Delhi High Court
Naresh Jain vs Directorate Of Enforcement on 30 July, 2021
Equivalent citations: AIRONLINE 2021 DEL 1129
Author: Yogesh Khanna
Bench: Yogesh Khanna
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 22nd July, 2021
Decided on : 30th July, 2021
+ BAIL APPLN. 112/2021 and CRL.M.(BAIL) 81/2021;
+ BAIL APPLN. 122/2021
BIMAL KUMAR JAIN and NARESH JAIN ..... Petitioner/s
Through : Mr.Vikram Chaudhri, Sr. Advocate with
Mr.Naveen Malhotra, and Mr.Harshit
Sethi, Advocates.
versus
DIRECTORATE OF ENFORCEMENT ..... Respondent
Through : Mr.S.V.Raju, ASG, Mr.Zoheb Hossain,
Special Counsel, Mr.Amit Mahajan,
CGSC, Ms.Aarushi Singh, Ms.Mallika
Hiremath, Mr.Vivek Gurnani, and
Mr.Agni Sen, Advocates
CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA
YOGESH KHANNA, J. (Through Video Conferencing)
1. These petitions are for grant of bail to the applicant Bimal Jain
(Bail Application No.112/2021) and Naresh Jain (Bail Application
No.122/2021).
2. On 01.07.2017, an enquiry under FEMA, 2019 was commenced by
the respondent and searches were carried out at various places against
accused Naresh Jain and others. It is alleged petitioners and others had
appeared on numerous occasions before the Enforcement Directorate and
the enquiry was conducted for two years under Section 47 of the FEMA.
Bail. Appln Nos..112/2021 & 122/2021 Page 1 of 12
Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
3. On 13.09.2018, the Enforcement Directorate got registered FIR
No.179/2018 with the EOW Cell for Scheduled Offences under the
Prevention of the Money Laundering Act, 2002 (hereinafter referred as
PMLA) i.e. Sections 419/420/467/468/471/476/120B IPC.. Thereafter,
instant ECIR No.05/HIU/2018 was recorded by the Enforcement
Directorate and petitioners appeared before the Enforcement Directorate
from November 2018 on several occasions. It is alleged the petitioner
Naresh Jain appeared at least 25 times, however, on 01.09.2020 he was
arrested under Section 19 PMLA. Searches were conducted by the
Enforcement Directorate on 23.10.2020 under PMLA at the residential
premises of the petitioner Bimal Jain also.
4. On 28.10.2020, the prosecution complaint was filed before the
learned Special Judge, PMLA against eight accused persons, including
the petitioners herein. Petitioner Bimal Kumar Jain also joined the
investigation of FEMA as also PMLA on various occasions. However,
on 02.11.2020, an application was filed by the Assistant Director of
Enforcement Directorate claiming interalia Bimal Jain had not
deliberately received the summons and prayer was made for issuance of
NBWs. Such NBWs were issued on 02.11.2020. In the meanwhile, one
of the co-accused Puneet Jain approached this Court by way of
CRL.M.C. 2283/2020 and NBWs were set aside against Puneet Jain by
this Court. On the basis of the order dated 23.11.2020 of this Court,
on 27.11.2020 in Crl.M.C.No.2283/2020 Bimal Jain moved an
application for cancellation of NBWs, but during the pendency of this
application, Bimal Jain was arrested on 30.11.2020, so he remained in
judicial custody.
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
5. Petitioner Bimal Jain then moved an application for bail but it was
rejected on the ground he did not co-operate with the Investigating
Officer; furnished fake addresses; and also on gravity of the offence.
6. The arguments of the learned senior counsel for the petitioner is
three folds a) while arresting Bimal Jain, procedure under Section 19
PMLA was not followed; b) the Enforcement Directorate cannot be the
complainant and the Investigating Officer at the same time; and c) effect
of declaration of twin conditions under Section 45 of the PMLA have
been declared unconstitutional and ultra virus in view of decision in
Nikesh Tarachand Shah vs. Union of India and Anr. (2018) 11 SCC 1.
7. It is argued by the learned senior counsel for the petitioner Bimal
Jain, per Section 19(1) PMLA the Investigating Officer must have the
material in his possession; and he has reasons to believe (the reasons for
such belief to be recorded in writing); that such person is guilty of
offence under the Act; and after arrest of such person under sub section
(1), he has to forward the copy of order along with material in his
possession to the adjudicating authority in a sealed envelope. The rules
qua form and the manner of forwarding the copy of the arrest order of the
person along with material to the adjudicating authority were also quoted
viz Rule 2, 3, 6, Form III under Rule 6 of the PMLA.
