Bombay High Court
Kiran Kulkarni vs The Enforcement Directorate And Anr on 22 December, 2018
Author: Prakash D. Naik
Bench: Prakash D. Naik
rpa 1/15 905-ba-2267-18.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL BAIL APPLICATION NO.2267 OF 2018
WITH
CRIMINAL APPLICATON NO.1338 OF 2018
Kiran Kulkarni .. Applicant
Vs.
The Enforcement Directorate & Anr. .. Respondents
......
Mr.Rizwan Merchant i/b. M/s.Rizwan Merchant & Associates,
Advocate for the Applicant.
Mrs.G.P. Mulekar, APP for the Respondent - State.
Mr.Pranav Badheka a/w. Shubhabrata Chakraborti and
Mr.Vaibhav Wali i/b. M/s. Juris Corp., Advocate for the Intervener.
Ms.Nitee Punde, Spl. P.P., E.D.
......
CORAM : PRAKASH D. NAIK, J.
DATED : DECEMBER 22, 2018.
P.C. :
This is an application for bail under Section 439 of
Code of Criminal Procedure in connection with ECIR No.2 of
2016. Applicant has been arrested in this case on 18th June, 2018.
2 The case of the prosecution is that MIDC Police
Station has registered First Information Report No.760 of 2015
dated 18th December, 2015, invoking Section 409, 420, 477(A),
120-B read with 34 of Indian Penal Code ("IPC", for short),
against applicant, Prashant Mulekar, Pankaj Shrivastav and
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 2/15 905-ba-2267-18.doc
Dinesh Jajodia. Subsequently, case was taken over by Economic
Offence Wing, Mumbai (EOW) Unit-V. In pursuant to the order
dated 22nd December, 2015, passed by the High Court, the
Directorate recorded a Enforcement Case Information Report
("ECIR" for short) No.ECIR/02/MBZ0/2016, dated 12th January,
2016, to investigate the offence of money laundering in terms of
Prevention of Money Laundering Act, 2002 ("PMLA", for short),
as the offences under Sections 420 and 120-B of IPC fall under
scheduled offences covered in Part-A of paragraph (1) of
Schedule to the PMLA Act, 2002. During the course of
investigation, statements of several persons were recorded.
In pursuant to that complaint has been filed before the competent
Court.
3 Applicant was granted bail in connection with the
case investigated by EOW on 10 th May, 2016. On completing
investigation, charge-sheet is filed in this case on 16 th April,
2016. Applicant continued to be on bail in connection with said
case. However, on 18th June, 2018, the applicant was arrested in
the present case.
4 Applicant had preferred an application for bail before
the Special Court, which has been rejected.
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 3/15 905-ba-2267-18.doc
5 Learned counsel for the applicant submitted that the
applicant was arrested in case investigated by EOW and
investigation in that case is already completed and charge-sheet
has been filed, and, subsequently, he was granted bail. In the
present case, he was arrested after period of 25 months from the
date of his release on bail in predicate offence. Applicant is not
involved in the alleged transaction. In any case, the investigation
is completed and complaint has been filed. The present case has
been merged with the case investigated by EOW and on the
application of respondent, both the cases are assigned to the
PMLA Court. It is further submitted that while he was on bail in
the case investigated by EOW, it was not alleged that there was
any tampering of evidence. It is the case of the prosecution that
after receipt of the amount in the account of M/s.GTSL, where
the applicant is not the director or member of GTSL, instead of
utilizing the same for acquisition of overseas companies and
invested its holding Part of the FCCB was utilized for the
investment in EEMF, where applicant is not director or member.
