M/S Billbody Vyapar Pvt. Ltd. vs The State Of Jharkhand Through ...
2022 Latest Caselaw 3877 Jhar

                                     1

      IN THE HIGH COURT OF JHARKHAND AT RANCHI
                  Cr.M.P. No. 3913 of 2018

M/s Billbody Vyapar Pvt. Ltd., through its Director namely, Buban Dutta,
aged about 34 years, son of Shri Madhusudan Dutta, resident of 00, Saltora
Bankura Road, Jhanka, P.O. Jhanka, P.S. Jhanka, District Bankura (West
Bengal) registered office at 7/1B, Grant Lane, Ground floor, Kolkata, P.O. and
P.S. Grant Lane, District-Kolkata (West Bengal )
                                    ...... Petitioner
                         Versus

The State of Jharkhand through Enforcement Directorate
                                                   ...... Opposite Party
                            with
                       Cr.M.P. No. 3918 of 2018

M/s Smridhi Sponge Ltd. through its Director namely, Swapan Kumar Roy,
aged 48 years, son of Shri Santosh Chandra Roy, resident of K.N. -84,
Kailash Nagar, Chhota Govindpur, Near Main Road, P.O. Chhota Govindpur,
P.S. Govindpur, Town Jamshedpur, District-East Singhbhum registered office
at Room No. 3AB, 34d Floor, Bishnu Residency, 193, Netaji Subhash Road,
Kolkata, Netaji Subhash Road, District-Kolkata, West Bengal
                                                          ...... Petitioner
                        Versus

The State of Jharkhand through Enforcement Directorate
                                                   ...... Opposite Party
                       With
                       Cr.M.P. No. 1440 of 2019

Tarun Kanti Paul, aged about 36 years, son of Manohar Lal Paul, resident of
H. No. 254, Road No. E, New West layout, Sonari, P.S. Sonari, Town
Jamshedpur, District-East Singhbhum
                                  ...... Petitioner
                        Versus

The State of Jharkhand through Enforcement Directorate
                                                   ...... Opposite Party

                         ---------

CORAM:      HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI
                      ---------
For the Petitioners             : Mr. Indrajit Sinha, Advocate
                                :Mr. Ajay Kr. Sah, Advocate

For the Enforcement Directorate : Mr. Amit Kr. Das, Advocate Mrs. Swati Shalini, Advocate Mr. Saurav Kumar, Advocate ................

C.A.V. on 18.08.2022 Prononunced on :-22/09/2022 The Court heard Mr. Indrajit Sinha, learned counsel appearing on

behalf of the petitioners and Mr. Amit Kr. Das, learned counsel appearing on

behalf of Enforcement Directorate at length on 18.08.2022 and on that date

judgment was reserved.

2. In all the petitions common facts and law are involved hence all the

petitions have been heard together with the consent of the parties.

3. In all these petitions prayer has been made for quashing of the

entire criminal proceedings including order taking cognizance dated 17.07.2018

(Cr.M.P. Nos. 3913/2018 & Cr.M.P. No. 3918/2018) and order taking cognizance

dated 03.05.2019 (Cr.M.P. No. 1440/2019) passed in connection with

ECIR/02/Pat/09/AD whereby learned A.J.C. XVI-cum-Special Judge, P.M.L. Act

has been pleased to find a prima facie case and had issued summons to the

petitioners for the offence under section 3 punishable under Section 4 of

Prevention of Money Laundering Act, 2002, pending in the Court of learned

A.J.C. XVI-cum-Special Judge, P.M.L. Act, Ranchi.

4. Prosecution has been lodged alleging therein as under.

"(a). Complainant is the Assistant Director, Directorate of Enforcement and this complaint is being filed under section 45 of PMLA for commission of offence defined under Section 3 of PMLA and punishable under Section 4 of PMLA, 2002 against the aforesaid accused person. The complainant is authorized person for filing this Supplementary Complaint in view of Notification No. S.O. 1274 (E), dated 13th September, 2005 issued by the Central Government and Government of India Notification No. F.N. 6/14/2008-ES dated 10.06.2008 read with addendum dated 04th August, 2012.

