Gujarat High Court
Rakesh Manekchand Kothari vs Union Of India & 3 on 16 January, 2015
Author: Anant S.Dave
Bench: Anant S. Dave, G.B.Shah
R/SCR.A/4496/2014 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION (DIRECTION) NO. 4496 of 2014
With
SPECIAL CRIMINAL APPLICATION NO. 4672 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE ANANT S. DAVE
and
HONOURABLE MR.JUSTICE G.B.SHAH
================================================================
1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
================================================================
RAKESH MANEKCHAND KOTHARI....Applicant(s)
Versus
UNION OF INDIA & 3....Respondent(s)
================================================================
Appearance:
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SCR.A No.4496 of 2014
MR VIKRAM CHAUDHARY Senior Advocate with MR SANJAY AGARWAL with
MR CHETAN K PANDYA, ADVOCATE for the Applicant(s) No. 1
MR DEVANG VYAS, ASG for the Respondent(s) No. 1
MS KRINA P CALLA APP for the Respondent(s) No. 4
SCR.A No.4672 of 2014
MR SUNIT SHAH for MR ISHAN MIHIR PATEL with MR OMKAR DAVE with
MR RJ GOSWAMI, ADVOCATE for the Applicant(s) No. 1
MR DEVANG VYAS, ASG for the Respondent(s) No. 1
MS KRINA P CALLA APP for the Respondent(s) No. 4
================================================================
CORAM: HONOURABLE MR.JUSTICE ANANT S. DAVE
and
HONOURABLE MR.JUSTICE G.B.SHAH
Date : 16/01/2015
COMMON CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE ANANT S. DAVE)
1 Considering the common issue involved in
both these petitions, they are taken up for final
hearing together and are being disposed of by the
common judgment.
1.1 The petitioner of Special Criminal
Application No.4496 of 2014 has filed this petition
under Articles 226 and 227 of the Constitution of
India, with the following prayers:
"[a] To strike down Section 45 of the Prevention
of MoneyLaundering Act, 2002 [hereinafter
referred to as `PMLA'] [as inserted / substituted
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by Amendment Act 2005 [20 of 2005] dt. 21.5.2005,
as the said provision does not bear any
reasonable and rational nexus with variety of
Scheduled offences mentioned in the Schedule
under the Act which may even be noncognizable,
bailable and on much lighter pedestal, for being
unreasonable and ultra vires, and consequently
unconstitutional, illegal, arbitrary,
discriminatory, and thus being violative of
Articles 14, 19 and 21 of the Constitution of
India, and this Hon'ble Court may read down, lay
down, expound, interpret and deliberate upon the
scope and perspective of Section 45 of PMLA so as
to harmonize the same in juxtaposition with
various scheduled offences [under amended Part A
of the Schedule],
[b] To read down, expound, deliberate and
interpret the scope and perspective of Section 19
of PMLA in light of section 49(3) read with Rules
notified by GSR 446[E] dated 1.7.2005, in
consonance and harmony with settled
constitutional mandate of Articles 14, 21 and 22
of Constitution of India as also in the context
of various provisions under the Code of Criminal
Procedure, 1973, as amended from to time and the
Guidelines laid down by the Hon'ble Apex Court in
D.K.Basu vs State of West Bengal 1997(1) SCC 416,
[c] For issuance of an appropriate writ of quo
warranto, calling upon Respondent No.3, who being
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an Assistant Director, Enforcement Directorate,
appointed under Foreign Exchange Management Act,
1999, can under Section 54 of PMLA only assist
any officer investigating under PMLA, to show
cause as to how and under what authority has he
exercised the power of arrest under Section 19 of
PMLA, while effecting arrest of the Petitioner on
01.09.2014 in ECIR/01/SRT/2014, without producing
till date, despite specific objection by the
Petitioner
[i] any authorization conferring upon him by
way of any notification or order issued by
the Central Government in terms of Section
19 and Section 49 of PMLA, 2002, read with
Rules notified by GSR 446(E), dt.1.7.2005,
authorizing him to be an "Arresting Officer"
and to exercise power to arrest under
section 19,
[ii] any notification issued by Central
Government for his appointment a Assistant
Director under section 49 of PMLA,
[iii] any records to show compliance of
Rules notified by GSR 446(E) dated 1.7.2005,
and
[v] any Criminal Proceedings against the
Petitioner in the alleged Scheduled offence
showing the Petitioner as an accused person;
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and
[d] For issuance of an appropriate writ of
Habeas corpus, or order or direction under
Article 226 of the Constitution of India,
directing forthwith release of the Petitioner
from custody, by setting aside the Impugned
Arrest Order dated 1.9.2014 and the consequent
remand proceedings, as the arrest of the
Petitioner is manifestly illegal, without
jurisdiction, null and void ab initio, for clear
violation of
[i] The directives of the Hon'ble Apex Court
in D.K.Basu vs. State of West Bengal, 1997
(1) SCC 416 [more particularly those
prescribed in subpara (2), (9) and (10) of
Para 35 thereof],
[ii] The provision of PMLA including amongst
others of Section 19(1) of PMLA, which
mandatorily prescribe the arrest to be made
on the basis of such "material in
possession", on the basis of which there
exists "reason to believe" that person is
"guilty" of an offence under the PMLA; which
shall be "recorded in writing"; and pursuant
to arrest to inform him of the `Grounds' for
such arrest,
[iii] Rules notified by Central
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Government vide GSR 446[E], dt.1.7.2005,
[iv] notification GSR 441(E) dated 1.7.2005
issued by the Central Government appointing
Director to exercise the "exclusive" power
conferred under section 19 of PMLA
[v] Article 14, 21, 22 of the Constitution
of India.
[e] At the interim / adinterim stage
[i] The proceedings under PMLA against the
Petitioner may please be stayed,
[ii] The Petitioner may please be released on
regular bail in the above case in
ECIR/01/SRT/2014,
[f] Dispense with filing of affidavit in
support to this Petition as the Petitioner
is in judicial custody;
[g] For such other or further order/s in the
peculiar facts of the case.
1.2 The petitioner of Special Criminal
Application No.4672 of 2014 has filed this petition
under Articles 226 and 227 of the Constitution of
India, with the following prayers:
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"[A] To strike down Section 45 of the Prevention
of MoneyLaundering Act, 2002 [hereinafter
referred to as `PMLA'] [as inserted / substituted
by Amendment Act 2005 [20 of 2005] dt.
21.5.2005], as the said provision does not bear
any reasonable and rational nexus with variety of
Scheduled offences mentioned in the Schedule
under the Act which may even be noncognizable,
bailable and on much lighter pedestal, for being
unreasonable and ultra vires, and consequently
unconstitutional, illegal, arbitrary,
discriminatory, and thus being violative of
Articles 14, 19 and 21 of the Constitution of
India, and this Hon'ble Court may read down, lay
down, expound, interpret and deliberate upon the
scope and perspective of Section 45 of PML Act so
as to harmonize the same in juxtaposition with
various scheduled offences [under amended Part A
of the Schedule],
[B] If the Hon'ble Court finds that provision of
Section 45 is not ultra vires of the Article 14,
19, 21 and 22 of the Constitution of India, then
to read down, expound, deliberate and interpret
the scope and perspective of Section 45 of the
PML Act to the scheduled offences where minimum
punishment is 3 years in the context of objects
and reasons underlying the rigors of Section 45
r/w. Section 4 of the PML Act.
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[C] To read down, expound, deliberate and
interpret the scope and perspective of Section 19
of PML Act in light of section 49(3) read with
Rules notified by GSR 446[E] dated 1.7.2005, in
consonance and harmony with settled
constitutional mandate of Articles 14, 21 and 22
of Constitution of India as also in the context
of various provisions under the Code of Criminal
Procedure, 1973, as amended from time to time and
the Guidelines laid down by the Hon'ble Apex
Court in D.K.Basu v. State of West Bengal 1997(1)
SCC 416,
[D] For issuance of an appropriate writ of quo
warranto, calling upon respondent No.3, who being
an Assistant Director, Enforcement Directorate,
appointed under Foreign Exchange Management Act,
1999, can under Section 54 of PMLA only assist
any officer investigating under PMLA, to show
cause as to how and under what authority has he
exercised the power of arrest under Section 19 of
PMLA, while effecting arrest of the Petitioner on
21.05.2014 in ECIR/01/SRT/2014, without producing
till date
[i] any authorization conferring upon
him by way of any notification or order
issued by the Central Government in terms of
Section 19 and Section 49 of PML Act, 2002,
read with Rules notified by GSR 446(E),
dt.7.7.2005, authorizing him to be an
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"Arresting Officer" and to exercise power to
arrest under section 19,
[ii] any notification issued by Central
Government for his appointment a Assistant
Director under section 49 of PML Act,
[iii] records to show compliance of Rules
notified by GSR 446(E) dated 1.7.2005, and
[d] For issuance of an appropriate writ of
Habeas corpus, or order or direction under
Article 226 of the Constitution of India,
directing forthwith release of the Petitioner
from custody, by setting aside the Impugned
Arrest Order dated 1.9.2014 and the consequent
remand proceedings, as the arrest of the
Petitioner is manifestly illegal, without
jurisdiction, null and void ab initio, for clear
violation of
[i] The directives of the Hon'ble Apex Court
in D.K.Basu v. State of West Bengal, 1997
(1) SCC 416 [more particularly those
prescribed in subpara (2), (9) and (10) of
Para 35 thereof,
[ii] The provisions of PML Act including
amongst others of Section 19(1) of PML Act,
which mandatorily prescribe the arrest to be
made on the basis of such "material in
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possession", on the basis of which there
exists "reason to believe" that person is
`guilty' or an offence under the PML Act;
which shall be `recorded in writing'; and
pursuant to arrest to inform him of the
`Grounds' for such arrest,
[iii] Rules notified by Central
Government vide GSR 446[E], dt.1.7.2005.
[iv] Notification GSR 441(E) dated 1.7.2005
issued by the Central Government appointing
Director to exercise the `exclusive' power
conferred under section 19 of PML Act.
[v] Articles 14, 21 and 22 of the
Constitution of India.
[F] At the interim / adinterim stage
[i] The Petitioner may please be released on
regular bail in connection with Complaint
NO.3 of 2014 pending in the court of Special
Judge, Ahmedabad District, Ahmedabad [Rural]
arising out of ECIR No.1/SRT/201415.
[G] Dispense with filing of affidavit in support
to this Petition as the Petitioner is in judicial
custody.
[H] For such other and further order/s in the
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peculiar facts of the case.
2 The facts of both the petitions are almost
similar, however, for the purpose of deciding the
issues involved in these petitions, facts of Special
Criminal Application No.4496 of 2014 are taken up.
The facts of Special Criminal Application No.4496 of
2014, as per the petitioner of that petition, are as
under:
2.1 On 11.04.2014, FIR No.5/16/2014 dated
11.4.2014 was registered by the District Crime Branch,
Surat, alleging various offences under IPC against one
M/s R.A. Distributors Pvt. Ltd., Surat and its
Directors for preparing bogus Bills of Entry and
presenting the same for outward remittances to various
parties in Dubai and Hong Kong. The petitioner herein
is not amongst the accused persons in the said FIR
dated 11.4.2014.
2.2 On 13.4.2014, another FIR was registered by
the District Crime Branch, Surat, alleging various
offences under IPC against M/s. Agni Gems Pvt. Ltd.,
M/s. Harmony Diamonds Pvt. Ltd., and their Directors
for preparing bogus Bills of Entry and presenting the
same for outward remittances to various parties in
Dubai and Hong Kong. The petitioner herein is not
amongst the accused persons even in the said FIR dated
13.4.2014.
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2.3 On 17.4.2014, Enforcement Case Information
Report (ECIR)/01/SuratSubZonal /201415 was
registered by the Directorate of Enforcement of
Ahmedabad, SuratZone Surat against the persons
accused in the aforesaid FIRs dated 11.4.2014 and
13.4.2014. This Fir (termed as ECIR), was registered
by respondent No.3 and the case was taken up for
investigating purportedly under the provisions of PMLA
and the Rules framed there under. The petitioner
herein is not amongst the accused persons named in the
said ECIR dated 17.4.2014.
2.4 Under the provisions of PML Act, although
there is no bar on filing a Charge Sheet under section
173(2) of Code of Criminal Procedure, however, second
proviso to impugned section 45 provides for filing of
a Complaint in writing in the manner prescribed.
Therefore, on 18.7.2014, after completing
investigations qua the persons accused there under,
the Deputy Director of the Directorate of Enforcement
filed a complaint before Trial Court against 79
accused, including natural persons and legal entities.
The petitioner herein is not named as accused in this
exhaustive complaint filed by the Enforcement
Directorate against 79 accused, which relief on
plethora of statements.
2.5 On 01.09.2014, the petitioner on being
summoned appeared before the respondent NO.3. He was
coerced to give a confession. He was threatened that
even his family members will be roped in the matter
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and put behind bars. Vide impugned Arrest Order dated
1.9.2014, the petitioner was arrested by respondent
No.3 purportedly in exercise of powers conferred by
Section 19(1) of PMLA, while alleging to have reasons
to believe that the petitioner has been guilty of
offences punishable under Section 4 read with Section
3 of PMLA. This arrest was in blatant violation of the
provisions of Section 19 of PMLA read with Rules
notified vide GSR 446 (E), dt. 1.7.2005, Notification
GSR 441(E) dated 1.7.2005, also in violation of the
Guidelines framed by the Hon'ble Apex Court in
D.K.Basu Vs. State of West Bengal, 1997 (1) SCC 416,
and in derogation of fundamental rights conferred
under the Constitution of India vide Articles 14, 21
and 22. Whereas the petitioner was coerced to give an
endorsement of having been informed of the Grounds of
Arrest and having understood the same, no such Grounds
of Arrest were either shown or supplied to him. No
witness was called to witness the petitioner's arrest
and alleged oral communication of grounds.
Consequently there is no endorsement of any witness on
the Arrest Order, or alleged Grounds of Arrest. The
respondent No.3 was not even authorized by the Central
Government to exercise power of arrest under Section
19 of PMLA.
2.6 After such illegal arrest of the petitioner,
the relatives of the petitioner sent a friend to meet
the petitioner to whom the personal belongings of the
petitioner were handed over by the respondent no.3.
It is not even the claim of the Respondents that at
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the time of Arrest or purported oral communication of
the Grounds of Arrest, this friend was present and had
witnessed the same.
2.7 On 2.9.2014, the Application for seeking
Enforcement custody was filed by respondent No.3
before the Designated Judge under PMLA Principal
District Judge Ahmedabad (Rural). In this Remand
Application it was, inter alia, claimed by the
Respondent No.3 that the arrest of the petitioner was
done on 1.9.2014 concerning his involvement in the
huge money laundering racket, and investigation could
not be completed in a short period of time. Thus
existence of reasonable belief that the petitioner has
been guilty of offence was far from reality.
2.8 In Enforcement custody, the petitioner was
again coerced, pressurized and threatened with dire
consequences including arrest of all his family
members and relatives, unless he submits to the
dictates of the officers of Respondent No.3. The
petitioner has truthfully narrated in his oral
interrogation, all the requisite details and answers
to all the questions orally put to him. However,
instead of permitting the petitioner to record his
statements as per his version and in his own
handwriting, he was coerced to sign typed statements
prepared by the officers of Respondent No.3 without
knowing the contents thereof. By use of coercive
measures, various such statements and endorsements
were obtained from the petitioner, against his will
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and contrary to facts. The petitioner was not even
permitted to read the contents of statements recorded
by the officers of respondent No.3. The petitioner
submits that false statements which were fictitious
creations of the officers were forcefully thrusted
upon the petitioner, and the same are far from being
voluntary and thus liable to be rejected.
2.9 On 8.9.2014, the application for opposing
further remand and for seeking bail was filed by the
petitioner before the trial Court, inter alia seeking
temporary bail till final disposal of the application.
3 The case of the respondent No.3, as stated
on oath, against the petitioners, is as under:
3.1 That certain information was received from
the Joint Commissioner of Customs, Customs Division,
Surat that companies M/s. Harmony Diamonds Pvt. Ltd.,
M/s. Agni Gems Pvt. Ltd. and M/s. R. A. Distributors
Pvt. Ltd. have made foreign remittance on the strength
of fake bills of entry without having made any
imports. It was gathered that within a span of two
months i.e. January and February 2014, remittances to
foreign shores worth more than Rs. 1000 crore against
fake import documents viz. bills of entry and
invoices were made from the said accounts.
Investigations have revealed that the various
companies were involved in presenting fake bills of
entry before the ICICI bank for foreign outward
remittances and all of them have opened accounts in
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late December, 2013 and January, 2014. The addresses
and the names of the Directors who were dummy and name
lenders.
3.2 Names of the companies involved in the
fraudulent remittances from their bank accounts with
ICICI Bank, their fake addresses and dummy directors:
Sr. Name of the Company Directors Account No Amount
No. illegally
remitted
Rs. in Crores
1 M/s. Agni Gems Pvt. ltd. Pankaj S. Jain and 005205500995 168.93
304, Shayona Hatfalia, Deepak Mahadev
Haripura, Surat Patil
2 M/s. Harmony Diamonds Pvt. Pankaj S. Jain and 005205501001 76.28
ltd. Deepak Mahadev
I Floor, Somnath Mahadev Patil
Street, Gurajara Faliyu,
Surat
3 M/s. R. A. Distributors Shailesh R. Patel 624605501750 1521
Pvt. ltd. and Aniket
6/1943, Office No. 303, Ambekar
Cabin No. 1, 3rd Floor,
Navakar Building, Opp.
Kabir Mandir, Mahidarpura,
Surat
4 M/s. Hem Jewels Pvt. ltd. Sagar Kamble and 624605501807 348.59
6/1764, Cabin No. 6, Manoj Kamble
Ground Floor, Back side,
Krishna Kunj Gundisheri,
Laldarwaja, Mahidarpura,
Surat
5 M/s. Maa Mumbadevi Gems Sagar Kamble and 624605501808. 446.4
Pvt. Ltd. Manoj Kamble
6/1764, Cabin No. 6,
Ground Floor, Back side,
Krishna Kunj Gundisheri,
Laldarwaja, Mahidarpura,
Surat
6 M/s. Riddhi Exim Pvt.ltd. Sitaram Salvi and 085005500829. 994.77
101, I Floor, Krishna Shailesh R. Patel
Kunj, Gundisheri,
Laldarwaja, Mahidarpura,
Surat
7 M/s. M.B. Offshore Sachin Sitaram 085005500828. 1013.18
Distributors Pvt. ltd. Salvi and Aniket
6/1943, Office No. 303, Ambekar
Cabin No. 1, 3rd Floor,
Navakar Building, Opp.
