Patna High Court
Ajay Singh vs The Directorate Of Enforcement, ... on 5 February, 2025
IN THE HIGH COURT OF JUDICATURE AT PATNA
Criminal Writ Jurisdiction Case No.2167 of 2024
Arising Out of PS. Case No.-7 Year-2022 Thana- E.C.I.R (GOVERNMENT OFFICIAL)
District- Patna
======================================================
Ajay Singh, S/O Late Suresh Singh, R/O Flat No. 18, AB, 18th Floor, Tower
2, The Empire, 16 A Gurusaday Road, Ballygunge, P.S- Karaya, Kolkata,
West Bengal- 700019.
... ... Petitioner/s
Versus
1. The Directorate of Enforcement, through the Director, Pravartan Bhawan,
APJ Abdul Kalam Road New Delhi, 110011.
2. The Deputy Director, Directorate of Enforcement, Patna Zonal Office First
Floor, Chandpura Place, Bank Road, West Gnadhi Maidan, Patna.
3. The Assistant Director, Directorate of Enforcement, Patna Zonal Office First
Floor, Chandpura Place Bank Road West Gnadhi Maidan, Patna.
... ... Respondent/s
======================================================
Appearance :
For the Petitioner/s : Mr.Rajendra Narayan, Sr. Advocate
Mr.Suraj Samdarshi, Advocate
Mr.Avinash Shekhar, Advocate
Mr.Vijay Shankar Tiwari, Advocate
Ms.Abhilasha Jha, Advocate
Ms.Simran Kumari, Advocate
Rohit Singh, Advocate
For the Respondent/s : Mr.Dr. Krishna Nandan Singh (A.S.G)
through ED, UOI Mr.Manoj Kumar Singh, Advocate
Mr.Shiv Aditya Dhari Sinha, Advocate
Mr.Ankit Kumar Singh, Advocate
======================================================
CORAM: HONOURABLE MR. JUSTICE BIBEK CHAUDHURI
CAV JUDGMENT
Date : 05-02-2025
1. The instant writ petition has been filed for the
following reliefs: -
"(i) To issue an appropriate
writ, order or direction for declaring the
arrest of Petitioner on 28.09.2024 in
connection with ECIR/PTZO/07/2022
dated 10.01.2022 read with Addendum
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
2/73
ECIR dated 04.06.2023 and 09.11.2023
registered by Directorate of Enforcement,
Patna Zonal Office, as wholly illegal and
arbitrary in nature and in violation of
Section 19 of the Prevention of Money
Laundering Act, 2002 (hereinafter
referred to as "PMLA")
(ii) This Hon'ble Court may
adjudicate and hold that since the arrest
of the Petitioner by the Directorate of
Enforcement is illegal and in violation of
section 19 of PMLA, the consequential
orders of remand passed by Learned
Special Court, PMLA, Patna dated
28.09.2024
and 05.10.2024 and all other
future orders extending the remand of the
Petitioner are also illegal.
(iii) To issue a further
appropriate writ, order or direction for
the forthwith release of the Petitioner
from judicial custody.
(iv) This Hon'ble Court may
award the cost of litigation and suitable
compensation to the Petitioner for the
loss and damages caused on account of
the illegal and arbitrary actions of the
Respondent(s) Authorities.
(v) To grant any other relief or
reliefs which the Petitioner may be found
entitled to in the facts and
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
circumstances of the case."
2. The salient facts necessary for the adjudication of
the instant writ petition are as follows:
One M/s Aditya Multicom Private Limited
(hereinafter described as "M/s AMPL" for short) was granted
settlement of all sand quarries (Ghats) for extraction of sand in
the district of Aurangabad and Rohtas during the period between
1st January, 2015 and 31st of December, 2019. The said
settlement was time to time extended after it was initially
granted for five years till 30th of September, 2021 by four
separate grants. However, M/s AMPL surrendered its settlement
on 30th of April, 2021 w.e.f. 1st of May, 2021. Initial dispute
arose between Mines and Geological Department, Government
of Bihar and M/s AMPL over payment of royalty for the
surrendered period and also with respect of M/s AMPL
entitlement to sell sand which was stocked at K-license sites,
i.e., storage sites. The Mines and Geological Department
cancelled the K-licenses obtained by M/s AMPL in the said two
districts vide order, dated 17th of August, 2021 and 7th of July,
2021, respectively, and seized the sand stocked by M/s AMPL.
Subsequent to the cancellation of license and seizure of sand,
the officials attached to Mining Department lodged several
F.I.R.s against M/s AMPL, alleging, inter alia, that it had
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
misappropriated the sand stocked at K-license site without
issuance of e-transit challans, causing loss of revenue to the
Government. In all, 13 numbers of F.I.R. was registered against
the said company and its Directors. On the basis of Dehri Nagar
P. S. Case No. 407 of 2021, the Enforcement Directorate
(hereinafter referred to as "ED" for short) registered
ECIR/PTZO/07/2022, dated 10th of January, 2022 for the
scheduled offence allegedly committed by M/s AMPL and its
Directors under Sections 411 and 420 of the Indian Penal Code.
The basis of the aforesaid case registered by ED is that the de
facto complainant of Dehri Nagar P. S. Case No. 407 of 2021
alleged that M/s AMPL has embazelled sand valued at Rs.
24,42,67,900/- stored at two different places vide two K-licences
issued to it by District Mining Office, Rohtas. However, the
properties were suspected to be proceeds of crime. It is further
alleged that only 600000 cubic ft. of sand was to be
extracted/stored in the sites in respect of which K-license were
granted, but there was 7784350 cubic ft. of sand stored in the
said sites as per the report provided by the Project Management
Unit. It was also alleged that the authorized staff / Director of
the license holder sold the sand stealthily without issuing any
pre-paid challans and thereby causing loss to the tune of Rs.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
24,42,67,900/- to the Government. Thus, M/s AMPL allegedly
embazelled huge quantity of sum by illegal mines and the
above-mentioned sum was proceeds of crime under the
Prevention of Money Laundering Act, 2002 ("the PMLA" for
brevity). Subsequently, vide another addendum dated 9th of
November, 2023, a second ECIR was registered taking into
consideration subsequent 12 F.I.R.s against M/s AMPL and
certain other persons. The Petitioner was neither named in the
F.I.R., nor connected with sand mining business. No license was
granted to the Petitioner for extraction of sand and he is no way
connected with sand business of M/s AMPL. However, in
course of investigation, the Petitioner was summoned to appear
before the ED on 27th of October, 2023. The Petitioner informed
the Investigating Officer of ED that at the relevant point of time
he was out of the country. The Petitioner appeared before the
ED on 25th of September, 2024 and furnished all required
information claimed by the Investigating Officer under
Annexure- A to the summon, dated 9th of September, 2024."
3. It is pertinent to mention at this stage that on 10th of
November, 2023, the ED, after completion of investigation,
submitted a complaint against M/s AMPL and its Directors,
namely, Jag Narayan Singh and Satish Kumar Singh under
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
Sections 3 and 4 of the PMLA.
4. Though the Petitioner fully cooperated with the
Investigating Officer, he was informed in the late hours of
27/28th of September, 2024 that the ED would arrest him in
connection with the second ECIR. On 28th of September, 2024,
the Respondents/ED filed an application seeking judicial
custody of the Petitioner before the learned Sessions Judge cum
Special Judge, PMLA, Patna. He was time to time remanded to
the custody of the Enforcement Directorate or in other words
judicial custody.
5. It is contended on behalf of the Petitioner that the
ED arrested the Petitioner violating the dictum of Section 19 of
the PMLA and without collecting any document with regard to
his involvement in respect of sand business and accumulation of
proceeds of crime in association with M/s AMPL or any other
person. The ED tried to make out a case that M/s AMPL used to
run a syndicate in sand mining business in which many other
people and companies including the Petitioner and his company
are involved. They had different shares in respect of the said
illegal business. The investigation of the case against M/s
AMPL disclosed that the Petitioner allegedly had 10 per cent
shares in the illegal business of sand mining and transaction was
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
made in favour of the Petitioner according to his share. It is the
specific case of the Petitioner that there is no business
relationship between the Petitioner and M/s AMPL. However,
the Petitioner maintains personal relationship with Jag Narayan
Singh, one of the Directors of M/s AMPL. There was certain
monetary transaction absolutely of personal level through bank
between Jag Narayan Singh and the Petitioner and the said
amount has already been squared up through bank. Therefore,
the amount of transaction through banking institution cannot be
said to be proceeds of crime. The said amount was obviously
shown in the Income Tax return of the Petitioner and the ECIR
lodged against the Petitioner was illegal, inoperative and not
binding upon him. Thus, arrest of the Petitioner on the basis of
the said ECIR has claimed to be illegal and in violation of
Article 21 of the Constitution of India.