8. It was argued it is obligatory to see if there was sufficient
compliance of the provisions of Section 19 of the PMLA and the Rules
made thereunder. It was argued the arrest of Bimal Jain was made
without compliance of Section 19 of the PMLA and Rules, hence his
custody is wholly illegal and he needs to be granted bail.
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
9. The arguments of the learned senior counsel for the petitioner are
being dealt with in seriatim.
10. Qua objection of non-compliance under Section 19 of the PMLA, I
may say since the arrest of accused Bimal Jain was in execution of the
NBWs therefore, the provision under Section 19 of the PMLA could not
be adhered to. Admittedly, Bimal Jain was arrested in execution of the
NBW by the learned Special Judge, PMLA while taking cognizance of
prosecution complaint filed by the Enforcement Directorate and thus
there was no occasion to comply with the requirement of Section 19 of
the PMLA. The very fact the complaint was filed by the Enforcement
Directorate arraying petitioner Bimal Jain as accused No.2, prima facie
show there were reasons to believe the person was guilty of offence
punishable under Section PMLA as the complaint is filed only against a
person who is presumed to be guilty. Admittedly, the learned Special
Judge, PMLA took cognizance of the complaint filed by the Enforcement
Directorate as he reasonably believed petitioner Bimal Jain, being guilty
of offence of money laundering.
11. Coming to his second argument viz the complainant and the
Investigating Agency cannot be same, I may refer to Mukesh Singh vs
State (NCT) of Delhi 2020 (10) SCC 120 wherein it was held:-
"8. The question which is referred to the larger Bench is,
whether in case the investigation is conducted by the
informant/police officer who himself is the complainant, the
trial is vitiated and in such a situation, the accused is
entitled to acquittal?
xxxx
10.5. Therefore, as such, the NDPS Act does not
specifically bar the informant/complainant to be an
investigator and officer in charge of a police station for the
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
investigation of the offences under the NDPS Act. On the
contrary, it permits, as observed hereinabove. To take a
contrary view would be amending Section 53 and the
relevant provisions of the NDPS Act and/or adding
something which is not there, which is not permissible.
13.2. (II) In a case where the informant himself is the
investigator, by that itself cannot be said that the
investigation is vitiated on the ground of bias or the like
factor. The question of bias or prejudice would depend
upon the facts and circumstances of each case. Therefore,
merely because the informant is the investigator, by that
itself the investigation would not suffer the vice of
unfairness or bias and therefore on the sole ground that
informant is the investigator, the accused is not entitled to
acquittal. The matter has to be decided on a case-to-case
basis. A contrary decision of this Court in Mohan Lal v.
State of Punjab [Mohan Lal v. State of Punjab, (2018) 17
SCC 627 : (2019) 4 SCC (Cri) 215] and any other decision
taking a contrary view that the informant cannot be the
investigator and in such a case the accused is entitled to
acquittal are not good law and they are specifically
overruled."
12. The last limb of argument was qua twin conditions of 45 of the
PMLA. Admittedly the Hon'ble Supreme Court in Nikesh Tarachand
Shah (supra) declared the Section 45 of the PMLA as it stood then, as
unconstitutional and violative of Articles 14 and 21 of the Constitution
of India, but the defects pointed out by the Hon'ble Supreme Court in
Nikesh Tarachand Shah (supra) were cured by the Legislature and an
amendment to section 45(1) was made vide the Finance Act, 2018 (No.13
of 2018). Under the amendment Act, section 45(1) was revived and for
the words "punishable for a term of imprisonment of more than three
years under part A of the Schedule", the words "under this Act" were
substituted in section 45(1) of the PMLA.
13. The Supreme Court in P. Chidambaram vs E.D. (2019) 9 SCC 24
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
has taken judicial note of such amendment:-
38. The twin conditions under Section 45(1) for the offences
classified thereunder in Part A of the Schedule was held
arbitrary and discriminatory and invalid in Nikesh
Tarachand Shah v. Union of India (2018)11 SCC 1. Insofar
as the twin conditions for release of the accused on bail
under Section 45 of the Act are concerned, the Supreme
Court held (at SCC p. 15. para 3) the same to be
unconstitutional as it violates Articles 14 and 21 of the
Constitution of India. Subsequently, Section 45 has been
amended by Amendment Act 13 of 2018. The words
"imprisonment for a term of imprisonment of more than
three years under Part A of the Schedule" has been
substituted with "accused of an offence under this Act...".
14. Further, in Mohd. Arif vs. Govt. of India, 2020 SCC OnLine Ori
544, the Orissa High Court has held as under:-
"23. While deciding a bail application, the provisions of
Section 45 read with Section 24 which reverses the burden
of proof and creates presumption of guilt required to be
dislodged by the accused, will mandatorily apply. A similar
view of the matter has been reiterated in Rohit Tandon v.