Kabir Mandir, Mahidarpura,
Surat
8 M/s. Ramshyam Exports Pvt. Sumit Kumar Babel 085005500850 650.42
ltd. and Mahendra and
6/1943, Office No. 303, Kumar Ranka 085005500879
Cabin No. 1, 3rd Floor,
Navakar Building, Opp.
Kabir Mandir, Mahidarpura,
Surat
9 M/s. Trinetra Trading Sumit Kumar Babel 085005500849 176.18
Pvt. ltd. and Mahendra and
6/1943, Office No. 303, Kumar Ranka 085005500880
Cabin No. 1, 3rd Floor,
Navakar Building, Opp.
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Kabir Mandir, Mahidarpura,
Surat
3.3 Investigation have also revealed that the
companies based in Hong Kong and Dubai were the
beneficiaries of foreign remittances made and the
following table shows the amount of rupees in crores
were fraudulently remitted by the above said Indian
firms.
Indian R. A. M/s. M/s. M/s. M/s. M/s. M/s. M/s. M/s. Grand
Firms Distri Agni Harmony M.B.Of Hem Riddhi Ram Trinetra Maa Total
Foreign butors Gems Diamonds fshore Jewels Exim Shyam Trading Mumba
Firms Pvt. Pvt. Pvt.Ltd Distri Pvt. Pvt. Exports Pvt. Devi
Ltd Ltd. butors Ltd. Ltd Pvt. Ltd. Gems
Pvt. Ltd Pvt.
Ltd. ltd
Nippon 230 0 0 165.94 60 150.25 106.14 6.29 103 821.62
Mabrook 239 0 0 228.08 0 269.58 106.6 0 163 1006.26
Daimur 290 0 0 55.93 49.59 74.45 43.71 12.55 42 568.23
Cornell 294 0 0 125.47 85 129.86 72.56 0 39.69 746.58
Al Saba 314 0 0 121.91 154 148.46 165.61 97.21 0 1001.19
Al Mignas 75 0 0 257.19 0 49.69 0 0 0 381.88
Al Almas 79 0 0 0 0 165.76 71.18 31.22 98.71 445.87
Golden 34.89 0 0 0 0 0 0 0 34.89
King
Good Step 47.79 0 0 0 0 0 0 0 47.79
Trading
Bin Sabt 0 0 0 0 0 16.86 0 16.86
Jewellery 0
LLC
Nice able 86.25 47.9 0 0 0 0 0 0 134.15
Trading
Sharp 15.81 0 0 0 0 0 0 15.81
Crown
Silver 12.57 0 0 0 0 0 0 12.57
Smart
Al Johara 0 0 6.72 0 0 0 6.72
Oracle 58.66 0 0 0 0 0 58.66
General
Trading
Comet 43.8 0 0 43.8
Corpn.
Chaushan 40.82 12.05 0 52.87
Trading
Ltd.
Total 1521 168.9 76.28 1013.1 348.59 994.77 650.42 176.18 446.4 5395.75
3 8
3.4 Investigation as to who are the sources of
such huge funds revealed that fake firms with dummy
partners have made RTGS Credits from their respective
bank accounts with Axis Bank to the ICICI Bank
accounts of above mentioned companies.
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Sr Name of the Address Name of the partners
No company
1 M/s. Aarzoo 6/1854, PAI, Shop Faisal Reza M Ali Patel
Enterprises No. 4, Cab. No. 1, and Zahir Abbas M Patel
Navkar Chambers,
Bhojabhai No Tekro,
Mahidarpura, Surat
395003
2 6/869, Ami Kunj Shahid M. Tamboli and
M/s. GT Building, Ground Faisal Reza M Ali Patel
Traders Floor, Back
Side,Cabin No. A,
Chapariya Sheri,
Mahidarpura, Surat
395003
3 M/s. Vandana & 6/2132, 3rd Floor, Ali Raza H. Bhojani and
Co. Cabin NO. 301, B, Shahid M. Tamboli.
Limbu Sheri,
Mahidarpura, Surat
4 M/s. Maruti 6/2497. 3rd Floor, Shahid M. Tamboli and
Trading Cabin No. 1 Ajanta Zahir Abbas M. Patel.
Matlar, Limbusheri,
Mahidarpura, Surat
5 M/s. Jash 7/3717 A, Cabin No. Faisal Reza M Ali Patel
Traders 1, 2nd Floor, and Ali Raza H. Bhojani
Rampura Main Road,
Surat
6 M/s. Natural 6/2155, Cabin NO. 3, Pukhraj Anandmal Mutha
Trading Co Basement, Gokul and Munnichand
Bldg., Pipala Sheri, Shantilal Bhandari.
Mahidarpura, Surat
7 M/s. M.D. 6/1766, Sainath Munnichand Shantilal
Enterprise Building, Ground Bhandari and Sushil
floor, Cabin No. 1, Kumar Anandmal Jain
Gundisheri,
Mahidarpura, Surat
8 Ms/. 307, Suparshwa Shri Surendra Kumar
Millennium & Building, 3rd Floor, Anandmal Dungarwal and
Co. Cabin No. 1,Near Shri Sushilkumar
Ganesh Temple, Thoba Anandmal Jain
Sheri, Mahidarpura,
Surat.
3.5 The following table further shows the amount
of funds transferred through RTGS from the firms to
the companies.
Directorial M/s.R.A. M/s. M/s. Hem M/s. Maa M/s. M.B. M/s.Ram M/s. Total
Companies Distri Riddhi Jewels Mumbadevi Offhsore Shyam Trinetra
Partnership butors Exim Pvt. ltd Gems Pvt. Distri Exports Trading
Firms Pvt. Pvt. ltd butors Pvt. Pvt.
Ltd. ltd Pvt. Ltd. ltd. ltd.
M/s.Vandana 233 113.6 45 54 139 65.99 13.56 664.15
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& Co
M/s.Natural 95 46.40 0 0 74 49 9 273.4
Trading Co
M/s.Jash 349 124.56 57 126 175 79.45 11.78 922.79
Traders
M/s.GT 270 154 54 66 202 87 6.33 839.33
Traders
M/s.M.D. 88 27 0 0 92 44.85 13.65 265.5
Enterprise
M/s. Aarzoo 272 64.85 47 95 155 71.66 7.35 712.86
Enterprise
M/s. 26 4.4 0 0 24 0 0 54.4
Millennium &
Co
M/s. Maruti 18 40 0 0 51 78.93 8.79 196.72
Trading
1351 574.81 203 341 912 476.88 70.46 3929.
15
3.6 It has also been found that several firms,
individuals, cheque discounters, commission agents and
others based in New Delhi, Mumbai, Surat, Chandigarh,
Hyderabad and Ahmedabad have made RTGS transfers to
the partnership firms.
3.7 The respondent No.3 had initially started
investigation under the FEMA,1999, and following in
the FIR NO. I/16/2014 dtd. 11.04.2014 and FIR No.
I/17/2014 dtd. 13.04.2014 registered by the Detection
of Crime Branch, Surat Police under Sections 420, 465,
467, 468, 471, 477 A of IPC upon the complaint of
ICICI Bank investigations under the Prevention of
Money Laundering Act, 2002 (PMLA) have been initiated
as the Offences under Section 420, 467, 471 of IPC are
'scheduled offences' in terms of Section 2(y) under
the Prevention of Money Laundering Act, 2002, which
have been registered against the above said companies
and its directors. Upon scrutiny of the said two FIRs,
a case was registered under ECIR No. 01/2014 dtd.
17/04/2014 by the Directorate of Enforcement, Surat
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for investigation into the offence of money laundering
under PMLA, 2002.
3.8 One Shri Afroz Mohamed Hasanfatta one of the
petitioner in cognate writ petition along with one
Shri Madanlal Jain was the brain behind the illegal
transfer of money and since he has received huge
proceeds for his active role in the crime he has been
arrested under Section 19 of PMLA, 2002. Shri Madanlal
Jain created the fake companies with dummy directors
and lent the same for Shri Afroz Mohamed Hasanfatta
for import and export of diamonds. No such import and
export of diamonds have been made from the said
private limited companies and bills of entry of the
year 2011 were allowed to be made and forged with the
signatures of Customs Officials for illegal transfer
of money by submitting the same before the ICICI Bank.
The Police have arrested Shri Madanlal Jain on
7/7/2014 and the Directorate has also arrested him on
17/7/2014 under the Section 19 of PMLA, 2002
following the transit remand granted by the Chief
Court, Surat. During his custodial interrogation, he
has stated that RTGS credits in huge amounts were
received through Shri Rakesh Kothari and the said
RTGS credits received in the accounts of the said
firms with the Axis bank were transferred to M/s. R.
A. Distributors Pvt. Ltd., M/s. Riddhi Exim Pvt. Ltd.,
M/s. Hem Jewels pvt. Ltd., M/s. Maa Mumbadevi Gems
Pvt.ltd. M/s.M.B. Offshore Distributors Pvt.ltd., M/s.
Ramshyam Exports Pvt. Ltd. and M/s. Trinetra Trading
Company Pvt.ltd. He has also stated that Shri Rakesh
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Kothari of M/s. Riddhi Siddhi Bullion Ltd would ensure
credits through RTGS were made in the firms namely,
M/s. Vandana & Co., M/s. Aarzoo Enterprise, M/s. GT
Traders, M/s. Jash Traders, M/s. Maruti Trading, M/s.
M.D. Enterprise, M/s. Millennium & Co., and M/s.
Natural Trading Co. from places like Mumbai, Surat and
Delhi and would use the same for smuggling of
diamonds and Gold. He further stated that M/s. Riddhi
Siddhi Bullion Ltd. had business transactions in Dubai
through Shri Raju Kothari of M/s. Riddhi Siddhi
Bullion Ltd. had business transactions with M/s. Al
Khayal Al Dahabi Jewellery LLC, Dubai and the said
firm had reportedly made illegal transactions with the
firm Al Khayal Al Dahabi Jewellery LLC, Dubai for
smuggling of Gold.
Role played by the Petitioner
Shri Urvish D. Shah, Director of M/s. P. Umesh
Chandra & Co , an Angadia firm, in his statement dtd.
26.6.2014 has named Shri Prithviraj Kothari (paternal
uncle of Rakesh Kothari) would send cash to Surat from
Mumbai through M/s. P. Umesh Chandra & Co. They would
telephone from 02223098745 to M/s. P. Umesh Chandra &
Co for collecting the cash and during a period of time
the cash amounting to Rs. 150 crore was stated to have
been transferred. The said cash was delivered to
various persons on the instructions of Shri Prafful
Patel, Surat. Shri Madanlal Jain in his statement dtd.
22/07/2014 has stated the sources of funds received
through RTGS in second layer companies namely, M/s.
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Vandana & Co, M/s. GT Traders, M/s. Maruti Trading,
M/s.Jash Traders, M/s. Aarzoo Enterprises, M/s.
Millennium & Co, M/s. Natural Trading and M.D.
Enterprise. He had stated that Shri Rakesh Kothari
would ensure credits through RTGS transfer to the
companies from places like Mumbai , Surat and Delhi.
He had also stated that Shri Rakesh Kothari would use
the fraudulent remittances made to Hong Kong and Dubai
for smuggling of Gold and Diamonds.
To specific question on the names of the
companies in which Shri Rakesh Kothari had ensured the
RTGS transfers to which Shri Madanlal Jain stated that
Shri Rakesh made RTGS to M/s.GT Traders and M/s.
Vandana & Co.
The forensic analysis of the computer seized from
the Office of Shri Madanlal Jain has the messages sent
from Shri Jayesh Desai regarding the debit advice of
Shri Raju Kothari, Shri Rajesh Kothari is an elder
brother of Shri Rakesh Kothari. Shri Rakesh Kothari
has not turned up on being twice summoned and turned
up on 01.09.2014 for his statement to be recorded
under Section 50 of PMLA, 2002.
The Modus Operandi under which the Petitioner helped
in Financing Shri Madanlal Jain:
In one of the Statements of the Petitioner
recorded under Section 50 of the PMLA, 2002 on
06/09/2014 wherein he inter alia stated that he had
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agreed to the statements dtd. 5/9/2014 of Shri C.K.
Patel (Jayanti Amba Angadia firm) and Shri Praveen
Kumar Jain (Commission agent from Mumbai) recorded
under Section 50 of PMLA, 2002 and perused and put his
dated signature on the above statements; that he had
sent Rs. 750 Crore to Surat through various angadias
for further RTGS and the money belonged to his
paternal uncle Shri Prithviraj Kothari; that on being
asked to elaborate the whole modus operandi of
collecting cash and sending it for the procurement of
RTGS he stated that the man of Shri Prithviraj
Kothari, Shri Anil would give cash to the petitioner
and Mr. Anil was working in the Office of Shri
Prithviraj Kothari; that Mr. Madanlal Jain and Mr.
Prithviraj Kothari would discuss the issue of handing
over the cash to individual / company for the purpose
of RTGS and Mr. Anil would come to him with the cash
and direction that to whom the cash might be given for
the purpose of making of RTGS; that thereafter as per
the direction given he would hand over the concerned
company / individual and they would complete the
transaction by making the RTGS; that he would wait for
2 to 3 hours and in case if the phone did not come to
him then it would be presumed that RTGS process was
complete and in case it was not complete then the
person would inform him citing the reason for non
completion and it was being completed the following
day; that Rs. 750 Crore in cash had been given by him
to different RTGS arranging persons from the period
during December'2013 to February/Mach'2014; that
besides him the other person who was doing illegal
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transfer of money work for Shri Prithviraj Kothari
were Shri Hukam Raj, Rajni Mahal, Tara deo, Shri
Yunus, Masjid under etc and the cash was given by him
to either angadias or the persons who arranged the
RTGS; that the RTGS arranged in Mumbai for that money
was given directly to the person who arranged the RTGS
and the RTGS procured in Surat money was given to the
Angadias; that the angadias thereafter would transport
the money from their Office in Mumbai to Surat and
would give it to the persons arranging RTGS in Surat;
that the name of RTGS arranging persons were Shri
Sagar and Shri Dharmendra; that those two were main
persons who arranged RTGS and the total money given by
him to the following angadias which was around Rs. 750
Crore were M/s. P. Umesh Chandra & Co, M/s. Gujarat
Angadia, M/s. Jayantilal Ambalal Choksi, M/s. S.
Babulal, Shri Arpit, Fofal wadi, Bhuleshwar, M/s. Soma
Magan, Fofal wadi, Bhuleshwar and in addition to
above, certain cheque discounters in Mumbai would
also arrange direct RTGS from Mumbai itself; that his
brother Shri Rajesh Kothari alias Raju Kothari has a
company named Al Khayal Al Dhahabi Jewellery LLC, M1,
M2, M3, Gold Souq, Deilva, P.O. Box, 51377, Dubai,
U.A.E.
4 According to the petitioner of Special Civil
Application No.4496 of 2014, FIR No.5/16 of 2014 was
registered by District Crime Branch, Surat on
11.04.2014 alleging various offences under IPC against
one M/s. R.A.Distributors Pvt. Ltd., Surat and its
directors for preparing bogus bills of entry and
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presenting the same for outward remittance to various
parties in Dubai and Hong Kong. That another FIR
came to be registered by District Crime Branch, Surat
on 13.04.2014 for various offences under IPC against
M/s. Agni Gems Pvt. Ltd., M/s. Harmony Diamonds Pvt.
Ltd. and the directors for preparing bills of entry
and presenting the same for outward remittance to
various parties in Dubai and Hong Kong. However,
Enforcement Case Information Report [ECIR]01/Surat
SubZonal/201415 was registered by Directorate of
Enforcement of Ahmedabad, Surat Zone, Surat against
persons accused in the aforesaid FIRs dated 11.04.2014
and 13.04.2014 and it was registered by respondent
No.3 and investigation commenced under provisions of
the PML Act and the Rules framed there under. During
the course of investigation, the Deputy Director of
the Directorate of enforcement complained against 79
accused including interested persons and legal
entities, but the petitioners herein were not named.
Later on, when the petitioner, who appeared on being
summoned was arrested by respondent NO.3 purportedly
in exercise of powers conferred by Section 19(1) of
the PML Act. On reasonable belief that the petitioner
has been guilty of offences punishable under Section 4
read with Section 3 of PML Act, on 02.09.2014 an
application was filed by respondent No.3 before the
designated Judge under PML Act viz. Principal District
Judge, Ahmedabad [Rural] for seeking enforcement
custody of the petitioner. In the remand application
it was claimed by respondent No.3 that arrest of
petitioner was done on 01.09.2014 for involvement in
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the huge money laundering racket and investigation
could not be completed in short time. Thereafter, the
application for opposing further remand and for
seeking bail was filed by the petitioner on 08.09.2014
for seeking temporary bail, till final disposal of the
said application. However, by order dated 09.09.2014,
learned Sessions Judge [PMLA] Designated Court was
pleased to reject the prayers for interim relief and
thereafter matter was kept for hearing on regular
bail. An affidavit in reply was filed by respondent
No.3 on 15.09.2014 and arguments were canvassed by
both the learned advocate for the parties respectively
and finally application filed by the petitioner for
opposing remand and grant of bail came to be rejected
by order dated 08.10.2014.
4.1 In the above mentioned factual aspects,
petitioners have filed the present petitions under
Article 226 of the Constitution of India with manifold
prayers as quoted herein above.
4.2 At the outset, legality, validity and
constitutionality of the PML Act is not under
challenge. However, Section 45 of PML Act is
challenged as arbitrary, unreasonable, illegal,
discriminatory inasmuch as certain offences under
amended schedule, which can even be noncognizable and
bailable and/or had much lighter importance mandates
such offences not only cognizable and nonbailable,
but also put onerous restrictions on accused persons
of such schedule offences while taking bail from the
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competent court of law and such accused persons have
to undergo rigor of provisions of Section 45 of the
PML Act which makes it impossible for them to get any
relief unless the court is satisfied that there are
reasonable grounds for believing such accused person
is not guilty of such offence and that he is not
likely to commit any offence while on bail. That in
the present case, when the petitioner herein is not
even accused of any schedule offence, still, rigors of
impugned Section 45 are erroneously made applicable
and law clearly abhors deprivation of any individual
except according to procedure established by law as
per Article 21 of the Constitution of India. It is
also submitted that even arrest of the petitioner in
exercise of powers under Section 19 of the PML Act by
respondent No.3 is per se illegal and violative of
procedure prescribed in the above Section itself read
with directions issued by the Apex Court in the case
of D.K.Basu [supra] and respondent No.3 is not
competent enough to order such arrest of the
petitioner and further mandatory procedure of rules
notified by Central Government vide GSR 446[E] dated
01.07.2005 viz. "The Prevention of Money Laundering
[the Forms and the Manner of Forwarding a Copy of
Order of Arrest of a Person along with the Material to
the Adjudicating authority And Its period of
Retention] Rules, 2005". That respondent Nos. 2 and 3
are the officers of the enforcement directorate and
such officers are empowered to order arrest, as
envisaged under Section 19 of the PML Act.
