Babulal Verma S/O Mulchand Varma ... vs Enforcement Directorate, Mumbai ...
2021 Latest Caselaw 4731 Bom

    ssm                              1                  apl-201.21gp.doc

           IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                 CRIMINAL APPELLATE JURISDICTION

            CRIMINAL APPLICATION (APL) NO. 201 OF 2021

                                 WITH

             CRIMINAL BAIL APPLICATION NO. 974 OF 2021

1     Babulal Verma
      S/o. Mulchand Varma

2     Kamal Kishore Gupta
      S/o.Gokalchand Gupta & Anr.                    ... Petitioners

           Vs.

1     Enforcement Directorate, Mumbai

2     State of Maharashtra                           ... Respondents

Mr.Vijay Aggarwal a/w. Mr. Mudit Jain, Mr. Rahul Agarwal, Mr. Aftab
Diamondwala, Mr.Ashraf Diamondwala, Mr.Pradeep Jain and Mr. Vijay Dali
i/b. Diamondwala & Co. for the Applicants in APL No. 201 of 2021.
Mr. Vijay Aggarwal a/w Mr. D.S. Mhaispurkar for the Applicants in BA No.
974 of 2021.
Mr. Anil Singh, Additional Solicitor General a/w. Mr. H.S. Venegavkar and
Mr. Adtiya Thakkar for the Respondent No.1-ED.
Mr. Amit Palkar, A.P.P. for Respondent No.2-State.

                                    CORAM : A.S. GADKARI, J.

DATE : 16th March 2021.

JUDGMENT:-

By the present Application No.201 of 2021, under Section 482

read with Section 483 of the Code of Criminal Procedure, 1973 (for short,

"the Cr.P.C."), the Applicants have impugned Order dated 15 th February,

2021 passed below Exhs-7 and 8 in PMLA RA No.117 of 2021 and Order

ssm 2 apl-201.21gp.doc

dated 28th January, 2021 passed in Remand Application No.117 of 2021 by

learned Special Judge, Mumbai and for direction to release the Applicants

from confinement from Jail in ECIR No.ECIR/MBZO-III/20/2020.

Application No.974 of 2021 is for seeking bail by Applicants.

2 By the impugned Order dated 15th February, 2021, learned

Special Judge has allowed the Application of Respondent No.1 filed below

Exh-7 for extension of judicial custody of the Applicants and has rejected

Application preferred by the Applicants below Exh-8 for grant of bail on any

type of bond.

3 Heard Mr. Aggarwal learned counsel for the Applicants in APL

No.201 of 2021 and BA No.974 of 2021, Mr. Anil Singh, learned Additional

Solicitor General for the Respondent No.1-ED and Mr. Palkar, learned APP

for the Respondent No.2-State.

4 The facts giving rise for filing the present Applications, can be

briefly stated as under:-

(i) Mr. Mahendra S. Surana, lodged a Crime bearing No.109 of

2020 on 7th March, 2020 with City Chowk Police Station, Aurangabad under

Sections 406, 420 read with Section 34 of the Indian Penal Code (for short,

"the IPC") against the Applicants and other accused persons. It is stated

therein that, the informant is one of the Directors of M/s. Aurangabad

Gymkhana Club Private Limited, (for short, "Aurangabad Gymkhana"). It is

alleged therein that, all the accused persons in the said crime jointly

ssm 3 apl-201.21gp.doc

connived with each other and committed the act of criminal breach of trust

and cheated the Aurangabad Gymkhana and it's Directors for an amount of

Rs.12,17,84,451/-by issuing cheques from blocked/ freezed account. The

detailed narration of facts mentioned in the said FIR are not necessary for

decision of the present Applications and therefore, its reproduction is

hereby avoided.

(ii) On 10th July, 2020, the Respondent No.1 (for short "ED")

received a Complaint from Aurangabad Gymkhana against M/s. Omkar

Realtors and Developers Private Limited (for short, "Omkar Realtors") and

its promoters/Directors. The said Complaint referred to FIR No.109 of

2020 filed at City Chowk Police Station, Aurangabad. After perusing the

said Complaint, it appeared to the Respondent No.1-ED that, a Scheduled

Offence as mentioned in Paragraph No.1 of the Schedule of the Prevention

of Money-Laundering Act, 2002 (for short, "PMLA") has taken place. It was

also revealed to the Respondent No.1 that, Omkar Realtors has more than

Rs.2000 Crores of loan of Yes Bank as outstanding. That, the loan was not

used for intended purposes and diverted for other purposes. On the basis of

the said information, it appeared to the ED that, the proceeds of crime

generated out of criminal activities related to the Scheduled Offences

appeared to be routed, utilized and parked by the accused and has

projected it as, untainted.

