaji v. The State represented by Deputy Director 1, interim orders in M/s. Satyam Computer Services Limited v. Directorate of Enforcement 2; Directorate of Enforcement v. M/s. Satyam Computer Services Limited 3 ; Vijay Madanlal Choudhary v. Union of India 4 ; Sukesh Gupta v. Govt. of India 5 ; Directorate of Enforcement v. Kamma Srinivas Rao 6 ; P. Chidambaram v. Enforcement Directorate 7; Union of India v. Padam Narain Aggarwal 8 ; State of Punjab v. Balbir Singh 9 ; Dr. Pratap Singh v. ED, FERA 10; Gurubaksh Singh Sibbia v. State of Punjab 11; 1 . 2023 SCC OnLine SC 934 [Crl.A. Nos.2284-2285 of 2023, decided on 07.08.2023] 2 . W.P.M.P.No.47572 of 2012 in W.P.No.37487 of 2012, dated 11.12.2012 3 . W.A. No.133 of 2013 (DB), decided on 31.12.2014 4 . 2022 (10) SCALE 577 5 . 2022 SCC OnLine TS 1767 6 . 2022 SCC OnLine TS 3410 7 . (2019) 9 SCC 24 8 . (2008) 13 SCC 305 9 . (1994) 3 SCC 299 10 . (1985) 3 SCC 72 11 . (1980) 2 SCC 565 11 KL,J Crl.R.C. No.378 of 2023 & batch Ramesh Chandra Mehta v. State of West Bengal 12; Jai Shankar v. State of Himachal Pradesh 13; Aslam Mohd. Merchant v. Competent Authority 14; A.S.Krishnan v. State of Kerala 15; Siddarth v. State of UP 16 and Mohammad Zubair v. State of NCT 17 contended as follows:
a) To effect an arrest, an Officer authorized has to assess and evaluate the materials in his possession and form a reason to believe that a person is guilty under PMLA;
b) In case of failure to comply with safeguards, an arrest will be termed as a punishment, which power can never be under Section - 19 of the PMLA;
c) Designated Court got very wide discretion and, therefore, the Designated Court shall pass a reasoned order and it is a judicial function. In the present case, vide impugned order dated 14.06.2023, the Designated Court rejected the remand on the ground that the reasons stated for arrest of the accused are not supported with any justifiable material, and there is no error in it;12
. AIR 1970 SC 940 13 . (1973) 3 SCC 83 14 . (2008) 14 SCC 186 15 . (2004) 11 SCC 576 16 . (2022) 1 SCC 676 17 . 2022 SCC OnLine 897 12 KL,J Crl.R.C. No.378 of 2023 & batch
d) It is for the Investigating Agency to satisfy the Designated Court with adequate material on the need for the custody or otherwise;
e) Learned Judge is duty bound to see that Section - 19 of the PMLA is duly complied , and failure would entitle arrestee to get released;
f) Any non-compliance of mandate under Section - 19 of the PMLA would enure to the benefit of the person arrested;
g) Authorized Officer has to record reasons in writing regarding necessity to arrest;
h) Safeguards under Section - 19 of the PMLA are stringent and of higher standard;
i) Objective of arrest is to ensure that Proceeds of Crime are not dealt with in any manner which may result in frustrating any proceedings relating to confiscation thereof;
j) Simply reproducing words that Agency is reasonably satisfied that accused is guilty of offence of laundering would not suffice;
k) Reasons to believe should be based on material in Officer's possession;
l) Arrest can only be made if material exists that justifies the arrest; 13
KL,J Crl.R.C. No.378 of 2023 & batch
m) Procedure under Section - 19 of the PMLA including 'reason to believe' is to ensure sufficient safeguard. Therefore, compliance of the same is mandatory;
n) Power must be exercised on objective facts of commission of offence and Officer has reason to believe that person is guilty of such offence. Power of arrest is circumscribed by objective considerations and cannot be exercised on whims, caprice or fancy of the Officer;
o) 'Reason to believe', must be held in good faith, and it cannot be merely pretence. It is open for the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of belief and are not extraneous or irrelevant to the purpose of the said Section;
p) 'Reasons to believe' means that belief must have been arrived at judicially after considering the material and on prima facie satisfaction of authority concerned;
q) If the Investigating Officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, 14 KL,J Crl.R.C. No.378 of 2023 & batch throughout cooperated with the investigation, then there is no compulsion to arrest;
r) The Investigating Officer has to consider distinction between existence of power to arrest and justification for arrest, which is mandatory in terms of Section - 19 of the PMLA;
s) Mere availability of power of arrest is not suffice. Arrest is last option. It has to be restricted to those exceptional cases. Personal liberty is very precious fundamental right and it cannot be curtailed in a mechanical manner;
