Final Order 4

Order Details: COPY OF ORDER
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IN THE COURT OF MS. ANJU BAJAJ CHANDNA
PRINCIPAL DISTRICT & SESSIONS JUDGE-CUM-SPECIAL
JUDGE (PC ACT) CBI, ROUSE AVENUE DISTRICT COURTS,
NEW DELHI
Bail Matter No. 230/2024
CNR No. DLCT11-000996-2024
ECIR/DLZO-I/44/2021
Pradeep Goel
S/o Jai Singh Goel
R/o 60/20, First Floor,
Prabhat Road, Ramjas Road
Karol Bagh, Delhi-110005
…...Applicant
vs
Directorate of Enforcement
through its Assistant Director
Pravartan Bhawan
APJ Abdul Kalam Road
New Delhi-110011
…….Respondent
21.11.2024
Appearance : Sr. Advocate Sh. Vikas Pahwa along with
advocates Sh.Prabhav Ralli, Ms.Namisha Jain,
Sh.Dev Vrat Arya, Sh.Naveen Sharma and
Sh.Sushil Kumar for applicant Pradeep Goel.
Sh.Atul Tripathi, Ld. Special PP for ED along
with Advocate Sh.V. K. Attri.
Pradeep Goel vs ED 1 of 38
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1. The applicant Pradeep Goel seeks anticipatory bail under
the provisions of Section 482 Bhartiya Nagrik Suraksha Sanhita 2023
(erstwhile Section 438 Cr.P.C) read with Section 45 of Prevention of
Money Laundering Act 2002. According to the applicant, he has
reasonable apprehension for being arrested in
ECIR/DLZO-I/44/2021.
2. The brief facts as stated are that on 28.06.2021 Bank of
India being the consortium leader of six banks, lodged a complaint
with Central Bureau of Investigation (CBI) with respect to credit
facilities advanced in favour of M/s Shree Raj Mahal Jewellers Pvt.
Ltd (in short SRMJPL). It was alleged in the complaint that ‘fraud’
had taken place in the account of M/s SRMJPL which was initially
constituted as partnership firm in the year 2008 and later on
converted into private limited company in the year 2009. The
complainant bank sanctioned / disbursed Rs.45 crores in 2010 against
hypothecated stocks (gold, diamond, silver and precious stones) while
in the year 2013, the credit facilities were enhanced to Rs.100 crores
under the consortium arrangement and it was further increased to
Rs.125 crores in the year 2014 and other banks joining as consortium
members. As per the complaint, the account of M/s SRMJPL was red
flagged on 03.11.2015 and special investigating audit was ordered
and based on the report, the account was declared ‘fraud’ while
investigation was for the period of two years from 01.04.2014 to
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31.03.2016. The account of M/s SRMJPL was declared as NPA and
proceedings under law were initiated for the recovery.
3. Based on the broad allegations, CBI registered the FIR.
It was stated that no irregularity was found against any bank
employee and staff accountability report against five officers has been
closed and against two officers is in process for procedural lapses.
The FIR was registered under Section 406, 420 IPC read with Section
120 B IPC and under Section 13 (2) read with Section 13 (1) (d) of
Prevention of Corruption Act dated 16.07.2021. The charge-sheet
was filed by the CBI and Ld. Special Judge recorded that sanction has
been declined under Section 17 (A) of Prevention of Corruption Act
against public servants and therefore investigation was carried out
only for the offences under IPC. The charge-sheet was sent to the
court of ACJM-II, Rouse Avenue Court, New Delhi. However, till
date documents have not been received and no cognizance has been
taken on the charge-sheet.
4. The present ECIR was registered on 06.09.2021 by the
ED (respondent herein) and despite the lapse of three years neither
the prosecution complaint nor any closure report has been filed. So
far as the predicate offence is concerned, the credit facilities were
extended in favour of M/s SRMJPL on 28.04.2010 with the covenant
that bank shall conduct quarterly inspection and also as and when
required. The sanction was renewed vide letter dated 09.12.2011
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after ascertaining that there are no lapses in the account of M/s
SRMJPL. In the year 2013-2015, the Bank of India and other
consortium banks enhanced the credit facilities and same were
revised from time to time after due scrutiny.
5. The sanction letters dated 17.04.2013 issued by the
complainant bank and letters by other banks have been relied upon.
Thereafter on annual review of the credit facilities sanction limit was
further enhanced to Rs.125 crores with two new consortium members
vide sanction letter dated 23.01.2015 issued by the complainant bank
and similar letters by other banks. On 30.06.2015 the account was
declared Non-performing Asset (NPA) as the company was not in a
position to meet its obligations. The efforts were made by the
applicant and other members of M/s SRMJPL to regularize the bank
accounts but due to the slowing down of the business, they were
unable to do so. Due to the demonetization in November 2016
business also got impacted adversely and later on the introduction of
GST, problems arose. The company submitted OTS (one time
settlement) on 16.08.2016 and on 29.06.2021 but with no results the
stand taken by the company has been that due to business problems
and financial losses the account has become NPA. The company went
into liquidation vide order of NCLT dated 08.09.2020. On
11.04.2023, ED conducted a search at various premises related to M/s
SRMPL including the premises of applicant and his brothers and on
the recovery of alleged incriminating documents, digital devices and
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other movable properties, an application was filed before
Adjudicating Authority dated 10.05.2023 under Section 17 (4)
PMLA 2002 for retention of documents/ articles. It was contended
that same are required for the purposes of investigation and
adjudication under the provisions of Prevention of Money Laundering
Act and vide order dated 26.09.2023, the application of ED was
allowed by Adjudicating Authority. Even after the lapse of 365 days,
since the order, no prosecution complaint has been filed by ED.