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4.3 Referring to two notifications dated
01.07.2005, GSR 446[E] and GSR 441[E], it is stated
that the above notifications were issued in exercise
of powers under subsection (1) read with clause [a],
Clause [p] of subsection (2) of section 73 of PML Act
notifying The Prevention of Money Laundering [the
Forms and the Manner of Forwarding a Copy of Order of
arrest of a Person Along with the Material to the
Adjudicating Authority and its Period of Retention]
Rules, 2005 and the second notification was issued by
the Central Government in exercise of powers conferred
by subsection [1] of Section 49 of the PML Act
whereby the Central Government appointed with effect
from 1st day of July, 2005 Directorate of Enforcement
holding office immediately before the said date under
the Foreign Exchange Management Act, 1999 as the
Director who exercise the exclusive powers conferred
under Sections 5, 8, 16, 17, 18, 19 20 and 21 and sub
section (1) of Section 26, Sections 45, 50, 57, 60, 62
and Section 63 of the PML Act and the said director
shall also concurrently exercise powers conferred by
subsections 3, 4 and 5 of Section 26 and Sections
39, 40, 41, 42, 48, 49, 66 and 69 of the PML Act.
4.4 That on 01.06.2009 Prevention of Money
Laundering [Amendment] Act, 2009 [No.21 of 2009] was
amended and vide Section 38 of the said Amended Act,
2009, the Schedule was partly amended and the offences
of lesser gravity remained in Part B of the said
Schedule with monetary ceiling. That on 27.11.2011 the
Directorate of Enforcement issued a circular Order
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bearing [Tech] No.03/2011 after cadre restructure of
the Directorate and redesignation of posts at various
levels.
4.5 On 03.01.2013, Prevention of Money
Laundering [Amendment] Act, 2013 was amended further
to amend the PML Act and Section 3 of the Act came to
be amended and vide Section 30 of the amended act,
even offences enumerated in Part B of the Schedule
were also inserted in Part A of the Schedule by
omitting Part B and substituting Part A of the said
Schedule. That on 08.02.2013 Central Government
appointed 15.02.2013 as the date on which provisions
of Prevention of Money Laundering Act, 2012 came into
force by putting same into gazette.
4.6 That Section 54 also came to be amended and
which was pertaining to certain officers empowered to
assist in inquiry etc. and clause [g] of the said
section 54 provide that officers of enforcement
appointed under subsection (1) of Section 36 and
Foreign Exchange Management Act, 1999 along with other
such officers of the Central Government institutions
recognized under law and thus like any other officers
of any other Department mentioned under Section 54,
the respondent No.3 was empowered according to the
petitioner to assist in inquiry and was not competent
to arrest the petitioner under Section 17 of the PML
Act.
5 In the backdrop of factual scenario of facts
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and law, learned Senior Advocate Mr. Vikram Chaudhary
with Mr. Sanjay Agarwal for the petitioner contended
that Section 45 of the PML Act is unreasonable,
unconstitutional, illegal, arbitrary, discriminatory
and ultra vires to Articles 14, 21 and 22 of the
Constitution of India. It is submitted that amended
schedule would show minor / lighter offences under the
IPC and other enactments which are even noncognizable
or bailable have been subjected to rigor in terms of
Section 45 of the PML Act, even when a person is
accused of such an offence and recourse to Section 3
of PML Act is attracted, the offence under the PML Act
could necessary become cognizable and nonbailable.
Such an anomalous situation would lead to disastrous
consequences. On the one hand a person may be accused
of noncognizable and/or a bailable offence however,
if applied rigors of PML Act, such an offence if finds
place in Part A of the Schedule of the offences under
PML Act, would become much graver, and if the liberty
of such person is curtailed, by application of the
provisions of Section 45 of the Act, a greater burden
would be put on the Court to hold that there are
reasonable grounds to believe that the accused person
is not guilty of offences under PML Act in order to
grant bail and such rigor is blatantly unreasonable,
absurd and discriminatory. Such rigor is even greater
than Section 37 of the NDPS Act where in case of
certain types of offences viz. under Sections 19 or
Section 24 or Section 27A and for offences involving
commercial quantity under NDPS Act where to undergo
rigor of section 37 and not for lesser offences.
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5.1 It is further submitted that a bare glance
on the provisions of Section 45 of PMLA would show
that irrespective of the nature of the accusation in
scheduled offence, all offences under PMLA are
cognizable as well as nonbailable, and if the person
is accused of any scheduled offence punishable for a
term of imprisonment of 3 years and more [even if of a
noncognizable and bailable offence], any offence
under PMLA concerning Proceeds of Crime qua such
Scheduled offence, would attracts rigors of Section
45(1) of PMLA thereof (supra). Although the
petitioner is not an accused of any scheduled offence,
and as such rigors of section 45 are not applicable to
him, the respondents are making their endeavors to any
how incarcerate the petitioner for oblique purposes.
In any event, such provisions are therefore certainly
tantamount to transgressing into fundamental rights of
life and liberty of persons guaranteed in Articles 14,
19, 21 and 22 of the Constitution of India.
5.2 It is further submitted that viewed from any
perspective, the provisions relating to bail under
PMLA as well as construction of nature of offences
there under, cannot be made in such a manner which may
render the very purpose thereof to be oppressive,
harsh, indiscriminate and repugnant to basic
fundamental right of an individual.
5.3 It is further submitted that law on the
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subject is no more res integra that
[i] if the court wants to ignore any law on the
ground that it violates the Constitution,
declaration by the Court of its
unconstitutionality is essential. Even though a
law becomes void automatically under Article 13,
without the necessity of any declaration by a
court, a declaration that a law has become void
is necessary before a court can refuse to take
notice of it. The voidness of law is not a
tangible thing which can be noticed as soon as it
comes into existence, a declaration that it is
void is necessary before it can be ignored.
[ii] In the alternative to submission (i), dire
necessity is to expound and interpret Section 45
of PMLA. It is however well nigh settled that
even if a provision under penal statue is intra
vires, the same may not stand the scrutiny of law
in case there is basic difficulty on account of
jurisdictional issue. Section 19 read with
Section 49(3) of PMLA, and Rules notified by GSR
446(E), dated 1.7.2005 would clearly show that
officers authorized under the Act can exercise
power to arrest only in the following manner and
eventualities -
(a) There has to be accusation of Scheduled
offence,
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(b) There has to be Proceeds of Crime derived
out of the Scheduled offence, and case shall
relate to its projection as untainted.
(c) There has to be 'material in possession',
(d) There must be reason to believe,
(e) The reasons for such belief must be recorded
in writing,
(f) Reasons to believe must relate to any person
to be 'guilty' of an offence punishable under
PMLA,
(g) Pursuant to such arrest, it is mandatory to
inform the arrestee of the grounds for such
arrest,
(h) In terms of Rules notified vide GSR 446 (E),
dated 1.7.2005, particularly Rule 2(1)(c), 2 (1)
(e), 2 (1) (f), 2 (1) (g), 2 (1) (h), Rule 3, and
Rule 6, arrest under PMLA can be made by an
"arresting officer" as defined in the Rules on
the basis of "material" and upon service of
Arrest order which must be made in accordance
with Form III, containing material particulars in
the matter of arrest, and the officer to be
'authorised' in this behalf by the Central
Government, and also indicating 'reason to
believe' as required under Section 19 because
arrest order would mean the order of arrest of a
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person and includes the grounds for such arrest
under subsection (1) of section 19 of the Act.
The aforesaid rules are reproduced hereinafter
for ready reference
"2 Definitions
1. In these rules, unless the context otherwise
requires,
(c) "Arresting Officer" means the Director,
Deputy Director, Assistant Director or any other
officer, authorized in this behalf by the Central
Government by general or special order to
exercise the power to arrest any person under
subsection (1) of Section 19 of the Act;"
"(e) "Director" or "Deputy Director" or
"Assistant Director" means a Director or a Deputy
Director or an Assistant Director, as the case
may be, appointed under subsection (1) of
Section 49 of the Act;"
"(f) "Form" means forms appended to these rules;"
"(g) "material" means any information or material
in the possession of the Director or Deputy
Director or Assistant Director or any authorized
officer, as the case may be, on the basis of
which he has recorded reasons under sub
section(1) of Section 19 of the Act;"
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"(h) "order" means the order of arrest of a
person and includes the grounds for such arrest
under subsection (1) of Section 19 of the Act;"
(I) Rule 3 of the aforesaid Rules further
prescribes that pursuant to the arrest, the
Arresting Officer shall prepare an index of the
copy of the order and the material in possession
and sign each page of such index of the copy of
the order and the material and shall also write a
letter while forwarding such index, order and the
material to the Adjudicating Authority in a
sealed envelope.
Rule 6 specifically provides that the Arresting
Officer while exercising powers under subsection
(1) of Section 19 of the Act shall sign the
arrest order in Form III appended to the Rules.
5.4 It is further submitted that as logical
corollary would postulate mandate of law, it is
luminous that in the event of breach of any of the
mandatory procedure as culled out above, the arrest
would be illegal and contrary to procedure established
by law and thus violative of Article 21 of the
Constitution of India.
5.5 It is further submitted that even if Section
45 of PMLA is taken on its face value, the same cannot
override the mandate of Section 19 (1) read with
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Section 49(3) of PMLA and Rules thereunder (supra).
Viewed from any perspective, Section 45 (1) of PMLA
must be construed in a harmonious manner in order to
give true meaning, effect of lack of authority, and
mandatory provisions under the Act and rigors as
contained in Section 45 (1) cannot be invoked unless
the other mandatory procedural requirements are met
with. It is further submitted that Section 45 of
PMLA, to the extent it is ultra vires of Articles 14,
19, 21 and 22 of the Constitution of India, is
unconstitutional.
5.6 Learned Senior Advocate would contend that
Section 19 of the PML Act is to be read down, expound,
deliberate and interpret in light of section 49(3)
read with Rules notified by GSR 446[E] dated 1.7.2005
and directions and guidelines laid down by the Hon'ble
Apex Court in D.K.Basu vs State of West Bengal 1997(1)
SCC 416. The above contention of learned counsel are
on the premise that the graver offences alleged
stricter requirement to follow the procedure and in
the instant case there is total breach of procedure
prescribed by law while taking away liberty of the
petitioner in illegal manner.
5.7 Section 49(3) permits the Central Government
to impose such conditions and limitations on exercise
of the powers and discharge of duty conferred or
imposed on any authority under the PMLA. Thus, as a
logical corollary it can be safely inferred that
Central Government can by way of Rules and
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Notifications etc issued by it from time to time may
also define and limit the scope and manner of exercise
of powers and functions by any authority under the
PMLA. It is not open for the respondents to claim the
rules and notifications issued by the Central
Government as redundant, much less when the personal
liberty of any citizen is taken away in violation of
the rules and notifications issued by the Central
Government.
5.8 It is further submitted that in exercise of
powers conferred by subsection (1) read with clause
(b) of subsection (2), of Section 73 of the PML Act,
the Central Government has notified Rules.
5.9 It is further submitted that on 26.9.2013,
the purported Grounds of Arrest were handed over to
the counsel for the petitioner, after the arguments in
the bail application were concluded by them on earlier
date. Even these purported Grounds of Arrest contain
the following manifest illegalities
[a] The same are not even titled as 'Grounds of
Arrest'.
[b] The same are not even addressed to the
petitioner.
[c] No FIR of any Scheduled Offence is remotely
mentioned in the Grounds of Arrest.
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[d] No gist of any Scheduled Offence is
mentioned in the Grounds of Arrest.
[e] It is not even informed that the petitioner
is not accused of any Scheduled Offence.
[f] No ECIR case number under PMLA is mentioned
in the Grounds of Arrest.
[g] No brief details of allegations leading to
registration of the ECIR case are mentioned.
[h] There is no reference to the Complainant
already filed against 79 accused persons in the
same case under PMLA.
[i] The purported Grounds of Arrest do not bear
endorsement of any witness to suggest that the
same were actually informed to the petitioner.
[j] The purported Grounds of Arrest do not bear
any endorsement of the petitioner to suggest that
these were the Grounds claimed as explained to
the petitioner.
[k] Although, the purported Grounds of Arrest
claim that (copies of statements enclosed), no
statements were provided even on 26.9.2014,
despite specific request by the Counsel for the
petitioner.
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[l] No proceeds of Crime relatable to the
petitioner herein are identified in these
Grounds, much less any willful conversion and/or
projection of any Proceeds of Crime as untainted,
by the petitioner, directly or indirectly.
[m] It do not show any prima facie basis to have
reasonable belief that the petitioner has been
guilty of offence under PMLA.
[n] In one paragraph the petitioner is alleged
as connected with Real Time Gross Settlement RTGS
received in about 8 second layer entities (Group
C), in the very next paragraph it is restricted
to 2 out of these 8 entities.
[p] The purported Grounds of Arrest show that
the petitioner had denied the allegations in
interrogation. This however cannot be the reason
for his arrest without there being any reasonable
belief, on any material in possession, that he is
guilty of offence under PMLA, even on prima facie
basis.
5.10 Inter alia, reliance is placed by the
learned Senior Advocate on the law laid down by the
Apex Court in the3 case of State of Punjab v. Baldev
Singh - AIR 1999 SC 2378 and also in the case of
D.K.Basu,. Vs. State of West Bengal, 1997(1) SCC 416.
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5.11 Thus, it is submitted that order of arrest
of the petitioner by respondent No.3 in exercise of
powers under Section 19(1) of the PML Act deserves to
be quashed and set aside.
5.12 Learned Senior Advocate submits that the
"Grounds of Arrest" on the basis of material in
possession for reason to believe the applicant as
guilty of offence under PML Act, have not even been
served upon the applicant, though mandatory under the
provisions of subsection (1) of Section 19 of PML
Act. The existence of such grounds for arriving at
such reasonable belief is prerequisite for arrest
under PML Act and are required to be recorded in
writing. Hence, nonsupply of such "Grounds of
Arrest", at the time of arrest or immediately
thereafter is fatal and hence the applicant is
entitled to be released on bail even on this ground.
It is further submitted that the arrest officer shall
record purported belief that the applicant is guilty
of offence under PML Act and thus having arrived at
such belief, noncommunication of the grounds of
arrest has rendered the arrest illegal, null and void
ab initio and hence the petitioner is entitled to be
released on bail. The applicant has also placed on
record by way of an illustration "Grounds of Arrest"
being served upon arrest under PML Act. Non
communication of grounds of arrest to the applicant is
thus in violation of Article 14, 21 and 22 of the
Constitution of India. Along with the above emphasis
is laid on para 30 guidelines in the case of D.K.Basu
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and directions are also equally binding to Revenue
Intelligence, Directorate of Enforcement, etc.
5.13 That even Rule 2(1)(c) of the Rules notified
vide GSR 446[E] dated 01.07.2005 defines duly
authorize arresting officer and not absence of any
general or specific order by Central Government
pursuant to respondent No.3 to exercise powers under
Section 19 of PML Act and arrest of the petitioner
again become illegal and such exercise and abuse of
process of law, and therefore, the impugned order is
required to be quashed and set aside and the
petitioner is required to be enlarged on bail.
5.14 Learned Senior Advocate placed reliance on
the following decisions:
[1] D.K.Basu v. State of West Bengal - (1997)1
SCC 416.
[2] State of Punjab v. Baldev Singh - AIR 1999
SC 2378.
[3] Harikishan v. State of Maharashtra - AIR
1962 SC 911.
[4] K. Kuppuswamy & Anr. vs. State of T.N.
(1998)8 SCC 469.
[5] Sunil Fulchand Shah v. Union of India -
(2000)3 SCC 409.
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[6] Hema Mishra v. State of UP - (2014)4 SCC
453.
[7] Madhu Limaye & Ors. 1969(1) SCC 292.
[8] C.B.Gautam v. Union of India - (1993)1 SCC
1999.
[9] Pragnasingh Thakore vs. State of Maharashtra
(2011)10 SCC 445.
[10] Hussein Ghandially & Ors. v. State of
Gujarat - (2014)8 SCC 425.
The learned Senior Advocate has further relied on
the Prevention of Money Laundering (Amendment)
Bill 2011 and the Prevention of Money Laundering
Bill of 1999.
6 Mr. Devang Vyas, learned ASG has heavily
relied on the affidavit in reply and opposed grant of
any relief in the prayer clauses and submitted that
involvement of the petitioner in offence under PML Act
have surfaced during the course of investigation
carried out and submitted as under:
6.1 Learned ASG appearing for the respondent
No.3 submits that Section 45 of PMLA is a mandate duly
provided by the legislature so as to make the offence
of money laundering a cognizable and non bailable
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offence, the offence of money laundering is a distinct
and separate offence which is exclusive of the
schedule offence on the basis of which money
laundering investigation under PMLA takes it course
and hence the investigation of the offence punishable
under section 4 of the Act has its own sanctity which
is not dependent on the course of schedule offence and
its procedure, the exclusivity of the offence and
section 45 has to be read in consonance with the Aims
and Objective of the said Act. It is further submitted
that public interest is paramount in the subject case
and PMLA, 2002 has been enacted to serve public
interest as evident in the opening statement of the
Statement of Objects and Reasons, which is as under:
" It is being realized, world over, that
moneylaundering poses a serious threat not
only to the financial systems of countries,
but also to their integrity and
sovereignty."
6.2 It is submitted that the nature and
classification of schedule offence be it bailable or
cognizable or non bailable or non cognizable has no
bearing on offence under S.3 of PMLA as the mandate of
the same provides for a distinct offence under Section
3 which is punishable under Section 4 of the statute
and creates a new, different and a separate
investigation under PML Act which is totally exclusive
and divergent of the course and nature of schedule
offence investigated and prosecuted by the predicate
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agency and henceforth, it is pertinent to mention that
Section 45 which has its applicability over the
offence under Section 3 has to be dealt in without the
nature and course of schedule offence and in light of
the aims and objectives of the PMLA.
