Telangana High Court
Ca.Anzar vs Directorate Of Enforcement on 7 February, 2022
Author: Lalitha Kanneganti
Bench: Lalitha Kanneganti
HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
CRIMINAL PETITIONS No. 9776 AND 9777 of 2021
COMMON ORDER:
These Criminal Petitions are filed by the petitioners
- Accused Nos. 2 and 1 respectively under Sections 437 and 439 Cr.P.C. seeking bail in connection with F No. ECIR/HYZO/11/2021 on the file of Deputy Director, Directorate of Enforcement, Hyderabad registered under the provisions of the Prevention of Money Laundering Act, 2002 (for short, 'the Act').
2. The case of the respondent Enforcement Directorate is that the subject crime was registered on 30.03.2021 by the Director of Enforcement in the case of multi- level marketing fraud done by M/s Indusviva Health Sciences Private Limited and others for investigation under the provisions of the PMLA, 2002 on the basis of FIR No. 124 of 2021 registered by Gachibowli Police Station under Sections 406 and 420 IPC and Sections 3, 4, 5 and 6 of Prize, Chits Money Circulation Scheme (Banning) Act out of which Section 420 IPC is the scheduled offence under the PMLA, 2002.
M/s Indusviva Health Sciences Private Limited is a company having registered office at Bangalore and is into multi- 2 level marketing scam and is working under the guise of Direct Selling Business. The company engaged large number of distributors and did rigorous marketing. The entire focus of their company, scheme, propaganda was to make the new entrants believe that they can become rich by merely investing Rs.12,500/- and by bringing in more and more people into the scheme. Although there was no direct enrollment / introduction fee charged by the company, but it was mandatory to buy the products of the company for becoming a distributor. The company projected its top-level distributors as celebrity members and they were felicitated and honourd during events to attract more people. In this way, the company enrolled around 10 lac members and collected Rs.1500 crores since its inception and as per their own admission, commission was the biggest expenditure head and the value of the product was merely 20% of the total revenue of the company.
It is alleged that M/s Indusviva Health Sciences Private Limited floated subsidiary companies viz. M/s Indusviva Ayurvedic Resorts Private Limited, M/s Indusviva Lab Private Limited etc. and diverted funds to them. Further, Accused No.2
- CEO of the company and Accused No.1 - Chairman of the company reaped the monetary benefits from the company in the 3 guise of dividends / salary commission to the tune of Rs. 42 an 25 crores. It is alleged that Accused No.2 helped Accused No.1 in diversion of funds to M/s Olive Life sciences Private Limited and M/s Ingex Lab Private Limited. It is also alleged that the petitioners are directly involved in laundering the proceeds of crime which is acquired by duping the lacs of customers in the guise of sale of highly over-priced products.
3. Learned Senior Counsel Sri T. Niranjan Reddy appearing on behalf of Sri M.P. Kashyap, learned counsel for the petitioners submits that Accused Nos. 1 and 2 are the Chairman and CEO of the company which is engaged in the business of selling products through a direct selling distribution and marked as one of the leading companies for the last several years. With regard to the direct selling guidelines, Ministry of Consumer Affairs issued the guidelines dated 09.09.2016 and the company also undertook to follow the guidelines as the same is approved and recognized by the Central Government. This company is shown at Sl.No. 143 of the List. It is also submitted that in concurrence with the Central Government guidelines, the State of Telangana also framed the Telangana Direct Selling Guidelines Order, 2017. Learned Senior Counsel submits that the petitioners business cannot be a money 4 circulation scheme or a pyramid scheme, the company provides for pooling up period which is 30 days from the date of dispatch of products from the company where the direct seller has a right to cancel and return the goods for which refund will also be provided and additional appointment of a direct seller is optional and not mandatory.
4. It is submitted that the petitioners company has owned 2 lac active direct sellers all over India and there is no evidence of money-laundering in any manner, the business is conducted in a fair manner. Learned Senior Counsel submits that the punishment for the alleged offences is below seven years and the police without following the procedure under Section 41-A Cr.P.C. have arrested the accrued. The learned Senior Counsel further submits that the petitioners company is permitted to continue with its business in accordance with the order passed by this Court in Writ Petition No. 5877 of 2021 and other crimes were also registered against the petitioners and in all those cases they were granted bail. It is submitted that the petitioners were arrested on 15.12.2021 and remanded to judicial custody on 17.12.2021. He submits that in the grounds of arrest, it is stated that Accused No.1 was summoned to appear on 14.12.2021 vide summons dated 03.12.2021 along 5 with Annexure - A issued under Section 50 of the PMLA for which he failed to appear. He was summoned again to appear on 15.12.2021 for which he appeared but during the recording of statement under Section 50 of the Act, he is evasive and uncooperative and has failed to submit / explain the documents / information which are in his possession. Learned Senior Counsel submits that it is not the case of the prosecution that Accused No.1 failed to appear before the authorities but he failed to answer the queries as expected by them. He submits that Accused No.1 has a right of silence. He submits that as per Clause 7(1) of the Telangana Direct Selling Guidelines Order, 2017, 'direct sellers and direct selling entity shall take appropriate steps to ensure the protection of all private information provided by a consumer'. Clause 7(2) says that 'direct sellers and direct selling entity shall be guided by the provision of the Consumer Protection Act, 1986'. He submits that in case of any procedural lapses, Clause 11 provides for 'Appeal' and Clause 12 provides for 'Revision'.