t) In the present case, the ED failed to consider the said aspects while arresting the respondents. However, considering the said aspects, learned Judge rejected the remand vide impugned order dated 14.06.2023 on the aforesaid two (02) grounds. Therefore, the arrest of the respondents is illegal. Thus, the respondents herein are entitled for compensation. Authority concerned has to initiate proceedings under Section - 62 of the PMLA against erring officers;
u) Constitutional Courts being the protectors of the civil liberties of the citizen have not only the power and jurisdiction but also an obligation to grant relief in exercise of its jurisdiction under 15 KL,J Crl.R.C. No.378 of 2023 & batch Article - 32 or 226 of the Constitution of India to the victim or the heir of the victim, whose fundamental rights under Article - 21 of the Constitution of India are flagrantly infringed. They placed reliance on the decision in Nilabati Behera v. State of Orissa 18;
v) Grant of compensation in proceedings under Article - 32 and 226 of the Constitution of India for the established violation of the fundamental rights guaranteed under Article - 21 is an exercise of the Courts under the public law jurisdiction for penalizing the wrong doers and fixing the liability for the public wrong on the State which failed in the discharge of its public duty to protect the fundamental rights of the citizen. Reliance was placed in D.K. Basu v. State of West Bengal 19; and w) Deprivation of liberty even for a single day is too many.
Reliance was placed on the principle laid down by the Apex Court in Arnab Manoranjan Goswami v. State of Maharashtra 20.
18 . (1993) 2 SCC 746 19 . (1997) 1 SCC 416 20 . (2021) 2 SCC 427 16 KL,J Crl.R.C. No.378 of 2023 & batch
iii) Mr. T. Niranjan Reddy, learned Senior Counsel representing Mr. S. Ram Reddy, learned counsel for the petitioner in W.P. No.21448 of 2023 and respondent No.2 in Crl.R.C. No.378 of 2023, referring to an Award of Arbitral Tribunal between M/s. DCHL and Board of Control for Cricket in India (BCCI), would submit that the Arbitrator, a retired Judge of the Hon'ble Supreme Court, passed a final award dated 17.07.2020 for an amount of Rs.486,00,00,000/- (Rupees Four Thousand Eight Hundred and Sixteen Crores Only). However, an application under Section - 34 of the Arbitration and Conciliation Act, 1996, is also pending challenging the said Award. Therefore, the allegation made by the ED that the respondents have siphoned off the funds is baseless. The said aspects were not considered by the ED.
iv) With the said submissions, all learned senior counsel would submit that the arrest of the respondents is illegal, in violation of the procedure laid down under law, also principle laid down by the Apex Court in the aforesaid judgments and, therefore, the Designated Court rightly rejected the remand of the respondents vide impugned order dated 14.06.2023. They are entitled for compensation and Authority concerned has to initiate action against the erring Officers under Section - 62 of the PMLA.
17
KL,J Crl.R.C. No.378 of 2023 & batch
8. Mr. A.R.L. Sundareshan, learned Additional Solicitor General of India, would contend that in the grounds of arrest, the reasons are specifically mentioned. Particulars of the crimes registered against the respondents and other facts including non-cooperation, role played by each of the accused etc. are also specifically mentioned. Placing reliance on the principle laid down by the Apex Court in Senthil Balaji1, Vijay Madanlal Choudhary4, Satender Kumar Antil v. CBI 21 , A.S. Krishnan15, Y. Balaji v. Karthik Desari 22 he would contend that while dealing with remand application, Designated Court shall not weigh the evidence to find out the guilt of the accused which is, of course, the work of trial Court. The Court is only required to place its view based on probability on the basis of reasonable material collected during investigation and the said view will not be taken into consideration by the trial Court in recording its finding of the guilt or acquittal during trial which is based on the evidence adduced during the trial. The words used in Section - 45 of the PMLA are "reasonable grounds for believing" which means the Court has to see only if there is a genuine case against the accused and the prosecution is not required to prove the charge beyond reasonable doubt. Though material was placed before the 21 . (2022) 10 SCC 51 22 . SLP (Crl.) Nos.12779-12781 of 2022, decided on 16.05.2023 18 KL,J Crl.R.C. No.378 of 2023 & batch Designated Court with regard to the reasons to believe, the Designated Court without considering the same rejected the remand application illegally.
9. During the course of hearing, learned Senior Counsel appearing for the respondents, would submit that the ED has filed only three (03) documents i.e., copy of FIR, grounds of arrest and medical certificates, whereas, learned Additional Solicitor General of India would contend that the ED has submitted all the documents.
