K.BABU, J.
1. This is an application filed under Section 439 of the Code of Criminal Procedure.
2. The petitioner is accused No.1 in Crime No.ECIR/08/KCZO/2021 on the file of the Directorate of Enforcement, Kochi. He, along with the other accused, is alleged to have committed the offence under Section 3 read with Section 4 of the Prevention of Money-Laundering Act, 2002 (hereinafter referred to as 'the Act').
3. The petitioner was arrested on 04.12.2023, when he appeared before the Investigating Officer in terms of the summons issued to him. He was produced before the jurisdictional Court. He was remanded to the judicial custody on 05.12.2023. He has been in judicial custody since then.
4. The petitioner is a builder and developer of real estate. He is also running an educational institution. He is the Managing Director of M/s Heera Constructions Company Private Limited (hereinafter referred to as 'HCCPL').
5. The CBI, Anti-Corruption Bureau, Kochi registered FIR No.RC3(A)/2019 on 10.04.2019. In the FIR, it is revealed that HCCPL having its registered office at City Centre, Patto of Plaza, Goa and Regional Office at Heera Park, M.P Appan road, Vazhuthacaud, Thycaud Village, Thiruvananthapuram availed credit facilities from Kowdiar Branch of erstwhile State Bank of Travancore (now State Bank of India) to the tune of about Rs.9.90 Crores and alienated the property mortgaged as primary security and collateral security without the consent of the bank. A project loan of Rs.15 Crores was sanctioned to HCCPL for the project “Heera Lake Front” at Akulam on 27.09.2013 through Kowdiar branch of SBT, which was to be paid by 23.12.2016. The project was not completed as scheduled. At the request of HCCPL, the credit limit was reviewed on 22.03.2017 and continuance of the facility was permitted up to 23.12.2017 at a reduced limit of Rs.9.90 Crores. The project loan was secured by the banker by equitable mortgage of the following immovable properties:
i. The primary security for the project loan was 12.40 ares in Re.Sy No.522/20, B1 No. 18 and 16.40 ares in Re. Sy.No.522/19, 1.55 ares in Re.Sy.No.530/30, 1.10 ares in Re. Sy No 530/31, 0.70 ares in Re.Sy.No.530/15 of Attipra Village (Heera Lake Front, Akulam). The Akulam Project for which the loan was granted was under construction and the value of the property was considered, including the construction of the structure and flats completed at the time of valuation, which was valued at Rs. 25.40 crores at the time of sanction.
ii. One of the collateral securities in respect of the above project loan was commercial property owned by the HCCPL namely "Heera Plaza" located at Chinnakada Kollam having an undivided share of 30.995 cents in total extent of 52.153 cents along with 26 shop rooms in commercial building in Survey Numbers 28/2 to 28/7 and 35/5 in Block No.179 of Kollam East village (Heera Plaza, Kollam). The market value of the property at the time of sanction was Rs.5.40 Crores.
iii. The Project loan is also secured by mortgage of three other collateral securities worth Rs. 2.43 crores, which are the properties held in the name of the company (HCCPL) and its Directors.
6. During 2013-2015 on various dates, at the request of HCCPL, the bank granted permission for part release of the mortgaged property measuring 8,513 Sq. Ft. of 12 shop rooms as the security available was sufficient to cover the Bank exposure to the company. On enquiry, it was revealed that HCCPL had sold the entire property which was the collateral security (Heera Plaza Kollam). HCCPL had not remitted the sale proceeds to the Bank to bring down the liability correspondingly. These properties which were sold by HCCPL without the permission of the bank are now physically occupied by third parties. Since the repayment of loan was not forthcoming, the loan account was classified as NPA on 29.05.2017. After that, the Bank initiated action to take possession of the property offered as primary security consisting of 72 flats. The Bank proceeded under Sec. 13 (4) of SARFAESI Act, 2002. All the flats in the apartment have been sold by the Company to various buyers, without the consent or knowledge of the Bank. The total dues in the said loan account is Rs. 12.08 crores as on 25.03.2019. It is alleged that the HCCPL and its Directors, with dishonest intention to cheat the Bank, had diverted the funds/sale proceeds of the collateral as well as primary security offered to the Bank and thereby caused wrongful loss to the Bank. The bank declared the account as fraud on 17.07.2018.
