Raj Singh Gehlot Vs Directorate of Enforcement (Delhi High Court)
As per the prosecution complaint, in total, Term loan of Rs.810 crores was availed by AHPL and sanctioned by the consortium of banks. The funds were disbursed through an Escrow Account maintained with J&K Bank, Ansal Plaza Branch.
The FIR was registered against the applicant, AHPL and others on the allegation that the Term loan taken from J&K Bank was misappropriated and the funds were siphoned off. Subsequently, the ECIR in question was recorded in relation to commission of offence under Sections 3/4 PMLA. It has been alleged that the sole purpose for which the Term loan was sanctioned was the implementation of AHPL’s hotel at Shahdara. But the funds obtained thereunder were put to other uses, for the direct/indirect benefit of the accused. In this regard, attention was drawn to ‘other terms and conditions’ of sanction of Rs.100 crores to AHPL, which included:-
“(iv) The company to undertake that funds will not be utilised for any purpose other than for implementation of the project.”
As per the prosecution complaint, out of Rs.810 crores, an amount of Rs.781 crores was routed through the Escrow Account. It is also stated that while a sum of Rs.156.5 crores was transferred to APL, Rs.66 crores were transferred to AHPL. Further, Rs.445.5 crores were transferred to 21 entities and Rs.49 crores to 4 individuals, who were non-contracting parties having no connection with the hotel project. On receipt of payments, said parties transferred an amount of Rs.461 crores (93 percent of the received amount) to M/s Raj Commercials and Agencies and M/s M&N Commercials. While M/s Raj Commercials and Agencies was the HUF concern of the applicant, M/s M&N Commercials was the HUF concern of Late Sh. Nakul Gehlot (nephew of the applicant). Both the entities were controlled by the applicant. It has come in the investigation that the amounts received by M/s Raj Commercials and Agencies and M/s M&N Commercials were further diverted to Ambience Group companies, which ultimately utilized the funds to settle unrelated loans and to make fixed deposits.
In the investigation conducted so far, Rs.113.73 crores have been detected to have been diverted and used for purposes such as settling of outstanding loan and overdraft liabilities of other companies and projects, tax payments, making of FDs, salary and cash withdrawals for expenses of other Group companies.
In addition to the above, Rs.41.56 crores out of the Term loan have been detected as having been utilized to purchase materials for the other projects of Group companies, such as – for project site of shopping mall of M/s Apex Homes Pvt. Ltd.; for project site of M/s Ambience Tower Pvt. Ltd. at Rohini and Shalimar Bagh in Delhi; for project site of M/s Ambience Project Pvt. Ltd. at Ambience Island, Nathupur, Gurgaon; for Caitrona project site in Gurgaon and for Ambience Mall, Vasant Kunj.
In this regard, reliance was placed on the statements of 13 vendors recorded under Section 50 PMLA. One of the vendors, namely M/s JK Cement Ltd., has stated that Rs.3.99 crores in total were paid by AHPL and APL to the company in the name of the hotel project at Shahdara. Out of the said sum, Rs.1.01 crores (approx.) were paid for supplying cement material to AHPL for the hotel project at Shahdara, but the remaining payment of Rs.2.44 crores was made for supply of cement material to the project site of APL at Ambience Islands, NH-8, Gurgaon. The other vendors have also given statements on similar lines.
It has been urged that in this way, funds from the Term loan were siphoned off, resulting in generation of ‘proceeds of crime’ as well as their layering and ultimate projection as untainted money.
It has also come in the investigation that the obligatory contribution of Rs.462 crores was not made by the promotors, thereby violating the loan conditions. Further, the loan amount disbursed by the Bank was siphoned off through certain entities, which have been found to exist only on papers.
Besides, the applicant has been stated to be the Authorized Signatory not only for AHPL, but also in respect of all documentation done towards sanction of the Term loan as well as in the Escrow Account in which the Term loan was disbursed and from which funds are alleged to have been diverted. Moreover, the forensic report stated that all payments towards construction of the hotel were not made through the Escrow Account.
