No bail if no grounds available for believing that applicant not guilty of offence under section 45 of the Prevention of Money Laundering Act

P.M. Thakkar, Sr. Advocate and R.J. Goswami, Advocate for the Applicant. Devang Vyas and Ms. Trusha K. Patel, Advocate for the Respondent.

JUDGMENT

1. By this application under section 439 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “the Code”) read with section 45 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as “the PML Act”), the applicant has challenged the order dated 07.10.2014 passed by the learned Sessions Judge & Designated Judge, Ahmedabad (Rural) under the provisions of the PML Act in Criminal Miscellaneous Application No.1072 of 2014, and seeks to be enlarged on regular bail in connection with the complaint being PMLA Case No.3 of 2015 pending in the court of the learned Special Judge, Ahmedabad District, Ahmedabad (Rural) arising out of ECIR No.1/SRT/2014-15 registered with the Directorate of Enforcement, Ahmedabad (ED).

2. The facts giving rise to the present application are that a search came to be carried out under the provisions of the Foreign Exchange Management Act, 1999 (hereinafter referred to as “FEMA”) at the registered office of M/s Nile Industries Pvt. Ltd. as well as the residence of the applicant at Surat, pursuant to which, certain documents were seized under FEMA. The statement of the applicant also came to be recorded by the officers of the Directorate of Enforcement under the provisions of FEMA. On 11.04.2014, a first information report being C.R. No.16/2014 came to be registered against M/s R.A. Distributors and its Directors by the Manager of ICICI Bank, Surat for the offences punishable under sections 420, 465, 467, 468, 471, 477A and 120B of the Indian Penal Code, wherein the applicant was not named as an accused. Subsequently, on 13.04.2014, another first information report came to be registered being C.R. No.17/2014 against M/s Harmony Diamonds Pvt. Ltd., M/s Agni Gems Pvt. Ltd. and its Directors by the Manager of ICICI Bank, Surat for the offences punishable under sections 420, 465, 467, 468, 471, 477A and 120B of the Indian Penal Code. Once again, the applicant was not named in the said first information report; however, subsequently, he was arrested in connection with the said scheduled offence. Later on, the Directorate of Enforcement registered a case being ECR No.1/2014 on 17.04.2014 wherein, the applicant was not named. On 23.04.2014, summons came to be issued to the applicant under section 50 of the PML Act. However, the applicant could not remain present due to health issues. On 29.04.2014, the applicant appeared before the Directorate of Enforcement pursuant to the summons and his statement came to be recorded under section 50 of the PML Act. On 08.05.2014, the applicant appeared before the Directorate of Enforcement pursuant to summons, however, on that date, no statement was recorded. On 21.05.2014, the applicant appeared before the Directorate of Enforcement in pursuance of the summons and his statement came to be recorded under section 50 of the PML Act and he came to be arrested on the very same day. It is the case of the applicant that he, however, was not brought before the Judicial Magistrate or the Metropolitan Magistrate, as prescribed under section 19(3) of the PML Act, but was brought before the Special Court designated under section 43 thereof. The applicant submitted an application for bail on 21.5.2014. The Directorate of Enforcement prayed for remand, pursuant to which, on 22.05.2014, the Designated Court granted three days remand. According to the applicant, during the period of remand, he had provided all documents that were demanded from him by the Directorate of Enforcement and upon completion of the period of remand on 25.05.2014, the Directorate of Enforcement did not pray for any further remand and since then the applicant is in judicial custody. On 17.07.2014, a co- accused Madanlal Jain was arrested by the Directorate of Enforcement in connection with ECIR No.1/2014 and on the same date, the Deputy Director, Directorate of Enforcement passed an order provisionally attaching the properties of the applicant and his family members under section 5 of the PML Act. On 18.07.2014, the Directorate of Enforcement filed a complaint before the Special Court which was numbered as PMLA Complaint No.3/2014. The applicant, therefore, withdrew that bail application being Bail Application No.709 of 2014 with liberty to file a fresh bail application. The applicant thereafter filed a bail application being Bail Application No.1072 of 2014 before the Designated Court. By an order dated 7.10.2014, the Designated Court rejected the bail application, pursuant to which the applicant has filed the present bail application.

3. It may also be pertinent to note certain other facts which have some bearing having regard to the case put forth on behalf of the applicant. On 20.08.2014, the applicant came to be arrested in connection with the first information report being C.R. No.16/2014 by the DCB, Surat and nine days remand of the applicant was granted. On 01.09.2014, another co-accused Rakesh Manekchand Kothari was arrested in connection with the ECIR No.1/2014. On 07.10.2014, the bail application filed by the applicant before the Special Court being Criminal Miscellaneous Application No.1072 of 2014 came to be rejected. On 29.10.2014, the Directorate of Enforcement filed supplementary complaint in the Special Court against eight persons and two companies, which came to be numbered as PML ACT No.4/2014. By an order dated 24.12.2014, the bail application filed by the applicant herein in connection with the first information report registered vide C.R. No.16/2014 came to be rejected by the Sessions Court, Surat. On 16.01.2015, the applicant moved a habeas corpus petition before this court being Special Criminal Application No.4672 of 2014 challenging the constitutional validity of section 45 of the PML Act as well as his illegal custody and detention, which came to be dismissed by a Division Bench of this court by a judgement and order dated 16.01.2015. On 04.03.2015, a review application came to be filed in the above referred special criminal application wherein, the court observed that the observations made in the said decision would not come in the way of the bail application and that the bail application may be decided on merits. By an order dated 05.03.2015, this court allowed the bail application filed by the applicant being Criminal Miscellaneous Application No.2191 of 2015 and granted him regular bail. Thereafter, Rakesh Kothari, a co- accused, who had also filed a habeas corpus petition before this court, which had been rejected by a common order along with the habeas corpus petition filed by the petitioner, presented another habeas corpus petition before this court being Special Criminal Application No.4247 of 2015, wherein a Division Bench of this court by an order dated 03.08.2015, granted interim relief releasing the said co-accused and admitted the matter as it was of the opinion that the same required deeper consideration.

4. Mr. P. M. Thakkar, Senior Advocate, learned counsel with Mr. R. J. Goswami, learned advocate for the applicant submitted that the applicant was neither named in the first information report, nor in the second first information report registered in respect of the scheduled offences. Therefore, at the time when the applicant came to be arrested on 21.05.2015, he was not an accused in the scheduled offence, nor was any complaint filed by the Directorate of Enforcement. That he was arrested in the scheduled offence on 20.08.2014 and was granted bail in connection therewith on 05.03.2015. Reference was made to the provisions of section 45 of the PML Act as they stood when the PML Act came to be introduced, to point out that clause (a) of sub-section (1) thereof provided that every offence punishable under the Act shall be cognizable. It was pointed out that subsequently, section 45 of the PML Act came to be amended with effect from 17.01.2013 whereby, clause (a) which provided that every offence under the Act shall be cognizable, came to be deleted. Reference was made to the speech of the Minister of Finance made at the time of introducing the Bill to amend the Prevention of Money Laundering Act, 2002 wherein broadly the reasons for the amendment are the following:

“Under the existing provisions in Section 45 of the Act, every offence 1s cognizable. If an offence is cognizable, then any police officer in India can arrest an offender without warrant. At the same time, under section 19 of the Act, only a Director or a Deputy Director or an Assistant Director or any other officer authorised, may arrest an offender, Clearly, there was a conflict between these two provisions. Under Section 45(1)(b) of the Act, the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint made in writing by the Director or any other officer authorised by the Central Government. So, what would happen to an arrest made by any police officer in the case of a cognizable offence? Which is the court that will try the offence? Clearly, there were inconsistencies in these provisions.