(b). The Directorate of Enforcement had earlier filed a Complaint on 15.01.2011 under Section 45 of PMLA against Binod Kumar for commission of offence under section 3 of PMLA, punishable under section 4r of the said Act for commission of offence of money laundering involving proceeds of crime and the investigation was continuously in progress.

(c)3. The learned court after taking cognizance of the offence, has framed charges in the said complaint against Binod Kumar Sinha and others on 25.09.2012 and trial is going on jointly against all seven accused persons before the Hon‟ble Court.

(d). The averments made in the earlier complaint filed on 15.01.2011 under section 45 of PMLA against Binod Kumar Sinha for commission of offence under section 3 of PMLA, may be taken as a part and facts are not repeated for the sake of brevity.

(e). During the investigation subsequent to the Final Report filed on 28.01.2010 by the Vigilance Bureau, Ranchi against Shri Madhu Koda and Others, a Provisional Attachment Order (PAO) No. 04 dated 10.11.2010 to attach the properties acquired through commission of offence of money laundering by the persons made accused in the supplementary complaint was issued by the directorate.

5. Mr. Indrajit Sinha, learned counsel appearing on behalf of the

petitioners in all the cases submitted that learned court by order dated

17.07.2018 (Cr.M.P. Nos. 3913/2018 & Cr.M.P. No. 3918/2018) and order dated

03.05.2019 (Cr.M.P. No. 1440/2019) has been pleased to take cognizance of the

offence punishable under section 3 punishable under section 4 of PML Act,

2002 and further directed to issue summons to the accused persons including

the petitioners. He submitted that company namely, M/s Bill Body Vyapar Pvt.

Ltd. was incorporated on 17th September, 1993. He submitted that at page

156 of the Provisional Attachment Order No. 4 dated 10.11.2010, it has been

mentioned that Mr. Mrinal Kanti Paul is one of the Directors of M/.s Creative

Fiscal Pvt. Ltd. which is factually incorrect. He submitted that from the

financial year 2007-08 to financial year 2010-11, it is apparent that Shri Mrinal

Kanti Paul was never appointed as a Director of M/.s Creative Fiscal Pvt. Ltd. He

submitted that foundation of allegation i.e. the link between other accused

persons viz. Shri Madhu Koda and Shri Mrinal Kanti Paul on the other is based

on the incorrect fact that Shri Paul was a Director of M/.s Creative Fiscal Pvt.

Ltd. along with Shri Joshi. He submitted that the petitioner in Cr.M.P. No. 3913

of 2018 was not an accused in the trial which has commenced pursuant to

submission of Charge Sheet No. 01 of 2013 dated 21.05.2013 in R.C. Case No.

5(A)/2010/AHD/AC.1. He submitted that on the basis of supplementary

complaint cognizance has been taken. He submitted that so far as finding with

regard to petitioner in Cr.M.P. No. 3913 of 2018 is concerned, the Adjudicating

Authority in its order dated 06.04.2011 has recorded at paragraph 169 where

he found that fixed assets of this company at least to the extent of Rs. 15

crores represented proceeds of crime. He submitted that said order dated

06.04.2011 passed by the Adjudicating Authority has been challenged by the

petitioner by filing an appeal being Appeal No. FPA-

PMLA/188/LKW/188/LKW/2011, which is still pending. He submitted that

order dated 06.04.2011 has not yet attained finality. He submitted that

Adjudicating Authority in its order dated 06.04.2011 has erred in law as well as

on facts to come to a conclusion that the petitioner has received proceeds of

crime and the same is retained even as of now. He submitted that in

paragraph no. 172 of the order dated 06.04.2011, findings that Paul brothers

are in control of these companies, are without any basis. He submitted that

statement of Mrinal Kanti Paul before the Income Tax Authority, cannot be sole

ground to initiate proceeding under the provision of PMLA Act. He submitted

that R.C. Case No. 5(A)/2010/AHD/AC.1 relates to the disproportionate assets

of Shri Madhu Koda and the check period is March, 2005 to May, 2009. He

submitted that so far as petitioner in Cr.M.P. No. 3918 of 2018 is concerned, in

paragraph no. 150 of the order of adjudicating authority dated 06.04.2011 the

Adjudicating Authority has recorded that as per statement of Shri Mrinal Kanti

Paul, Director of M/.s Creative Fiscal Pvt. Ltd. before income tax authorities on

