Gujarat High Court
Madanlal Manekchand Jain vs State Of Gujarat & on 25 February, 2016
Author: A.J.Desai
Bench: A.J.Desai
R/CR.MA/22552/2015 CAV ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR REGULAR BAIL) NO.22552
of 2015
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MADANLAL MANEKCHAND JAIN....Applicant Versus STATE OF GUJARAT & 1....Respondents ========================================= Appearance :
MR P M THAKKAR, SENIOR ADVOCATE ASSISTED BY MR MOUSAM R YAGNIK, ADVOCATE for the Applicant.
MR MITESH AMIN, PUBLIC PROSECUTOR for the Respondent No.1. MS TRUSHA K PATEL, ADVOCATE for the Respondent No.2.
========================================= CORAM : HONOURABLE MR.JUSTICE A.J.DESAI Date : 25/02/2016 CAV ORDER
1. By way of the present application under Section 439 of the Code of Criminal Procedure, 1973 (hereinafter referred to as 'the Code') read with Section 45 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as 'PML Act'), the applicant has prayed to release him on regular bail in connection with PMLA Case No.3 of 2014 pending in the Court of learned Designated Judge, Special Court constituted under the provisions of PML Act arising from File No.ECIR/01/SRT/2014 registered at the instance of the respondent No.2 - the authority appointed under the PML Act for the offences punishable under Section 3 read with Section 4 of the PML Act read with Section 120-B of the Indian Penal Code.
2. The brief facts arise from the record are as under :-Page 1 of 15
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2.1 An information was received from the Joint Commissioner of Customs, Surat vide letters dated 27.2.2014 and 6.3.2014 which revealed that Surat based diamond companies M/s. Harmony Diamonds Pvt. Ltd., M/s. Agni Gems Pvt. Ltd. and M/s. R. A. Distributors Pvt. Ltd. Have filed fake bills of entry before the ICICI Bank for making foreign remittance through bank accounts with ICICI Bank, Surat. From the information so received it has come to the notice that within a span of two months i.e. January and February, 2014, remittances worth more than Rs.1000 Crore against fake import documents viz. Bills of entry and invoices were made from the said accounts to Hongkong and Dubai. The Customs Department, Surat have confirmed that the bills of entry, in question, did not originate from their offices. Thus, the said bills of entry etc. against which the said remittances were affected were apparently fake. Enquiries made with the banks and the documents obtained from them revealed that the amount as mentioned below were remitted from the following companies having accounts with ICICI Bank. Thus, amount to the tune of Rs.5395.75 Crores (Rupees Five Thousand Three Hundred Ninty Five Crores and Seventy Five Lacs) were remitted to companies in Hong Kong and UAE on the strength of fake bills of entry.
2.2 The investigation revealed that the above mentioned Indian entities had received the above said amounts through RTGS credits in their respective bank accounts with ICICI Bank primarily from certain other Indian firms viz. M/s. Vandana & Co., M/s. Natural Trading Co., M/s. Maruti Trading, M/s. Millenium & Co., M/s. Aarzoo Enterprises, M/s. GT Traders, M/s. M. D. Enterprises, M/s. Jash Traders etc. which had transferred the above said amounts from their accounts with Axis Bank held at Mumbai and Surat. These firms in turn had received RTGS Credits into their Page 2 of 15 HC-NIC Page 2 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER bank accounts from various other firms based in New Delhi, Mumbai and Surat.