6. Hence, the instant writ.
7. Mr. Rajendra Narayan, learned Sr. Advocate
appearing on behalf of the Petitioner, at the outset, submits that
the Petitioner is not implicated as an accused in Dehri Nagar
P.S. Case No. 407 of 2021 which was registered by police
attached to Dehri Nagar Police Station under Sections 411 and
402 of the IPC. In ECIR No. PTZO/07/2022, dated 10th of
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
January, 2022 and Addendum ECIR, dated 4 th June, 2023, the
contents of the FIR of the aforesaid case has been briefly
narrated as hereunder:-
(i) Examination of the FIR no,
407/2021 dated 03.08.2021 revealed that
Authorized Staff/Director of the license
holder M/s Aditya Multicom Private
Limited for the license no. K-
ROHTAS/07/2021 having address Mauza -
Makrain, Mauza no.-00, Block-Dehri
Thana Dalmia Nagar, District-Rohtas,
Khata No-112, Khesra No-408 and license
no. K-ROHTAS/14/2021 having address-
Mauza - Makrain, Mauza no-00, Block-
Dehri, Thana Dalmia Nagar, District-
Rohtas, Khata No.-112, Khesra No.-408
has, been charged with section 411 and
420 of Indian Penal Code for Dishonestly
receiving stolen property and Criminal
Conspiracy respectively have been
invoked which are scheduled under Part
A, Paragraph 1 of Prevention of Money
Laundering Act, 2002.
(ii) In the above mentioned FIR,
it is alleged that during the inspection of
both the above license holding places,
only 6,00,000 cubic feet of sand was
found. Whereas, there is 77,84,350 cubic
feet of sand stored at both the above
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
mentioned license holding places as per
the report provided by P.M.U. (Project
Management Unit). It is also alleged in
the said FIR that Authorized
Staff/Director of the license holder sold
the sand stealthily without issuing prepaid
E-Challans, thus causing loss to the tune
of Rs. 24,42,67,900/- to the Bihar
Government Exchequer.
(iii) Therefore, it appears from
the above that the 71,84,350 cubic feet of
sand amounting to Rs. 24,42,67,900/-
have been embezzled by M/s Aditya
Multicom Private Limited by illegal
means which is accounting to 2002.)
Proceeds of Crime and come under the
ambit of PMLA, 2002."
8. From the FIR, it is ascertained that the Petitioner is
not a party to the sand license. He does not deal with the sand
business.
9. A pertinent question has been raised by Mr.
Rajendra Narayan that the said case, being Dehri Nagar P.S.
Case No. 407 of 2021 was quashed by this Court vide order
dated 7th of April, 2022. On quashment of the original FIR under
Sections 411 and 420 of the IPC, there is no scheduled offence
and in the absence of the scheduled offence, the Petitioner
cannot be arrested in a case under PMLA Act.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
10. The learned Senior Advocate further submits that
the case of the respondents specially against M/s AMPL is that
the said company and its Directors have caused loss of revenue
amounting to Rs. 2109176276/- to the State Government by way
of illegal mining of sand and selling the same without issuance
of transit challans. During investigation, the ED seized certain
documents claiming to be income tax return from the house of
Radha Charan Sah. A ledger book of income and expenditure
related to sell of sand in Aurangabad and Rohtas was also
seized. It was learnt from the said ledger book that a syndicate
was being operated by M/s AMPL and others who amongst
themselves distributed profit proportionate to their share. As for
example, M/s AMPL from April, 2020 to August, 2020, sold
sand worth Rs. 90,92,71,400/- from sand ghats of Aurangabad
and Rohtas and out of the said amount, sand worth Rs.
38,71,46,070/- was sold without issuance of E-transit Challans.
11. It is alleged that the syndicate members were
engaged in sand mining and they participated in the auction
process through dummy entities. After one dummy entity wins
the bid, initial royalty payment is made pulling money from
different persons. Actual mining is controlled by the syndicate
and profits generated from illegal mining of sand are divided
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
amongst the syndicate members. The said profit from illegal
mining is claimed to be the proceeds of crime. One Mithlesh
Kumar being a syndicate member in his statement stated that the
Petitioner/ Ajay Singh is part of the syndicate having 10 per cent
share. On perusal of the bank accounts statement of S.G. Project
Pvt. Ltd. (hereinafter described as SGPL), a Private Limited
Company of the Petitioner, huge financial transaction was found
between the said company and M/s AMPL. The said money
amounting to Rs. 1 Crore 34 Lakhs, approximately are
transactions in non-interests bearing loans to M/s AMPL. It is
also alleged by the ED that huge amount of money was
transferred from bank account of Vinay Vinimay Private
Limited to M/s AMPL. It is claimed by the ED that the said
amount was transferred as loans to M/s AMPL but no supporting
documents has been filed by the ED in support of his claim.
12. The learned Senior Advocate for the petitioner has
further pointed out that there are certain monetary transactions
between M/s AMPL and M/s SGPL that reveal suspicious
circumstances in respect of financial relationship between two
companies. According the learned Senior Advocate on behalf of
the petitioner the above-mentioned financial transactions
between two companies are briefly "reason to believe" that the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
petitioner is part of syndicate operating in Bihar in sand mining
scam and thereby generating huge "proceeds of crime" through
commission of offences under Sections 411 and 420 read with
Section 120B of the IPC. It is further pointed out that the above
stated facts constitute ground of arrest of the petitioner.
13. The learned Senior Counsel for the petitioner
refers to definition of money laundering stated in Section 2(1)
(p) of the said Act. It states:-
"2(1)(p) Money-laundering has
the meaning assigned to it in section 3."
14. Section 2(1)(u) defines "proceeds of crime" in the
following words:-
"2(1)(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" include property not
only derived or obtained from the
scheduled offence but also any property
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
which may directly or indirectly be
derived or obtained as a result of any
criminal activity relatable to the
scheduled offence."
15. Section 3 defines offence of money laundering.
The provision runs thus:-
"3. 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 including its concealment,
possession, acquisition or use and
projecting or claiming it as untainted
property shall be guilty of offence of
money-laundering.
Explanation.--For the removal
of doubts, it is hereby clarified that,--
(i) a person shall be guilty of
offence of money-laundering if such
person is found to have directly or
indirectly attempted to indulge or
knowingly assisted or knowingly is a
party or is actually involved in one or
more of the following processes or
activities connected with proceeds of
crime, namely:--
(a) concealment; or
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted
property; or
(f) claiming as untainted
property, in any manner whatsoever;
(ii) the process or activity
connected with proceeds of crime is a
continuing activity and continues till such
time a person is directly or indirectly
enjoying the proceeds of crime by its
concealment or possession or acquisition
or use or projecting it as untainted
property or claiming it as untainted
property in any manner whatsoever."
16. The learned Senior Counsel on behalf of the
petitioner next refers to the provision contained in Section 19 of
the said Act which speaks of power to arrest. Section 19 states
as follows:-
"Section 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
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
in his possession, reason to believe (the
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."
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
17. Referring to the above provisions, it is submitted
by the learned Senior Counsel for the petitioner that the ED
failed to prove any nexus between the petitioner and M/s AMPL
in respect of the allegation of illegal sand mining, theft of miner
and mineral, receiving sand as stolen property or commission of
cheating in furtherance of criminal conspiracy with M/s AMPL.
There is absolutely no evidence that the petitioner or his
company took part in the auction process of sand ghats in
Aurangabad and Rohtas. Monetary transaction between M/s
AMPL and Ajay Singh does not prove that the said transaction
was made for purchasing sand in clandestine manner. On the
other hand, it is reveled that some amount of money was paid to
M/s AMPL through bank and similar amount of money was paid
to the petitioner also through bank. In support of his contention,
he refers to page 140 to 147 of the writ petition.
18. The learned Senior Counsel on behalf of the
petitioner next submits that the petitioner has been implicated in
the case instituted by the ED by subsequent ECIR which is
termed as addendum ECIR on the basis of so called entries in
the ledger book of one Mithlesh Kumar. The said entries in the
ledger book contained in some loose sheets cannot be used as a
material evidence against the petitioner to hold that there was
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
reason to believe that the petitioner is guilty of an offence
punishable under the said Act.
19. In support of his contention, learned Senior
counsel for the petitioner has referred to Paragraph No. 15 of
Central Bureau of Investigation v. V. C. Shukla & Ors.,
reported in 1998 3 SCC 410. It is held by the three Judge's
Bench of the Hon'ble Supreme Court in paragraph no. 15 of the
said judgment as hereunder:-
"15. After having held that the
documents were neither books of account
nor kept in the regular course of business
the High Court observed that even if they
were admissible under Section 34, they
were not, in view of the plain language of
the section, sufficient enough to fasten the
liability on the head of a person, against
whom they were sought to be used. As,
according to the High Court, the
prosecution conceded that besides the
alleged entries in the diaries and the
loose sheets there was no other evidence
it observed that the entries would not
further the case of the prosecution. As
regards the admissibility of the documents
under Section 10 the High Court held that
the materials collected during
investigation did not raise a reasonable
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
ground to believe that a conspiracy
existed, far less, that the respondents
were parties thereto and, therefore, these
documents would not be admissible under
Section 10 also. The High Court next took
up the question as to whether those
documents could be admitted under
Section 17 and observed that the
admissions, if any, therein could be used
against the Jains only and not against
Shri Advani and Shri Shukla. The High
Court, however, observed that the
production and proof of the documents by
themselves would not furnish evidence of
the truth of their contents and that during
investigation CBI did not examine any
witness or collect materials to prove the
same. With the above findings and
observations, the High Court arrived at
the following conclusion:
"In the present case there is no
evidence against the petitioners except
the diaries, notebooks and the loose sheet
with regard to the alleged payments (vide
MRs 68/91, 72/91 and 73/91). The said
evidence is of such a nature which cannot
be converted into a legal evidence against
the petitioners, in view of my above
discussion.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
There is no evidence in the
instant case with regard to the monies
which are alleged to have been, received
by the Jains for the purpose of
disbursement. There is no evidence with
regard to the disbursement of the amount.