10. In the light of the same, it is relevant to note that as discussed above, the Designated Court rejected the remand of the respondents on the aforesaid two (02) grounds i.e., i) non-compliance of Section - 41A of the Cr.P.C. and ii) reasons stated for arrest of the accused are not supported with any justifiable material.
11. CONSIDERATION OF THE COURT:
i) The learned Metropolitan Sessions Judge, Hyderabad, a designated Court under PML Cases, passed the following docket order dated 14.06.2023:
"On perusal of the record, it discloses that Section 41-A of CrPC notice was not complied and the 19 KL,J Crl.R.C. No.378 of 2023 & batch reasons stated for arrest of accused is not supported with any justifiable material. Admittedly the offence alleged against the accused is under Sections 3 and 4 of PML Act attracting the punishment not less than 3 years and which may extend to 7 years. Therefore, in view of the law laid down by the Hon'ble Apex Court in the decision in Satender Kumar Antil, dt:11.7.2022, the submission of the learned Special Public Prosecutor would not sustain as the gravity is not a ground for remanding the accused to judicial custody. Therefore, following the directions in Satender Kumar Antil, dt:1.7.2022 for failure to comply Sec.41-A of CrPC, the accused cannot be remanded to judicial custody. However, for securing the presence of the accused before this court for further proceedings, the accused are directed to furnish personal bonds for Rs.1,00,000/- with two sureties each for a likesum to the satisfaction of this court on or before 16.06.2023."
ii) Thus, the Designated Court rejected the remand application on the following two (02) grounds:
i. Non-compliance of Section - 41A of the Cr.P.C.; and 20 KL,J Crl.R.C. No.378 of 2023 & batch ii. Reasons stated for arrest of the accused are not supported with any justifiable material.
iii) The Designated Court relied upon the law laid down by the Apex Court in Satender Kumar Antil21.
iv) It is relevant to note that the Apex Court in V. Senthil Balaji1 relying upon its earlier judgments in Vijay Madanlal Choudhary4, Satender Kumar Antil21, Directorate of Enforcement v. Deepak Mahajan 23 and other judgments held that:
(a) Section - 41A of the Cr.P.C. has got no application to an arrest made under the PMLA;
(b) When an arrestee is forwarded to the jurisdictional Magistrate under Section - 19 (3) of the PMLA2, no writ of Habeas Corpus would lie. Any plea of illegal arrest is to be made before such Magistrate since custody becomes judicial;
(c) Any non-compliance of the mandate of Section - 19 of the PMLA would enure to the benefit of the person arrested. For such noncompliance, the Competent Court shall have the power to initiate action under Section - 62 of the PMLA; and 23 . (1994) 3 SCC 440 21 KL,J Crl.R.C. No.378 of 2023 & batch
(d) An order of remand has to be challenged only before a higher forum as provided under the Cr.P.C. when it depicts a due application of mind both on merit and compliance of Section -
167 (2) of the Cr.P.C. read with Section - 19 of the PMLA.
v) It is relevant to note that the said judgment was delivered on 07.08.2023, whereas, the impugned order is dated 14.06.2023. Therefore, the Designated Court is not having benefit of going through the said judgment and the principle laid down therein. However, the Designated Court relied on the principle laid down in Satender Kumar Antil21, wherein the Apex Court held that for non-compliance of Section - 41A of the Cr.P.C. accused cannot be remanded to judicial custody.
vi) The Designated Court also relied upon the judgment in Arnesh Kumar v. State of Bihar 24 and K. Ranjith v. State of A.P. 25.
vii) It is relevant to note that in Kamma Srinivas Rao6, this Court eld that PMLA is a complete Code in itself. Therefore, there is no need to comply with Section - 41A of the Cr.P.C. Feeling aggrieved by the said judgment, the respondents therein filed SLP (Criminal) No.1540 of 2022 before the Hon'ble Supreme Court, wherein the Apex Court stayed 24 . (2014) 8 SCC 273 25 . 2021 (2) ALD (Crl.) 768 22 KL,J Crl.R.C. No.378 of 2023 & batch operation of the impugned order directing the petitioners therein to surrender in ten (10) days from the date of order. However, the said criminal appeal is pending before the Hon'ble Supreme Court.
viii) As discussed above, the Apex Court in V. Senthil Balaji1 categorically held that there is no need of compliance of Section - 41A of the Cr.P.C. However, as on the date of the impugned order dated 14.06.2023, the Designated Court is not having benefit of going through the said judgment and relying on the principle laid down in Satender Kumar Antil21, the Designated Court rejected the remand of the respondents vide impugned order dated 14.06.2023.
