ED Arrest Of Satyendar Jain After 5 Years Of Case Registration & Bail In Predicate Offence Unnecessary: Singhvi To Supreme Court

A bench comprising Justices AS Bopanna and Bela M Trivedi was hearing the former Delhi government cabinet minister's special leave petition challenging a decision of the Delhi High Court to deny him bail in April. Jain was arrested by the Enforcement Directorate in May 2022 and was granted interim bail due to medical reasons earlier this year.

In August, the court extended Jain’s interim bail for the second time after Senior Advocate Abhishek Manu Singhvi, representing the embattled legislator, stated that he was undergoing rehabilitation following a complex spinal operation. Despite opposition from Additional Solicitor-General SV Raju, who advocated for an independent examination by AIIMS and a cancellation of interim bail, the bench agreed to defer Jain’s surrender until September 1. The court also listed his main bail application to be heard on the same day. On September 1, the hearing was adjourned after Justice Prashant Kumar Mishra recused himself from hearing Jain’s bail plea. Once again, on September 12, the hearing was postponed after ASG Raju requested an adjournment, a suggestion to which Singhvi readily agreed.

Although the hearing was adjourned again on the last ocassion, the additional solicitor-general flagged alleged delay tactics being used by Jain to push back the trial court hearing. While requesting the court to enjoin him from seeking further adjournments in the special court trying him for offences under the Prevention of Money Laundering Act, ASG Raju told the bench, "As many as 16 dates have been taken in trial court just to get documents under Section 207 of the Code of Criminal Procedure. They are taking adjournments and not proceeding with trial. They are also filing application after application which are frivolous."

Before adjourning the proceedings, the court clarified that interim relief would continue until the next date of the hearing. Also addressing the concern of the State that the AAP leader has allegedly been using delay tactics to push back his trial, the apex court directed him to 'diligently' participate in the ongoing proceedings before the trial court. "It is made clear pendency of proceedings before this court or any reason shall not be used as an excuse or ruse to defer proceedings before trial court, but would diligently take part in proceedings before the trial court and permit the case to progress," the bench ordered.

Since his arrest in May last year, Jain has spent almost an entire year - four days less than a year to be precise - in jail before finally being released on interim medical bail to undergo a spinal operation, Singhvi told the court during today's hearing. This was despite no 'demonstrable' reason for his arrest, the senior counsel insisted. 

"Interestingly, the Enforcement Directorate's case arises out of an enforcement case information report lodged on August 30, 2017, based on a first information report relating to the predicate offence filed on August 24 of the same year. With respect to the predicate offence, he was never arrested and even got bail in July 2019 after cognizance. In the ED case, he was not arrested for five years. During this time, he appeared on seven occasions and fully cooperated with the investigating agency. He appeared before the Enforcement Directorate thrice in April 2018, once in May, and again in December. Then he is not summoned for three years because the next date is December 2021. Finally, he is called in in May of the next year, when he is arrested. The argument is not about the power of arrest, but its necessity. If you have a person who has been out on bail in the predicate offence, and five years since the ECIR was registered, where there is cooperation...I'm not saying that the Enforcement Directorate cannot make an arrest...I'm saying that unless they can show demonstrable, obvious, and palpable reasons, they ought not to do it."

Besides this, Singhvi also expressed doubt over whether any predicate offence could be made out. "There's a violation of the Vijay Madanlal ruling. There's no predicate offence because no shares were purchased by Jain or his wife in the check period, i.e., 2014 to 2015. The asset also admittedly remained unchanged. And since there's no predicate offence, there's no culpable act under the Prevention of Money Laundering Act."

The Act only requires the registration of a predicate offence for the Enforcement Directorate to initiate its proceedings, Justice Trivedi countered, voicing her reservations about the contention that the ingredients of the predicate offence not being made out was grounds for a case to be taken out of the net of the Prevention of Money Laundering Act. 

"There's no change in assets. That's what the first information report filed by the Central Bureau of Investigation says. If the offence according to their writing is not made out, then the PMLA, which confers consequential jurisdiction, does not arise," Singhvi maintained. 

Another plank of Singhvi's argument in favour of bail was that the alleged irregularities in the financial transactions under the scanner could not be attributed to Jain. He explained, "The charge is that certain unaccounted money was given to some Calcutta companies that bought shares of the three companies Paryas Infosolution, Akinchan Developers, and Mangalayatan Projects. From RC Cooper to Vodafone, this court has firmly held that the assets of a company are not assets of the shareholders. Matters of far higher stakes have been decided on the basis of this principle. The allegation under the PMLA is that money coming into the three companies, i.e., the flowback, can be attributed to Jain in proportion to his shareholding in these companies. But whatever is owned or is part of a company cannot be attributed to its shareholder, even if the company is fully owned by one person."

