Shiv Lal Pabbi vs Directorate Of Enforcement
2021 Latest Caselaw 3048 P&H

CRM-M-35662-2021 (O&M)                                                   -1-


    IN THE HIGH COURT FOR THE STATES OF PUNJAB AND
                HARYANA AT CHANDIGARH

                                                    CRM-M-35662-2021 (O&M)
                                                       Reserved on : 26.10.2021
                                                     Pronounced on : 27.10.2021


Shiv Lal Pabbi                                                      ...Petitioner


                                           Versus


Directorate of Enforcement                                        ...Respondent


CORAM: HON'BLE MR. JUSTICE ARVIND SINGH SANGWAN

Present:-     Mr. Vikram Chaudhary, Sr. Advocate with
              Mr. S. S. Gill, Advocate &
              Mr. Keshavan Chaudhary, Advocate
              for the petitioner.

              Mr. S. V. Raju, Additional Solicitor General of India with
              Mr. Zoheb Hossain, Special Counsel for ED,
              Mr. Vishal Gupta, Advocate &
              Mr. Vivek Gurnami, Advocate
              for the respondent-ED.

              Mr. Tanvir Joshi, AAG, Punjab.

ARVIND SINGH SANGWAN, J.

Prayer in this petition, filed under Section 439 Cr.P.C., is for

grant of regular bail to the petitioner in case ECIR No. HQ-STF/15/2020

dated 07.09.2020, registered by the respondent-Enforcement Directorate,

STF-HQ, New Delhi for an offence under Sections 3 and 4 of the

Prevention of Money Laundering Act, 2002 (for short 'PMLA').

Brief facts of the case are that the aforesaid case is registered

against petitioner Shiv Lal Pabbi at the instance of Enforcement

Directorate, STF-HQ, New Delhi (for short 'ED') on the ground that a letter

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dated 29.12.2017 was received from the Ministry of Home Affairs, vide

which the original letter dated 20.04.2017, sent by the Embassy of

Netherlands was endorsed, wherein a request was made for legal assistance

in the matter of petitioner Shiv Lal Pabbi and others for their involvement in

money laundering as they were indulged in secret banking and were having

various assets in Dubai and India. The letter further states that the offence

registered by the Dutch Police corresponds to Sections 420 and 467 of the

IPC, which are scheduled offences under Part "A" of the PMLA. On the

basis of the same, the aforesaid case/ECIR was registered on 07.09.2020 by

the ED as per Part "C" and Section 58 of the PMLA.

During investigation, it was found that the petitioner is

involved in the acts of cheating and forgery in Netherlands by transferring

of money of other persons through Hawala operations and earned

commissions in the shape of cash. Statement of the petitioner and one

Mukesh Sharma was recorded under Sections 17 and 50 of the PMLA,

however, the petitioner did not disclose the details of the bank accounts held

by him in India and sought time. Again, summons under Section 50 of the

PMLA were issued to the petitioner on 06.07.2021 for appearance on

09.07.2021 to record his statement but he, through an email, requested for

four weeks more time to collect the documents and on 17.07.2021, the

petitioner was apprehended by the officials of Bureau of Immigration at

New Delhi Airport in response to an LOC (Lookout Circular) dated

19.02.2021 as he was trying to board a flight in order to flee from India.

Thereafter, he was produced before the Special Judge, CBI, Punjab, from

where, he was remanded to ten days' police custody and then, he was sent to

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judicial custody.

Learned senior counsel for the petitioner has argued that the

petitioner, who is aged about 63 years, is a Dutch National since 1982 and

has come to India in February, 2021. It is also submitted that the petitioner

has transferred certain assets for purchasing a property for the Cabbana

Resorts in Punjab and in pursuance to a notice issued by the authorities

under PMLA, the petitioner has appeared before them and has got recorded

his statement. It is further submitted that in the month of February, 2021,

search was also carried out at the premises of the petitioner and certain

documents were taken in possession. Learned senior counsel has further

submitted that since the authorities under PMLA can retain the documents

for a period of 30 days, thereafter, an application was moved before the

adjudicating authorities under Section 17(4) of the PMLA for extending the

time and in the meantime, in pursuance to another notice, the petitioner

appeared before the authorities.