They have not been removed. We have enabled only the Director or an officer authorised by him to investigate offences. ******

What we are doing is, we are inserting a new Section 2(n)(a) defining the term, ‘investigation’; making an amendment to Sections 28, 29,30, dealing with tribunals; amending Section 44 and 45 of the Act to make the offence non-cognisable so that only the Director could take action; and also making consequential changes in section 73. ***”

4.1 Mr. Thakkar submitted in view of the amendment in section 45 of the PML Act, the offences under the said Act are non-cognizable offences and hence, the Directorate of Enforcement could not have arrested the petitioner without obtaining warrant from the Metropolitan Magistrate in view of section 2(l) read with section 155 of the Code. Therefore, the arrest of the applicant without a warrant in a non-cognizable offence, which is being investigated without any order of the Magistrate, is in total violation of the mandatory provisions of section 155 read with section 4(2) of the Criminal Procedure Code read with section 45 of the PML Act and is therefore, unauthorised and illegal.

4.2 It was submitted that the alleged offence under the ECIR/the complaint/the supplementary complaint under the PML Act is punishable up to a maximum imprisonment of seven years. In the scheduled offence in which the maximum punishment is much higher, this court has already granted bail to the applicant herein. Under the circumstances, there is no reason for not granting bail in the present offence. In support of such submission, reliance was placed upon the decision of the Supreme Court in the case of Arnesh Kumar v. State of Bihar [2014] 8 SCC 273 wherein the court has endeavoured to ensure that police officers do not arrest the accused unnecessarily and Magistrate do not authorise detention casually and mechanically.

4.3 Referring to the complaint lodged by the Directorate of Enforcement, it was pointed out that the applicant is alleged to have received Rs. 7 crores from one Natural Trading Company and Rs. 6.31 crores from one M/s Gangeshwar Mercantile Pvt. Ltd. It was submitted that it is the case of the respondents that since the applicant has received the above money from the above two firms and has failed to explain satisfactorily why he has received such amounts, the applicant is guilty as charged. It was argued that section 3 of the PML Act makes such receipt an offence provided that the amounts so received were proceeds of crime emanating from a scheduled offence. It was submitted that M/s Natural Trading Company or its partners are not shown to be accused in the scheduled offence in connection with the first information report registered vide C.R. No.I-16/2014 of DCB or C.R.No.I-17/2014 of DCB, Surat. It was submitted that there are no averments in the complaint under the PML Act, which if accepted at face value, would show that M/s Natural Trading Company had received any proceeds of crime as defined under section 2(u) of the PML Act from the scheduled offence being C.R. No.I-16/2014 of DCB or C.R.No.I- 17/2014 of DCB, Surat. It was contended that no material in the form of statements produced before the Special Court in Complaint Case No.3/2014 is produced by the Directorate of Enforcement, which if accepted at its face value would show that M/s Natural Trading Company and M/s Gangeshwar Mercantile Pvt. Ltd. had received any proceeds of crime from the scheduled offences being C.R. No.I-16/2014 of DCB or C.R.No.I-17/2014 of DCB, Surat. It was submitted that insofar as the complaint by the Directorate of Enforcement for the offence under the PML Act is concerned, all statements supporting the complaint are of the co-accused, who are facing trial with applicant in the very complaint and even they do not show that amount received by M/s Natural Trading Company and M/s Gangeshwar Mercantile Pvt. Ltd. were proceeds of crime. It was submitted that in the same trial, the statements of the co-accused would be inadmissible in evidence. Thus, the complaint is entirely supported by statements of the co- accused which have no evidentiary value.

4.4 Reference was made to the statements of Urvishbhai and Ashwinbhai referred to in the complaint, to submit that any material against Natural Trading Company and M/s Gangeshwar Mercantile Pvt. Ltd. must come from the investigation of the scheduled offence, which is not being investigated by the Directorate of Enforcement. It was submitted that apart from the fact that Natural Trading Company and M/s Gangeshwar Mercantile Pvt. Ltd. are not arraigned as accused in the scheduled offence, in the complaint, they are stated to be fictitious firms; however, no statement of any person has been obtained in this regard. Moreover, both the firms and their directors are arraigned as accused and such firms have bank accounts and hence, it is wrong to say that they are fictitious firms. It was submitted that receiving money from fictitious firms is not “proceeds of crime” because in the light of the definition under section 2(u) of the PML Act, the proceeds of crime must emanate from the scheduled offence. It was submitted that, therefore, there is no evidence that the amount received by the applicant are proceeds of crime as contemplated under section 2(u) of the PML Act.

4.5 It was submitted that statements of co-accused Madanlal Jain have been recorded after his arrest and remand and are, therefore, inadmissible in evidence. It was submitted that if those statements are seen they make out a new story contrary and inconsistent with the complaint against the applicant. Even otherwise, these statements are not referred to or relied upon in the complaint lodged by the Directorate of Enforcement against the applicant, and that the same having been recorded in a separate criminal case cannot be relied upon.

4.6 Strong reliance was placed upon the interim order passed by a Division Bench of this court in the case of co-accused Rakesh Kothari rendered on 03.08.2015 in Special Criminal Application No.4275 of 2015, to point out that the court has recorded prima facie findings at the admission stage that the offence under the PML Act is a non-cognizable offence and that the arrest had been made overlooking the provisions of section 155 of the Code. That any arrest in violation of section 155 of the Code would vitiate his continued detention. It was pointed out that the court has prima facie found that the investigation was neither commenced nor progressed in accordance with law and has, accordingly, found that the arrest and continued custody to be in violation of Article 21 of the Constitution of India. It was pointed out that the Division Bench has recorded that if the offence under the PML Act is held to be cognisable offence, it was mandatory to comply with sections 154 and 157 of the Code apart from sections 157(1) and 172 of the Code and if the offence under the PML Act is held to be non- cognizable, it was mandatory to comply with section 155 of the Code apart from sections 167(1) and 172 of the Code. It was pointed out that the court had turned down the submission advanced on behalf of the respondent that the above provisions would not be applicable because the provisions of the Code used the word “police officers” and they are officers of the Directorate of Enforcement; the court observed that such interpretation proposed by the respondent would render section 165 of the PML Act meaningless and cannot be accepted as being contrary to the ratio laid down in the case of Om Prakash v. Union of India [2011] 14 SCC 1. It was pointed out that the court has further recorded that the provisions of section 45 of the PML Act do not override the provisions of Article 21 of the Constitution of India.

4.7 Reliance was also placed upon the decision of the Supreme Court in the case of Ranjitsing Brahmajeetsing Sharma v.State of Maharashtra [2005] 5 SCC 294I, to submit that the applicant was called under section 50 of the PML Act and then arrested. It was urged that the nomenclature of section under which he was summoned is inconsequential and that the applicant having been arrested by an authority who recorded his statement and who had the power to search, seize and arrest, which is akin to the powers of a police officer, therefore, the arrest of the applicant without a warrant in a non-cognizable offence is without authority of law. Reliance was placed upon a decision of the Supreme Court in the case ofTofan Singh v. State of Tamil Nadu [2013] 16 SCC 31, wherein the court in paragraph 35 of the reported decision has held that the crucial test to determine whether an officer is a police officer for the purpose of section 25 of the Evidence Act viz. the “influence or authority” that an officer is capable of exercising over a person from whom a confession is obtained. The court further held that the term “police officer” has not been defined in the Code or in the Evidence Act and, therefore, the meaning ought to be assessed not by equating the powers of the officer sought to be equated with a police officer but from the power he possesses from the perception of the common public to assess his capacity to influence, pressure or coercion on persons who are searched, detained or arrested. The influence exercised has to be, assessed from the consequences that a person is likely to suffer in view of the provisions of the Act under which he is being booked. The court held that it follows that a police officer is one who (i) is considered to be a police officer in “common parlance” keeping into focus the consequences provided under the Act; (ii) is capable of exercising influence or authority over a person from whom the confession is obtained.