Despite the fact that investigation is pending for more than three
years, ED has failed to conclude if there are any proceeds of crime
involved in the case. On 07.05.2024, again a search was carried out
during which the applicant cooperated. Enforcement Directorate filed
application before Adjudicating Authority dated 05.06.2024 for
retention of seized records and immovable properties and for freezing
of bank accounts which is pending adjudication. ED / Respondent has
also passed provisional attachment order dated 10.06.2024 whereby
the properties worth Rs.94 crores have been attached which is
equivalent to the alleged proceeds of crime and after this attachment,
arrest of the petitioner is not needed. M/s SRMJPL has paid interest
to the tune of Rs.80 crores to the banks against the credit facilities. It
is further contended that declaration of account as ‘fraud’ is under re-
consideration as evident from the proceedings of WP (C) 7786/2024
wherein the declaration of fraud has been challenged. Therefore,
very basis of initiating criminal proceedings by CBI becomes
void
ab-initio.
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6. The applicant further submits that he is 42 years old and
suffering from life endangering ailments requiring special medical
care and attention. The applicant has a strong family history of
Chronic Liver Disease (CLD) and is suffering from Grade-II Fibrosis
and is on medication and strict diet schedule. The applicant is also an
acute patient of anxiety disorder and he is having depressive suicidal
tendencies and suffering from frequent panic attacks. On account of
ongoing medical and special condition, petitioner claims to be sick
and infirm person. The applicant claims to have joined and
cooperated in the investigation on various dates from April 2023 to
June 2024. The Director of M/s SRMJPL namely Ashok Goel
(brother of the applicant) was arrested by the respondent while he had
gone to join the investigation. The applicant received summons on
10.10.2024 for appearance before the investigating officer. The entire
case of the Enforcement Directorate is based upon the documentary
evidence and particularly when there is no fraud, the question of
generation of proceeds of crime does not arise as the investigation
under Prevention of Money Laundering is dependent upon the
predicate / scheduled offence.
7. It is further stated by the applicant that he was never
arrested by the CBI in the scheduled offence. The complaint is based
on the forensic audit exercise and report was released on 27.05.2016.
There is inordinate and unexplained delay in filing the complaint with
CBI. Petitioner has further contended that there is no necessity to
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arrest him under Section 19 PMLA and the judgment of Arvind
Kejriwal vs Directorate of Enforcement, Crl. Appeal No.2493/2024
has been relied upon. The period as stipulated in Section 8 (3) (a) of
PMLA is over and non-filing of prosecution complaint by ED
indicates that nothing material has come on record against the
applicant to file a prosecution complaint against him. The documents
and devices seized from the house of the applicant (confirmed vide
order dated 26.09.2023 by Adjudicating Authority) are liable to be
returned.
8. The applicant further claims to be the sole breadwinner
of his family consisting of his wife and three minor children. The
parents are also old suffering from various ailments. The applicant
has got deep roots in the society and there is no possibility of
applicant influencing the witnesses or interference with the process of
justice.
9. Respondent / Enforcement Directorate filed reply to the
anticipatory bail application with the preliminary denial of all the
allegations. It is asserted that FIR was lodged on the basis of the
complaint filed by Bank of India against M/s SRMJPL for not
repaying the loan of Rs.125 crores which was given for business of
manufacturing and trading of gold/diamond jewellery. The lending
banks had declared fraud in the loan accounts of M/s SRMJPL on
30.07.2016 for various reasons one of which was suspected diversion
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of funds into real estate business other than core business. It is also
alleged that M/s SRMJPL stopped submitting the stock and book debt
statements to the lending banks and disposed off the hypothecated
stock / goods etc. The investigation conducted under PMLA 2002
revealed that M/s SRMJPL along with Directors and Promoters
started illegal diversion of funds from loan accounts right from the
year 2010. The said diversion were done through entities like M/s
Ridhi Sidhi Gold, M/s Royal Gold, M/s Radha Jewellery House and
M/s Krishna Jeweller etc which were also controlled by promoters /
directors of M/s SRMJPL. Various transactions during the period
from 2011 to 2016 showing diversion of funds from M/s SRMJPL
have been detailed.
10. As per the investigation, in the financial year 2015-2016
M/s SRMJPL had shown huge outstanding debts to the tune of
Rs.110.87 crores from various entities against sale of gold / diamond
jewellery and these debts kept on increasing every year. The
company went into liquidation on 24.04.2019 with the outstanding
debts of Rs.156.95 crores receivable from various entities. Four major
debtor companies are controlled by the Directors/ Promoters of M/s
SRMJPL including the applicant. It is further contended that during
the search conducted on 07.05.2024, a Mercedes Benz car owned in
the name of M/s Astro Jewels Pvt. Ltd was recovered from the
residential premises of the applicant to which applicant could not
support his claim of having purchased the same in the year 2022. The
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companies managed and controlled by Pradeep Goel have been
heavily benefited by the funds diverted from M/s SRMJPL.
Applicant appeared in the office in response to summons but he did
not submit information of his financial affairs. Applicant has made
significant investments in acquisition and development of immovable
properties on commercial scale and he has earned huge profits by
selling these properties. The complete details of such properties are
yet to be traced. Applicant is in exclusive knowledge of properties
acquired / developed by him in disguise. Documents related to these
properties are also in his exclusive knowledge and he is required to be
confronted with the evidence collected during the investigation.
11. An Application has already been preferred by respondent
to secure the presence of applicant during investigation with the
request of issuance of Non-bailable warrants. The investigation
involves large number of companies and bank accounts. It is denied
that M/s SRMJPL suffered any business losses and it is alleged that
company failed to repay the dues due to illegal diversion of funds.
The directors of company were diverting the loan funds for their
personal gains. The investigation conducted by the respondent is at its
crucial stage and applicant is being summoned as per requirement of
the investigation. So far as re-examination of fraud of Bank of India
is concerned, it is contended that same has not affected the existence
of FIR involving scheduled offences. CBI has already filed charge-
sheet in the scheduled offences. The applicant has not cooperated
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during the investigation and he is making excuse of having medical
problems, although he is living a lavish life and enjoying the proceeds
of crime.
12. It is admitted that charge-sheet has been filed by the CBI
only for the offences under IPC and as no sanction was received
against public servants qua the offences under Prevention of
Corruption Act 1988.