Learned senior counsel further submitted that in the meantime,

on the same set of charges, vide judgment dated 22.09.2020, the petitioner

was convicted by the competent Court in Netherlands for a period of 44

months and the petitioner preferred an appeal, which was admitted and,

therefore, as per the criminal procedure applicable to said country, the

petitioner's sentence automatically stood suspended and he was not arrested.

Learned senior counsel has further argued that the petitioner, in

the month of February, 2021, demanded the said documents back from the

authorities and having failed to do so, the petitioner filed a civil writ

petition bearing CWP No. 9987 of 2020 challenging the action of the

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authorities under PMLA as well as the notices issued to petitioner and

during the pendency of the said writ petition, the respondent-authorities

never brought it to the notice of the Writ Court that any LOC has been

issued against the petitioner.

Learned senior counsel has further submitted that after hearing

both the sides, the judgment was reserved in the aforesaid writ petition on

12.07.2021 and in the meantime, the petitioner was arrested on 17.07.2021,

therefore, the petitioner moved an application for withdrawal of the said

writ petition to avail his appropriate remedy and the said writ petition was

dismissed as withdrawn on 20.07.2021.

Learned senior counsel has further submitted that in fact the

petitioner was not fleeing from the process of law, rather he had received

summons from the District Public Prosecutor Office in Netherlands with

regard to a confiscation case pending before the competent authority in

Netherlands and the petitioner was directed to appear on 27.07.2021. In

order to attend the said proceedings, the petitioner had booked the return

tickets from 17.07.2021 to 05.08.2021, however, he was detained at the

Airport.

Learned senior counsel further submitted that the entire process

of arresting the petitioner, in pursuance to the LOC, which was never

brought to the notice of the writ Court, is nothing but an attempt to

overreach the proceedings of the Court as it is not the case of the PMLA

authorities that at any point of time, any such information was conveyed to

petitioner. It is also argued that the petitioner is an overseas citizen and

without taking any transit remand, he was brought from New Delhi to

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Mohali and even the grounds of arrest were not communicated to him.

Learned senior counsel has, thus, prayed for grant of regular

bail to the petitioner on the grounds that since the request was made by the

Netherlands authorities to provide mutual legal assistance for giving

information regarding assets of the petitioner in India, qua which, a case

was already pending in the Courts at Netherlands, wherein the petitioner

was ultimately convicted for a period of 44 months, the prosecution of the

petitioner in India amounts to double jeopardy.

Learned senior counsel has next argued that the petitioner has

not committed any scheduled offence in India and the allegations of

cheating and forgery, leveled in the remand application, are afterthought. It

is further argued that even prior to his arrest, the petitioner has appeared

before the ED on two-three occasions in between 06.07.2021 to 09.07.2021

and 13 documents were called from the petitioner including his ITR/Salary

etc. and since the same were in Netherlands, the petitioner sought time to

supply the said documents and in the meantime, when the petitioner

received summons from the authorities in Netherlands, he booked his return

flight to attend the said proceedings and bring the documents, which were

required by the ED and there was no intention on the part of the petitioner to

flee from the process of law. It is further submitted that the petitioner was

unaware about the issuance of LOC as the same was intentionally not

brought to the notice of the writ Court by the respondent-authorities, when

the writ petition was pending.

Learned senior counsel further submitted that there is not

material on record to believe that the petitioner is guilty of any offence. It is

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also submitted that the petitioner, who is in judicial custody for the last

more than three months, may be released on bail as even the investigation

qua him is complete as per the chargesheet filed by the ED in September,

2021.

In reply, learned Additional Solicitor General of India,

appearing for the respondent-ED, on the basis of the conclusion of

investigation, has argued that the petitioner has earned huge amount in cash

by way of underground bank/Hawala business in Netherlands, which was

generated as commission to cover up his legitimate business and the

petitioner, in conspiracy with co-accused Mukesh Sharma, has prepared

certain documents, which amounts to tax evasion in Netherlands and also

amounts to forgery, cheating and money laundering as no permission was

taken by him in Netherlands. The operative part of the conclusion of

investigation, which runs from para 19.1 to 19.8, is reproduced below"

"19.1 It has been established during the investigation that Shivlal Pabbi, with an intention to save taxes in the Netherlands and to cheat the Netherlands Authorities, incorporated a firm SM Fashion BV in Netherlands in the name of his childhood friend Mukesh Sharma, a resident of Phagwara, India. Mukesh Sharma was the owner of SM Fashion BV only on paper and the said form was managed and controlled by Shivlal Pabbi.