4.8 Referring to the preamble of the PML Act, the learned counsel pointed out that the Act has been enacted only for the purpose of dealing with the proceeds of crime and nothing else. The applicant is in jail since fourteen months. The money is already attached and that the proceeds so attached are more than Rs. 16 crores. It was urged that all the accused, other than Madan Lal Jain, who has not approached the court for bail, have been released. Bilal Haroon, another co-accused, who is stated to be one of the main persons, has also been released. It was submitted that considering the fact that the material with which the complaint is supported consists entirely statements of co-accused, the evidentiary value of which is highly debatable, the applicant is required to be spared from the punishment without trial. It was submitted that even if the admissibility is accepted, it does not conclusively show that money received is definitely “proceeds of crime” and hence, an excellent prima facie case for grant of bail has been made out.

4.9 It was further submitted that the arrest of the applicant without warrant in a non-cognizable offence renders the arrest and continued custody pursuant thereto illegal and in violation of section 155 read with section 4(2) of the Code and the fundamental rights guaranteed under Articles 14 and 21 of the Constitution of India, warranting release of the applicant forthwith. It was submitted that since the offence under the PML Act is a non-cognizable offence, in the absence of any specific provision conferring power to arrest without warrant, as provided by section 6 of the Railway Property (Unlawful Possession) Act, 1966, the respondent has no power to arrest without warrant. Reference was made to the provisions of section 5 and 6 of the Railway Property (Unlawful Possession) Act, 1966, which read thus:

“5. Offences under the Act not to be cognizable – Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898) an offence under this Act shall not be cognizable.”

“6 Power to arrest without warrant – Any superior officer or member of the Force may, without an order from a Magistrate and without a warrant, arrest any person who has been concerned in an offence punishable under this Act or against whom a reasonable suspicion exists of his having been so concerned.”

It was submitted that thus, under that Act, despite the fact that the offence thereunder is “non-cognizable”, section 6 thereof expressly permits “arrest without warrant”, whereas there is no such similar provision in the PML Act authorizing the Director or the officer so authorised by the Central Government under section 19 of the PML Act to arrest without a warrant. Under the circumstances, it was incumbent upon the respondents to first obtain an order under section 155 of the Code from jurisdictional Magistrate to investigate and then, if required, to seek warrant for arrest in respect of the non-cognizable offence punishable under the PML Act.

4.10 The learned counsel further invited the attention of the court to various provisions of the Code as well as to the provisions of section 65 of the PML Act, to submit that all the procedure under the Code unless inconsistent with the provisions of the PML Act has to be followed. It was submitted that the Sessions Court/Special Court comes into the picture only at the stage of trial, except that the formal committal by the Magistrate is done away with. However, under PMLA, the Special Court does not act as a court of original jurisdiction. Referring to section 44(b) of the PML Act, it was submitted that a harmonious construction would be that arrest is made with the protection of examination made by the Magistrate. It was submitted that the statutory protection against arbitrary exercise of arrest has been given and that the production within twenty-four hours is a statutory safeguard which also gives the earliest opportunity to get bail. It was submitted that in the facts of the present case, section 19(3) of the PML Act has been violated and therefore also, the detention of the applicant is unauthorized because at no point of time, the court of competent jurisdiction before which he ought to have been produced, viz. the Magistrate, has authorized the detention of the applicant after the arrest. It was argued that in view of section 2(l) read with section 155 of the Code, the initial arrest of the applicant is itself bad as the same was effect without a warrant of arrest. It was urged that the present case is squarely covered by the above referred decision dated 3rd August, 2015 of the Division Bench, that since the arrest is not in accordance with law, the rigours of section 45 will not apply.

4.11 The attention of the court was invited to the fact that on 29.10.2014, the Directorate of Enforcement filed supplementary complaint which was numbered as PMLA No.4/2014 and the Special Court took cognizance of the offence and issued non-bailable warrants against seven accused persons, who approached the High Court praying that the same be quashed. It was pointed out that by an order dated 19.11.2014 made in Special Criminal Application No.4697 of 2014, this court quashed and set aside the non- bailable warrants. It was also pointed out that the Directorate of Enforcement had approached the Special Court seeking non-bailable warrant against Prithviraj Kothari in connection with the ECIR No.1/2014, and the learned Special Judge issued non- bailable warrant, which came to be quashed by this court in Special Criminal Application No.4441 of 2014. That on 02.08.2014, the Directorate of Enforcement filed an application seeking non-bailable warrants against the accused No.2 to 79 in connection with the Complaint Case No.3/2014, which came to be rejected on the same day by the Special Court. It was pointed out that insofar as the other co-accused persons are concerned, either non-bailable warrants have not been issued at all, or if issued, the same have been quashed, and in other cases, they have been granted bail, to submit that under the circumstances, there is no reason for refusing to grant bail to the applicant.

4.12 In conclusion, it was urged that a prima facie case has been made out for grant of bail inasmuch as the arrest of the applicant is itself bad in law. Moreover, even on merits, there is no legally admissible material in support of the complaint qua the applicant, under the circumstances the application deserves to be allowed by granting bail as prayed for.

5. Vehemently opposing the application, Ms. Trusha Patel, learned Central Government Standing Counsel for the respondents invited the attention of the court to the facts of the case and the nature of the allegations made against the applicant and the material collected against him. Dealing with the submissions advanced by the learned counsel for the applicant, it was submitted that insofar as the arrest and continuation of detention of the applicant in alleged breach of certain provisions of the PML Act as well as the Code is concerned, while considering a bail application, this court is required to satisfy itself about the two conditions stipulated under section 45 of the PML Act. It was contended that if the court is not satisfied that the said two conditions are fulfilled, assuming without admitting that there is a procedural lapse in the initial arrest, the same would not be sufficient to enlarge the applicant on bail. In support of such submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of N. R. Mon v. Mohd. Nasimuddin [2008] 6 SCC 721, wherein the court, in the context of section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (hereinafter referred to as “the NDPS Act”), placed reliance upon its earlier decision in the case of Collector of Customs, New Delhi v. Ahmadalieva Nodira [2004] 3 SCC 549, and observed that the limitations on granting of bail come in only when the question of granting bail arises on merits. Apart from the grant of opportunity to the Public Prosecutor, the other twin conditions which really have relevance so far the accused therein is concerned, are the satisfaction of the court that there are reasonable grounds for believing that the accused is not guilty of the alleged offence, and that he is not likely to commit any offence while on bail. The conditions are cumulative and not alternative. The satisfaction contemplated regarding the accused being not guilty has to be based on reasonable grounds. The expression “reasonable grounds” means something more than prima facie grounds. It contemplates substantial probable causes for believing that the accused is not guilty of the alleged offence. Reliance was also placed upon the decision of this court in the case of Sardarsing Nagsing Rajput v. State of Gujarat [1993] 1 GLH 861, wherein the court has held that merely because some default is committed either in not physically forwarding the custody of the accused or the police papers pertaining to him to the Special/Sessions Court, that by itself cannot be held to be sufficient to mechanically confer any right on the accused to be released on default-bail, who is otherwise arrested and kept in the custody on some serious charges of non-bailable offences under the NDPS Act, for which the Legislature has come out with a special enactment and thereafter with a provision under section 37 (amended) placing absolute limitation on the courts while considering the bail applications. The court observed that as held by the Supreme Court in the case of Narcotics Control Bureau v. Kishan Lal AIR 1990 SC 556, such procedural illegality cannot be permitted to outweigh and over-shadow the underlying object of the special provision as contained in section 37 (amended) of the NDPS Act which has clearly taken away all the rights of the accused to have the benefit of default-bail. The court, accordingly, held that despite contravention of the provisions of section 36(1)(b) of the Act, by operation of section 37 (amended) of the NDPS Act, they would not be entitled to be released on bail.