It is submitted that he is not connected with the company YIL in
any manner. It is the case of the prosecution that out of the US$
82.02 Million invested in EEMF, where the applicant is not the
director or member. An amount of 57.52 Million US$ was
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 4/15 905-ba-2267-18.doc
transferred into the account of M/s.YIL UAE, where the applicant
was not director. It is submitted that the applicant has
unnecessarily incarcerated in custody although he has been
undergone detention in predicate offences. He was not party to
the transaction and was unaware about all the transactions. The
case of the prosecution is that the applicant is being managing
director of M/s.GEL as well as incharge of the department
handling products such as Mundu etc., has projected the receipt
of US$ 31.79 Million into the account of M/s.GTSL from the
account of M/s.YIL, to which the applicant was not party. He was
not aware about the sales/collections of M/s.GTSL. Applicant has
not committed any offence under the PMLA Act. He is not
connected in any of the entities, who have allegedly committed
the crime alleged by the prosecution. Learned Magistrate while
granting bail to the applicant in the predicate offence has taken
into consideration the nature of the involvement of the applicant
in the crime and was pleased to grant him bail. Applicant could
not be subjected to detention again in respect to the present
case. The entire case relates to the documents. He was already
arrested and was in custody for substantial time, and, was
subsequently released on bail. There is no new evidence
presented by the prosecution. He had cooperated with the
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 5/15 905-ba-2267-18.doc
investigation prior to his arrest and thereafter. The fact that he
was not arrested for long period of time after granting bail, would
indicate that his custody was not required. There are no
complaints from any of the Authorities that the applicant had
been tampering with the investigation at any point of time. It is
further submitted that the present case was under investigation
since 2016, and, during the investigation it was not noticed that
the applicant was involved in laundering the proceeds of any
crime. It is, therefore, prayed that the applicant be granted bail.
It is further submitted that the custody was sought for finding out
trail of money, however, the complaint filed by the complainant,
itself reflects the trail. The custody of applicant, is, therefore, not
necessary for any purpose. In the order dated 28 th April, 2017,
passed by this Court in Company Petition No.514 of 2013, it was
observed that from papers proceeded by ED, it is established that
Mr.Mulekar and Mr.Jajodia have made false statements before
Court. Learned counsel pointed out letter dated 6th November,
2015, sent by RBI to EOW, stating that they have not come across
any contravention of FEMA guidelines in respect of FCCB's
issued by company. Learned advocate also pointed out summary
of transaction on saving account No.5155893003.
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 6/15 905-ba-2267-18.doc
6 Learned counsel for the respondent, however,
submitted that the applicant was arrested in the present case on
the basis of evidence collected in connection with the offence
under PLMA Act. There is substantial evidence against the
applicant showing his involvement in the crime. The crime is
serious, which affects the economy of the country. It is submitted
that M/s.Geodesic Information System Private Limited (Now
M/s.Geodesic Limited) was engaged into the software and
hardware manufacturing business, having its registered office at
MIDC Andheri, Shri Prashant Mulekar, is one of the director of
M/s.Geodesic Limited. In 2008, M/s.GL raised 125 Million US$ by
issuing Foreign Currency Convertible Bonds (FCCB), for which
Citi Bank London acted as Trustee and the company has raised
said FCCB amount to 125 Million US$ (equivalent to Rs.493
crores, as per prevailing exchange rate) for investment in its
overseas subsidiaries or acquisition of new overseas subsidiaries
and M/s.GL was not allowed to use said funds for local bill and
the FCCB were also listed on Singapore Stock Exchange. The
maturity date for the FCCB was January 2013, and the maturity
value was approximately 165 Million US$. However, M/s.GL
defaulted on maturity. Respondent has filed affidavit-in-reply
opposing the application for bail. It is contended that M/s.GL has
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 7/15 905-ba-2267-18.doc
two direct overseas subsidiaries viz. M/s.Geodesic Technologies
Solution Limited (M/s.GTSL), Hong Kong and M/s.Geodesic
Holding Limited ("M/s. GHL"), Mauritius. M/s.GL thorough GHL,
Mauritius had acquired two step-down subsidiaries viz. M/s.Zomo
Technologies and M/s.Emiloto Associates based in tax haven
countries and these two companies were not reputed and were
merely shell companies having no established software business
with consistent revenue income or prestigious clientèle.
M/s.Geodesic Limited had made investment through these two
companies. It is further submitted that the investigation under
PMLA had revealed that the amount of FCCB raised by M/s.GL
was received in the bank accounts of M/s.GTSL and M/s.GHL.
Part of the amount received in the account of M/s.GTSL was
transferred in the accounts of M/s. Zomo Technologies Ltd. And
M/s.Emiloto Associates Inc. After receipt of the funds in those
companies, those funds were not utilized for the intended
purpose of acquisition of new companies. Mr.Dinesh Jajodia is the
director and authorized signatory in the aforesaid companies. It
is further stated that during the investigation, Bank Statement
being account number 710902319001 of M/s.Yvette Investment
Ltd. with Abu-Dhabi Commercial Bank was obtained. The scrutiny
of the same had revealed that an USD 31799750 was transferred
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 8/15 905-ba-2267-18.doc
from the account of M/s.Yvette into the accounts of M/s.GTSL.