(iii) An ECIR bearing No.ECIR/MBZO-II/20/2020 dated 16th

ssm 4 apl-201.21gp.doc

December, 2020 has been accordingly recorded and taken up for

investigation under the provisions of PMLA and the Rules framed

thereunder.

(iv) During the course of investigation of the present crime, it was

further revealed to the Respondent No.1 that, rehab buildings of Anand

Nagar SRA CHS, have not been constructed, however, the FSI which would

have been available after construction of rehab buildings, was mortgaged

with Yes Bank and loan of Rs.410 Crores was taken. This kind of notional

FSI was used for availing credit facility from banks. It was also revealed

that, Rs.410 Crores of loan was given for the purpose of construction of

SRA/Rehab Buildings and part of sale buildings, however, the said loan was

diverted towards construction of sale buildings and no rehab buildings were

constructed.

(v) During the course of investigation of the present crime, the

Applicants were produced before the Special Court from time to time for

their remand, which was granted by the impugned Orders. It is to be noted

here that, after the impugned Order dated 28 th January 2021 was passed,

thereby remanding Applicants to ED custody till 30 th January 2021, by a

subsequent Order dated 30th January, 2021, the Special Court, extended

custody of the Applicants for further period of 3 days i.e. upto 2 nd February,

2021. That, on 2nd February 2021, the Applicants were again produced

before the Special Court for seeking their further custody with a Remand

ssm 5 apl-201.21gp.doc

Application. The Special Court, by its Order dated 2 nd February 2021,

rejected the request of the Respondent No.1 for further custodial

interrogation and directed that, the Applicants be remanded to judicial

custody till 15th February 2021. The said Order dated 2nd February 2021,

was impugned before this Court by the Respondent No.1 by way of Criminal

Revision Application No.22 of 2021. This Court, by its Order dated 8 th

February 2021, upheld the Order of Special Court dated 2 nd February 2021

and dismissed the said Revision Application.

(vi) The record further indicates that, on 6 th February 2021, the

Complainant in CR No.109 of 2020, Mr. Mahendra S. Surana, submitted a

letter of even date, to the Investigating Officer of the said crime, stating

therein that, he filed the said Complaint out of misunderstanding. That, the

accused persons therein personally went to his office on 9 th February, 2021

and paid an amount of Rs.14,73,84,361/- after deducting TDS of

Rs.15,10,991/- from the amount due to the Complainant in consideration

of Rs.12,17,84,451/- by way of Demand Draft and it was transferred in the

account of the Complainant's firm in the Axis Bank, Aadalat Road Branch,

Aurangabad.

(vii) The Investigating Officer of CR No.109 of 2020 accordingly

submitted, "C" Summary Report in the Court of Judicial Magistrate, First

Class, Aurangabad on 10th February, 2021. The learned III rd Civil Judge,

Junior Division and Judicial Magistrate, First Class, Aurangabad accepted

ssm 6 apl-201.21gp.doc

the said C-Final Report by its Order dated 12 th February, 2021. The learned

Magistrate, while accepting the said "C" Summary Report, has observed

that, considering the aspects of the said case and the report of the

Investigating Officer and the say of the informant in the form of Affidavit,

as the alleged offences punishable under Sections 406, 420 read with

Section 34 of the IPC are compoundable and the same are compounded

between the informant and all the accused persons, no reason remains to

keep the said C-Final Report pending. It accordingly accepted the said

report.

(viii) As the period of judicial custody of the Applicants was to come

to an end on 15th February 2021, the Respondent No.1 produced the

Applicants before the Special Court by filing an elaborate Remand

Application below Exh-7, under Section 65 of PMLA read with Section 167

of the Cr.P.C. seeking further judicial custody of the Applicants for 14 days.