5.1 Reliance was further placed upon the decision of the Supreme Court in the case of Union of India v. Thamisharasi[1995] 2 GLH 244, for the proposition that the limitation on the power to release on bail in section 437 of the Code is in the nature of a restriction on that power, if reasonable grounds exist for the belief that the accused is guilty. On the other hand, the limitation on this power in section 37 of the NDPS Act is in the nature of a condition precedent for the exercise of that power, so that, the accused shall not be released on bail unless the court is satisfied that there are reasonable grounds to believe that he is not guilty. The court observed that the provision in section 37 to the extent it is inconsistent with section 437 of the Code supersedes the corresponding provision in the Code and imposes limitation on granting of bail in addition to the limitations under the Code as expressly provided in sub- section (2) of section 37. These limitations on granting of bail specified in sub-section (1) of section 37 are in addition to the limitations under section 437 of the Code and were enacted only for this purpose. Reliance was placed upon an unreported decision of this court in the case of Rakesh Manekchand Kothari v. Dy. Director, Enforcement Director rendered on 31.03.2015 in Criminal Miscellaneous Application No.3637 of 2015 wherein, the court in the context of section 45 of the PML Act, had observed that since the court was unable to record the first satisfaction as contemplated under section 45(1)(ii) of the PML Act, it would be immaterial as to whether the applicant meets with the second requirement. The court observed that there was no dispute that, both the stipulations need to be met with and if any one is missing, it would not be permissible to release the applicant on bail. The court observed that the contention that the applicant has not committed any scheduled offence cannot be gone into by the court on the face of the decision of the Division Bench of this Court recorded on Special Criminal Application No.4496 of 2014. The court made special reference to paragraphs 10.12 to 12.13 of the said decision which was rendered in a petition filed by the applicant therein. Various decisions laying down similar propositions of law were also relied upon by the learned counsel for the respondents; however, with a view to avoid prolix reference is not made to all such decisions.

5.2 Reliance was placed upon the decision of the Supreme Court in the case of Union of India v. Hassan Ali Khan [2011] 109 SCl 615 wherein, the Supreme Court cancelled the order of bail granted by the High Court observing that when there are surrounding circumstances which reveal that there were doubts about origin of accounts and monies deposited therein, and when the accused had not been able to establish that the same were neither proceeds of crime nor untainted property, he ought not to have been released.

5.3 Ms. Patel next submitted that the applicant has neither challenged the act of his production before the Designated Judge, nor has he raised any protest about his arrest by the Directorate of Enforcement without warrant. In the petition seeking issuance of a writ of habeas corpus, the applicant had contended that his arrest and custody was allegedly illegal; however, his contentions were negatived by the Division Bench of this court in its judgment rendered in Special Criminal Application No.4672 of 2014, which has been confirmed by the Supreme Court. It was submitted that in a bail application it is not permissible for the applicant to raise all these questions.

5.4 Reference was made to the provisions of section 44(b) of the PML Act, to submit that the Special Court has been duly authorized to take cognizance of an offence under section 3 of the PML Act upon a complaint being made by an authority authorized in this behalf under that Act without the accused being committed to it for trial.

5.5 As regards the contention that under section 19 of the PML Act, an officer of the Directorate of Enforcement cannot arrest without warrant as the offence is now made non- cognizable, the learned counsel submitted that section 19 of the Act nowhere speaks about the exercise of powers of arrest only after obtaining warrant from the Magistrate. It was urged that the title of section 45 still provides that it is a cognizable offence and that the legislative debate referred to by the learned counsel for the applicant has to be read only when the Act is ambiguous. It was contended that even if the parliamentary discussion produced by the applicant is to be seen, it goes to show that section 45(a) is deleted only to take away powers of the police and it did not intend to restrict the powers of the Directorate of Enforcement as contended by the applicant. It was submitted that the provisions of the PML Act have overriding effect and section 65 thereof provides that the Code of Criminal Procedure would only apply only so far as it is not inconsistent with the PML Act and hence, when the PML Act does not require the officer of the Directorate of Enforcement to obtain warrant from the court, the provisions of the Code cannot be pressed into service.

5.6 As regards the submission that the applicant was produced before the Special Court and not before the Magistrate though section 19 of the PML Act provides for his production before the Magistrate, it was submitted that no prejudice is caused to the applicant by such course of action having been adopted by the respondents. The attention of the court was invited to the provisions of section 68 of the PML Act, to submit that the same provides that even if there is any irregularity in following any procedure, the same would not invalidate the action if it is in furtherance of the object. According to the learned counsel, by production of the applicant directly before the Designated Judge, the object and purpose of the Act is, in no manner, defeated. Reliance was placed upon the decision of the Supreme Court in the case of Sundeep Kumar Bafna v.State of Maharashtra AIR 2014 SC 1745, for the proposition that no provision in the Code categorically prohibits the production of an accused before the Sessions Court or the High Court. Reliance was also placed upon the decision of this court in the case of Directorate of Enforcement v. Deepak Mahajan [1994] 2 GLH 603, for the proposition that every law is designed to further the ends of justice but not to frustrate on the mere technicalities.

5.7 As regards the contention that the supplementary complaint cannot be looked into while considering the bail application of the applicant, it was submitted that the supplementary complaint is in connection with the same case registered vide ECIR-1/SRT/2014-15 and that only because the Designated Judge has numbered it with a separate number, it does not become an independent complaint. It was pointed out that even at the time of filing the initial complaint, liberty was reserved to file further complaint as the investigation was going on. Reliance was placed upon the decision of the Supreme Court in the case of Sivanmoorthy v. State [2010] 12 SCC 29, for the proposition that additional evidence collected even after completion of substantial trial can be relied upon. Reliance was placed upon the decision of the Supreme Court in the case of Rama Chaudhary v. State of Bihar [2009] 6 SCC 346 for the proposition that no permission is required from the court to continue and carry out further investigation. It was submitted that section 65 of the PML Act provides that to the extent they are not inconsistent, the provisions of the Code apply. It was submitted that sub-section (1) of section 173 of the Code speaks about report to be filed after investigation without delay; but does not provide for any limitation for the same. Moreover, section 173(8) of the Code provides for further investigation and that there are no contrary provisions in the PML Act and hence, further investigation can be carried out by the Directorate of Enforcement even under the PML Act.

5.8 As regards the contention that the statements of co- accused cannot be relied upon, it was submitted that the statements recorded under section 50 of the PML Act can be relied upon not only at the interim stage of bail, but can even be made the basis for conviction of an accused. It was contended that the officers of the Directorate of Enforcement not being police officers, the provisions of sections 24 and 25 of the Evidence Act, which provide that no confession made to a police officer shall be proof as against a person accused of any offence, would not be attracted in the present case. It was submitted that sub-section (2) of section 50 of the PML Act specifically provides for evidentiary value of such statements and sub-sections (2) and (3) thereof provide that the person giving the statement under that Act has to say the truth and the proceeding of recording statement etc. is considered as judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code. Reliance was also placed upon the decision of the Supreme Court in the case of Naresh J. Sukhawani v. Union of India AIR 1996 SC 522.

5.9 Insofar as reliance placed by the learned counsel for the applicant on the interim order passed by the Division Bench of this court in Special Criminal Application No.4247 of 2015, the learned counsel submitted that the said petition was a petition of habeas corpus, governed by wide powers under Article 226 of the Constitution of India; whereas the present application is an application for bail which has to be considered within the limited scope of section 45 of the PML Act. Thus, the scope of both the provisions is entirely different. It was also submitted that the order passed by the Division Bench being an interim order, cannot be treated as a precedent. In support of such submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of State of Assam v. Barak Upatyaka D. U. Karmachari Sanstha AIR 2009 SC 2249.