Further, on 09.05.2005, Mukesh Sharma signed a power of attorney in Shivlal Pabbi's favour so tht the business operations of the company could be run by Shivlal Pabbi in the Netherlands. Shivlal Pabbi indulged in the transfer of money on behalf of other persons i.e. in Hawala operations or underground banking activity and earned commission in the form of cash. To hoodwink the

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Netherlands Authority and to evade taxed in the Netherlands, he created a facade of legitimate business opeartions in the name of SM Fashion BV which was deliberately and fraudulently created in the name of an Indian citizen Mukesh Sharma. Shivlal Pabbi also used to cover of the business operations in SM Fashion BV to conduct underground banking.

19.2 Sh. Mukesh Sharma, Indian National also signed and executed a loan agreement for providing a loan of Euro 200,000 to Shivlal Pabbi even though no loan was actually extended by him to Shivlal Pabbi. Further, on behalf of SM Fashion BV, Sh. Mukesh Sharma also signed and executed a 'Deed of Sale of Assets and Liabilities' dated 31.12.2007 with Shivlal Pabbi and by virtue of his deed, purchased all the assets and liabilities of Shivlal Pabbi's business concern named Euromode. In reality, there was no money involved in the transactions shown in books on behalf of Sh. Mukesh Sharma and the transactions shown against payments to creditors and loan to Shivlal Pabbi from Mukesh Sharma was only a sham done for the purpose of book-keeping. 19.3 Shivlal Pabbi indulged in criminal offences having cross border implications as defined in Section 2 (1) (ra)

(i) of the PMLA, 2002 read with Section 2 (1) (ia) and Part C of the PMLA, 2002. Criminal offences committed by him under corresponding laws in the Netherlands constitute offences under Sections 420 and 467 of the IPC which are specified in Part A of the Schedule of the PMLA and are thus covered under Part C of the PMLA, 2002.

19.4 The Hawala/underground banking operations in the Netherlands was run by Shivlal Pabbi under the cover of business operations of SM Fashion BV and the commission earned through this illegitimate Hawala

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business in cash was then transferred by Shivlal Pabbi to his bank accounts in SBI Phagwara through Hong Kong and Dubai. Proceeds earned through this Hawala/underground banking operations were not declared to the Netherlands authority and the same after being laundered to India through Hong Kong and Dubai, were invested in M/s Mayfair resorts and M/s CIPL, Phagwara, Kapurthala, Punjab, India.

19.5 Income Tax Returns in respect of Shivlal Pabbi and his firm S.M. Fashion B.V., for the period 2008 to 2014 revealed that Shivlal Pabbi was drawing wages in the capacity of Manager in M/s S.M. Fashion B.V. even after having General Power of Attorney issued in his name by Mukesh Sharma and even after effectively owning and controlling operations of SM Fashion BV; and that he received Euro 2,80,095 over the period as wages from S.M. Fashion B.V. Further, during the same period S.M. Fashion B.V. continuously yielded lossed totaling Euro 2,98,551.85. This finding corroborated the fact that Shivlal Pabbi had no legitimate means to earn such huge amount of money and then remit the same to India for investment; and that the amount transferred by him through Hawala from the Netherlands to Dubai and Hong Kong and thereafter to bank accounts in India was nothing else but proceeds of crime generated out of the criminal activities committee by him in the Netherlands. 19.6 It was also observed by the Netherlands authority that no payments relating to India were made during the period 2007 to 2015 from the Netherlands bank accounts and Shivlal Pabbi, his wife Marie Sharda Hiralal, or the sole proprietorship Euromode or SM Fashion BV.

Further, during the analysis of bank accounts of Shivlal Pabbi and his family members maintained in SBI, Phagwara, no remittances from the Netherlands were

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found to have been received in those accounts. This, therefore, further proves that fact that Shivlal Pabbi had no legitimate means to earn such huge amount of money and then remit the same to India for investment; and that the amount transferred to him through Hawala from the Netherlands to Dubai and Hong Kong and thereafter to bank accounts in India was nothing else but proceeds to crime generated out of the criminal activities committee by him in the Netherlands.