The Applicants also filed an Application below Exh-8 dated 15 th February,

2021 for opposing any further remand and for forthwith release of the

Applicants on any type of bond or otherwise, as may be directed by the

concerned Court in the crime registered by ED. The Special Court, by its

common Order dated 15th February 2021, passed below Exhs-7 and 8 was

pleased to allow the Application of Respondent No.1 below Exh-7 and

remanded the Applicants to judicial custody till 1 st March 2021 and rejected

Application filed by the Applicants below Exh-8.

     ssm                                 7                    apl-201.21gp.doc

5           Mr. Aggarwal, learned counsel for the Applicants submitted

that, Amendment to Sub-Section (b) of Section 44 of the PMLA by way of

insertion of proviso came into effect from 1 st August, 2019. He submitted

that, the Hon'ble Supreme Court pronounced its judgment in the case of P.

Chidambaram Vs. Directorate of Enforcement, reported in (2019) 9 S.C.C.

24 on 5th September, 2019. That, after taking into consideration the said

Amendment, the Hon'ble Supreme Court in para No.24 has categorically

held that, "Scheduled offence" is a sine qua non for the offence of money-

laundering which would generate money that is being laundered. He

submitted that, in the Frequently Asked Questions (FAQs) on the PMLA,

published by the Enforcement Directorate, Government of India and in

particular question Nos.6, 10 to 13, the Respondent No.1 has given

information about what is money laundering?, what is the offence of money

laundering?, proceeds of crime, Scheduled Offence and Predicate offence.

He submitted that, to question No.13 i.e. what is a predicate offence?, the

answer given by the ED to it is, every Scheduled Offence is a predicate

offence. The Scheduled Offence is called predicate offence and the

occurrence of the same is a pre-requisite for initiating investigation into the

offence of money laundering. He also drew my attention to Annexure-4,

Format No.1 i.e. the Form prescribed by the Respondent No.1 for lodgment

of ECIR. He further submitted that, the then Finance Minister, who was the

presenting Minister of the Finance Act in Rajya Sabha on 17 th December,

ssm 8 apl-201.21gp.doc

2012 has said that, "we must remember that money-laundering is a very

technically-defined offence. It is not the way we understand 'money-

laundering' in a colloquial sense. It is a technically-defined offence. It

postulates that there must be a predicate offence and it is dealing with the

proceeds of a crime. That is the offence of money-laundering. It is more

than simply converting black-money into white or white money into black.

That is an offence under the Income Tax Act.................So, it is a very

technical offence. The predicate offences are all listed in the Schedule.

Unless there is a predicate offence, there cannot be an offence of money-

laundering."

By relying on a decision of the Supreme Court in the case of

K.P. Varghese Vs. Income Tax Officer, Ernakulam & Ors. reported in MANU/

SC/0300/1981 : AIR 1981 SC 1922, he submitted that, where the speech

made by the Finance Minister while introducing a Clause in the Act, was

relied upon by the Court for the purpose of ascertaining what was the

reason for introducing that Clause. The same has to be construed as

intention of Legislature.

Mr. Aggarwal therefore, submitted that, the moment Predicate/

Schduled offence comes to an end, the offence lodged by Respondent No.1

on the basis of the said Predicate Offence also comes to an end and does

not remain in existence. He submitted that, it is a settled legal proposition

that, if initial action is not in consonance with law, all subsequent and

ssm 9 apl-201.21gp.doc

consequential proceedings would fall through for the reason that illegality

strikes at the root of the order. In such a fact situation, the legal maxim

sublato fundamento cadit opus meaning thereby that foundation being

removed, structure/work falls, comes into play and applies on all scores in

the present case. In support of his contention, he relied on the decision of

the Supreme Court in the case of State of Punjab Vs. Davinder Pal Singh

Bhullar, reported in (2011) 14 S.C.C. 770. By relying on a decision of the

Hon'ble Supreme Court in the case of Sanjaysingh Ramrao Chavan Vs.

Dattatray Gulabrao Phalke & Ors. reported in (2015) 3 S.C.C. 123 and in

particular para No.17, Mr. Aggarwal submitted that, therefore once the

'crux' goes, the superstructure also falls, lacking in legs. Hence, prosecution

becomes a futile exercise, as the materials available do not show that an

offence is made out as against the accused.

He therefore, vehemently submitted that, once the Scheduled

Offence lodged against the Applicants is compromised/compounded by the

Complainant therein, the structure of the present crime registered by ED

falls on ground, as it does not survive and is non-est. He submitted that, in

view thereof, the offence registered by the Respondent No.1 under the

PMLA now stands wiped out from the record and therefore, there is no

question of Applicants being remanded to further custody and therefore,

the Applicants are entitled to be released on bail.