Notably, the lender banks did not take recourse under SARFAESI Act and chose to opt initially for an OTS, as the action, even if successful, would have led to recovery only of the debt portion, and not the part of the debt that the banks were constrained to convert into equity under the SDR scheme of RBI. As on date, 51% shareholding in AHPL, worth Rs.666.13 crores, is stated to have been transferred to the banks to convert part of the debt into equity. Though the applicant has claimed leniency in view of the same, this Court is of the opinion that conversion of a part of the debt into equity, pursuant to the SDR scheme, was an outcome of the criminal misuse of the loan amount by the applicant and the same does not wipe off the criminality relating to the underlying transaction, whereby public money under the garb of loan was diverted and siphoned off.
Considering the parameters of Section 45(1) PMLA, I find no reasonable ground for believing that the applicant is not guilty of the alleged offence. From a prima facie view of the material placed on record and in light of the gravity of the alleged offences, it cannot be said either that the applicant is not likely to commit any such offence while on bail. Accordingly, the bail application is dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
The present application has been filed under Section 439 Cr.P.C. on behalf of the applicant seeking regular bail in Complaint Case No.39/2021 filed under Sections 44/45 of the Prevention of Money Laundering Act, 2002 (hereinafter, referred to as the ‘PMLA’) and arising out of ECIR No. 14/STF/2019 registered under Sections 3/4 PMLA by the respondent/ED.
Factual Background
2. Briefly stated, the facts of the case are that one M/s Aman Hospitality Pvt. Ltd. (hereinafter, referred to as ‘AHPL’), a group entity of Ambience Group which was founded by the applicant, purchased a plot of commercial land at Shahdara in an open auction held by the DDA on 03.03.2006 for the purpose of construction and development of a hotel. Upon technical evaluation, the cost of the hotel project was estimated as Rs.867 crores, in which promoters’ contribution was fixed @ Rs.287 crores and Term loan @ Rs.580 crores. Based on this estimate, AHPL approached J&K Bank, Ansal Plaza Branch through the applicant, with a proposal dated 12.03.2009 for sanction of loan of Rs.75 crores and BG facility of Rs.15 crores towards financial closure.
Later, the development strategy was changed and it was decided that a luxury hotel would be constructed instead of two hotels of lower categories. The step having resulted in cost escalation, the feasibility of the project, the cost and the source of finance were re-assessed by PNB Investment Services Ltd., and the loan amount was worked out @ Rs.810 crores and promoter’s contribution was fixed @ Rs.462 crores. The total project cost was estimated as Rs.1272 crores. In due course, a Term loan of Rs.810 crores was sanctioned and disbursed in favor of AHPL by a consortium of banks, led by J&K Bank. When the company turned defaulter, the consortium of banks sanctioned a funded interest term loan of Rs.165.82 crores to restructure its loan. AHPL still failed to discharge its obligations, and as a result, J&K Bank declared the company’s loan account NPA on 30.06.2018.
3. On the basis of source report verification, FIR No. 15/2019 dated 24.07.2019 was registered by Anti-Corruption Bureau (ACB), J&K against the applicant and others, for commission of offence punishable under Section 120B of the Ranbir Penal Code, 1989 (hereinafter, referred to as ‘RPC’) and Section 5(1)(d) read with Section 5(2) of the Jammu & Kashmir Prevention of Corruption Act Samvat, 2006 (hereinafter, referred to as ‘J&K PC Act’). On 20.03.2021, charge sheet No. 1 was filed against the applicant, AHPL, M/s Ambience Pvt. Ltd. (hereinafter, referred to as ‘APL’) and others, under Section 120B read with Sections 409/420 RPC and Sections 5(1)(c)/5(1)(d) read with Section 5(2) of the J&K PC Act, for misappropriation and diversion of funds from the loan of Rs.100 crores sanctioned by J&K Bank. The applicant was not arrested and the charge sheet was filed without arrest. Vide order dated 29.11.2021 passed by the learned Addl. Special Judge, Anti-Corruption Srinagar, the applicant was formally admitted to regular bail in the scheduled offence.
The Prosecution Complaint
4. On 18.10.2019, the ECIR in question came to be registered against the applicant and others under Sections 3/4 PMLA. During investigation, it was revealed that out of the Term loan of Rs.810 crores, Rs.781 crores were routed by the accused through Escrow Account No. CD *** (i.e. 0408010*********) maintained with J&K Bank, Ansal Plaza Branch, Delhi, in which the loan amount was disbursed. The payments were made to various entities, including 25 non-contracting parties (21 companies and 4 individuals), who were not connected with the project in any manner and did not provide any service or goods in furtherance of its implementation.