17.02.2010 Binod Sinha is out of M/s Smridhi Sponge and his share have been

purchased by Manohar Paul for Rs. 12 crores. He submitted that in paragraph

no. 154 of the order of adjudicating authority it has been recorded that all

these four companies are operating from two rooms in the same address 23A,

N.S. Road, Kolkata, as the copies of their letter dated 11.07.09 addressed to

Creative Fiscal indicate. He submitted that the petitioner in Cr.M.P. No. 1440 of

2019 has been arrayed as an accused in the present complaint solely for the

reason that the petitioner at the relevant point of time was Director of Smridhi

Sponge Ltd. He submitted that admittedly there was other directors in the

company at the relevant point of time, but they have not been made an

accused. He submitted that the allegation that the proceeds of crime

generated by Shri Madhu Koda and Shri Binod Sinha were knowingly concealed

and transferred by him is legally and factually untenable. He submitted that

shares of Smridhi were purchased by M/.s Creative Fiscal on or about

December, 2007 and admittedly at that point of time, the petitioner namely,

Tarun Kanti Paul was not even a director or any way concerned with Smridhi.

He submitted that remaining 50% shares of Smridhi were purchased by M/s

Kamayani Saler Promotion Pvt. Ltd., M/s Saket Distributors Pvt. Ltd., M/s TRS

Finvest Leasing Ltd., M/s Wofin Leasing & Finance Pvt. Ltd., M/s Eastern Credit

Capital Pvt. Ltd., M/s Dhantaresh Tarcon Pvt. Ltd. and M/s Billbody Vayapaar

Pvt. Ltd. on or about January, 2008. He submitted that none of the sections

and provisions of PMLA is applicable so far the petitioners are concerned. He

submitted that a shareholder has got no interest in the property of the

company though he has a right to participate in the profits. He relied on

judgment in the case of " Bacha F. Guzdar Vs. Commissioner of Income

Tax, Bombay" reported in AIR 1955 S.C. 74 wherein para 7 the Hon‟ble

Supreme Court has held as under:-

"7. It was argued by Mr Kolah on the strength of an observation made by Lord Anderson in Commissioners of Inland Revenue v. Forrest that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word „assets‟ in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-a-vis the company was explained in the Sholapur Mills Case. That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in the property of the company. It is true that the shareholders of the company have the, sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders. Reliance is placed on behalf of the appellant on a passage in Buckley‟s Companies Act (12th Edn.), p. 894 where the etymological meaning of dividend is given as dividendum, the total divisible sum but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company. The proper approach to the solution of the Question 1s to concentrate on the

plain words of the definition of agricultural income which connects in no uncertain language revenue with the land from which it directly springs and a stray observation in a case which has no bearing upon the present question does not advance the solution of the question. There is nothing in the Indian law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the Articles of Association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole as Lord Anderson puts it."

Learned counsel for the petitioners submitted that in the light of

aforesaid judgment, shareholders are not responsible and these petitions are fit

to be allowed.

6. Per contra, Mr. Amit Kr. Das, learned counsel appearing on behalf

of the Enforcement Directorate in all these cases by referring paragraph no.

165 of the order of adjudicating authority, submitted that it has been held by

the authority that Def. No. 16 (M/s Creative Fiscal Services Ltd.), Def. No. 18

(M/s Anjaniputra Ispats Ltd.) and Def. No. 19 (M/s Shivam Devcon Pvt. Ltd.) it

has been held that the share capitals of the companies, being their liability, are

not property in their hands and therefore, it is not permissible in law to attach

the same. He submitted that in paragraph no. 169 of the order of adjudicating

authority it has been held that Defendant No. 14 (M/s Bill Body Vyapar Pvt.