Countering the Enforcement Directorate's argument that Jain was the beneficiary and controller of the allegedly irregular transactions, Singhvi pointed out that he was neither a director nor had he financially benefitted from the amounts that were suspected to have been transferred from the three companies to Vaibhav and Ankush Jain after being routed through the Kolkata-based companies in the form of investments. "Poonam, Jain's wife, remained a director in one of the companies but her shareholding was minuscule. Not one penny travels to Jain or his wife. Not one share travels to Jain or his wife. The shares also travel to Vaibhav or Ankush, according to the allegations."

The test of allocation based on the proportion of shareholding was not legally sound, Singhvi repeated, before adding that even assuming that the test could be applied, based on the direct and indirect shareholding - which had incorrectly been described as one-third of the total shares - the amount allegedly laundered would be 59 lakhs, and not the 1.53 crores as claimed by the Central Bureau of Investigation. Here, the senior counsel also pointed to a 'divergence' between the Central Bureau of Investigation's and Enforcement Directorate's charges. "The CBI applied a rule of thumb of one-third. That's erroneous but that's a different matter. Also, the actual shareholding is much lower. On this one-third, there is a gross 300 per cent variation by the ED, which has accused Jain of laundering 4.61 crores. The Enforcement Directorate has raised a figure three times the CBI's. Both are wrong. Whether it is 1.53 crores or 4.61 crores. The figure is 59 lakhs, much below the one crore threshold."

Before concluding for the day, Singhvi also opposed the central agencies' contention that Jain had a controlling stake in the companies, by arguing that he had been engaged by the company only in the capacity of a consultant, in terms of a memorandum of understanding signed between them. The senior counsel added, "Jain was no longer a director in two of the companies. In the third one, he was never a director. How do you get a controlling stake by a paltry figure of 59 lakhs and no directorship?"

The hearing will continue on November 24. The court ordered the interim bail of Satyendar Jain, as well as Vaibhav and Ankush Jain, to be extended until then.

Background

In 2017, the Central Bureau of Investigation accused Jain and others of laundering money to the tune of Rs 11.78 crore during 2010-2012 and Rs 4.63 crores during 2015-16, when he had become a minister in the Delhi government. It was alleged that the money laundering exercise was carried out through three companies – Paryas Infosolution, Akinchan Developers, and Mangalayatan Projects.

Jain allegedly had given money to some Kolkata-based entry operators of different shell companies for accommodation entries, through his associates. The entry operators had then allegedly re-routed the money in the form of investment through shares in Jain-linked companies after ‘layering them through shell companies’.

The case lodged by the Directorate of Enforcement is based on the CBI complaint and alleges that Jain signed conveyance deeds for the purchase of agricultural lands by Prayas Infosolutions in 2011 and 2012. The central agency has further alleged that the land was later transferred to family members of Jain's associates who denied knowledge about the transfers.

Last year, the ED year attached properties worth Rs. 4.81 crores belonging to five companies and others in the money laundering case against Jain and others. These assets reportedly were in the name of Akinchan Developers, Indo Metal Impex, Paryas Infosolutions, Mangalayatan Projects, and J.J. Ideal Estate etc. The Aam Aadmi Party leader was taken in custody in connection with the money laundering case on May 30, 2022.

In November of last year, the bail application of the former cabinet minister was dismissed by a trial court, which said that it had prima facie come on record that Jain was ‘actually involved’ in concealing the proceeds of crime by giving cash to the Kolkata-based entry operators and thereafter, bringing the cash into three companies against the sale of shares to show that income of these three companies was untainted.

Subsequently, his bail was denied by the Delhi High Court as well in April, on the ground that he was an influential person and had the potential of tampering with evidence. As such, the twin conditions under the Prevention of Money Laundering Act, 2002 were held to not be satisfied. Justice Dinesh Kumar Sharma also denied bail to co-accused Vaibhav Jain and Ankush Jain.

In May, a vacation bench headed by Justice JK Maheshwari granted interim bail to the Aam Aadmi Party leader on medical grounds, which was extended by the court in July.

Case Title

Satyendar Kumar Jain v. Directorate of Enforcement | Special Leave Petition (Criminal) No. 6561 of 2023