Karnataka High Court
Sri Misbahuddin S vs Directorate Of Enforcement on 21 February, 2023
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CRL.P No. 80 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF FEBRUARY, 2023
BEFORE
THE HON'BLE MRS JUSTICE M G UMA
CRIMINAL PETITION NO. 80 OF 2023
BETWEEN:
SRI. MISBAHUDDIN .S.
AGED ABOUT 38 YEARS
SON OF LATE SALALUDDIN
RESIDING AT FLAT NO.400
4TH FLOOR, J.S.J. OPEL APARTMENT
B.H.E.L. LAYOUT, BENGALURU - 560 041
...PETITIONER
(BY SRI: ASHWIN VAISH, ADVOCATE FOR
SRI: GAUTHAM SHREEDHAR BHARADWAJ, ADVOCATE)
Digitally signed by
NANDINI B G
AND:
Location: High
Court Of Karnataka DIRECTORATE OF ENFORCEMENT
THROUGH ASSISTANT DIRECTOR
3RD FLOOR, B BLOCK, BMTC
SHANTHINAGAR
BENGALURU - 560 027
...RESPONDENT
(BY SRI: PRASANNA KUMAR .P., SPL.PP)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 439
CR.P.C PRAYING TO ENLARGE THE PETITIONER ON BAIL IN
ECIR/BGZO/30/2020 REGISTERED BY ASSISTANT DIRECTOR,
DIRECTORATE OF ENFORCEMENT, BENGALURU FOR THE OFFENCE
PUNISHABLE UNDER SECTIONS 3 AND 4 OF PREVENTION OF MONEY
LAUNDERING ACT AND PENDING ON THE FILE OF PRINCIPAL CITY
CIVIL AND SESSIONS JUDGE, BENGALURU (CCH-1).
THIS CRIMINAL PETITION COMING ON FOR ORDERS THIS
DAY, THE COURT PASSED THE FOLLOWING:
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CRL.P No. 80 of 2023
ORDER
The petitioner-accused No.2 is before this Court seeking grant of bail under Section 439 of Cr.P.C. in ECIR/BGZO/30/2020 by the Assistant Director, Directorate of Enforcement, Bengaluru, pending on the file of the Principal City Civil and Sessions Judge, Bengaluru, registered for the offences punishable under Sections 3 and 4 of Prevention of Money Laundering Act (for short 'PMLA').
2. Brief facts of the case are that, the Assistant Director, Directorate of Enforcement filed the complaint before the Special Court at Bengaluru, under Sections 44 and 45(1) of PMLA alleging commission of offence of money laundering as defined under Section 3 read with Section 70 punishable under Section 4 of PMLA. It is contended by the complainant that the Revenue Inspector, Tahsildar office at Yelahanka filed the first information on 07.09.2018 against M/s Injaz International and its associated group, alleging commission of offences under Section 3, 4 and 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, under Section 420 of Indian Penal Code, 1860 and under Section 76 of Chit Funds Act, 1982 with Wilson Garden Police Station and FIR came to be -3- CRL.P No. 80 of 2023 registered in Crime No.157 of 2018 on 07.09.2018. The offence under Section 420 of IPC is the scheduled offence under PMLA.
3. It is stated that accused No.2 i.e., the petitioner was apprehended on 15.11.2022 after subjecting him for interrogation. It is specifically stated that no search and survey were conducted, no proceeds of crime have been attached, seized or frozen. However, it is stated that the further investigation is still in progress and the complainant reserves right to attach, freeze such proceeds of crime during further investigation. The complaint also discloses that the petitioner had appeared before the Investigating Officer on 06.12.2021, again on 15.11.2022 and his statements were recorded. Even after his apprehension his statements were recorded. Since prima facie materials were collected for commission of the offence of money laundering and for having proceeds of crime, the Enforcement Case Information Report (ECIR), was registered.
4. It is alleged that in the year 2015, accused No.1 M/s Injaz International, a partnership firm invited investments -4- CRL.P No. 80 of 2023 from the general public with a promise of lucrative return at 5% to 7.5% per month and also promising to return the invested amount on demand. Accused No.1 used to enter into an agreement with the investors and collected huge sums of money from morethan 500 investors from 2015 till mid of 2017. The investors were treated as sleeping partners of accused No.1. Accused No.3 - Suhail Ahmed Sheriff was said to be the key person who used to look after the office administration, bank transactions and used to purchase lands out of the amount so collected and used to develop the same. He was summoned to appear before the Investigating Officer and accordingly he appeared on 05.10.2022 and 20.10.2022 in response to summons and gave his statements. It was found that accused No.1 through accused Nos.2 and 3 collected huge amount of 145.88 crores from about 4,545 investors during the above period from 2015 to 2017. Out of the same, an amount of Rs.64,88,74,745/- was repaid, while an amount of Rs.80,99,25,525/- is still due to be repaid.