5.10 On the merits of the bail application, it was submitted that the applicant herein has used the firms M/s R. A. Distributors Pvt. Ltd., M/s Hem Jewels Pvt. Ltd., M/s Maa Mumbadevi Gems Pvt. Ltd., M/s M. B. Offshore Distributors Pvt. Ltd., M/s Ramshyam Exports Pvt. Ltd., M/s Trinetra Trading Company Pvt. Ltd. and M/s Riddhi Exim Pvt. Ltd. (hereinafter referred to as “the seven companies”) for fraudulent foreign remittances under the cover of fake and forged bill of entry and invoices. It was submitted that the applicant was in the know that preparing fake documents, such as, bills of entry and invoices and presenting the same before the ICICI Bank for fraudulent remittances was a crime under the relevant provisions of the Indian Penal Code. He along with his accomplice Shri Bilal Haroon Galani, was responsible for sourcing of funds from various places in India and making RTGS transfer to the firms, viz., M/s Vandana & Co., M/s G. T. Traders, M/s Maruti Trading, M/s Jash Traders, M/s Aarzoo Enterprises, M/s Natural Trading Co., M/s Millennium & Co. and M/s M. D. Enterprises. The applicant would ensure that the funds credited in the above cited firms were transferred through RTGS to the “big seven” entities for siphoning the money out of India. The precious foreign exchange was thus illegally transferred to the firms in Hong Kong and Dubai and the end use of that money is nothing but money laundering. It was contended that investigations have established that the applicant was actually involved in the offence of money laundering under section 3 of the PML Act, as he had used the seven companies belonging to his accomplice Shri Madanlal Manekchand Jain for siphoning off precious foreign exchange out of India to the entities owned by him in Hong Kong and Dubai. It was contended that the entire remittances made by the seven companies had started from late December 2013 to the first week of March 2014 and during this period, the applicant and his brother have received Rs. 10 crores from a firm M/s Natural Trading Co., which was not physically existent at its given address in Surat. The receipt of Rs. 10 crores from the said firm which was under the control of Shri Madanlal Manekchand Jain was nothing but proceeds of crime and appropriately covered under section 3 of the PML Act. The receipt of Rs. 3 crores from M/s Natural Trading Co. into the bank account of the applicant’s brother, Shri Jafar Mohamed Hasan Fatta in Union Bank of India, Nanpura, Surat and investments thus made in the stock market and real estate and projecting the same as untainted property was clearly covered under section 3 of the PML Act. It was contended that Shri Jafar Mohamed Hasan Fatta had stated that his brother Shri Afroz had arranged the said money when he was in need of the same. It was contended that receipt of Rs. 7 crores in the applicant’s own account with Union Bank of India from M/s Natural Trading Co. was nothing but proceeds of crime. The illegal money earned for his role in entire scam was unquestionable and beyond doubt. The layering and placement of the same in the stock market and in real estate was an attempt made to project the same as untainted. The proceeds of crime thus earned by the applicant and his brother are appropriately covered under the definition of “proceeds of crime” as envisaged under section 2(u) of the PML Act. It was submitted that the role of the applicant in making fraudulent remittances abroad on the strength of fake documents is covered under the scheduled offences. It was pointed out that M/s Nile Trading Corporation is into trading of utensils and has surprisingly received Rs. 6.31 crores in the month of February 2014 from one M/s Gangeshwar Mercantile Pvt. Ltd., which was revealed to have been created by Shri Madanlal Manekchand Jain who had full control over it. The statement of the applicant revealed that he had made an attempt to cover up the receipt of the proceeds of crime by producing some fake documents of M/s Vidhatri Exim Pvt. Ltd., which had not existed at its given address and was a creation of Shri Madanlal Jain. It was submitted that while the search on the applicant’s premises was under section 37 of the FEMA, 1999, but as the investigations progressed the applicant’s role in the money laundering has emerged and accordingly, the proceedings under PML Act have been rightly invoked. It was pointed out that the receipt of monies from M/s Natural Trading Co. and M/s Gangeshwar Mercantile Pvt. Ltd. are nothing but proceeds of crime. Various other facts were brought to the notice of the court from the complaint lodged by the respondents to point out that there is sufficient material on the record to connect the applicant with the offence in question. It was, accordingly, urged that the applicant who is one of the main accused in the crime, has not been able to satisfy the twin requirements laid down under section 45(1) of the PML Act for grant of bail, and hence, this court may not exercise discretion in favour of the applicant.

6. This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record and proceedings of the case as produced before it as well as the decisions cited by the learned counsel for the respective parties.

7. As noticed hereinabove, several submissions have been advanced by the learned counsel for the applicant on the validity of the applicant’s arrest as well as the order of remand made under section 167 of the Code; however, this court cannot be oblivious of the fact that it is considering a bail application under section 439 of the Code read with section 45 of the PML Act and not a habeas corpus or other application under Article 226 of the Constitution of India. As observed by the Division Bench of this court in the case of Rakesh Manekchand Kothari (supra) on which strong reliance has been placed by the applicant, the powers of the High Court in writ jurisdiction under Article 226 of the Constitution of India are much wider than the jurisdiction for granting bail.

8. Thus, whereas while the High Court is vested with wide powers while exercising writ jurisdiction under Article 226 of the Constitution of India, it has limited powers while considering a bail application like one as the same is governed by section 45 of the PML Act read with section 439 of the Code. Therefore, the applicable parameters would be those which are applicable to a bail application under section 439 of the Code and under section 45 of the PML Act. Therefore, in addition to the normal parameters which are applied while granting bail under section 439 of the Code, the conditions laid down under section 45 of the PML Act are also required to be taken into consideration.

9. As noticed hereinabove, various contentions have been raised by the learned counsel for the applicant as regards the validity of arrest of the accused on the ground of non- production before the Magistrate as well as the order of remand made by the Special Court being dehors its powers. Thus, from the submissions advanced by the learned counsel for the applicant it appears that under the guise of a bail application, in effect and substance, what the applicant seeks to challenge is the validity or his arrest, the order of remand, etc. Strong reliance has been placed upon the decision of the Division Bench of this court in the case of Rakesh Manekchand Kothari (supra) rendered in a habeas corpus petition filed by a co-accused. What the applicant has lost sight of is that the present application is an application for bail under section 439 of the Code read with section 45 of the PML Act and not a petition under Article 226 of the Constitution of India challenging his detention for infringement of his right under Article 21 of the Constitution of India. If at all the petitioner wants to challenge the validity of his arrest and continued detention, the remedy lies elsewhere. This court while exercising powers under section 439 of the Code read with section 45 of the PML Act has to decide the application within the scope and ambit of such powers. Therefore, although various contentions have been raised with regard to the powers of arrest and non production of the applicant before the magistrate at the stage of his arrest, in the opinion of this court, it is not necessary to enter into the merits of the same, as they are beyond the scope of the present application. Besides, it may be noted that the order of remand was passed after hearing the learned counsel for the applicant. When the order of remand came to be passed by the Designated Court, the applicant was represented by a reputed Senior Advocate, but at that stage no contention was raised with regard to the arrest being without authority of law, or that the said court was not empowered to make an order of remand. Therefore, at this stage, and more particularly, in an application for bail, the question of entering into the merits of such contentions does not arise.