5. The amounts received by the 25 non-contracting parties were transferred to one M/s Raj Commercials and Agencies and one M/s M&N Commercials, which companies further transferred the funds to Ambience Group companies, wherefore the money was used to settle loans of Ambience Group companies and for meeting expenses of the applicant, his family and his friends.
6. The applicant joined investigation between 31.07.2020 and 28.07.2021. On 28.07.2021, he was arrested in the present case and remained in custody of the respondent till 07.08.2021. Thereafter, he was remanded to judicial custody. His first application seeking regular bail was dismissed by the Sessions Court on 10.09.2021, subsequent to which the prosecution complaint came to be filed on 24.09.2021. The applicant preferred another bail application, urging that the filing of the complaint by the respondent constituted a material change in circumstance. However, his second bail application was also dismissed by the Sessions Court on 27.10.2021.
Proceedings before the Special Court
7. Vide order dated 10.09.2021, passed in respect of the first bail application of the applicant, it was noted by the Special Court that in January 2018, the applicant/accused had attempted to settle the total outstanding liability of about Rs.783.96 crores towards the principal amount for a paltry sum of Rs.286.95 crores and the same showed his intent to embezzle public money. It was further observed that the applicant, a qualified Chartered Accountant, was an influential person owing to his financial status and professional expertise and the crucial witnesses, being his acquaintances or relatives, he would certainly attempt to influence the fair course of investigation. In consideration of the nature of the allegations and the investigation, the possibility of his attempting to influence the course of investigation, and the legal position that economic offences are to be treated as a class apart, the relief of bail was denied to the applicant.
8. The second bail application preferred on behalf of the applicant came up before the Special Court on 27.10.2021, when note was taken of two changes in circumstance since the dismissal of the earlier bail application of the applicant – first, that the applicant was represented by a different counsel, and second, that the prosecution complaint had been filed by the ED. While the first change was not cited by the applicant, the second change was held by the Court to not constitute any material change in circumstance. Considering the nature of the offence, the seriousness of allegations and a strong possibility of the applicant/accused attempting to influence the course of trial by influencing witnesses and tampering with evidence, the relief of bail was denied.
Contentions raised on behalf of the Applicant
9. A.M. Singhvi, learned Senior Counsel appearing on behalf of the applicant, raised the following contentions:-
(A) AHPL had engaged APL on turnkey basis to obtain permissions/clearances/approvals from various authorities and to further undertake construction/development/completion of the aforesaid hotel project. Prior to the sanction of the Term loan, i.e., up till 31.03.2009, APL invested an amount of Rs.267.33 crores towards the project, using its own funds as well as funds raised from Ambience Group. The said funds were to be ‘reimbursed’ by means of the payments received from AHPL in terms of the turnkey contract, after the loan was disbursed to it. Thus, the allegations of siphoning off of funds to the tune of Rs.781 crores are baseless.
(B) It has been alleged that funds from the Term loan were diverted to 25 non-contracting parties, but the allegation is misleading, as after disbursal of the Term loan, funds were transferred from the Escrow Account, on instructions of the turnkey contractor, to entities who had given financial assistance to AHPL/APL for the construction of the hotel. Besides, the loan was disbursed over a long period of time and lenders, engineers visited the site time and again to inspect the progress of the project.
It has further been alleged that funds were siphoned off for making FDs and for diversion of materials to other projects, and the same constituted ‘proceeds of crime’, but the averment to the effect is also misplaced. The terms and conditions of the loan sanctioned to AHPL required the company to first invest equivalent/higher amount in the project and only then the loan amounts were to be disbursed. Accordingly, even prior to the disbursal of the loan amount, the promoters had invested Rs.267.33 crores, which fact was duly acknowledged at the time of sanction. Thereafter, the amount sanctioned to AHPL was utilized in the construction of the hotel, which has 480 rooms with 10 lacs square feet covering area with 30,000 square feet banquet area, and is completely functional since its inauguration. The completion of the hotel project and its being completely functional indicate that there has been no diversion of funds, and least of all, any generation of ‘proceeds of crime’.