5. It is alleged that the petitioner who is arrayed as accused No.2 used to purchase lands out of the amount received by accused No.1 and used to develop the same. It is -5- CRL.P No. 80 of 2023 stated that even though the petitioner had no source of income, had purchased in all 10 items of the properties as described in the complaint which include 31 residential sites and 20 flats. The assets purchased by the petitioner may value around 60 crores. The details of the bank accounts held by the accused at various banks are also furnished.
6. It is also stated that further investigation is still in progress and the complainant sought leave of the Special Court to file supplementary complaints as provided under Section 44 of PMLA. Since from the investigation already conducted, offence of money laundering and having the proceeds of crime appears to have committed by accused No.1, which is the firm, through its partners - accused Nos.2 and 3. The complainant requested the Special Court to take cognizance of the offence under Section 3, punishable under Section 4 of PMLA.
7. Heard Sri Ashwin Vaish, learned counsel for the petitioner and Sri P Prasanna Kumar, learned Special Public Prosecutor for the respondent. Perused the materials placed on record.
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8. Learned counsel for the petitioner submitted that the case of the prosecution is entirely based on the so-called confession made by the petitioner recorded under Section 50 of PMLA. But none of the statements of the petitioner said to have been recorded during investigation disclose the ingredients of Section 420 of IPC. Moreover, the statements were recorded on or after 15.11.2022 i.e., after apprehending the accused and while he was in custody. Those statements are inadmissible in evidence as hit by Article 20(3) of the Constitution of India.
9. Learned counsel further submitted that there are no prima facie materials to constitute any offence as alleged. There are no victims of cheating to constitute the offence under Section 420 of IPC. None of the depositors came forward to contend that they were cheated by the accused. There is no proceeds of crime even according to the complainant and nothing has been attached, seized or frozen. When intention to cheat or mens rea on the part of the accused is absent, no offence is made out.
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10. Learned counsel further submitted that to exercise the power of arrest under Section 19 of PMLA, the officer authorized should have reason to believe that the accused is guilty of the offence punishable under the Act. But no such materials are placed before the Court, nor the same is highlighted in the complaint to apprehend the petitioner or to detain him in custody. When the ingredients referred to under Section 19 of PMLA is not satisfied, the arrest itself is bad and the petitioner is entitled for grant of bail.
11. Learned counsel also submitted that, initially a complaint was registered in the year 2018 with Wilson Garden Police Station, on the basis of information given by the Tahsildar. Till today, none of the depositors have alleged commission of offence nor their statements were recorded. The petitioner is available for investigation since 2018 till his arrest on 15.11.2022. His passport is already seized. Almost all the witnesses relied on by the complainant are official witnesses. Under such circumstances, there is no chance of either abscondence of the accused or tampering or influencing the prosecution witnesses. Detention of the petitioner would amount to pre-trial punishment. Since there are no materials -8- CRL.P No. 80 of 2023 available to constitute the scheduled offence punishable under Section 4 of PMLA, the bar under Section 45(1)(ii) of PMLA would not come into operation. The petitioner is the permanent resident of the address mentioned in the cause title to the petition and is ready and willing to abide by any of the conditions that would be imposed by this Court. Hence, he prays to allow the petition.
12. Per contra, learned Special Public Prosecutor for the respondent opposing the petition submitted that accused No.1 is the firm and accused Nos.2 and 3 are its partners. They have invited investment offering the interest at the rate of 90% per annum. They have collected morethan 145.88 crores from more than 4500 investors. Even though small amount so collected was repaid, major portion of the amount which is morethan 80 crores is still due to be paid. When the accused have promised of paying interest at the rate of 5% to 7.5 % per month, which works out to 60% to 90% per annum, no prudent man would agree that the accused are able to pay such huge rate of interest. The intention and the mens rea on the part of the accused to connect to the offence is apparent from their conduct. The accused collected huge sums of money -9- CRL.P No. 80 of 2023 under promise to pay huge returns, but instead of returning the amount, the same was invested in the landed properties, which is nothing but cheating under Section 420 of IPC, which is a scheduled offence. At this stage, it is enough to show that the petitioner had obtained or derived the proceeds of crime.