Then there is no evidence with regard to
the fact to prove prima facie that the
petitioners i.e. Shri L.K. Advani and Shri
V.C. Shukla accepted the alleged amounts
as a motive or reward for showing favour
or disfavour to any person and that the
said favours and disfavours were shown
in the discharge of their duties as public
servants as contemplated by Section 7 of
the Act (Prevention of Corruption Act,
1988). Thus the Court will have to
presume all the above facts in the absence
of any evidence in connection therewith
to frame charges against the petitioners."
20. Thus, it is submitted on behalf of the petitioner
that in the aforementioned report, the Hon'ble Supreme Court
held that entries in some loose sheets or some books of accounts
are not admissible in evidence under Section 10 of the Evidence
Act.
21. Section 10 of the Evidence Act reads as under:-
"10. Things said or done by
conspirator in reference to common
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
design.
Where there is reasonable
ground to believe that two or more
persons have conspired together to
commit an offence or an actionable
wrong, anything said, done or written by
any one of such persons in reference to
their common intention, after the time
when such intention was first entertained
by any one of them, is a relevant fact as
against each of the persons believed to be
so conspiring, as well for the purpose of
proving the existence of the conspiracy as
for the purpose of showing that any such
person was a party to it."
22. In Sardul Singh Caveeshar v. State of Bombay,
reported in AIR 1957 SC 747, the Hon'ble Supreme Court
observed that it is recognized on well established authority that
principle underlying the reception of evidence of the statements,
acts and writings of one co-conspirator as against the other is on
the theory of agency. Ordinarily, a person cannot be made
responsible for the acts of others unless they have been
instigated by him or done with his knowledge or consent.
23. This Section provides an exception to the rule, by
laying down an overt act committed by one of the conspirators
being sufficient to make it the act of all. But then, the opening
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
words of Section made it abundantly clear that such concept of
agency can be availed, only after the Court is satisfied that there
is reasonable ground to believe that they have conspired to
commit an offence or an actionable wrong. In other words, only
when such reasonable ground exits, anything said, done or
written by any one of them in reference to their common
intention thereafter is relevant against the others, not only for
the purpose of existence of the conspiracy but also for proving
that the other person was a party to it.
24. It is urged by the learned Senior Counsel for the
petitioner that if the case of the prosecution is believed in its
face value, there was conspiracy between M/s AMPL and M/s.
SGPL. The Investigating Officer failed to collect any document
either from M/s AMPL or M/s SGPL or its Directors in order to
prove monetary transaction as a result of conspiracy to run sand
mining illegally in the districts of Aurangabad and Rohtas. The
ED relied upon a so called ledger maintained by one Mithlesh
Kumar with whom the petitioner had no business relationship.
There is also no evidence that the petitioner and the said
Mithlesh Kumar hatched conspiracy to deal with the proceeds of
crime. Therefore, the statement of Mithlesh Kumar is not at all
admissible against the petitioner.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
25. On the same point, the learned Senior Counsel for
the petitioner refers to another decision of the Hon'ble Supreme
Court in the case of Common Cause / Manohar Lal Sharma &
Ors. v. Union of India & Ors., reported in (2017) 11 SCC 731.
Discussions contained in paragraph no. 276 to 278 are relevant
for our purpose and are quoted below:-
"276. Placing implicit reliance
on the decision of this Court in CBI v.
V.C. Shukla [CBI v. V.C. Shukla, (1998) 3
SCC 410 : 1998 SCC (Cri) 761] , it was
submitted that it is open to any
unscrupulous person to make any entry
any time against anybody's name
unilaterally on any sheet of paper or
computer excel sheet. There being no
further corroborative material with
respect to the payment, no case is made
out so as to direct an investigation, and
that too against large number of persons
named in the documents. Such entries
have been held to be prima facie not even
admissible in V.C. Shukla case [CBI v.
V.C. Shukla, (1998) 3 SCC 410 : 1998
SCC (Cri) 761] . He urged that in case
investigation is ordered on the basis of
such documents, it would be very
dangerous and no constitutional
functionary/officer can function
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
independently, as per the constitutional
imperatives. No case is made out on the
basis of material which is not cognizable
in law, to direct investigation.
277. Before dilating upon the
issue canvassed in the application we
make it clear that we have not examined
the main writ petitions vis-à-vis challenge
to the appointments of Respondents 2 and
3. We are examining only the merit of IA
No. 3 supported by IA No. 4, as to
whether a case is made out on the basis
of materials which are placed on record,
to constitute SIT and direct investigation
against the various functionaries/officers
which are projected in Annexures A-8, A-
9 and A-10 and other entries on loose
sheets and further monitor the same.
278. With respect to the kind of
materials which have been placed on
record, this Court in V.C. Shukla case
[CBI v. V.C. Shukla, (1998) 3 SCC 410 :
1998 SCC (Cri) 761] has dealt with the
matter though at the stage of discharge
when investigation had been completed
but same is relevant for the purpose of
decision of this case also. This Court has
considered the entries in Jain Hawala
diaries, notebooks and file containing
loose sheets of papers not in the form of
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
"books of accounts" and has held that
such entries in loose papers/sheets are
irrelevant and not admissible under
Section 34 of the Evidence Act, and that
only where the entries are made in the
books of accounts regularly kept,
depending on the nature of occupation,
that those are admissible."
26. It is submitted by the learned Senior Counsel for
the petitioner that implication of the accused in the offence
under Section 3 of the PMLA is in gross violation of Article 21
of the Constitution of India. Since, the ECIR was equivalent to
FIR, the ECIR contains the grounds of arrest, details of offence
etc. and without the knowledge of ingredients of such a
document, the ability of the accused to defend himself at the
stage of bail could not be fully realized. It was urged that the
same may also hamper the ability of the trial at latter stage. It is
for this reason there were adequate safeguards under Sections
19 of the PMLA which made the provision constituting
complaint.
27. Section 19(1) empowers the Director, Deputy
Director, Assistant Director or any other officer authorized in
this behalf by the Central Government to arrest a person on the
basis of material in his possession when he has "reason to
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
believe" (the reason of such believe to be recording in writing)
that any person is guilty of an offence punishable this Act.
28. The term "reason to believe" is of great
implication and Arresting Officer is under obligation to establish
at the initial stage of arrest of a person that he is having
sufficient material which has "reason to believe" that the person
is guilty under the Act.
29. In Arvind Kejriwal v. Directorate of Enforcement
(Criminal Appeal No. 2493 of 2024) decided on 12th of July,
2024, the Hon'ble Supreme Court had the occasion to deal with
various nuances of Section 19 of the PMLA. In paragraph no. 9
of the Arvind Kejriwal (supra), it is observed by the Hon'ble
Supreme Court:-
"9. A bare reading of the
section reflects, that while the legislature
has given power to the Director, Deputy
Director, Assistant Director, or an
authorised officer to arrest a person, it is
fenced with preconditions and
requirements, which must be satisfied
prior to the arrest of a person. The
conditions are -
=> The officer must have
material in his possession.
=> On the basis of such
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
material, the authorised officer should
form and record in writing, "reasons to
believe" that the person to be arrested, is
guilty of an offence punishable under the
PML Act.
=> The person arrested, as
soon as may be, must be informed of the
grounds of arrest.
These preconditions act as
stringent safeguards to protect life and
liberty of individuals."
30. On the same issue, the learned Senior Counsel for
the petitioner refers to paragraph no. 38 of Pankaj Bansal v.
Union of India & Ors. reported in (2024) 7 SCC 576. The
Hon'ble Supreme Court, has observed, while interpreting
Section 19 of the said Act with reference to Article 22 (1) of the
Constitution of India, "In this regard, we may note that Article
22(1) of the Constitution provides, inter alia, that no person who
is arrested shall be detained in custody without being informed,
as soon as may be, of the grounds for such arrest. This being the
fundamental right guaranteed to the arrested person, the mode of
conveying information of the grounds of arrest must necessarily
be meaningful so as to serve the intended purpose. It may be
noted that Section 45 PMLA enables the person arrested under
Section 19 thereof to seek release on bail but it postulates that
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
unless the twin conditions prescribed thereunder are satisfied,
such a person would not be entitled to grant of bail. The twin
conditions set out in the provision are that, firstly, the Court
must be satisfied, after giving an opportunity to the Public
Prosecutor to oppose the application for release, that there are
reasonable grounds to believe that the arrested person is not
guilty of the offence and, secondly, that he is not likely to
commit any offence while on bail. To meet this requirement, it
would be essential for the arrested person to be aware of the
grounds on which the authorised officer arrested him/her under
Section 19 and the basis for the Officer's "reason to believe" that
he/she is guilty of an offence punishable under the 2002 Act. It
is only if the arrested person has knowledge of these facts that
he/she would be in a position to plead and prove before the
Special Court that there are grounds to believe that he/she is not
guilty of such offence, so as to avail the relief of bail. Therefore,
communication of the grounds of arrest, as mandated by Article
22(1) of the Constitution and Section 19 PMLA, is meant to
serve this higher purpose and must be given due importance.
31. It is learnt from the submission made by the
learned Additional Solicitor General that the petitioner withheld
relevant information which was exclusively within his
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
knowledge and contended that he had family relationship with
Jag Narayan Singh, one of the Directors of M/s AMPL since his
father's time and the money which was transited between the
petitioner and M/s AMPL are friendly borrowings.