He further submitted that, in the case of Om Prakash Nogaja

ssm 10 apl-201.21gp.doc

& Anr. Vs. K. Nageshwar Rao & Anr. decided by the learned Single Judge of

this Court, on 10th August, 2009, in Criminal Application No.3360 of 2009,

it is held that, it is only when property is derived or obtained as a result of

criminal activity relating to the Scheduled Offence, then and then alone the

offence under Section 3 of PMLA could be committed by indulging any

process or activity connected with the proceeds of crime and by projecting

it, as untainted property. He therefore, at the cost of repetition submitted

that, as the Scheduled Offence in the present case, has been compounded

and the learned Magistrate has accepted "C" Summary Report, the

prosecution initiated by the Respondent No.1 under PMLA does not survive.

Mr. Aggarwal submitted that, the Respondent No.1 in Para

No.2.3 of its reply has stated that, after recording the case under PMLA,

inquiry, investigation and trial under the said Act is totally independent

from the investigation and Orders of the Scheduled Offence. He submitted

that, the Explanation inserted to Section 44(1)(d) of PMLA will not change

the basic provision of Section 44(c) and Explanation (i) thereto. In support

of his contention, he relied on the decision of the Hon'ble Supreme Court in

the case of Hardev Motor Transport Vs. State of Madhya Pradesh reported

in 2006 (8) S.C.C. 613. He submitted that, it has been held therein that, by

inserting an explanation in Scheduled of the Act, main provisions of the Act

cannot be defeated. He submitted that, hence the explanation to Section

44(1)(d) cannot be read in a manner so as to defeat the basic purpose for

ssm 11 apl-201.21gp.doc

which the PMLA was introduced.

Mr. Aggarwal further contended that, even this Court in an

earlier round of litigation i.e. in Criminal Revision Application No.22 of

2021 in its Order dated 8 th February, 2021, has observed that, on the basis

of a Scheduled Offence i.e. FIR No.109 OF 2020, the present crime has

been registered by the Respondent No.1 on 16 th December, 2020. He

submitted that, as the Predicate/Scheduled Offence itself is not in existence,

the existence of a crime under PMLA is wiped out.

Mr. Aggarwal submitted that, the reasoning given by the

Special Court while passing impugned Order dated 15 th February, 2021 is

fallacious. He submitted that, the impugned Orders are wholly erroneous

and needs to be quashed and set aside.

6 Mr. Anil Singh, the learned Additional Solicitor General of

India, while opposing the Applications drew my attention to the Remand

Application dated 15th February, 2021 filed below Exh-7. He submitted

that, the facts mentioned in the said Application would make it abundantly

clear that, the offence which is being investigated by the Respondent No.1

is a very serious economic offence, with an allegation of money-laundering

of Rs.410 Crores by the Applicants. He submitted that, as per the

Respondent No.1, the firm of the Applicants has more than Rs.2000 Crores

of loan of Yes Bank as outstanding. He submitted that, even if a settlement

has taken place between the Original Complainant and the Applicants

ssm 12 apl-201.21gp.doc

herein, in the said Predicate/Scheduled Offence, the ED continues to

investigate the aspect as to, where the laundered money has gone. He

submitted that, the object behind enacting the present Act is laudable. It is

the prime intention of the Legislature to investigate into the offence of

money-laundering. He submitted that, for removal of doubts, the

Legislature has inserted Explanation to Sub-Section (d) of Section 44 by

Finance (No. 2) Act, 2019 (23 of 2019), which has come into effect from 1 st

August, 2019. That, in view of the explanation to Sub-Section (d) of

Section 44, the jurisdiction of the Investigating Agency and Special Court

under PMLA, is not dependent on any Orders passed in respect of the

Scheduled Offence. By referring to Explanation to Section (2)(1)(u), he

submitted that, proceeds of crime include 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. He submitted that, the said

Explanation is wide enough to interpret and constricted or narrow

interpretation of the same is not permissible. He submitted that, during the

course of the investigation of the present crime, it clearly revealed that, the

Applicants along with other accused persons have diverted a loan of Rs.410

Crores obtained from Yes Bank for some other purpose, than for which it

was approved. That, the Applicants have committed an offence as

contemplated under Section 3 of PMLA. He submitted that, the criminal

ssm 13 apl-201.21gp.doc

activities of the Applicants have larger effect on the society as an economic

offence committed in a planned manner.

