What would happen when there was a criminal overlay (forgery/cheating) that converted gambling returns into apparently legitimate company funds? Would it become tainted with the scheduled offences? The Bombay High Court explains that even property indirectly derived via criminal activity related to a scheduled offence qualifies. So, the funds withdrawn illegally from the bank accounts of the shell companies would become ‘tainted proceeds’, and certainly the “proceeds of crime” as defined in Section 2 (u) of the PMLA.
The High Court therefore ruled that the association of the money gained by way of illegal business and/or online gambling/betting with the bank accounts of the shell companies opened by cheating and showing that money as that of the innocent individuals, being an integral part of the entire scheme of this crime, attracts penal liability under the provisions of Section 318 (4), 338 and 340(2) of BNS, 2023. Accordingly, the Court refused the bail applications.
Although gambling itself is not a scheduled offence, the core of the criminal scheme in this case was cheating and forgery, forging identities, forging blank cheques, and forging shell-company accounts, all of which are listed/scheduled offences. Those offences directly helped to show that the money withdrawn was falsely projected as proceeds of genuine trading/business, added the Court.
The Court pointed out that the deception and dishonest act of the applicant and his co-accused, leading to the opening and operating of the bank accounts of the shell entities, resulted in handing over the signed cheque books, making false valuable security, i.e., writing the name of the payee in the blank cheques signed in advance by the victims and finally, using the said cheques as genuine for withdrawal/delivery of the money.
As the applicant and his co-accused caused a wrongful gain for themselves, the Court clarified that the provision of Section 318 BNS is attracted against delivery of any property to any person by the person who was deceived and fraudulently or dishonestly induced to do so. The Court declared this a clear case of cheating the individuals, making a false valuable security and using it as a genuine or legal cheque.
A Single Judge Bench of Justice Shyam C. Chandak observed that the money accumulated/credited in the bank accounts of the shell companies was not withdrawn by the actual account holders, but by the applicant and the co-accused, who wrote their name as ‘payee’ in the blank signed cheques to encash it, falsely and without any authority, to derive or obtain the money from the bank account concerned.
The Single Judge noted from the perusal of the FIR and the statement of the prosecution witness that the applicant, along with the co-accused, had deceptively and fraudulently caused the innocent individuals to part with their identity documents with the intent to use them to open the shell entities, based on the false promise of giving them a job in the APMC. Later on, bank accounts in the name of those shell companies were established with the help of said documents.
The Bench therefore observed that the modus operandi followed in respect of operating the bank accounts showed active participation of the applicant in the criminal activities to help the main accused in money laundering for pecuniary benefit, as money deposited in the bank accounts of the shell companies was accumulated through illegal business and online gambling/betting.
In the case at hand, the Bench observed that the accused persons first deceived the individual victims of the crime, then made them open their bank accounts and lastly, caused them to allow the accused to take complete control and operations of the bank accounts in their hands. This was a clear wrongful loss of documents and the right to operate the bank account by the individuals and wrongful gain of property by the accused persons.
Briefly, based on an FIR under Sections 318(4), 338, 340(2) of BNS, 2023, the ED had registered a case, on the complaint filed by Jayesh Lotan Misal, who had alleged that one Seraj Ahmed Mohammad Harun Memon had collected the identity documents from the informants in the guise of giving them a financial benefit, and later used those documents to establish shell entities. Further, certain bank accounts were opened in the name of such entities and new SIM Cards were obtained in the name of the informants to take control over those bank accounts, from which huge financial transactions, including term deposits, were made.
The investigation revealed that, credit amounting to more than Rs. 112.72 crores was made from the accounts of around 200 firms within a span of two months, and the accumulated amounts were transferred to various other accounts maintained in the name of different persons/entities. The record also revealed that cash amounting to Rs. 28.22 was withdrawn within a span of less than two months. When the applicant and his accomplices tried to escape from India, they were arrested, and they confessed to active involvement in establishing the shell companies for which they had received a commission in cash.
Thus, the ED framed charges against the accused persons for playing a very crucial role in laundering huge money. When the applicant approached the Trial Court seeking bail, the same was denied.
Appearances:
Senior Advocate Aabad Ponda, along with Advocates Jugal Kanani and Prabanjay R. Dave, for the Applicant
Advocates Manisha Jagtap, Yashashree Raut, and Sangeeta Shinde, for the Respondents
