Parasuraman Karthik Iyer vs Union Of India
2023 Latest Caselaw 2079 Tel

             HONOURABLE SRI JUSTICE K. LAKSHMAN

     CRIMINAL REVISION CASE No.378 OF 2023 ALONG WITH

        WRIT PETITION Nos.19163, 21448 & 20835 OF 2023 AND

              CRIMINAL REVISION CASE No.509 OF 2023

COMMON ORDER:

        Heard Mr. A.R.L. Sundareshan, learned Additional Solicitor

General of India representing learned Deputy Solicitor General of India

for the petitioner in Crl.R.C. No.378 of 2023 and the respondents in the

writ petitions, Mr. T. Niranjan Reddy, learned Senior Counsel

representing Mr. S. Ram Reddy, learned counsel for the petitioner in W.P.

Nos.21448 of 2023 and Crl.R.C.No.509 of 2023 and respondent No.2 in

Crl.R.C.No.378 of 2023, Mr. S. Niranjan Reddy, learned Senior Counsel

representing Mr. N. Naveen Kumar, learned counsel for the petitioner in

W.P. No.19163 of 2023 and respondent No.1 in Crl.R.C. No.378 of 2023

and Mr. A. Venkatesh, learned Senior Counsel representing Mr. V.

Surender Rao and Mr. P. Gautham Rao, learned counsel for the petitioner

in W.P. No.20835 of 2023 and respondent No.3 in Crl.R.C.No.378 of

2023.

2. Criminal Revision Case No.378 of 2023 is filed by the

Directorate of Enforcement (for short 'ED'), challenging the impugned

KL,J Crl.R.C. No.378 of 2023 & batch

remand rejection order dated 14.06.2023 passed by learned Metropolitan

Sessions Judge, Hyderabad, in S.R. No.6506 of 2023, wherein the learned

Sessions Judge illegally and erroneously refused to grant remand of

respondent Nos.1 to 3, who are arraigned as accused Nso.1 to 3, for the

offence committed under Section - 3 read with 4 of the Prevention of

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

i) W.P. No.19163 of 2023 is filed by Mr. T. Venkatram Reddy,

accused No.1 (Respondent No.1 in Crl.R.C. No.378 of 2023), seeking a

writ of mandamus declaring his arrest in furtherance to

ECIR/02/HYZO/15, Zone - Hyd. as illegal and in violation of Section -

19 of the PMLA and to set aside the same and for a consequential

direction to respondent Nos.2 to 4 to pay compensation of Re.1/- or any

such amount and also to direct respondent Nos.2 and 3 to initiate

appropriate enquiry and disciplinary proceedings against all the

delinquent officers, who have indulged in causing his unlawful arrest.

ii) W.P.No.21448 of 2023 is filed by Mr. Parasuraman Karthik

Iyer, accused No.2 (respondent No.2 in Crl.R.C.No.378 of 2023) seeking

a writ of mandamus declaring the action of official the respondents in

arresting him without complying with mandatory requirement under

Section - 41-A of the Code of Criminal Procedure, 1973 (for short

KL,J Crl.R.C. No.378 of 2023 & batch

'Cr.P.C.') as illegal and for a consequential direction to take necessary

disciplinary action against the erring official, who were responsible for

effecting his arrest and also further direction to pay compensation of

Rs.8.00 lakhs to the petitioner.

iii) He has also filed Crl.R.C. No.509 of 2023 challenging the

impugned order 14.06.2023 to the extent of not initiating action against

the arresting Officers under Section - 62 of the PMLA.

iv) W.P. No.20835 of 2023 is filed by Mr. Mani Oommen, accused

No.3 (Respondent No.3 in Crl.R.C.No.378 of 2023) seeking a writ of

mandamus declaring his arrest in furtherance to ECIR/02/HYZO/15,

Zone - Hyd. as illegal and in violation of Section - 19 of the PMLA and

to set aside the same, and for a consequential direction to the respondent

Nos.2 to 4 to pay compensation of Re.1/- or any such amount and also to

direct respondent Nos.2 and 3 to initiate appropriate enquiry and

disciplinary proceedings against all the delinquent officers, who have

indulged in causing his unlawful arrest.

3. The issue involved in the aforesaid matters and the parties are

common, therefore, the same were heard together and are being decided

by way of this common order.

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4. For the sake of convenience, the parties arrayed in Crl.R.C.

No.378 of 2023 will be hereinafter referred.