32. It is submitted by the learned Senior Advocate on
behalf of the petitioner that if this Court proceeds by the
narration of facts, it would obviously be found that except
exchange of money by way of bank transaction by the petitioner
in favour of M/s AMPL, no other document could be seized by
the Investigating Officer. Monetary transaction between two
companies does not lead to the reason to believe that the
petitioner is guilty under the PMLA. Moreover, the statement of
a co-accused implicating the petitioner or self-inculpatory
statement of the petitioner can also not be used as material fact
under the provisions of PMLA. It is gross violation of the
constitutional mandate as well as the law of evidence to use
one's confessional statement.
33. In this case, the statement of Mithlesh Kumar, has
been taken for implicating another person, i.e., the petitioner.
Similarly, no document has been filed by the ED to show that
the petitioner has admitted his involvement in sand mining
scam.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
34. Therefore, it is submitted by the learned Senior
Advocate on behalf of the petitioner that the petitioner's arrest is
illegal, violative of fundamental right and is liable to be
quashed.
35. Referring to the decision of the Hon'ble Supreme
Court in Pankaj Bansal v. Union of India & Ors. reported in
(2024) 7 SCC 576, it is contended on behalf of the Petitioner
that the failure on the part of the petitioner to respond to the
question put to him by ED would not be sufficient in itself for
the Investigating Officer to hold that he was liable to be arrested
under Section 19, as the said provisions specially required him
to find reason to believe that they were guilty of an offence
under the said Act. Mere non-corporation of a witness in
response to the summons issued under Section 50 of the PMLA
would not be enough to render him liable to be arrested under
Section 19.
36. It was stated by the ED that the petitioner was
evasive in providing relevant information. It was however not
clarified as to why the petitioner's replies were categorized as
evasive and that record is not placed before this Court for
verification. Evasive reply by the petitioner as alleged by the
ED cannot be a ground for his arrest.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
37. The Assistant Director, ED, Patna Zonal Office,
has filed a counter affidavit on behalf of the respondents. It is
submitted on behalf of the respondents that as many as 24 FIRs
have been registered in different Police Stations situated in the
districts of Aurangabad and Rohtas in the State of Bihar against
M/s AMPL, alleging illegal mining, transportation, storage and
sale of huge quantity of sand causing revenue loss of Rs.
210,91,76,276/-. On the basis of the said complaints, police
registered specific cases under penal provisions of Bihar
Minerals (Concession, Prevention of Illegal Mining,
Transportation and Storage) Rules, 2019 and scheduled offences
under Sections 411, 420, 120B, 384 and 467 of the IPC against
the above-named company and its Directors. ED took up the
investigation lodging ECIR under Paragraph No. 1 in part A of
the Schedule to the PMLA. Again, on the basis of Dehri Nagar
P.S. Case No. 407 of 2021, dated 3rd of August, 2021 registered
against M/s AMPL for the offences under Sections 34, 120B,
379, 384, 406, 411, 420, 467, 468 and 471 of the IPC read with
Rule 21 Mines and Mineral (Development and Regulation) Act,
1957 (2015), Rule 40 of Bihar Minor Mineral Concession
Rules, 1972, Rules 11, 39 of Bihar Minerals (Concession,
Prevention of illegal mining, Transportation and Storage) Rules,
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
2019 and Section 15 of Environment Protection Act, 1986, an
investigation was initiated against M/s AMPL and its Directors
after recording ECIR, dated 10th of January, 2022 read with
addendum dated 4th June, 2023 and 9th of November, 2023 to the
above-mentioned ECIR. In course of investigation and physical
verification of the sites of stocking places of sand allotted to
company by way of K-licences, it was found that huge quantity
of sand stock was available at various sites though in the
website, the stock of sand was shown "nil". The ED recovered
various documents and fixed deposits worth Rs. 6,85,77,580/-
and seizure of cash Rs. 24,60,000/- from the premises of M/s
AMPL, its Directors and other stockholders. During
investigation, it was learnt that Income Tax Department, Patan,
carried out searches in the month of February, 2023 at the
premises of one Ashok Kumar, Director of one M/s Broadson
Commodities Private Limited, Sudama Kumar (an Associate of
Ashok Kumar) and Radha Charan Sah (one of the syndicate
members of the illegal sand mining). The documents seized by
the I.T. Department were procured under Section 54 of the
PMLA.
38. It is further contended on behalf of the
respondents that the documents seized from the premises of
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
Radha Charan Sah and Ashok Kumar include details of ledger
of income and expenditure related to sale of sand from various
Ghats of Aurangabad and Rohtas, Bihar and details of profit
sharing percentage among the syndicate members. The entries
recorded in the said documents were further corroborated with
the transactions undertaken through bank account of M/s AMPL
and others.
39. It was learnt from the ledger that sand worth Rs.
38,71,46,070/- was illegally sold during the period April, 2020
to August, 2020 without generation of challan causing revenue
loss to the Government exchequer.
40. It is further stated on behalf of the respondents
that the information was shared under Section 66(2) of the
PMLA with the Mining Department, Bihar with a copy to DGP,
Bihar Police. On the basis of the said information, the Mining
Department filed the complaint before the State Police and
accordingly FIR No. 6137017240047 was registered by the
police in Dehri Nagar Police Station on 8th of February, 2024 as
well as Dehri Nagar P.S. Case No. 5125024240115 on 13th of
February, 2024 against M/s AMPL for commission of offences
under Sections 420 and 379 of the IPC. The said FIRs were
however quashed by a Co-ordinate Bench of this Court vide
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
order dated 7th of October, 2024. The investigation of the above-
mentioned cases revealed that illegal sale of sand by the various
companies was mainly controlled by syndicate, of which the
petitioner is a member who by investing funds in the company
either through banking or non-banking channels became
syndicate members and the profit generated from illegal sale of
sand is nothing but proceeds of crime which were distributed
among syndicate members. As there was monetary transaction
between the petitioner and M/s AMPL, his statement was
recorded under Section 50 (3) of the PMLA on 25 th of
September, 2024 to 27th of September, 2024. Further statement
of the petitioner under Section 50 (3) of the PMLA was
recorded when he was in custody of the ED from 6 th of October,
2024 to 11th of October, 2024. The ledger book recovered from
Radha Charan Sah was confronted with the petitioner but he
failed to give any specific explanation in respect of the
transaction between M/s AMPL and him. The ledger book
contained the name of the petitioner along with the others as
syndicate members and also the percentage of profit sharing
against their names. The petitioner was arrested on 28 th of
September, 2024 by the ED after complying substantive and
procedural requirements of Section 19 of the PMLA. Further
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
investigation revealed that the petitioner is directly involved in
sharing the proceeds of crime. He is one of the syndicate
members dealing with illegal sand mining business as he
invested proportionality in the said business. The bank accounts
statement of M/s SGPL and Vinay Vinimay Private Limited, two
companies owned by Ajay Singh reveals that he invested Rs.
10.63 Crore during the year 2014-2016, i.e., equivalent to 10 per
cent of the biding amount, confirming his 10 per cent share in
the syndicate. Proceeds of crime generated from illegal sand
mining were distributed to him through syndicate by M/s
AMPL. Bank account analysis of M/s SGPL revealed huge cash
deposits totaling Rs. 29.3 Crore in its account during the year
2016-2021.
41. The Learned Additional Solicitor General
practically relied on the above-mentioned averments made on
behalf of the respondents in the counter affidavit to provide an
overview of the incident. It is submitted by him that syndicate of
sand scam has been operating.
42. Entire process of tender of sand ghats is under the
control of the syndicate. M/s AMPL, Radha Charan Sah, Ashok
Kumar, the present petitioner and others are members of the said
syndicate and illegal trade of sand was operated by syndicate
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
members and they used to receive proceeds of crime according
to their share. M/s AMPL and Broadson Commodities Private
Limited are the two major companies involved in illegal trade of
sand. The ED filed complaint against M/s AMPL and its
Directors after 24 numbers of FIRs were lodged alleging
commission of scheduled offence by them. During investigation
of the cases, ED found complicity of the present petitioner and
others allegedly on the basis of ledger book seized from the
possession of one Radha Charan Sah and documents seized by
the Income Tax Department during raid and therefore the
accused were arrested.
43. It is further submitted by the learned ASG that
incriminating materials against the accused were found from the
statement of one Mithlesh Kumar and the documents mentioned
above. The petitioner was interrogated for three consecutive
days but he failed to clear away the circumstances collected
against him and, therefore, he was arrested.
44. It is submitted by learned ASG that the statement
of the present petitioner before the ED is prima facie admissible
on the ground that such statement was made by him before his
arrest. It is further submitted by the learned ASG that during
2015-2021, a sum of Rs. 21 Crore was deposited in cash in the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
account of the petitioner. Subsequently, a sum of Rs. 38 Lakh
deposited in cash, in the ledger book maintained by Radha
Charan Sah and monetary transaction between M/s AMPL and
the petitioner as per petitioner's share in sand business is
recorded. The documents seized by the Income Tax Department
also shows involvement of the petitioner in sand scam. These
are the "reason to believe" which the Arresting Officer had that
the petitioner is guilty of an offence punishable under the
PMLA.
