Bail Granted in Money Laundering Case: Court Emphasizes Predicate Offences and Burden of Proof

Case title: 

THOMAS DANIEL v. ENFORCEMENT DIRECTORATE  (REPRESENTED BY ITS DEPUTY DIRECTOR) & ORS.

Date of Order: 

14th SEPTEMBER 2023

Bench: 

HON’BLE JUSTICE BECHU KURIAN THOMAS

Parties: 

PETITIONER– THOMAS DANIEL

RESPONDENT – ENFORCEMENT DIRECTORATE  (REPRESENTED BY ITS DEPUTY DIRECTOR) & ORS.

SUBJECT: 

Allegations of financial irregularities and fraudulent conduct is the case's central focus.  Specifically, allegations of fraud, money laundering, and other financial violations are involved. The petitioner is charged with collecting public deposits through a number of corporations without the required authority, and then using those deposits to distribute shares in partnership firms. The COVID-19 pandemic's effects on the petitioner's capacity to fulfill his financial commitments to depositors are also discussed in this case. The petitioner's age and circumstances, as well as the alleged charges, continuing investigations, and those elements, were all taken into consideration by the court while deciding whether to issue bail to the petitioner.

IMPORTANT PROVISIONS:

PREVENTIONS OF MONEY LAUNDERING ACT, 2002 (PML Act) -

1. Section 45: The Code of Criminal Procedure, 1973 allows individuals to be released on bail or bond if the Public Prosecutor opposes the application. However, individuals under sixteen, women, sick or infirm, or accused of less than one crore rupees can be released on bail.
2. Section 50: The Director of Investigation has similar powers as a civil court, including discovery, inspection, attendance, witness examination, and record requirements. They can summon witnesses and produce records, but require approval for longer retention.

INDIAN PENAL CODE, 1860 (IPC) –

1. Sections 420: Cheating or deceiving someone of property or valuable security can result in imprisonment for up to seven years and a fine, and can also lead to damage.
2. Section 406: Trust breach can result in imprisonment for up to three years, a fine, or both.
3. Section 409: If a public servant or businessman commits a criminal breach of trust in property, they may face life imprisonment or ten-year imprisonment, and may also face a fine for stealing property.
4. Section 421: Dishonestly or fraudulently removing, concealing, or transferring property without proper consideration to prevent distribution among creditors may result in imprisonment, a fine, or both, with the potential for up to two years in prison.
5. Section 465: Forgery can result in imprisonment for up to two years, a fine, or both.
6. Section 471: Fraudulent or dishonest individuals who use forged documents or electronic records as genuine will face the same punishment as if they had forged them.

RESERVE BANK OF INDIA ACT, 1934

1. Section 45S: Deposits not to be accepted in certain cases

OVERVIEW: 

The petitioner in the current case is accused of committing financial crimes in violation of the Prevention of Money Laundering Act of 2002 (PML Act) and other provisions of the Indian Penal Code of 1860 (IPC). Given the gravity of the allegations and the requirements set forth in the PML Act, the main question in this case is whether the petitioner should be granted regular release. This case encompasses intricate legal and financial issues, such as money laundering and cheating, and it raises concerns about bail in light of the gravity of the allegations and the state of the investigation.

1. The petitioner was initially detained in August 2020 and was accused of, among other offenses relating to it, defrauding and criminal breach of trust.
2. Subsequently, at the command of the court, the inquiry was handed over to the Central Bureau of inquiry (CBI).
3. In September 2020, the Enforcement Directorate (ED) also filed a PML Act complaint against the petitioner.
4. The petitioner and his family were detained by the ED in August 2021 after being freed on bail in connection with the local police/CBI proceedings.
5. Because there were no orders prolonging the petitioner's remand, the court granted temporary bail in August 2022 while the petitioner was still in ED custody.
6. The petitioner is accused of taking deposits without the Reserve Bank of India's (RBI) consent and using them in a number of financial programs and partnerships.
7. All of the petitioner's assets had been attached by the ED, and an ongoing investigation into the predicate offenses, including those covered by the IPC, had lasted more than three years.
8. The petitioner stated that he had made sincere efforts to pay off the debts and that the COVID-19 outbreak was principally to blame for the failure to pay interest.
9. After taking into account a number of legal factors, including the burden of proof, IPC cheating components, and bail-related principles, the court decided to grant the petitioner normal bail with some restrictions.