13. The filing of charge-sheet by CBI proves commission of
the scheduled offence and generation of proceeds of crime. The
independent investigation conducted by Enforcement Directorate
reveals generation of proceeds of crime. The claim of the applicant
about recovery of dues by the consortium bank through NCLT
proceedings is denied. It is alleged that directors of M/s SRMJPL
have shown bogus debtors in order to siphon off the funds for
personal gains. During the liquidation proceedings, company has
been bought back for an amount of Rs. 68.50 Lakhs by the entity M/s
Radha Jewellery House which is controlled by them only. It is
admitted that respondent has provisionally attached assets worth
Rs.94 crores vide attachment order dated 10.06.2024 which is subject
matter of adjudication proceedings. The issuance of summons by the
respondent to the applicant does not indicate that he necessarily
would be arrested. The issuance of summons is required for the
investigation. The respondent cannot comment upon the investigation
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conducted by the CBI relating to predicate offence while the
respondent is required to trace the proceeds of crime generated from
the scheduled offences which is generally subjected to multiple level
of layering. It is contended that applicant has invested huge funds in
real estate by diverting funds from the company and he has refrained
from submitting copy of registration deed/sale agreement of such
properties. It is prayed that application of the applicant be dismissed.
14. Arguments have been advanced at length on behalf of
both the sides.
15. Arguing on behalf of applicant, Sr. Advocate Sh. Vikas
Pahwa submitted that credit facility was approved by Bank of India in
the year 2010 and same was reviewed in 2012. The credit facilities
were sanctioned till the year 2014. On the basis of Forensic Audit
Report for the period 01.04.2014 to 31.03.2016, the account was
declared ‘fraud’ on 30.07.2016 but only after the gap of 5 years, the
complaint was lodged with the CBI. The FIR related to predicate
offences was registered and although the charge-sheet has been
submitted but no cognizance has been taken on the same. No
proceedings against public servant have been initiated or carried out
for the reason permission under Section 17 A of PC Act, was
declined.
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16. Ld. Counsel forcefully argued that declaration of fraud
by the Bank of India as to the account of M/s SRMJPL stands vitiated
due to non-compliance to the rules of natural justice. On this aspect,
Ld. Counsel has relied upon the judgment of Supreme Court of India,
State Bank of India & Ors. vs Rajesh Agarwal & Ors.(2023) 6 SCC 1.
The subject matter of this judgment has been challenge to the Reserve
Bank of India (frauds Classification and reporting by Commercial
Banks and Select FIs) Directions 2016 and during the course of
hearing, the apex court directed that matter may not be reported to the
CBI for the time being. Elaborating the principle of
audi alteram
partem, the apex court made the following observations:-
“36. We need to bear in mind that the principles of natural
justice are not mere legal formalities. They constitute
substantive obligations that need to be followed by
decision-making and adjudicating authorities. The
principles of natural justice act as a guarantee against
arbitrary action, both in terms of procedure and substance,
by judicial, quasi-judicial, and administrative authorities.
Two fundamental principles of natural justice are
entrenched in Indian jurisprudence: (i) nemo judex in
causa sua, which means that no person should be a judge
in their own cause; and (ii) audi alteram partem, which
means that a person affected by administrative, judicial or
quasi- judicial action must be heard before a decision is
taken. The courts generally favor interpretation of a
statutory provision consistent with the principles of natural
justice because it is presumed that the statutory authorities
do not intend to contravene fundamental rights.
Application of the said principles depends on the facts and
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circumstances of the case, express language and basic
scheme of the statute under which the administrative
power is exercised, the nature and purpose for which the
power is conferred, and the final effect of the exercise of
that power.
37. While the borrowers argue that the actions of banks in
classifying borrower accounts as fraud according to the
procedure laid down under the Master Directions on
Frauds is in violation of the principles of natural justice,
the RBI and lender banks argue that these principles
cannot be applied at the stage of reporting a criminal
offence to investigating agencies. At the outset, we clarify
that principles of natural justice are not applicable at the
stage of reporting a criminal offence, which is a consistent
position of law adopted by this Court.
40. The process of forming an informed opinion under the
Master Directions on Frauds is administrative in nature.
This has also been acceded to by RBI and lender banks in
their written submissions. It is now a settled principle of
law that the rule of audi alteram partem applies to
administrative actions, apart from judicial and quasi-
judicial functions. It is also a settled position in
administrative law that it is mandatory to provide for an
opportunity of being heard when an administrative action
results in civil consequences to a person or entity.”
17. In concluding portion of the judgment, Hon’ble Supreme
Court made the following directions:-
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“95...In light of the legal position noted above, we hold
that the rule of audi alteram partem ought to be read in
Clauses 8.9.4 and 8.9.5 of the Master Directions on Fraud.
Consistent with the principles of natural justice, the lender
banks should provide an opportunity to a borrower by
furnishing a copy of the audit reports and allow the
borrower a reasonable opportunity to submit a
representation before classifying the account as fraud. A
reasoned order has to be issued on the objections
addressed by the borrower. On perusal of the facts, it is
indubitable that the lender banks did not provide an
opportunity of hearing to the borrowers before classifying
their accounts as fraud. Therefore, the impugned decision
to classify the borrower account as fraud is vitiated by the
failure to observe the rule of audi alteram partem. In the
present batch of appeals, this Court passed an ad-interim
order restraining the lender banks from taking any
precipitate action against the borrowers for the time being.
In pursuance of our aforesaid reasoning, we hold that the
decision by the lender banks to classify the borrower
accounts as fraud, is violative of the principles of natural
justice. The banks would be at liberty to take fresh steps in
accordance with this decision.”
18. Ld. counsel further relied upon the judgment of Punjab
& Haryana High Court, AGR Steel Strips Pvt. Ltd & Ors. vs Reserve
Bank of India & Ors., CWP 34297/2019 wherein coercive action
drawn against the petitioners pursuant to the circular of RBI dated
01.07.2016 (updated on 03.07.2017) was under challenge and the
court on relying upon the judgment of SBI & Ors. vs. Rajesh
Agarwal & Ors. (supra) and the principles laid down in the said
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judgment, held that FIRs, if any, registered against the petitioners
concerned, in terms of tainted declaration of ‘fraud’ being made of
the accounts concerned, there is plenitude of jurisdiction vested in the
court to construe that such lodged FIRs are also required to be
quashed and set aside. The court clearly held that declaration of
fraud and consequent registration of FIR without adherence to the
principles
audi alteram partem would be the FIR born from such
stained declarations and therefore required to be quashed and set
aside. However, liberty was given to lending institutions to proceed
to draw such actions, after adherence to the principles of natural
justice. Ld. Counsel also relied upon various orders of High Court of
Delhi, wherein declaration of fraud and consequential proceedings or
actions initiated have been stayed, due to non-compliance of the
above judgment.