6.3 It is further submitted that the Respondent
No.3 is empowered to investigate cases under PMLA and
has rightly executed his powers as defined in the law.
It is submitted that due process of law was
scrupulously followed and was within the jurisdiction
as manifested in the PMLA.
6.4 It further submitted that the contention
raised by the Petitioner in terms of 'Arresting
Officer' as defined in Rule 2(1)(C) of the rules
notified vide GSR 446(E) dated 01.07.2005 has to be
contrasted with the expression used in subsection (1)
of section 19 of the Act and hence the rules cannot
control the provisions of the enactment and therefore,
the power of Arrest given under Section 19 (1) by the
Parliament, could not be curtailed under rule making
power of the executive by specifying that such
Assistant Director has to be additionally authorised
by Central Government by general or special order.
6.5 It is further submitted that as far as the
contention of the applicant in terms of the power to
arrest has been conferred by Central Government
exclusively upon the Director in the Enforcement
Directorate vide Notification GSR 441(E) dated
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01.07.2005, the words used in the notification do not
show that the Director was to have powers under the
Act to the exclusion of all other officers. It only
reveals that the Director has the exclusive power but
not necessarily to the exclusion of the others, who
are empowered under the Act. The same contention was
also settled by the Hon'ble Bombay High Court in the
matter of Syed Mohamed Masood Vs D. Shanmugam and
others in Criminal Bail Application No. 71 of 2013.
6.6 It is further submitted that PMLA was
amended so as to bring the offences under various
statutes under the ambit of investigation under the
Prevention of Money Laundering, stringent and
Statement as to notification.
6.7 It is further submitted that Amendment to
the PML Act,2002 has further been made which merged
the erstwhile schedules under a single schedule so as
to remove the monetary limit for investigation under
PMLA,2002.
6.8 It is further submitted that the contention
raised by the petitioner in terms of Section 54 of the
PML Act does not have any locus as the arresting
officer is duly authorized under the provisions of
statute and derives his authority from Section 19 of
the Prevention of Money laundering Act, 2002 and as
far as Directors, Deputy Directors, or Assistant
Directors are concerned, no authorization of Central
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Government is required and that, as far as the
contention of the petitioner in terms of the power to
arrest has been conferred by Central Government
exclusively upon the Director in the Enforcement
Directorate vide Notification GSR 441(E) dated
01.07.2005, the words used in the notification do not
show that the Director was to have powers under the
Act to the exclusion of all other officers. It only
reveals that the Director has the exclusive power but
not necessarily to the exclusion of the others, who
are empowered under the Act. It is further submitted
that in terms of S. 54 (g) of PMLA, 2002 that other
officers of enforcement who are not specially
empowered to authorized powers under various Sections
like 19, 17 etc. are also to assist the officers like
Director, Joint Director, Deputy Director, Assistant
Director who exercises the power to arrest etc under
provisions of PMLA and hence 54(g) provides just as
the staff to assist the officer exercising and the
Assistant Director was well within his powers to
investigate the cases under PMLA and the execution of
powers vested in him under the Section 19 was
apposite.
6.9 It is further submitted that the contention
of the petitioner with respect to not mentioning of
his name in FIR No. I/16/2014 dated 11.4.2014 and FIR
No.I/17/2014 dated 13.4.2014 is irrelevant and is not
applicable in the present set of case as the offence
of money laundering as defined under Section 3 r/w
Section 2 (1) (u) of the Act there should only be a
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nexus between the criminal activity relating to
scheduled offence and the proceeds thereof in order to
bring the person to book, and the said offence of
money laundering is altogether a separate and a
distinct offence which is investigated by Enforcement
Directorate exclusive of the Schedule offence and
persons found involved in the money laundering racket
who may or may not have been named in offence
registered by the predicate agency are been prosecuted
for their alleged involvement in the offence as
defined under S. 3 of the Act.
6.10 It is further submitted that the
petitioner's involvement in the offence has come up
during the process of investigation carried on by the
Directorate of Enforcement and his name appeared as
one of the main accused while unearthing the said
money laundering racket later on after 17.4.2014.
Initially the investigation covers the individuals /
companies mentioned in the FIR and as the
investigation progresses, names of other individuals /
companies keep on coming up. The persons / companies
so emerged during the investigation consequently come
under the ambit of investigation under the PMLA, 2002.
It is most respectfully submitted that the
petitioner's role cropped up during the investigation
and he was twice summoned under PMLA,2002. Since he
was not forthcoming during the investigations his
arrest under PMLA,2002 has been effected.
6.11 It is next submitted that the Prosecution
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Complaint dated 18.07.2014 has been filed before the
Hon'ble Designated Court Under PML Act against 79
accused and in the same case after further
investigation a supplementary complaint has also been
filed on 29.10.2014 against the said petitioner and
other 9 accused. Investigation is still in progress in
terms of the proceeds of crime and the beneficiaries
of fraudulent remittances at Hong Kong and Dubai.
6.12 It is next contended that unsubstantiated
allegations of the petitioner against the Directorate
as to coercion and threatening are nothing but the
afterthought just to abuse the due process of law and
it is respectfully submitted that the arrest under
section 19 (1) of PML Act by respondent no. 3 is valid
and within the powers conferred upon him by Section 19
read with Rules notified vide GSR 446 (E) dated
1.7.2005 of Prevention of Money Laundering Act, 2002
and not in derogation with the fundamental rights
enshrined by the Constitution of India as the said
arrest comes under the purview and fulfills
requirement of S. 19. It is also submitted to the
Hon'ble Court that as provided by S. 19 (1) grounds of
arrest were communicated to the accused, and a due
medical check up was under taken after which accused
was produced within stipulated time frame before the
Hon'ble Designated Judge under PML Act, Ahmedabad
along with the detailed Production memo providing
reasons and written grounds of such arrest and the
application for custody thereof which were not
objected by the petitioner during the said production.
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It is further submitted that the baseless allegation
as to derogation of fundamental rights are nothing but
an afterthought added to the baseless allegations of
coercion and the same was not complained by the
petitioner on being produced on the very first day and
thereafter before the Hon'ble Designated Court. It is
also respectfully submitted that this is ploy to abuse
due process of law since the investigation has
revealed his involvement and the complaint has already
been filed before the Designated Court under PML Act,
Ahmedabad.
6.13 It is submitted that in execution of arrest
in compliance with the procedure followed above,
relatives of accused were telephonically informed
about his arrest which has also been endorsed by the
accused on arrest memo given to him and one Mr. Amit
Solanki, a Chartered Account and friend of the accused
was handed over the belongings and signed the
inventory annexed to the arrest memo. The personal
belongings of the petitioner as mentioned in the
inventory were handed over to Shri Amit Solanki who
accompanied the petitioner to Ahmedabad from Mumbai
on 01/9/2014 and was waiting in the corridor of the
office of the Enforcement Directorate. He has been
told the reasons for handing over the belongings of
the petitioner and had duly acknowledged of having
received the belongings of the petitioner.
6.14 It is further submitted that along with the
production of the accused, an application for
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Enforcement Custody was made before the Designated
Judge and the learned Judge was pleased to grant
custody of the petitioner for four days from 4/9/2014
to 8/9/2014. That the petitioner has been told the
grounds of arrest and having learned about his grounds
of arrest he has put his signature on the arrest memo.
6.15 It is further submitted that repeated
allegations as to threatening of petitioner and his
family members and coercing him to sign the statements
made during the custody are preposterous, false,
baseless and can be termed as added script as same
were never contended by the petitioner during his
production post arrest or after the enforcement
custody, the statements given were voluntary and
petitioner thereby was not forced to give any
involuntary confession. It is also respectfully
submitted that the statements were typed as per the
version and say of the petitioner and he was allowed
to read before he put his signature on all the
occasions. That the petitioner has in his own
handwriting made several corrections to the statements
and hence there was no question of coercion or duress.
The petitioner in his own handwriting has also
mentioned that whatever was stated during the remand
period was voluntarily, without any coercion and the
facts to the best of his knowledge.
6.16 It is further submitted that on 08.09.2014
application opposing further enforcement custody has
never been an issue involved in the given case as
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Enforcement Directorate has not prayed for any further
custody of the petitioner and in addition to that
Hon'ble Designated Court vide their order dated
09/09/2014 was pleased to reject the prayer of
temporary bail to the petitioner and as on date the
alleged involvement of the petitioner in offence of
money laundering has been made clear by filing of a
prosecution complaint dated 29.10.2014 against the
petitioner and others in the Hon'ble Designated Court.
The proceeds derived from helping Shri Madanlal Jain
and others in the illegal transfer of money to Hong
Kong and Dubai are being investigated against the
petitioner.
6.17 It is further submitted that the Arrest Memo
was served to petitioner and the inventory of the
belongings of the petitioner were handover to Shri
Amit Solanki, a Chartered Account and friend of the
petitioner and grounds of arrest were inculcated in
the production memo which was very well served upon
the petitioner at the time of first production,
moreover the file containing the grounds of arrest has
been perused by the Hon'ble Designated Judge and was
pleased to grant the petitioner the Enforcement
Custody of the petitioner. During the hearing of the
bail application a request has been made by the
counsel of the petitioner that the grounds of arrest
be made available to them and as per the directions of
the Hon'ble Designated Judge, the copy of the grounds
of arrest has been made available to the counsel of
the petitioner. The said copy of grounds of arrest
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has also been seen by the Hon'ble Designated Judge and
confirmed that it was the same copy that was produced
before them for seeking remand. It is pertinent to
note that production memo submitted before the
Designated Judge also contained detailed grounds of
arrest.
6.18 It is further submitted that the petitioner
was in cahoots with Shri Madanlal Jain in financially
helping him in as much as sending the money through
various angadia firms to Surat and other places for
the sake of RTGS transfers to the companies
categorised as Group C by the petitioner himself is
well established. That the petitioner has himself
stated the modus operandi as to how the large chunks
of money were allowed to be transferred through RTGS
to the companies under Group C with the help of
various cheque discounters / angadia firms known to
the petitioner. The statement of the petitioner is
quite evident as to how he helped in illegal transfer
of money by various individuals without being
connected to the companies mentioned under the Groups
A, B, C and D either directly or indirectly. It is
further submitted that investigations were initially
started under FEMA and on receipt of the copies of
FIRs from the Police authorities, investigations under
PMLA have also been initiated. The investigation under
FEMA is also in progress and is in parallel to the
investigation under PMLA,2002. The role of the
petitioner has cropped up during the investigation in
the form of statements of various cheque discounters,
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angadia firms and Shri Madanlal Jain with whom the
Petitioner was having good relations. That the
petitioner with the help of his brother Shri Rajesh
Kothari used the said illegal monies remitted on the
strength of fake documents to Dubai for smuggling of
Gold and Diamonds was stated by Shri Madanlal Jain.
Shri Rajesh Kothari is a beneficiary of the unlawful
remittances to Dubai and his role has been evident by
the summary of email messages sent from the computer
of Shri Madanlal Jain wherein the summary reads as
under: details of debit of Rajesh Kothari's account.
It is submitted that the petitioner is guilty of
offence under Money laundering in as much as he had
financially helped Shri Madanlal Jain for making RTGS
transfers to the companies owned by Shri Madanalal
Jain. The Petitioner has used cheque discounters,
angadia firms for sending money to various places and
has also made arrangements for RTGS transfers from
Mumbai itself. The statements of various persons who
transferred monies belonging to the petitioner and
further allowed the same for RTGS transfers is
insurmountable.
6.19 It is further submitted that the petitioner
with his strong financial clout sourced huge chunks of
money to the companies mentioned under Group C which
belonged to Shri Madanlal Jain is undeniable. That the
petitioner having lent money to Shri Madanlal Jain for
his fraudulent activities has also unquestionably
received commission for helping in the Offence of
Money Laundering. Since the petitioner has helped
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Shri Madanlal Jain in his criminal activities and the
petitioner having derived proceeds from such criminal
activities are nothing but proceeds of crime which is
a matter of investigation being conducted by the
Enforcement Directorate. The petitioner has been
guilty of offence of money laundering, a complaint
under PMLA, 2002 has been filed before the designated
court on 29/10/2014.
6.20 It is further submitted that the
investigation conducted so far has undoubtedly
established the role of the Petitioner in the Offence
of Money Laundering. The material in possession and
other evidence submitted before the designated court
and after considering the same the bail application of
the petitioner was rejected vide an order dtd.
8/10/2014 by the Hon'ble Designated Court. That the
claim of the petitioner that the material possession
with the Enforcement Directorate was vague or
insufficient to be called the petitioner guilty of
Offence under Money Laundering has reasonably been set
aside by the Hon'ble Designated Judge for PMLA,2002.
6.21 It is further submitted that mere mention of
the words such as "believe" " Incontrovertible" and
other phrases without the full sentences accompanying
the above words do not give a complete understanding
of the background in which the said words / phrases
have been used. In so far as the grounds under which
the above words and phrases were mentioned under the
remand application and the reply filed before the
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designated court for PMLA,2002 was to elaborate the
role of the involvement of the petitioner in sourcing
funds to Shri Madanlal Jain in the mammoth fraudulent
remittances to Hong Kong and Dubai. That the
petitioner was not alleged to have made remittances
abroad but had only sourced funds belonging to his
paternal uncle to the companies mentioned under the
Group C is unquestionably substantiated. That the
companies under Group C were of Shri Madanlal Jain and
made RTGS transfer to Companies mentioned under Group
A which used the same for illegal transfer of money to
places like Hong Kong and Dubai on strength of fake
documents. The investigation has also established the
role of the petitioner beyond an iota of doubt to the
extent of sourcing funds to the companies categorised
as Group C and the petitioner himself as stated the
way the funds were seen to be transferred through
RTGS. Shri Rajesh Kothari, the brother of the
petitioner has been named by Shri Madanlal Jain to be
a beneficiary of illegal remittances in Dubai and the
petitioner with the help of his brother used such
illegal remittances for smuggling of Gold and Diamonds
is incontrovertible. Hence it is most respectfully
submitted that the petitioner is guilty of offence of
money laundering as defined under Section 3 of
PMLA,2002.
6.22 It is further submitted that the
petitioner's involvement in the offence of money
laundering has been established by the statements of
various persons and the investigation carried out by
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the Directorate of Enforcement following which a
prosecution complaint has been duly filed against the
accused before Designated Court on 29/10/2014. Shri
Madanlal Jain for whom the petitioner lent Rs. 750
crore financial help for illegal transfer of money
amounting to Rs. 5395.75 Crore has stated that the two
brothers, the Petitioner and Shri Rajesh Kothari used
the illegal remittances for the sake of smuggling of
Gold and Diamonds. The petitioner has himself named
various commission agents and cheque discounters who
helped in arranging RTGS transfers from Mumbai and
other places. The forensic analysis of the computer
seized from the Office of Shri Madanlal Jain had email
messages sent from Shri Jayesh Desai, an accomplice of
Shri Madanlal Jain regarding the debit advice of Shri
Raju Kothari also known as Shri Rajesh Kothari who is
an elder brother of the petitioner and details of
transactions in PDF format.
6.23 It is further submitted that the Respondent
has taken due care in making arrest of the said
petitioner and the same has been executed after
fulfilling the requites as laid under S. 19 of the
prevention of Money Laundering Act, 2002, The material
in possession and reasons to believe were also made
explicit in the production memo at the time of
production of the petitioner after arrest before the
Designated Court.
6.24 It is further submitted that offence under
prevention of money laundering act, 2002 is a separate
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and distinct offence altogether exclusive of the
schedule offence registered by predicate agency, hence
the contention of the petitioner not being named in
the FIR has no relevance because on the basis of the
FIR a distinct case has been registered under PMLA and
role of petitioner has been established by the
investigation carried on by the Directorate. The ECIR
was registered following the receipt of FIR registered
by the Police authorities. The investigations
launched under PMLA,2002 after registering the ECIR
for source and trail of this mammoth illegal transfer
of money led to various individuals and companies.
The financial sources to the companies categorised
under Group C by the petitioner himself was used for
RTGS transfers to the companies categorised under
Group A which have made the fraudulent remittances
made from Surat on the strength of fake documents. It
is most respectfully submitted that Shri Madanlal Jain
created the companies mentioned under categories Group
A and Group C and one of the sources of funds to the
companies under Group C is the petitioner who had used
the services of cheque discounters, angadias and other
commission agents for the benefit of Shri Madanlal
Jain. The petitioner is thus appropriately termed as
guilty under the offence of money laundering and his
role is aptly covered under the definition under
Section 3 of PMLA,2002. The proceeds thus derived from
the illegal transfer of money are nothing but proceeds
of crime as has been defined under Section 2 (1) (u)
of PMLA,2002.
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6.25 It is further submitted that it has been
held by the Hon'ble Designated Judge under PML Act,
Ahmedabad that the Respondent No. 3 i.e. Assistant
Director of Enforcement has been authorized to execute
arrest and arrest is not invalid in law vide their
order dated 09.09.2014 and Hon'ble Designated Court
was also pleased to reject the interim and regular
bail application of the petitioner. The Hon'ble
Designated Court was pleased to reject the bail
application of petitioner vide its seasoned order
dated 8/10/2014.
6.26 It is further submitted that on mere perusal
of the bare provisions of Section 37 of NDPS Act and
Section 45 of the PML Act shows similarity in the
provisions moreover, the S. 45 of PML Act cannot be
construed as violative of the Constitution of India on
sole reasons of providing grounds in addition to the
normal bail procedure provided under code of criminal
procedure, furthermore the mandate of the Act is
intended to make money laundering an offence and
provide for its punishment thereof so as to deprive
the offender to enjoy fruits of money which has ill
gotten source, henceforth creating an altogether
separate and distinct offence which is purely
exclusive of the schedule offence, so contention as to
nature of the schedule offence with respect to
bailable or non cognizable does not have any locus as
the investigation under PMLA is not dependent on the
investigation and procedure under schedule offence and
it is the aim and objective of the Act to provide for
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such provisions so as to deprive the offenders of such
heinous crime to continue involving themselves in such
racket and enjoy fruits of the proceeds so generated.
The scope of S.45 PMLA, 2002 like S. 37 of NDPS Act
and similar provision in MCOCA Act stands to the
offence included in the same statute and thus, it is
submitted that 'offences' which come within the
purview of the S.45 are the offence under the
Prevention of Money Laundering Act and hence
applicability of the said section is over the offence
under PMLA, 2002 and not over the investigation or
trial under the schedule offence on basis of which the
independent investigation under PMLA takes it course.