Mr. Singh further submitted that, proviso to Sub-Section (b) of

Section 44 has been brought into effect with 1st August, 2019 and therefore,

it cannot be said that, merely because of a closure report is filed in the

Scheduled Offence, the Respondent No.1 cannot continue with the

investigation. He submitted that, if the Respondent No.1 comes to the

conclusion that, no offence under PMLA is made out, it may submit a

closure report before the Special Court.

Mr. Singh, further submitted that, the ED came into picture

when it was informed to them by the Complainant in the Scheduled

Offence. That, it is a case of money-laundering of Rs.410 crores. That, the

Applicants along with other Accused persons have taken loan of Rs.410

crores from Yes Bank by mortgaging future FSI for constructing rehab

buildings for slum dwellers. The rehab buildings for slum dwellers are not

constructed till today. That, no rehabilitation of the slum dwellers has

taken place and the said money has been diverted and used somewhere else

by the Applicants.

Mr. Singh submitted that, the investigation of the present crime

is an independent investigation. Once the ECIR is registered, then the

base/Predicate/Scheduled Offence is no more further required for taking

offence under PMLA to its logical end. He submitted that, scheduled

ssm 14 apl-201.21gp.doc

offence is necessary only for registration of an offence under PMLA and

thereafter, whatever may happen to the Predicate/Scheduled Offence is

totally irrelevant. He submitted that, otherwise the basic purpose of

enacting PMLA will be frustrated. He submitted that, the Division Bench of

this Court in the case of Radha Mohan Lakhotia Vs. Deputy Director, PMLA,

Directorate of Enforcement reported in 2010 SCC Online Bom. 1116, has

held that, the offence of money-laundering under Section 3 of the Act is an

independent offence. That, the said view has been followed by the Division

Bench of the Madras High Court in the case of VGN Developers P. Ltd & Ors.

Vs. The Deputy Director, Directorate of Enforcement reported in

MANU/TN/6087/2019. He submitted that, the PMLA is self contained and

the offence registered under it, can stand alone, independent of Predicate

Offence. He submitted that, similar view has been expressed by the Sikkim

High Court in the case of Eastern Institute for Integrated Learning in

Management University Vs. The Joint Director, Directorate of Enforcement

and Ors. dated 17th September, 2015 and Smt. Usha Agarwal Vs. Union of

India & Ors. dated 29th August, 2017.

He therefore, submitted that, there are no merits in the

Applications and it may be dismissed summarily.

7 In rejoinder to the arguments of the learned Additional

Solicitor General, Mr. Aggarwal submitted that, in the present case, the

Complainant in the Predicate crime himself states that, he lodged the said

ssm 15 apl-201.21gp.doc

Complaint out of misunderstanding and therefore, the Investigating Agency

has filed "C" Summary Report before the Trial Court, which has been

accepted by the learned Magistrate. He submitted that, the Respondent

No.1 derives jurisdiction on the basis of the Scheduled Offence only. That,

once the Predicate/Scheduled Offence goes, the case of Respondent No.1

collapses. He submitted that, the observations made by the Division Bench

in Radha Mohan Lakhotia's case (Supra) are restricted to that case only. He

submitted that, the Judgment of the Madras High Court in VGN Developers

P. Ltd (Supra) is under challenge before the Hon'ble Supreme Court and the

trial arising out of the said case has been stayed by an Order dated 17 th

December, 2019. He therefore, once again prayed that, the present

Applications may be allowed.

8 Section 2(1) of the PMLA defines various terms. Sub-section

(n) defines 'intermediary'; (na) defines 'investigation'; (p) defines 'money-

laundering'; (u) defines 'proceeds of crime' and (y) defines 'Scheduled

Offence'. Section 3 of the Act defines Offence of money-laundering. Section

4 prescribes punishment for money-laundering and Section 5 of the Act

prescribes attachment of property involved in money-laundering.

A conjoint reading of Sections 2(1)(n)(na)(p)(u)(y), 3, 4 and 5

with the Statement of Object in enacting the PMLA would clearly indicate

that, it has been enacted with an avowed object to investigate into the

offence of money-laundering and to punish the accused for commission of

ssm 16 apl-201.21gp.doc

the said offence. It also provides for attachment of property involved in

money-laundering.