Ltd.), the Deputy Director has mentioned that the documents seized by the

income tax department during searches on 31.10.2009 revealed huge amount

of unaccounted for money to the tune of Rs. 106,40,56,700/- laundered

through different companies including M/s Bill Body Vyapar Pvt. Ltd through

which Rs. 15 crores was laundered vide para "uu" at page 201 of the complaint.

Mrinal Kanti Paul in his statement dated 17.02.2010 had also disclosed this

amount vide para "ww" page 202 of the complaint. As such fixed assets of this

company namely, M/s Bill Body Vyapar Pvt. Ltd at least to the extent of 15

crores represented proceeds of crime. The Deputy Director has attached all the

fixed assets of the company amounting to Rs. 2.19 lakhs. He submitted that

Mrinal Kanti Paul in his statement before Income Tax Department dated

17.02.2010 disclosed that in financial year 2008 investment of Rs. 15 crore was

made in M/s Bill Body Vyapar Ltd. from M/s Creative Fiscal Services Pvt. Ltd. He

submitted that in the light of sections 23 and 24 of PMLA the onus lies on the

petitioners to prove that proceeds of crime is not involved in money laundering.

He referred judgement in the case of "Vijay Madanlal Choudhary & Others

Vs. Union of India and others" reported in 2022 SCC Online 929 and

submitted that the case is not maintainable. He submitted that so far as

petitioner in Cr.M.P. No. 3918 of 2018 is concerned, in paragraph nos. 150 and

151 of the order of adjudicating authority it has been discussed that as per

statement of Mrinal Kanti Paul, Director of M/s Creative Fiscal Services Ltd.

before Income Tax Authorities on 17.02.2010, Binod Sinha is out of M/s

Smridhi Sponge and his shares have been purchased by Manohar Paul for Rs.

12 crores. Thus proceeds of crime is gone to these companies. He submitted

that M/s Creative Fiscal Services, the proceeds of crime i.e. ill-gotten money

generated by Shri Madhu Koda and Binod Sinha was parked in M/s Smridhi

Sponge Ltd. He submitted that it is mentioned in the original complaint

before the Adjudicating Authority that during the financial year, 2007-08 capital

base of the company was increased from Rs. 10 crores to Rs. 25 crores and the

investment made in shares by Shri Binod Sinha (Aid of Madhu Koda) was

made. The Adjudicating Authority in its order concluded that proceeds of crime

still lie with M/s Smridhi Sponge Ltd. So far the petitioner in Cr.M.P. No.1440 of

2019 is concerned, learned counsel for the Enforcement Directorate submitted

that the money was acquired through corrupt and illegal means and was

transferred to a number of companies in India as well in foreign countries

through illegal channels. The proceeds of crime has changed hands and has

been laundered not only through a group of persons but also through various

legal entities i.e. companies/firms both in and outside India laundered between

12.12.2007 to 14.07.2009. He submitted that there are direct allegations

against these petitioners hence, all these petitions are fit to be dismissed.

7. In view of above submissions of the learned counsel for the

petitioner and well as opposite party, the Court has gone through the materials

on record and finds that there are serious allegation of transferring the amount

and investing money of illegal and corrupt practices which amounts proceeds of

crime in terms of PML Act. In all the cases in the order of adjudicating authority

it has been elaborately discussed how the proceeds of crime of illegal money

have been invested in these company. In para 169 of the order of adjudicating

authority it has been found that huge amount of Rs. 106,40,56,700/- was

laundered through different companies including M/s Bill Body Vyapar Pvt. Ltd

through which Rs. 15 crores was laundered vide para "uu" at page 201 of the

complaint. Moreover, Mrinal Kanti Paul in his statement dated 17.02.2010 had

also disclosed this amount vide para "ww" page 202 of the complaint. It has

been recorded that at least 15 crores represented proceeds of crime. The

Deputy Director has attached all the fixed assets of the company amounting to

Rs. 2.19 lakhs. The involvement of M/s Smridhi Sponge Ltd. which is subject

matter in Cr.M.P. No. 3918 of 2018, has been discussed in para 150 and 151 of

the order of adjudicating authority wherein Deputy Director has disclosed that

as per statement of Mrinal Kanti Paul, Director of M/s Creative Fiscal Service Ltd

before Income Tax Authorities on 17.02.2010, Bindo Sinha is out of M/s

Smridhi Sponge and his shares have been purchased by Manohar Paul for Rs.