19. Ld. Counsel further contended that in this case, Bank of
India in order to make compliance, a fresh show cause notice was
issued by Bank of India on 23.04.2024 to the company M/s SRMJPL
and its directors stating therein that in order to re-examine the matter,
written submissions be presented. The said notice was immediately
replied on behalf of company on 10.05.2024 seeking copy of Forensic
Audit Report dated 27.05.2016, however, vide its communication
dated 13.05.2024, the Bank again advised the company and its
directors to provide written submissions and in the event of non
submission, to be presumed that company has nothing to say in the
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matter and bank would proceed with examination of fraud angle in
terms of RBI Master Circular / Banks Guidelines on fraud
classification and reporting. The applicant Pradeep Goel filed a writ
petition (WP (C) No. 7786/2024) challenging the wrongful and
arbitrary classification of account of the company as fraud and during
the proceedings (as evident vide order dated 28.05.2024), the counsel
for Bank of India (respondent no.1) submitted that accounts of
petitioners and respondent no.2 company have still not been declared
as ‘Fraud’ and that only SCN (Show Cause Notice) has been issued.
It was also submitted that case is under re-consideration as the bank is
re-considering its earlier decision, by which the account of the
company had been declared ‘Fraud’. The court specifically noted that
the account of the company, have still not been declared as ‘Fraud’
and that earlier declaration of ‘Fraud’ is under reconsideration in the
light of the judgment, State Bank of India & Ors. vs Rajesh Agarwal
& Ors (supra). The court also ordered the bank to provide copy of
Forensic Audit Report and documents to the petitioner (applicant
herein).
20. Ld. Counsel further contended that another director of
the company namely Praveen Gupta has already filed a petition for
quashing of FIR of scheduled offence before the High Court of Delhi
wherein notice has been issued. The offences under PMLA are
dependent upon scheduled offence and since the scheduled offence is
under re-consideration by the complainant bank, it cannot be
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concluded that applicant is guilty of offence of money laundering.
Secondly, the judgment of Supreme Court of India, in the matter of
Karnartaka EMTA Coal Mines vs CBI, 2024 SCC OnLine SC 2250
has been relied upon wherein the order on charge passed by Ld.
Special Judge (PC Act), CBI was under challenge and the Supreme
court took into consideration that sanction was denied by Sanctioning
authority and CBI having accepted the decision of sanctioning
authority, cannot be permitted to argue that these were merely the
administrative decisions and even if permission to prosecute the
public servants has been denied, the department can still proceed
against the appellants (private persons) based on the very same set of
evidence. It was held that simply because the said senior
functionaries / public servants, to whom respondent CBI described as
co-accused in a criminal conspiracy and attributed similar motives
and if they have been let off the hook, the respondent CBI has not
challenged the said decision, there is no reason to proceed against the
appellant on the very same set of facts. CBI having accepted the
decision of sanctioning authority / competent authority was not
justified to press the charges against the appellants. In conclusion,
appeals were allowed and order of framing of charge was set aside.
According to Ld. Counsel, in this case also, the public servants were
not charge-sheeted despite registration of RC by CBI, as no
permission under Section 17A of PC Act could be obtained and
applying the ratio of above judgment, the charges against accused
persons (who are directors of M/s SRMJPL) cannot be pressed.
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21. Thirdly, Ld. Counsel argued that applicant is entitled to
relaxation so far as the stringent conditions under Section 45 of
Prevention of Money Laundering Act 2002 is concerned, in view of
his medical condition. Ld. Counsel relied upon the certificate issued
by Dr. Nikhil Raheja dated 08.10.2024 and to the diagnostic reports
and medical prescriptions showing applicant being the patient of
severe fibrosis and Anxiety Disorder with Panic Attacks and
Depressive features.
22. Further, Ld. Counsel has relied upon the judgments of
Sanjay Chandra vs CBI, AIR 2012 SC 830, Satender Kumar Antil vs
CBI, (2022) 10 SCC 51, Manish Sisodia vs ED, 2024 SCC Online
1920 to contend that bail is the rule and jail is the exception even in
the cases relating to special statutes. In view of delay in filing the
complaint by Bank and further delay caused by Enforcement
Directorate, there is no possibility that proceedings may be concluded
in near future. The valuable right of the applicant as to his personal
liberty and freedom cannot be deprived. Ld. Counsel for applicant
has relied upon the following judgments in support of his arguments:-
1. State Bank of India & Ors. vs. Rajesh Agarwal & Ors. 2023 SCC
OnLine SC 342.
2. Vijay Madanlal Choudhary vs. Union of India (2023) 12 SCC
1.
3. S. Martin vs. Directorate of Enforcement (SLP Crl
No.4768/2024).
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4. Prakash Industries Ltd. vs. Directorate of Enforcement, 2022 SCC
OnLine Del 2087.
5. Rajiv Channa vs. Union of India (Misc. Appeal (PMLA)
13/2023, High Court of Delhi.
6. Arvind Kejriwal vs. Directorate of Enforcement, Crl. Appeal
No.2493/2024, Supreme Court of India.
7. Mahender Kumar Khandelwal vs. Directorate of Enforcement
& Anr. [W. P. (C) 10993/2023], High Court of Delhi.
8. Amit Aggarwal vs Enforcement Directorate (2024) 1 HCC (Del)
288, High Court of Delhi.
9. Bikash Kumar vs The State of Bihar & Ors. Criminal
Miscellaneous No.24928 of 2022 of High Court of Patna.
10. Dr. G.S.C Rao vs Directorate of Enforcement, Criminal Misc.
Anticipatory Bail Application No.138 of 2023, High Court of
Allahabad.