6.27 It is further submitted requisites of S.19
have been complied while executing arrest under PMLA
and hence no such breach and violation of Fundamental
Rights of the petitioner have been done.
6.28 It is further submitted that the rules which
have been relied on have been framed in exercise of
the powers under clauses (a) and (p) of Section 73 (1)
and (2) of the Act. These clause (a) and (p) of
Section 73(2) read as under:
73. (2) (a) the form in which records
referred to in this act may be maintained;
73. (2) (p) the manner in which the order
and the material referred to in Section
19(2) shall be maintained.
6.29 It is further submitted that the rules were,
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therefore, framed in order to prescribe forms in which
records were to be maintained and the manner in which
order and material referred to in sub section (2) of
Section 19 was to be maintained. The term arresting
officer was defined for the purpose of those rules
only and definition of "Arresting Officer" in these
rules cannot be held to control provisions of Section
19 of the Act or require that the Central Government
has to issue notification under those rules for
authorising an assistant director to effect arrest.
6.30 It is further submitted that the non
communication of grounds of arrest is not the question
because the same has been communicated to the
petitioner as described in above paragraphs.
6.31 It is further submitted that the impugned
provisions and the actions or inactions of the
Respondents cannot be upheld as legal and proper and
in consonance with the fundamental rights guaranteed
under the constitution of India.
7 Mr. Sunit Shah, learned counsel for the
petitioner of Special Civil Application No.4672 of
2014 adopted the arguments canvassed by learned Senior
Advocate Shri Vikram Chaudhary appearing for the
petitioner in Special Civil Application No.4496 of
2014. He further relied on debate in the Rajya Sabha
[Council of States] when the Prevention of Money
Laundering Bill, 1999 was presented after it was
passed by Lok Sabha [House of Representatives]. He
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further submitted that under Section 24 of the Act
burden of proof is shifted upon accused, and
therefore, it is virtually impossible for an accused
of scheduled offence under Money Laundering Act to
secure his freedom.
8 Before dealing with the rival contentions
and submissions made by the learned counsels for the
parties, the relevant provisions of the Prevention of
MoneyLaundering Act, 2002 and The Prevention of
MoneyLaundering [The Forms and the Manner of
Forwarding a copy of Order of Arrest of a Person Along
With The Material to the Adjudicating Authority and
its period of Retention] Rules, 2005, are reproduced,
as under:
THE PREVENTION OF MONEYLAUNDERING ACT, 2002
[A] The enacting history of the Act including
International commitment and convention, resolutions
of the General Assembly of the United Nations, the
statement of objects and reasons accompanying the Bill
which was eventually enacted by the Parliament; the
preamble of the Act; and its several provisions
disclosing a policy to address the scourge of
Laundering of Money which destabilizes National and
International economies, the sovereignty of several
States and has adverse impact on law and order
maintenance. The provisions of the Act must therefore
be interpreted consistently with the evil the
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provisions are intended to address;
[B] MoneyLaundering while facially appears to
comprise one or more clear and simple financial
transactions, involves and comprises and complex web
of financial and other transactions. A money
laundering transaction usually involves three stage:
[i] The placement stage: The malfeasant places
the crime money into the normal financial system;
[ii] The Layering state: The money induced into
the financial system is layeredspread out into
several transactions within the financial system
with a view to concealing the origin or original
identity of the money and to make this
origin/identity virtually disappear; and
[iii] The integration stage: The money is
thereafter integrated into the financial system
in such a way that its original association with
crime is totally obliterated and the money could
be used by the malfeasant and/or the accomplices
to get it as untainted/clean money.
[C] Money laundering often involves five different
directional fund flows:
[i] Domestic money laundering flows: In which
domestic funds are laundered within the country
and reinvested or otherwise spent within the
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country;
[ii] Returning laundered funds:Funds originate in
a country, are laundered abroad and returned
back.
[iii] Inbound funds:illegal funds earned out
of crime committed abroad are either laundered
[place] abroad or within the country and are
ultimately integrated into the country;
[iv] Out bound funds: Typically constitute
illicit capital flight from a country and do not
return back to the country; and
[v] Flowthrough: The funds enter a country as
part of the laundering process and largely depart
for integration elsewhere.
[D] The Act is a special Law and a self contained
code intended to address the increasing scourge of
money laundering and provides for confiscation of
property derived from or involved in money laundering.
The Act provides a comprehensive scheme for
investigation, recording of statements, search and
seizure, provisional attachment and its confirmation,
confiscation and prosecution. The provisions of the
Act [vide Sec.71] are enacted to have an overriding
effect [entrenched by a nonobstante provision],
notwithstanding anything inconsistent therewith
contained in any other law fro the time being in
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force.
[E] The provisions of the Act are fair, reasonable
and have sufficient safeguards, checks and balances to
prevent arbitrary exercise of power and/or abuse by
the authorities and provide several layers of scrutiny
at various stages of the proceedings.
[F] A person accused of money laundering is subject
to broadly two parallel actions:
[i] prosecution for punishment under section 4, for
the offence of moneylaundering defined in Section 3;
[ii] attachment of the property involved in money
laundering, under Section 5 of the Act. Proceedings
under each section is independent.
Moneylaundering poses a serious threat not only
to the financial systems of countries, but also to
their integrity and sovereignty. To obviate such
threats international community has taken some
initiatives. It has been felt that to prevent money
laundering and connected activities a comprehensive
legislation is urgently needed. To achieve this
objective the Prevention of Moneylaundering Bill,
1998 was introduced in the Parliament. The Bill was
referred to the Standing Committee on Finance, which
presented its report on 4th March, 1999 to the Lok
Sabha. The Central Government broadly accepted the
recommendation of the Standing Committee and
incorporated them in the said Bill along with some
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other desired changes.
STATEMENT OF OBJECTS AND REASONS
It is being realized, would over, that money
laundering poses a serious threat not only to the
financial systems of countries, but also to their
integrity and sovereignty. Some of the initiatives
taken by the international community to obviate such
threat are outline below:
[a] the United Nations Convention Against Illicit
Traffic in Narcotic Drugs and Psychotropic Substances,
to which India is a party, calls for prevention of
laundering of proceeds of drug crimes and other
connected activities and confiscation of proceeds
derived from such offence.
[b] the Basic Statement of Principles, enunciated in
1989, outlined basic policies and procedures that
banks should follow in order to assist the law
enforcement agencies in tackling the problem on money
laundering.
[c] the Financial Action Task Force established at
the summit of seven major industrial nations, held in
Paris from 14th to 16th July, 1989, to examine the
problem of moneylaundering has made forty
recommendations, which provide the foundation material
for comprehensive legislation to combat the problem of
moneylaundering. The recommendations were classified
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under various heads. Some of the important heads are
[i] declaration of laundering of monies carried
through serious crimes a criminal offence;
[ii] to work out modalities of disclosure by financial
institutions regarding reportable transactions;
[iii] confiscation of the proceeds of crime;
[iv] declaring moneylaundering to be an extraditable
offence; and
[v] promoting international cooperation in
investigation of moneylaundering.
[d] the Political Declaration and Global Programme of
Action adopted by United Nations General Assembly but
its Resolution No.S17/2 of 23rd February, 1990, inter
alia, calls upon the member States to develop
mechanism to prevent financial institutions from being
used for laundering of drug related money and
enactment of legislation to prevent such laundering.
[e] the United Nations in the Special Sessions on
countering World Drug Problem Together concluded on
the 8th to the 10th June, 1998 has made another
declaration regarding the need to combat money
laundering. India is a signatory to this declaration.
2 In view of an urgent need for the enactment or a
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comprehensive legislation inter alia for preventing
moneylaundering and connected activities confiscation
of proceeds of crime, setting u of agencies and
mechanisms for cocoordinating measures for combating
moneylaundering, etc., the Prevention of Money
Laundering Bill, 1998 was introduced in the Lok Sabha
on the 4th August, 1998. The Bill was referred to the
Standing Committee on Finance, which presented its
report on the 4th March, 1999 to the Lok Sabha. The
recommendations of the Standing committee accepted by
the Central Government are that (a) the expressions
"banking company" and "person" may be defined; (b) in
Part I of the Schedule under Indian Penal Code the
work offence under section 477 A relating to
falsification of accounts should be omitted; (c)
'knowingly' be inserted in clause 3 (b) relating to
the definition of moneylaundering; (d) the banking
companies financial institutions and intermediaries
should be required to furnish information of
transactions to the Director instead of Commissioner
of Incometax (e) the banking companies should also be
brought within the ambit of clause II relating to
obligations of financial institutions and
intermediaries; (f) a definite timelimit of 24 hours
should be provided for producing a person about to be
searched or arrested person before the Gazetted
Officer or Magistrate; (g) the words "unless otherwise
proved to the satisfaction of the authority concerned"
may be inserted in clause 22 relating to presumption
on interconnected transactions; (h) vacancy in the
office of the Chairperson of an Appellate Tribunal, by
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reason of his death, resignation or otherwise, the
seniormost member shall act as the Chairperson till
the date on which a new Chairperson appointed in
accordance with the provisions of this Act to fill the
vacancy, enters upon his office; (i) the appellant
before the Appellate Tribunal may be authorized to
engage any authorized representative as defined under
section 288 of the Incometax Act, 1961, (j) the
punishment for vexatious search and for false
information may be enhanced from three months
imprisonment to two years imprisonment, or fine or
rupees ten thousand to fine of rupees fifty thousand
or both; (k) the word 'good faith' may be incorporated
in the clause relating to Bar of legal proceedings.
The Central Government have broadly accepted the above
recommendations and made provisions of the said
recommendations in the Bill.
3 In addition to above recommendations of the
standing committee the Central Government proposes to
(a) relax the conditions prescribed for grant of bail
so that the Court may grant bail to a person who is
below sixteen years of age, or woman, or sick or
infirm, (b) levy of fine for default of noncompliance
of the issue of summons, etc. (c) make provisions for
having reciprocal arrangement for assistance in
certain matters and procedure for attachment and
confiscation of property so as to facilitate the
transfer of funds involved in moneylaundering kept
outside the country and extradition of the accused
persons from abroad.
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4 The Bill seeks to achieve the above objects.
Act 15 of 2003
The Prevention of MoneyLaundering Bill having
been passed by both the Houses of Parliament received
the assent of the President on 17th January, 2003. It
came on the Statute Book as THE PREVENTION OF MONEY
LAUNDERING ACT, 2002 (15 of 2003).
Section 2 contains definitions.
[c] "Assistant Director" means an Assistant
Director appointed under subsection (1) of
section 49;
[d] "attachment" means prohibition of transfer,
conversion, disposition or movement of property
by an order issued under Chapter III;
[da] "authorised person" means an authorised
person as defined in clause (c) of section 2 of
the Foreign exchange Management Act, 1999 [42 of
(1991)]
[j] "Deputy Director" means a Deputy Director
appointed under subsection (1) of section 49;
[k] "Director" or "Additional Director" or
"Joint Director" means a Director or Additional
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Director or Joint Director, as the case may be,
appointed under subsection (1) of section 49;
[na] "Investigation" includes all the proceedings
under this Act conducted by the Director or by an
authority authorized by the Central Government
under this Act for the collection of evidence.
[p] "moneylaundering" has the meaning assigned
to it in section 3.
[r] "notification" means a notification
published in the Official Gazette;
[s] "person" includes
i] an individual,
ii] a Hindu undivided family,
iii] a company,
iv] a firm,
v] an association of persons or a body of
individuals, whether incorporated or not,
[vi] every artificial juridical person
not falling within any of the preceding sub
clauses, and
[vii] any agency, office or branch owned
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or controlled by any of the above persons
mentioned in the preceding subclauses;
[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;
[v] "property" means any property or assets of
every description, whether corporeal or
incorporeal, movable or immovable, tangible or
intangible and includes deeds and instruments
evidencing title to, or interest in, such
property or assets, wherever located;
[y] "scheduled offence" means
[i] the offences specified under Part A of
the Schedule; or
[ii] the offences specified under Part B of
the Schedule if the total value involved in
such offences is thirty lakh rupees or more
[iii] the offences specified under Part C
of the Schedule
[z] "Special Court" means a Court of Sessions
designated as Special Court under subsection (1)
of Section 43;
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[za] "transfer" includes sale, purchase,
mortgage, pledge, gift, loan or any other form of
transfer of right, title, possessions or lien;
[zb] "value" means the fair market value of any
property on the date of its acquisition by an
persons, or if such date cannot be determined,
the date on which such property is possessed by
such person.
3 Offence of moneylaundering
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 proceeds of crime including
tis concealment, possession, acquisition or use
and projecting or claiming it as untainted
property shall be guilty of offence of money
laundering.
4 Punishment for moneylaundering.
Whoever commits the offence of moneylaundering
shall be punishable with rigorous imprisonment
for a term which shall not be less than three
years but which may extend to seven years and
shall also be liable to fine which may extend to
five lakh rupees: Provided that where the
proceeds of crime involved in moneylaundering
relates to any offence specified under paragraph
2 of Part A of the Schedule, the provisions of
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this section shall have effect as if for the
words "which may extend to seven years", the
words "which may extend to ten years" had been
substituted.
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 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 subsection
(1), forward a copy of the order along with the
material in his possession, referred to in that
subsection, 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 subsection (1)
shall, within twentyfour hours, be taken to a
Judicial Magistrate or a Metropolitan Magistrate,
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as the case may be, having jurisdiction: Provided
that the period of twentyfour hours shall
exclude the time necessary for the journey from
the place of arrest to the Magistrate's Court.
23. Presumption in interconnected transactions
- Where money laundering involves two or more
interconnected transactions and one or more such
transactions is or are proved to be involved in
moneylaundering, then for the purposes of
adjudication or confiscation under section 8f or
for the trial of the moneylaundering offence, it
shall unless otherwise provided to the
satisfaction of the Adjudicating authority or the
Special Court, be presumed that the remaining
transactions form part of such interconnected
transactions.
24 Burden of Proof - In any proceeding relating
to proceedings of crime under this Act,
[a] in the case of a person charged with the
offence of moneylaundering under section 3,
the Authority or Court shall, unless the
contrary is provided, presume that such
proceeds of crime are involved in money
laundering; and
[b] in the case of any other person the
Authority or Court, may presume that such
proceeds of crime are involved in money
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laundering.
44. Offences triable by Special Courts.
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 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, 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
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section 4 except upon a complaint in writing made
by
[i] the Director; or
[ii] any officer of the Central Government or a
State Government authorised in writing in this
behalf by the Central Government by a general or
special order made in this behalf by that
Government.
[1A] Notwithstanding anything contained in the
Code of Criminal Procedure, 1973, [1973 (2 of
1974], or any other provision of this Act, no
police officer shall investigate into an offence
under this Act unless specifically authorized, 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 subsection (1) is in addition to the
limitations under the Code of Criminal Procedure,
1973 (2 of 1974) or any other law for the time
being in force on granting of bail.
48 Authorities under Act There shall be the
following classes of authorities for the purposes
of this Act, namely:
[a] Director or Additional Director or Joint
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Director,
[b] Deputy Director,
[c] Assistant Director, and
[d] such other class of officers as may be
appointed for the purposes of this Act.
49 Appointment and powers of authorities and
other officers. [1] The Central Government
may appoint such persons as it thinks fit to be
authorities for the purposes of this Act.
[2] Without prejudice to the provisions of sub
section (1), the Central Government may authorise
the Director or an Additional Director or a Joint
Director or a Deputy Director or an Assistant
Director appointed under that subsection to
appoint other authorities below the rank of an
Assistant Director.
[3] Subject to such conditions and limitations
as the Central Government may impose, an
authority may exercise the powers and discharge
the duties conferred or imposed on it under this
Act.
50. Powers of authorities regarding summons,
production of documents and to give evidence,
etc.
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51 Jurisdiction of authorities [1] The
authorities shall exercise all or any of the
powers and perform all or any of the functions
conferred on, or, assigned, as the case may be,
to such authorities by or under this Act or the
rules framed there under I accordance with such
directions as the Central Government may issue
for the exercise of powers and performance of the
functions by all or any of the authorities.
[2] In issuing the directions or orders referred
to in subsection (1), the Central Government may
have regard to any one or more of the following
criteria, namely:
[a] territorial area;
[b] classes of persons;
[c] classes of cases; and
[d] any other criterion specified by the
Central Government in this behalf.
52 Power of Central Government to issue
directions, etc.
The Central Government may, from time to time,
issue such orders, instructions and directions to
the authorities as it may deem fit for the proper
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administration of this Act and such authorities
and all other persons employed in execution of
this Act shall observe and follow such orders,
instructions and directions of the Central
Government:
Provided that no such orders, instructions or
directions shall be issued so as to
[a] require any authority to decide a
particular case in a particular manner; or
[b] interfere with the discretion of the
Adjudicating Authority in exercise of his
functions.
53 Empowerment of certain officers.
The Central Government may, by a special or
general order, empower an officer not below the
rank of Director of the Central Government or of
a State Government to act as an authority under
this Act:
Provided that the Central Government may empower
an officer below the rank of Director if the
officer of the rank of the Director or above are
not available in a particular area.
54 Certain officers to assist in inquiry,
etc.
The following officers are hereby empowered and
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required to assist the authorities in the
enforcement of this Act, namely:
[a] to [f] xxx
[g] officers of enforcement appointed under sub
section (1) of section 36 of the Foreign Exchange
Management Act, 1999 (40 of 1999);
73 Power to make rules.
[1] The Central Government may, by notification,
make rules for carrying out the provisions of
this Act.
[2] In particular, and without prejudice to the
generality of the foregoing power, such rules may
provide for all or any of the following matters,
namely:
[p] the manner in which the order and the
material referred to in subsection (2) of
section 19 shall be maintained.
The Prevention of MoneyLaundering [The Forms
and the Manner of Forwarding a copy of Order of
Arrest of a Person Along With The Material to
the Adjudicating Authority and its period of
Retention] Rules, 2005
2[c] "Arresting Officer" means the Director,
Deputy Director, Assistant Director or any other
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officer, authorized in this behalf by the Central
Government by general or special order to
exercise the power to arrest any person under
subsection (1) of section 19 of the Act.
6. Forms of records - The Arresting Officer
while exercising powers under subsection (1) of
section 19 of the Act shall sign the Arrest Order
in Form III appended to these Rules.
