Sukesh Gupta vs Government Of India
2022 Latest Caselaw 4738 Tel

             HON'BLE SRI JUSTICE K.SURENDER

             CRIMINAL PETITION No.6656 of 2022
ORDER:

1. This petition is filed for grant of anticipatory bail to the

petitioner/A1 under Section 438 of Cr.P.C in ECIR

No.5/HYZO/2014, dated 25.02.2014 of Joint Director,

Enforcement Directorate, Government of India, Hyderabad

Zonal Office, Hyderabad registered under Section 3 of the

Prevention of Money Laundering Act, 2002 (for short 'the Act

of 2002').

2. The petitioner is A1 in ECIR No.5/HYZO/2014, registered

by Enforcement Directorate (ED) for the offence under Section

3 of the Act of 2002. Petitioner was issued summons on

20.07.2022 asking him to appear. The petitioner has appeared

previously and provided the statements and also his statement

was recorded during November, 2018. Since there was a

provisional attachment order on 26.08.2021 under the Act of

2002, the petitioner is apprehending arrest. However, when

the provisional attachment order was passed, this Court in

Criminal Petition No.5196 of 2019 filed for quashing of

proceedings in ECIR No.5/HYZO/2014, by order dated

17.09.2019 directed not to take coercive steps. The said order

was extended on 08.02.2022. However, by order dated

23.02.2022, quash petition was dismissed finding that there is

a prima facie case for the ED to register the said crime against

the petitioner.

3. Initially, the CBI registered First Information Report

No.1(A)/2013, dated 03.01.2013. The complaint was given by

the General Manager, MMTC Limited, Hyderabad stating that

there was collusion in between this petitioner, who is the

Director of M/s.MBS Group of companies. Both M/s.MBS

Impex Private Limited and M/s.MBS Jewellers Private Limited

obtained gold on credit basis. During the year 2005 to 2011,

nearly Rs.20,000/- Crores worth of gold was purchased from

MMTC. Gold was purchased by MMTC from foreign buyers

and as per the bullion drill, MMTC was granted hedge its

exposure, thereafter debiting expenses from the account of the

purchaser. For every Rs.100/- paid by the purchaser, Rs.90/-

worth of gold was to be supplied. MMTC agreed to reduce the

margin of 5% to increase the volume of business. According to

the petitioner, MMTC started keeping the full upfront payment

in the form of Fixed Deposit and interest earned on it which

was kept as a margin. Petitioner company purchased gold of

nearly Rs.20,000/- Crores without any dispute. In July, 2011,

the rupee value depreciated against US dollar crashing up to

27% in the financial year, for which reason, the liability arose.

4. On 15.09.2011, the company issued a letter requesting

that forex rates be kept open for the transaction. However,

most of the 82 transactions in which forex losses took place

were prior to the letter, which liability has also been put on the

company. On 05.10.2012, MOU was signed in between MBS

and MMTC wherein MMTC informed the liability of MBS at

Rs.181.39 Crores. Complaint was lodged with CBI on

31.12.2012. MBS filed Arbitration Application No.5 of 2013

before this Court seeking nomination of an arbitrator to

resolve the disputes with MMTC. MMTC in turn filed civil suit

OS No.903 of 2013 before the City Civil Court for recovery of

Rs.274 Crores. On 08.08.2013, KPMG submitted 'Flash

Report' wherein fraud of MMTC qua MBS was exposed, but

said report was suppressed. The petitioner was arrested by

CBI on 27.12.2013 and released on 15.12.2014. The ED

registered present case on 25.02.2014. On 27.11.2014, the

CBI filed charge sheet against the petitioner and other public

servants of MMTC. The petitioner filed quash petition in

Criminal Petition No.5196 of 2019 to quash the present crime

and this Court by order dated 17.09.2019 ordered that 'no

coercive steps shall be taken' against the petitioner.