10. Since strong reliance has been placed on behalf of the applicant on the order dated 03.08.2015 passed by a Division Bench of this court in the case of Rakesh Manekchand Kothari (supra), it may be noted that in the said case apart from the fact that the Division Bench was exercising writ jurisdiction under Article 226 of the Constitution of India, inasmuch as, the petitioner therein had filed a habeas corpus petition and the court was considering the question of infringement of the petitioner’s right under Article 21 of the Constitution of India; on merits in the said case, the court noted in paragraph 24 of the order that it was not in dispute that the petitioner therein was not arraigned as accused in the scheduled offence investigated by the Crime Branch. The court observed that a bare reading of section 45 shows that the rigours of bail are applicable only to the person accused of an offence in Schedule I and recorded a prima facie view that rigours of section 45 in granting bail are even otherwise not applicable in the case qua the petitioner therein. Whereas, in the present case, it is an admitted position that the applicant has also been arraigned as an accused in the scheduled offence and has been granted bail in respect thereof. Before the Designated Court, it was the case of the applicant that he has not committed the scheduled offence and that he is arraigned as an accused in the complaint only after complying with section 120B of the IPC on the basis of the statement of Praful Patel. Thus, though it is the case of the applicant that he has not committed a scheduled offence, it is nevertheless a fact that he is an accused in the scheduled offence being C.R. No. I – 17/2014. Evidently therefore, in view of the fact that the applicant is an accused in the scheduled offence, the applicant does not stand on the same footing as in the case of the petitioner before the Division Bench in the above case and therefore, the rigours of section 45 of the PML Act would be applicable to the facts of the present case. Moreover, on merits, the court in the above case has found that the complaint against the said petitioner does not show any material evidence, direct or circumstantial against the said petitioner.

11. The Division Bench in the above order has, prima facie, agreed with the arguments raised on behalf of the petitioner therein and ordered that he be released till the final decision in the petition. Thus, the decision on which strong reliance has been placed by the learned counsel for the applicant is only an interim order expressing a prima facie view and at this stage does not lay down any ratio decidendi so as to constitute a binding precedent.

12. Assuming for the sake of argument that the above order passed by the Division Bench, despite being an interlocutory order, is to be treated as a precedent, as noticed hereinabove, on facts, the case of the applicant and the petitioner in the said case are different. Whereas in the facts of the said case, the rigours of section 45 were not attracted, that is not so in the case at hand, where the applicant is an accused in the scheduled offence also. It may also be noted that the Division Bench has repelled the contention raised on behalf of the Directorate of Enforcement that the provisions of the Code are inapplicable merely because provisions of the Code used the word “police officer” and they are officers of Enforcement Directorate. The court observed that such interpretation as proposed by the respondents would render section 165 (sic. 65) of PMLA meaningless and thus cannot be accepted as contrary to the ratio laid down in Om Prakash (supra) where Central Excise Officer was held to have no authority to arrest without warrant in non- cognizable offence under Central Excise Act, 1944 in light of section 155 of the Code. In this regard it may be apposite to refer to the decision of the Supreme Court in Sayyed M. Masud v. Union of India [2012] 13 SCC 746. In that case, the Supreme Court was considering a case where the main prayer in the writ petition was for issuance of a writ of mandamus to declare the offence under section 135(1) of the Customs Act, 1962 as a bailable offence, which question at that point of time, was pending determination. The court indicated that subsequently, in Om Prakash (supra), it had held that the offences under the Customs Act were bailable. The court on the basis of the averments and submission was given the impression that the alleged offences were confined to the provisions of the Customs Act alone and had stayed the arrest of the petitioner therein, in connection with the subject matter of the said file, presuming that the same would be relating to the offences under the Customs Act, 1962. The court in paragraph 4 of the said decision noted that however, in the petition for vacating the interim relief, it was brought to its notice that the subject-matter of the said file had nothing to do with the offences under the Customs Act but under the provisions of the Foreign Exchange Management Act, 1999, and the Prevention of Money Laundering Act, 2002, in respect of which it had not expressed any opinion regarding the bailability of the offences thereunder. The court, accordingly, held that insofar as the provisions of the Customs Act are concerned, the same stand covered by its decision in Om Prakash (supra). However, as regards the offences under the FEMA and PML Act, the court permitted the respondents to proceed in accordance with law. Thus, the Supreme Court has not expressed any opinion as regards the bailability of the offences under the PML Act. Moreover, as noticed earlier, the Division bench was exercising writ jurisdiction which is wider than the jurisdiction for granting bail under the provisions of section 439 of the Code read with section 45 of the PML Act.

13. Another factor which cannot be lost sight of is the Division Bench decision in the petitioner’s own case rendered in Special Civil Application No. 4672 of 2014, wherein the court has gone into the aspect of the validity of the arrest of the petitioner and the provisions of section 19 of the PML Act and in paragraph 10.26 of the said decision, which is a final decision and therefore, constitutes a binding precedent, held that it cannot be said that the order of arrest suffers from vice of any illegality on the ground that it is ordered by an incompetent or unauthorized authority and there is no failure in adhering to the procedure laid down under section 19(1) of the PML Act and it cannot be said that the petitioners are detained or confined illegally warranting issuance of writ of Habeas Corpus. Thus, in the said petition, it was open for the applicant to raise all grounds as regards the validity of his detention as well as the order of remand; however, the applicant having not raised those grounds in the said petition, cannot now seek to urge such grounds before this court in an application under section 439 of the Code.

14. For the purpose of present case, the bail application has to be decided within the framework of section 439 of the Code read with section 45 of the PML Act. The applicant being an accused in the scheduled offence, the rigours of section 45 of the PML Act would clearly be applicable. Sub-section (2) of section 45 of the PML Act provides that the limitation in granting bail specified in sub-section (1) thereof is in addition to the limitation under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting bail. Therefore, while considering an application for grant of bail under section 439 of the Code in relation to an offence under the PML Act, the requirements of both, section 439 of the Code as well as section 45 of the PML Act have to be satisfied. The Supreme Court in Ahmadalieva Nodira (supra) has in the context of clause (b) of sub-section (1) of section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985 which is in pari materia with sub-section (1) of section 45 of the PML Act, held thus:

“6. As observed by this Court in Union of India v. Thamisharasi, clause (b) of sub-section (1) of Section 37 imposes limitations on granting of bail in addition to those provided under the Code. The two limitations are: (1) an opportunity to the Public Prosecutor to oppose the bail application, and (2) satisfaction of the court that there are reasonable grounds for believing that the accused is not guilty of such offence and that he is not likely to commit any offence while on bail.

7. The limitations on granting of bail come in only when the question of granting bail arises on merits. Apart from the grant of opportunity to the Public Prosecutor, the other twin conditions which really have relevance so far as the present accused-respondent is concerned, are: the satisfaction of the court that there are reasonable grounds for believing that the accused is not guilty of the alleged offence and that he is not likely to commit any offence while on bail. The conditions are cumulative and not alternative. The satisfaction contemplated regarding the accused being not guilty has to be based on reasonable grounds. The expression “reasonable grounds” means something more than prima facie grounds. It contemplates substantial probable causes for believing that the accused is not guilty of the alleged offence. The reasonable belief contemplated in the provision requires existence of such facts and circumstances as are sufficient in them- selves to justify satisfaction that the accused is not guilty of the alleged offence.”

15. Thus, in terms of section 45 of the PML Act, the court is required to record satisfaction that there are reasonable grounds for believing that the accused is not guilty of such offence and that he is not likely to commit any offence while on bail. Reasonable grounds have to be something more than prima facie grounds. The facts of the case are required to be examined keeping in mind the above statutory provisions.

