Criminal Application (APL) No. 201 of 2021 With
Criminal Bail Application No. 974 of 2021
Date of Judgement:
16 March 2021
Justice A.S. Gadkari
Petitioner – Babul Verma,
Kamal Kishore Gupta
Respondent – Enforcement Directorate,
State of Maharashtra
The following is a case of money laundering under the Prevention of Money Laundering Act, 2002 (PMLA) which reflected the power and scope of the Enforcement Directorate (ED) to investigate Scheduled Offences under the said Act.
- Section 406 IPC – Punishment in case of criminal breach of trust.
- Section 420 IPC – Cheating and dishonestly inducing a person to deliver his property.
- Section 34 IPC – Criminal act done by many persons with a common intention.
- Section 65 Prevention of Money Laundering Act, 2002 – CrPC shall apply in search and seizure, arrest, investigation, attachment, confiscation, and prosecution.
- Section 3 Prevention of Money Laundering Act, 2002 – Constituting the offence of money laundering.
- Section 44 Prevention of Money Laundering Act, 2002 – Power of Special Court to try offences under this Act.
- Mr Mahendra S. Surana is one of the directors of Aurangabad Gymkhana Club Pvt. Ltd. Babul Verma, Kamal Kishore Gupta (main accused and petitioners in this case) are directors and promoters of Omkar Realtors Pvt. Ltd.
- On 7 March 2020, an FIR was filed by Mr Mahendra against Omkar Realtors under Sections 406, 420, and 34 of the IPC for issuing cheques from blocked accounts amounting to 12,17,84,451/- Rs. resulting in a criminal breach of trust.
- On 10 July, the Enforcement Directorate (ED) received the complaint mentioned above. When they pursued the complaint, they found that a Scheduled Offence under the Prevention of Money Laundering Act,2002 (PMLA) had taken place. They also discovered that Omkar Realtors owed more than Rs. 2,000 Crores loan to Yes Bank.
- During the investigation, the ED further learned that a loan of Rs. 410 Crores was given to Anand Nagar SRA CHS(which is an SRA project under Omkar Realtors) from Yes Bank for constructing SRA/Rehab buildings. However, the loan amount was spent on the construction of sale buildings and not rehab buildings.
- While this case was pending before the special court, the accused (directors of Omkar Realtors) were remanded to the custody of the ED and later to judicial custody till 14 February 2021.
- On 6 February 2021. Mr Mahendra (original complainant) approached the ED and informed them that there was a misunderstanding on his part in filing the complaint. He informed the ED that the accused had paid an amount of Rs.14,73,84,361/- to the complainant by way of demand draft and it was transferred into his account. Hence, giving rise to no cause of action.
- Thereafter, the ED submitted a summary report before the Judicial Magistrate of the First Class. The Magistrate observed that the offences in the matter i.e. Sections 406, 420, 34 of the IPC are compoundable offences and since both the parties have compounded, the final report shall be filed and the case shall be disposed of.
- However, before the accused could be released on 14 February, the ED filed for further judicial custody of the accused persons for 14 days under Section 65 of PMLA to be read with Section 167 of the CrPC. The same was granted by the Special Court and the accused were remanded to judicial custody till 1 March 2021. Aggrieved by this, the accused filed a petition before the Bombay High Court.
- Whether the Enforcement Directorate has the power to further remand and investigate into the matter if the offence has been compounded by the complainant?
- The learned counsel for the petitioner/accused submitted that since the offences lodged against his client are compounded by the complainant through amicable settlement, the structure of the case of the ED does not survive and is wiped out. Hence, the petitioners ought not to be further remanded to custody, and must be released on bail forthwith.
- He also mentioned the case of P. Chidambaram V. Directorate of Enforcement (2019) wherein it was held that "Scheduled offence" is a sine qua non (integral part) to constitute the offence of money laundering which would generate money that is being laundered.
- The learned counsel appearing for the ED said that the case contains a very serious economic offence involving allegations of money laundering amounting to more than 400 Crore Rupees. He opined that even if the offence under IPC is compounded, the ED still continues to investigate the question regarding the whereabouts of the laundered money.
- He further submitted that the investigation of the present crime is an independent investigation. Once the Enforcement Case Information Report (ECIR) is registered, then the Scheduled Offence is no longer required for taking offence under PMLA to its final conclusion. To support this he relied on the case of Radha Mohan Lakhotia V. Deputy Director, PMLA (2010), which held that the offence of money laundering u/s 3 of PMLA is an independent offence.
- The Court, after careful perusal of definitions given under Section 2(1) of PMLA, said that the object of the Act is to investigate the offences of money laundering and to punish the guilty for commission of the said offence. It held that mere filing of closure report by the ED will not create any impediment or hurdle in the process of investigation by the ED for any offence under PMLA and being investigated by it.
- The High Court rejected the contention of the petitioner that if the Scheduled Offence is compounded, the investigation shall cease to continue and said that the investigation of an offence under Section 3 does not depend upon the result of the Scheduled Offence. Hence, it is a totally independent investigation. The Court also allowed the investigation by the ED to continue on its own till it reaches the stage as contemplated under Section 44 of the PMLA.
- Finally, the Court dismissed the petition of the accused on the grounds of having no merit. It also upheld the order of the Special Court to further remand the accused to judicial custody and also denied bail application filed by the accused.
The PMLA is a special statute with a specific aim to track and investigate cases of money laundering. Therefore, after instituting a Scheduled Offence, its end result will not have any effect on its investigation and the offence under the PMLA will survive and stand alone on its own. In this case, the High Court also pointed out that if an accused under PMLA is an influential person, then he might use his influence to compound the offence, in order to escape from any further investigation by the ED.
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