5. Learned counsel for the petitioner would submit that the

crime was registered in the year 2014. However, there was no

arrest by the ED. Though, there is a clause for arbitration,

MMTC has adverted to filing criminal cases. He further

submits that the petitioner has assisted the investigation

earlier and presently apprehends arrest since the ED had

taken steps to attach the properties. He relied on the

judgment of Hon'ble Supreme Court in the case of Satender

Kumar Antil v. CBI1 and argued that the procedure under

2022 SCC Online SC 825

Sections 41 and 41-A of Cr.P.C has to be followed. In

conclusion, the Hon'ble Supreme Court at para 73 held that

the investigating agencies and their officers are duty bound to

apply the mandate of Section 41 and 41-A of Cr.P.C and the

directions issued by the Court in Satender Kumar Antil

(supra). Since the offence under Section 3 of the Act of 2002

is punishable up to seven years, the procedure under Section

41-A of IPC has to be followed. He also relied upon the

judgment of the Hon'ble Division Bench in the case of

Vakamulla Chandrasekhar v. Enforcement Directorate and

another2, in which it is held that the scheme of the Act of

2002 does not exclude the application of Section 41 and 41-A

of the Code and the said provisions are made to safeguard the

liberty of the citizens against the arbitrary and malafide

exercise of power of arrest by the agencies. This Court in

Criminal Petition Nos.9825, 9846 and 10021 of 2021 while

passing common order held that the provisions of Section 41

and 41-A of Cr.P.C are not applicable since the procedure

2017 SCC OnLine Delhi 12810

prescribed under Section 19 of the Act of 2002 over rides the

provisions of Section 41 and Section 41-A of Cr.P.C. The said

order was questioned before the Hon'ble Supreme Court and

the Hon'ble Supreme Court by order dated 24.02.2022 vide

Special Leave to Appeal (Crl.) No(s). 1540 of 2022 directed that

no coercive action shall be taken against the petitioners

therein. Further, by order dated 04.04.2022, the Hon'ble

Supreme Court held that the matter relating to PMLA where

similar questions were raised, was reserved for judgment.

6. The Bench was referring to the case of Vijay Madanlal

Choudhary v Union of India (Special Leave Petition (Criminal)

No.4634 of 2014). The said judgment was delivered on

27.07.2022. However, there is no discussion regarding the

applicability of Section 41-A of Cr.P.C. The learned counsel

submits that in view of judgment of Satender Kumar Antil v.

CBI (supra), which was subsequent to the order of this Court

in Criminal Petition Nos.9825, 9846 and 10021 of 2021

finding that the procedure under Section 41-A cannot be

applied to PMLA is overruled on account of the judgment in

Vijay Madanlal Choudhary's case. Learned counsel also

relied upon the judgment of Hon'ble Supreme Court in the

case Ashok Munilal Jain v. Assistant Director, Director of

Enforcement3, judgment of this Court in P.V.Ramana Reddy

v. Union of India, rep. by Secretary4, Union of India v.

Ashok Kumar Sharma5 and K.Ranjith v. State of A.P,

through SHO, rep. By Public Prosecutor6. He prayed to

grant relief to the petitioner and the petitioner undertakes to

abide by any condition imposed by this Court.

7. Sri B.Narasimha Sharma, learned Standing Counsel for

Enforcement Directorate would submit that the Court cannot

intervene in economic offences cases, as the offences are

serious in nature and affect the society as a whole. He further

submits that the economic offences constitute class apart

having serious ramifications and there is a prima facie case to

show that the petitioner is involved in economic offence The

(2018) 16 SCC 158

2019 SCC OnLine TS 3332

2020 SCC OnLine SC 683

2021 SCC OnLine 3121

petitioner is a 'flight risk' i.e., if anticipatory bail is granted, he

may run away from the country. Though the petitioner was

summoned 16 times to appear in the office from the year

2015, he has appeared only once and given statement in part

and by virtue of non cooperation of the petitioner, the

investigation is pending. He further submits that the Hon'ble

Supreme Court in the case of Vijay Madanlal Choudhary's

case (supra) at paras 88 to 90 discussed the provision under

Section 19 of the Act, where power to arrest is granted. The

Hon'ble Supreme Court held that Section 19 of the Act cannot

be held to unconstitutional and it is for the purpose of

achieving the object of the act and also for confiscation of

proceedings of crime in money laundering.