5. Learned Senior Counsel submits that in this case, offence of money-laundering is not made out and the Act itself has no application. It is submitted that as per Section 4 of the Act, 'whoever commits the offence of money-laundering shall be 6 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'. He further submits that 'proceeds of crime' is defined under Section 2(sc)(u) and it reads as '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'. Learned Senior Counsel submits that it is not their case that it cannot be held that these are the proceeds of crime and further it is submitted that as per Section 19 of the Act, 'Director, Deputy Director, Assistant Director or any other officer authorized 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 believe 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'.
6. Learned Senior Counsel submits that pre-requisite for arresting an accused is Section 19 has to be complied with. The officer has to record that the petitioner has been guilty of an 7 offence punishable under the Act and in this case, without there being compliance of Section 19 of the Act, the petitioners have been arrested. He submits that this Court in cases of offences under NDPS Act as well as Scheduled Castes & Scheduled Tribes (Prevention of Atrocities) Act held that Section 41-A Cr.P.C. is applicable. In this case also, though PMLA is a special enactment, the police ought to have followed the procedure under Section 41-A Cr.P.C., but without providing any proper check-list contrary to the judgments of the Apex Court they have been arrested. He submits that the respondent Enforcement Directorate sought for custody of petitioners and further custody was not sought and no useful purpose would be served by detaining the petitioners in jail. Though it is stated that the company has collected Rs.1500 crores since inception, in their counter itself, they have categorically stated that the commission paid to the family members of the petitioners is to a tune of Rs.42 and 25 crores. He submits that they have been languishing in jail from 17.12.2021 and as the allegations against the petitioners do not attract the provisions of the PMLA, they may be enlarged on bail.
7. Sri Namavarapu Rajeswhwar Rao, learned Assistant Solicitor General filed a detailed counter. He does not dispute 8 the fact that the custody of the petitioners was sought and further custody was not sought. He submits that unless and until the provisions of Section 45 are satisfied, the petitioners cannot be granted bail. He submits that as Accused No.1 was evasive when he appeared as per the notices issued under Section 50 of the Act, he was arrested and the investigation reveals that the petitioners are actively involved in money- laundering and as investigation is still pending and some more evidences have to be collected, the petitioners are not entitled for grant of bail.
8. The admitted facts in this case are, the petitioners were arrested and remanded to judicial custody on 17.12.2021. Further, it is also the case of the respondent that they have sought for custody of the petitioners and could elicit the required information and that they have also not sought for further custody as it was not required. It is only stated that they have to complete further investigation, as such the accused are not entitled for bail. Nothing has been stated if the petitioners are enlarged on bail it is going to impact the investigation process. While considering the bail applications, the Courts necessarily have to take into consideration the nature of allegations, gravity of offences and in case the bail is 9 granted what would be the impact of it on the investigation. The respondents failed to state anything in this regard except stating that investigation is pending. As the petitioners are languishing in jail from the last 51 days and as the custody of the petitioners is not required any further, and taking into consideration the fact that the petitioners were granted bail in similar case, this Court is inclined to grant bail to the petitioners, however, on certain conditions.
9. The Criminal Petitions are allowed. The petitioners
-Accused Nos.2 and 1 shall be enlarged on bail in connection with F.No. ECIR/HYZO/11/2021 on the file of Deputy Director, Directorate of Enforcement, Hyderabad on each of them executing a personal bond for a sum of Rs.20,000/- (Rupees twenty thousand only) with two sureties for a like sum each to the satisfaction of the Metropolitan Sessions Judge, Ranga Reddy District at L.B. Nagar. The petitioners shall appear before the authorities concerned once in a week i.e. on Friday between 10.00 a.m. and 01.00 p.m. They shall cooperate with the investigation and shall not influence the officers or the witnesses. They shall not leave the country without prior permission of the Court and shall surrender the passport with the authorities. In case of violation of any of the conditions 10 imposed above, the authorities are at liberty to move an appropriate Application seeking cancellation of bail.
___________________________ LALITHA KANNEGANTI, J 7th February 2022 ksld