12 crores.

8. Section 24(a) of the Act applies if the person charged with the

offence of money laundering under section 3, the Authority or Court shall

unless the contrary is proved, presume that such proceeds of crime are

involved in money laundering and section 24(b) applies in the case of any

other person the Authority or Court, may presume that such proceeds of crime

are involved in money laundering.

9. In the case of Vijay Madanlal Choudhary & Others Vs. Union

of India and others" reported in 2022 SCC Online 929 in paragraph nos.

349, 350 and 351 the Hon‟ble Supreme Court has held as under:-

"349. Notably, the legal presumption in the context of Section 24(b) of the 2002 Act is attracted once the foundational fact of existence of proceeds of crime and the link of such person therewith in the process or activity is established by the prosecution. The stated legal presumption can be invoked in the proceeding before the Adjudicating Authority or the Court, as the case may be. The legal presumption is about the fact that the proceeds of crime are involved in money-laundering which, however, can be rebutted by the person by producing evidence within his personal knowledge.

350. Be it noted that the presumption under Section 24(b) of the 2002 Act is not a mandatory legal presumption, unlike in the case falling under the other category, namely Section 24(a). If the person has not been charged with the offence of money-laundering, the legal presumption under Section 24(b) can be invoked by the Adjudicating Authority or the Court, as the case may be. More or less, same logic as already noted while dealing with the efficacy of Section 24(a) of the 2002 Act, would apply even to the category of person covered by Section 24(b), in equal measure.

351. We, therefore, hold that the provision under consideration namely Section 24 has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional."

10. Section 2 (1) (u) of the Act speaks of proceeds of crime in 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. Seeing the nature of

allegation, it transpires that huge amount has been transferred to one company

to another. Section 5(1) (b) of the Act speaks that such proceeds of crime are

likely to be concealed, transferred or dealt with in any manner, then only the

order of attachment of the property can be passed. Section 8 of the Act

prescribes the procedure of adjudication, which says that on receipt of a

complaint under sub-section (5), or applications made under section (4) of

Section 17 or under sub-section (10) of Section 18, if the Adjudicating Authority

has reason to believe that any person has committed an offence under section

3 or is in possessions of proceeds of crime, he will proceed for such execution

after providing notice to the accused. In view of above Act, proceeds of crime

is required to be considered in view of said definition. Money laundering is the

process of conversion of such proceeds of crime, "dirty money" to make it

appear as legitimate money. As the Act deals with socio-economic offence, it

deviates from the beaten track of the common law on the burden of proof. In

fact Section 24 of the Act casts a reverse burden on the suspect. In any

proceeding relating to the proceeds of crime under the Act, the Authority or

Court shall presume that "such proceeds of crime are involved in money

laundering" unless the person charged with the offence of money laundering

under Section 3 proves to the contrary.

11. The offence of money laundering is threefold including the stages

of placement, whereby the criminals place the proceeds of crime to the

general and genuine financial system, layering, whereby such proceeds of

crime are spread into various transactions within the financial system and

finally, integration, where the criminals avail the benefits of crime as untainted

money.

12. In view of above facts, reasons and analysis the court finds that

there are serious allegation of proceeds of crime and transferring the money to

one company to another, the case is made out against the petitioners. There is

no illegality in the orders by which the petitioners have been summoned.

Moreover, it is admitted fact that against the attachment order the petitioners

have already preferred appeal which is still pending and in the meantime these

petitions have been filed. The petitioners were required to pursue the appeal.

No case of interference is made out. Accordingly, these petitions are dismissed.

Pending, I.A., if any stands disposed of. Interim order passed in respective

cases are vacated.

(Sanjay Kumar Dwivedi, J.) Jharkhand High Court, Ranchi Dated.22/09/2022 Satyarthi/- N.A.F.R