Telangana High Court
Sanjay Raghunath Agarwal vs The Directorate Of Enforcement on 7 December, 2022
Author: Chillakur Sumalatha
Bench: Chillakur Sumalatha
HON'BLE Dr. JUSTICE CHILLAKUR SUMALATHA
CRIMINAL PETITION No.9695 of 2022
ORDER:
Heard Sri S.Niranjan Reddy, learned senior counsel, who argued on behalf of Sri Avinash Desai, learned counsel on record for the petitioner. Also, heard Sri Anil Prasad Tiwari, learned Standing Counsel for Enforcement Directorate.
2. Seeking the Court to enlarge the petitioner, who is arrayed as accused No.2 in ECIR No.ECIR/HYZO/26/2022 of Hyderabad zone, on bail, the present Criminal Petition is filed under Section 439 Cr.P.C.
3. The matrix of the case, as could be perceived through the contents of the Enforcement Case Information Report, is that M/s Farmax India Limited is a company engaged in production of vermicelli, atta, soaps, detergents and other FMCG products in India. The said company availed the services of the accused in raising Global Depository Receipts (hereinafter referred to as "GDRs" for brevity). The said GDRs were raised to a tune of USD 71.09 millions which is equivalent to Rs.318 crores in Indian currency. Out of the 2 Dr CSL, J Crl.P.No.9695 of 2022 said amount, M/s Farmax India Limited received only Rs.2.20 crores and the remaining amount was never received by it. On enquiry, M/s Farmax India Limited came to know from Euram Bank, Austria that the amount raised by way of GDRs was misappropriated by the petitioner and others by forging the signatures and by pledging the forged documents.
4. In the matter of issuance of GDRs by M/s Farmax India Limited, Securities Exchanges Board of India (hereinafter referred to as "SEBI" for brevity) has passed final order dated 14.7.2020 holding that there is violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and that accused No.3- Arun Pacharia and others, in a planned and structured manner, mislead Indian investors. SEBI had also observed that accused No.3-Arun Pacharia orchestrated 14 similar GDR issues involving fraudulent schemes and he was already been debarred in one such case for a period of one year. SEBI also directed that M/s Farmax India Limited shall continue to pursue the measures to bring back the outstanding amount of USD 72.20 millions into its bank account in India. 3
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5. Investigations conducted by SEBI revealed that all the GDRs are subscribed by a firm by name M/s Vintage FZE, UAE which is controlled by accused No.3-Arun Pacharia. It appears that for all the GDRs payable to the Indian Issuing Companies, loan was taken from Euram Bank Austria by M/s Vintage FZE and the proceeds of GDR itself was kept as pledge with Euram Bank. More over, loans taken by M/s Vintage FZE are fraudulently defaulted after some initial payments and the outstanding loan was adjusted by GDR proceeds, which was initially provided by Euram Bank itself. Meanwhile, GDRs were converted into equity and were sold to the Indian entities which are again related to accused No.3- Arun Pacharia. The pledge agreement between Euram Bank and the GDR Issuing Companies was not disclosed to the respective shareholders. M/s Farmax India Limited sold the converted equity in Indian Stock Markets and caused a loss of Rs.55 crores to Indian investors. The stock price of M/s Farmax India Limited is reported to be Rs.0.04 per share, where it was priced at Rs.120/- per share prior to GDR issue.
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6. Accused No.3-Arun Pacharia appears to be involved in multiple GDR issues and huge amount was transferred to foreign countries in the form of GDRs, the proceeds of which was ultimately defaulted. The criminal activities thus committed by the accused are punishable under Sections 406, 407, 415, 420 and 120-B r/w 34 IPC. Prima facie case is thus made out for an offence under Section 3 of the Prevention of Money-Laundering Act, 2002 (hereinafter referred to as "PMLA Act, 2002" for brevity) which is punishable under Section 4 of the said Act.