45. It is admitted by the learned ASG that Section 19
is a procedural safeguard against the power of arrest by the
authorised officers of ED and the procedural safeguards are:-
(i) The Arresting Officer has on the basis of material
in his possession, "reason to believe" that any person has been
guilty of an offence punishable under the PMLA;
(ii) The grounds of arrest shall be handed over to the
petitioner simultaneously with his arrest:
(iii) no person can be arrested in absence of material
in his possession against the accused.
46. According to the learned ASG, the petitioner was
arrested following procedural safeguards. The Arresting Officer
on the basis of the materials collected during investigation as
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
narrated above had "reason to believe" that the petitioner is
guilty of offence. The said fact has been stated in the grounds of
arrest which was supplied to the petitioner and during
investigation, the ED collected incriminating material against
the petitioner. There was not only monetary transaction between
the M/s AMPL and the petitioner through bank but during the
period 2014-2016, Rs. 29 Crores were transacted between the
parties.
47. It is further submitted by the learned ASG that
monetary transaction between two companies is not uncommon
in the business, but when there is monetary transaction between
two companies some norms are required to be followed. As for
example, there should be a board meeting where decision for
monetary transaction would be taken by the Board of Directors.
On the basis of such resolution, the bank institutions shall be
asked by the company to disburse the amount in the credit of the
trasferee company and there would be similar resolution at the
time of transfer of the money in the account of transferee
company. No such requirement was followed either by M/s
AMPL or by the petitioner. Therefore, petitioner's complicity is
proved.
48. The learned ASG refers to page 92 of the writ
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
petition, consisting the statement regarding "reason to believe".
Paragraph Nos. 9 to 14 and 19 to 20 of the said document states
as follows:
"9. Further investigation in this
case revealed that Shri Ajay Singh,
Director of SG Projects Pvt Ltd is also a
part of this syndicate with 10% of total
share in the profit generated from the
illegal sand mining and sale of sand by
M/s Aditya Multicom Private Limited.
Further document seized by income tax
department also corraborates
involvement of syndicate members,
amount paid to them against the dding
amount and share received from the
illegal sale of sand. Further, the analysis
of bank accounts of Mis SG Projects Pvt
Ltd reflects huge transactions with Mis
Aditya Multicom Pvt Ltd.
10. During the course of
statement u's 50 of the PMLA, 2002 of Sh.
Mithilesh Kumar Singh, Director of
Broadson Commodities Pvt Ltd (the
company is one of the members with
60.9% share of syndicate), revealed that
there is a Syndicate behind the illegal
sand mining and sale of sand and named
Sh Ajay Singh, Director of SG Projects
Pvt Ltd as one of the members of
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
syndicate with 10% share in the illegal
profits.
11. Further, analysis of the
documents procured from Income Tax
Department, Patna u/s 54 of PMLA, 2002
revealed that on 28.07.2020, Rs
39,00,000/- were transferred from PNB
Dehri account of Aditya Multicom Pvt Ltd
to SG Projects Pvt Ltd. Similarly, on
19.03.2020, Rs 1 Cr were transferred
from M/s Aditya Multicom Pvt Ltd to SG
Projects Pvt Ltd against cash deposit of
Rs 1 Cr which clearly establishes
involvement of SG Projects Pvt Ltd in the
illegal sand mining business of M/s
Aditya Multicom Pvt Ltd.
12. Further, analysis of the
bank accounts of M/s Aditya Multicom
Pvt Ltd and SG projects Pvt Ltd reveals
huge transactions however Sh. Ajay Singh
could not satisfactorily explain the reason
for such huge transactions. He stated that
all these transactions were family loans
given to M/s Aditya Multicom Pvt Ltd
without any interest, however he accepted
that he did not have any supporting
documents regarding the same. However,
analysis of the ledger of M/s Aditya
Multicom Pvt Ltd revealed that
transactions with M/s SG Projects Pvt ltd
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
were against sale of sand. Hence, it is
evident that Ajay Singh. Director of SG
Projects Pvt Ltd is giving contradictory
replies and trying to hide the truth to
mislead the investigation.
13. Further, analysis of bank
accounts of Vinay Vinimay Pvt Ltd (an
associated entity of Ajay Singh) reveals
that Vinay Vinimay Pvt Ltd has
transferred huge funds to M/s Aditya
Multicom Pvt Ltd. Further, it can be seen
from the analysis of the bank Accounts
that in all instances money was
transferred from SG Projects Pvt Ltd to
Vinay Vinimay Pvt Ltd and the same
amount was subsequently transferred to
Mis Aditya Multicom Pvt Ltd on the same
day however, when asked about the wa
Ajay Singh could not satisfactorily
explain nature and purpose of the
transactions and gave misleading
answers. He stated that Vinay Vinimay
Pvt Ltd has given loans to M/s Aditya
Multicom Pvt Ltd, however he accepted
that he did not have any supporting
documents regarding the same. Further,
analysis of the ledger of M/s Aditya
Multicom Pvt Ltd revealed that
transactions with Vinay Vinimay Pvt Ltd
were against sale of sand. Hence, it is
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
evident that Ajay Singh. Director of SG
Projects Pvt Ltd is giving contradictory
replies and trying to hide the truth to
mislead the investigation.
14. Further on perusal of
ledger of SG Projects Pvt Ltd it is seen
that cash deposit of Rs 49,58,000/- was
made into the account of SGPL on
17.06.2015 and on the same day Rs 3 Cr
was transferred to M/s Aditya Multicom
Pvt Ltd from SGPL.
19. Thus, in view of the above, I
have reasons to believe that SG Projects
Pvt Ltd through its director Shri Ajay
Singh is involved in illegal sand mining
business and also a part of the syndicate
which is involved in illegal mining and its
sale, thereby generating huge proceeds of
crime through commission of offences u/s
120B, 411, 420 of IPC, 1860 which are
scheduled offences under the PMLA,
2002. Further the said proceeds of crime
are subsequently being layered and
laundered through various
entities/individuals. Thus, Ajay Singh is
found to be involved in the activities
related with the scheduled offence hence
is guilty of the offence of the money
laundering.
20. Shri Jag Ajay Singh has
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
been non cooperative during the
investigation by resorting to withholding
of relevant information which are in his
exclusive knowledge and has shifted onus
on others. He has thereby made attempts
to misguide and frustrate the
investigation proceedings under the
Prevention of Money
Laundering Act, 2002."
49. On the question as to whether statement of a co-
accused can be used against another to implicate him in a case
under the PMLA, the learned ASG refers to Section 50 of the
PMLA. Section 50 runs thus:-
"50. Powers of authorities
regarding summons, production of
documents and to give evidence, etc. -
(1) The Director shall, for the
purposes of section 12, have the same
powers as are vested in a civil Court
under the Code of Civil Procedure, 1908
(5 of 1908) while trying a suit in respect
of the following matters, namely:
(a) discovery and inspection;
(b) enforcing the attendance of
any person, including any officer of a
reporting entity, and examining him on
oath;
(c) compelling the production
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
of records;
(d) receiving evidence on
affidavits;
(e) issuing commissions for
examination of witnesses and documents;
and
(f) any other matter which may
be prescribed.
(2) The Director, Additional
Director, Joint Director, Deputy Director
or Assistant Director shall have power to
summon any person whose attendance he
considers necessary whether to give
evidence or to produce any records
during the course of any investigation or
proceeding under this Act.
(3) All the persons so
summoned shall be bound to attend in
person or through authorised agents, as
such officer may direct, and shall be
bound to state the truth upon any subject
respecting which they are examined or
make statements, and produce such
documents as may be required.
(4) Every proceeding under
sub-sections (2) and (3) shall be deemed
to be a judicial proceeding within the
meaning of section 193 and section 228
of the Indian Penal Code .
(5) Subject to any rules made in
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
this behalf by the Central Government,
any officer referred to in sub-section (2)
may impound and retain in his custody
for such period, as he thinks fit, any
records produced before him in any
proceedings under this Act:
Provided that an Assistant
Director or a Deputy Director shall not
(a) impound any records
without recording his reasons for so
doing; or
(b) retain in his custody any
such records for a period exceeding three
months, without obtaining the previous
approval of the Joint Director.
50. In Abhishek Banerjee & Anr. v. Directorate of
Enforcement, reported in 2024 9 S.C.R. 110, the Hon'ble
Supreme Court observed in Paragraph No. 13 as follows:
"13. At the outset, it may be
noted that as well settled by now, the
provisions of PMLA are not only to
investigate into the offence of money
laundering but more importantly to
prevent money laundering and to provide
for confiscation of property derived from
or involved in money laundering and the
matters connected therewith and
incidental thereto. As held by the Three-
Judge Bench in Vijay Madanlal (supra),
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
the PMLA is a self- contained Code and
the dispensations envisaged thereunder,
must prevail in terms of Section 71
thereof, which predicates that the
provisions of the Act shall have effect
notwithstanding anything inconsistent
therewith contained in any other law for
the time being in force, which includes
provisions of the Cr.P.C. The Section
65 of the Act predicates that the
provisions of the Cr.P.C. shall apply
insofar as they are not inconsistent with
the provisions of the PMLA in respect of
arrest, search and seizure, attachment,
confiscation, investigation, prosecution
and all other proceedings under the Act.