Out of the amount of 82.02 Million USD invested in EEMF, as
mentioned in the affidavit filed in the Court, an amount of USD
57.52 Million USD was transferred into the accounts of M/s.YIL,
UAE, wherein Mr.Dinesh Jajodia is the director. Out of USD 57.52
Million, which was transferred in the accounts of M/s.YIL from
EEMF, an amount of USD 23.8 Million was transferred from
M/s.YIL into the accounts of M/s.GTSL, wherein Mr.Prashant
Mulekar is the director. It is submitted that the applicant being
the managing director of M/s.GL as well as incharge of the
department handling the products, such as Mundu etc., has
projected receipt of 31.72 Million USD into the account of
M/s.GTSL from the account of M/s.YIL, as untainted, which was
also included in the annual report of M/s.GL. M/s.GL being the
listed company, it was duty of the Managing Director to present
correct and true figure and facts in the annual report of M/s.GL,
as the public money was involved. It is, therefore, submitted that
the applicant is involved in serious offence. Further investigations
under PMLA conducted so far revealed tht M/s.GL had recovered
the expenses under the guise of bogus purchase of software. Out
of 608.64 crores on account of bogus purchase of software of
M/s.GL an amount of Rs.5.29 crores had gone to M/s.Unsound
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 9/15 905-ba-2267-18.doc
Venture.com India Private Limited (UVIPL) and this receipt of
amount of Rs.5.29 crores was projected as untainted wherein
applicant is the director. Reliance is placed on eh decision of the
Supreme Court of India in the case of State Vs. Jaspal Singh
Gill1, and decision of Supreme Court in Criminal Appeal No.492
jof 2014.
7 Learned counsel for the intervener also reiterated the
submissions advanced by the respondent. It is submitted that the
offence committed by the applicant-accused is of high magnitude
in terms of money involved in the said transaction and that the
alleged crime is on the economy of the country. Foreign investors,
who have invested huge amounts are now wary of investing of
further amount. The applicant is involved in money laundering.
The company issued a bond as accepted Trust Deed dated 17 th
January, 2008, in respect of bonds with Citi Bank. Under the
Trust deed, the said bank was appointed as a trustee for and on
behalf of the bond holders who are the actual and beneficial
owners of the money due under the bonds. The investigating
authority despite all efforts, has not been successful in recovering
the money, due under the bonds which was siphoned off by the
1 1984 AIR 1503
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 10/15 905-ba-2267-18.doc
applicant and other accused. He, therefore, submitted that the
application be rejected. The bondholders being the actual and the
beneficial owners of the bounds and being the actual victim of
perpetuated crime seeks intervention to oppose bail. Reliance is
placed on the decision of the Supreme Court in the case of State
of Bhiar & Anr. Vs. Amit Kumar Alias Bachcha Rai 2. He also
pointed order passed by this Court in Company Petition No.514 of
2013 on 14th July, 2016, referring to affidavit filed by Joint
Commissioner of Police, EOW, stating that three Directors of
Geodesic Ltd., hatched conspiracy with Dinesh Jajodia to cause
wrongful gain to themselves and wrongful loss to shareholders
and FCCB holders, siphoned off funds of shareholders to the tune
of Rs.250 crores by showing bogus purchases of software and
failed to redeem foreign currency convertible bonds worth USD
125 Million to FCCB holders by creating a web of shell
companies in various countries with malafide intention to siphon
off the money through fictitious dealings.
8 I have gone through the documents on record.
9 Applicant was arrested in predicate offence, and,
2 (2017) 13 SCC 751
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 11/15 905-ba-2267-18.doc
subsequently, he was granted bail. Investigation in respect to
PMLA, had been assigned to respondents before the applicant
was granted bail. It appears that the respondents have continued
with investigation and collected evidence against the applicant.