2.3 It is submitted that initially investigation was carried out under the FEMA, 1999. Enquiries revealed that Afroz Mohamed Hasanfatta is the brain behind the entire racket of sending remittances outside India on the basis of forged bills of entry. He was assisted in this racket by Madanlal Jain and Bilal Haroon Gilani. Searches were conducted at the premises of Afroz Fatta in Surat and Madanlal Jain in Mumbai on 21.3.2014 and 28.3.2014 respectively which resulted in the recovery and seizure of documents, mobile phones, CPU etc. Shri Trivedi, an accountant of Shri Madanlal Jain, has on 28.3.2014, during the search operations, stated on oath that he had frequently seen Shri Afroz Fatta visiting the office of Shri Madanlal Jain at 416A & 417A, Panchratna Tower, Opera House, Mumbai in the last couple of months. Further, the forensic analysis of the mobile phone seized from Shri Afroz Fatta revealed Madanlal Jain's whatsapp message to Afroz Fatta about the companies, namely, "Aarzoo Enterprises, Vandana & Co., M.D. Enterprises, Millenium & Co., Maruti Trading". The investigation has revealed that the said companies were used in this case for making RTGS credits for siphoning off the funds as per the modus operandi submitted above. In another whatsapp message sent to Afroz Fatta, Madanlal Jain has passed on the full address of Al Mignas FZE Ltd., Hong Kong which is one of the companies to which remittances have been sent from the ICICI Bank accounts on strength of forged bills of entry.
2.4 In the meanwhile, a complaint was received by the Crime Branch, Surat from ICICI Bank against M/s. R. A. Distributors Pvt. Ltd and its Directors alleging that the Company Page 3 of 15 HC-NIC Page 3 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER had prepared 17 fake bills of entry and presented the same before ICICI Bank for outward remittances based on which FIR No. I/16/2014 dated 11.4.2014 was registered by the Detection of Crime Branch, Surat Police under Sections 420, 465, 467, 468, 471, 477 A of Indian Penal Code. Another FIR No. I/17/2014 dated 13.4.2014 has also been registered by the Detection of Crime Branch, Surat Police against M/s. Harmony Diamonds Pvt. Ltd., M/s. Agni Gems Pvt. Ltd., and their Directors for similar offences.
2.5 Investigations under PML Act, 2002 have been initiated as the offences under Sections 420, 467, 471 of Indian Penal Code are 'scheduled offences' in terms of Section 2(1)(y) of the PML Act 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 dated 17.4.2014 for investigation into the offence of money laundering under PML Act, 2002.
2.6 During the course of investigation, it has been revealed from the statements of Madanlal Jain that he had created several firms with name sake partners and that he had created certain companies viz : M/s. R. A. Distributors, M/s. Riddhi Exim Pvt. Ltd. etc. and handed over these companies to Afroz Fatta for importing of diamonds; that Afroz Fatta had opened bank accounts of these companies in ICICI bank, Surat; that no diamonds were imported in these companies and that payments were made on the strength of fake and fabricated bills of entry presented before ICICI Bank; that remittances amounting to Rs.5000 Crore were fraudulently made from these companies and that Prithviraj Kothari and Rakesh Kothari would ensure credits through RTGS in the firms viz :
Vandana & Co., M/s. Aarzoo Enterprises, M/s. G. T. Traders etc. Page 4 of 15 HC-NIC Page 4 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER The funds were further transferred from these firms having accounts with Axis Bank to the accounts of M/s. R. A. Distributors, M/s. Riddhi Exim Pvt. Ltd., etc. with ICICI Bank, Surat from which funds were remitted to Hong Kong and Dubai on the basis of forged bills of entry. Madanlal Jain in his statement dated 18.7.2014 has stated that he has floated more than 60 companies viz. Mohit Gems, Sahil Gems India Ltd., Sahil Diamonds Pvt. Ltd., Seven Star Gems Pvt. Ltd., Blooming Star Diamonds Pvt. Ltd., Clair Diamonds Pvt. Ltd. etc. These companies have transferred huge funds to Axis Bank accounts in ICICI Bank and ultimately these funds were remitted to UAE and Hong Kong on the basis of forged bills of entry. Madanlal Jain has started that he has floated the firms viz. Vandana & Co., M/s. Aarzoo Enterprises, M/s. G. T. Traders etc which are having accounts with Axis Bank.