5. CONTENTIONS OF THE E.D. ARE AS FOLLOWS:

i) The following charge sheets were filed by the Predicate

Agencies against M/s. Deccan Chronicle Holdings Limited (for short

'DCHL') and others. The details of the same are as under:

                                                                    Amount of                         Charge
                                                       Charge       loss caused     Scheduled       sheet filed
Sl.           Name of                FIR No. &                        to bank                       before the
No.                                                   Sheet No.                      offence
            complainant                Date                            (Rs. in                        Court
                                                       & Date
                                                                      Crores)
01     Canara Bank,                RC-3(E)13,         01/2015,         357.77      Sec.120B         XIV ACM
       Sec.bad.                    dt.06.07.13        14.04.15                     r/w 420 IPC
                                   by CBI, BS &
                                   FC
02.    Andhra Bank, Hyd.           RC-2(E)/14 ,       04/2015,        225.77       Sec.120B        Magistrate,
                                   29.03.14 by        28.09.15                     r/w 420 &       Hyderabad
                                   CBI, BS&FC                                      471 IPC
03.    Indian Overseas             RC-3(E)/14,        03/2015,        72.61            -do-            -do-
       Bank, Large                 29.03.14 by        03.08.15
       Corporate Branch,           CBI, BS&FC
       Hyd.
04.    Central Bank of             RC-1(E)/15,        06/2015,        72.03            -do-
       India, Mid Corporate        13.01.15 by        13.11.15
       Branch, Hyd.                CBI, BS&FC
05.    Corporation Bank,           RC-5(E)/14,        05/2015,        116.35           -do-          XVII
       Bangalore                   22.05.14 by        14.11.15                                      ACMM,
                                   CBI, BS&FC                                                      Bangalore
06     IDBI Bank, Mumbai           RCBSM                  --          317.40          Sec.120B       XVII
                                   2015 E0005,        29.12.16                      r/w 420 IPC     ACMM,
                                   02.07.2015                                                      Esplanade,
                                   by CBI,                                                          Mumbai
                                   BS&FC
07     Axis Bank, Green            95/2015,           507/2017,       409.50           -do-        XII ACMM,
       Lands, Hyd.                 04.04.15 by         31.08.17                                    Hyderabad
                                   CCS, DD,
                                   Telangana
                                   Police
08     SEBI                             NA            Prosecution      NA           Sec.12A r/w      Sessions
                                                      Compalinant
                                                      No.MA                              24         Court for
                                                      42/16                                        SEBI Cases
                                                                                                    at Greater
                                                                                                     Mumbai
Total loss caused to the Banks as per the charge sheets.            1571.43

                                                               KL,J
                                                   Crl.R.C. No.378 of 2023 & batch

ii) Enforcement Case Information Report (ECIR) was registered

vide F.No.ECIR/HYZO/02/2015, dated 11.03.2015 by the ED,

Hyderabad Zonal Office in the case of M/s. DCHL and others for

investigation under the provisions of the PMLA on the basis of FIR No.3

of 2013, dated 06.07.2013 registered by the CBI, BS & FC, Bangaluru

since the offences committed under Section - 120B, 420 and 471 IPC

invoked in the said FIR are part of the Scheduled Offences under the

PMLA, 2002.

iii) Subsequently, multiple FIRs and charge sheets were registered

and filed by the Law Enforcement Agencies (LEAs) i.e., CBI, BS & FC,

Bengalore, Mumbai and Telangana Police, and the prosecution complaint

was also filed by the Securities & Exchanges Board of India (SEBI). The

same was also taken up for investigation under the provisions of the

PMLA.

iv) The LEAs have cumulatively filed eight (08) charge

sheets/complaints against M/s. DCHL and others for causing total loss of

Rs.1571.43 Crores to the Public Sector Banks/Private Banks under

Section 173 (2) of the Cr.P.C. before the Designated Courts.

KL,J Crl.R.C. No.378 of 2023 & batch

v) The SEBI has also filed prosecution complaint No.MA 42 of

2016 under Sections - 190 and 200 of the Cr.P.C. read with Section 12A

(a) to (c) and Sections 24 (1), 26A, 26B, 26C, 26D, 26E and 27 of the

SEBI Act, 1992 before the Sessions Court for SEBI Cases at Greater

Mumbai.

vi) Investigation conducted by the ED under the PMLA revealed

that M/s. DCHL had availed credit facilities from both Public Sector

Banks and Private Sector Banks, but did not utilize them for their

intended purpose. The Company and its Promoter-Directors diverted and

siphoned off the funds by employing various methods to launder the

wrongful gains obtained through defrauding and duping the banks. The

same are also specifically mentioned under the following heads:

(a) Cyclical repayment of already existing loans;

(b) Declaring the dividends by the management of M/s. DCHL;

(c) Share Buy-back by M/s. DCHL;

(d) Diversion of Funds to Subsidiaries/Associates and related parties;

(e) Funds transferred to proprietary and related party concerns;

(f) Suspicious donation made to Charitable Trusts;

(g) Re-purchase of stressed assets through benami company M/s.