7. Making his submission, learned senior counsel for the petitioner contended that the initial complaint was given by M/s Farmax Private Limited which is represented by Srinivas Reddy. The said Srinivas Reddy, who is the defacto complainant in the predicate case, i.e., Crime No.664 of 2013 of Dundigal Police Station, Cyberabad, is arrayed as accused in the present case by the Enforcement Directorate, which is most unjustifiable. Learned senior counsel states that even in the said F.I.R., after lapse of nine years also, no charge sheet has been filed, which itself goes to show that no case is made out against any of the accused in the present case and that 5 Dr CSL, J Crl.P.No.9695 of 2022 there is no basis for initiation of proceedings by the Enforcement Directorate. Learned senior counsel further submits that the case registered in Crime No.664 of 2013 by Dundigal Police is a false one and the order rendered by SEBI itself establishes the said fact. Learned senior counsel states that even if the version of the Enforcement Directorate is taken to be true that the proceeds of crime were generated by sale of shares by accused No.3-Arun Pacharia, there is no connection between the said Arun Pacharia and the petitioner and therefore, the petitioner cannot be said to be guilty of 'money laundering' as defined under Section 3 of PMLA Act, 2002. Learned senior counsel also submits that the petitioner is neither a beneficiary nor a person who is involved in generating the proceeds of crime. Learned senior counsel also states that the petitioner is a Chartered Accountant by profession and as a professional advisor to M/s Farmax India Limited, he might have given certain suggestions and that does not mean that the petitioner got involved in the transactions that went on. Learned senior counsel further submits that the petitioner has got no role to play in the decision making process and therefore, his 6 Dr CSL, J Crl.P.No.9695 of 2022 involvement in money laundering cannot be believed upon. By stating thus, learned senior counsel seeks the Court to enlarge the petitioner on bail who is in judicial custody since 26.9.2022.
8. Vehemently opposing the submissions thus made, learned Standing Counsel for Enforcement Directorate states that Mr. Srinivas Reddy, who representing M/s Farmax India Limited, gave complaint is indeed at fault and to cover his lapses and liability, he himself gave complaint to Police basing on which, a case was registered in Crime No.664 of 2013 of Dundigal Police Station. Learned Standing Counsel also states that having found the involvement of the said Srinivas Reddy, the Enforcement Directorate arrayed him as accused and subsequently, arrested him and produced him before the Court concerned. However, the remand was not accepted as in the crime in question, the said Srinivas Reddy is shown as the defacto complainant. Learned Standing Counsel also states that the GDRs issued by various Indian companies including M/s Farmax India Limited were subscribed by a firm by name M/s Vintage FZE which is controlled by accused No.3-Arun Pacharia. Learned Standing 7 Dr CSL, J Crl.P.No.9695 of 2022 Counsel states that the said Arun Pacharia with the help of the petitioner, mortgaged all the GDRs payable to Indian Issuing Companies and took loan from Euram Bank, Austria. Learned Standing Counsel submits that the proceeds of the GDRs itself was kept as pledge with Euram Bank and the accused are not supposed to do so. Learned Standing Counsel also submits that the loan taken by M/s Vintage FZE was finally defaulted and the outstanding loan was adjusted by GDRs proceeds, which was initially provided by Euram Bank. Learned Standing Counsel also states that GDRs were converted into equity and thereafter, they were sold in Indian market. Learned Standing Counsel submits that the fact of entering into pledge was not disclosed to the respective shareholders and further, the converted equity was sold in the Indian Stock Markets causing loss of Rs.55 crores to Indian investors. Learned Standing Counsel also submits that the petitioner runs a company by name La Richesse Advisors Private Limited and the petitioner is the Director of the said company. Learned Standing Counsel also states that the petitioner was an advisor to M/s Farmax India Limited and he is responsible for GDRs issue. Learned Standing 8 Dr CSL, J Crl.P.No.9695 of 2022 Counsel further submits that as per the investigation done, it is revealed that the petitioner forwarded necessary documents to prime accused i.e., accused No.3-Arun Pacharia and thereby, facilitated preparation of various documents and agreements. Learned Standing Counsel also submits that as per the investigation done, it is disclosed that the petitioner helped M/s Farmax India Limited in opening bank accounts in Euram Bank which is again related to accused No.3-Arun Pacharia.
9. Learned Standing Counsel also submitted that investigation done by the Enforcement Directorate revealed that the petitioner assisted in generation of huge proceeds of crime and he is also suspected to have invested the proceeds of crime in various movable and immovable properties. Learned Standing Counsel states that the petitioner is trying to shift the responsibility to different entities. Learned Standing Counsel further submits that there is every possibility of the petitioner fleeing away from India in case he is enlarged on bail. Learned Standing Counsel also states that he will certainly induce and threat the witnesses so that they will not disclose vital information. Learned Standing 9 Dr CSL, J Crl.P.No.9695 of 2022 Counsel finally submits that after hectic efforts for eight long years, the petitioner could be brought to India and that too, after issuance of Look Out Circular and therefore, taking into consideration all these facts, the bail application may be dismissed.