13. He further submitted that the complaint filed by the complainant discloses that the accused instead of repaying the amount, used to invest the proceeds of crime in purchasing the valuable properties and indulged in money laundering as defined under Section 2(u) of PMLA. Explanation to Section 2(u) makes it clear that even the property which may directly or indirectly derived or obtained as a result of such criminal activity relatable to the schedule offence also constitute proceeds of crime. During investigation, the statements of the petitioner were recorded which disclose about the investment of huge amounts in purchase of land and buildings. The list of such assets are appended in the complaint. The details of the bank account is also stated in the complaint.
14. As per Section 24 of PMLA, there is presumption in favour of the prosecution and it has to be presumed that the
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CRL.P No. 80 of 2023proceeds of crime are involved in money laundering, unless the contrary is proved. Therefore, the burden is on the accused to rebut the presumption of law. The further investigation is still in progress. Since there are prima facie materials to constitute the offence in question, the bar under Section 45(1)(ii) of PMLA comes into operation and there is a clear bar for granting bail unless twin conditions therein are satisfied. If the materials placed before the Court are taken into consideration, there are no reasons for believing that the petitioner is not guilty of such offence or that he is not likely to commit any offence while on bail. He also submitted that accused No.3 is still absconding and not co-operating in investigation. Under such circumstances, the petitioner is not entitled for grant of bail. Accordingly, he prays for dismissal of the petition.
15. In view of the rival contentions urged by THE learned counsel for both the parties, the point that would arise for my consideration is:
"Whether the petitioner has made out any ground for release him on bail under Section 439 of Cr.P.C.?"
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CRL.P No. 80 of 2023My answer to the above point is in the 'Affirmative' for the following:
REASONS
16. The Directorate of Enforcement filed the ECIR under Sections 44 and 45(1) of PMLA alleging commission of offence under Section 3, read with Section 70, punishable under Section 4 of the PMLA. Brief facts of the case as stated above disclose that accused No.1 being the firm having accused Nos.2 and 3 as its partners invited deposits from general public promising to pay interest upto 90% per annum. It is stated that accused are successful in getting more than 145.88 crores as deposits from more than 4500 investors. Admittedly, an FIR was registered in the year 2018 at Wilson Garden Police Station in Crime No.157 of 2018 and Crime No.91 of 2019, against accused No.1 for the offences under Section 3, 4 and 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, under Section 420 of Indian Penal Code, 1860 and under Section 76 of Chit Funds Act, 1982. Section 420 of IPC is a scheduled offence under PMLA.
17. It is not in dispute that no charge sheet is yet filed in Crime No.157 of 2018 or in Crime No.91 of 2019 of Wilson
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CRL.P No. 80 of 2023Garden Police Station. In the meantime, considering the nature of offence and the amount involved, the Enforcement Directorate took up investigation to investigate about the scheduled offence. It is stated that accused Nos.2 and 3 have appeared before the Investigating Officer on few occasions and thereafter, accused No.3 remained absent. After questioning accused No.2 and recording his statements on 15.11.2022, he was apprehended.
18. The grounds of arrest submitted by the Investigating Officer produced at Annexure-B discloses that accused No.1 being the firm, accused Nos. 2 and 3 being the partners have cheated the depositors and violated RBI guidelines. They are luring the depositors with promise to pay high returns, since 2016. The money so collected was lured through various bank accounts. They have not filed any returns nor it was subjected to audit. The amounts so collected were also not returned to the investors. Therefore, it is stated that Enforcement Directorate is having sufficient materials with reasons to believe that the petitioner is guilty of the offence of money laundering.
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CRL.P No. 80 of 2023
19. It is contended that, even though the petitioner has not revealed anything about the possession, concealment, loss or gain from the proceeds of crime which is involved in money laundering, there are materials collected during investigation to prove the commission of scheduled offence and generating huge amounts. Hence, the accused is guilty of the offences stated above. If the petitioner is not apprehended and taken into custody, it is suspected that he may destroy, tamper the evidence that are to be collected by the Investigating Officer. The property acquired from the proceeds of crime is to be ascertained and identified. Since the petitioner was not co- operating while recording the statements, the Investigating Officer thought it fit to apprehend the accused.