VRT Infra Pvt. Ltd.;

KL,J Crl.R.C. No.378 of 2023 & batch

vii) The role played by each of the respondents i.e., Directors of

M/s. DCHL as identified during investigation conducted by the ED is also

specifically mentioned;

viii) Thus, according to the ED, investigation conducted by it

would reveal that the respondents along with other Promoters of M/s.

DCHL created large number of subsidiary companies. The

subsidiary/associated entities were not involved in any genuine business

activities. The bank accounts of these subsidiary/associated entities were

used for rotation of funds with M/s. DCHL. Subsequently, most of the

entities were amalgamated into M/s. DCHL. During the course of

investigation, summons were issued to the respondents and others to find

out the details of funds diverted to subsidiaries/associated entities and to

trace the proceeds of crime. However, the respondents and other

Promoters/Directors of M/s. DCHL remained completely evasive about

these entities and did not furnish any details and purpose of transfer of

funds to the subsidiary and associated entities.

ix) Therefore, the respondents and Directors of M/s. DCHL are not

co-operating with the ED during investigation. Summons were given to

the respondents to appear on 13.06.2023, to give another opportunity to

disclose the true facts of the case. Though they have appeared and their

KL,J Crl.R.C. No.378 of 2023 & batch

statements were recorded, they maintained their non-cooperation and

evasive reply and did not disclose the true facts of the case.

x) On 13.06.2023, the ED exercising its power under Section - 19

of the PMLA, after recording the reasons to believe and informing the

grounds of arrest to respondents and after following due process of law,

arrested the respondents.

xi) Subsequent to the arrest of the respondents, they were

produced before the learned Metropolitan Sessions Judge, Hyderabad and

sought the judicial custody of the respondents. But, learned Sessions

Judge rejected the remand application of the ED on the ground that no

notice under Section - 41A of the Cr.P.C. has been issued by the ED and

rejected the remand petition vide order dated 14.06.2023. Challenging

the said orders, the ED filed Crl.R.C. No.378 of 2023.

6. The respondents, Directors of the Company, filed the aforesaid

writ petitions and Crl.R.C. No.509 of 2023, to declare their arrest as

illegal and to set aside the same, and for a consequential direction to the

ED to pay compensation and also to initiate action against the erring

officers under Section - 62 of the PMLA.

KL,J Crl.R.C. No.378 of 2023 & batch

7. CONTENTIONS OF RESPONDENTS:

i) Mr. T. NIranjan Reddy, Mr. S. Niranjan Reddy and Mr. A.

Venkatesh, learned senior counsel appearing on behalf of the respondents,

referring to various proceedings including the first provisional attachment

order (PAO) No.03 of 2017, dated 28.03.2017, second PAO No.1 of 2020,

dated 15.10.2020 and the summons issued by the ED, would contend that

there are no reasons to believe to arrest of the respondents. The

respondents have appeared before the ED pursuant to the summons issued

by it on 13.11.2015, 17.05.2016, 30.05.2016, 20.03.2023 and 13.06.2023,

and on their appearance in the aforesaid ECIR, the ED has recorded their

statements under Section - 50 of the PMLA. Thereafter, the First PAO

orders dated 28.03.2017 was passed.

ii) Mr. T. Vinayak Ravi Reddy, brother of Mr. T. Venkatram

Reddy, the petitioner in W.P. No.19163 of 2023, one of the Directors of

M/s. DCHL, filed a writ petition vide W.P. (C) 7015 of 2017 before the

High Court of Delhi challenging the first PAO No.03/2017 and the Delhi

High Court granted stay of proceedings arising out of the said PAO. The

said writ petition was disposed of on 11.04.2019 granting liberty to the

petitioners therein to approach appropriate High Court. He filed a writ

petition vide W.P. No.9319 of 2019, and this Court vide order dated

KL,J Crl.R.C. No.378 of 2023 & batch

29.04.2019 granted stay of proceedings arising out of PAO No.03 of 2017,

dated 28.03.2017. Summons were issued to the respondents to appear on

20.03.2023 and they have appeared. Though the ED has recorded

statements of the respondents - accused, without there-being proper

reasons to believe, arrested the respondents on 13.06.2023. Thus, all of

them referring to the principle laid down by the Apex Court in several

judgments including V. Senthil Balaji v. The State represented by

Deputy Director 1, interim orders in M/s. Satyam Computer Services

Limited v. Directorate of Enforcement 2; Directorate of Enforcement

v. M/s. Satyam Computer Services Limited 3 ; Vijay Madanlal

Choudhary v. Union of India 4 ; Sukesh Gupta v. Govt. of India 5 ;

Directorate of Enforcement v. Kamma Srinivas Rao 6 ; P.