19.7 As explained above, investigation further revealed that Sh. Shivlal Paabi had committed large-scale criminal offences over a long period of several years, in this case involving banking without a permit (underground banking/hawala) and money laundering. Sh. Shivlal Pabbi had large sums of cash - the proceeds of crime - at his disposal. According to investigations, Pabbi appears to have played a central role in the management of money couriers, who, by order of Sh. Shivlal Pabbi, transported large sums of cash. Money generated i.e. proceeds of crime from his Hawala business was not reported to Netherlands government and the same was then transferred to the bank accounts of himself and his family members/friend, maintained in India through Hong Kong and Dubai. Proceeds of crime amounting to Rs. 3257.07 lakhs, in the form of foreign inward remittance from Hong Kong and Dubai were thus received in the bank accounts of the Shivlal Pabbi and his family members/friend.

19.8 The aforesaid proceeds of crime were used by Shivlal Pabbi with the help of Mukesh Sharma, Anil Chodha and Manoj Chodha for various purposes, the main purpose being investment M/s Mayfair Resorts -

partnership firm of Shivlal & Hiralal Pabbi and Anil & Manoj Chodha and M/s Hyatt Resorts Pvt. Ltd. - a

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company having equal shareholding of the Pabbi & Chodha brothers which later became M/s Cabbana Infrastructure Pvt. Ltd. The proceeds of crime were also used by them to repay the laon (along with interest thereon) that they had taken in other bank accounts against FCNR deposits. Shivlal Pabbi also transferred the proceeds of crime to their relataives & family friends who used the said proceeds of crime to further their business interests, repay loans to creditors and also to buy property."

Learned counsel for the respondent has referred to Section 2

(ra) of the PMLA, which reads as under;

"offence of cross border implications means-- (i) any

conduct by a person at a place outside India which

constitutes an offence at that place and which would

have constituted an offence specified in Part A, Part B or

Part C of the Schedule, had it been committed in India

and if such person transfers in any manner the proceeds

of such conduct or part thereof to India.

Learned counsel for the respondent-ED has further referred to

Section 2(u) of the PMLA, which reads as under:

"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."

It is next argued on behalf of the respondent-ED that under the

provisions of Section 45 of the PMLA, no person accused of any offence

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under the PMLA shall be released on bail or on his own bonds unless (i) the

Public Prosecutor has been given an opportunity to oppose the application

for such release and (ii) where the Public Prosecutor opposes the

application, the Court is satisfied that there are reasonable grounds for

believing that accused is not guilty of such offence and that he is not likely

to commit any offence while on bail. It is further submitted that limitation of

granting bail as specified in sub-Section (i) is in addition to limitation

provided under the Criminal Procedure Code.

Learned counsel for the respondent-ED has further argued that

the petitioner does not qualify the triple test laid down under Section 45 as

there is every possibility that he may flee from country if granted the

concession of regular bail as he is a Dutch National and may also try to

tamper with the evidence as the allegations are of siphoning of the money

through Hawala and since the offence under PMLA is an international

offence as he has brought the money from Netherlands and has used it in

India by investing in Cabbana Resorts in Punjab.

It is also argued that co-accused of the petitioner, namely

Mukesh Sharma, had filed anticipatory bail application in FIR No. 161

dated 17.06.2021, registered under Sections 467, 471, 120-B, 108-A of the

IPC at Police Station City Phagwara, District Kapurthala on a complaint

given by the Assistant Director, ED, wherein the allegations against the

petitioner as well as said Mukesh Sharma were identical and were

considered by this Court and the said application was dismissed by passing

a detailed order, vide order dated 08.10.2021 passed in CRM-M-31053-

2021.

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 CRM-M-35662-2021 (O&M)                                                    -12-

It is further argued on behalf of the respondent-ED that the

provisions of Section 45 of the PMLA were struck down by the Hon'ble

Supreme Court on 23.09.2017, however, again amendment was made on

19.04.2018 and the question of its constitutional validity is pending before

the Hon'ble Supreme Court as different High Courts are taking divergent

views whether the provisions of Section 45 are revived/re-enacted or not.