11. Ranji Singh vs. Directorate of Enforcement, Criminal Misc.
Anticipatory Bail Application No.1518 of 2023, High Court of
Allahabad.
12. Karnataka EMTA Coal Mines Ltd. Vs Central Bureau of
Investigation 2024 SCC Online SC 2250.
13. AGR Steel Strips Pvt. Ltd. vs. Reserve Bank of India, CWP
34297/2019, High Court of Punjab and Haryana
14. M/s Rajshree Cotex & Ors. vs. Bank of Baroda & Ors, writ petition
no. 22497 of 2023, High court of Madhya Pradesh.
15. Madanlal Goyal & Ors. vs IDBI Bank Ltd 2024 SCC OnLine MP
1782.
16. Sanjay Tiku & Ors. vs. Reserve Bank of India & Anr. 2024 SCC
OnLine Del 1345.
17. Vijay Kumar Jain & Ors. vs Reserve Bank of India & Ors. 2024
SCC OnLine MP 1199.
18. Basant Bansal vs State (NCT of Delhi) & Ors. 2023 SCC
OnLine Del 3589.
19. Pankaj Bansal vs State (GNCTD) & Ors. 2023 SCC OnLine Del
3590.
20. Ankit Aggarwal vs DOE 2021 SCC OnLine Del 4820
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21. Simanchala Mishra vs Enforcement Directorate Bail Application
No. 3820/2021, High Court of Delhi
22. Chandra Sekhar Panda vs. Enforcement Directorate, Bail
application No.3307/2021, High Court of Delhi.
23. Sanjay Pandey vs. DOE 2022 SCC OnLine Del 4279.
24. Kewal Kishan Kumar vs. Enforcement Directorate 2023 SCC
OnLine Del 1547.
25. Amit Arora vs Enforcement Directorate 2024 SCC OnLine Del
6496.
26. Dheeraj Wadhwan vs CBI, 2004 SCC OnLine Del 6263.
23. Arguing on behalf of Enforcement Directorate, Ld.
Special Prosecutor Sh.Atul Tripathi submitted that although the issue
of declaration of fraud is pending re-consideration with the Bank of
India in terms of judgment of SBI & Ors. vs Rajesh Agarwal & Ors.
(supra) but the existence of predicate offence/scheduled offence is not
disputed. The principle of
audi alteram partem need not be complied
with while filing a criminal complaint before the investigating
authority. The investigation conducted by Enforcement Directorate is
independent and the requirements of Section 3 Prevention of Money
Laundering Act are altogether different from the ingredients of the
scheduled offence. Applicant has joined the company M/s Shree Raj
Mahal Jewellers Pvt. Ltd. since its inception and with full authority to
carry out all functions of the company and was actively involved in
running the company. There were irregularities and illegitimate
transactions from the very beginning which ultimately resulted in
wrongful loss to the Bank of India and consortium members. The
transactions have been conducted in a manner that ultimately the
Pradeep Goel vs ED 20 of 38
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21
proceeds of crime landed in the hands of the applicant through which
real estate assets were created. The bank loans were diverted through
various entities, controlled and managed by the applicant and his
relatives. The company continued diverting the funds through the
period from 2010 to 2016 which ultimately led to default and the loan
account was declared as Non-Performing Asset (NPA). The role and
participation of the applicant Pradeep Goel is not less than the other
Directors. In order to divert the loan funds and to deal in proceeds of
crime various entities were floated through the relatives and family
members and the applicant is in possession of proceeds of crime
which he got invested in other assets to his own benefit. The charge-
sheet has been submitted in predicate offence before the court and the
applicant has been impleaded as an accused. On the aspect of the
medical condition of the accused, Ld. Counsel has submitted that
applicant is taking shelter of his ailments in order to avoid and delay
the investigation. The claim with respect to medical ailments has
been denied by Ld. Special PP for ED and it is prayed that bail may
not be granted. Ld. Special Prosecutor for Directorate of Enforcement
has relied upon the following judgments:-
1. Vijay Madanlal Choudhary & Ors. vs Union of India & Ors., 2022
LiveLaw (SC) 633.
2. Pavana Dibbur vs Directorate of Enforcement, Criminal Appeal
No.2779 of 2023 dated 29.11.2023 of Supreme Court of India.
3. Directorate of Enforcement vs Aditya Tripathi, Criminal Appeal
No.1402 of 2023 dated 12.05.2023 of Supreme Court of India.
Pradeep Goel vs ED 21 of 38
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22
4. P. Chidambaram vs Directorate of Enforcement Criminal Appeal
No.1340 of 2019 dated 05.09.2019 of Supreme Court of India.
5. Amanatullah Khan vs Directorate of Enforcement, Bail
application No.795/2024 dated 11.03.2024 of Delhi High
Court.
24. I have analysed the contentions of both the sides and
given due consideration to the relevant legal position on the issues
involved.
25. Money Laundering is the process of hiding the source of
money obtained from illegal sources and converting it into a clean
source. It is an illegal exercise that converts black money into white
money. Through money laundering, a criminal transforms the
monetary proceeds derived from criminal activity into funds with
apparently legal source. In simple words, money laundering disguises
as to where the money has come from, who it belongs to, where it has
come from and where it is going. The process of money laundering
involves three steps:- (i) placement (ii) layering and (iii) integration.
26. The scope and ambit of Section 3 of Prevention of
Money Laundering Act 2002 is wide enough and any person who
deals with proceeds of crime in any manner is responsible for
committing the offence.
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27. Before discussing the facts and merits of the present
case, it is important to mention the relevant provisions of Prevention
of Money Laundering Act 2002 as follows :-
Section 2 (u) in The Prevention of Money-Laundering Act,
2002.
“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 [or where such property is
taken or held outside the country, then the property
equivalent in value held within the country [or abroad];
[Explanation: For the removal of doubts, it is hereby
clarified that “proceeds of crime” include property not
only derived or obtained from the scheduled offence but
also any property which may directly or indirectly be
derived or obtained as a result of any criminal activity
relatable to the scheduled offence;]
Section 3 in The Prevention of Money-Laundering Act,
2002
3. Offence of money-laundering.
Whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually
involved in any process or activity connected with
the [proceeds of crime including its concealment,
possession, acquisition or use and projecting or claiming]
it as untainted property shall be guilty of offence of
money-laundering.