10. Admittedly, the allegation against the petitioner is that he has committed offence of money laundering which is punishable under Section 4 of PMLA Act, 2002. As the petitioner, who is alleged to have committed the offence falling within the ambit of PMLA Act, 2002, seeks bail, Section 45 of the said Act has to be taken note. Section 45 of PMLA Act, 2002 reads as under:-
"45. Offences to be cognizable and non-bailable.--
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond 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 10 Dr CSL, J Crl.P.No.9695 of 2022 reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:
Provided that a person who is under the age of sixteen years or is a woman or is sick or infirm or is accused either on his own or along with other Court- accused of money-laundering a sum of less than one crore rupees, may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by--
(i) the Director; or
(ii) any officer of the Central Government or State Government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government.
(1-A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.
(2) The limitation on granting of bail specified in sub- section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any 11 Dr CSL, J Crl.P.No.9695 of 2022 other law for the time being in force on granting of bail."
11. Thus, when the release of an accused who is alleged to have committed offence falling within the ambit of PMLA Act, 2002, is sought for, the conditions laid down under the afore- mentioned provision have to be taken care of. There is every necessity for the Court to afford opportunity to the learned Additional Public Prosecutor for submitting his contentions regarding the release of the accused on bail and where the learned Additional Public Prosecutor opposes the application, the Court should be satisfied that there are reasonable grounds for believing that the applicant is not guilty of such offence and that he is not likely to commit any offence while on bail. It is also laid down that the above limitations are in addition to the limitations that are to be taken care as provided under the Code of Criminal Procedure.
12. Referring to series of decisions, starting from the decision of the Hon'ble Apex Court in the case between Nikesh Tarachand Shah Vs. Union of India1, the learned senior counsel for the petitioner argued that the petitioner is 1 (2018)11 SCC1 12 Dr CSL, J Crl.P.No.9695 of 2022 entitled for bail notwithstanding anything contained in Section 45 of PMLA Act, 2002. During the course of his submission, learned senior counsel also referred to the decision of the Hon'ble Apex Court in the case between Vijay Madanlal Choudhary and others Vs. Union of India and others2. Contending that where prima facie case is not made out, even anticipatory bail can be granted, learned senior counsel relied upon the decision of this Court in the case between Sukesh Gupta Vs. Government of India3 and also the decision of the Allahabad High Court in the case between Siddh Narain Sharma Vs. Assistant Director, Directorate of Enforcement, Lucknow Zonal Office4 and further, the decision of the Chattisgarh High Court in the case between Dhiraj Sao Vs. Enforcement Directorate, Government of India, through the Assistant Director, Raipur5.
13. The mandate of law is that apart from Section 45 of PMLA Act, 2002, the requirement under Section 439 Cr.P.C. should also be taken note of. In the case on hand, there are 2 2022 SCC Online SC 929 3 2022 SCC Online TS 1767 4 2022 SCC Online All 681 5 2022 SCC Online Chh 1731 13 Dr CSL, J Crl.P.No.9695 of 2022 grave allegations that are directed against the petitioner. Also, by the submission of the learned Standing Counsel for Enforcement Directorate, it is clear that the presence of the petitioner could not be secured easily. Learned Standing Counsel states that only after issuance of Look Out Circular, the petitioner could be traced out and arrested. The apprehension of the investigating agency i.e., the Enforcement Directorate is that in case, the petitioner is enlarged on bail, he may interrupt the investigating process by threatening the witnesses. Learned Standing Counsel also submits that some crucial documents are yet to be traced out. A submission is also made that the proceeds of crime was converted for purchase of movable and immovable properties by the petitioner and in that regard, investigation is yet in progress.
14. Having considered the submissions thus made, this Court is of the view that even if Section 45 of PMLA Act, 2002 is not applied, independently also, the petitioner is not entitled for bail at this stage when the investigation is in progress and where the allegations are grave in nature and that too, when fraud is committed by embezzlement of an 14 Dr CSL, J Crl.P.No.9695 of 2022 amount to a tune of Rs.318 crores and Indian depositors were deceived. Therefore, this Court is of the view that the request of the petitioner cannot be honoured at this stage.
15. Resultantly, this Criminal Petition is dismissed.
16. As a sequel, miscellaneous petitions pending, if any, shall stand closed ________________________________________ Dr. JUSTICE CHILLAKUR SUMALATHA 07.12.2022 DRu