Uttarakhand High Court
Satish Kumar And Another ... vs Directorate Of Enforcement on 10 May, 2022
Author: Ravindra Maithani
Bench: Ravindra Maithani
HIGH COURT OF UTTARAKHAND AT NAINITAL
Criminal Misc. Application No.636 of 2022
Satish Kumar and another ..........Petitioners
Vs.
Directorate of Enforcement, Government of India
........... Respondent
Present : Mr. S.K. Mandal, Advocate for the petitioners.
Mr. Lalit Sharma, Standing Counsel for the Government of
India/respondent.
JUDGMENT
Hon'ble Ravindra Maithani, J. (Oral) The challenge in this petition is made to the proceedings of Complaint Case No.3 of 2022, Directorate of Enforcement, Govt. of India vs. M/S Luxmi Auto Industries (through its partners Satish Kumar Gupta and Parminder Singh) and others, under Section 3 read with 70 and 4 of the Prevention of Money Laundering Act, 2002 (for short, "the Act"), pending before the court of Special Judge (PMLA)/District and Sessions Judge, Dehradun (for short, "the case").
2. Facts necessary to appreciate the controversy briefly stated are as follows. According to the case, the petitioners being partners of M/S Luxmi Auto Industries, B-2 Industrial Estate, Ramnagar, Roorkee, District Haridwar forged certain documents, cheated the Central Bank of India (for short, "the Bank") and obtained a loan 2 of `1.71 Crores. According to the case, various documents were fabricated and falsely prepared by the petitioners. It was done with the conspiracy of the bank officials. An FIR was filed by the CBI on 23.07.2009, in which, after investigation, a charge-sheet has already been submitted. In the year 2022, a complaint under the Act has been filed against the petitioners and others which is basis of the case. In this complaint, on 30.03.2022 cognizance has been taken against the petitioners and others. These proceedings are questioned in this petition.
3. Heard learned counsel for the parties and perused the record.
4. Learned counsel appearing for the petitioners would submit that proceeding of the case cannot continue under law. It is argued that with regard to the loan, a claim was made by the bank before the Debt Recovery Tribunal (for short, "DRT"), which was allowed. But, during execution proceedings, the matter was settled and the due amount was paid by the petitioners to the Bank.
5. It is argued that long thereafter, the complaint has been filed under the Act. Learned counsel also raised the following points in his arguments. 3
(i) The provisions of the Act are not attracted in this case because the loan has already been paid.
(ii) The proceedings of the case cannot be simultaneously taken against a person, it is barred by virtue of Section 26 of the General Clauses Act, 1897 (for short, "General Clauses Act"), Section 300 of the Code of Criminal Procedure, 1973 (for short, "the Code") and Article 20 Sub-Clause (2) of the Constitution of India.
(iii) The proceedings are time barred in view of Section 468 of the Code.
(iv) The department proceeded against the petitioners under Section 5 of the Act in a court in Ludhiana, Punjab and now, proceedings under Section 3 and 4 of the Act has been initiated in the court at Dehradun, which has no jurisdiction.
(v) Since, petitioners have already repaid the loan, nothing survives in the matter in view of Section 3(ii) of the Act.
(vi) Summoning has been done without inquiry under Sections 200 and 202 of the Code.
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6. In support of his contention, learned counsel for the petitioners has placed reliance on the principle of law, as laid down by the Hon'ble Supreme Court in the case of K. Virupaksha and another vs. State of Karnataka and another, AIR 2020 SC 3648.
7. In the case of K. Virupaksha (supra), a person, who obtained loan defaulted in its payment. Proceedings were initiated before the DRT, which were dismissed. Thereafter, a complaint was filed, which was ordered to be investigated for the offences punishable under Sections 511, 109, 34, 120-B, 406, 409, 420, 405, 417 and 426 IPC. The Hon'ble Court observed, "the petitioners after dismissal of the application before the DRT filed the impugned complaint which appears to be an intimidatory tactic and the afterthought, which is an abuse of process of law."