It is pertinent to note that Section 4(2) of
the Code states that all offences under
any other law shall be investigated,
inquired into, tried, and otherwise dealt
with according to the same provisions but
subject to any enactment for the time
being in force regulating the manner or
place of investigating, inquiring into,
trying or otherwise dealing with such
offences. Further, Section 5 of the Code
states that nothing contain in the Code
shall, in absence of specific provision to
the contrary, affect any special or local
law for the time being in force, or any
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
special jurisdiction or power conferred,
or any special form of procedure
prescribed, by any other law for the time
being in force. Thus, having regard to the
conjoint reading of Section 71 and
Section 65 of the PMLA as also Section
4(2) and Section 5 of the Code, there
remains no shadow of doubt that the
provisions of PMLA will have the effect
notwithstanding anything inconsistent
therewith contained in any other law for
the time being in force, including the
provisions of the Cr.P.C."
51. With regard to the conferment of power upon the
authority under Section 50 of the PMLA excluding the
procedural safeguard would be contrary to the stand of
"procedure established by law" under Article 21 of the
Constitution of India, the Hon'ble Supreme in Abhishek
Banerjeee (supra) quoted Paragraph No. 425 and 431 of Vijay
Madanlal Choudhary (supra) in order to establish once again
the validity of Section 50 of the PMLA in the touchstone of
Article 20(3) and Article 21 of the Constitution of India. The
aforesaid paragraph are quote below:-
"425. Indeed, sub-section (2) of
Section 50 enables the Director,
Additional Director, Joint Director,
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
Deputy Director or Assistant Director to
issue summon to any person whose
attendance he considers necessary for
giving evidence or to produce any records
during the course of any investigation or
proceeding under this Act. We have
already highlighted the width of
expression "proceeding" in the earlier
part of this judgment and held that it
applies to proceeding before the
Adjudicating Authority or the Special
Court, as the case may be. Nevertheless,
sub-section (2) empowers the authorised
officials to issue summon to any person.
We fail to understand as to how Article
20(3) would come into play in respect of
process of recording statement pursuant
to such summon which is only for the
purpose of collecting information or
evidence in respect of proceeding under
this Act. Indeed, the person so summoned,
is bound to attend in person or through
authorised agent and to state truth upon
any subject concerning which he is being
examined or is expected to make
statement and produce documents as may
be required by virtue of sub-section (3) of
Section 50 of the 2002 Act...
426 to 430.....
431. In the context of the 2002
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
Act, it must be remembered that the
summon is issued by the Authority under
Section 50 in connection with the inquiry
regarding proceeds of crime which may
have been attached and pending
adjudication before the Adjudicating
Authority. In respect of such action, the
designated officials have been
empowered to summon any person for
collection of information and evidence to
be presented before the Adjudicating
Authority. It is not necessarily for
initiating a prosecution against the
noticee as such. The power entrusted to
the designated officials under this Act,
though couched as investigation in real
sense, is to undertake inquiry to ascertain
relevant facts to facilitate initiation of or
pursuing with an action regarding
proceeds of crime, if the situation so
warrants and for being presented before
the Adjudicating Authority. It is a
different matter that the information and
evidence so collated during the inquiry
made, may disclose commission of
offence of money-laundering and the
involvement of the person, who has been
summoned for making disclosures
pursuant to the summons issued by the
Authority. At this stage, there would be no
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
formal document indicative of likelihood
of involvement of such person as an
accused of offence of money laundering.
If the statement made by him reveals the
offence of money -laundering or the
existence of proceeds of crime, that
becomes actionable under the Act itself.
To put it differently, at the stage of
recording of statement for the purpose of
inquiring into the relevant facts in
connection with the property being
proceeds of crime is, in that sense, not an
investigation for prosecution as such; and
in any case, there would be no formal
accusation against the noticee. Such
summons can be issued even to witnesses
in the inquiry so conducted by the
authorised officials. However, after
further inquiry on the basis of other
material and evidence, the involvement of
such person (noticee) is revealed, the
authorised officials can certainly proceed
against him for his acts of commission or
omission. In such a situation, at the stage
of issue of summons, the person cannot
claim protection under Article 20(3) of
the Constitution. However, if his/her
statement is recorded after a formal
arrest by the ED official, the
consequences of Article 20 (3) or Section
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
25 of the Evidence Act may come into
play to urge that the same being in the
nature of confession, shall not be proved
against him. Further, it would not
preclude the prosecution from proceeding
against such a person including for
consequences under Section 63 of the
2002 Act on the basis of other tangible
material to indicate the falsity of his
claim. That would be a matter of rule of
evidence."
52. Finally in Paragraph No. 19 of the aforesaid
judgement, the Hon'ble Supreme Court held as under:-
"19. The above ratio laid down
in Vijay Madanlal clinches the
contentions raised by the learned
counsels for the appellants with regard to
the provisions of Section 50 being
violative of Article 20(3) or Article 21 of
the Constitution, and we need not further
elaborate the same, nor do we need to
deal with the decisions of this Court on
the said issue which have already been
dealt with in Vijay Madanlal. Suffice it to
say that Section 50 enables the authorized
Authority to issue summon to any person
whose attendance he considers necessary
for giving evidence or to produce any
records during the course of the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
proceedings under the Act, and that the
persons so summoned is bound to attend
in person or through authorized agent,
and to state truth upon the subject
concerning which he is being examined
or is expected to make statement and
produce documents as may be required by
virtue of sub- section (3) of Section 50. At
the stage of issue of summons, the person
cannot claim protection under Article
20(3) of the Constitution, the same being
not "testimonial compulsion". At the
stage of recording of statement of a
person for the purpose of inquiring into
the relevant facts in connection with the
property being proceeds of crime, is not
an investigation for prosecution as such.
The summons can be issued even to
witnesses in the inquiry so conducted by
the authorized officers. The consequences
of Article 20(3) of the Constitution or
Section 25 of the Evidence Act may come
into play only if the involvement of such
person (noticee) is revealed and his or
her statements is recorded after a formal
arrest by the ED official. In our opinion,
the learned counsels for the appellants
have sought to reagitate the issues which
have already been settled in Vijay
Madanlal."
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
53. Referring to another decision in Anoop Bartaria
& etc. v. Directorate of Enforcement & Anr., reported in 2023
SCC OnLine SC 477. It is submitted by the learned ASG that
the power of the High Court to quash the complaint filed by the
statutory agency under Article 226 of the Constitution of India
and Section 482 of the Cr.P.C. are different though, the
Constitutional Court must take into consideration the sever
parameters delineated in State of Haryana & Ors. v. Bhajan
Lal & Ors., reported in 1992 Supp (1) SCC 335. The instant
case does not fall under any of the above parameters. There
being enough material to show prima facie involvement of the
petitioner in the alleged offence of money laundering, as
contemplated under the PMLA, the order of the High Court
dismissing the petition filed by the petitioner was affirmed by
the Hon'ble Supreme Court.
54. In Tarun Kumar v. Assistant Director Directorate
of Enforcement, reported in AIR 2024 SC 169, is another
judgement of the Hon'ble Supreme Court which is relied upon
by the learned ASG to submit that the petitioner does not have
any scope to challenge the remand order passed by the learned
Special Judge, Patna in view of twin conditions applicable for
grant of bail contained in Section 45 (1) of the said Act.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
55. In Tarun Kumar (supra), the Hon'ble Supreme
Court refers to Paragraph No. 412 of Vijay Madanlal
Choudhary (supra) which runs thus:-
"412. As a result, we have no
hesitation in observing that in whatever
form the relief is couched including the
nature of proceedings, be it under Section
438 of the 1973 Code or for that matter,
by invoking the jurisdiction of the
Constitutional Court, the underlying
principles and rigors of Section 45 of the
2002 must come into play and without
exception ought to be reckoned to uphold
the objectives of the 2002 Act, which is a
special legislation providing for stringent
regulatory measures for combating the
menace of money-laundering."
56. In Gautam Kundu v. Directorate of Enforcement
reported in 2015 16 SCC 1, the Hon'ble Supreme Court
observed that the conditions specified in Section 45 of PMLA
are mandatory and need to be complied with, which is further
strengthened by the provisions of Section 65 and Section 71 of
the said Act. Section 65 requires that the provisions
of CrPC shall apply insofar as they are not inconsistent with the
provisions of this Act and Section 71 provides that the
provisions of PMLA shall have overriding effect
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
notwithstanding anything inconsistent therewith contained in
any other law for the time being in force. PMLA has an
overriding effect and the provisions of CrPC would apply only
if they are not inconsistent with the provisions of this Act.
Therefore, the conditions enumerated in Section 45 of PMLA
will have to be complied with even in respect of an application
for bail made under Section 439 CrPC. That coupled with the
provisions of Section 24 provides that unless the contrary is
proved, the authority or the Court shall presume that proceeds of
crime are involved in money-laundering and the burden to prove
that the proceeds of crime are not involved, lies on the
appellant.
57. Thus, the learned ASG concludes that the ED
arrested the accused, while performing his mandatory duty
regarding the reasons. The said exercise has to be followed by
way of an information being served on the arrestee of the
grounds of arrest. The sufficient materials have been collected
by the Investigating Officer in support to his involvement in the
offence of sand scam operating in the State of Bihar by forming
a syndicate. Under such circumstances, there is no reason to
allow the application under Article 226 of the Constitution of
India filed by the petitioner.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
58. Though it has not been argued in great detail about
the scope and import of the term "reason to believe", Section 19
(1) casts a duty upon the Arresting Officer to form an opinion on
the basis of materials in his possession collected by him that
there is "reason to believe" that the person has been guilty of an
offence punishable under the Act. The word reason to believe
has not been defined in the PMLA. Section 26 of the IPC
defines "reason to believe" in the following words:-
"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."