8. The learned Standing Counsel for the ED was asked as to

why the agency has not taken steps to arrest the petitioner

though crime was registered in the year 2014 and CBI has

already filed charge sheet.

9. In reply, learned Standing Counsel for ED submits that

the petitioner has to appear and after appearance and

recording of the statement of the petitioner, if the investigating

officer finds that there is enough evidence to effect arrest only

in such cases arrest would be effected. It is mandatory on the

part of agency to fulfill the conditions under Section 19 of the

Act which mandates that belief shall be recorded in writing

that the person is guilty for the offence under the Act of 2002.

10. Admittedly, no attempt was made by the agency to arrest

the petitioner for the last 8 years. It is not the case of the

agency that he has evaded any arrest attempt made by the

agency or absconded contrary to directions of any Court.

11. The attachment of the property was also not undertaken

by the agency though it is admitted that no coercive action

shall be taken against the petitioner, which was ordered by

this Court in Criminal Petition No.5196 of 2019, would not

cover any such attachment proceedings.

12. In general, the Court directing 'not to take coercive steps'

would only mean that there shall not be detention or any

physical abuse. However, the said order of 'not to take coercive

steps' will not cover collection of evidence, examining the

accused and also proceeding under Chapter III to deal with

attachment of property, adjudication and confiscation unless

there are any specific directions by the Court restraining such

action which can be taken during the course of investigation.

The agency can also file its complaint under Section 45 of the

Act of 2002 if the investigation is complete. The provision

under Section 173(8) of Cr.P.C enables a police officer to file

report and further such filing of report will not preclude any

further investigation. A complaint under Section 45 of the Act

for the offence punishable under the Act of 2002 can be made

initially, if the situation warrants. Filing of such complaint will

not preclude the agency from further investigation and also

filing of further complaint to be tried along with first complaint

before commencement of trial.

13. Learned Standing Counsel for ED submitted that the

petitioner has only appeared once in spite of agency issuing

notices 16 times. The investigation cannot proceed at the

mercy of an accused, who has been summoned for the

purpose of investigation. Section 50(1)(b) of the Act of 2002

empowers the agency to enforce appearance, which would

include arrest for non appearance. Arrest under Section 19 of

the Act of 2002 would require the reasonable assessment of

the accused being guilty. However, in the absence of petitioner

not assisting investigation, though summoned, would be a

valid ground for the agency to arrest such accused and such

arrest will not violate any of the provisions under the Act of

2002.

14. Admittedly, the case is of the year 2014. For five and half

years i.e., till 17.09.2019, till petition was filed for quashing of

the present crime and this Court ordered not to take coercive

steps, no such attempt to arrest was made.

15. The crux of the case against the petitioner herein and

others, who are involved is that the company of the petitioner

received gold from MMTC on buyers credit loan basis by

keeping forex position open without paying additional 5%

margin money in collusion with the officials of MMTC and

ultimately causing loss to the tune of over Rs.190.00 Crores

according to complaint.

16. The Hon'ble Supreme Court in the case of Vijay

Madanlal Choudhary's (supra) at para 89 held as follows:

"As noticed earlier, it is a comprehensive legislation, not limited to provide for prosecution of person involved in the offence of money-laundering, but mainly intended to prevent money-laundering activity and confiscate the proceeds of crime involved in money-laundering."

17. Admittedly, the agency has not taken steps since the date

of registration of crime in the year 2014 either to arrest the

petitioner under Sections 19 or 50(1)(b) of the Act of 2002.