20. Admittedly, the accused was apprehended on 15.11.2022. Three months have already lapsed from the date of arrest. The complaint in the form of ECIR is filed on 13.01.2023 which is registered in PCR No.4 of 2023. Details of the assets acquired and the money invested by the accused along with the details of bank account are stated in the complaint. It is the specific contention of the prosecution that accused No.2 being one of the partner of accused No.1 is in
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CRL.P No. 80 of 2023charge of investing the proceeds of crime in various assets as he has purchased the lands out of the amount so received by accused No.1 and used to develop the same. It is stated that even though the petitioner had no source of income, had purchased in all 10 items of the properties as described in the complaint, including 31 residential sites and 20 flats. The total value of the assets purchased by the petitioner may be around 60 crores. There is description of 10 such properties acquired by the accused by investing the proceeds of the crime. There is reference to two other transaction where advance amount was paid for acquiring the property.
21. Strangely, learned Special Public Prosecutor would contend that none of the registered documents under which the properties were acquired were collected by the Investigating Officer. The reason assigned by the learned Special Public Prosecutor is that, the further investigation is still in progress and the Investigating Officer will collect those materials in due course of time. When the complaint disclose the particulars of investment with details of the properties in which such investment are made, I do not find any justification for non producing any of the documents in support of the allegations
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CRL.P No. 80 of 2023made in the complaint. Apparently, the statements of the petitioner recorded by the Investigating Officer disclose that the accused invited deposits promising exorbitant rate of interest, not subjected such monetary transaction for audit, not returned the amount i.e., due to the investors on time and on the other hand, the amounts were being invested in the landed properties in the name of the accused.
22. It is stated that, the statements of the investors are not recorded to constitute the offence of cheating. However, apparently, the petitioner could not justify collection of crores of rupees from thousands of depositors, promising to pay return as high as upto 90%. Prima facie, the intention of the accused may attract Section 420 of IPC, for which a criminal complaint is already lodged way back in the year 2018. To constitute the proceeds of crime as defined under Section 2(u) of PMLA, the prosecution has to prove that the properties derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. As per Section 3 of PMLA, even concealment, possession, acquisition, use of proceeds or claiming the proceeds of crime as untainted property would amount to money laundering.
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CRL.P No. 80 of 2023
23. To constitute the offence of money laundering, the prosecution has to establish that the petitioner had indulged in criminal activity relating to scheduled offence, the property referred to in the complaint have been derived or obtained as a result of such criminal activity and the petitioner is involved in any process or activity connected with the said property being the proceeds of crime. Unless these basic requirements are fulfilled, the presumption under Section 24 of PMLA, cannot be raised.
24. It is the contention of the prosecution that further investigation is still in progress. But at present, no prima facie materials, except the assertion made in the complaint are available to form an opinion that the accused is guilty of the offence which is one of the requirement under Section 45(1)(ii) of PMLA to deny bail to the petitioner. Without such materials on record, the accused is not required to be detained in custody as the same would amount to infringement of his right to life and liberty. It is not the contention of the prosecution that the petitioner would abscond as his passport is already said to have been seized. The interest of the prosecution could be safeguarded by imposing suitable conditions. Hence, I am of
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CRL.P No. 80 of 2023the opinion that the petitioner is entitled to be enlarged on bail subject to conditions, which will take care of the apprehension expressed by the learned Special Public Prosecutor that the petitioner may abscond or may tamper or threaten the prosecution witnesses.
25. Accordingly, I answer the above point in the affirmative and proceed to pass the following:
ORDER The petition is allowed.
The petitioner is ordered to be enlarged on bail in ECIR/BGZO/30/2020 by the Assistant Director, Directorate of Enforcement, Bengaluru, pending on the file of the Principal City Civil and Sessions Judge, Bengaluru, on obtaining the bond in a sum of Rs.2,00,000/- (Rupees Two Lakhs only) with two sureties for the likesum to the satisfaction of the jurisdictional Court, subject to the following conditions:
a). The petitioner shall not commit similar offences.
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CRL.P No. 80 of 2023
b). The petitioner shall not threaten or tamper with the prosecution witnesses.
c). The petitioner shall appear before the Court as and when required.
If in case, the petitioner violates any of the conditions as stated above, the prosecution will be at liberty to move the Trial Court seeking cancellation of bail.
On furnishing the sureties by the petitioner, the Trial Court is at liberty to direct the Investigating Officer to verify the correctness of the address and authenticity of the documents furnished by the petitioner and the sureties and a report may be called for in that regard, which is to be submitted by the Investigating Officer within 5 days. The Trial Court on satisfaction, may proceed to accept the sureties for the purpose of releasing the petitioner on bail.
Sd/-
JUDGE *bgn/-