Introduction
In the matter of Sanjay Jain v. Enforcement Directorate[i], the Delhi High Court (‘DHC’) granted bail to Sanjay Jain (‘Applicant’) by relying on various parameters of bail under the Prevention of Money-Laundering Act, 2002 (‘PMLA’) along with considering the satisfied twin conditions of bail as laid down under s. 45 of the PMLA. The DHC further noted that the confession made by a co-accused under s. 50 of the PMLA cannot be considered substantive evidence by the Court but can only be used to corroborate other evidence and assist the Court in forming a conclusion regarding the offense and guilt.
Brief Facts
Based on a First Information Report (‘FIR’) registered by the Central Bureau of Investigation (‘CBI’) under ss. 120B and 420 of the Indian Penal Code, 1860 and ss. 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988, the Respondent i.e., Enforcement Directorate (‘ED’) filed the enforcement case information report (‘ECIR’) against the Petitioner and other accused persons.
The complaint filed by the CBI contained allegations against the managing director (‘MD’) of Indian Farmers Fertilizer Cooperative Limited (‘IFFCO’) for fertilizer subsidy fraud. These allegations included manipulating subsidy claims and obtaining illegal gains from overpriced imports of raw materials and fertilizers through a subsidiary of IFFCO, discussed as follows:
The CBI had received credible information from other sources suggesting that the MDs of both IFFCO and Indian Potash Limited (‘IPL’), other board members of these companies and the Petitioner were involved in manipulating sales data, exchange of illegal commission etc., which caused significant financial losses to both companies and resulted in unfair personal gains for the accused persons and their families.
The Petitioner and other accused persons were also suspected of working together from the year 2007 to 2014 during which they defrauded IFFCO, IPL, their shareholders, and the Government of India. ED alleged that IFFCO created a fully-owned subsidiary in Dubai to import fertilizers and materials. In respect of this, the accused persons were suspected of a scheme where foreign suppliers would inflate their prices on invoices. This extra money would then be used as bribes for the MDs of IFFCO and IPL which were allegedly paid indirectly through middlemen or using an informal money transfer system (hawala).
The sons of the MDs of IFFCO and IPL allegedly received illegal commissions through a middleman named Rajeev Saxena. To hide the source of the money, Rajeev Saxena created fake consulting agreements and used them with the MD's sons’ companies to transfer the ill-gotten gains to the sons without any actual consulting work being done.
It was alleged that the Petitioner along with the co-accused persons (i.e., MDs, Rajeev Saxena and other accused persons) was channelling illicit funds through two different entities and that the Petitioner was also an owner/ key person of these entities. All these entities played a major role in this fraudulent network.
On the basis of the aforesaid facts and allegations and the basis of incriminating statements made by unreliable witnesses under s. 50 of the PMLA, the ED arrested the Petitioner on 06.10.2022. Consequently, the Petitioner approached the Delhi High Court (‘DHC’) seeking regular bail under s. 45 of the PMLA read with s. 439 of the Code of Criminal Procedure, 1973 in connection with the ECIR registered by the ED.
Held
The Hon’ble DHC referred to Vijay Madanlal Choudhary vs. Union of India[ii], and observed that while considering bail applications in the PMLA cases, the Constitutional Courts need to consider several factors such as the intent of the accused person i.e., mens rea, reasonable suspicion, presumption of innocence, a detailed review of the evidence and the likelihood of the accused person committing the crime again. The DHC further noted that in order to grant bail to the Applicant, the threshold of meeting the twin conditions under s. 45 of the PMLA should also be considered.
The DHC by placing reliance on Vijay Madanlal (supra), Chandra Prakash Khandelwal vs. Directorate of Enforcement[iii], Preeti Chandra vs. Enforcement Directorate[iv] and other such cases, observed that the statement recorded under s. 50 of the PMLA should be considered a part of the trial and are admissible as evidence during the trial. It further emphasized that the statements recorded under s. 50 of the PMLA are not directly considered during bail hearings but can be used to corroborate other evidence.
The DHC further noted that the final weight and reliability of these statements will be determined by the trial court meaning that the statements should be initially accepted as true, but any inconsistencies or contradictions within or between them can benefit the applicant when considering bail. However, a conclusive finding of guilt of the Applicant will only be made by the trial court after a thorough analysis of all evidence, including the value of the statements and the reliability of the witnesses.
In light of Vijay Madanlal Choudhary (supra), the DHC further observed that while the statement recording process might be considered legal, the confession itself cannot be treated like a regular court confession as there is no specific law in PMLA allowing this, unlike other acts. The DHC further emphasized that a court cannot base its finding of guilt solely on the confession of a co-accused. Instead, it must first consider all other available evidence, and only if the guilt of the accused person is established can the statement of the co-accused be considered to substantiate the guilt.
The DHC noted that in order to be charged with money laundering under the PMLA, there must be demonstrably illegal activity that has generated the proceeds of crime and that the accused person must have been directly or indirectly involved in handling or managing these illicit funds. In this case, it was alleged that the Petitioner received illicit money through two distinct channels involving various intermediaries. However, there was no unbroken money trail showing a clear and direct path from the initial criminal activity, through the intermediaries, and ultimately to the Applicant.
The DHC invoked s. 30 of the Indian Evidence Act, 1872, and further clarified that confessions under the PMLA cannot serve as primary evidence against co-accused individuals. Judges must evaluate all evidence comprehensively, ensuring that a co-accused’s confession is only used to reinforce other substantial proof, rather than as the sole basis for establishing guilt.
·The DHC by referring to Vijay Madanlal Choudhary (supra) observed that money laundering charges can only stick if the predicate offence is proven. The DHC based on the evidence so far noted that the predicate offence was weak, and the accused person was not convicted of it which further proved a good chance for the accused person not being guilty of money laundering either.
In granting bail to the Petitioner, the DHC also considered factors such as the consistent cooperation of the Petitioner, the lack of substantial evidence against him, the absence of any evident flight risk, and the principle of parity, which highlighted the unequal treatment of the Petitioner compared to other co-accused individuals. These factors collectively led to the DHC's decision to grant bail.
Analysis
The DHC conducted a thorough analysis of the admissibility and weight of statements recorded under s. 50 of the PMLA in the context of bail applications. This decision involved a meticulous examination of various case laws to establish the extent to which such statements can be relied upon by the coordinate Courts. The decision of DHC in this matter was comprehensive and well-reasoned, outlining the threshold that needs to be met under s. 45 of the PMLA for these statements to be considered. Despite the evidence presented by the ED, the DHC found that the Applicant had presented strong arguments suggesting his innocence. The DHC, therefore, identified reasonable grounds to believe that the Applicant was not guilty, considering various aspects such as flight risk and his conduct. Ultimately, the DHC granted bail, acknowledging that the strict conditions of Section 45 of the PMLA were met.
End Notes
[i] 2024 SCC OnLine Del 1656
[ii] 2022 SCC OnLine SC 929
[iii] 2023 SCC OnLine Del 1094
[iv] 2023 SCC OnLine Del 3622
Authored by Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.