2.7 These companies / partnership firms have received huge funds through RTGS and further transferred these funds to accounts of the companies in ICICI Bank from where the funds were remitted to UAE and Hong Kong on the basis of forged bills of entry. Shri Madanlal Jain has further stated that original bills of entry of year 2011 belonged to him and xerox copies of the same was handed over to Shri Afroz Fatta by his clerk Shri Amit Kumar working at his office at 417A, Panchratna Tower, Opera House, Mumbai. On their basis duplicate / fake copies of bills of entry were created and presented to ICICI Bank and foreign remittances were made. He has further stated that for these illegal transfers of funds from India to UAE and Hong Kong through forged bills of entry he has earned Rs.12 Crores as commission for arranging transfers through his companies and further abroad.
2.8 During the course of this statement, Shri Madanlal Jain
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was confronted with the forensic analysis reports of the CPUs seized from his office premises and he has admitted the contents of the data that the details belong to him and these records were kept by him in his computers to ensure the quantum of fraudulent remittances made abroad in companies i.e. M/s. Mabrook Trading, M/s. Al Saba M/s. Nippon Incorporation and M/s. Cornel etc. and for further calculation of his commission.
2.9 Shri Manish Bhogilal Shah, another accused in this matter, during his statement dated 4.7.2015 has stated that Shri Madanlal Jain went to Dubai and opened a company M/s. Mabrook Trading FZE with his help and that he was working on directions of Shri Jayesh Desai who is his maternal uncle and a very close friend of Madanlal Jain. In his further statement dated 5.7.2015, he has stated that Shri Madanlal Jain and his maternal uncle Shri Jayesh Desai hatched a conspiracy to fraudulently remit thousands of crores from India to Dubai and Hong Kong on the strength of forged documents. He has further stated that Shri Madanlal Jain was handling M/s. Mabrook Trading FZE and M/s. Al Saba General Trading FZE and was involved in illegal transfer of money to Dubai from India.
2.10 Prosecution proceedings against Madanlal Jain, Afroz Fatta and 77 other accused have been initiated vide PMLA Case No.3 of 2014 on 19.7.2014 before the Designated Court, PMLA.
3. The applicant came to be arrested on 24.7.2014. The applicant preferred an application under Section 439 of the Code being Criminal Misc. Application No.1709 of 2015 in the Court of learned District and Sessions Judge, Ahmedabad (Rural) at Ahmedabad. The learned Sessions Judge and Designated Special Page 6 of 15 HC-NIC Page 6 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER Judge, Ahmedabad (Rural) by his judgment and order dated 4.11.2015 rejected the said application. Hence, the present application.
5. Pursuant to the notice issued by this Court, the respondent No.2 i.e. Deputy Director, Directorate of Enforcement, Government of India, Ahmedabad appeared through learned Central Government Standing Counsel Ms. Trusha Patel and opposed this application by filing affidavit-in-reply dated 19.12.2015 and by producing relevant documents in the form of paper-book.
