The Delhi High Court has viewed that the predicate offence has also been regist [Readered under Sections 420 and 120B of the Indian Penal Code, apart from the provisions of the Prevention of Corruption Act. Both offences under Section 120-B and Section 420 IPC are mentioned in Schedule-A of the PMLA, therefore, such offences by themselves can be a predicate offence to trigger the offence of money laundering under the Prevention of Money Laundering Act, 2002 ( PMLA ).
Sanjay Jain, the petitioner filed a petition under Section 45 of the Prevention of Money Laundering Act, 2002 read with Section 439 of the Code of Criminal Procedure, 1973 seeking regular bail.
Two complaints were forwarded to the CBI against the MD, Indian Farmers Fertilizer Cooperative Limited ( ‘IFFCO’ ) relating to subsidy fraud in IFFCO by opening Kisan International Trading, exchange of illegal commissions in the import of raw materials and fertilizers, manipulation of sales data of fertilizers for claiming higher subsidy etc.
During scrutiny and verification of the complaints by the CBI, specific inputs were received from reliable sources alleging serious irregularities committed by the MD, IFFCO and other board members of IFFCO as well as MD, Indian Potash Limited ( IPL ) and others resulting in huge losses to both the entities and undue pecuniary gain to them and their family members.
It was alleged that the accused persons including the petitioner entered into a criminal conspiracy amongst themselves and during the period from 2007 to 2014 cheated and defrauded IFFCO, IPL, the general shareholders of these entities, as well as, the Government of India by fraudulently importing fertilizers and other materials at inflated prices and claimed higher subsidy thereby causing loss to the public exchequer. It is alleged that the commission from the supplies was siphoned off and the same was done through a complex web of fake commercial transactions through multiple companies that were owned by the accused persons to camouflage the fraudulent transactions as genuine.
It was revealed that out of the total illegal commission, an amount of USD 80.18 million ( Rs. 481 Crores approx. ) was channelized through Rare Earth Group and the remaining amount of USD 34.40 million ( Rs. 204 Crores approx. ) has been received by the sons of the Managing Directors of IFFCO and IPL either in the accounts of the firms/companies owned by them or in cash.
Mr Dayan Krishnan, Senior Counsel appearing for the petitioner at the outset submitted that to initiate an investigation and subsequent prosecution under the Prevention of Money Laundering Act, 2002 [ “the PMLA” ] there should be a commission of a scheduled offence and there should be generation of proceeds of crime from such scheduled offence. The person sought to be prosecuted should be directly or indirectly involved in any process or activity connected with the said proceeds of crime and the money trail shall remain unbroken for curtailing the personal liberty of the accused.
that IFFCO and IPL are private companies and the provisions of the Prevention of Corruption Act do not apply to the office bearers of IFFCO and IPL, the RC has also been registered under Sections 120B r/w 420 IPC, which are also scheduled offences under the PMLA and bare reading of the RC manifests that the offence of cheating against the accused persons is made out.
Further argued that the predicate offence under the Act should also hold good i.e. hold authority under the law, which is based on cogent material that would lead to a reasonable inference that the accused would be convicted of the predicate offence. If the predicate offence is weak, the same shall enure in favour of the petitioner.
Mr. Hossain submitted that it is the case of the petitioner that out of the accused persons who have been arrested, the petitioner is the only one who is in custody. He submitted that the petitioner is not entitled to grant bail on the ground of parity, in as much as, the other accused were granted bail disregarding the twin conditions as contained under Section 45 of the PMLA, based upon the judgment of Nikesh Tarachand Shah v. UOI2, wherein Section 45(1) of the PMLA, insofar as it imposes twin conditions for release on bail, was declared to be unconstitutional, whereas the Supreme Court in Vijay Madanlal Chaudhary has now upheld the twin conditions under Section 45(1) of the PMLA.
Justice Vikas Mahajan viewed that the proceedings under Section 50 of the PMLA may be judicial proceedings for the limited purpose mentioned therein but a confession made by an accused in his statement under Section 50 of the PMLA is not a judicial confession nor there is any provision in the PMLA like Section 15 of Terrorist and Disruptive Activities Act, 1987 or Section 18 of Maharashtra Control of Organised Crime, 1999 which specifically confesses a co-accused admissible against the other accused under certain eventualities.
The High Court has viewed that the predicate offence has also been registered under Sections 420 and 120B of the Indian Penal Code, apart from the provisions of the Prevention of Corruption Act, which are mentioned in Schedule-A of the PMLA, therefore, such offences can be a predicate offence to trigger the offence of money laundering under the Prevention of Money Laundering Act, 2002 ( PMLA ).
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