Learned State counsel has filed the custody certificate, as per

which, the petitioner is in judicial custody for the last three months and two

days and it is admitted case of the parties that chargesheet has already been

filed and investigation qua petitioner is complete.

After hearing learned counsel for the parties and in view of

provisions of Section 45 of the Act, I find merit in the present petition, for

the following reasons:

(a) The primary objection raised by learned counsel for the

respondent-ED is that the petitioner does not qualify the

triple test laid down under Section 45 of the PMLA. The

said three conditions laid down under Section 45 are that

the public prosecutor should be given an opportunity of

hearing, which has been given in the present case;

secondly, if the public prosecutor opposes the

application, a reasoned order be passed that the person is

not guilty of offence and not likely to commit offence

while on bail and thirdly that in addition to provisions

PMLA, the provisions of Cr.P.C., regarding grant of bail,

shall apply. Section 45 (1) (ii) is akin to Section 37 of

the NDPS Act, wherein the Court, while granting bail,

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has to form an opinion. In a case under the NDPS Act, it

is easy for an accused who has been released on bail to

repeat such offence, however, in a case under the PMLA

like the present case, it is not easy for an accused to

commit the offence again while on bail while staying in

India.

(b) In view of the arguments raised by learned senior

counsel for the petitioner that the entire proceedings

were initiated on the basis of the mutual legal assistance

sought by the Netherlands authorities in 2017 to apprise

about the assets of the petitioner in India, for which later

on the competent Court at Netherlands has already

convicted the petitioner for a period of 44 weeks, vide

judgment dated 22.09.2020 and, therefore, it will be a

matter of trial whether the prosecution of the petitioner in

India after his conviction in Netherlands would amount

to double jeopardy.

(c) Not only this, there was no request on behalf of the

Netherlands authorities to register a case under Section

44/45 or 65 of the PMLA as at the first instance, a

mutual legal assistance was called in 2017 and it is not

the case of the ED that by way of any further

correspondence, it was communicated to corresponding

authorities in Netherlands that the petitioner, who is a

Dutch National, is being prosecuted in India, for which

he has already been convicted by the Courts at

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Netherlands.

(d) A perusal of order dated 17.07.2021, passed by the

Special Judge, CBI, Punjab as well as reply filed by the

ED nowhere reveals that when the petitioner has filed the

aforesaid civil writ petition, which remain pending for a

considerable long time, at any stage, it was conveyed to

the writ Court that LOC has been issued against the

petitioner and, therefore, the arrest of the petitioner on

the basis of such LOC without communicating the

grounds of arrest, shows that the petitioner was not

informed about the LOC as even subsequent to that,

show cause notices were issued to him and he attended

the office of the ED for three occasions between

06.07.2021 to 09.07.2021.

(e) It is well settled principles of law that when the

investigation is complete and charge sheet is filed in the

Court, conclusion of trial is likely to take a long time, a

person/accused like the present petitioner, who is aged

about 63 years old, can be released on bail, subject to his

furnishing bail/surety bonds and with a condition that his

passport shall remain deposited with the

Court/Prosecuting Agency and he will not leave the

country without seeking prior permission of the Court.

Accordingly, it is held that the petitioner qualifies the test

under Section 45 of the Act and therefore, the present petition is allowed.

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The petitioner is ordered to be released on regular bail, subject to following

conditions:

(i) The petitioner will furnish bail and two sureties to the

satisfaction of the trial Court/Illaqa Magistrate, out of

which, one surety will be a local surety.

(ii) The passport of the petitioner will remain in the

custody of the prosecuting agency or the trial Court

and the petitioner will not leave India without prior

permission of this Court.

(iii)The petitioner will furnish an undertaking that he

will appear before the Investigating Agency as well

as the trial Court as and when he is required and in

case, he defaults in appearance, it will be open for

the prosecution to apply for cancellation of his bail.

Disposed of.

27.10.2021                                      (ARVIND SINGH SANGWAN)
Waseem Ansari                                          JUDGE




                Whether speaking/reasoned                     Yes/No

                Whether reportable                            Yes/No




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