7. The CBI, Anti-Corruption Bureau, Kochi filed charge sheet on 16.03.2022 before the Special Judge, CBI, Thiruvananthapuram in FIR No.RC 03(A)/2019 alleging offences under Section 120B r/w Section 420 and Section 406 r/w Section 405 of the Indian Penal Code against the petitioner and others.
8. Based on the FIR registered by CBI, an Enforcement Case Information Report bearing No. ECIR/08/KCZO/2021 dated 05.02.2021 was recorded at the Cochin Zonal Office and the investigation was initiated under the provisions of the Act.
9. I have heard Sri.C.S.Manu the learned counsel appearing for the petitioner and Sri.Jaishankar.V.Nair, the learned Standing Counsel appearing for the respondent Enforcement Director.
10. The learned counsel for the petitioner made the following submissions:
(i) The allegations against the petitioner are absolutely incorrect and baseless.
(ii) Initially cash credit of Rs.10 Crores was availed from the SBT, Kowdiar Branch in the year 2010. Subsequently, on 27.09.2013, the said cash credit limit was converted as a project loan and the amount of cash credit of Rs.10 Crores was enhanced and granted as project loan of Rs.15 Crores in the name of 'Heera Lake Front' Project.
(iii) The project loan of Rs.15 Crores was reduced to Rs.9.90 Crores on 22.03.2017.
(iv) The collateral security offered for the said project, Heera Plaza at Chinnakada in Kollam District was sold out by the petitioner with the consent of the bank.
(v) The petitioner has not sold out 69 apartments and the undivided share of the 'Heera Lake Front' Project to any person.
(vi) The loan account statement of Account No.00000067257646567 with the State Bank of India, Kowdiar Branch in the name of Heera Construction Company Private Limited for the period from 23.12.2013 to 30.01.2019 would reflect that the petitioner remitted substantial amounts to the loan account. The petitioner repaid an amount of Rs.16.90 Crores to the loan account.
(vii) The petitioner has been co-operating with the Investigating Officer.
(viii) The petitioner is aged 68 years. He is an acute type-1 diabetic patient. He has a dead pancreatic gland. An insulin pump has been connected to his body which regularly monitors and pumps required insulin from time to time. He is also suffering from ailments related to prostate and taking constant medication for high blood pressure.
11. Sri.Jaishankar.V.Nair, the learned Standing Counsel appearing for the respondent submitted the following:
(1) The Investigating agency collected sufficient materials to establish that the petitioner and the other accused deliberately layered the proceeds of the crime to the third parties.
(2) There are reasonable grounds for believing that the petitioner has committed the offences alleged. The economic offences constituting a class apart having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole. The rigour contained in Section 45 (1) of the Act is perfectly applicable in the facts of this case. The petitioner is given proper medical aid whenever required.
12. The Act has been enacted to prevent laundering and to provide for confiscation of property derived from, or involved in, money laundering and for the matters connected therewith and incidental thereto.
13. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep-rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as a grave offence affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations. It has also to be kept in mind that for the purpose of granting bail, the legislature has used the words “reasonable grounds for believing” instead of “the evidence” which means the court dealing with the grant of bail can only satisfy itself as to whether there is a genuine case against the accused and that the prosecution will be able to produce prima facie evidence in support of the charge. It is not expected, at this stage, to have the evidence establishing the guilt of the accused beyond reasonable doubt {Vide:
Nimmagadda Prasad v. CBI, [(2013) 7 SCC 466] [LQ/SC/2013/567] }.