[Explanation.--For the removal of doubts, it is hereby
clarified that,-
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(i) a person shall be guilty of offence of money-laundering
if such person is found to have directly or indirectly
attempted to indulge or knowingly assisted or knowingly
is a party or is actually involved in one or more of the
following processes or activities connected with proceeds
of crime, namely:--
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property,
in any manner whatsoever;
(ii) the process or activity connected with proceeds of
crime is a continuing activity and continues till such time a
person is directly or indirectly enjoying the proceeds of
crime by its concealment or possession or acquisition or
use or projecting it as untainted property or claiming it as
untainted property in any manner whatsoever.]
Section 19 in The Prevention of Money-Laundering Act,
2002
19. Power to arrest
(1) If the Director, Deputy Director, Assistant Director or
any other officer authorised in this behalf by the Central
Government by general or special order, has on the basis
of material in his possession, reason to believe (the reason
for such belief to be recorded in writing) that any person
has been guilty of an offence punishable under this Act, he
may arrest such person and shall, as soon as may be,
inform him of the grounds for such arrest.
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(2) The Director, Deputy Director, Assistant Director or
any other officer shall, immediately after arrest of such
person under sub-section (1), forward a copy of the order
along with the material in his possession, referred to in
that sub-section, to the Adjudicating Authority in a sealed
envelope, in the manner, as may be prescribed and such
Adjudicating Authority shall keep such order and material
for such period, as may be prescribed.
(3) Every person arrested under sub-section (1) shall,
within twenty-four hours, be taken to a [Special Court or]
Judicial Magistrate or a Metropolitan Magistrate, as the
case may be, having jurisdiction:
Provided that the period of twenty-four hours shall exclude
the time necessary for the journey from the place of arrest
to the 1[Special Court or] Magistrate's Court.
Section 45 in The Prevention of Money-Laundering Act,
2002
45. Offences to be cognizable and non-bailable.
(1) [Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974), no person accused
of an offence [under this Act] [Substituted by Act 20 of
2005, Section 7, for certain words (w.e.f. 1.7.2005).] shall
be released on bail or on his own bond unless]
(a) every offence punishable under this Act shall be
cognizable;
(b) no person accused of an offence punishable for a
term of imprisonment of more than three years under Part-
A of the Schedule shall be released on bail or on his own
bond unless:-
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(i) the Public Prosecutor has been given an opportunity
to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the
application, the Court is satisfied that there are reasonable
grounds for believing that he is not guilty of such offence
and that he is not likely to commit any offence while on
bail:
Provided that a person, who, is under the age of sixteen
years or is a woman or is sick or infirm [or is accused
either on his own or along with other co-accused of
money-laundering a sum of less than one crore rupees]
may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take
cognizance of any offence punishable under section 4
except upon a complaint in writing made by
(i)the Director; or
(ii)any officer of the Central Government or State
Government authorised in writing in this behalf by the
Central Government by a general or a special order made
in this behalf by that Government.
[(1-A) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974), or any other
provision of this Act, no police officer shall investigate
into an offence under this Act unless specifically
authorised, by the Central Government by a general or
special order, and, subject to such conditions as may be
prescribed;]
(2)The limitation on granting of bail specified in [The
words "clause (b)" omitted by Act 20 of 2005, Section 7
(w.e.f. 1.7.2005).] of sub-section (1) is in addition to the
limitations under the Code of Criminal Procedure, 1973 (2
Pradeep Goel vs ED 26 of 38
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27
of 1974) or any other law for the time being in force on
granting of bail.
Explanation: For the removal of doubts, it is clarified that
expression “Offences to be cognizable and non-bailable”
shall mean and shall be deemed to have always meant that
all offences under this Act shall be cognizable offences
and non-bailable offences notwithstanding anything to the
contrary contained in the Code of Criminal Procedure,
1973 (2 of 1974), and accordingly the officers authorised
under this Act are empowered to arrest an accused without
warrant, subject to the fulfillment of conditions under
Section 19 and subject to the conditions enshrined under
this section.]
28. It is no doubt true that the predicate offence is the very
basis of registration of ECIR by Enforcement Directorate. In the
absence of scheduled offence, the law relating to money laundering
cannot came into play. The observations of Vijay Madan Lal
Chaudhary, 2022 SCC OnLine SC 929, make it clear that provisions of
Prevention of Money Laundering Act are dependent upon scheduled
offence as it must be shown that proceeds of crime were derived or
obtained as a result of criminal activity. The observations are as
under:-
“253...Tersely put, it is only such property which is
derived or obtained, directly or indirectly, as a result of
criminal activity relating to a scheduled offence can be
regarded as proceeds of crime. The authorities under the
2002 Act cannot resort to action against any person for
money-laundering on an assumption that the property
Pradeep Goel vs ED 27 of 38
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28
recovered by them must be proceeds of crime and that a
scheduled offence has been committed, unless the same is
registered with the jurisdictional police or pending inquiry
by way of complaint before the competent forum. For, the
expression “derived or obtained” is indicative of criminal
activity relating to a scheduled offence already
accomplished. Similarly, in the event the person named in
the criminal activity relating to a scheduled offence is
finally absolved by a Court of competent jurisdiction
owing to an order of discharge, acquittal or because of
quashing of the criminal case (scheduled offence) against
him/her, there can be no action for money-laundering
against such a person or person claiming through him in
relation to the property linked to the stated scheduled
offence. This interpretation alone can be countenanced on
the basis of the provisions of the 2002 Act, in particular
Section 2(1)(u) read with Section 3. Taking any other view
would be rewriting of these provisions and disregarding
the express language of definition clause “proceeds of
crime”, as it obtains as of now.
281...The next question is: whether the offence under
Section 3 is a standalone offence? Indeed, it is dependent
on the wrongful and illegal gain of property as a result of
criminal activity relating to a scheduled offence.