Chidambaram v. Enforcement Directorate 7; Union of India v. Padam

Narain Aggarwal 8 ; State of Punjab v. Balbir Singh 9 ; Dr. Pratap

Singh v. ED, FERA 10; Gurubaksh Singh Sibbia v. State of Punjab 11;

. 2023 SCC OnLine SC 934 [Crl.A. Nos.2284-2285 of 2023, decided on 07.08.2023]

. W.P.M.P.No.47572 of 2012 in W.P.No.37487 of 2012, dated 11.12.2012

. W.A. No.133 of 2013 (DB), decided on 31.12.2014

. 2022 (10) SCALE 577

. 2022 SCC OnLine TS 1767

. 2022 SCC OnLine TS 3410

. (2019) 9 SCC 24

. (2008) 13 SCC 305

. (1994) 3 SCC 299

. (1985) 3 SCC 72

. (1980) 2 SCC 565

KL,J Crl.R.C. No.378 of 2023 & batch

Ramesh Chandra Mehta v. State of West Bengal 12; Jai Shankar v.

State of Himachal Pradesh 13; Aslam Mohd. Merchant v. Competent

Authority 14; A.S.Krishnan v. State of Kerala 15; Siddarth v. State of

UP 16 and Mohammad Zubair v. State of NCT 17 contended as follows:

a) To effect an arrest, an Officer authorized has to assess and

evaluate the materials in his possession and form a reason to

believe that a person is guilty under PMLA;

b) In case of failure to comply with safeguards, an arrest will be

termed as a punishment, which power can never be under

Section - 19 of the PMLA;

c) Designated Court got very wide discretion and, therefore, the

Designated Court shall pass a reasoned order and it is a judicial

function. In the present case, vide impugned order dated

14.06.2023, the Designated Court rejected the remand on the

ground that the reasons stated for arrest of the accused are not

supported with any justifiable material, and there is no error in

it;

. AIR 1970 SC 940

. (1973) 3 SCC 83

. (2008) 14 SCC 186

. (2004) 11 SCC 576

. (2022) 1 SCC 676

. 2022 SCC OnLine 897

KL,J Crl.R.C. No.378 of 2023 & batch

d) It is for the Investigating Agency to satisfy the Designated

Court with adequate material on the need for the custody or

otherwise;

e) Learned Judge is duty bound to see that Section - 19 of the

PMLA is duly complied , and failure would entitle arrestee to

get released;

f) Any non-compliance of mandate under Section - 19 of the

PMLA would enure to the benefit of the person arrested;

g) Authorized Officer has to record reasons in writing regarding

necessity to arrest;

h) Safeguards under Section - 19 of the PMLA are stringent and of

higher standard;

i) Objective of arrest is to ensure that Proceeds of Crime are not

dealt with in any manner which may result in frustrating any

proceedings relating to confiscation thereof;

j) Simply reproducing words that Agency is reasonably satisfied

that accused is guilty of offence of laundering would not suffice;

k) Reasons to believe should be based on material in Officer's

possession;

l) Arrest can only be made if material exists that justifies the arrest;

KL,J Crl.R.C. No.378 of 2023 & batch

m) Procedure under Section - 19 of the PMLA including 'reason to

believe' is to ensure sufficient safeguard. Therefore,

compliance of the same is mandatory;

n) Power must be exercised on objective facts of commission of

offence and Officer has reason to believe that person is guilty of

such offence. Power of arrest is circumscribed by objective

considerations and cannot be exercised on whims, caprice or

fancy of the Officer;

o) 'Reason to believe', must be held in good faith, and it cannot be

merely pretence. It is open for the Court to examine the

question whether the reasons for the belief have a rational

connection or a relevant bearing to the formation of belief and

are not extraneous or irrelevant to the purpose of the said

Section;

p) 'Reasons to believe' means that belief must have been arrived at

judicially after considering the material and on prima facie

satisfaction of authority concerned;

q) If the Investigating Officer has no reason to believe that the

accused will abscond or disobey summons and has, in fact,

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throughout cooperated with the investigation, then there is no

compulsion to arrest;

r) The Investigating Officer has to consider distinction between

existence of power to arrest and justification for arrest, which is

mandatory in terms of Section - 19 of the PMLA;

s) Mere availability of power of arrest is not suffice. Arrest is last

option. It has to be restricted to those exceptional cases.