9 It is the settled position of law by a catena of judgments that, a

statute is an edict of the Legislature and the conventional way of

interpreting or construing a statute is to seek the 'intention' of its maker. A

statute is to be construed according to the intent of them, that make it and

the duty of judicature is to act upon the true intention of the Legislature. If

a statutory provision is open to more than one interpretation the Court has

to choose that interpretation which represents the true intention of the

Legislature, in other words the 'legal meaning' or 'true meaning' of the

statutory provision. The statute must be read as a whole in its context. It is

now firmly established that the intention of the Legislature must be found

by reading the statute as a whole.

The statute to be construed to make it effective and workable

and the Courts strongly lean against a construction which reduces a statute

to futility. A statute or any enacting provision therein must be so construed

as to make it effective and operative. The Courts should therefore reject

that construction which will defeat the plain intention of the Legislature

even though there may be some inaccuracy or inexactness in the language

used in a provision. Every provision and word must be looked at generally

and in the context in which it is used. Elementary principle of interpreting

any word while considering a statute is to gather the intention of the

ssm 17 apl-201.21gp.doc

legislature. The Court can make a purposeful interpretation so as to

effectuate the intention of the legislature and not a purposeless one in order

to defeat the intention of the legislature wholly or in part.

10 At the time of debate in Rajya Sabha, while introducing

Amendment to the Finance Act on 17th December, 2012, the then Finance

Minister has categorically made the aforestated statements as reproduced in

para No.5 page No.8 above. From the statement of the Finance Minister, it

can be clearly discerned that, for lodgement for an offence under the PMLA,

there must be a Predicate Offence and it is dealing with the proceeds of a

crime. The information published by Respondent No.1-ED pertaining to

FAQs, for an answer to question No.13 therein, it has been specifically

stated that, every Scheduled Offence is a Predicate Offence. The Scheduled

Offence is called Predicate Offence and the occurrence of the same is pre-

requisite for initiating investigation into the offence of money-laundering.

The Hon'ble Supreme Court, in the case of P. Chidambaram

(Supra) while considering various provisions of PMLA and in particular

Section 2(1)(y), which defines "Scheduled Offence" has held that,

"Scheduled Offence" is a sine qua non for the offence of money-laundering

which would generate the money that is being laundered. It is held that,

PMLA contains schedules, which originally contained three parts namely,

Part-A, Part-B and Part-C.

The Division Bench of this Court in the case of Radha Mohan

ssm 18 apl-201.21gp.doc

Lakhotia (Supra) in para No.13 has held that, Sections 3 and 4 of the Act

deal with the offence of money-laundering and punishment for money-

laundering respectively. That, both these provisions, even on strict

construction, plainly indicate that, the person to be proceeded for this

offence need not necessarily be charged of having committed a Scheduled

Offence. For the Expression used is "whosoever". The offence of money-

laundering under Section 3 of the Act is an independent offence. It is

committed if "any person" directly or indirectly attends to indulge or

knowingly assists or knowingly is a party or is actually involving any

process or activity connected with the proceeds of crime and projecting it as

untainted property. The Division Bench thus in unequivocal terms has held

that, the offence of money-laundering under Section 3 of the PMLA is an

independent offence.

The Division Bench of Madras High Court in the case of VGN

Developers P. Ltd & Ors. (Supra) has relied upon the decision in the case of

Radha Mohan Lakhotia (Supra). The Madras High Court accepted the

contention of the learned Additional Solicitor General appearing therein,

that, the PMLA is self-contained and stand alone and thus, independent of

predicating offence. It has been held that, it cannot be stated that, a mere

closure by the CBI would provide a death knell to the proceedings of the

Respondent (i.e.ED therein). That, in a given case, the complaint may

emanate from a registration of a case involving scheduled offence. But the

ssm 19 apl-201.21gp.doc

fate of the investigation in the said scheduled offence cannot have bearing

to the proceedings under the PMLA. From the reading of the said decision

it is clear that, mere filing of closure report by the Investigating Agency will

not create any impediment or hurdle in the process of investigation by the

ED of an offence registered under PMLA and being investigated by it.