(C) The hotel project at Shahdara was independently got valued by the banks and the reports concerned pegged the value of the hotel @ Rs.1150-1200 crores. In this regard, reliance was placed on 04 different valuation reports, wherein the project was valued between Rs.1206.38 crores to Rs.1381 crores.
(D) In 2019, two forensic audits were conducted on the directions of banks. Neither report makes any mention of misappropriation or diversion of funds, or records any adverse finding against the applicant or AHPL. Moreover, not one bank out of the consortium of 8 banks has filed any complaint, either against the applicant or against AHPL, alleging any fraud or cheating in sanction or disbursal of the Term loan.
(E) The applicant had agreed to a one-time settlement (OTS) offer for Rs.470 crores as base price as per Swiss Challenge Method and the Bank had issued OTS Letter dated 10.02.2021, but the OTS was not followed through. Besides, adequate security was available with the banks, in pursuance of which, 51% of shareholding worth about Rs.666.13 crores was transferred in their favor, converting debt into equity. As on 09.01.2018, the loan outstanding of the member banks was Rs.286.96 crores.
(F) The investment of Rs.1204 crores in the construction and development of the hotel project is not disputed by the respondent, as apparent from the counter-affidavit filed on its behalf. Further, the hotel at Shahdara is operational since 2012 and an occupancy certificate has also been issued in respect thereof.
(G) The investigation by the ED is not focusing on the Bank loans alone. ED’s case is that the promoters’ contribution was siphoned off and the Term loan was not used ‘directly’. The averment with respect to the promoter’s contribution is logically flawed, as the same can never be ‘siphoned off’. Besides, if the allegations of siphoning off are to be believed, the hotel could never have been constructed.
(H) The submission made on behalf of the respondent that the Term loan was obtained on the basis of expired sanction letters is erroneous, as the only sanction letter that had expired was with respect to TFCI, which had not taken any loan.
(I) The second bail application preferred by the applicant was dismissed by the Sessions Court on the ground that there was no change in circumstance but the dismissal was erroneous, inasmuch as after dismissal of the first bail application, the ED had filed the prosecution complaint and the same constituted a material change in circumstance.
(J) Establishing of an offence under PMLA involves three tests – the commission of an act, the said act resulting in proceeds of crime, and the projection of the proceeds of crime as untainted. These core ingredients being cumulative, conjunctive and consequential in nature, and the respondent having failed to show generation of any ‘proceeds of crime’ as defined under Section 2(1)(u) PMLA, offence under Section 3 PMLA is not made out. As a necessary corollary, the burden of proof would have fallen on the applicant only if the allegations had been established or had any basis.
(K) Economic offences cannot be classified separately in matters of bail. In fact, it is the length of the punishment that should form a guiding factor.
(L) The charge sheet in the scheduled offence, which entails punishment upto life imprisonment, came to be filed before the concerned Court without seeking arrest of the applicant. Thus, there is no reason for the applicant to be kept languishing in jail in the PMLA offence, in which the maximum sentence that may be awarded is of 07 years.
(M) So far as the triple test for grant of bail is concerned, it was submitted that the applicant, being a Chartered Accountant with vast business interests, has deep roots in the society. From 31.07.2020 to 30.09.2020, he joined investigation 07 times, and thereafter, he was not called for more than 10 months. He again joined investigation on 19.07.2021 and 28.07.2021. On said occasions, the applicant also cooperated by providing all the information sought. As his passport has already been seized by ACB, Srinagar, it cannot be said that the applicant is a flight risk.
It was urged that considering the facts that the entire evidence, which is documentary in nature, has been seized, that the statements of the witnesses have been recorded, and that the complaint has already been filed, there is no possibility of the applicant tampering with evidence or influencing witnesses. It was also averred that since the applicant satisfies the triple test for grant of bail, the seriousness of the offence is not a factor that shall preclude the Court from granting bail.
(N) The applicant, who is a 62-year-old man, was arrested on 28.07.2021 and since then he has been in custody. The investigation in the case is complete, inasmuch as the complaint was filed on 24.09.2021, and the applicant is no longer required for any investigation.
Besides, Section 44 PMLA provides the procedure for trying of both the PMLA offence as well as the predicate offence by the Special Court. As such, the trial is likely to take a long time considering there are 28 accused persons and the investigation is stated to be pending in the predicate offence. It was stressed that the prosecution has cited nearly 35 witnesses and the documents run into 6201 pages. While placing reliance on the decision in State of Kerala v. Raneef reported as (2011) 1 SCC 784, it was urged that the applicant may not be subjected to further pre-trial incarceration.
