The Delhi High Court has held that where it is evident that the trial is not likely to conclude in a reasonable time, Section 45 of the Prevention of Money Laundering Act (PMLA) cannot be allowed to become a shackle which leads to unreasonably long detention of accused persons.
The bench of Justice Manoj Kumar Ohri while granting bail has observed that the right of liberty and speedy trial guaranteed under Article 21 is a sacrosanct right which needs to be protected and duly enforced even in cases where stringent provisions have been made applicable by way of special legislation. The stringent provisions would have to be interpreted with due regard to Article 21 and in case of a conflict, the stringent provisions, such as section 45 of the PMLA, would have to give way.
Table of Contents
Background – Long Detention Of Accused
The applicant is alleged to be involved in creating fraudulent documents for availing LC facility from the banks. In this regard, it is stated that draft letters of LC discounting were seized from his home. The seized documents were mere draft templates of bill discounting applications and were unsigned.
On the aspect of allegations relating to incorporating approximately 150 companies, it is stated that the co-accused Neeraj Singhal in his statement did not attribute any role the applicant. The applicant is not a Director in any company.
As per the SFIO investigation report, ex-promoters of M/s Bhushan Steel Ltd. (hereafter, the BSL) i.e., Brij Bhushan Singhal and Neeraj Singhal had obtained loan of Rs. 56,000 Crores from various banks and financial institutions before BSL went into insolvency and CIRP were initiated.
The aforesaid accused needed to infuse capital in BSL in order to avail credit facilities from the lender banks for its teel plant in Orissa and to do so as well as to maintain the required level of debt equity, the said accused persons assisted by their employees and close associates siphoned off funds from BSL and Bhushan Energy Ltd (BEL) by using complex web of companies and financial transactions starting from the year 2009-10 onwards.
The funds were transferred from BSL and BEL to the connected category ‘B’ and ‘C’ companies (approx. 150 in number in which employees of BSL were appointed as Directors/signatories and whose effective control was with the promoters) terming them as ‘Capital Advances’. The recipient companies through layering ultimately invested the said sum in BSL as promoter equity and for issuance of preference shares.
The layered funds were consolidated through bank accounts held by Uma Singhal and Ritu Singhal (the respective wives of Brij Bhushan Singhal and Neeraj Singhal).
The accused persons in the garb of availing credit facilities from banks used forged documents. BSL opened a Letter of Credit (LC) with consortium banks for availing non-fund based limits against forged invoices for supply of goods by M/s Jindal Steel Works (JSW) and M/s Hindustan Zinc Ltd. (HZL).
On the basis of forged documents, the LCs were discounted by using account No. of BSL on the request letters of JSW and HZL. No goods were ever supplied by JSW/HZL to BSL against the said LCs.
The fraud was covered up by showing false increase in valuation of assets and fraudulent valuation and inflated figures of Stock-in-Transit. In this manner public funds to the tune of Rs. 45,818 Crores were diverted during the period 2013-14 to 2016-17 to its accounts.
Arguments – Long Detention Of Accused
The applicant contended that the applicant is innocent and has been falsely roped in the present case. The applicant was working as Vice President (Finance) with BSL. He was arrested on 11.01.2024 and has been arrayed as accused no. 78 in the Supplementary Prosecution Complaint.
The applicant contended that on the aspect of twin conditions under Section 45 PMLA, it is stated that it pari materia to Section 212(6) of the Companies Act, 2013. ED’s case being a mirror image to that investigated by SFIO in which the applicant was not even arrested and enlarged on bail, the parameters under Section 45 PMLA stand satisfied.
The applicant submitted that he is 55 years of age, has deep roots in society, lives with his 86 year old mother, his wife and two children, is a chartered accountant by profession currently employed by Angul Energy Ltd and is not a flight risk.
The applicant contended that the applicant has joined investigation 7 times prior to his arrest and 3 times post arrest as well and all the material has been collected from him. The main accused i.e., Brij Bhushan Singhal, Neeraj Singhal, Nitin Johari and Ajay Mittal have already released on bail.
The applicant argued that investigation was initiated in the year 2019 and the prosecution has named 156 accused persons and cited 82 witnesses. The trial would inevitably take a long time and the applicant’s right to life and liberty is being affected as the trial is yet to commence.
The department contended that though Neeraj Singhal is the mastermind, the applicants have misused their professional qualifications to aid in the commission of offence. He further submits that the applicants fail to meet the rigours of the twin conditions enumerated in Section 45 of the PMLA as well as that of the triple test.
The department argued that with respect to validity of the statements made under Section 50 of the PMLA, it is submitted that the same are admissible in nature, and can be relied upon at the stage of remand or even to reject bail. It is further submitted that the contention of the applicants that they have been granted bail in the predicate offence is meritless as it is settled law that the offence of money laundering is an independent offence.
Conclusion – Long Detention Of Accused
The court noted that the investigation was initiated in the year 2019 and the prosecution has named 156 accused persons and cited 82 witnesses. There are 2.5 lac pages of documents which need to be analysed. Special Judge took cognizance of the supplementary chargesheet vide order dated 26.07.2024. It is also observed that in the supplementary complaint dated 08.03.2024, permission was taken by the ED under Section 173(8) Cr.P.C. for further investigation into the matter. As such, the Trial is yet to commence.
The court found that when there are multiple accused persons, lacs of pages of evidence to assess, scores of witnesses to be examined, the trial is not expected to end anytime in the near future. Importantly, the delay being not attributable to accused, keeping the accused in custody by using Section 45 PMLA as a tool for incarceration is not permissible.
The court held that flow of liberty cannot be dammed by Section 45 without taking all other germane considerations into account. It is the duty of Constitutional Courts to champion the constitutional cause of Liberty and uphold the majesty of Article 21.
The court has held that the trial is yet to commence, keeping in mind the import of the Catena of decisions of Supreme Court discussed hereinabove, it is directed that both the applicants be released on regular bail subject to them furnishing a personal bond in the sum of Rs.1,00,000/- with one surety of the like amount each to the satisfaction of the concerned Jail Superintendent/concerned Court/Duty J.M. and subject to the various conditions.
Firstly, the applicants shall not leave Delhi/NCR without prior permission of the concerned Court and surrender their passports, if any.
Secondly, the applicants shall provide their mobile numbers to the Investigating Officer on which they will remain available during the pendency of the trial.
Thirdly, in case of change of residential address or contact details, the applicants shall promptly inform the same to the concerned Investigating Officer as well as to the concerned Court.
Fourthly, the applicants shall not directly/indirectly try to get in touch with the prosecution witnesses or tamper with the evidence.
Lastly, the applicants shall regularly appear before the concerned Court during the pendency of the trial.
Case Details
Case Title: Pankaj Kumar Versus Enforcement Directorate
Case No.: BAIL APPLN. 3210/2024
Date: 24 .10.2024
Counsel For Applicant: Sanjay Jain
Counsel For Respondent: Manish Jain