Personal liberty is very precious fundamental right and it cannot

be curtailed in a mechanical manner;

t) In the present case, the ED failed to consider the said aspects

while arresting the respondents. However, considering the said

aspects, learned Judge rejected the remand vide impugned order

dated 14.06.2023 on the aforesaid two (02) grounds. Therefore,

the arrest of the respondents is illegal. Thus, the respondents

herein are entitled for compensation. Authority concerned has to

initiate proceedings under Section - 62 of the PMLA against

erring officers;

u) Constitutional Courts being the protectors of the civil liberties

of the citizen have not only the power and jurisdiction but also

an obligation to grant relief in exercise of its jurisdiction under

KL,J Crl.R.C. No.378 of 2023 & batch

Article - 32 or 226 of the Constitution of India to the victim or

the heir of the victim, whose fundamental rights under Article -

21 of the Constitution of India are flagrantly infringed. They

placed reliance on the decision in Nilabati Behera v. State of

Orissa 18;

v) Grant of compensation in proceedings under Article - 32 and

226 of the Constitution of India for the established violation of

the fundamental rights guaranteed under Article - 21 is an

exercise of the Courts under the public law jurisdiction for

penalizing the wrong doers and fixing the liability for the public

wrong on the State which failed in the discharge of its public

duty to protect the fundamental rights of the citizen. Reliance

was placed in D.K. Basu v. State of West Bengal 19; and

w) Deprivation of liberty even for a single day is too many.

Reliance was placed on the principle laid down by the Apex

Court in Arnab Manoranjan Goswami v. State of

Maharashtra 20.

. (1993) 2 SCC 746

. (1997) 1 SCC 416

. (2021) 2 SCC 427

KL,J Crl.R.C. No.378 of 2023 & batch

iii) Mr. T. Niranjan Reddy, learned Senior Counsel representing

Mr. S. Ram Reddy, learned counsel for the petitioner in W.P. No.21448

of 2023 and respondent No.2 in Crl.R.C. No.378 of 2023, referring to an

Award of Arbitral Tribunal between M/s. DCHL and Board of Control

for Cricket in India (BCCI), would submit that the Arbitrator, a retired

Judge of the Hon'ble Supreme Court, passed a final award dated

17.07.2020 for an amount of Rs.486,00,00,000/- (Rupees Four Thousand

Eight Hundred and Sixteen Crores Only). However, an application under

Section - 34 of the Arbitration and Conciliation Act, 1996, is also pending

challenging the said Award. Therefore, the allegation made by the ED

that the respondents have siphoned off the funds is baseless. The said

aspects were not considered by the ED.

iv) With the said submissions, all learned senior counsel would

submit that the arrest of the respondents is illegal, in violation of the

procedure laid down under law, also principle laid down by the Apex

Court in the aforesaid judgments and, therefore, the Designated Court

rightly rejected the remand of the respondents vide impugned order dated

14.06.2023. They are entitled for compensation and Authority concerned

has to initiate action against the erring Officers under Section - 62 of the

PMLA.

KL,J Crl.R.C. No.378 of 2023 & batch

8. Mr. A.R.L. Sundareshan, learned Additional Solicitor General

of India, would contend that in the grounds of arrest, the reasons are

specifically mentioned. Particulars of the crimes registered against the

respondents and other facts including non-cooperation, role played by

each of the accused etc. are also specifically mentioned. Placing reliance

on the principle laid down by the Apex Court in Senthil Balaji1, Vijay

Madanlal Choudhary4, Satender Kumar Antil v. CBI 21 , A.S.

Krishnan15, Y. Balaji v. Karthik Desari 22 he would contend that while

dealing with remand application, Designated Court shall not weigh the

evidence to find out the guilt of the accused which is, of course, the work

of trial Court. The Court is only required to place its view based on

probability on the basis of reasonable material collected during

investigation and the said view will not be taken into consideration by the

trial Court in recording its finding of the guilt or acquittal during trial

which is based on the evidence adduced during the trial. The words used

in Section - 45 of the PMLA are "reasonable grounds for believing"

which means the Court has to see only if there is a genuine case against

the accused and the prosecution is not required to prove the charge

beyond reasonable doubt. Though material was placed before the

. (2022) 10 SCC 51

. SLP (Crl.) Nos.12779-12781 of 2022, decided on 16.05.2023

KL,J Crl.R.C. No.378 of 2023 & batch

Designated Court with regard to the reasons to believe, the Designated

Court without considering the same rejected the remand application

illegally.