(O) In support of his submissions, learned Senior Counsel placed reliance on the decisions in Sanjay Chandra Central Bureau of Investigation reported as (2012) 1 SCC 40, P. Chidambaram v. Directorate of Enforcement reported as (2020) 13 SCC 791, Tunde Gbaja v. Central Bureau of Investigation reported as 2007 SCC OnLine Del 450, Babu Singh and Others v. State of U.P. reported as (1978) 1 SCC 579, Laxman Irappa Hatti and another v. State of Maharashtra reported as 2004 SCC OnLine Bom 599, Mahimav. State of Maharashtrareported as 2015 SCC OnLine Bom 6161, Sri Mohammed Nalpad Haris v. State of Karnataka by Cubbon Park Police Station reported as 2018 SCC OnLine Kar 1034, Mohan Raikwar v. State of M.P. reported as 1999 SCC OnLine MP 104, Gayatri Devi v. State & Ors. reported as 2011 SCC OnLine Del 4061, Nisha Arya v. The State (NCT of Delhi) reported as 2016 SCC OnLine Del 4533, Mrs. Shivani Rajiv Saxena v. Directorate of Enforcement & Anr. reported as 2017 SCC OnLine Del 10452, Munawar v. State of Maharashtra and Others reported as (2021) 3 SCC 712, H.B. Chaturvedi v. C.B.I. reported as 2010 SCC OnLine Del 2155, Directorate of Enforcement v. Gagan Dhawan reported as 2019 SCC OnLine Del 9521, Awanish Kumar Mishra v. State reported as 2021 SCC OnLine Del 4786, Suresh Kalmadi v. CBI reported as 2012 SCC OnLine Del 361, Mahesh Kumar & Ors v. Central Bureau of Investigation reported as 2013 SCC OnLine Del 3903, Raneef (Supra), Shameet Mukherjee v. State reported as 2003 SCC OnLine Del 821, K. Narayana Rao v. CBI, BAIL APPLN. 1432/2009, Ashok Kumar Gupta v. State reported as 2007 SCC OnLine Del 893, Ratnakar Manikrao Gutte v. The State of Maharashtra, SLP(Crl.) No. 9554/2019, Rakesh Kumar Paul v. State of Assam reported as (2017) 15 SCC 67, State v. Hargyan reported as 2016 SCC OnLine Del 3730, Manish Gandhi v. State of Madhya Pradesh through Police Station ATS/STF, Bhopal (M.P.), M.Cr.C. No. 15397/2017, Court on its own motion v. Central Bureau of Investigation reported as 2004 SCC OnLine Del 53, Aman Preet Singh v. C.B.I. through Director reported as 2021 SCC OnLine SC 941, R. Vasudevan v. CBI, New Delhi reported as 2010 SCC OnLine Del 130, Ravi Singhal v. Union of India and Another reported as 1993 SCC OnLine Del 274, Firoz Khan v. State (NCT of Delhi) reported as 2020 SCC OnLine Del 1694, Sushil Ansal v. Central Bureau of Investigation & Anr reported as 1997 SCC OnLine Del 629, Ankit Agarwal v. Directorate of Enforcement reported as 2021 SCC OnLine Del 4820, Anil Mahajan v. Commissioner of Customs & Anr. reported as 2000 SCC OnLine Del 119, Shri Gurbaksh Singh Sibbia and Others v. State of Punjab reported as (1980) 2 SCC 565, Jitender Kumar v. Govt. of NCT of Delhi reported as 2016 SCC OnLine Del 1170, Paras Mal Lodha v. Assistant Director, Directorate of Enforcement reported as 2017 SCC OnLine Del 8676, Preeti Gupta and Another v. State of Jharkhand and Another reported as (2010) 7 SCC 667, Gaurav Gupta v. Director of Enforcement reported as 2015 SCC OnLine Del 9929, Rakesh Manekchand Kothari v. Union of India & 2 reported as 2015 SCC OnLine Guj 6256, Suresh @ Bubby v. State, BAIL APPLN. 699/2011, Parvez Akhtar v. State (NCT of Delhi) reported as 2006 SCC OnLine Del 1084, Brahm Singh v. State (N.C.T. of Delhi) reported as 2009 SCC OnLine Del 3792, Amar Singh v. State & Ors. reported as 2011 SCC OnLine Del 4522, Santosh s/o Dwarkadas Fafat v. State of Maharashtra reported as (2017) 9 SCC 714 and Ishwar Singh v. State (Delhi Admn.) & Another reported as 1993 SCC OnLine Del 244.