6. Mr. P.M. Thakkar, learned Senior counsel assisted by Mr. Mousam R. Yagnik, learned advocate appearing for the applicant has raised several contentions. However, he has submitted that the applicant may be released on bail on the ground that except the applicant, all the co-accused are out of prison pursuant to the different orders passed in different type of proceedings. He would submit that initially, there were 79 accused. However, the present applicant and Afroz Fatta came to be arrested by the Investigating Agency. Against rest of the accused, only summons were issued. He would further submit that by filing supplementary complaint, name of ten persons were added as accused. Out of the said ten accused persons, one Rakesh Kothari came to be arrested. Non-bailable warrants were issued against one Prithviraj Kothari and other seven accused which were challenged by them by way of filing petitions either under Article 226 of the Constitution of India or under Section 482 of the Code for quashment of the same on the ground that the procedure was not followed. The warrants issued against those accused persons have been quashed and set aside. He would submit that another Page 7 of 15 HC-NIC Page 7 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER accused, namely, Afroz Fatta preferred an application under Section 439 of the Code before the learned Trial Court which was rejected by the learned Sessions Judge. Therefore, he filed similar application before this Court being Criminal Misc. Application No.17000 of 2014. He would submit that the coordinate Bench of this Court by an oral judgment and order dated 5.10.2015 dismissed the said application which is under challenge before the Hon'ble Supreme Court. He would submit that the said Afroz Fatta has been enlarged on interim bail by the Hon'ble Supreme Court and his interim bail has been continued since the matter is pending. He would further submit that another accused, namely, Rakesh Kothari who was added as an accused by supplementary complaint, did prefer an application under Section 439 of the Code before the learned Sessions Judge, which was rejected. He also preferred an application under Section 439 of the Code before this Court being Criminal Misc. Application No.3637 of 2015 which was dismissed by the coordinate Bench of this Court. He would submit that the said Rakesh Kothari had preferred petition under Article 226 of the Constitution of India for issuance of a writ of Habeas Corpus being Special Criminal Application No.4247 of 2015. The said petition has been entertained by the Division Bench of this Court and by an interim order dated 3.8.2015, the said Afroz Fatta has been released from the prison. He would further submit that the said order dated 3.8.2015 passed in the said Habeas Corpus petition was challenged before the Hon'ble Supreme Court which was not entertained and, therefore, Rakesh Kothari is out of prison pursuant to said order of interim relief. By taking me through the orders passed by coordinate Bench in the case of Rakesh Kothari, who is released in Habeas Corpus petition as well as the orders passed by the coordinate Bench of this Court, by which non-
bailable warrants have been quashed. He would submit that the Page 8 of 15 HC-NIC Page 8 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER applicant may be released on bail.
6.1 Mr. Thakkar would further submit that the co-accused, namely, Afroz Fatta and Rakesh Kothari did prefer Special Criminal Application Nos.4496 and 4672 of 2014 before the Division Bench of this Court wherein vires of Section 45 of the PML Act came to be challenged. The Division Bench by common CAV judgment dated 16.1.2015 dismissed the said petition and upheld the provisions of Section 45 of the PML Act and held that the provisions of the PML Act are not illegal, arbitrary, discriminatory and violative of Articles 14, 19, 21 and 22 (1) of the Constitution of India. Accused Afroz Fatta has already challenged the said decision before the Hon'ble Supreme Court which is pending for final hearing. He would submit that while releasing Rakesh Kothari by interim order in the habeas corpus proceedings, the Division Bench has considered several decisions of the Hon'ble Supreme Court as well as the decision rendered by the Division Bench wherein vires of Section 45 of PML Act has been upheld and after considering the same, he has been released by interim order which is confirmed by the Hon'ble Supreme Court. He would further submit that the material provided to the accused, prima facie, establish that another co- accused, namely, Prithviraj Kothari is the key person whose money has been transmitted to foreign countries and the applicant has worked as an Agent only. The said Rakesh Kothari is also out of Jail since non-bailable warrant issued against him is quashed and set aside by the coordinate Bench of this Court.
6.2 Mr. Thakkar would further submit that the applicant has already been released on bail for the offence registered as I C.R. No.16 of 2014 with DCB Police Station, Surat for the offences punishable under Sections 420, 465, 467, 468, 471, 477 A and 120-
Page 9 of 15 HC-NIC Page 9 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER B of Indian Penal Code. He has also produced several orders
passed by this Court releasing the accused of other offences who were facing charges under the provisions of the PML Act.
6.3 Mr. Thakkar would further submit that the applicant is behind bar since 24.7.2014 and was released on temporary bail and has not misused the liberty granted in his favour. Therefore, considering the overall facts and circumstances of the case, he would submit that the applicant be released on regular bail by imposing appropriate terms and conditions.