The Foreign Exchange Management Act, 1999
The Director of Enforcement holding office
immediately before the 1st day of July, 2005 under the
Foreign Exchange Management Act, 1999 [42 of 1999]
shall be entitled to exercise the exclusive powers
conferred under the following provisions:
[1] Under section 5 i.e attachment of property
involved in moneylaundering.
[2] Under section 8 i.e. power of adjudication.
[3] Under section 16 i.e. power power of survey.
[4] Under section 17 i.e. power to search and
seizure.
[5] Under section 18 i.e. power to search
persons.
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[6] Under section 19 i.e. power to arrest.
[7] Under section 20 i.e. retention of
property.
[8] Under section 21 i.e. retention of records.
[9] Under subsection (1) of 26 i.e. to prefer
appeals before the Appellate Tribunal.
[10] Under section 45 i.e. to file complaints
before the Special Court.
[11] Under section 50 i.e. power regarding
summons, production of documents and to
give evidence.
[12] Under section 57 i.e. to apply for letter of
request to a contracting state.
[13] Under section 60 i.e. power of attachment,
seizure and confiscation in contracting
State or in India.
[14] Under section 63 i.e. to impose penalty in
respect of failure to give information.
36. Directorate of Enforcement - [1] The Central
Government shall establish a Directorate of
Enforcement with a Director and such other officers or
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class of officers as it think fit, who shall be called
officers of Enforcement, for the purposes of this Act.
[2] Without prejudice to provisions of subsection
(1), the Central Government may authorise the Director
of Enforcement or an Additional Director of
Enforcement or a Special Director of Enforcement or a
Deputy Director of Enforcement to appoint officers of
Enforcement below the rank of an Assistant Director of
Enforcement.
[3] Subject to such conditions and limitations as the
Central Government may impose, an officer of
enforcement may exercise the powers and discharge the
duties conferred or imposed on him under this Act.
Relevant notifications / Orders / Circular, are
reproduced hereinbelow:
"Notification
New Delhi, the 1st July, 2005
G.S.R.440[E] - In exercise of the powers conferred by
subsection (1) of Section 49 of the Prevention of
Moneylaundering Act, 2002 [15 of 2003], the Central
Government hereby appoints, with effect from the 1st
day of July, 2005, the Director, Financial
Intelligence Unit, India, under the Ministry of
Finance, Department of Revenue, as the Director to
exercise the exclusive powers conferred under clause
[b] of subsection (1) of section 12 and its proviso,
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section 13, subsection (2) of section 26 and sub
section (1) of section 50 of the said Act and the said
Director, Financial Intelligence Unit, India, shall
also concurrently exercise powers conferred by sub
section (3) and subsection (5) of section 26, section
39, section 40, section 41, section 42, section 48,
subsection (2) of section 49, section 66 and section
69 of the aforesaid Act.
[Notification No.5/2005/F.No.6/2/2005E.S.]
V.P.ARORA, Under Secy.
"Notification
New Delhi, the 1st July, 2005
G.S.R.441[E] - In exercise of the powers conferred by
subsection (1) of Section 49 of the Prevention of
Moneylaundering Act, 2002 [15 of 2003], the Central
Government hereby appoints, with effect from the 1st
day of July, 2005, the Director of Enforcement holding
office immediately before the said ate under the
Foreign Exchange Management Act, 1999 [42 of 1999], as
the Director to exercise the exclusive powers
conferred under section 5, section 8, section 16,
section 17, section 18, section 19, section 20,
section 21, subsection (1) of section 26, section 45,
section 50, section 57, section 60, section 62 and
section 63 of the said Act and the said Director shall
also concurrently exercise powers conferred by sub
section (3), subsection (4) and subsection (5) of
section 26, section 39, section 40, section 41,
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section 42, section 48, section 49, section 66 and
section 69 of the aforesaidsaid Act.
[Notification No.6/2005/F.No.6/2/2005E.S.]
V.P.ARORA, Under Secy."
ORDER NO. S.O. 906[E] DATED 21.04.2010, ISSUED BY
MINISTRY OF FINANCE [DEPARTMENT OF REVENUE]
In exercise of powers conferred by subsection
(1) of section 49 of the Prevention of Money
Laundering Act, 2002 (15 of 2003), the Central
Government hereby appoints the Enforcement Officer in
the Directorate of Enforcement appointed under sub
section (2) of section 36 of the Foreign Exchange
Management Act as Assistant Director for the purpose
of the Prevention of MoneyLaundering Act, 2002.
MINISTRY OF FINANCE
(Department of Revenue)
ORDER
New Delhi, the 13th September, 2005 S.O.1273(E) - In exercise of the powers conferred by subsection (1) of Section 49 of the Prevention of Moneylaundering Act, 2002 (15 of 2003), the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Special Director holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Additional Director for the purpose of the Prevention Page 85 of 127 R/SCR.A/4496/2014 CAV JUDGMENT of Moneylaundering Act, 2002.
[F.No.6/2/2005E.S.] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1274[E] - In exercise of the powers conferred by Subsection (1) of Section 49 of the Prevention of Moneylaundering Act, 2002 (15 of 2003) the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Deputy Director holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Deputy Director for the purpose of the Prevention of Moneylaundering Act, 2002.
[F.No.6/2/2005E.S.] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1275[E] - In exercise of the powers conferred by Subsection (1) of Section 49 of the Prevention of Moneylaundering Act, 2002 (15 of 2003) the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Assistant Director holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Assistant Director for the purpose of the Prevention of Moneylaundering Act, 2002.
Page 86 of 127 R/SCR.A/4496/2014 CAV JUDGMENT[F.No.6/2/2005E.S.] ANUJ SARANGI, Director Ref.No.A3/1/2011 Date:27/08/2011 CIRCULAR ORDER (TECH) NO.03/2011 The cadre restructuring of the Directorate and re designation of posts of Deputy Director, Assistant Director Grade I and Assistant Director Grade II in the Directorate as Joint Director, Deputy Director and Assistant Director respectively vide Circular Order (Admn.) No.54/2011 dated 28/09/2011 has necessitated revision in the statutory authorities in the Directorate. In view of the above, there shall be following statutory authorities under PMLA and FEMA for the enforcement of the provisions of the said two enactments: (I) Statutory Authorities under PMLA:
Sections Nature of function Officer Conditions of Authorized Authorization 5 Provisional Attachment Joint Director Nil of Property 8(4) Taking possession of Deputy Director Subject to attached property approval of Joint Director 16 Survey Assistant Subject to Director approval of Joint Director 17 Search and Seizure Assistant Subject to Director/Deputy approval of Director Joint Director 18 Search of persons Assistant Subject to Director approval of Joint Director 19 Power of arrest Assistant Subject to Director approval of Special Director Page 87 of 127 R/SCR.A/4496/2014 CAV JUDGMENT 45 Filing of Prosecution Deputy Director Subject to complaint approval of Special Director (II) Statutory Authorities under FEMA:
The Assistant Director shall continue to act as Investigating Officer. The authorities and functions presently being discharged by the officers shall continue to be so discharged.
(III) Legal cadre:
The legal cadre shall be consulted in all matters relating to legal issues as well as before the Courts/Tribunals/Adjudicating authorities.
The above mentioned authorities shall also perform other works/functions, as may be specifically assigned to them from time to time by the Director of Enforcement/their supervisory officers.
9 The Apex Court in the case of Ram Jethmalani & Ors. vs. Union of India & Ors. reported in (2011)8 SCC 1, extensively considered unaccounted / black money generated in India by Indians and transferred and accumulated in foreign banks and about prevention of moneylaundering and PartI of the above order begins as under:
"1 "Follow the money" was the short and simple Page 88 of 127 R/SCR.A/4496/2014 CAV JUDGMENT advice given by the secret informant, within the American Government, to Bob Woodward, the journalist from Washington Post, in aid of his investigations of the Watergate Hotel break in.
Money has often been claimed, by economists, to only be a veil that covers the real value and the economy. As a medium of exchange, money is vital for the smooth functioning of exchange in the market place. However, increasing monetization of most social transactions has been viewed as potentially problematic for the social order, in as much as it signifies a move to evaluating value, and ethical desirability, of most areas of social interaction only in terms of price obtained in the market place.
9.1 That other paragraphs before PartII of the order speak volume about state of affairs about incidence of crime, petty and grand, like any other social phenomena is often linked to transfers of monies, small or large, the Apex Court clearly notices that money, in the sense, can both power and also reward crime. In paras 11 and 14, the Apex Court further held as under:
"11. Unaccounted for monies, especially large sums held by nationals and entities with a legal presence in the nation, in banks abroad, especially in tax havens or in jurisdictions with a known history of silence about sources of Page 89 of 127 R/SCR.A/4496/2014 CAV JUDGMENT monies, clearly indicate a compromise of the ability of the State to manage its affairs in consonance with what is required from a constitutional perspective. This is so in two respects. The quantum of such monies by itself, along with the numbers of individuals or other legal entities who hold such monies, may indicate in the first instance that a large volume of activities, in the social and the economic spheres within the country are unlawful and causing great social damage, both at the individual and the collective levels. Secondly, large quanta of monies stashed abroad, would also indicate a substantial weakness in the capacity of the State in collection of taxes on incomes generated by individuals and other legal entities within the country. The generation of such revenues is essential for the State to undertake the various public goods and services that it is constitutionally mandated, and normatively expected by its citizenry, to provide. A substantial degree of incapacity, in the above respect, would be an indicia of the degree of failure of the State; and beyond a particular point, the State may spin into a vicious cycle of declining moral authority, thereby causing the incidence of unlawful activities in which wealth is sought to be generated, as well as instances of tax evasion, to increase in volume and in intensity.Page 90 of 127 R/SCR.A/4496/2014 CAV JUDGMENT
14. When a catchall word like "crimes" is used, it is common for people, and the popular culture to assume that it is "petty crime," or crimes of passion committed by individuals. That would be a gross mischaracterization of the seriousness of the issues involved. Far more dangerous are the crimes that threaten national security, and national interest. For instance, with globalization, nation states are also confronted by the dark worlds of international arms dealers, drug peddlers, and various kinds of criminal networks, including networks of terror. International criminal networks that extend support to homegrown terror or extremist groups, or those that have been nurtured and sustained in hostile countries, depend on networks of formal and informal, lawful and unlawful mechanisms of transfer of monies across boundaries of nation states. They work in the interstices of the microstructures of financial transfers across the globe, and thrive in the lacunae, the gaps in law and of effort. The loosening of control over those mechanisms of transfers, guided by an extreme neoliberal thirst to create a global market that is free of the friction of law and its enforcement, by nationstates, may have also contributed to an increase in the volume, extent and intensity of activities by criminal and terror networks across the globe".
9.2 Though PartI of the order prefaces issues Page 91 of 127 R/SCR.A/4496/2014 CAV JUDGMENT of large sums of unaccounted for monies, modus operandi of transfers of such money generated in activities that have been deemed unlawful, nature of governance, impact on economy of the State, cross border funding for terrorist activities, etc. shows concern of the Apex Court on such issues, including moneylaundering in general is to be born in mind in the context of subject petition for which investigation is carried out "Follow the Money" by the Directorate of Enforcement upon registering on offence under Section 3 of the PML Act to the tune of Rs.5395.75 crores is to be considered.
10 It is to be noted that no specific challenge is made to omission of Part B containing paras 1 to 25 by amendment Act 2 of 2013 with effect from 15.02.2013 and also substitution of Part A by the very Act. That only effect and consequence of the above omission of Part B and substitution of Part A by amendment Act 2 of 2013 with effect from 15.02.2013 qua Section 45 of the PML Act is under challenge on the ground that it is violative of Articles 14, 21 and 22 of the Constitution of India.
10.1 It is trite that any provision of any statute if operate harshly or effect of such operation result into any hardships or difficulty by itself is no ground to declare such provision as ultra vires to the Constitution of India if legality, validity and constitutionality of the enactment is otherwise not ultra vires meaning thereby such an enactment is Page 92 of 127 R/SCR.A/4496/2014 CAV JUDGMENT enacted in exercise of powers conferred upon the Central Government or State Government, as the case may be, keeping in mind various entries in Schedule VII read with Articles 245 and 246 of the Constitution of India. There is no dispute about legality, validity and constitutionality of the PML Act, 2002 and subsequent amendments except Section 45 of the Act, which is subject matter of the petition.
10.2 That for interpretation of a penal statute and provisions include imposition of penalties for infringement, it is trite that all such penal provisions contain in penal statutes are to be construed strictly so as to see that thing charges as an offence is within plain meaning of words used and such words are not to be stretched on any notion by supplying casus omissus.
10.3 Maxwell in the Interpretation of Statutes [12th Edn.] says : "the strict construction of penal statutes seems to manifest itself in four ways : in the requirement of express language for the creation of an offence; in interpreting strictly words settling out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction.
10.4 In Craies and Statute Law [7th Edn. At Page 93 of 127 R/SCR.A/4496/2014 CAV JUDGMENT P.529] it is said that penal statutes must be construed strictly. At page 530 of the said treatise, referring to [U.S. v. Wiltberger [1820]2 Wheat [US] 76], it is observed, thus : the distinction between a strict construction and a more free one has, no doubt in modern times almost disappeared, and the question now is, what is the true construction of the statute? I should say that in a criminal statute you must be quite sure that the offence charged is within the letter of the law. This Rule is said to be founded on the tenderness of the law for the rights of individuals, and on the plain principles that the power of punishment is vested in the Legislature, and not in the juridical department, for it is the Legislature, not the Court, which is to define a crime and ordain its punishment".
10.5 Even the Apex Court interpreted provisions of Penal statute containing strict provisions. In the case of Kartar Singh vs. state of Punjab reported in (1994)3 SCC 569, the Apex Court held that "The conditions imposed under section 20(8)(b), as rightly pointed out by th Additional Solicitor General, are in consonance with the conditions prescribed under clauses [I] and [iii] of subsection (1) of Section 437 and clause [b] of subsection [3] of that section. Similar to the conditions in clause [b] of subsection [8], there are provisions in various other enactments such as Section 35(1) of Foreign Exchange Regulation Act and Section 104(1) of the Customs Act to the effect that any authorized or empowered officer under Page 94 of 127 R/SCR.A/4496/2014 CAV JUDGMENT the respective Acts, if, has got reason to believe that any person in India or within the Indian Customs water has been guilty of an offence punishable under the respective Act, may arrest such person. Therefore, the condition that "there are grounds for believing that he is not guilty of an offence", which condition in different form is incorporated in other Acts such as clause [I] of Section 437(1) of the Code and Section 35(1) of FERA and 104(1) of the Customs Act, cannot be said to be an unreasonable condition infringing the principle of Article 21 of the Constitution. IN view of the detailed discussion made above, we set aside the conclusion of Punjab and Haryana High Court in Bimal Kumar holding.
"Therefore, the last portion of clause [b] of sub section (8) of Section 20 of the Act, which reads :
`and that he is not likely to commit any offence while on bail, alone is ultra vires". On th same analogy, the limitations contained in S.37(1)(b) and (2) are constitutionally valid".
10.6 The Apex Court interpreted the identical provisions regarding granting of bail while dealing with section 21[4] of Maharashtra Control or Organised Crime Act, 1999 (MCOCA) and held that the said wordings does not lead to the conclusion that the Court must arrive at a positive finding that the applicant has not committed offence under the Act. It must be so construed that the Court is able to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail Page 95 of 127 R/SCR.A/4496/2014 CAV JUDGMENT much before commencement of trial. The Court will be required to maintain finding as to the possibility of his committing a crime after grant of bail. However, such an offence in future must be an offence under the Act and not any other offence. Since it is difficult to predict the future conduct of an accused, the Court must necessarily consider this aspect of the matter having regard to the antecedents of the accused, is propensities and the nature and manner in which he is alleged to have committed the offence.
10.7 That Section 2 of Chapter I contains various definitions and money laundering is defined under Section 2(p) makes a reference that `money laundering' means the meaning assigned to it in section 3 of Chapter II under the head Offences of MoneyLaundering is wide and extensive.
10.8 It is worth noting that Section 3 is again amended and earlier words "with the proceeds of crime and projecting" came to be substituted by Act 2 of 2013 with effect from 15.02.2013 vide S.O. 343(E), dated 8.2.2013, with the words "proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money laundering".
10.9 Therefore, Section 3 in its width and amplitude include whosoever directly or indirectly attempts to include or knowingly assist or knowingly Page 96 of 127 R/SCR.A/4496/2014 CAV JUDGMENT is a party or is actually involved in any proceeds or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of moneylaundering read with definitions of "proceeds of crime" under Section 2[u], "property' under Section 2[v] and "value" under Section [zb] of the PML Act. In the present case, not only direct or indirect attempt to indulge, but the petitioners have knowingly assisted various persons and companies viz. legal entities and actually involved in process and also activity connected with proceeds of crime, which include its concealment and projecting and claiming as untainted property in possessing and transferring untainted money by creating forged record of department of Customs, RTGS and import and export of diamonds and payment thereof.
10.10 That the "proceeds of crime" is defined in Section 2[u], which 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 as defined under Section 2[v] of the PML Act and activity relating to schedule offence or value of any property and scheduled offence is defined under Section 2[y] which after amendment Act 2 of 2013 remained all those offences specified under part A of the schedule since part B is omitted and part A is substituted accordingly by shifting offences in Part B enblock to Part A. Page 97 of 127 R/SCR.A/4496/2014 CAV JUDGMENT 10.11 That reference to criminal activity relating to a schedule offence is again a wider connotation and even may extend to a person, who is connected with criminal activity relating to schedule offence but may not be offender of scheduled offence. Thus, money laundering itself is an offence standalone under Section 3 of PML Act having a distinct character, with many facets with wider implications and, therefore, twofold dragnet is laid down by the Legislature by providing a mechanism of punishment as defined under Section 4 for such offender under Section 3 read with Sections 44 and 45 of PML Act and to take care of attachment, confiscation of such tainted property under sections 5, 8, etc. subject to outcome at the end of trial before the special court. In the above context, section 24 of PML Act cast burden of proof upon an accused person to prove that proceeds of crime are untainted property.