14. The jurisdiction of the Court to grant bail to a person accused of an offence under the Act is circumscribed by the provisions of Section 45 as amended in 2018. Section 45 reads thus:
“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 shall be released on bail or on his own bond unless’
(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 a State Government authorised in writing in this behalf by the Central Government by a general or 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 sub- section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail. ”
15. A plain reading of the provision would show that the embargo imposed by Section 45(1) of the Act on grant of bail took the form of twin conditions - (i) that the Public Prosecutor shall be given an opportunity to oppose the application for release, and (ii) where the Public Prosecutor opposes such application, the Court should be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offence and that he is not likely to commit any offence while on bail. The limitations so imposed were in addition to those imposed under Cr.P.C. and had an overriding effect over the provisions of the Code, in case there occurred any inconsistency between the provisions of the two. Though stringent, they were held by the Supreme Court to be mandatory {Vide: Raj Singh Gehlot v. Directorate of Enforcement [2022 SCC OnLine Del 643]}.
16. As regards the twin conditions for the grant of bail contained in Section 45(1) of the said Act, it has been held in Vijay Madanlal Choudhary v. Union of India [2022 SCC OnLine SC 929] as under:
“412. As a result, we have no hesitation in observing that in whatever form the relief is couched including the nature of proceedings, be it under Section 438 of the 1973 Code or for that matter, by invoking the jurisdiction of the Constitutional Court, the underlying principles and rigors of Section 45 of the 2002 must come into play and without exception ought to be reckoned to uphold the objectives of the 2002 Act, which is a special legislation providing for stringent regulatory measures for combating the menace of money-laundering.”
17. In Gautam Kundu v. Directorate of Enforcement (Prevention of Money-Laundering Act), Government of India Through Manoj Kumar, Assistant Director, Eastern Region [(2015) 16 SCC 1] [LQ/SC/2015/1678] , it was observed as under:
“30. The conditions specified under Section 45 of PMLA are mandatory and need to be complied with, which is further strengthened by the provisions of Section 65 and also Section 71 of PMLA. Section 65 requires that the provisions of CrPC shall apply insofar as they are not inconsistent with the provisions of this Act and Section 71 provides that the provisions of PMLA shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. PMLA has an overriding effect and the provisions of CrPC would apply only if they are not inconsistent with the provisions of this Act. Therefore, the conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 CrPC. That coupled with the provisions of Section 24 provides that unless the contrary is proved, the authority or the Court shall presume that proceeds of crime are involved in money-laundering and the burden to prove that the proceeds of crime are not involved, lies on the appellant.”
18. On the touchstone of the legal position discussed above let me consider the merits of the contentions raised on either side.
The investigation so far conducted revealed the following:
(I) The total amount of project cost was Rs.22,76,54,658.82/-, excluding the cost of the land.
(II) 90% of the project `Heera Lake Front' has been completed.
(III) HCCPL received an amount of Rs. 37,16,08,262/- from 68 buyers of flats towards selling price/collection amount.
(IV) The sale proceeds of flats were deposited in the accounts of other banks as against the conditions of agreement with the bank, which is evident from the statement of the banker.
(V) The petitioner sold the mortgaged property at Kollam for an amount of Rs. 1,15,00,000/- without the NOC issued by the banker. But the sale proceeds were not deposited in the loan account at SBT, which is evident from the statement dated 15.02.2023.
(VI) The proceeds of the crime based on the material collected by the Investigating agency would come to approximately 34.82 Crores as per the following split up:
a) Rs. 21.50 Crores approximately (Outstanding loan amount as on 30.09.2022).
b) Rs. 1.15 Crores (Sale proceeds of mortgaged property).
c) Rs. 12.17 Crores (Net sale proceeds in the hands of business entity calculated as the difference amount of total sale proceeds of the project flats of Rs.37,16,08,262/- from the buyers of flats minus sum of amount of Rs. 2,82,91,537/- deposited in the loan account No.67257646567, maintained with SBT, Kowdiar Branch and project cost of Rs.22,76,54,658.82/-).