Directorate of Enforcement. It may further be held that the
reliance placed by the petitioner on Nikesh Tarachand
Shah v. Union of India is untenable in view of the fact that
Section 45 has been amended (by the Amendment Act 13 of
2018) whereby the original expression "imprisonment for a
term of more than three years under Part A of the
Schedule"(pre-amendment) now stands substituted by the
expression "no person accused of an offence under this Act
shall be released on bail or on his own bond". Thus, the
contention raised by the petitioner with regard to Section
45 of the Act does not hold good. A similar sentiment has
been echoed by the apex court in P. Chidambaram v.
Directorate of Enforcement"
15. The Supreme Court has dismissed the SLP as withdrawn against
the above judgment of the Orissa High Court vide order dated 24.11.2020
in SLP Crl 4878/2020.
16. The contrary view taken by this Court in Upendra Rai vs.
Bail. Appln Nos..112/2021 & 122/2021 Page 6 of 12
Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
Directorate of Enforcement 2019 SCC OnLine Del 9086 has also been
stayed by the Hon'ble Supreme Court in SLP (Crl) 2598/2020 vide an
order dated 03.06.2020. Moreso, contrary view taken by this Court also
in Dr. Shivender Mohan Singh vs. Directorate of Enforcement 2020 SCC
OnLine Del 766, has also been stayed by the Supreme Court vide its
order dated 31.07.2020 in SLP(Crl) No.3474/2020 while stating "Until
further orders, status quo with respect to release from jail be maintained
and impugned Judgment not to be treated as a precedent for any other
case."
17. No doubt, the legislature has the power to cure the underlying
defect pointed out by a Court, while striking down a provision of law and
pass a suitable amendment. In State of Karnataka v. Karnataka Pawn
Brokers Association (2018) 6 SCC 363 it was held:-
"24. On analysis of the aforesaid judgments it can be said
that the Legislature has the power to enact validating laws
including the power to amend laws with retrospective
effect. However, this can be done to remove causes of
invalidity. When such a law is passed, the Legislature
basically corrects the errors which have been pointed out
in a judicial pronouncement. Resultantly, it amends the
law, by removing the mistakes committed in the earlier
legislation, the effect of which is to remove the basis and
foundation of the judgment. If this is done, the same does
not amount to statutory overruling."
18. It is well settled the legislature has the power to cure the
underlying defect pointed out by a Court, while striking down a provision
of law and pass a suitable amendment. In Municipal Committee,
Amritsar & Ors. vs State of Punjab & Ors. (1969) 1 SCC 475, it was
held:-
"7. We are unable to accept the argument that since the
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
High Court of Punjab by their judgment in Mohinder Singh
Sawhney case struck down the Act, Act 6 of 1968 had
ceased to have any existence in law, and that in any event,
assuming that, the judgment of the Punjab High Court in
Mohinder Singh Sawhney case did not make the Act non-
existent, as between the parties in whose favour the order
was passed in the earlier writ petition, the order operated
as res judicata, and on that account the Act could not be
enforced without re-enactment."
19. Therefore, merely because the entire section is not re-enacted
would be of no consequence since the provision even after being declared
unconstitutional, does not get repealed or wiped out from the statute book
and it only becomes unenforceable. Therefore, once the Parliament steps
in and cures the defect pointed out by a Constitutional Court, the defect
appears to be cured and the presumption of constitutionality is to apply to
such provision.
20. Thus, there is a presumption in favour of constitutionality since
the amended section 45(1) of the PMLA has not been struck down, (see)
Nagaland Senior Govt. Employees Welfare Assn. v. State of Nagaland
(2010) 7 SCC 643.
21. Now the question is if Section 45(1) of the PMLA is ignored,
whether the petitioners are entitled to bail per parameter of Section 439
Cr P C.
22. The investigation conducted by the Directorate of Enforcement so
far has revealed Naresh Jain along with his brother Bimal Jain and other
accomplices hatched a criminal conspiracy to cause loss to the exchequer
and banks by indulging in illegal foreign exchange transactions on the
basis of forged/ fabricated documents. For the furtherance of conspiracy,
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
documents like identity proof, birth and education certificate, voter ID,
PAN Card and signatures were forged/fabricated to incorporate entities,
operating bank accounts, facilitating bogus/over-invoiced/ under-
invoiced import and export transactions and rotation of the funds through
web of shell companies to cause undue benefit to the parties involved and
loss to the exchequer and banks. Naresh Jain also facilitated parking of
funds abroad by Indian nationals through his international Hawala
transaction structure created in India and in various other jurisdictions.
