Bail Can't Be Denied Under PMLA On Mere Assumption That Property Recovered From Accused Must Be Proceed Of Crime: Delhi High Court
The Delhi High Court has recently held that bail cannot be denied under Prevention of Money Laundering Act, 2002, merely on the assumption that the property recovered from the accused must be proceed of crime.
Justice Dinesh Kumar Sharma rejected a plea moved by Enforcement Directorate (ED) against grant of bail to an accused, Rahil Hiteshbhai Chovatia, in a money laundering case on October 19, 2022.
An FIR was registered by Delhi Police's special cell the investigation of which revealed that there was large-scale money laundering taking place wherein public money was looted through apps like Power Bank App, Tesla Power Bank App, Ezplan, by luring people with the promise of doubling their money in a short period.
ECIR was registered by ED in 2021. The probe revealed that from August 2020 to June 2021, various shell companies were either formed or acquired by Chinese nationals with the assistance of Indian nationals and bank accounts of the first layer shell companies were used to collect money from the public.
ED alleged that the money was further laundered through several bank accounts of other dummy entities like M/s. Akash Corporation and M/s. Haresh Corporation being the second layer shell companies. Ultimately, the laundered money was transferred out of the country under the guise of payments for imports, import logistics, and in the form of cryptocurrencies, the probe agency further alleged.
As per ED, the funds were further layered and laundered through additional accounts including that of M/s. Sagar Diamonds Ltd. and M/s. Patel Rushabh & Co. being third layer shell companies.
Chovatia was summoned by ED to record his statement. However, ED alleged that instead of cooperating with the investigation, he attempted to flee to Dubai and was detained by the Bureau of Immigration in July 2022.
His statement was then recorded under Section 50 of the PMLA. It was ED's case that rather than providing the requested details, Chovatia shifted the responsibility to his brother-in-law, claiming that he handled all matters related to trading, export-imports and finance for M/s. Sagar Diamond Ltd. and M/s. RHC Global Exports Pvt. Ltd.
The probe agency submitted that despite being a Director of both the companies, Chovatia deliberately shifted the burden of providing details to his brother in law, knowing he had already fled to Dubai and could not be contacted.
On the other hand, Chovatia submitted that even after grant of bail, he had appeared as and when directed by the ED. He also submitted that ED was seeking cancellation of his bail with the sole motive to compel and force him to “toe the line” of the probe agency “to make a confessional statement.”
Dismissing ED's plea, Justice Sharma observed that the order granting bail was only a prima facie view expressed by the trial court and such observations are not taken into consideration while deciding the matter finally.
“The case of the ED is based on the fact that the entity of the respondent has received the funds from the first, second and third layer entities. It is to be kept in mind that even as per Vijay Madan Lal Chaudhary (supra) it has categorically been held that ingredients constituting the offence of money laundering needs to be construed strictly,” the court said.
It added: “It is also no longer a matter of debate that the probative value of statement under section 50 of PMLA is to be considered at the stage of trial. The bail cannot be denied merely on the assumption that the property recovered from the respondent must be proceed of crime.”
Furthermore, the court said that the criminality regarding transfer of funds was something which is to be considered at the stage of trial. It added that ED's apprehension that if Chovatia was allowed to be remain on bail, he may derail the investigation or was a flight risk was mere apprehension and no substantial reason was given by the agency.
“The frequent rotation of funds disproportionate to the nature of business of Mr.Akash Panchal and the authenticity of statement under Section 50 of PMLA is required to be examined during the trial. The investigation has already been completed and the complaint has already been filed. I consider that there is no material on record to allow the application of ED for cancellation of bail,” the court said.
However, it clarified that any observation made by the trial court in the order granting bail will not be taken into consideration at the time of final appreciation of evidence.
Counsel for Petitioner: Mr.Zoheb Hossain, special cousel for ED with Mr. Vivek Gurnani, Mr. Kartik Sabharwal, Mr. Kanishk Maurya, Mr. Vivek Gaurav and Ms.Abhipriya Rai, Advs. for ED
Counsel for Respondent: Mr. Vikram Chaudhari, Sr. Adv. with Mr. Rishi Sehgal, Ms. Arveen Sekhon, Ms. Nikita Gill, Ms. Muskaan Khurana, Advs
Title: DIRECTORATE OF ENFORCEMENT v. RAHIL HITESHBHAI CHOVATIA