(P) With regard to Section 45 PMLA, it was submitted that the twin conditions set out in sub-clause (1), having been struck down in Nikesh Tarachand Shah v. Union of India and Another reported as (2018) 11 SCC 1, are not applicable to the present case. In this regard, reference was made to sub-clause (e) of Clause 205 of the Finance Bill, 2018, which reads as under :-
“(e) in section 45, in sub-section (1), ––
(i) for the words “punishable for a term of imprisonment of more than three years under Part A of the Schedule”, the words “under this Act” shall be substituted;
(ii) in the proviso, after the words “sick and infirm,”, the words “or is accused either on his own or along with other co-accused of money-laundering a sum of less than one crore rupees” shall be inserted;”
It was urged that by virtue of the Finance Act, 2018, the only amendment made in Section 45(1) PMLA is that the term “punishable for a term of imprisonment of more than three years under Part A of the Schedule” has been substituted with the term “under this Act” and the same does not result in revival of the twin conditions.
(Q) Reliance was placed on the decisions in Sameer Magan Bhujbal Assistant Director, Directorate of Enforcement and Others reported as 2019 SCC OnLine Bom 7574, Dr. Vinod Bhandari v. Asstt. Director reported as 2018 SCC OnLine MP 1559, Okram Ibobi Singh v. Directorate of Enforcement with its Headquarter at New Delhi through the Director of Enforcement reported as 2020 SCC OnLine Mani 365, Upendra Rai v. Directorate of Enforcement reported as (2017) 9 SCC 714, D.K. Shivakumar v. Directorate of Enforcement reported as 2019 SCC OnLine Del 10691, Babu Lal Agrawal v. Enforcement Directorate Through- I.O., Enforcement Directorate (FEMA/ PMLA), Raipur., MCRC No.78/2021, Sai Chandrashekhar v. Directorate of Enforcement reported as 2021 SCC OnLine Del 1081, Deepak Virendra Kochhar v. Directorate of Enforcement and Another, Criminal Bail Application No. 1322/2020, Amarendradhari Singh v. Directorate of Enforcement reported as 2021 SCC OnLine Del 3901, Union of India, Through, Directorate of Enforcement v. Yogesh Narayanrao Deshmukh and Another reported as 2021 SCC OnLine Bom 2905, Jyoti Prakash Jay Prakash v. Union of India (E.D.), ABLAPL No. 15091/2019, Satender Kumar Antil v. Central Bureau of Investigation and Another reported as 2021 SCC OnLine 922, Pradeep Kumar Sethy v. Enforcement Directorate, Government of India reported as 2021 SCC OnLine Ori 2307 to submit that since the passing of the judgment in Nikesh Tarachand Shah (Supra), various High Courts have held that the twin conditions contained in Section 45(1) PMLA do not stand revived by virtue of the amendment made in 2018.
(R) Reference was made to the decisions in M/s Ujagar Prints and Others (II) Union of India and Others reported as (1989) 3 SCC 488 and Indian Aluminium Co. and Others v. State of Kerala and Others reported as (1996) 7 SCC 637 to submit that an amendment cannot validate a law which was previously declared invalid without remedying the infirmities that led to its invalidation.
(S) Reliance was placed on Shri Prithvi Cotton Mills Ltd. and Another v. Broach Borough Municipality and Others reported as 1969 (2) SCC 283 and Madan Mohan Pathak and Another v. Union of India and Others reported as 1978 (2) SCC 50 to submit that nullification of judicial order cannot be done by legislative amendment. Learned Senior Counsel also placed reliance on the decisions of various High Courts in this regard and pressed that there is no revival by implication.