7. Ms. Trusha Patel, learned Central Government Standing Counsel appearing for the respondent No.2 - original complainant has vehemently opposed this application and submitted that it is an undisputed fact that the applicant is facing charges under PML Act as well as scheduled offence like 420, 465, 467, 468, 471, 477 A and 120-B of Indian Penal Code and, therefore, the rigors of Section 45 of the PML Act would apply in the case. She would submit that as per the provisions of Section 45 of PML Act, an accused who is facing charges for the offences punishable for a term of imprisonment of more than three years under Part A of the Schedule, shall not be released on bail or on his own Bond unless the public prosecutor is heard and if the public prosecutor opposes application and if the Court is satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and that he is not likely to commit any offence while on bail. She would submit that during the investigation so far carried out, huge material has been collected wherein prima facie it is established that the petitioner has committed several offences of Schedule A. She would further submit that there is ample material which directly establishes that Page 10 of 15 HC-NIC Page 10 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER the applicant has indulged as well as associated the other accused with regard to activity connected to proceeds of crime. She would submit that the the word "proceeds of crime" is defined under Section 2 (u) of the PML Act. By taking me through the statements of the present applicant as well as the co-accused and of witnesses, she would submit that the applicant had created about 100 fake companies through which Crores of rupees have been remitted to other countries like Dubai and Hong Kong. She would submit that the applicant was in constant touch with the other accused and all of them have hatched conspiracy to illegally transmit money to other countries. She would submit that the present applicant has facilitated other accused by creating fake companies and was successful in transferring huge money. She would, therefore, submit that there is sufficient material against him even at this stage that he cannot be said to be not guilty of offences which he is facing in the present case.
7.1. As far as co-accused, namely, Afroz Fatta is concerned, she has placed the order of coordinate Bench passed in Criminal Misc. Application No.17000 of 2014 by which the application filed by him has been rejected mainly on the ground that the rigors of Section 45 of the PML Act would come in the way and has held that he cannot be released on bail though the maximum punishment is of seven years. She would further submit that initially, said Afroz Fatta was released on temporary bail which has been extended by the Hon'ble Supreme Court only on the ground that the Authority could not file the affidavit-in-reply within the time before the Hon'ble Supreme Court. She would further submit that judgment in the matter of Afroz Fatta has not been stayed by the Hon'ble Supreme Court and he has been released only on temporary bail. She, therefore, would submit that the case of the present applicant Page 11 of 15 HC-NIC Page 11 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER and said Afroz Fatta are grave in nature and, therefore, order releasing one of the accused on interim bail is not comparable and therefore, applicant cannot claim any parity. She would further submit that the coordinate Bench has also dismissed bail application filed under Section 439of the Code of Rakesh Kothari which is confirmed by the Hon'ble Supreme Court. She would further submit that Rakesh Kothari has also been ordered to be released by an interim order and habeas corpus petition is pending for hearing and, therefore, that order would also not help the applicant for getting regular bail during the pendency of the application. As far as other accused are concerned, the orders passed by the Trial Court issuing non-bailable warrants have been quashed. Those accused have not been released on regular bail by examining the material collected by the Investigating Agency and, therefore, the same would not help the applicant. She has placed on record both the orders passed by the coordinate Bench rejecting the application filed under Section 439 of the Code by the co- accused, namely, Afroz Fatta and Rakesh Kothari.
7.2 Ms. Patel would further submit that the order passed by the Division Bench in Special Criminal Application Nos.4496 and 4672 of 2014 by which vires of Section 45 of the PML Act is upheld, one of them, namely, Rakesh Kothari preferred a Special Leave Petition (Criminal) No.7277 of 2015 before the Hon'ble Supreme Court. The said petition was not entertained by the Hon'ble Supreme Court and came to be disposed of as withdrawn on 7.7.2015. She would submit that it is true that some petitions with regard to the vires of Section 45 of the PML Act are pending before the Hon'ble Supreme Court, however, the same would not help the accused in view of the provisions of the rigors of Section 45 of the PML Act. She, therefore, would submit that the application be Page 12 of 15 HC-NIC Page 12 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER dismissed.