59. The term "reason to believe" is also used in
Section 35 of the Foreign Exchange Regulation Act, 1973 and
Section 103 of the Customs Act.
60. Section 35 (1) reads thus:-
"35. Power to arrest:-(1) If any
officer of Enforcement authorised in this
behalf by the Central Government, by
general or special order, has reason to
believe that any person in India or within
the Indian customs waters 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.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
(2)Every person arrested under
sub-section (1) shall, without unnecessary
delay, be taken to a Magistrate.
(3)Where any officer of
Enforcement has arrested any person
under sub-section (1), he shall, for the
purpose of releasing such person on bail
or otherwise, have the same powers and
be subject to the same provisions as the
officer-in-charge of a police station has,
and is subject to, under the, [Code of
Criminal Procedure, 1973 (2 of 1974).]"
59. Section 103 of the Customs Act states:-
"103. A comparative reading of
Section 19 of the PMLA and the above-
mentioned two provisions suggest that
while PMLA and FERA prescribed
Arresting Officer "reason to believe" that
the person is guilty of offence, Section 103
speaks of the Customs Officers power to
screen and scan a person with scientific
equipment when he has reason to believe
that any person referred to in sub-section
(2) of section 100 has any goods liable to
confiscation secreted inside his body."
61. In Vijay Madanlal Choudhary & Ors. v. Union
of India & Ors., reported in (2023) 12 SCC 1, the Hon'ble
Supreme Court made detailed discussion on the meaning and
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
purport of "reason to believe" relying on a Canadian Judgement
in the case of Gifford v. Kelson. The relevant paragraph in Vijay
Madanlal Choudhary (supra) read:
"16(liii). ..... Secondly, there
must be material in possession with the
authority before the power of arrest can
be exercised as opposed to CrPC which
gives the power of arrest to any police
officer and the officer can arrest any
person merely on the basis of a
complaint, credible information or
reasonable suspicion against such
person. Thirdly, there should be reason to
believe that the person being arrested is
guilty of the offence punishable under the
PMLA in contrast to the provision in
CrPC, which mainly requires reasonable
apprehension/suspicion of commission of
offence. Also, such reasons to believe
must be reduced in writing. Fifthly, as
per the constitutional mandate of Article
22(1), the person arrested is required to
be informed of the grounds of his arrest.
It is submitted that the argument of the
other side that the accused or arrested
persons are not even informed of the case
against them, is contrary to the plain
language of the Act, as the Act itself
mandates that the person arrested is to be
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
informed of the ground of his arrest.......
XX XX XX
16(lix). Reliance is then placed
on the decision of this Court in Union of
India v. Padam Narain Aggarwal [Union
of India v. Padam Narain Aggarwal,
(2008) 13 SCC 305 : (2009) 1 SCC (Cri)
1] , wherein the Court examined the
power to arrest under Section 104 of the
1962 Act. Relying on the decision, it was
stated that the power to arrest is statutory
in character and cannot be interfered
with and can only be exercised on
objective considerations free from whims,
caprice or fancy of the officer. The law
takes due care to ensure individual
freedom and liberty by laying down
norms and providing safeguards so that
the authorities may not misuse such
power. It is submitted that the requirement
of "reason to believe" and "recording of
such reasons in writing" prevent
arbitrariness and makes the provision
compliant with Article 14. This is
reinforced from the fact that only 313
arrests have been made under the PMLA
in 17 years of operations of the PMLA.
16(Ix). Canadian judgment in
Gifford v. Kelson [Gifford v. Kelson,
(1943) 51 Man R 120 (Canada --
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
Manitoba)] was also relied on to state
that "reason to believe" conveys
conviction of the mind founded on
evidence regarding the existence of a fact
or the doing of an act, therefore, is of a
higher standard than mere suspicion.
Reliance has been further placed on
Premium Granites v. State of T.N.
[Premium Granites v. State of T.N.,
(1994) 2 SCC 691] to urge that the
requirement of giving reasons for exercise
of the power by itself excludes chances of
arbitrariness...."
We will reproduce what has
been held in Gifford (supra):
"A suspicion or belief may be
entertained, but suspicion and belief
cannot exist together. Suspicion is much
less than belief; belief includes or
absorbs suspicion.
XX XX XX
When, we speak of "reason to
believe" we mean a conclusion arrived at
as to the existence of a fact. Of course,
"reason to believe" does not amount to
positive knowledge nor does it mean
absolute certainty but it does convey
conviction of the mind founded on
evidence regarding the existence of a fact
or the doing of an act. Suspicion, on the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
other hand, rings uncertainty. It lives in
imagination. It is inkling. It is mistrust. It
is chalk. 'Reason to believe' is not. It is
cheese."
Gifford (supra) accurately
explains the difference between the
"reasons to believe" and "suspicion".
"Suspicion" requires lower degree of
satisfaction, and does not amount to
belief. Belief is beyond speculation or
doubt, and the threshold of belief
"conveys conviction founded on evidence
regarding existence of a fact or doing of
an act". Given that the power of arrest is
drastic and violates Article 21 of the
Constitution, we must give meaningful,
true and full play to the legislative
intent."
62. Thus, it is now established that the term "reason to
believe" cannot be equated with the term reasonable complaint
or credible information or reasonable suspicion contained in
Section 41 (1) (B) of the Cr.P.C. "Reason to believe" is the
tangible evidence or material which constitutes sufficient cause
to believe existence of certain facts. This reason to believe goes
to the root of the power of arrest. The subjective opinion of
Arresting Officer is based upon fair and objective consideration
of material as available with him on the date of arrest. On the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
basis of reason to believe, the Court shall form the secondary
opinion on the validity of the exercise undertaken for
compliance of Section 19 (1) of the PMLA when the arrest is
made.
63. Coming to the instant case, it is found from Page
No. 88 of the writ petition that the petitioner was supplied with
the statements made containing reason to believe to invoke
Section 19 (1) of the PMLA. The petitioner was also supplied
with grounds of arrest.
64. The contents of the "reason to believe" are stated
briefly hereinbelow:-
(a) M/s AMPL obtained licence of sand mining and its
sale initially for 5 years starting 2015 to 2019. The said licence
was however extended upto the year 2021. Licence was granted
for extraction of sand from all Ghats in the District of
Aurangabad and Rohtas, Bihar.
(b) As many as 24 FIRs were instituted against AMPL
under Sections 34, 120B, 379, 384, 406, 411, 420, 467, 468 and
471 of the IPC read with Rule 21 of the Mines and Mineral
(Development and Regulation) Act, 1957 (2015), Rule 40 of
Bihar Minor Mineral Concession Rules, 1972, Rules 11, 39 of
Bihar Minerals (Concession, Prevention of Illegal Mining,
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
Transportation and Storage) Rules, 2019 and Section 15 of
Environment Protection Act, 1986 on the basis of complaints
filed by the District Mining Officers, Aurangabad and Rohtas.
It is alleged that the company and its Directors caused
huge revenue loss to the extent of Rs. 210,91,76,276 to the
Government exchequer.
(c) As the accused persons named in the above-
mentioned FIRs committed scheduled offence under the PMLA,
ED took upon the cases for investigation by recording an ECIR
No. PTZO/7/2022, dated 10th of January, 2022 read with
Addendum ECIRs dated 04.06.2023 and 09.11.2023. During
investigation, premises of Ashok Kumar, Director of Broadson
Commodities Private Limited; Sudama Kumar, Associate of
Ashok Kumar; and Radha Charan Sah, one of the syndicate
members of the illegal sand mining were raided and IT returns
of the said persons and the company were collected and seized.
(d) On examination of a ledger, seized from the
premises of Radha Charan Sah, in respect of income and
expenditure, Investigating Officer came to know details of profit
sharing percentage amongst the syndicate members.
(e) Upon analysis of the said documents, it was
ascertained that M/s AMPL illegally sold out sand extracted
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
from the mines without any permit amounting to Rs.
38,71,46,070/- without generation of challans causing revenue
loss of the Government.
(f) During investigation, it was also learnt that
syndicate members are operational in sand mining activity and
they participated in the biding process through dummy entities
controlled by them. After one of the dummy entities wins the
bid, initial royalty payments are made by pulling money from
different persons in the accounts of the bid winning entity.
Further the actual sand mining generated from illegal sand
mining are divided among the syndicate members.
(g) It is also learnt that the petitioner is also a part of
the syndicate with 10 per cent share in the profit generated from
the illegal sand mining and sale of sand by M/s AMPL. The
documents seized from the I.T. Department also corroborates
involvement of syndicate members, amount paid them against
the biding amount and share received from the illegal sale of
sand.
(h) One Mithlesh Kumar, Director of Broadson
Commodities Private Limited having 60.9 per cent share of
syndicate, revealed that there is a syndicate behind the illegal
sand mining and sale of sand, and named the petitioner as one of
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
the members of the syndicate, having 10 per cent share in the
illegal profits. The ledger account book seized from Radha
Charan Sah and the statement of Mithlesh Kumar revealed that
the transactions with M/s SGPL were against sale of sand.
(i) It is also learnt that Vinay Vinimay Private Limited
and Associate Company of the petitioner transferred huge fund
to M/s AMPL. Further investigation revealed that M/s SGPL
transferred the money to Vinay Vinimay Private Limited and
Vinay Vinimay Private Limited transferred the same to M/s
AMPL. There were other documents seized from the house of
Ashok Kumar and Radha Charan Sah regarding financial
transactions of M/s SGPL with M/s AMPL.
