'Confinement Inevitable': Madras HC Denies Bail To NRI Company Director Accused Of Money Laundering, Supplying Inferior Quality Coal To PSUs

Madras High Court has refused to grant bail to Ahmed A.R Buhari, director and promoter of M/s Coastal Energen Private Limited (CEPL), accused of the offence under Section 3 of the Prevention of Money Laundering Act, 2002.

Justice G. Jayachandran observed that the petitioner is alleged to have supplied Indonesian imported coal of inferior quality to Public Sector Undertakings (PSUs), routing the supply through his shell company in Dubai, and siphoning the overinflated and over-invoiced money to his offshore entities in UAE, British Virgin Islands (BVI) and Mauritius. According to the respondent ED, the money so laundered is brought back to India as an equity investment in Coastal Energy Private Limited owned by him.

The court also noted the prosecution's submission that the accused has not been cooperating with the investigation. In fact, he is withholding relevant information for the continuance of the investigation. The court, therefore, noted in its order dismissing the bail:

"In view of this Court, this petitioner who is a Non-Resident Indian widely connected with other parts of the World and not inclined to cooperate with the investigation in its true sense is not entitled for bail. The ramification of the alleged crime runs to several hundred crores. Several persons in and outside India are connected in the crime. The documents connected with the Shell Companies floated by him in other countries are to be collected...His appearance before the Investigating Officer for investigation as and when it was convenient for him does not indicate that his presence can be secured, if he once decide to leave the Country for ever."

On the petitioner's Senior Counsel P. Chidambaram's submission that the arrest was unnecessary, the court opined that Section 45(1) of PMLA after amendment ought to be applied when 'a bail petition is considered in case of offences involving "Proceeds of Crime" above Rs.1 crore'. Section 45(1) of the Act imposes an additional condition for the grant of bail apart from the condition contained in the Code of Criminal Procedure. 

The court also noted that the principle of  'bail being the rule and jail being the exception' is not entirely applicable in special legislations like PMLA, NDPS Act etc. where 'Jail becomes the rule and bail becomes the exception' based on the gravity of offences committed.

"...Whether such classification is reasonable or not is the question primarily now subject matter pending before of the Apex Court. Till verdict is pronounced, as the Division Bench of this Court has observed in N.Umashankar & others -vs- The Assistant Director, Directorate ofEnforcement, Government of India, Chennai(2022)...., the constitutional validity of Section 45(1) of PMLA, 2002 found in the statute has to be held valid", the court clarified.

The court acknowledged the Additional Solicitor General's submission that the petitioner deliberately evaded the queries made by the investigating agency to furnish bank account statements of the offshore Companies involved in this transaction, original invoices raised by the Indonesian Coal Miners to his Dubai based entities, Books of Accounts of his foreign entities located in Mauritius and the British Virgin Islands (BVI).

These documents, being crucial to determine if money has been laundered in the manner as prima facie indicated by the investigation, must be handed over to the agency, the court noted.

Arguments Raised

The petitioner argued that for arrest under PMLA, arrest under PMLA, the authorised officer must prima facie satisfy himself that the accused is guilty of the offence under PMLA. For granting bail, the court should reach a conclusion that the accused is not guilty of the said offence under PMLA. The crux of the argument was that predicate offence is not made out and no final report has been filed so far, therefore, prima facie satisfaction guilt does not arise. The petitioner also added that the constitutional validity of Section 45 of PMLA is currently under challenge in the Supreme Court and the rigours of the same shouldn't be applied for grant of bail. The triple test in Section 437 Cr. P.C should only be applied, they argued.

Refuting the petitioner's submission that there must be a conclusion of proceedings initiated under the 'predicate offence' to act upon the petitioner, ASG submitted that initiation of proceedings under the schedule offence is more than enough and even the outcome of proceedings is immaterial. He added that there is no bar to simultaneously initiating action under PMLA, 2002 and sustaining it independent of the orders passed in respect of the schedule offence.

Before the court, the ASG argued that the petitioner's co-operation was 'partial and selective'. After outrightly refusing to provide the documents related to offshore accounts and shell companies, the petitioner resorted to his right to maintain silence, ASG added. However, such right is subject to 'adverse inference' and Section 63 of the Act penalises anyone who withholds information or furnishes false information, ASG argued.

Other Court Observations

After taking note of the rival submissions, the court remarked in the order that:

"...Further, having declared to maintain silence, the investigating agency needs time to collect the documents required, by other means as the petitioner himself have put it in his petition, (i.e.,) Letter of Request (LOR) under Section 57 of PMLA, 2002 or Section 166-A of Cr.P.C., may be resorted. It is the discretion and prerogative of the investigating agency, to choose the mode and they need no advice neither from the Court nor from the accused...."

The court added that the confinement of the promoter Mr Buhari is inevitable for collecting those documents since there is a genuine apprehension he might 'secret away' with these relevant documents if granted bail. 

Background

It is pertinent to note that the Directorate of Revenue Intelligence (DRI) was the first agency to take note of the overvaluation of coal imported from Indonesian Mines through Dubai to India in 2017. Show Cause notice was given to Mr Buhari to re-determine the import value of the coal in terms of section 14 of the Customs Act and confiscate the coal under Section 112 (iii) of the Customs Act. Sections 112(a) and (b) r/w 112 (iii) also imposes penalty for the same.

A Reply was given by Mr Buhari and it was not proceeded by the Directorate of Revenue Intelligence (DRI) according to the petitioner. Afterwards, CBI registered an FIR in 2018 for offences under  Sections 120B r/w 420 I.P.C and Sections 13(2) r/w Section 13(1)(d) of Prevention of Corruption Act 1988. According to the petitioner, he has also appeared before the CBI and gave all the relevant documents. However, CBI has not filed a final report on the same.

Thereafter, the Directorate of Enforcement registered ECIR for the same transaction in 2018. The alleged Proceeds of Crime to the extent of Rs.557.25 Crores at Mutiara Thermal Power Plant, Tuticorin in the possession of M/s.Coastal Energen Pvt. Ltd was been provisionally attached vide PAO No.01/2020 in OC No.1286 of 2020 by the  Adjudicating Authority (PMLA) New Delhi.

According to the petitioner, since there was no confirmation of the provisional attachment within 180 days, the provisional attachment order lapsed and the Delhi High Court ordered status quo in respect of the movable and immovable properties which are the subject matter of attachment. All proceedings before the adjudicating authority were also accordingly stayed. Thereafter, the investigation by the Enforcement Directorate was ongoing.

The Look Out Circular (LOC) issued in 2020 by the ED was suspended periodically by the Madras High Court after the petitioner filed writ petitions for foreign travels till 2022. This was till the petitioner requested periodic deferring of appearance before the agency and finally refused to part with the documents on 3rd March 2022.

Case Title: Shri. Ahmed A.R.Buhari, S/o.Shri.Abdul Rahman Buhary Seyed v. The Assistant Director, Directorate of Enforcement

Case No: Criminal Original Petition No.6205 of 2022

Citation: 2022 LiveLaw (Mad) 125

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