10.12 A bare perusal of section 45 of the PML Act reveals that it is pertaining to offences to be cognizable and nonbailable and begins with non obstinate clause "notwithstanding anything contained in the Code of Criminal Procedure, 1973" and mandates that no person accused of offence punishable for term of imprisonment for more than 3 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 opportunity to oppose the application for such release; and [ii] Where the Public Prosecutor opposes Page 98 of 127 R/SCR.A/4496/2014 CAV JUDGMENT such application, the court has to satisfy about existence of reasonable grounds for believing that such accused person is not guilty of such offences and that he is not likely to commit such offences while on bail. The above two conditions are of course subject to two unnumbered provisos viz. that a person under the age of sixteen years or is a women or is sick or infirm, may be released on bail, if the special court so directs and further that Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by authorized person. Thus, when the situation arises about legality and validity of the complaint whether filed by the authorized officers / authorities or not can be considered at the time of taking cognizance of offence under PML Act by the Special Court. However, limitations of granting of bail specified in sub section (1) is in addition to the limitation under the Code of Criminal Procedure, 1973 or any other law time being in force for grant of bail.
10.13 Thus, if the accused person succeeds in satisfying the designated court / special court for believing that reasonable grounds exist that the accused person is not guilty of such offence and while on bail he is not likely to commit any offence in spite of opposition by the public prosecutor, no restriction is put upon orders of Special Court to release such accused person on bail. When money laundering is a distinct offence under Section 3 of PML Act read with Section 2[p], 2[u], 2[v] and 2[zb], Page 99 of 127 R/SCR.A/4496/2014 CAV JUDGMENT which comprise one or more clear and simple financial transactions, which may involve and comprise a complex web of financial and other transactions and is carried out mainly at three states viz. placement, the layering and integration and its further five different directional fund flows; viz. [i] domestic money laundering flow; [ii] returning laundered funds; [iii] inbound funds; [iv] out bound funds and [v] flowthrough assume graver magnitude of crime. That omission of PartB and substituting PartA of the schedule by amendment Act 2 of 2013 relegating the offender of Section 3 of PML Act having connected with "proceeds of crime" meaning thereby as defined in Section 2[u] and "property" as per Section 2[v] derived as a criminal activity relating to erstwhile part B offences prior to omission and subjecting to rigor of Section 45 of PML Act is adequate remedy to secure bail by a person accused of Section 3 of PML Act before designate court. That offences under penal statue or statutes included in Part B prior to omission having lesser or negligible consequences or infraction on liberty of an individual after omission of Part B and inclusion by way of substitution of Part A of the schedule under Section 2[y] of the PML Act resulting into a stricter procedure if considered in view of aforementioned facet of money laundering read with object and reasons of the Act, we are of the view that such an amendment Act 2 of 2013 with effect from 15.02.2013 consequently resulting into such offender under section 3 of the PML Act to undergo rigor of Section 45 is not ultra vires to the Constitution of Page 100 of 127 R/SCR.A/4496/2014 CAV JUDGMENT India. That such offences of lesser gravity having negligible consequences if related or connected with criminal activities of offenders of Section 3 of PML Act viz. money laundering transactions having interstate and/or cross border implications become menace to humankind. Even to trace out its source, transfer and ultimate use even by terrorists group or outlaws jeopardize integrity and sovereignty of nations and having far reaching consequences on financial system / economies of such sovereign state along with security of the citizens cannot be viewed only on the touchstone of cognizable or noncognizable and bailable and nonbailable offences as contended by the learned Senior Counsel. Since in a given case the magnitude of crime of money laundering affect the humanity as a whole.
10.15 That contention based on Article 22 of the Constitution of India about safeguards provided by Constitution of India, no doubt are of paramount importance but complete mechanism is provided in Section 19 of the PML Act which takes care of clauses 1 and 2 of Article 22 of the Constitution of India and facts stated on oath by the deponent respondent No.3 about following the above safeguards are discerning from the record that the accused person was informed about the grounds for such arrest as signed by him and was also produced within a period of 24 hours of such arrest before the nearest Magistrate. That other provisions of Article 22 of the Constitution of India Page 101 of 127 R/SCR.A/4496/2014 CAV JUDGMENT are about preventive detention as stated in clauses, 4, 5, 6 and 7 and by no stretch of imagination case of the petitioners accused can be considered on the above mentioned clauses. Therefore, the arrest of the petitioners is not violative of Article 22 of the Constitution of India. That careful perusal of guidelines contained in the case of D.K.Basu [supra] and paras 35 and 36 of the above decision no doubt applies to enforcement directorate also, but again for the reasons recorded herein that proper procedure was followed by respondent No.3 and other officers while arresting the petitioners it cannot be said that the arrest is violative of Article 22 of the Constitution of India or guidelines / directions of D.K.Basu [supra] warranting any interference of this court in exercise of jurisdiction under Article 226 of the Constitution of India issuing writ of habeas corpus. 10.16 The next contention is based on Section 19 read with Sections 48 and 49 of the PML Act that the respondent No.3 is not authorized officer, and therefore, competent to order arrest of the petitioners, is also based on misconceived application of Rule 2(1) of The Prevention of MoneyLaundering [The Form and the Manner of Forwarding a Copy of Order of Arrest of a Person Along With the material to the Adjudicating Authority and its Period of Retention] Rules, 2005 [for short, Order of Arrest Rules, 2005'] visavis Section 19 of the Act we may also deal with contention of nonexistence of "coma[`]", in sub section (1) of Section 19 after the words "any other officer". Section 48 defines authority under the Act Page 102 of 127 R/SCR.A/4496/2014 CAV JUDGMENT and Section 49 is about appointment and powers of authorities and other officers, Section 50 is about powers of authorities regarding summons, production of documents and to give evidence etc. Section 51 is for jurisdiction of authorities. Section 52 is for powers of Central Government to issue directions and Section 53 is for empowerment of certain officers and Section 54 is for certain officers to arrest in inquiry. Section 73 empowers the Central Government to make the rules and subsection (1) of section 73 specifically provides that the Central Government may, by notification, make rules for carry out the provisions of this Act and subsection (2) states in particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters. Clause [p] includes the manner in which order and the material referred to in section 2 and Section 19 shall be maintained and precisely for this purpose. Clause [a] provides for form in which records referred to in the Act to be maintained.
10.14 The Rules, 2005 defines "Arresting Officer"
as per definition under rule 2(c) and contains, ","
[coma] after "Any other officer", which is missing in Section 19 of the Act, and therefore, contention of learned counsel for the petitioners that unless there is special notification empowering Assistant director of Enforcement Directorate to order arrest could not have exercised power for the purpose of Section 19 of the PML Act and therefore arrest of the petitioners is Page 103 of 127 R/SCR.A/4496/2014 CAV JUDGMENT illegal. Reliance is placed on various notifications containing specific orders empowering Special Director, Deputy Director, Assistant Director, vide notification dated 13.09.2005 in exercise of powers conferred in subsection (1) of Section 49 of the Act and such officer empowered for the purpose of PML Act ought to have held office immediately before 01.07.2005. That reference is also made to GSR 440(E) and GSR 441(E) both dated 01.07.2005 issued in exercise of powers conferred by subsection (1) of Section 49 of the PML Act, which specifically conferred exclusive power upon designated officers for the purpose of sections mentioned therein. It is contended that vide GSR 440 [E], no power is conferred upon the Director, Financial Intelligence Unit, under the Ministry of India, Department of Revenue though designated as the Director to exercise powers under various Sections but not under Section 19 of the PML Act, but GSR 441 (E) confers such power upon the Directorate of Enforcement holding office immediately before 01.07.2005 under FEMA Act, 1999 to exercise powers as the Director under various sections of PML Act including Section 19 of the PML Act. Therefore, when no specific notification is issued empowering the Assistant Director - respondent No.3 in the present case ordering arrest of the petitioners, such exercise of power is illegal and unconstitutional and accordingly arrest order is to be set aside.
10.15 That Section 19 postulates the following preconditions viz. that the competent authority under Page 104 of 127 R/SCR.A/4496/2014 CAV JUDGMENT the Act empowered to arrest must have material in possession before exercising such powers and rule 2[g] of Order of Arrest Rules, 2005 define the term "material".
10.16 That on the basis of such material in possession, the competent authority must have reason to belief recorded in writing that any person has been guilty of offences punishable PML Act and upon arrest of such person as soon as may be, he is to be informed of the grounds for such arrest.
10.17 That subsection (2) of section 19 further imposes duty upon such competent authority to forward a copy of such arrest with the material in his possession to the adjudicating authority in a sealed envelop as per the procedure prescribed and sub section (3) of Section 19 mandates that every person arrested under that section shall have to be produced before the learned Magistrate or the Metropolitan Magistrate, as the case may be, having jurisdiction, within a period of 24 hours. The above provisions are in consonance with Article 22(1) of the constitution of India.
10.18 That the Ministry of Finance, Department of Revenue has appointed the Enforcement Officer in the Directorate of Enforcement appointed under subsection (2) of Section 36 of FEMA as Assistant Director for the purpose of PML Act and such order is issued in exercise of powers conferred by subsection (1) of Page 105 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Section 49 of the PML Act. When the above notification is in force and subsequent orders are issued on the same line by the Ministry of Finance, Department of Revenue, Central Government and definition of Assistant Director as contained in Section 2(1)(c) of PML Act means the Assistant Director appointed under subsection (1) of Section 49, it cannot be said that Assistant Director of Enforcement Department is incompetent to arrest the petitioners in exercise of powers under Section 19(1) of the PML Act. That sub section (2) of Section 49 will come into play only when Director, Deputy Director or Assistant Director, as the case may be, would like to appoint any other officer for the purpose of exercising powers and discharge the duties conferred or imposed under the PML Act. However, that does not preclude the Ministry of Finance, Department of Revenue to issue order appointing Assistant Director of FEMA to function under PML Act.
10.19 Under Rule 2(1)(c) of the Rules, 2005, again cannot have overriding effect over Section 19 of the PML Act when the Act itself provides that Assistant director shall have power to order arrest subject to fulfillment of conditions enumerated in subsection (1) of Section 19 of the Act. It only shows that GSR 441 [E] dated 01.07.2005 confers the Director exclusive power but not to the exclusion of other officers empowered under the PML Act.
Therefore, a conjoint reading of Sections 19, 49, Page 106 of 127 R/SCR.A/4496/2014 CAV JUDGMENT 73(1)(2)(a)(p) and definition clause 2(1)(c) makes it clear that as far as the Directors, Deputy Directors or Assistant Directors are concerned, no specific or general authorization of the Central Government is necessary and such authorization will be required only when any other officer viz. officers other than the above are to be appointed to carry out purpose of the Act, a notification by the Central Government may be necessary. Therefore, contention raised by learned counsel for the petitioners that Assistant Director - respondent No.3 who ordered arrest of the petitioners lacked competence and authority to arrest, is devoid of merit, and therefore also, there is no violation of any procedural safeguards, as envisaged in Article 22 of the Constitution of India or under the provisions of PML Act.
10.20 It is profitable to refer to order dated 04.02.2013 passed by learned single Judge [Coram :
Hon'ble Mr. Justice R.C.Chavan] passed in Criminal Bail Application No.71 of 2013, where a person who was arrested by the enforcement directorate for his involvement in offence under Section 3 of PML Act, 2002 came to be decided where similar contention was raised by the applicant therein that the Assistant Director was not authorized to affect arrest under Section 19(1) of the PML Act, in which reliance was placed on Scheme of the Act viz. Sections 19, 45, 49, 73, etc came into consideration along with SR 441(E) dated 01.07.2005 and other such notifications. The learned Single Judge of Bombay High Court in paras 13 Page 107 of 127 R/SCR.A/4496/2014 CAV JUDGMENT to 17 held as under:
"13. I have considered these arguments. First the rules which have been relied on have been framed in exercise of powers under clauses (1) and (p) of subsection (2) of Section 73 of the Act. These clauses (a) and (p) of Section 73(2) read as under:
"73.(2)(a) the form in which records referred to in this act may be maintained;
(p) the manner in which the order and the material referred to in subsection (2) of Section 19 shall be maintained.
14. The rules were, thus, framed in order to prescribe forms in which records were to be maintained and the manner in which order and material referred to in subsection (2) of section 19 was to be maintained. The term "Arresting Officer" was defined for the purpose of those rules only. Inserting in clause (c) (1) of Rule (2) of those Rules, a subsequent comma, [,] after the words, "or any other officer", may be an error of the draftsman. In any case it is not necessary to go into that question since definition is only for the purpose of rules which have been framed for the restricted purpose of clauses (a) & (p) of sub section (2) of section 73 of the Act. Therefore, definition of "arresting officer" in these rules cannot be held to control the provisions of Section 19 of the Act or to require that the Central Government has to issue notification under those rules for authorizing an officer to defect arrest. The definition would have to be read in conformity with the provisions of Section 19 of the Act and the most appropriate interpretation may be that as far as Directors, Deputy Directors, or Assistance Directors are concerned, no authorization of the Central Government is required, and while any other officer could also be authorised by the Central Government, if such other officers has to be Page 108 of 127 R/SCR.A/4496/2014 CAV JUDGMENT authorised, a notification by the Central Government would be required. Thus, there is no substance in the contention that the Assistant Director who effected arrest lacked the authority to arrest. Therefore, there is no violation of any procedural safeguards which the application had and he cannot be said to have suffered by any eclipse of his rights by not following the procedure established by law in effecting his arrest.
15. The observations of the Supreme Court in Shri Gurbaksh Singh Sibbia and ors. vs. State of Punjab, reported in (1980)2 SCC 565, do not help the applicant since there is no breach of procedural safeguards provided in the Act. Since there is no violation of Articles 21 and 22 of the Constitution of India, in effecting the arrest of the applicant, even judgment of this Court in Suaibo Ibow Casamma vs Union of India, reported in 1995 (80) E.L.T. 762 (Bom.), does not help the applicant.
16. Learned Senior Counsel for the applicant next submitted that the power to arrest has been conferred by the Government exclusively upon the Director of the Enforcement Directorate. He drew my attention tot he notification dated 1st July, 2005, which has been extensively reproduced in ground (a)(v) of the application.
"{SR 441 (E) DT. 1`.7.2005}.
In exercise of powers conferred by sub section (1) of Section 49 of th Prevention of Money Laundering Act, 2002 (15 of 2003), the Central Government hereby appoints, with effect from the 1ast day of July, 2005, the Director of Enforcement holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as director to exercise the exclusive powers conferred under Section 5, section 8, section 17, section 18, section 19, section 20, section 21, subsection (1) of section 26, section 45, section 50, section 57, section 60, section 62, and section 63, of Page 109 of 127 R/SCR.A/4496/2014 CAV JUDGMENT the said Act and the said Director shall also concurrently exercise powers conferred by subsection (3) subsection (4) and sub section (5), of section 26, section 39, section 40, section 41, section 42, section 48, section 49, section 66 and section 69 of the aforesaid Act".
17. As rightly submitted by the learned Advocate General, the words used in the notification do not show that the Director was to have powers under Section 5, 8, 17, 18, 19, 20, 21, 26, 28 of the Act, to the exclusion of all other offences. It only shows that the Director has the exclusive power but not necessarily to the exclusion of others, who have been empowered under the Act. Since the act itself does not provide for any power in the Central Government to issue notification abridging the powers statutorily conferred on the authorities under the Act, there can be no question of the Central Government issuing notification the Assistant director from the authorities who are exercising power of arrest. Therefore, , this notification too does not help the applicant in contending that he has been arrested by the officer who had no authority."
10.21 Thus, with amended Section 3 and Schedule under Section 2[y] by Amendment Act 2 of 2013 the above reasonings persuade us to take similar view upon due deliberations and Scheme of th Act read with relevant notification. Accordingly, we are unable to agree with submissions made by learned Counsels for the petitioners that reasonings of learned Single Judge of High Court of Bombay in the above case ignored true import of Notification GSR 441(E) dated 01.07.2005 and Section 73(1) of the Act. That it is trite that by the above notifications dated 01.07.2005 powers were conferred upon the authority so defined Page 110 of 127 R/SCR.A/4496/2014 CAV JUDGMENT under Section 48 of the PML Act and in view of Section 49 the Central Government appoints such persons as it thinks fit to be authorized for the purposes of this Act. Therefore, the appointment of Director, Department of Enforcement is not exclusion of other authorities viz. Additional Director, Joint Director, Deputy Director, Assistant Director, who are otherwise empowered by PML Act, 2002.
10.22 Thus, what emerges from the discussion and findings as above, our conclusions are as under:
That Section 45 of PML Act, 2002 [as substituted by amendment Act 2005] is not illegal, arbitrary, discriminatory and violative of Articles 14, 19 and 21 of the Constitution of India and accordingly no case is made out to read down, lay down, expound, interpret and deliberate upon the scope and perspective of Section 45 of the PML Act so as to harmonize the same in juxtaposition with various scheduled offences [under amended Part A of Schedule].
In the process of undertaking lawful investigation, Ministry of Finance has issued 3 different orders viz. [i] S.O. 1273[E], [ii] S.O. 1274[E] and [iii] S.O. 1275/E all dated 13.09.2005 in exercise of powers under subsection (1) of Section 49 of PML Act whereby the Special Director, Deputy Director and Assistant Director, who held office immediately before 01.07.2005 under The Foreign Page 111 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Exchange Management Act, 1999 as Additional Director, Deputy Director and Assistant Director for exercise of powers under PML Act.
This is further evident from the fact that in continuation of order No. S.O. 906[E] dated 21.04.2010 issued by Ministry of Finance in exercise of powers conferred by subsection (1) of Section 49 of the PML Act, the Central Government has appointed enforcement officer in the Directorate of Enforcement appointed under subsection (2) of Section 36 of The Foreign Exchange Management Act, 1999 as Assistant Director for the purpose of PML Act, 2002. Circular Order No.03/2011 dated 27.08.2011 further designated the posts of Deputy Director, Assistant Director GradeI and Assistant Director, GradeII and conferred power of arrest upon Assistant Director, subject to approval of Special Director. Therefore, harmonious reading of Sections 48 to 54 and definition of Assistant Director contained in Section 2[c] of PML Act reveal the Assistant Director - respondent No.3 in this case is duly empowered to order arrest under Section 19 of the PML Act.
10.23 That in view of our holding that the Assistant Director of Directorate of Enforcement -
respondent No.3 is competent and authorized officer under PML Act to order arrest under Section 19(1) of PML Act, and therefore, again there is no scope to read down, lay down, expound, interpret and deliberate upon the scope and perspective of Section 19 of PML Page 112 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Act in light of Section 49(3) read with the Rules notified under Notification GSR 446(E) dated 01.07.2005.