9. During the course of hearing, learned Senior Counsel appearing

for the respondents, would submit that the ED has filed only three (03)

documents i.e., copy of FIR, grounds of arrest and medical certificates,

whereas, learned Additional Solicitor General of India would contend that

the ED has submitted all the documents.

10. In the light of the same, it is relevant to note that as discussed

above, the Designated Court rejected the remand of the respondents on

the aforesaid two (02) grounds i.e., i) non-compliance of Section - 41A of

the Cr.P.C. and ii) reasons stated for arrest of the accused are not

supported with any justifiable material.

11. CONSIDERATION OF THE COURT:

i) The learned Metropolitan Sessions Judge, Hyderabad, a

designated Court under PML Cases, passed the following docket order

dated 14.06.2023:

"On perusal of the record, it discloses that Section 41-A of CrPC notice was not complied and the

KL,J Crl.R.C. No.378 of 2023 & batch

reasons stated for arrest of accused is not supported with any justifiable material. Admittedly the offence alleged against the accused is under Sections 3 and 4 of PML Act attracting the punishment not less than 3 years and which may extend to 7 years. Therefore, in view of the law laid down by the Hon'ble Apex Court in the decision in Satender Kumar Antil, dt:11.7.2022, the submission of the learned Special Public Prosecutor would not sustain as the gravity is not a ground for remanding the accused to judicial custody. Therefore, following the directions in Satender Kumar Antil, dt:1.7.2022 for failure to comply Sec.41-A of CrPC, the accused cannot be remanded to judicial custody. However, for securing the presence of the accused before this court for further proceedings, the accused are directed to furnish personal bonds for Rs.1,00,000/- with two sureties each for a likesum to the satisfaction of this court on or before 16.06.2023."

ii) Thus, the Designated Court rejected the remand application on

the following two (02) grounds:

i. Non-compliance of Section - 41A of the Cr.P.C.; and

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ii. Reasons stated for arrest of the accused are not supported with

any justifiable material.

iii) The Designated Court relied upon the law laid down by the

Apex Court in Satender Kumar Antil21.

iv) It is relevant to note that the Apex Court in V. Senthil Balaji1

relying upon its earlier judgments in Vijay Madanlal Choudhary4,

Satender Kumar Antil21, Directorate of Enforcement v. Deepak

Mahajan 23 and other judgments held that:

(a) Section - 41A of the Cr.P.C. has got no application to an arrest

made under the PMLA;

(b) When an arrestee is forwarded to the jurisdictional Magistrate

under Section - 19 (3) of the PMLA2, no writ of Habeas Corpus

would lie. Any plea of illegal arrest is to be made before such

Magistrate since custody becomes judicial;

(c) Any non-compliance of the mandate of Section - 19 of the

PMLA would enure to the benefit of the person arrested. For

such noncompliance, the Competent Court shall have the power

to initiate action under Section - 62 of the PMLA; and

. (1994) 3 SCC 440

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(d) An order of remand has to be challenged only before a higher

forum as provided under the Cr.P.C. when it depicts a due

application of mind both on merit and compliance of Section -

167 (2) of the Cr.P.C. read with Section - 19 of the PMLA.

v) It is relevant to note that the said judgment was delivered on

07.08.2023, whereas, the impugned order is dated 14.06.2023. Therefore,

the Designated Court is not having benefit of going through the said

judgment and the principle laid down therein. However, the Designated

Court relied on the principle laid down in Satender Kumar Antil21,

wherein the Apex Court held that for non-compliance of Section - 41A of

the Cr.P.C. accused cannot be remanded to judicial custody.

vi) The Designated Court also relied upon the judgment in Arnesh

Kumar v. State of Bihar 24 and K. Ranjith v. State of A.P. 25.

vii) It is relevant to note that in Kamma Srinivas Rao6, this Court

eld that PMLA is a complete Code in itself. Therefore, there is no need

to comply with Section - 41A of the Cr.P.C. Feeling aggrieved by the

said judgment, the respondents therein filed SLP (Criminal) No.1540 of

2022 before the Hon'ble Supreme Court, wherein the Apex Court stayed

. (2014) 8 SCC 273

. 2021 (2) ALD (Crl.) 768

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operation of the impugned order directing the petitioners therein to

surrender in ten (10) days from the date of order. However, the said

criminal appeal is pending before the Hon'ble Supreme Court.