8. I have heard learned advocates appearing for the respective parties. Perused several orders annexed along with the application as well as produced on record at the time of hearing. It is an undisputed fact that the petitions filed by co-accused, namely, Rakesh Kothari and Afroz Fatta wherein vires of Section 45 of the PML Act is upheld, Special Leave Petition filed by one of the applicant is already dismissed by the Hon'ble Supreme Court by order dated 7.7.2015. It is true that some Special Leave Petitions are pending before the Hon'ble Supreme Court with regard to validity of Section 45 of the PML Act. But there are no order passed therein which would dilute the rigors of Section 45 of the PML Act.
9. As stated herein above, the Division Bench of this Court has upheld the validity of Section 45 of the PML Act by judgment dated 16.1.2015. The Court cannot ignore the rigors provided under Section 45 of the PML Act only on the ground that some Special Leave Petition is pending for hearing before the Hon'ble Supreme Court and particularly, when no orders whatsoever have been passed by the Hon'ble Supreme Court. Therefore, in my view, the submissions made by Mr. Thakkar that since the petition is pending with regard to the vires of Section 45 of the PML Act, the applicant be released on bail since the maximum punishment of seven years and is behind bar since April 2014. I have gone through various statements made by several witnesses and the applicant himself which has been recorded under Section 50 of the PML Act. Prima facie, the prosecution is successful to make out a case by collecting relevant documents that Crores of rupees have been transmitted to foreign countries through number of fake companies created by the applicant wherein he was Director and Page 13 of 15 HC-NIC Page 13 of 15 Created On Sun Feb 28 07:50:44 IST 2016 R/CR.MA/22552/2015 CAV ORDER was fully aware about the illegal activities going on through his companies. Considering the evidence collected by the Investigating Agency and produced before the Court, it is difficult to satisfy that there are reasonable grounds for believing that the applicant is not guilty of the offences and, therefore, the applicant cannot be released on regular bail.
10. As far as the submission made by Mr. Thakkar that the applicant is the only accused who is behind bar and, therefore, he may be released on bail cannot be accepted since co-accused, namely, Afroz Fatta's regular bail application is rejected by the coordinate Bench of this Court by a reasoned order and he is out of jail on interim bail that too on the ground that the investigating agency could not file reply in the matter before the Hon'ble Apex Court. Similarly, co-accused Rakesh Kothari whose regular bail application is also dismissed and confirmed by the Hon'ble Supreme Court is released only by an interim order that too in habeas corpus writ petition. Therefore, in my opinion, the applicant is not at all benefited by such interim order and would not entitle for any bail during the pendency of the trial. As far as the orders passed by this Court as well as the coordinate Bench with regard to other accused of other offences are concerned, those accused who have been released by this Court mainly on the ground that they were not facing any charges under scheduled offences and, therefore, it has been held that the rigors of Section 45 of the PML Act would not be applicable and considering the facts and circumstances of the case, they were released on regular bail. As far as order passed by coordinate Bench of this Court is concerned, those persons are not co-accused of the present applicant and are facing charges for cricket betting.
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11. Since the matter is at the stage of hearing of an application under Section 439 of the Code, as advised by the Hon'ble Supreme Court in various decisions, I would not like to discuss the evidence in detail, though I have gone through the statement of accused recorded under Section 50 of the PML Act and the statements of several witnesses and documents collected and produced before this Court by way of paper-book.
12. Considering the overall facts and circumstances of the case, the application stands rejected. Rule is discharged.
(A.J.DESAI, J.) Savariya Page 15 of 15 HC-NIC Page 15 of 15 Created On Sun Feb 28 07:50:44 IST 2016