10. Mukul Gupta, learned Senior Counsel appearing for the applicant, additionally submitted that as per the charge sheet filed by ACB, Srinagar, it was noted at the time of conducting of Techno Economic Viability study by PNB Gilts Ltd. that the applicant had already spent Rs.267.33 crores upto 31.03.2009 towards the twin hotel project, out of which Rs.189.76 crores were spent on land and site development and Rs.65.78 crores were spent on cost of building and furnishing, Furniture and interior, P&M, Fixed Assets etc. He further drew attention of the Court to the complaint filed in the present case, wherein it has been stated that an amount of Rs.267.33 crores has been spent by the applicant from his own pocket and Rs.593 crores have been contributed by the applicant’s family and friends.
Reference was made by the learned Senior Counsel to the recent decision of the Punjab and Haryana High Court in Sukhpal Singh Khaira v. Assistant Director, Enforcement Directorate, CRM-M No. 51885/2021.
Contentions made on behalf of the respondent/ED
11. Per contra, Mr. Zoheb Hossain, learned Special Counsel appearing for the respondent, vehemently opposed the bail application and made the following submissions:-
(A) AHPL, a private limited company of which the applicant is the promoter/Director, took a loan of Rs.810 crores and Bank Guarantee facility of Rs.60 crores from a consortium of banks, led by J&K Bank, in respect of the project in question. The company also availed working capital of Rs.3 crores from Punjab & Sind Bank.
(B) Initially, Term loan of Rs.580 crores, alongwith BG facility of Rs.60 crores, was sanctioned by the banks for which debt-equity ratio of 2:1 was agreed upon. However subsequently, the company changed the development strategy of the project and instead of two hotels under lower categories, it decided to develop one five-star Deluxe Hotel. Upon change in the scope of the project, revised financial closure was worked out at Term loan of Rs.810 crores and BG facility of Rs.60 crores. An Escrow Account was opened with J&K Bank Ltd., Ansal Plaza Branch for disbursal of this loan and for making of payments towards construction and development of the hotel.
(C) In due course, the Term loan was disbursed to the accused, but without adhering to the pro-rata mechanism mentioned in the sanction letter. The funds received were siphoned off by the accused for purposes other than sanctioned, to the benefit of the applicant and his relatives and friends, either directly or indirectly. The siphoning off of the loan amount was done from the stated Escrow Account, as evident from the complaint. The applicant was the authorized signatory for documentation in respect of the sanction of loans from banks and in connection with the Escrow Account.
(D) Out of the sanctioned loan, Rs.718 crores were routed through the Escrow Account to different parties, in complete violation of the terms and conditions stipulated in the sanction letter. In his representation dated 15.09.2020 addressed to the respondent, it was admitted by the applicant that Rs.486.9 crores were transferred from the Escrow Account to 25 non-contracting parties without any bill/invoice being raised by them. The applicant was also the ‘Introducer’ as well as the ‘Authorised Signatory’ in most of these parties, which had not provided any services or goods whatsoever for the hotel project. During the investigation, the non-contracting parties produced only generic receipts towards payment received and failed to produce any corresponding invoices/bills.
(E) The amounts received by the 25 non-contracting parties were further transferred to two entities, namely M/s Raj Commercials and Agencies and M/s M&N Commercials. Almost all of the aforesaid 25 non-contracting parties as well as the two entities were controlled by the applicant, as the directors/owners/individuals therein were either his relatives or employees of the Ambience Group companies.
The amounts received by the two entities were again transferred to the credit of other companies of Ambience Group, and ultimately diverted for purposes other than implementation of the hotel project, such as for settling loans of Ambience Group companies and for making fixed deposits. Till date, Rs.155.29 crores have been detected as having been diverted.
(F) Investigation has revealed that besides diversion of money, the accused also engaged in diversion of materials to other project sites of Ambience Group. As the payments towards said materials were recorded in the expenses book of AHPL for its hotel project at Shahdara, the diversion amounted to generation of ‘proceeds of crime’ as defined under Section 2(1)(u) read with Section 3(1)(v) PMLA.
With respect to the allegation of diversion of materials, reliance was placed on the statements recorded under Section 50 PMLA of vendors, including M/s JK Cement Ltd., M/s JK Lakshmi Cement, M/s Shree Cement Ltd., M/s KL Rathi Steel, M/s RGTL Industries Ltd., M/s Shri Rathi Steel Ltd., M/s Rathi Steel and Power Ltd., M/s Sudhir Gensets Ltd., M/s Lord Krishna Ispat Trading Co., M/s DS Gupta Construction Pvt. Ltd., M/s Taneja Vidyut Control Pvt. Ltd., M/s Schneider Electric India Pvt. Ltd. and M/s Voltas Limited.