8. Hon'ble Supreme Court while allowing the petition in the case of K. Virupaksha, "In a circumstance, where we have already indicated that a criminal proceeding would not be sustainable in a matter of the present nature, exposing the appellants even on that count to the proceedings before the 5 investigating officer or the criminal court would not be justified."
9. On the other hand, learned State counsel would submit that since complaint has been filed by a public servant, therefore, there is no necessity to conduct the inquiry under Sections 200 and 202 of the Code. On the question of jurisdiction learned State counsel referred to Section 44 of the Act to argue that, in fact, the complaint has been filed in the special court constituted for the area, in which, the offence has been committed. There is no error of jurisdiction.
10. It is argued that proceeds of crime has been taken and utilized. Hence, no interference is warranted.
11. It is a petition under Section 482 of the Code. The jurisdiction is too wide to ensure the ends of justice. It is guided by the principles of law, as laid down by the Hon'ble Supreme Court in a catena of decisions. In the case of Indian Oil Corporation vs. NEPC India Ltd. and others, (2006)6 SCC 736. In para 12 of it, the Hon'ble Court observed as hereunder:-
"12. The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this 6 Court in several decisions. To mention a few-- Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre [(1988) 1 SCC 692 : 1988 SCC (Cri) 234] , State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] , Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC 194 : 1995 SCC (Cri) 1059] , Central Bureau of Investigation v. Duncans Agro Industries Ltd. [(1996) 5 SCC 591 : 1996 SCC (Cri) 1045] , State of Bihar v. Rajendra Agrawalla [(1996) 8 SCC 164 : 1996 SCC (Cri) 628] , Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259 : 1999 SCC (Cri) 401] , Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269 : 2000 SCC (Cri) 615] , Hridaya Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168 :
2000 SCC (Cri) 786] , M. Krishnan v. Vijay Singh [(2001) 8 SCC 645 : 2002 SCC (Cri) 19] and Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque [(2005) 1 SCC 122 : 2005 SCC (Cri) 283] . The principles, relevant to our purpose are:
(i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused.
For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint.
(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.
(v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from 7 furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not."
12. Mainly, arguments have been raised on the ground of jurisdiction, non-maintainability for the reasons that a proceeding had already been taken place and that the loan had been returned.
13. Arguments have been advanced with regard to the non-compliance of Sections 200 and 202 of the Code. The provisions of Section 200 of the Code empowers the Magistrate to proceed straightway without conducting inquiry under Sections 200 and 202 of the Code. This proviso is as hereunder:-
"200. Examination of complainant.--A Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witnesses, and also by the Magistrate:
Provided that, when the complaint is made in writing, the Magistrate need not examine the complainant and the witnesses--
(a) if a public servant acting or purporting to act in the discharge of his official duties or a court has made the complaint; or 8
(b) if the Magistrate makes over the case for inquiry or trial to another Magistrate under Section 192:
Provided further that if the Magistrate makes over the case to another Magistrate under Section 192 after examining the complainant and the witnesses, the latter Magistrate need not re-examine them."
14. In the instant case, complaint has been filed by a public servant in discharge of his official duties. Therefore, apparently there is no need to examine the complainant and the witnesses under Sections 200 and 202 of the Code before issuance of the process.
15. In so far as the jurisdiction is concerned, according to the FIR, (Annexure No.10 to this petition) the loan had been taken from the Central Bank of India, Branch B.T. Ganj Puri Rajputana, Roorkee and according to the case, the forged and fabricated documents were produced at the time of taking loan. In the complaint of the instant case, the role of both the petitioners have been recorded. It is as hereunder:-
"11.2 Satish Kumar Gupta (Accused No.2) Satish Kumar Gupta is one of the partners of M/s Luxmi Auto Industries and is the main accused in this case. He had taken loan from Central Bank of India, Roorkee Branch from his firm namely M/s Luxmi Auto Industries by submitting forged property documents to the bank as collateral security. Further, the said loan amount was transferred to the accounts of fake/paper companies namely 9 M/s Ludhiana Steel Industries and M/s Thuman Industries for purchasing of machinery parts etc. for the firm M/s Luxmi Auto Industries.