16. It may, therefore, be apposite to briefly refer to the facts of the case. An information was received from the Joint Commissioner of Customs, Customs Division, Surat, that two Surat based companies M/s Harmony Diamonds Pvt. Ltd. and M/s Agni Gems Pvt. Ltd. had recently opened bank accounts with ICICI Bank, Surat. Further a letter dated 06.03.2014 of the Joint Commissioner of Customs, Surat, also forwarded 18 bills of entry relating to M/s R. A. Distributors Pvt. Ltd. informing that the bills of entry submitted by the said entity before the ICICI Bank for making foreign remittance, were fake. On the basis of the inputs received, it was gathered that within a span of two months, that is, January and February 2014, remittances to foreign shores worth more than Rs. 1000 crores against fake import documents, viz., bills of entry and invoices were made from the said accounts. The Customs Department verified the 25 bills of entry (total value of Rs. 100 crores and found the same to be fake). The companies had huge credit deposits in their account followed by outward remittances and the addresses given in the bank account were bogus. Investigation came to be carried out under the provisions of the Foreign Exchange Management Act, 1999. It was found that seven companies (which have been referred to in detail in the preceding paragraphs) have sent foreign remittances against bogus/forged bills of entry mainly to Hong Kong based companies, one of which was AI Mignas FZE Ltd. The said seven companies received monies through RTGS from M/s Vandana & Co., M/s Natural Trading Co., M/s Maruti Trading, M/s Millennium & Co., M/s Aarzoo Enterprises, M/s G. T. Traders, M/s M. D. Enterprises, M/s Jash Traders etc., which had transferred the amounts out of their bank accounts held at Mumbai and Surat. Further, these firms had received RTGS credits into their bank accounts from various other firms based in New Delhi, Mumbai and Surat. Investigation revealed that the Companies, namely, M/s Vandana & Co., M/s Natural Trading Co., M/s Maruti Trading, M/s Millennium & Co., M/s Aarzoo Enterprises, M/s G. T. Traders, M/s M. D. Enterprises, M/s Jash Traders, who made RTGS credits to the Surat based entities have turned out to be fictitious. Funds were received through RTGS also from Cosmo Impex, S G Trade Impex, S K Trading Co., Archana Traders, etc., having bank accounts in Surat, Mumbai and Delhi. Investigation further revealed that a hawala racket was being run by Shri Afroz Fatta and Shri Madanlal Jain and that all the other persons were connected to them. The statement of Shri Amit Patel, Deputy Branch Manager of Axis Bank recorded by the Directorate of Enforcement office, Surat, revealed that some bank accounts in Axis Bank were opened on the directions of Shri Madanlal Jain. During the search of Panchratna, Mumbai office of Shri Madanlal Jain under FEMA, his accountant has stated that he had seen Afroz Fatta with Shri Madanlal Jain on three to four occasions in the last couple of months. CDR analysis of mobile numbers of Afroz Fatta and Shri Madanlal Jain showed that they were in touch. The Directorate of Enforcement office had telephone interception of the applicant Afroz Fatta in which he was found to be involved in the hawala racket. From forensic analysis of mobile set of the applicant Afroz Fatta, the following two concrete evidences have been recovered:

As noticed hereinabove, Al Mignas is one of the Hong Kong based companies where foreign remittances have gone.

17. Out of the two first information reports related to the scheduled offences, an offence under sections 120B, 420, 467 and 471 of the Indian penal Code has been registered against the companies, M/s R A Distributors, M/s Agni Gems Pvt. Ltd., M/s Harmony Diamonds Pvt. Ltd. and its directors which are also scheduled offences in terms of section 2(y) of the PML Act. Further investigation revealed that the applicant, his brother- in-law and his sister and brother have received money from M/s Natural Trading Co., which is one of the companies through which funds have been transferred to M/s R. A. Distributors.

18. It may also be noted that in the complaint being PMLA Complaint Case No.3/2014, it has been stated that the Surat Customs authorities have already confirmed about the bills of entry in question being fake. Thus, precious foreign exchange worth Rs. 5395.75 crores had been fraudulently siphoned off by the said Surat based entities against which no imports were made by them. It is the case of the respondents that the investigation has revealed that the masterminds behind the entire clandestine and illegal foreign remittances were Shri Afroz Mohamed Hasan Fatta (the applicant herein), Bilal Haroon Galani, Surat and Madanlal Jain, Mumbai. Investigation also revealed that the accounts of the firms, viz. M/s Vandana & Co., M/s Natural Trading Co., M/s Maruti Trading, M/s Millennium & Co., M/s Aarzoo Enterprises, M/s G. T. Traders, M/s M. D. Enterprises and M/s Jash Traders, with Axis Bank were opened pursuant to the directions of Shri Madanlal Jain. M/s Natural Trading Co., Surat was found to have made five such RTGS transfers on a single day on 16.12.2013 and thirty- seven RTGS transfers involving an amount to the tune of Rs. 95.13 crores from its account at the Axis Bank, Shivaji Park, Mumbai were made till 18.02.2014, that is, within 62 days to M/s R. A. Distributors Pvt. Ltd. Investigation also revealed that M/s Natural Trading Company made RTGS credit to M/s R. A. Distributors Pvt. Ltd., M/s Riddhi Exim Pvt. Ltd., M/s M. B. Offshore Distributors Pvt. Ltd., M/s Ramshyam Exports Pvt. Ltd. and M/s Trinetra Trading Pvt. Ltd. During scrutiny of the said bank account, it also came to light that huge amounts were transferred by M/s Natural Trading Co. to the applicant Shri Afroz Fatta and his brother Shri Jafar Hasan Fatta. A total amount of Rs. 3 crores was transferred to Shri Jafar Hasan Fatta and Rs. 7 crores were transferred to the applicant Shri Afroz Fatta through RTGS from the bank account of M/s Natural Trading Co. It was also found that M/s Natural Trading Co. was also involved in transferring huge amounts to various firms, including M/s Gangeshwar Mercantile Pvt. Ltd., Surat. The account of M/s Gangeshwar Mercantile Pvt. Ltd. was also traced to the Axis Bank and the bank account opening form and its statement were collected and scrutinized. It was revealed that M/s Gangeshwar Mercantile Pvt. Ltd. has received RTGS credits amounting to Rs. 27,10,000/-, Rs. 13,60,000/- and Rs. 22,35,000/- from M/s Natural Trading Co. on 08.01.2014, 09.01.2014 and 13.01.2014 respectively. Scrutiny of the said statement revealed that RTGS transfer was made to the account of M/s Nile Trading Corporation on 17.02.2014 in the following manner :

19. Investigation carried out led to the tracing of the account number 00672320013409 of M/s Nile Trading Corporation to the HDFC Bank, Ghod Dod Road Branch, Surat. Further scrutiny of its account and account form revealed that the applicant Shri Afroz Mohamed Hasan Fatta was the proprietor of M/s Nile Trading Corporation which was into the declared business of trading in utensils. The statement of the applicant was recorded under section 50 of the PML Act wherein, he had, inter alia, stated that in the year 2011, he came in contact with Shri Madanlal Jain who was engaged in sale and purchase of diamonds. That in the year 2014, he had talked to Shri Madanlal Jain and sought Rs. 7 crores for investment in the share market; Shri Madanlal Jain had arranged the said fund in the form of unsecured loan which he received through RTGS in his personal account with Union Bank of India, Nanpura, Surat and the said amount was received in three parts, Rs. 1 crore, Rs. 3 crores and Rs. 3 crores; that on his request, Shri Madanlal Jain had arranged Rs. 3 crores for his brother Shri Jafar Mohamed Hasan Fatta from M/s Natural Trading Co. In his statement recorded under section 50 of the PML Act on 22.05.2014, the applicant had stated that there were no documents relating to the unsecured loans taken from M/s Natural Trading Co. by him and his brother Shri Jafar Mohamed Hasan Fatta. During the course of his custodial interrogation on 24.05.2014, the applicant had produced retail invoices dated 10.12.2013 and 12.12.2013 of M/s Vidhatri Exim Pvt. Ltd. respectively for Rs. 3,00,00,123/- and Rs. 2,99,10,013/- showing the purchase of cut and polished diamonds by M/s Nile Trading Corporation. He also produced four invoices of M/s Nile Trading Corporation all dated 14.12.2013 for having sold the said cut and polished diamonds for Rs. 1,71,90,517/-, Rs. 1,44,36,831, Rs. 1,44,98,627/- and Rs. 1,69,93,966/- respectively. On being asked, the applicant had stated that he had purchased the above diamonds from M/s Vidhatri Exim Pvt. Ltd. from the office of Shri Madanlal Jain and the payment was not made for the purchase of above stated diamonds from M/s Vidhatri Exim Pvt. Ltd. He had also stated that the diamonds were sold to Shri Madanlal Jain and the invoices in the name of M/s Gangeshwar Mercantile Pvt. Ltd. were prepared on the advice of Shri Madanlal Jain and the payment was received in his HDFC Bank Account.