(G) The submission that promotors’ contribution @ Rs.462 crores was only the initially decided amount, and not the actual amount, is misleading. As per the terms and conditions of the loan sanction orders, promoters’ contribution @ Rs.462 crores was to be routed through the Escrow Account. However, the promoters did not bring the said contribution through the Escrow Account. In view of the lapse, promotors’ contribution has deliberately not been accounted for in the calculation of cost of construction on behalf of the applicant. During investigation, AHPL has also not cooperated in providing details of exact contribution of the promoters. Accordingly, investigation is pending in this regard.
(H) AHPL’s initial loan proposal to J&K Bank dated 12.03.2009 for sanction of Rs.75 crores, alongwith BG facility of Rs.15 crores, was rejected by the then Branch Head Rajni Saraf, while giving detailed reasons. However, the said Officer was mischievously transferred from Delhi to Srinagar and within two weeks of her transfer, an enhanced loan of Rs.100 crores was sanctioned to AHPL by connivance of the Bank officials, without referring to the earlier rejection note. In this regard, it was also mentioned that the then Branch Head Sh. Rakesh Kumar Karyal and then Manager Advances Sh. Kuldeep Kumar Gupta are also arrayed as accused.
(I) The cost of project mentioned in the complaint as Rs.1204.79 crores is not a finding of the investigation, but rather a reproduction of the statement given by the applicant during investigation.
(J) With respect to Section 45 PMLA, it was submitted that the twin conditions under sub-clause (1), which were held unconstitutional in Nikesh Tarachand Shah (Supra), have been revived by the amendment made vide the Finance Act, 2018.
Reference was made to the judgment dated 28.01.2022 passed in Ajay Kumar v. Directorate of Enforcement, Criminal Application (BA) No. 1149/2021, where a Division Bench of the Bombay High Court, while answering a reference in respect of Section 45 PMLA post the decision in Nikesh Tarachand Shah (Supra) and the amendment made in the provision by virtue of Finance Act, 2018, has held:-
“49. …Undoubtedly, the Legislature has power and competence to amend the provisions of the Act. Unless the amended provision is struck down by the Courts, it cannot be watered down. Since after the amendment the entire complexion of section 45 has been changed, we are not in agreement with the contention that the entire section has to be re-enacted by way of amendment after decision in the case of Nikesh Shah (Supra). Therefore, in our opinion, the twin conditions would revive and operate by virtue of Amendment Act, which is on date in force. In view of that, we answer the reference by stating that the twin conditions in section 45(1) of the 2002 Act, which was declared unconstitutional by the judgment of the Apex Court in Nikesh T.Shah Vs. Union of India (2018) 11 SCC 1, stand revived in view of the Legislative intervention vide Amendment Act 13 of 2018.”
It was also urged that placing of reliance on various Single-Bench decisions of the High Courts in connection with the issue is of no use to the applicant, considering the decision rendered by a Division Bench in Ajay Kumar (Supra) and the recent decisions of the Supreme Court in The Directorate of Enforcement v. Parkash Gurbaxani etc., SLP(Crl.) 7666-7667/2021 and The Asst. Director Enforcement Directorate v. Dr. V.C. Mohan, Criminal Appeal No. 21/2022.
(K) Economic offences constitute a class apart and bail should not be ordinarily granted in such cases. In this regard, reliance was placed on the decision in Rohit Tandon Directorate of Enforcement reported as (2018) 11 SCC 46.
(L) The authorized officer, on the basis of the material in his possession and after having reason to believe that the applicant was guilty of an offence punishable under PMLA, arrested him in terms of Section 19 of the Act. Later, the applicant’s bail application was rightly rejected by the Sessions Court, as there was no change in circumstance since dismissal of his first bail application. In this regard, reliance was placed on the decisions in Virupakshappa Gouda and Another State of Karnataka and Another reported as (2017) 5 SCC 406 and Kalyan Chandra Sarkar v. Rajesh Ranjan alias Pappu Yadav and Another reported as (2005) 2 SCC 42.