Satish Kumar Gupta in connivance with Parminder Singh has generated funds to the tune of Rs. 1.71 Cr. Through criminal activity related to the scheduled offence. It also revealed that the accused persons have used their fake/paper companies namely M/s Ludhiana Steel Industries and M/s Thuman Industries and their individual accounts as a vehicle to launder proceeds of crime and integrate them so as to project the same as untainted property. These funds are nothing but proceeds of crime generated through criminal activity related to the scheduled offence. Further, by layering and integrating the POC through his personal account and account of M/s Golden Industry, Satish Kumar Gupta tried to hide the criminal originality of the POC and projected the said tainted money generated out of criminal activities as untainted.
Thus, Satish Kumar Gupta is one of the main architects involved in cheating the Central Bank of India, Roorkee and hence he is directly or indirectly beneficiary of POC. He indulged or knowingly involved in process/activities of possession, acquisition; use/concealment of the POC hence appears to have committed offence of money laundering under section 3 of the Prevention of Money Laundering Act, 2002, which is punishable under Section 4 of the Prevention of Money Laundering Act, 2002.
11.3 Parminder Singh (Accused No.3) Parminder Singh is one of the partners of M/s Luxmi Auto Industries and is the main accused in this case. He had taken loan from Central Bank of India, Roorkee Branch for his firm namely M/s Luxmi Auto Industries by submitting forged property documents to the bank as collateral security. Further, the said loan amount was transferred to the 10 accounts of fake/paper companies namely M/s Ludhiana Steel Industries and M/s Thuman Industries for purchasing of machinery parts etc. for the firm M/s. Luxmi Auto Industries.
Parminder Singh in connivance with Satish Kumar Gupta has generated funds to the tune of Rs.1.71 Cr. Through criminal activity related to the scheduled offence. It also revealed that the accused persons have used their fake/paper company accounts in the name of M/s Ludhiana Steel Industries and M/s Thuman Industries and their individual accounts as a vehicle to launder proceeds of crime and integrate them so as to project the same as untainted property. These funds are nothing but proceeds of crime generated though criminal activity related to the scheduled offence. Further, by layering and integrating the said POC through his personal account and withdrawing the same in cash through cheques/ATM Parminder Singh tried to hide the criminal originality of funds and projected the said tainted money generated out of criminal activities as untainted.
Thus, Parminder Singh is one of the main architects involved in cheating the Central Bank of India, Roorkee and hence he is directly or indirectly beneficiary of POC. He indulged or knowingly involved in process/activities of possession, acquisition; use/concealment of the POC hence appears to have committed offence of money laundering under section 3 of the Prevention of Money Laundering Act, 2002, which is punishable under section 4 of the Prevention of Money Laundering Act, 2002."
16. Section 44 of the Act provides for the Special Courts competent to try offences under the Act. According to Sub-Section (1) of it, an offence punishable under 4 of the Act may be tried by the Special Court constituted for 11 the area in which the offence has been committed. It may be read with Section 3 and 4 of the Act, which is as hereunder:-
"3. Offence of money-laundering.--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 with the 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.
Explanation.--For the removal of doubts, it is hereby clarified that,--
(i) a person shall be guilty of offence of money-
laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely:--
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property, in any manner whatsoever;
(ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.12
4. Punishment for money-laundering.--Whoever commits the offence of money-laundering 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 3***:
Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of 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."
17. A bare perusal of Section 3 of the Act, makes it abundantly clear that it provides for punishment for involvement in any process or activity connected with the proceeds of crime.
18. Proceeds of Crime has been defined under Section 2(U) of he Act, which is as hereunder:-
"(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 [or where such property is taken or held outside the country, then the property equivalent in value held within the country] [or abroad];
Explanation.--For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;"
19. What is the allegation in the instant case is that the petitioners prepared forged documents, used them as genuine and untainted.13
20. Loan was taken from the Rookree Branch of the Central Bank of India. For that purpose of the Act, the offence has been committed in Roorkee area.