20. Thus, while no payment was made by the applicant for the purchase of said cut and polished diamonds by M/s Nile Trading Corporation, on the other hand, upon such diamonds being sold to M/s Vidhatri Exim Pvt. Ltd., the payment was received by the applicant in his HDFC Bank Account. Based on the above allegations, it is the case of the investigating agency that the applicant Afroz Fatta was instrumental in the fraudulent outward remittance of foreign exchange for which he was amply compensated monetarily. The entire money received by Shri Afroz Fatta and his brother Shri Jafar Fatta in this process is nothing but proceeds of crime generated through criminal activities relating to scheduled offences under investigation by the Surat District Crime Branch. The applicant Shri Afroz Fatta is one of the main players in the nefarious deals of submitting forged/bogus bills of entry, invoices etc. on the strength of which, precious foreign exchange amounting to Rs. 5395.75 crores were remitted outside India without any actual imports.

21. Reliance was also placed by the respondents on the statement of Urvish Shah recorded by the Directorate of Enforcement under section 50 of the PML Act as well as the statements of other persons including the co-accused Shri Madanlal Jain. Some of the persons whose statements have been recorded under section 50 of the PML Act have stated that Shri Bilal Haroon who was released on bail would often visit them and threaten them not to go before the Directorate of Enforcement till the applicant comes out on bail.

22. In the aforesaid backdrop, the question that arises for consideration is as to whether the conditions precedent for grant of bail under section 45(1) of the PML Act, are satisfied. Section 45 of the PML Act, requires the court to record satisfaction that (i) there are reasonable grounds for believing that the accused is not guilty of such offence and (ii) that he is not likely to commit any offence while on bail. Both the above conditions have to be satisfied cumulatively. The facts of the case are required to be examined keeping in view the above statutory provisions.

23. One of the main contentions advanced on behalf of the applicant is that the statement of the co-accused recorded under section 50 of the PML Act cannot be taken into consideration as they have no evidentiary value. Strong reliance has been placed upon the decision of the Supreme Court in the case of Toofan Singh (supra) wherein, the Supreme Court has referred the matter to the Larger Bench for reconsideration of the issue as to whether the officer investigating the matter under the NDPS Act would qualify as police officer or not. The second related issue was whether the statement recorded by the Investigating Officer under section 67 of the NDPS Act can be treated as a confessional statement or not, even if the officer is not treated as police officer. The court noted thus:

“43. As far as this second related issue is concerned, we would also like to point out that Mr. Jain argued that the provisions of section 67 of the Act cannot be interpreted in the manner in which the provisions of section 108 of the Customs Act or section 14 of the Excise Act had been interpreted by a number of judgments and there is a qualitative difference between the two sets of provisions. Insofar as section 108 of the Customs Act is concerned, it gives power to the customs officer to summon persons “to give evidence” and produce documents. Identical power is conferred upon the Central Excise Officer under section 14 of the Act. However, the wording to section 67 of the NDPS Act is altogether different. This difference has been pointed out by the Andhra Pradesh High Court in Shahid Khan v.Director of Revenue Intelligence, 2001 Cri.L.J. 3183 (AP).”

24. Thus, in the above decision, on behalf of the applicant who had requested the court to refer the matter to the Larger Bench for reconsideration, it had been stated that section 67 cannot be interpreted in the manner in which the provisions of section 108 of the Customs Act and section 14 of the Excise Act have been interpreted by a number of judgments and there is a qualitative difference between the two sets of provisions. Insofar as section 108 of the Customs Act is concerned, it gives power to the customs officer to summon persons to give evidence and produce the documents. However, the wording of section 67 of the NDPS Act is altogether different.

25. In this regard, it may be germane to refer to the provisions of section 50 of the PML Act. A conjoint reading of section 50 of the PML Act and section 108 of the Customs Act reveals that section 50 of the PML Act is in pari materia with section 108 of the Customs Act. Therefore, prima facie, the decisions of the Supreme Court interpreting the provisions of section 108 of the Customs Act or section 14 of the Excise Act from time to time could be applicable to statements recorded under section 50 of the PML Act. However, at this stage while considering the question of grant of bail, it is not permissible for this court to record a finding one way or the other as regards the evidentiary value of the statements recorded under section 50 of the PML Act, which can be gone into only at the stage of trial.

26. From the facts noted hereinabove it is evident that the allegation against the applicant is that the amount of Rs. 13 crores paid to the applicant and further amount paid to his brother at the instance of the applicant, are ‘proceeds of crime’ within the meaning of such expression as envisaged under section 2(u) of PML Act and that the applicant has attempted to project the same as untainted money. The expression “proceeds of crime” means any property derived or obtained directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. On the facts as emerging from the record, it cannot be said that the respondents have not been able to establish any link between the scheduled offence and the moneys received by the applicant. As held by the Supreme Court in Hassan Ali Khan (supra), the said allegation may not ultimately be established, but having been made, the burden of proof that the said monies were not the proceeds of crime and were not, therefore, tainted shifts on the applicant under section 24 of the PML Act, which provides that in any proceeding relating to proceeds of crime under that Act, in case of a person charged with the offence of money- laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering. In the facts of the present case the applicant, at this stage, has failed to satisfactorily establish that the moneys received by him are untainted, inasmuch as, the circumstances brought on record by the Directorate of Enforcement reveal that there are doubts that the origin of the moneys received by the applicant, which appear to be connected with the scheduled offence. Under the circumstances, having regard to the involvement of the applicant in the offences in question as indicated hereinabove, it would not be possible for this court at this stage, to state that there are reasonable grounds for believing that the applicant is not guilty of the offences alleged against him. It may be reiterated that while considering the question of grant of bail in the present case, since the applicant is an accused in the scheduled offence, the rigours of section 45 of the PML Act would apply and the court is required to record twin satisfaction, one that, there are reasonable grounds for believing that the applicant is not guilty of such offence and second that, he is not likely to commit any offence while on bail. Having regard to the fact that this court has found that the first condition precedent, viz. that there are reasonable grounds for believing that the applicant is not guilty of such offence has not been satisfied, it is not necessary to record any finding as regards the second condition precedent. In the light of the fact that one of the conditions precedent, namely, that the applicant is not guilty of such offence, is not satisfied, the applicant is not entitled to be released on bail under section 45 of the PML Act.

27. For the foregoing reasons, the application fails and is, accordingly, rejected. It is, however, clarified that any observation made in this order is a prima facie observation made only for the purpose of deciding the bail application and the same shall have no bearing on the merits of the case at the time of trial which has to be adjudicated on the basis of the evidence that may be led by the respective parties. The Designated Court, during the course of trial shall not refer to nor shall it in any manner be influenced by any observation made in this order.