Introduction
In the case of Udhaw Singh v. Enforcement Directorate,[i] the Allahabad High Court (‘AHC’) denied bail to Udhaw Singh, who was accused of laundering substantial proceeds of crime under the Prevention of Money Laundering Act, 2002 (‘PMLA’). Despite his contentions of legitimate business transactions and cooperation with the enforcement directorate (‘ED’), the AHC found prima facie evidence of his involvement in illicit activities.
Brief Facts
Shine City Infra Project Pvt. Ltd. (‘Shine City’) was allegedly involved in multiple fraudulent schemes, alluring homebuyers and investors with lucrative offers and subsequently defrauding them.
Numerous first information reports (‘FIRs’) were filed against Shine City and its directors under various sections of the Indian Penal Code. This resulted in a registered enforcement case information Report (‘ECIR’) under the PMLA.
The enforcement directorate (‘ED’) alleged that money collected from homebuyers was routed to various associates and companies, including substantial payments to Udhaw Singh (‘Applicant’) under the guise of commission (ranging from 5% to 12%).
The Applicant was accused in the ECIR of handling proceeds of crime through his various firms. Allegations include receiving about Rs. 7.68 crores over five years, primarily from Shine City, with inadequate explanations for these transactions. This suggests that the Applicant assisted Shine City in property transactions and that the money involved was proceeds of crime, masked as legitimate funds by layering the same.
The Applicant was before the AHC seeking bail, contending that his continued detention was unjustified and that he had been falsely implicated in the money laundering case.
Contentions of the Applicant
The Applicant contended that he was not named in any FIRs related to the predicate offences. He claimed the transactions were legitimate business earnings from providing consultancy and construction services to Shine City. The Applicant also argued that his cooperation with the ED and absence of any prior criminal history justified the grant of bail.
It was argued that despite the Applicant providing statements and necessary documents to the ED during the investigation, even if unable to justify the source of funds or the value of properties exceeding tax records, this might constitute non-disclosure of income under tax laws rather than a violation under ss. 3 and 4 of the PMLA.
Arguments of the ED
The ED opposed bail, citing the direct involvement of the Applicant in money laundering. They highlighted unusually high commissions (5-12%) deposited into the Applicant’s bank accounts, exceeding standard rates (3%) in real estate brokerage.
It was also contended that the money laundering offence did not mandate the Applicant’s naming in the predicate offence. S. 3 of the PMLA permits proceedings if the provisions are violated, irrespective of their mention in the FIR tied to the predicate offence.
Held
The AHC examined statutory provisions and precedents, including the precedent laid down by the Apex Court in Vijay Madanlal Choudhary v. Union of India,[ii] applying these principles to the case.
The AHC found prima facie evidence linking the Applicant to the alleged money laundering activities. Despite the Applicant’s cooperation in giving statements, there was insufficient explanation for the substantial commissions and the lack of formal authorization for land deals.
The AHC highlighted the rapid wealth accumulation by the Applicant and his firms, primarily through dealings with Shine City, suggesting complicity. Given the gravity of the offence and ongoing investigations, the AHC denied bail, emphasizing that these observations should not influence the trial’s merits, which should proceed expeditiously.
Conclusion
The AHC rightly held that while bail is a rule and jail an exception, the stringent provisions of the PMLA necessitate careful consideration of the gravity of offences and the accused’s role. Despite the Applicant's contentions, the decision underscores the stringent conditions of the PMLA, particularly as outlined in s. 45.
End Notes
[i] Criminal Misc. Bail Application No. 3206 OF 2024.
[ii] 2022 SCC OnLine SC 929.
Authored by Nitish Solanki, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.