The complaint gives filed by the respondents alleges that
applicant had played a major role in money laundering. The
complaint details as to how the applicant and other accused are
involved in the present case. The contention of the applicant is
that he is not concerned with the companies allegedly involved in
the transactions. It is also contended by the applicant that overt-
acts are attributed to Dinesh Jajodia and others and not the
applicant. According to the prosecution, the applicant is the
managing director of M/s.GL and incharge of department, which
handles the product, such as Mundu etc. He is also director of
M/s.UVIPL. M/s.GL had received the amount of Rs.125 Million
USD on account of FCCB, which was transferred into the account
of M/s.GHL and M/s.GTSL, after receipt of the amount to the tune
of 31.2 Million USD in the account of M/s.GTSL, instead of
utilising the same for acquisition of overseas company and the
investment in wholly owned subsidiary companies, the part of the
FCCB was utilized for the investment in EEMF of 82.02 Million
USD, in ADG Fund of 87.07 Million USD and for the purpose of
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 12/15 905-ba-2267-18.doc
loan of 29.03 Million USD to M/s.Audrain Commercial, which is
not a subsidiary of M/s.GL, M/s.GHL and M/s.GTSL. According to
the prosecution these investments, part of which was source from
FCCB funds were admitted in the affidavit filed before this Court
by M/s.GL through Mr.Prashant Mulekar. Out of 82.02 Million
USD invested in EEMF, an amount of 57.52 Million USD was
transferred into the accounts of M/s.YIL fro EEMF, UAE, wherein
Dinesh Jajodia is a director. M/s.YIL, out of USD 57.52 Million
which was transferred in the accounts of M/s.YIL.
10 It is alleged in the affidavit filed by Prashant Mulekar,
Executive Director of M/s.GL dated 6th April, 2014, in this Court
in Company Petition No.471 of 2014, he had claimed the
investments in M/s.Emiloto Associates, M/s.Zomo Technologies
and M/s.GTSL. The investigation reveals that the amount of FCCB
raised by M/s.GL was received in the Bank account of M/s.GTSL
and M/s.GHL. Part of the amount is received in the account of
M/s.GTSL was transferred in the account of M/s.Zomo
Technologies and M/s.Emiloto Associates. After receipt of the
funds in those companies, the same were not utilized for the
intended purpose of acquisition of companies. It is the case of the
prosecution that though the amount totalling to USD 31.79
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 13/15 905-ba-2267-18.doc
Million was transferred from the account of M/s.YIL into account
of M/s.GTSL, M/s.GTSL has not disclosed the transaction with
M/s.YIL in their books of accounts. M/s.GTSL has projected the
transaction of 31.79 Million USD, as untainted under guise of
income from sales receivable of the goods viz. Mundu etc.,
purportedly sold by M/s.GL under the directions of Mr.Prashant
Mulekar. Applicant is being incharge of the department of holding
the product viz. Mundu, is aware of the fact that the product is
purportedly sold by M/s.GL, as untainted in the account of
M/s.GTSL. The investigation under the PMLA has revealed that
M/s.GL had recorded the expenses under the guise of bogus
purchase of software. Out of Rs.608.64 crores on account of
bogus purchase of software of M/s.GL an amount of 5.29 crores
had gone to M/s.UVIPL and others receipt of amount of Rs.5.29
crores was projected as untainted wherein the applicant is the
director. It is, thus, the case of the prosecution that the applicant
is prima facie guilty for the offence of money laundering. The
evidence collected during the course of investigation, thus,
indicate involvement of the applicant in the said crime. The
applicant being managing director of M/s.GL had projected the
receipt of 31.79 Million USD into the account of M/s.GTSL from
the account of M/s.YIL as untainted which was also included in
::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 14/15 905-ba-2267-18.doc
the annual report of M/s.GL. M/s.G.L. being listed company, it is
the duty of M.D. to present the correct figures in annual report.
The application preferred by the applicant was rejected by the
Sessions Court vide order dated 21 st July, 2018. While rejecting
the said application, it was observed that there is sufficient
evidence showing involvement of the applicant in the crime.
There is prima facie material to show the involvement of the
applicant in siphoning off the proceeds of crime showing tainted
amount, as untainted. It is also observed that this is a serious
matter having international ramifications. The offence is
economic offence is involving public money and the applicant has
played vital role in laundering money. In the light of the evidence,
I do not find that applicant is made out any case for grant of bail.
11 Hence, I pass the following order:
:: O R D E R ::
(i) Bail Application No.2267 of 2018, is rejected;
(ii) Criminal Application No.1338 of 2018, stands disposed of.::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::
rpa 15/15 905-ba-2267-18.doc
(iii) It is clarified that the observations made in the order are prima facie for considering grant of bail and the trial Court shall not be influenced by the same at the time of trial.
(PRAKASH D. NAIK, J.) ::: Uploaded on - 28/12/2018 ::: Downloaded on - 28/12/2018 22:56:15 :::