viii) As discussed above, the Apex Court in V. Senthil Balaji1

categorically held that there is no need of compliance of Section - 41A of

the Cr.P.C. However, as on the date of the impugned order dated

14.06.2023, the Designated Court is not having benefit of going through

the said judgment and relying on the principle laid down in Satender

Kumar Antil21, the Designated Court rejected the remand of the

respondents vide impugned order dated 14.06.2023.

ix) Section - 3 of the PMLA is relevant and the same are extracted

hereunder:

"3. Offence of money-laundering.--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 and projecting it as untainted property shall be guilty of offence of money-laundering.

x) In Y. Balaji22, the Apex Court considered the scope of Section -

3 of the PMLA and the relevant paragraph Nos.96, 97, 98 and 99 are

relevant and the same are extracted as under:

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"96. If the main part of Section 3 is dissected with forensic precision, it will be clear that Section 3 addresses itself to three things (we may call them 3 'P's) namely, (i) person; (ii) process or activity; and

(iii) product. Insofar as persons covered by Section 3 are concerned, they are, (i) those who directly or indirectly attempt to indulge; or (ii) those who knowingly assists; or (iii) those who are knowingly a party; or (iv) those who are actually involved. Insofar as process is concerned, the Section identifies six different activities, namely (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting; or

(vi) claiming as untainted property, any one of which is sufficient to constitute the offence. Insofar as product is concerned, Section 3 identifies "proceeds of crime" or the property representing the proceeds of crime as the product of the process or activity.

97. Out of the three things that Section 3 addresses, namely (i) person; (ii) process; and (iii) product, the first two do not require any interpretation or definition. The third aspect namely "product", which Section 3 refers to as "proceeds of crime" requires a definition and hence it is defined in Section 2 (1) (u) as follows:-

"2. Definitions. -- (1) In this Act, unless the context otherwise requires, --

xxx xxx xxx

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(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" including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;"

98. Keeping in mind these essential elements that make up the molecular structure of Section 3, if we go back to the case on hand, we will find (i) that the offences under Sections 120, 419, 420, 467 and 471 IPC are scheduled offences included in paragraph 1 of the Schedule; and (ii) that the offences under Section 7 and 13 of the PC Act are included in paragraph 8 of the Schedule.

99. All the three FIRs allege that the accused herein had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. In one case it is alleged that a sum of more than Rs.2 crores had been collected and in another case a sum of Rs.95 lakhs had been collected. It is this bribe money

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that constitutes the 'proceeds of crime' within the meaning of Section 2 (1) (u). It is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. The argument that the mere generation of proceeds of crime is not sufficient to constitute the offence of money-laundering, is actually preposterous. As we could see from Section 3, there are six processes or activities identified therein. They are, (i) concealment;

(ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; and (vi) claiming as untainted property. If a person takes a bribe, he acquires proceeds of crime. So, the activity of "acquisition" takes place. Even if he does not retain it but "uses" it, he will be guilty of the offence of money-laundering, since "use" is one of the six activities mentioned in Section 3."

The Apex Court also considered delay in paragraph Nos.113 i.e., from

2016 till 2021.

xi) Section - 19 of the PMLA is also relevant and it is extracted

below:

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 in his possession, reason to believe (the

KL,J Crl.R.C. No.378 of 2023 & batch

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."

xii) Thus, as per Section - 19, the following are the factors to be

considered for arresting an accused.

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(a) There should be material in the possession of the authorized

officer;

(b) reasons to believe (reason for such application to be recorded in

writing on the basis of the material in possession; and

(c) accused has been guilty of an offence punishable under the

provisions of the PMLA.

xiii) The word used is "may". Therefore, despite satisfying the

aforesaid three grounds, discretion is vested in the Authorized Officer to

effect arrest is not compulsory.

xiv) In Principal Director of Income Tax (Investigation) v.

Laljibhai Kanjibhai Mandalia 26, the Apex Court held the formation of

opinion and the reasons to believe recorded is not a judicial or quasi-

judicial function, but administrative in character.

xv) In A.S. Krishnan15, the Apex Court held as under:

"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."