Nevertheless, it is concerning the process or activity
connected with such property, which constitutes offence of
money-laundering. The property must qualify the
definition of “proceeds of crime” under Section 2(1)(u) of
the 2002 Act. As observed earlier, all or whole of the crime
property linked to scheduled offence need not be regarded
as proceeds of crime, but all properties qualifying the
definition of “proceeds of crime” under Section 2(1)(u)
will necessarily be crime properties. Indeed, in the event
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of acquittal of the person concerned or being absolved
from allegation of criminal activity relating to scheduled
offence, and if it is established in the court of law that the
crime property in the concerned case has been rightfully
owned and possessed by him, such a property by no
stretch of imagination can be termed as crime property and
ex-consequenti proceeds of crime within the meaning of
Section 2(1)(u) as it stands today. On the other hand, in the
trial in connection with the scheduled offence, the Court
would be obliged to direct return of such property as
belonging to him. It would be then paradoxical to still
regard such property as proceeds of crime despite such
adjudication by a Court of competent jurisdiction. It is
well within the jurisdiction of the concerned Court trying
the scheduled offence to pronounce on that matter.”
467(d)….The offence under Section 3 of the 2002 Act is
dependent on illegal gain of property as a result of
criminal activity relating to a scheduled offence. It is
concerning the process or activity connected with such
property, which constitutes the offence of money
laundering. The Authorities under the 2002 Act cannot
prosecute any person on notional basis or on the
assumption that a scheduled offence has been committed,
unless it is so registered with the jurisdictional police
and/or pending enquiry/trial including by way of criminal
complaint before the competent forum. If the person is
finally discharged/acquitted of the scheduled offence or
the criminal case against him is quashed by the Court of
competent jurisdiction, there can be no offence of money
laundering against him or any one claiming such property
being the property linked to stated scheduled offence
through him.”
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29. Coming to the case in hand, so far as scheduled offence
is concerned, it has been the contention of CBI that irregularities and
illegalities were committed by M/s SRMJPL qua the loan funds as
they were diverted for other purposes thereby violating the conditions
of cash credit limit. M/s SRMJPL defaulted and failed to repay the
loan despite various legal notices. It is, however, evident that loan
funds were disbursed till 2015 on the basis of review and checking of
balance sheets and stock statements and sanction letters were issued
by the Bank (s) on various occasions. Although ED has shown
various entries of diversion of loan funds through other entities with
the specific allegations that credits were diverted to these entities
immediately on receiving from bank and these entities immediately
transferred the funds to other entities controlled by the applicant as
Director or by his relatives and ultimately the funds were used to
create real estate assets, but they have been countered by the
applicant by stating that these entries were duly done and returned
from time to time even before registration of RC by CBI and were
being scrutinized on behalf of bank and consortium members on
regular basis. These transfer of funds was not for the purpose of
layering or integration but they were genuine business transactions.
The pertinent questions have been raised that if account was being
serviced through fraudulent practices from the inception itself, how
banks continued sanctioning and disbursing the credit facilities till
2015 and why after more than 10 years complaint of fraud was
lodged in 2021. The valid point is raised as to whether the offence
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under PMLA can precede the scheduled offence and if fraud is
committed by M/s SRMJPL by diverting the funds, then money
laundering is attributable to the entities through which funds were
used allegedly to create real estate assets but none of those entities or
their directors have been impleaded as accused either by CBI or by
ED.
30. On examining the nature of allegations as contained in
the complaint of predicate offence or as contained in the proceedings
of ED, it is clear that allegations are similar and identical. The main
focus is on the diversion of loan funds to create real estate assets
through various other entities. So far as the predicate offence is
concerned, it is the very basis of the proceedings under Prevention of
Money Laundering Act 2002. It is an admitted position that while
declaring the account of M/s SRMJPL as ‘fraud’ no opportunity was
given to company or its directors to explain various transactions and
entries. In terms of judgment of SBI & Ors. vs Rajesh Agarwal &
Ors. (supra), the rule of
audi alteram partem has been held to be an
integral part of such proceedings and not merely a formality. In
conclusion, the specific direction has been recorded that borrower
must be given reasonable opportunity to submit a representation
before classifying the account as fraud and reasoned order has to be
issued on the objections addressed by the borrower. The decision as
to declaration of fraud has been held to be vitiated due to the failure
to observe the rule of
audi alteram partem.
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31. The judgment of SBI & Ors. vs Rajesh Agarwal & Ors.
(supra) is a judgment in rem and is applicable across all cases. In
terms of the said judgment, the matter was brought under re-
consideration by the complainant bank and therefore fresh show-
cause notice dated 23.04.2024 was issued to the accused company. It
is also true that due to non-compliance of
audi alteram partem, the
cases are being quashed by the court wherein criminal action has
been initiated. Although banks can take fresh steps in order to make
compliance to the judgment of SBI & Ors. vs Rajesh Agarwal & Ors.
(supra), but it cannot be denied that these compliances are not merely
a formality but has to be carried out in its true spirit. In this case, the
very basis of declaration of fraud is brought under cloud and
complainant bank is re-considering the whole issue. The Bank of
India has accepted in the proceedings before High Court (in writ
petition No.7786/2024 order dated 28.05.2024) that entire matter is
under re-examination and in view thereof the accounts of the
company cannot be taken as ‘fraud’ at this point of time. The relevant
portion of the said order is as under:-
“11. Having heard learned counsels for the parties, this
court notes the statement made by learned counsel for
respondent no.1-bank, that the account of the petitioners
and respondent no.2-Company, have still not been
declared as ‘Fraud’. The said statement is taken on record.
The submission made by learned counsel for respondent
no.1-bank is noted, that earlier declaration of ‘Fraud’ is
under re-consideration and that the account of the
petitioners and respondent no.2-Company, have still not
Pradeep Goel vs ED 32 of 38
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33
been declared as ‘Fraud’ in the light of the judgment
passed in the case of State Bank of India & Others Versus
Rajesh Agarwal & Others, 2023 SCC OnLine SC 342.”