11 It is thus absolutely clear that, for initiation/registration of a

crime under the PMLA, the only necessity is registration of a

Predicate/Scheduled Offence as prescribed in various Paragraphs of the

Schedule appended to the Act and nothing more than it. In other words,

for initiating or setting the criminal law in motion under the PMLA, it is

only that requirement of having a predicate/Scheduled crime registered

prior to it. Once an offence under the PMLA is registered on the basis of a

Scheduled Offence, then it stands on its own and it thereafter does not

require support of Predicate/Scheduled Offence. It further does not depend

upon the ultimate result of the Predicate/Scheduled Offence. Even if the

Predicate/Scheduled Offence is compromised, compounded, quashed or the

accused therein is/are acquitted, the investigation of ED under PMLA does

not get affected, wiped away or ceased to continue. It may continue till the

ED concludes investigation and either files complaint or closure report

before the Court of competent jurisdiction.

12 The language of Sections 3 and 4 of PMLA, makes it absolutely

clear that, the investigation of an offence under Section 3, which is

ssm 20 apl-201.21gp.doc

punishable under Section 4, is not dependent upon the ultimate result of

the Predicate/Scheduled Offence. In other words, it is a totally

independent investigation as defined and contemplated under Section

2(na), of an offence committed under Section 3 of the said Act.

PMLA is a special statute enacted with a specific object i.e. to

track and investigate cases of money-laundering. Therefore, after lodgment

of Predicate/Scheduled Offence, its ultimate result will not have any

bearing on the lodgment/investigation of a crime under the PMLA and the

offence under the PMLA will survive and stand alone on its own. A

Predicate/Scheduled Offence is necessary only for registration of crime/

launching prosecution under PMLA and once a crime is registered under the

PMLA, then the ED has to take it to its logical end, as contemplated under

Section 44 of the Act.

13 The PMLA itself, does not provide for any contingency like the

case in hand and argued by the learned counsel for the Applicants. Section

44(b) only provides for filing of a complaint or submission of a closure

report by the Investigating Agency under PMLA and none else.

If the contention of the learned counsel for the Applicants that,

once the foundation is removed, the structure/ work thereon falls is

accepted, then it will have frustrating effect on the intention of Legislature

in enacting the PMLA. The observations of the Hon'ble Supreme Court in

the case of State of Punjab Vs. Davinder Pal Singh Bhullar, (supra) in

ssm 21 apl-201.21gp.doc

paragraph No.107 and Sanjaysingh Ramrao Chavan (Supra) in para No.17

are in context of the facts of the said case and pertaining to the offences

under the provisions of IPC and P.C. Act and therefore, the same cannot be

applied to the case in hand which arises out of a special statute namely

PMLA enacted by the Legislature with an avowed object.

Hypothetically, 'an accused' in a Predicate/Scheduled Offence is

highly influential either monetarily or by muscle power and by use of his

influence gets the base offence, compromised or compounded to avoid

further investigation by ED i.e. money laundering or the trail of proceeds of

crime by him, either in the Predicate/Scheduled Offence or any of the

activities revealed therefrom. And, if the aforestated contention of the

learned counsel for the Applicants is accepted, it will put to an end to the

independent investigation of ED i.e. certainly not the intention of

Legislature in enacting the PMLA. Therefore, if the contention of the

learned counsel for the Applicants is accepted, in that event, it would be

easiest mode for the accused in a case under PMLA to scuttle and/or put an

end to the investigation under the PMLA. Therefore, the said contention

needs to be rejected.

14 In view of the aforesaid discussion, it is clear that, even if the

Investigating Agency investigating a Scheduled Offence has filed closure

report in it and the Court of competent jurisdiction has accepted it, it will

not wipe out or cease to continue the investigation of Respondent No.1

ssm 22 apl-201.21gp.doc

(ED) in the offence of money-laundering being investigated by it. The

investigation of Respondent No.1 will continue on its own till it reaches the

stage as contemplated under Section 44 of the PMLA.

The contention for the learned counsel for the Applicants in

that behalf is accordingly answered.