In substance what it means is that a person must have reason to believe if the circumstances are such that a

. 2022 SCC OnLine SC 872

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reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. These two requirements i.e. "knowledge" and "reason to believe" have to be deduced from various circumstances in the case. (See Joti Parshad v. State of Haryana (AIR 1993 SC 1167) As noticed by the High Court in great detail, the factual position leaves no manner of doubt that the accused appellants had not only the knowledge, but also had reason to believe that the document was a forged one before they used it.

Acquittal of some of the co-accused from the charge of conspiracy cannot really affect the accusations under Section 471 IPC. In Madan Lal v. The State of Punjab (AIR 1967 SC 1590) two persons were tried for alleged commission of offences punishable under sections 409, 465, 477-A and 120B IPC. Though the accusations under Section 120B were set aside, the High Court confirmed the conviction under Section 409 simpliciter. A contention was raised before this Court that if the charge relating to criminal breach of trust was along with the charge of conspiracy, conviction simpliciter for criminal breach

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of trust would not be valid. This Court held that if the charge of conspiracy is followed by substantive charge of another offence there is nothing to prevent the Court convicting an accused for the substantive charge even if the prosecution had failed to establish conspiracy. Looked at from any angle the judgment of the High Court does not suffer from any infirmity to warrant interference.

So far as the question of sentence is concerned, we find that the High Court has already taken a liberal view so far as A-2 is concerned. In a case when students use forged mark sheets to obtain admission thereby depriving eligible candidates to get seats and that too to a medical course and a doctor is involved in the whole operation, uncalled for leniency or undue sympathy will be misplaced and actually result in miscarriage of justice. Such types of crimes deserve as a matter of fact, deterrent punishment in the larger interests of society. If at all, the case calls for severe punishment. We find no substance in the plea relating to sentence or extending the benefits of the Probation Act. The appeal fails and is dismissed."

xvi) With regard to the first ground, as discussed above, the Apex

Court in Senthil Balaji1 categorically held that Section - 41A of the

Cr.P.C. has got no application to an arrest made under the PMLA. The

said judgment was rendered by the Apex Court on 07.08.2023, whereas

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the impugned order is dated 14.06.2023. Therefore, the Designated Court

is not having benefit of going through the said order, and consider the

said aspect.

xvii) With regard to other ground i.e., reasons for arrest of the

accused are not supported with any justifiable material, there is dispute

with regard to furnishing of documents by the ED along with remand

application. According to the respondents, ED has filed copies of FIR,

grounds of arrest and medical certificates, whereas according to the ED, it

has filed all the supporting material in support of the reasons for arrest of

the accused. However, the Designated Court did not refer the said

aspects in its order dated 14.06.2023. It is for the Designated Court to

consider the material filed by the ED in support of the reasons for arrest

of the accused.

xviii) As discussed above, Designated Court is not having the

benefit of going through the judgment of the Apex Court in Senthil

Balaji1. In the light of the same, the impugned order dated 14.06.2023 is

liable to be set aside.

12. CONCLUSION:

i) In the light of the aforesaid discussion, the impugned order dated

14.06.2023 is liable to be set aside and accordingly the same is set aside.

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The matter is remanded back to the learned Metropolitan Sessions

Judge/Designated Court under PMLA, Nampally, Hyderabad, with a

direction to consider the remand application submitted by the ED and

pass appropriate orders strictly in accordance with law by putting the ED

and the respondents - accused on notice and affording them an

opportunity. The Designated Court is directed to consider the principle

laid down by the Apex Court in the aforesaid decisions. Liberty is also

granted to the ED and the respondents - accused to file all the material

before the Designated Court and raise all the grounds and contentions

which they have raised in the present petitions, and it is for the

Designated Court to consider the same.

ii) Since the matters are remanded back to the Designated Court

for fresh consideration and it has to decide legality of the arrest of the

accused. Thereafter, it is for the respondents to seek compensation and

action under Section - 62 of the PMLA.

iii) The Designated Court shall not insist the physical presence of

the respondents in Crl.R.C. No.378 of 2023 during hearing of the said

application. However, the respondents shall appear before the

Designated Court on the date when the matter is posted for orders.

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iv) Criminal Revision Case No.378 of 2023 is accordingly allowed,

while W.P. Nos.19163, 21448 & 20835 of 2023 and Criminal Revision Case

No.509 OF 2023 are disposed of. In the circumstances of the case, there

shall be no order as to costs.

As a sequel, the miscellaneous petitions, if any, pending in the

Criminal Revision Cases and the Writ Petitions shall stand closed.

_________________ K. LAKSHMAN, J

8th September, 2023 Note:

Furnish C.C. of order today itself.

(B/O.) Mgr