'Proceeds Of Crime' Not Magical Term Which Can Be Established Merely Because ED Recites It In Complaint: Delhi Court Grants Bail In PMLA Case

While granting bail to a man in a money laundering case, a Delhi Court has observed that “proceeds of crime” is not a magical term that can be taken to be established merely because the Enforcement Directorate (ED) has recited it in its complaint.

Additional Sessions Judge Sudhanshu Kaushik of Patiala House Courts observed that there ought to be some evidence on record to demonstrate that the money has either been derived or obtained from a criminal activity in respect of which a predicate offence stands registered.

Relying on various judgments on the subject, the court said that ED cannot take action against any person on the assumption that the scheduled offence is committed unless it is registered with the police or pending inquiry by way of a complaint

“The authorities under the PMLA cannot resort to action against any person for money laundering on the assumption that the property recovered by them must be proceeds of crime and that a schedule offence has been committed, unless the same is registered within the jurisdictional police or pending inquiry by way of complaint before the competent forum,” the court reiterated.

The judge granted regular bail to Mohan Madaan, accused in a case registered over alleged online fraud and cheating at the instance of Chinese entities through Indian shell entities. It was alleged that Madaan committed the offense of money laundering by remitting foreign exchange abroad under the garb of fake imports.

ED further alleged that the funds received in India were being used for various anti-national activities and that Chinese-owned companies were not allowed to obtain Non-Baking Financial Companies (NBFCs) license by the Reserve Bank of India (RBI) and for securing a back door entry, they started using NBFCs license of defunct Indian companies. It was alleged that Indian NBFCs were made to sign MoUs with the Chinese companies and the funds were used for providing loans through various Chinese Apps.

Granting bail to Madaan, the court said that there was nothing to indicate that the Chinese entities, which allegedly remitted funds to India through Indian shell entities for carrying out the alleged nefarious activities, were identified by ED at any point of time.

It added that there must have been some material to demonstrate that the investigation was carried out to reveal the connection between the alleged proceeds of crime with the alleged shell company.

“There is no cogent evidence to establish the said link and therefore, the aspect of proceeds of crime were generated from the predicate offense becomes doubtful,” the court said.

The judge concluded that the ED failed to identify and investigate the proceeds of crime which were purportedly derived out of the predicate scheduled offenses. It said that no evidence was placed on record to demonstrate how the Chinese entities operated in India and committed the schedule offense to obtain or derive the proceeds of the crime.

“The Enforcement Directorate came up with a version that sub-standard goods were exported by the firms controlled by the applicant but no investigation on this aspect has been done by the competent authority. The evidence falls short of showing the necessary link between the predicate offence and the proceeds of crime,” the court observed.

Counsel for Accused: Ms. Rebecaa M.John, Sr. Counsel along with Advocates Sh. Bharat Gupta and Sh. Rohan Wadhwa

Counsel for ED: Sh. N.K. Matta and Sh. Manish Jain, Ld. Special Public Prosecutors for Enforcement Directorate along with Advocates Sh. Aaditya Raj Sharma, Sh. Ishaan Baisla, Sh. Sudeepto Sur

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