10.24 That not mentioning name of the petitioners in FIR dated 11.04.2014 and 13.04.2014 is of no consequence since in the present case nexus is established between the criminal activity relating to schedule offence and the proceedings thereof for the offences of money laundering as defined under Section 3 read with Section 2(1)(u) of the PML Act. That during the process and investigation carried out by the Directorate of Enforcement, the petitioners are found to have been involved in money laundering racket and not naming the petitioners in the offences registered initially by investigating agency is now being prosecuted for the involvement under Section 3 of the PML Act by Directorate of Enforcement. Even, prosecution complaint dated 18.07.2014 is filed before the designated court under PML Act and after further investigation a supplementary complaint is filed on 29.10.2014.
10.25 The grounds of arrest was communicated to the accused after due medical check up as undertaken and he was also produced within the stipulated time before the designated Judge under PML Act at Ahmedabad and no complaint or grievance was ever made by the petitioners about any kind of illtreatment or coercion by the offices of Directorate of Enforcement. That in execution of arrest, all procedural Page 113 of 127 R/SCR.A/4496/2014 CAV JUDGMENT requirements were complied with and the accused has signed receipt of grounds for arrest and even a friend of the accused viz. Mr. Amit Solanki, C.A. Was handed over the belongings and signed the inventory annexed to the arrest memo. That learned Designated Judge was pleased to grant custody of the petitioners for a period of 4 days and in a pro in a procedure to remand etc. and rejection of prayer of temporary bail on 09.09.2014 by the designated court and filing of prosecution complaint dated 29.10.2014 against the petitioner and competency of the Assistant Director - respondent No.3 to order arrest in compliance of Section 19(1) of PML Act surface on record, which is again in consonance with the safeguards enshrined under Article 22(1) of the Constitution of India and we find no breach of any procedural enumerated either under Article 19(1)of the PML Act or under Article 22(1) of the Constitution of India. Further, since the subject matter is pending before the competent designated court and upon registering complaint, we do not further deliberate on the import of the nature of involvement of the petitioners for the offences under Section 3 of the PML Act, but the fact remains that affidavit filed by the respondent No.3 placing his version on the record remains undisputed till the matter was heard and kept for judgment.
10.26 Thus, it cannot be said that order of arrest suffers from vice of any illegality on the ground that it is ordered by the incompetent or unauthorized and there is no failure in adhering procedure laid down Page 114 of 127 R/SCR.A/4496/2014 CAV JUDGMENT under Seton 19(1) of the PML Act and further no breach to the guidelines laid down in the case of D.K.Basu [supra] and it cannot be said that the petitioners are detained or confined illegally warranting issuance of writ of Habeas Corpus. At the same time respondent No.3 - Assistant Director of Enforcement is competent and authorized to issue order of arrest under Section 19(1) of the PML Act and no case is made out to issue writ of quo warranto as prayed for.
10.27 That offence under Section 3 of PML Act is distinct and different, and therefore, omission of Part B from Schedule under Section 2[y] and substitution of Part A do not make any difference to the case of the petitioners, who are accused of offences under Section 3 of the PML Act, irrespective of absence of monetary ceiling.
11 The Apex Court has taken note of the above aspect that offence under Section 3 of the PML Act is distinct in the case of Binod Kumar vs. State of Jharkhand and Ors. reported in (2011)11 SCC 463.
12 The Andhra Pradesh High Court in the case of B. Rama Raju v. Union of India, Ministry of Finance, Department of Revenue, represented by its Secretary [Revenue], New Delhi & Ors. reported in 2011(3) ALT 443 has formulated various issues, including the issues [E] and [F] with regard to Section 24 of the PML Act and we are in complete agreement with the reasons and conclusions qua sections 23 and 24 of the Page 115 of 127 R/SCR.A/4496/2014 CAV JUDGMENT PML Act and we reject the contention of Shri Sunit Shah, leaned counsel for the petitioner that burden of proof is shifted at the stage of time of bail but not at the stage of trial. The relevant portion of issues [E] and [F] of the judgment in the case of B.Rama Raju, reads as under:
ISSUEE The challenge to Section 23 is projected on the ground that the presumption enjoined by this provision in respect of interconnected transactions is unduly restrictive of the right to property; is a disproportionate burden, not commensurate with legitimate Governmental interests in targeting proceeds of crime involved in moneylaundering, for eventual confiscation.
Moneylaundering, it is pleaded in the counter affidavit by the Enforcement Directorate, while apparently comprising one or more apparently clear and simple financial transactions or dealings with property, in reality involve a complex web of transactions that are processed through three stages the placement, layering and integration stage. When laundering operations are pursued across State boundaries, flows of funds would involve several routes. Since the object of the Act is to seize or attach proceeds of crime involved in money laundering for eventual confiscation to the State, the enforcement strategy must be commensurate with, correspond to and complement the degree of camouflage, deceit, layering and integration normally associated with a money laundering operation, to be effective and successful, is the contention on behalf of the respondents.
Section 23 enjoins a presumption in respect of interconnected transactions. Moneylaundering is defined in Section 2 (p) (with reference to Page 116 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Section 3). Though Section 3 defines the offence of moneylaundering, the ingredients of the offence enumerated in this provision define moneylaundering in its generic sense as applied by the Act to attachment and confiscation processes as well. Such duality is achieved by the drafting technique of defining money laundering in Section 2 (p) by ascription of the definition of the offence of moneylaundering in Section 3.
This technique, though specific, is not unique. As observed in LIC of India Vs. Crown Life Insurance Co., the object of a definition clause in a statute is to avoid the necessity of frequent repetitions in describing all the subject matter to which the word or expression so defined is intended to apply. A definition section may borrow definitions from an earlier or an existing statute; not necessarily in the definition section but in some other provision, of that Act; and may equally borrow the definition from some other section of the same Act where a word or an expression is defined for a distinct purpose, occasion, or in a specific context. Section 2(1)(p), thus, defines the expression moneylaundering by borrowing the definition expressed in Section 3, where this expression is defined for the purpose of delineating the offence. In Section 2(1)(p), however, the expression moneylaundering is defined for the generic purpose of describing the contours of the conduct; wherever the expression is employed in the several provisions of the Act, including in Chapter.III for attachment and confiscation. It is also well settled that the legislature has the power to define a word or an expression artificially Kishanlal Vs. State of Rajasthan. The definition of a word or an expression in the definition section may thus be restrictive or extensive of its ordinary meaning. When a word is defined to mean so and so, the definition is prima facie exhaustive and restrictive Inland Revenue Commissioner Vs. Joiner; Vanguard Fire and General Insurance Co.Page 117 of 127 R/SCR.A/4496/2014 CAV JUDGMENT
Ltd. Vs. Frazer & Ross; and Feroze N. Dotiwala Vs. P.M.Wadhwani.
Conduct of directly or indirectly attempting to indulge, knowingly assist or being a party to or actual involvement in any process or activity connected with proceeds of crime and projecting such proceeds of crime as untainted property, constitutes moneylaundering. The expression proceeds of crime means 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 {Section 2 (u)}. Thus, a property acquires a taint on account of being a derivative of criminal activity relating to a scheduled offence and includes the value of such property. Since placement, layering and integration are among the essential features of moneylaundering, the proceeds of crime may not necessarily continue in the hands of the original malfeasant(s).
Where proceeds of crime are layered through plural transactions, the intent to camouflage the source of the property as a derivative of criminality renders it difficult to identify the succeeding transactions as relatable to the initial proceeds of crime. It is for this reason and to effectuate the purposes of the Act that Section 23 incorporates the presumption that where moneylaundering involves two or more connected transactions and one or more such transactions is/are proved to be involved in moneylaundering, then for the purposes of adjudication or confiscation under Section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such interconnected transactions i.e., involved in moneylaundering as well.
The presumption enjoined by Section 23 is Page 118 of 127 R/SCR.A/4496/2014 CAV JUDGMENT clearly a rebuttable presumption i.e., presumptio pro tantum.
In Izhar Ahmad v. Union of India, Gajendragadkar, J. [as his Lordship then was] observed (in the majority opinion of the Constitution Bench) that: The term Presumption in its largest and most comprehensive signification, may be defined to be an inference, affirmative or disaffirmative of the truth of falsehood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted. Quoting with approval the statement of principle set out in the Principles of the Law of Evidence by Best, his Lordship observed that when the rules of evidence provide for the raising of a rebuttable or irrebuttable presumption, they are merely attempting to assist the judicial mind in the matter of weighing the probative or persuasive force of certain facts proved in relation to other facts presumed or inferred.
Wills observes that the expression Presumption inherently imports an act of reasoning a conclusion of the judgment; and it is applied to denote such facts or moral phenomena, as from experience we know to be invariably, or commonly, connected with some other related facts.
In M. Narsinga Rao v. State of A.P., Thomas, J. [writing the opinion for the Court] observed that presumption is an inference of a certain fact drawn from other proved facts. While inferring the existence of a fact from another, the Court is only applying a process of intelligent reasoning which the mind of a prudent man would do under similar circumstances. Presumption is not the final conclusion to be drawn from other facts, but it could as well be final, if it remains undisturbed later. Presumption in the law of evidence is a rule Page 119 of 127 R/SCR.A/4496/2014 CAV JUDGMENT indicating the stage of shifting the burden of proof. From a certain fact or facts the Court can draw an inference and that would remain until such inference is either disproved or dispelled.
Having regard to the fact that money laundering is indulgence, informed assistance or being a party to or actual involvement in any process or activity connected with proceeds of crime and projecting it as untainted property, inherently assuming a degree of deceit and camouflage in the process of layering the proceeds of crime through a series of transactions, in the considered legislative wisdom a presumption in interconnected transactions is enjoined by Section 23 of the Act, contingent upon one or more of inter connected transactions having to be proved to be involved in moneylaundering. The legislatively enjoined presumption shifts the burden of proof to the person in the ownership, control or possession of a property comprising the inter connected transactions to rebut the statutory presumption that this property is not involved in moneylaundering.
Section 23 enacts a rule prescribing a rebuttable presumption and is a rule of evidence. The rule purports to regulate and structure the judicial process of appreciating evidence relating to adjudication of moneylaundering for the purposes of confirmation of attachment/seizure and confiscation and provides that the said appreciation will draw an inference from the fact of one or more transactions forming part of interconnected transactions having been proved to be involved in moneylaundering, that the other transactions are also to be presumed so, unless the contrary is established.
As observed in Izhar Ahmad (supra), the rule of presumption enjoined by Section 23 takes away judicial discretion either to attach or not due Page 120 of 127 R/SCR.A/4496/2014 CAV JUDGMENT probative value to the fact that one or more of the interconnected transactions have been proved to be involved moneylaundering; and requires prima facie due probative value to be attached and mandates an inference that the other transactions form part of the raft of inter connected transactions involved in money laundering, subject of course to the said presumption being rebutted by proof to the contrary.
On the aforesaid analysis, since Section 23 enjoins a rule of evidence and a rebuttable presumption considered essential and integral to effectuation of the purposes of the Act in the legislative wisdom; a rebuttable and not an irrebuttable presumption, we are not persuaded to conclude that the provision is unduly harsh, oppressive or arbitrary. Afterall a legislative remedy must correspond to the social pathology it professes to regulate.
IssueE is answered accordingly.
" ISSUEF Section 24 shifts the burden of proving that proceeds of crime are untainted property onto person(s) accused of having committed the offence under Section 3. This provision is challenged as arbitrary; is contended to be applicable only to the trial of an offence under Section 3 and not the proceedings for attachment and confiscation of property under ChapterIII; and alternatively as not applicable to proceedings for attachment and confiscation of property of a person not accused of an offence under Section 3.
On its textual and grammatical construction, the provision shifts the burden of proving that proceeds of crime are untainted property on person(s) accused of having committed the offence under Section 3.Page 121 of 127 R/SCR.A/4496/2014 CAV JUDGMENT
We have noticed while on the analysis of Issues C to E that the provisions of Sections 3, 5, 8, 17, 18, 20, 21 and 23; the definitions of moneylaundering {Section 2 (p); proceeds of crime (Section 2 (u); property (Section 2 (v) and value (Section 2 (zb)} are intertwined, delineate the provisions of each other and in tandem operate to effectuate one of the two substantial purposes of the Act viz., attachment for the purposes of eventual confiscation, of proceeds of crime involved in moneylaundering, whether in the ownership, control or possession of a person accused of the offence under Section 3 or not. The offence of moneylaundering as defined in Section 3 comprises direct or indirect attempt to indulge, knowingly assist, and knowingly be a party to or actual involvement in any process or activity connected with the proceeds of crime and projecting it as untainted property. Proceeds of crime is any property derived or obtained directly or indirectly by any person as a result of a criminal activity relating to a scheduled offence or the value of any such property (Section 2 (u). Qua the provisions in ChapterIII of the Act, the process of provisional attachment, confirmation of such attachment by the adjudicating authority and confiscation of the property attached is operative against property constituting the proceeds of crime involved in moneylaundering whether in the ownership, control or possession of a person who has committed an offence under Section 3 or otherwise. Section 8 (1) while enjoining the adjudicating authority to issue a notice to a person in possession of proceeds of a crime, whether in his own right or on behalf of any other person, calling upon the noticee to indicate the sources of his income, earning or assets for the purposes of establishing that the acquisition of ownership, control or possession of the property by the noticee is bona fide and out of legitimate sources; of his income, earning or assets, does not enact a presumption that where the noticee is a person accused of the Page 122 of 127 R/SCR.A/4496/2014 CAV JUDGMENT offence under Section 3, the provisionally attached property is proceeds of crime. Since camouflage and deceit are strategies inherent and integral to moneylaundering operations and may involve successive transactions relating to proceeds of crime and intent to project the layered proceeds as untainted property, effectuation of the legislative purposes is achieved only where the burden is imposed on the accused to establish that proceeds of crime are untainted property. This is the legislative purpose and the justification for Section 24 of the Act.
In response to a notice issued under Section 8 (1) and qua the legislative prescription in Section 24 of the Act the person accused of having committed the offence under Section 3 must show with supporting evidence and material that he has the requisite means by way of income, earning or assets, out of which or by means of which he has acquired the property alleged to be proceeds of crime. Only on such showing would the accused be able to rebut the statutorily enjoined presumption that the alleged proceeds of crime are untainted property. This being the purpose, we are not satisfied that the provisions of Section 24 are arbitrary or unconstitutional. Section 24 is not confined to the trial of an offence under Section 3 but operates to attachment and confiscation proceedings under ChapterIII, as well. The legislative prescription that the burden of proof inheres on a person accused of having committed the offence under Section 3 is only to confine the inherence of the expressed burden to an accused. Where the property is in the ownership, control or possession of a person not accused of having committed an offence under Section 3 and where such property/proceeds of crime is part of inter connected transactions involved in money laundering, then and in such an event the presumption enjoined in Section 23 comes into operation and not the inherence of burden of proof under Section 24. This is in our Page 123 of 127 R/SCR.A/4496/2014 CAV JUDGMENT considered view the true and fair construction of the provisions of Section 24.
Clearly, therefore a person other than one accused of having committed the offence under Section 3 is not imposed the burden of proof enjoined by Section 24. On a person accused of an offence under Section 3 however, the burden applies, also for attachment and confiscation proceedings.
Issue F is answered accordingly."
12.1 We are in complete agreement with declaration of law with regard to Sections 23 and 24 of the PML Act by the Division Bench of Andhra Pradesh High Court in the above decision, which gives complete answer to additional contentions raised by Shri Sunit Shah, learned counsel in cognate petition.
It is trite that debate in the Parliament while enacting any legislation no doubt gives insight about what was passing in the minds of parliamentarians, but when the statute is enacted and it comes into force, the Court interpreting the provisions of such statute will go by clear wordings of the provisions as per golden rule of interpretation.
13 In the case of D.K.Basu [supra], the Apex Court upheld the basic human rights of an individual in the context of Article 21 of the Constitution of India visavis custodial violence and deprecated naked violation of human dignity by custodial violence and Page 124 of 127 R/SCR.A/4496/2014 CAV JUDGMENT found third degree methods are totally impermissible. While laying down mandatory guidelines in paras 35 and 36 of the said judgement mandated police authorities and likewise to follow such guidelines strictly and breach thereof would entail serious consequences, including proceedings to be taken up by the Court concerned in accordance with law, including punishment for contempt of court. However, as we have noticed, discussed and upheld that arrest of the petitioners by a competent officer viz. The Assistant Director - respondent No.3 herein duly empowered to do so and further envisaged procedure under Section 19 of the PML Act, which galore on the record of the case. Therefore, judgement in the case of D.K.Basu [supra] is not applicable to the facts of the present petitioners.
13.1 The decision in the case of Harikishan [supra] was in the context of order of detention passed under Section 3(1)(a)(ii) of the Preventive Detention Act in which no opportunity was given to the appellant - detenue to have sufficient knowledge of all the grounds on which the detention order was based and thus depriving him of making representation. The case of Harikishan [supra] again will not be applicable in the facts and circumstances of the case when the petitioners are arrested during the course of investigation by following procedure laid down under Section 19 of the PML Act.
13.2 In the case of K. Kuppusamy [supra], the Page 125 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Apex Court held the where the rules framed under Article 309 had not been amended, the Government could not act contrary to such rules merely because it had taken a decision to amend such Rules. It is, therefore, held that administrative instructions, circulars, orders could not override statutory Rules. Therefore, case of K.Kuppusamy [supra] is not applicable to the facts of the present cases.
13.3 The case of Sunil Fulchand Shah [supra] was again arising out of Sections 10 and 12 of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 where the distinction was made of preventive detention and punitive detention.
13.4 In the case of Madhu Limaye [supra] detention was ordered without informing grounds of arrest which was held to be violative of Article 22(1) and (2) of the Constitution of India. Neither the detention of the petitioners is unlawful nor it is in violation of Provisions of Section 19 of the PML Act and the appellant is not only informed the grounds of arrest duly signed by him, as reflected from his arrest memo and produced on record of the petition and even the above fact was recorded by learned Special Judge while considering application for bail. The above decision, therefore, is of no help to the petitioners.
13.5 The next decision in the case of Hussein Ghadially [supra] was in the context of Terrorist and Page 126 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Disruptive Activities (Prevention) Act, 1987 and the Apex Court held that the Apex Court in the context of Designated Authority [SP] under Section 20A had not given approval, but such approval was given by superior officer and it was held that such invalidity cannot be cured by Section 465 of the Code of Criminal Procedure.
Therefore, the decisions relied upon by the learned counsels appearing for the petitioners have no bearing on the facts of the present case and law involved in the subject petitions.
14 In the result, both these petitions fail and are hereby dismissed.
Rule issued in each of the petitions stand discharged. However, there shall be no order as to costs.
(ANANT S.DAVE, J.) (G.B.SHAH, J.) pvv Page 127 of 127