ix) Section - 3 of the PMLA is relevant and the same are extracted hereunder:
"3. Offence of money-laundering.--Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.
x) In Y. Balaji22, the Apex Court considered the scope of Section -
3 of the PMLA and the relevant paragraph Nos.96, 97, 98 and 99 are relevant and the same are extracted as under: 23
KL,J Crl.R.C. No.378 of 2023 & batch "96. If the main part of Section 3 is dissected with forensic precision, it will be clear that Section 3 addresses itself to three things (we may call them 3 'P's) namely, (i) person; (ii) process or activity; and
(iii) product. Insofar as persons covered by Section 3 are concerned, they are, (i) those who directly or indirectly attempt to indulge; or (ii) those who knowingly assists; or (iii) those who are knowingly a party; or (iv) those who are actually involved. Insofar as process is concerned, the Section identifies six different activities, namely (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting; or
(vi) claiming as untainted property, any one of which is sufficient to constitute the offence. Insofar as product is concerned, Section 3 identifies "proceeds of crime" or the property representing the proceeds of crime as the product of the process or activity.
97. Out of the three things that Section 3 addresses, namely (i) person; (ii) process; and (iii) product, the first two do not require any interpretation or definition. The third aspect namely "product", which Section 3 refers to as "proceeds of crime" requires a definition and hence it is defined in Section 2 (1) (u) as follows:-
"2. Definitions. -- (1) In this Act, unless the context otherwise requires, --
xxx xxx xxx 24 KL,J Crl.R.C. No.378 of 2023 & batch (u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;
Explanation.--For the removal of doubts, it is hereby clarified that "proceeds of crime" including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;"
98. Keeping in mind these essential elements that make up the molecular structure of Section 3, if we go back to the case on hand, we will find (i) that the offences under Sections 120, 419, 420, 467 and 471 IPC are scheduled offences included in paragraph 1 of the Schedule; and (ii) that the offences under Section 7 and 13 of the PC Act are included in paragraph 8 of the Schedule.
99. All the three FIRs allege that the accused herein had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. In one case it is alleged that a sum of more than Rs.2 crores had been collected and in another case a sum of Rs.95 lakhs had been collected. It is this bribe money 25 KL,J Crl.R.C. No.378 of 2023 & batch that constitutes the 'proceeds of crime' within the meaning of Section 2 (1) (u). It is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. The argument that the mere generation of proceeds of crime is not sufficient to constitute the offence of money-laundering, is actually preposterous. As we could see from Section 3, there are six processes or activities identified therein. They are, (i) concealment;
(ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; and (vi) claiming as untainted property. If a person takes a bribe, he acquires proceeds of crime. So, the activity of "acquisition" takes place. Even if he does not retain it but "uses" it, he will be guilty of the offence of money-laundering, since "use" is one of the six activities mentioned in Section 3."
The Apex Court also considered delay in paragraph Nos.113 i.e., from 2016 till 2021.
xi) Section - 19 of the PMLA is also relevant and it is extracted below:
19. Power to arrest.-(1) If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the 26 KL,J Crl.R.C. No.378 of 2023 & batch reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.
(2) The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub-section (1), forward a copy of the order along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed.
(3) Every person arrested under sub-
section (1) shall, within twenty-four hours, be taken to a Special Court or Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction:
Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Special Court or Magistrate's Court."
xii) Thus, as per Section - 19, the following are the factors to be considered for arresting an accused.
27
KL,J Crl.R.C. No.378 of 2023 & batch
(a) There should be material in the possession of the authorized officer;
(b) reasons to believe (reason for such application to be recorded in writing on the basis of the material in possession; and
(c) accused has been guilty of an offence punishable under the provisions of the PMLA.
xiii) The word used is "may". Therefore, despite satisfying the aforesaid three grounds, discretion is vested in the Authorized Officer to effect arrest is not compulsory.
xiv) In Principal Director of Income Tax (Investigation) v. Laljibhai Kanjibhai Mandalia 26, the Apex Court held the formation of opinion and the reasons to believe recorded is not a judicial or quasi- judicial function, but administrative in character.
xv) In A.S. Krishnan15, the Apex Court held as under:
"26 - "Reason to believe": A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise."
In substance what it means is that a person must have reason to believe if the circumstances are such that a 26 . 2022 SCC OnLine SC 872 28 KL,J Crl.R.C. No.378 of 2023 & batch reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. These two requirements i.e. "knowledge" and "reason to believe" have to be deduced from various circumstances in the case. (See Joti Parshad v. State of Haryana (AIR 1993 SC 1167) As noticed by the High Court in great detail, the factual position leaves no manner of doubt that the accused appellants had not only the knowledge, but also had reason to believe that the document was a forged one before they used it.