19. Relying on the materials collected during the investigation, it is alleged that the petitioner with deliberate intention tactfully layered the proceeds of crime to the third party entities as well as his educational trust namely- Heera Education and Charitable Trust, hiding the illicit origin without any economic rationale at the books of accounts of HCCPL. It is the case of the Investigating agency that the petitioner is directly involved in the generation of proceeds of crime.
20. While in the custody of the Enforcement authority, the statement of the petitioner was recorded under Section 50 of the Act on 06.12.2023 and 07.12.2023. It is submitted that he made the following statements:
(a) The project specific loan of Rs.15 crores was taken in the loan account No. 67257646567 of SBT, Kowdiar Branch for the project 'Heera Lake Front'. At the time of construction of 'Heera Lake Front', ten other residential and commercial projects were also undertaken for construction. Due to the mismanagement of the finances, the loan amounts could not be repaid on time and therefore the loan amount was declared NPA. Approximately Rs.9 crores received from the said loan amount were diverted to other projects.
(b) He being the MD of the company violated the terms and conditions regarding diversion of funds to other projects. Altogether 68 apartments of 'Heera Lake Front' were sold to 68 buyers for a total amount of Rs.37,16,08,262/-. Part of this amount was utilised for the construction of other projects also and therefore could not remit the full amount in the project loan account.
(c) He violated the terms and conditions regarding diversion of funds received as sale proceeds of 'Heera Lake Front' project to various other current accounts of HCCPL.
(d) The sale realisations from the 'Heera Lake Front' project were not routed through the loan account and thereby admitted that he has violated the loan agreement with SBT.
(e) He had availed two housing loans, one for an amount of around Rs.70 lakhs from SBI, Vazhutheadu against an apartment in Heera Highlife, Trivandrum. The loan account was closed in 2020.
(f) Second housing loan was for an amount of Rs.1.2 crores from HDFC, Vazhuthecadu against his residential property named “Citadel” in Trivandrum.
21. It is submitted that the petitioner is not co-operative and his replies were evasive. It is also submitted that he has not fully divulged the details of utilization and concealment of proceeds of crime, though the same is within his exclusive knowledge.
22. A careful perusal of the materials, including the statement of witnesses recorded under Section 50 of the Act and the other materials collected in the form of documents, prima facie shows complicity of the petitioner in the alleged offences. The conditions specified under Section 45 of the Act are mandatory while considering, the bail plea of the petitioner. This Court is required to be satisfied that there are reasonable grounds for believing that the petitioner is not guilty of such offence and he is not likely to commit any offence while on bail. As per Section 24 of the Act, in the case of a person charged with the offence of money-laundering under Section 3, the Authority/Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money- laundering. The conditions enumerated in Section 45 of the Act are to be complied with even in respect of an application for bail under Section 439 Cr.PC in view of the overriding effect given to the Act over the other loss for the time being in force, under Section 71 of the Act.
23. The learned counsel for the petitioner relied on Thomas Daniel v. Enforcement Directorate, Ernakulam [2023 (6) KHC 40] to contend that the presumption under Section 24 of the Act cannot be extended to presume the guilt of the accused for predicate offences alleged. The learned Standing Counsel for the Enforcement Director submitted that even without the presumption under Section 24 of the Act, the Investigating agency could collect sufficient materials to establish that the petitioner has committed the predicate offences.
24. The learned counsel for the petitioner relied on P. Chidambaram v. Directorate of Enforcement [(2020) 13 SCC 791] [LQ/SC/2019/1822 ;] to canvass that the illness of the petitioner is to be taken into account while considering whether his further detention is required or not. The petitioner has no case that proper medical care is not being given to him.
25. With the said observations, the Bail Application stands dismissed.