ISSUES RAISED: 

Whether the petitioner satisfied the bail conditions under Section 45 of the Prevention of Money Laundering Act, including reasonable grounds to believe in the accused's innocence and no possibility of future similar offenses?

ARGUMENTS ADVANCED BY THE PETITIONER :

1. The petitioner made a point of stating that he had never been found guilty of any crime connected to the accusations made against him. He defended his right to remain free until his guilt was established.
2. He emphasized that the delay in the inquiry was demonstrated by the fact that he had already spent more than a year and a half in detention without a charge sheet being filed for the underlying offenses.
3. The petitioner contended that his ability to fulfill financial responsibilities, such as paying back depositors, was greatly impacted by the Covid-19 pandemic, and that this should be taken into account in light of his alleged transgressions.
4. The petitioner emphasized his sincere attempts to pay off debts and reimburse depositors, which were demonstrated by a suggested settlement plan created in response to a writ petition.
5. The petitioner's age—roughly 69 years old—was cited as a reason why bail should be granted. It was suggested that keeping him in detention would endanger his health and wellbeing.
6. The petitioner emphasized that he no longer constituted a flight risk or a danger to society because all of his properties had been attached, his enterprises shut down, and his passport had been turned in.
7. The petitioner underlined that despite a thorough inquiry, no charge sheet had been filed for these charges and that it was the prosecution's responsibility to prove the predicate offense.
8. There is no inference of guilt. It was stated once more that there was no assumption of guilt for the underlying offenses under the PML Act and that the onus was entirely on the offender.

ARGUMENTS ADVANCED BY THE RESPONDENT:

1. The respondent contended that the petitioner had engaged in severe money-laundering activities that entailed a sizeable sum of money taken from the general public.
2. It was argued that the Prevention of Money Laundering Act's (PML Act) Section 45 spelled out the legislative intent to limit the ability of courts to issue bail in these circumstances.
3. The respondent emphasized that the petitioner had effectively admitted to committing violations of the PML Act in comments made under Section 50 of that law.
4. The respondent claimed that the petitioner had misled numerous investors and that the proceeds of the crime totaled huge sums, amounting to thousands of crores. It was stated that releasing the petitioner on bail would harm the ongoing investigation as well as the impacted investors.
5. It was emphasized that the petitioner's prolonged custody was necessary because the investigation was still open and other complaints or charge sheets might be brought.
6. The respondent noted that the petitioner had improperly obtained authorisation to accept deposits and had formed partnership firms using these money without the depositors' agreement. This was considered to be financial misconduct.
7. The respondent cited a prior instance, B.A. No. 7709/2021, in which the court discovered evidence supporting the petitioner's guilt prima facie. They claimed that this implied that the petitioner might have committed the crimes.
8. Respondent emphasized the need for a comprehensive review of the evidence and the complexity and scope of the investigations, which supported keeping the petitioner in detention. These investigations involved many offenses.
9. It was contended that the petitioner's arrest was required to protect the rights of investors who were seeking compensation for their financial losses because his release could have a negative impact on their interests.

JUDGEMENT ANALYSIS:

1. The court considered whether the petitioner was qualified for standard bail under Section 45 of the Prevention of Money Laundering Act (PMLA) in this instance. From the verdict, a few significant points were made:
2. The PMLA places the burden of proof on the prosecution because it does not presume guilt for the underlying charges.
3. Since the predicate offenses were the subject of a protracted inquiry, the petitioner's culpability was called into question.
4. The court noted the chaos that the Covid-19 pandemic caused as a result of the petitioner's failure to pay interest to depositors. The court recognised the effect of the pandemic on the petitioner's capacity to repay depositors.
5. The court emphasized that bail is not intended to be a form of punishment, but rather to ensure that an accused person appears at trial.
6. The petitioner's age (about 69), the attachment of his property, and the lack of a chance that he would conduct similar crimes were all taken into consideration.
7. As a result, the court granted bail to the petitioner under certain guidelines, valuing personal freedom while avoiding interference with current inquiries or processes under the PMLA.

CONCLUSION: 

To summarise, as a result of the protracted investigation into the underlying charges, the effect of the Covid-19 pandemic on financial concerns, and the petitioner's personal circumstances, the court granted the petitioner regular bail in accordance with Section 45 of the Prevention of Money Laundering Act (PMLA). In particular, when there is a lack of evidence implicating the accused in the predicate charges, this ruling reaffirmed the idea that bail should emphasize an accused person's personal liberty while assuring their presence at trial.