Acquittal of some of the co-accused from the charge of conspiracy cannot really affect the accusations under Section 471 IPC. In Madan Lal v. The State of Punjab (AIR 1967 SC 1590) two persons were tried for alleged commission of offences punishable under sections 409, 465, 477-A and 120B IPC. Though the accusations under Section 120B were set aside, the High Court confirmed the conviction under Section 409 simpliciter. A contention was raised before this Court that if the charge relating to criminal breach of trust was along with the charge of conspiracy, conviction simpliciter for criminal breach 29 KL,J Crl.R.C. No.378 of 2023 & batch of trust would not be valid. This Court held that if the charge of conspiracy is followed by substantive charge of another offence there is nothing to prevent the Court convicting an accused for the substantive charge even if the prosecution had failed to establish conspiracy. Looked at from any angle the judgment of the High Court does not suffer from any infirmity to warrant interference.
So far as the question of sentence is concerned, we find that the High Court has already taken a liberal view so far as A-2 is concerned. In a case when students use forged mark sheets to obtain admission thereby depriving eligible candidates to get seats and that too to a medical course and a doctor is involved in the whole operation, uncalled for leniency or undue sympathy will be misplaced and actually result in miscarriage of justice. Such types of crimes deserve as a matter of fact, deterrent punishment in the larger interests of society. If at all, the case calls for severe punishment. We find no substance in the plea relating to sentence or extending the benefits of the Probation Act. The appeal fails and is dismissed."
xvi) With regard to the first ground, as discussed above, the Apex Court in Senthil Balaji1 categorically held that Section - 41A of the Cr.P.C. has got no application to an arrest made under the PMLA. The said judgment was rendered by the Apex Court on 07.08.2023, whereas 30 KL,J Crl.R.C. No.378 of 2023 & batch the impugned order is dated 14.06.2023. Therefore, the Designated Court is not having benefit of going through the said order, and consider the said aspect.
xvii) With regard to other ground i.e., reasons for arrest of the accused are not supported with any justifiable material, there is dispute with regard to furnishing of documents by the ED along with remand application. According to the respondents, ED has filed copies of FIR, grounds of arrest and medical certificates, whereas according to the ED, it has filed all the supporting material in support of the reasons for arrest of the accused. However, the Designated Court did not refer the said aspects in its order dated 14.06.2023. It is for the Designated Court to consider the material filed by the ED in support of the reasons for arrest of the accused.
xviii) As discussed above, Designated Court is not having the benefit of going through the judgment of the Apex Court in Senthil Balaji1. In the light of the same, the impugned order dated 14.06.2023 is liable to be set aside.
12. CONCLUSION:
i) In the light of the aforesaid discussion, the impugned order dated 14.06.2023 is liable to be set aside and accordingly the same is set aside. 31
KL,J Crl.R.C. No.378 of 2023 & batch The matter is remanded back to the learned Metropolitan Sessions Judge/Designated Court under PMLA, Nampally, Hyderabad, with a direction to consider the remand application submitted by the ED and pass appropriate orders strictly in accordance with law by putting the ED and the respondents - accused on notice and affording them an opportunity. The Designated Court is directed to consider the principle laid down by the Apex Court in the aforesaid decisions. Liberty is also granted to the ED and the respondents - accused to file all the material before the Designated Court and raise all the grounds and contentions which they have raised in the present petitions, and it is for the Designated Court to consider the same.
ii) Since the matters are remanded back to the Designated Court for fresh consideration and it has to decide legality of the arrest of the accused. Thereafter, it is for the respondents to seek compensation and action under Section - 62 of the PMLA.
iii) The Designated Court shall not insist the physical presence of the respondents in Crl.R.C. No.378 of 2023 during hearing of the said application. However, the respondents shall appear before the Designated Court on the date when the matter is posted for orders. 32
KL,J Crl.R.C. No.378 of 2023 & batch
iv) Criminal Revision Case No.378 of 2023 is accordingly allowed, while W.P. Nos.19163, 21448 & 20835 of 2023 and Criminal Revision Case No.509 OF 2023 are disposed of. In the circumstances of the case, there shall be no order as to costs.
As a sequel, the miscellaneous petitions, if any, pending in the Criminal Revision Cases and the Writ Petitions shall stand closed.
_________________ K. LAKSHMAN, J 8th September, 2023 Note:
Furnish C.C. of order today itself.
(B/O.) Mgr