Learned Special Counsel contended that the Hon'ble Supreme

Court in several judgments held that in economic offences, the

Courts cannot grant anticipatory bail, unless exceptional

circumstances are present and the Court has to reasonably

find that the petitioner seeking anticipatory bail under the Act

of 2002 is not guilty of offence.

18. As already stated, the petitioner was not arrested nor any

attempt was made to arrest the petitioner Civil suits are filed

for recovery of money and though the agency was prepared to

attach the properties of the petitioner, no such action was

taken.

19. Counter filed by the Enforcement Directorate does not

state that they have any evidence, which according to them

can conclude reasonably that the petitioner is guilty of the

offence under the said Act. Further, what is the additional

material that is collected by the ED apart from the

investigation conducted by CBI for filing the charge sheet in

the present case is not mentioned. Except stating that there is

a prima facie case made out, there are no averments in the

counter, which in fact are specifically mentioned referring to

oral and documentary evidence, the investigating officer of the

agency could reasonably conclude that the petitioner is guilty

of the offence under the Act.

20. Learned Special Counsel has also submitted that the

reason for not arresting the petitioner was that a statement

was not recorded and unless the criteria under Section 19 of

the Act is fulfilled, the ED would not effect arrest. In the said

scenario the Court cannot reasonably conclude that the

petitioner is not guilty when no such specific statement is

made by the ED that petitioner is believed to be guilty. Simply

reproducing the words that the agency is reasonably satisfied

that the accused is guilty of the offence of money laundering

would not suffice. Since the legislation has thought it fit to

specifically mention the word guilty in the provision under

Sections 19 and 45 of the Act, it is for the agency to produce

before the Court not in the form of 'prima facie evidence' but

reasonably conclude that the petitioner is 'guilty', which is a

degree higher than the requirement of 'prima facie case'. Such

assertion of the accused being guilty shall be by way of

supporting oral and documentary evidence.

21. Conclusion:

i) The ED is empowered to arrest under Section 50 (1)(b)

of the Act when an accused does not attend pursuant to notice

in addition to the procedure prescribed under Section 63 of

the Act. In such circumstances, the reasons required under

Section 19 of the Act need not be stated. Similarly, if bail is

sought when arrested under Section 50(1)(b) of the Act, the

Court can grant bail without adverting to the restrictions

under Section 45 of the Act if not let off by the investigating

officer after his arrest.

ii) A complaint can initially be made by the ED in a case

and in the event of any additional information that is gathered

in respect of the very same case, additionally another

complaint can be filed to be tried along with the first

complaint. The said additional complaints can be filed prior to

commencing trial on the first complaint.

22. In view of the peculiar facts and circumstances of

the case, when there is no improvement in the process of

investigation for the last eight years, it is appropriate to direct

as follows:

i) The petitioner shall appear before the concerned

Investigating Officer, Enforcement Directorate, at Hyderabad

for the purpose of questioning/interrogation on 26.09.2022 at

10.00 A.M and surrender his passport.

ii) He shall continue to appear from 27.09.2022 to

30.09.2022, 06.10.2022 and 07.10.2022 and from 10.10.2022

to 14.10.2022 for assisting investigation. Thereafter, the

petitioner shall appear on every Monday to Wednesday for five

weeks excluding public holidays. The petitioner shall assist

investigation as required by the officer on every day from

10.00 A.M to 4.00 P.M. However, no third degree methods

shall be adopted.

iii) On the date of surrender i.e., 26.09.2022 the

petitioner shall furnish security for Rs.2.00 lakhs each for the

likesum to the satisfaction of the Investigating Officer.

iv) In the event of any violation of conditions imposed, the

ED is at liberty to seek cancellation of this order, for arresting

the petitioner.

With the above directions, the Criminal Petition is

disposed off.

_________________ K.SURENDER, J Date:20.09.2022 kvs

THE HON'BLE SRI JUSTICE K.SURENDER

Crl.P.No.6656 of 2022

Dated:20.09.2022

kvs