15 The Respondent No.1 is investigating an offence under Sections

3 and 4 of the PMLA. The Respondent No.1 in its Application filed below

Exh-7 has stated that, it has been revealed during the investigation of the

present crime that, the firm of the Applicants namely M/s. Omkar Relators

and Developers Private Limited had clubbed project of 4 SRA projects

namely (i) Mahalaxmi SRA CHS in G South Ward, (ii) Ganeshwadi

Utkarsha SRA CHS in F South Ward, (iii) Sheikh Mishree SRA CHS in F

North Ward and (iv) Anand Nagar SRA CHS in F North Ward. The total

loan taken for the said project of Worli 1973 from Yes Bank was Rs.3155

Crores out of which Rs.2755 Crores was disbursed. That, a loan of Rs.1800

Crores is still outstanding and the same has turned NPA. It has been further

revealed that, the rehab buildings of Anand Nagar SRA CHS have not been

constructed, however, the FSI, which would have been available after

construction of the rehab buildings was mortgaged with Yes Bank and the

loan of Rs.410 Crores was taken. Thus, a kind of notional FSI was used for

availing the credit facility from Banks. It is also revealed that, Rs.410

Crores loan was given for the purpose of construction of SRA/Rehab

ssm 23 apl-201.21gp.doc

buildings and part of sale buildings, however, total loan was diverted

towards sale buildings and no rehab buildings were constructed. It was

further found that, the said loan was sanctioned by creating exclusive

charge on all development rights/FSI/Saleable area/ interest with respect

to Wadala SRA Project along with structure built thereon (present and

future) along with any sale of TDR/FSI generated from this project. That,

the rehab buildings of SRA project at Wadala and Antop Hill were to be

completed along with O.C. for the same rehab buildings. However, the

rehab buildings are still not completed. The Respondent No.1 is

investigating into the money-laundering of the said huge amount by the

Applicants. The Respondent No.1 therefore, filed a detailed Application for

further judicial custody of the Applicants below Exh-7 as noted earlier. The

Trial Court, by its impugned Order has allowed the said Application.

16 It is the settled position of law that, in a case of money-

laundering where it involves many stages of "placement", "layering i.e.

funds moved to other institutions to conceal origin" and "interrogation i.e.

funds used to acquire various assets", it requires systematic and analysed

investigation which would be of great advantage.

The further remand of Applicants to judicial custody is

therefore proper on all counts. This Court finds that, the Special Court has

not committed any error while passing impugned Order thereby remanding

the Applicants to further judicial custody. In view of the above discussion, it

ssm 24 apl-201.21gp.doc

is not necessary to interfere with the impugned Order dated 15th February,

2021 passed below Exhs-7 and 8 in PMLA RA No.117 of 2021 by learned

Special Judge, Mumbai.

17 Coming to prayer clause (b) of the Application, whereby the

Applicants have impugned Order dated 28 th January, 2021 in Remand

Application No.117 of 2021, thereby remanded them further to the custody

of ED till 30th January, 2021. It is to be noted here that, after the impugned

Order dated 28th January 2021 was passed, remanding Applicants to ED

custody till 30th January 2021, by an Order dated 30 th January, 2021, the

Special Court, extended custody of the Applicants for a further period of 3

days i.e. upto 2nd February, 2021. That, on 2nd February 2021, the

Applicants were again produced before the Special Court for seeking their

further custody with a Remand Application. The Special Court, by its Order

dated 2nd February 2021, rejected the request of the Respondent No.1 for

further custodial interrogation and directed that, the Applicants be

remanded to judicial custody till 15 th February 2021. The said Order dated

2nd February 2021, was impugned before this Court by the Respondent No.1

by way of Criminal Revision Application No.22 of 2021. This Court, by its

Order dated 8th February 2021, upheld the Order of Special Court dated 2 nd

February 2021 and dismissed the said Revision Application. It is thus clear

that, the subsequent remands of Applicants by Orders dated 30 th January,

2021 and 2nd February, 2021 have been approved by this Court. As noted

ssm 25 apl-201.21gp.doc

earlier, the Order dated 2nd February, 2021 passed by the Special Court

remanding the Applicants to the judicial custody has been upheld by this

Court by its Order dated 8 th February, 2021. The said prayer clause (b) of

the present Application therefore does not survive.

In view of the above discussions the Applicants cannot be

released from confinement or on bail.

18 A corollary to the aforestated deliberation is that, there are no

merits in the present Application and is accordingly dismissed.

19 In view of dismissal of Application No.201 of 2021, the Bail

Application No. 974 of 2021 does not survive and is accordingly disposed

off.

(A.S. GADKARI, J.)

Digitally signed by Sanjiv S. Sanjiv S. Mashalkar Mashalkar Date: 2021.03.18 13:11:17 +0530