21. The offence, is committed within the area of Roorkee, District Haridwar. The Special Court having jurisdiction under the Act has taken cognizance in this matter. Therefore, in view of Section 44(1) of the Act, it cannot be said that the court which took cognizance has no jurisdiction in the matter.
22. An argument has been raised with regard to non-proceeding of the trial on the ground that the Section 26 of the General Clauses Act, Section 300 of the Code and Article 20(2) of the Constitution of India, bars the prosecution of the complaint. In fact, the principles of double jeopardy has been put into service. Article 20(2) of the Constitution of India reads, "no persons shall be prosecuted and punished for the same offence more than once."
23. In the instant case, the FIR was filed for offences under Indian Penal Code, 1860 (for short, "IPC") and here, in the instant case, the complaint is filed under Sections 3 and 4 of the Act. Both are distinct offences. 14 The acts are also different. They are not the same offence. Therefore, apparently the provisions of Article 20(2) of the Constitution of India are not attracted in the instant case. Instant complaint case is not a second trial. The petitioners have never been tried before.
24. In so far as Section 300 of the Code is concerned, it is also not applicable, it deals with the situation when the person once convicted or acquitted is tried for the same offence again. This Section bars such trial. Instant complaint case is not a second trial. The petitoners have never been tried out.
25. Section 26 of the General Clauses Act also makes provisions with regard to an act which falls as an offence under different statutes. This section reads as hereunder:-
"26. Provision as to offences punishable under two or more enactments.--Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but 15 shall not be liable to be punished twice for the same offence."
26. It may be noted that the offence under the Act is not as such an offence, as defined under the IPC. As the Section 3 of the Act makes it abundantly clear that it is an activity connected with the proceeds of crime.
27. In the case of P. Chidambaram vs. Director orate of Enforcement, (2019)9 SCC 24. Hon'ble Supreme Court has discussed this concept of money laundering and observed, "in the case of money laundering, where it involves many staging of "placement", "layering i.e. funds moved to other institutions to conceal origin"
and "interrogation i.e. funds used to acquire various Assets", it requires systematic and analysis investigation which should be of great advantage."
28. The complaint records that by layering and integrating the said proceeds of crime through personal account and withdrawing the same in cash through cheques, ATM, the petitioners tried to hide the proceeds of crime and projected the tainted money generated out of criminal activities as untainted.
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29. This act is not an offence under the IPC, under which FIR was filed and charge-sheet has been submitted, of which the trial is pending. This is distinct offence, defined under the Act. Therefore, mere pendency of criminal trial for the offences based on FIR lodged against the petitioners on 23.07.2009, it cannot be said that the complaint may not proceed further.
30. An argument has been raised that the petitioners had already deposited the entire money in the execution proceeding pursuant to the judgment passed by the DRT. Reference has been made to the Section 3 Sub- Clause (2) of the Act, it reads as hereunder:-
"3. Offence of money-laundering.--................,--
(i) ..................................
(ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever."
31. In the instant case, it is the allegation against the petitioner that he used Proceeds of Crime, he concealed it by layering, by integrating it. Merely because the petitioners have already deposited the money, it does 17 not absolve the petitioners of any liability under the Act. Section 3(ii) of the Act, does not bar the prosecution.
32. It is also been argued that an application under Section 5 of the Act was moved by the department in a Ludhiana Court for attachment. Therefore, the complaint could not have been filed in Dehradun. This argument has less merit for acceptance. This Court has already observed that in view of Section 44 of the Act, the Court of competence jurisdiction has taken cognizance.
33. In view of the foregoing discussion, this Court is of the view that there is no merits in this petition and deserves to be dismissed at the stage of admission itself.
34. The petition is dismissed in limine.
(Ravindra Maithani, J.) 10.05.2022 Sanjay