32. The clear situation that comes forth now is that
declaration of fraud is under re-consideration and the exercise of
issuing show cause notice for compliance of natural justice principles
is under way. The question that arises is, as to what extent, weightage
be given to the scheduled offence and to the money laundering
proceedings initiated in pursuance thereof. The answer would depend
upon further course of action adopted by both the sides and resultant
outcome. However, as of now, it cannot be disputed that existence of
scheduled offence is tentative and has been brought under doubt and
even the quashing of FIR is pending consideration before High court
of Delhi. If at any point of time, FIR is quashed or decision of fraud
is recalled by the bank, it would be unjust to allow the respondent /
ED to proceed with the arrest of the applicant. It is important to note
that no arrest has been effected by the CBI for the scheduled offences
and the charge-sheet has only been submitted under the offences of
IPC. No public servant has been investigated and the proceedings are
closed qua the offences under Prevention of Corruption Act 1988.
From the view point of legal preposition of Karnataka EMTA Coal
Mines Ltd (supra), the proceedings against private persons can also
be brought into question and action against applicant might fail
before the court.
Pradeep Goel vs ED 33 of 38
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34
33. Ld. Sr. Advocate has aptly argued that every default is
not a cheating. The company was involved in high risk business and
without offering an opportunity of explaining the circumstances or
the transactions, accounts of company cannot be termed as ‘fraud’.
The company has already paid interest to the tune of Rs. 65 crores
and collateral securities through which the account was secured and
other properties have already been attached. It is an admitted position
that while obtaining cash credit facility from the Bank of India and
consortium members, no misrepresentation was done by the
company. Therefore it is not the case that cash credit facility was
obtained through fraudulent practices. Since the matter is under re-
consideration with the Bank of India and co-accused has filed the
case to get the FIR of the scheduled offence quashed, wherein already
notice has been issued to the CBI on 05.09.2023 (writ petition
no.2534/2023), therefore applicant must be released on bail.
34. Delay is an important aspect to be considered as also the
need to arrest. It is important to note that there is delay in lodging
the complaint as after the lapse of ‘five years’ of declaration of fraud,
the bank reported the matter to CBI. CBI opted not to arrest the
applicant for fraud. At this belated stage, no useful purpose would be
served with the arrest or custody of the applicant. In reply, ED has
failed to show substantial reasons to arrest the applicant or for his
custodial interrogation particularly when it has been more than 10
years since the offence and more than 3 years since the registration of
ECIR and more than one year since search and seizure by the ED.
Pradeep Goel vs ED 34 of 38
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35
The charge-sheet for scheduled offence has been casually submitted
and even after several months, documents have not been placed on
record by CBI to secure the cognizance. There is clear delay in
prosecuting the case of scheduled offence by CBI. It is thus clear that
there is no possibility of investigation and the trial being concluded
within reasonable timelines. In above circumstances, denying bail and
leaving the applicant to the discretion of investigating officer, may
result in misuse of the powers.
35. The bail jurisprudence heavily favours the valuable
rights of freedom and liberty of an individual. The judicial approach
towards fundamental rights of freedom and liberty has to be
reasonable, just and transparent. The concept of due process of law
must be adhered to in its true spirit and state’s action must be
evaluated in the manner that the rule of law prevails. Hon’ble Justice
B. R. Gavai in the matter of Manish Sisodia vs Directorate of
Enforcement (supra) specifically reminded the trial courts to
recognize the time honoured principle that the bail is not to be
withheld as a matter of punishment.
36. Under Section 45 of Prevention of Money Laundering
Act 2002, the bail conditions are stringent and when the bail is
opposed by the Public Prosecutor, the court must be satisfied that
there are reasonable grounds for believing that accused is not guilty
of such offence but the condition can be relaxed in favour of a sick or
infirm person. In this case, so far as element of guilt in the process of
Pradeep Goel vs ED 35 of 38
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36
alleged money laundering is concerned, when commission of
scheduled offence itself has been tentative, the assessment of guilt
would be a pre-mature exercise. Although the claim of the applicant
that he is sick or infirm is denied but documents relied upon by the
applicant on this aspect have not been disputed or described as forged
or fabricated. On examining the documents so relied upon,
apparently the applicant requires special diet and care.
37. The applicant has joined the investigation on various
occasions in response to the summons issued by ED. The search and
seizure has already been done under the provisions of Prevention of
Money Laundering Act 2002 as well as properties have been
attached. There is no categorical statement coming from the
investigating officer or from the Ld. Special Prosecutor that custodial
interrogation of the applicant is needed. It is clear from the
contentions of the reply filed by Enforcement Directorate that they
require presence of applicant to join the investigation as and when
called for. Even the apprehension of the applicant qua arrest has been
questioned on behalf of Enforcement Directorate. After a lapse of
more than ten years since the alleged offence and more than three
years since registration of FIR and ECIR and in view of search and
seizure already done, nothing is to be recovered or discovered at the
instance of the applicant. The applicant is having roots in the society
and there is nothing on record to suggest that he can interfere with the
process of justice or is at flight risk.
Pradeep Goel vs ED 36 of 38
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37
38. In the totality of above facts and circumstances, I am of
the opinion that applicant is entitled to anticipatory bail, accordingly,
it is ordered that in the event of arrest, the applicant be released on
furnishing personal bond and surety bond of Rs.2,00,000/- to the
satisfaction of investigating officer/ arresting officer, subject to the
following conditions:-
(i) Applicant is directed to join the investigation as and
when required by the IO/Competent Officer of ED.
(ii) Applicant is directed not to contact or influence any of
the witnesses of the case.
(iii) Applicant is directed not to leave the country without
taking permission of the court.
(iv) Applicant is directed to inform the IO/ Competent
Officer of ED in case of change of address (residential and
official) and contact number.
(v) Applicant is directed to attend the court as and when
required.
(vi). Applicant is directed to mark his appearance at ED
office before IO/ Competent Officer, once in a month.
Pradeep Goel vs ED 37 of 38
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38
39. Nothing stated hereinabove would be taken as final
expression as to the merits of the case.
40. The application is disposed off in above said terms.
(Anju Bajaj Chandna)
Principal District & Sessions Judge-
cum-Special Judge (PC Act) (CBI),
Rouse Avenue District Court
New Delhi/21.11.2024
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