Naresh Jain conducted international Hawala operation and domestic
operation of providing accommodation entries to co-conspirators i.e. the
beneficiaries in lieu of his commission. For this purpose, Naresh Jain
along with his brother Bimal Kumar Jain and other accomplices,
confidants, employees and others established a structure of paper entities
(barring a few that were doing real business) by incorporating companies
or forming other business entities like firm or individual proprietorship.
Investigation so far, has revealed that Naresh Jain incorporated and
operated 450 Indian entities and 104 foreign entities. These entities were
incorporated by using original identity proofs and documents of dummy
shareholders and directors as well by fabricating identity proofs and
documents of these shareholders and directors. Fabricated documents
were used to open bank accounts as well.
23. During the investigation conducted so far, out of 450 shell
companies, 603 bank accounts of 311 companies have been examined
and it has been gathered that Naresh Jain and his accomplices including
the Bimal Jain rotated funds approximately to the tune of Rs.96,000
Crores for providing accommodation entries of approximately Rs.18,679
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
Crores to 973 beneficiaries. Petitioner Bimal Jain was made a director in
various companies in which proceeds of crime generated by Naresh Jain
and his accomplices were projected as untainted properties and is in
possession of proceeds of crime to the tune of Rs.35,78,53,638/-.
24. It is alleged both the petitioners are well connected in India and
abroad and there is an apprehension that they will flee from the country
to evade trial in case they are enlarged on bail. As alleged above, Bimal
Jain has evaded the summons issued by the department and had refused
to join investigation. The apprehension qua Naresh Jain finds support
from the following fact:
"It was further informed that Dubai Police had arrested
Naresh Jain and his 9 accomplices for money
laundering activities. Naresh Jain in his statement dated
11.09.2017 recorded under Section 37 of FEMA, 1999
and taken on record in this case vide his statement dated
27.08.2020 recorded under Section 50 of PMLA, 2002,
informed that he was arrested in February, 2007 in
Dubai and got bail in August, 2007. However, he fled
from Dubai in May, 2009 through Nepal. Government of
Dubai had sent a report on the case of Naresh Jain
which was forwarded by NCB vide their letter dated
20.01.2010. The report indicates that Naresh Jain and
his accomplices carried out transfers of money gains
worth (2,022,459,177,00 UAE Dirham) resulting from
drugs and bribery crimes with the intention to hide their
illegal sources."
25. It is alleged the evidence so far collected indicate Naresh Jain has
done Hawala operation of Rs.11,800 Crore approx in 104 foreign entities,
details of which have been gathered so far.
26. Further, it is alleged by the Enforcement Directorate the
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
petitioners are involved in various criminal cases in India and abroad too
including, USA, Britain, Dubai etc and even two Red Corner Notices
have been issued by the Interpol against Naresh Kumar Jain. The USA
Southern District Court of New York vide its Order dated 16.06.2009
upheld the forfeiture of assets worth USD 43,72,653/- of Naresh Jain and
his accomplices in a money laundering case.
27. It is alleged Naresh Jain has continued the business of
international Hawala and domestic accommodation entries; by keeping
himself under veil and adopted measures i.e. kept his offices secret; hired
premises for his operations; got rent agreements of rented premises
signed by his employees; employees were paid in such a way that they
could not be linked with him directly; got SIM cards issued in the name
of other persons for himself and his employees and accomplices to
conduct business and avoid detection; incorporated entities with dummy
shareholders and directors; and his name does not appear anywhere in
documents. Even the allegations are the petitioners have forged their
medical certificates and Naresh jain continues the criminal activities
while in Jail and the investigation in the case is still going on and a large
number of activities/fact accounts/witnesses /employees and beneficiaries
are involved.
28. It is also alleged if enlarged on bail there is every likelihood the
petitioners may flee to Dubai or elsewhere to avoid the process of law
and they are flight risks.
29. Thus, in the circumstances stated above, I am not inclined to grant
bail to both the petitioners. The petitions are dismissed. Pending
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Signature Not Verified
Digitally Signed By:VIJAYA
LAKSHMI DOBHAL
Signing Date:30.07.2021 11:46
application, if any, also stands disposed of.
30. Nothing opined above, shall not be treated as an observation on
merits of claim of either side.
YOGESH KHANNA, J.
JULY 30, 2021 DU/M Bail. Appln Nos..112/2021 & 122/2021 Page 12 of 12 Signature Not Verified Digitally Signed By:VIJAYA LAKSHMI DOBHAL Signing Date:30.07.2021 11:46