65. Power to arrest under Section 19 (1) of the PMLA
is not for the purpose of investigation. Arrest can and should
wait and the power in terms of Section 19(1) of the PMLA can
be exercised only when the material with the designated officers
enables them to form an opinion by recording reasons in writing
that the arrestee is guilty. Section 19(1) thus, does not permit
arrest only to conduct investigation. Conditions of Section 19(1)
have to be satisfied Clauses A, C, D and E to Section 41(1)(ii)
of the Cr.P.C., apart from other considerations may be relevant.
66. On perusal of Clause 7 of the ECIR, dated 10 th of
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
January, 2022, it is found that the said ECIR was lodged on the
basis of FIR No. 407 of 2021, dated 3rd of August 2021.
67. The allegation in the said FIR was against M/s
AMPL who was the licence holder in respect of sand blocks. It
is the specific case of the ED in Clause 7 (ii) of the above-
mentioned ECIR that the concerned FIR upon which Dehri
Nagar P.S. Case No. 407 of 2021 was instituted revealed that
only 600000 cubic ft. of sand was allegedly extracted, whereas
there was 7784350 cubic ft. of sand stored at the both the above-
mentioned licence holding places as per the report provided by
the Project Management Unit. It was alleged in the said FIR that
the authorised staff/Director of the licence holder sold the sand
stealthily without issuing pre-paid challans. Thus, causing loss
to the tune of Rs. 24,42,67,900/- to the Bihar Government
Exchequer. Clause 7(3) also speaks of embezzlement of the said
money by M/s AMPL.
68. It is not alleged in the ECIR that the petitioner is
the licence holder of any of the sand blocks. It is also not
alleged that men and agents of the petitioner or its company
were engaged for illegal extraction and storage of sand at the
storing places. Therefore, we can safely come to the conclusion
that the ED could not collect any evidence to prove that the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
petitioner was engaged in illegal mining operation in the State
of Bihar. In the Addendum ECIR also, all allegations were made
against M/s AMPL.
69. The petitioner was arrested in connection with the
case on the basis of a statement purportedly made by one
Mithlesh Kumar who alleged the involvement of the petitioner
as a member of the syndicate. Secondly, a ledger book was
recovered mentioning the accounts of syndicate members from
the possession of one Radha Charan Sah, Director of Broadson
Commodities Private Limited. Thirdly, some documents seized
by Income Tax Department showing transfer of Rs. 39 lakhs on
20th of July, 2020 from the bank account of M/s AMPL to the
bank account of M/s SGPL. Similarly, on 19th of March, 2020, a
sum of Rs. 1 Crore was transferred from M/s AMPL to M/s
SGPL against cash deposit of Rs. 1 Crore. The ED held that
those monetary transactions between M/s AMPL and M/s SGPL
establishes their involvement in illegal sand mining business.
70. The ED did not take into consideration the
statement of Jag Narayan Singh, one of the Directors of M/s
AMPL that he had a long family and business relationship with
the petitioner and entire transaction between the petitioner and
M/s AMPL was friendly transaction by way of loan. The said
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
money is not proceeds of crime and there is absolutely no iota of
evidence that the said money was used in sand mining business.
71. According to the ED in sand mining business,
syndicate was in operation in the way that after wining the bid,
money was collected as per share of those unscrupulous
businessmen employed in sand mining business and tender
money is deposited on condition that the profit of business by
way of illegal extraction would be shared amongst them. The
ED has not come up with any material showing transaction of
money between the petitioner and the M/s AMPL or any other
syndicate members simultaneously with the call of bids and
selection of the highest bidder.
72. In order to prove the involvement of the petitioner
in illegal sand mining business, at least some material was
required to be produced to the effect that the petitioner
deposited money as per his share for winning the bid. No such
evidence, unfortunately, was produced by the ED in course of its
investigation.
73. There is no explanation as to why statement of
Mithesh Kumar was accepted and the statement of Jag Narayan
Sing was not considered by the ED.
74. The learned ASG has argued with great stress
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
about the power of the ED regarding summons, production of
documents and to give evidence.
75. In this regard, it is the obligation of this Court to
mention that in Vijay Madanlal Choudhary (supra), the validity
of Section 50 has been challenged on the ground of being
violative of Article 20(3) and 21 of the Constitution of India
because it allows the various officers under PMLA to summon
any person and record his statement during the course of
investigation. Further the provision mandates that person should
disclose true and correct facts known to his personal knowledge
in connection with the subject matter of the investigation. The
person is also obliged to sign the statement so given with the
threat of being punished for the falsity or incorrectness thereof
in terms of Section 63 of the PMLA. Under Section 50 of the
PMLA, the Director is vested with the same powers as are
vested in a Civil Court in the matter of ................ (b)
enforcing the attendance of any person, including any officer of
a (reporting entity) and examining him on oath. The Directors
also empowered to impose fine under Section 13 of the said Act.
76. In this regard, the Hon'ble Supreme Curt in
Paragraph No. 338 and 339 of Vijay Madanlal Choudhary
(supra), reported in (2023) 12 SCC 1, has observed hereunder:-
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
"338. In the context of the 2002
Act, it must be remembered that the
summons is issued by the authority under
Section 50 in connection with the inquiry
regarding proceeds of crime which may
have been attached and pending
adjudication before the adjudicating
authority. In respect of such action, the
designated officials have been
empowered to summon any person for
collection of information and evidence to
be presented before the adjudicating
authority. It is not necessarily for
initiating a prosecution against the
noticee as such. The power entrusted to
the designated officials under this Act,
though couched as investigation in real
sense, is to undertake inquiry to ascertain
relevant facts to facilitate initiation of or
pursuing with an action regarding
proceeds of crime, if the situation so
warrants and for being presented before
the adjudicating authority. It is a different
matter that the information and evidence
so collated during the inquiry made, may
disclose commission of offence of money
laundering and the involvement of the
person, who has been summoned for
making disclosures pursuant to the
summons issued by the authority. At this
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
stage, there would be no formal document
indicative of likelihood of involvement of
such person as an accused of offence of
money laundering. If the statement made
by him reveals the offence of money
laundering or the existence of proceeds of
crime, that becomes actionable under the
Act itself.
339. To put it differently, at the
stage of recording of statement for the
purpose of inquiring into the relevant
facts in connection with the property
being proceeds of crime is, in that sense,
not an investigation for prosecution as
such; and in any case, there would be no
formal accusation against the noticee.
Such summons can be issued even to
witnesses in the inquiry so conducted by
the authorised officials. However, after
further inquiry on the basis of other
material and evidence, the involvement of
such person (noticee) is revealed, the
authorised officials can certainly proceed
against him for his acts of commission or
omission. In such a situation, at the stage
of issue of summons, the person cannot
claim protection under Article 20(3) of
the Constitution. However, if his/her
statement is recorded after a formal
arrest by the ED official, the
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
consequences of Article 20(3) or Section
25 of the Evidence Act may come into
play to urge that the same being in the
nature of confession, shall not be proved
against him. Further, it would not
preclude the prosecution from proceeding
against such a person including for
consequences under Section 63 of the
2002 Act on the basis of other tangible
material to indicate the falsity of his
claim. That would be a matter of rule of
evidence."
77. There is absolutely no ambiguity with regard to
the scope of Section 50. The only question is as to whether the
statement of the petitioner involved him in an offence of money-
laundering. The petitioner admitted that he had financial
transitions with M/s AMPL. According to the case of the
prosecution, it is M/s AMPL and its Director who have proceeds
of crime. There is absolutely no evidence that the
petitioner directly or indirectly attempts to indulge or knowingly
assists or knowingly is a party or is actually involved in any
process or activity (here sand scam) connected with
the proceeds of crime including its concealment, possession,
acquisition or use and projecting or claiming it as untainted
property.
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
78. The documents filed by the petitioner, Annexure
P8 series shows payment and receipt of money including an
amount of Rs. 39 Lakhs which was claimed to be projected as
tainted money by the ED. The ED has failed to establish that it
has reason to believe that petitioner is involved in concealment,
or possession, or acquisition, or use, or projecting as untainted
property or claiming as untainted property, any money obtained
by M/s AMPL through illegal sand mining business.
79. Thus, the statement containing "reason to believe"
delivered by ED to petitioner does not contain satisfactory
material to hold that the petitioner is guilty of offence under
Section 3 of the PMLA.
80. In view of the above discussions, petitioner's
arrest, dated 20th of September of 2024, is illegal and in
violation of the safeguards contained in Section 19(1) of the
PMLA.
81. It is needless to say that any illegal detention is
violative of right to life and personal liberty enshrined under
Article 21 of the Constitution of India.
82. As a result, the instant writ petition is allowed.
83. The petitioner be released from the judicial
custody of the learned Special Judge, (PMLA), Patna, forthwith,
Patna High Court CR. WJC No.2167 of 2024 dt.05-02-2025
on his executing a bond with or without sureties as learned
Special Judge deems fit and proper.
84. The instant writ petition is, thus, allowed on
contest.
85. However, there shall be no order as to costs.
(Bibek Chaudhuri, J)
uttam/skm/-
AFR/NAFR AFR
CAV DATE 24.01.2025.
Uploading Date 05.02.2025
Transmission Date N/A
