Confessional statement of co-accused u/s 50 of PMLA not substantive piece of evidence, can be used only for corroboration: Delhi HC grants conditional bail to accused in IFFCO money laundering & fertilizer import scam case
Justice Vikas Mahajan [07-03-2024]

feature-top

Read Order: SANJAY JAIN v. ENFORCEMENT DIRECTORATE [DEL HC- BAIL APPLN. 3807/2022]

 

Tulip Kanth

 

New Delhi, March 12, 2024: While granting conditional bail to businessman Sanjay Jain in a money-laundering case registered against the directors of Indian Farmers Fertilizer Cooperative Limited, the Delhi High Court has held that no provision exists under the Prevention of Money Laundering Act, 2002 which makes confession of a co-accused admissible against the other accused.

 

The Enforcement Case Information Report (ECIR) was registered against the petitioner and others on the basis of an FIR registered by the CBI under Sections 120B read with 420 IPC and Sections 13(2) read with 13(1)(d) of the PC Act, 1988. It was alleged therein that two complaints were forwarded to the CBI against the MD, Indian Farmers Fertilizer Cooperative Limited (IFFCO) relating to subsidy fraud in IFFCO by opening Kisan International Trading, exchange of illegal commissions in import of raw materials and fertilizers, manipulation of sales data of fertilizers for claiming higher subsidy etc.

 

It was alleged that the accused persons including the petitioner entered into a criminal conspiracy amongst themselves and during the period from 2007-2014 cheated and defrauded IFFCO, IPL, the general shareholders of these entities, as well as, the Government of India by fraudulently importing fertilizers and other materials at inflated prices and claimed higher subsidy thereby causing loss to the public exchequer. It was alleged that the commission from the supplies was siphoned off and the same was done through a complex web of fake commercial transactions through multiple companies which were owned by the accused persons to camouflage the fraudulent transactions as genuine. The modus operandi adopted by the accused persons was that original bills were raised by the foreign manufacturers/suppliers (M/s Uralkali Trading Ltd.) at inflated prices to cover the bribe money which was to be paid to the Managing Directors of IFFCO and IPL.

 

The commission was received by the sons of the Managing Directors of IFFCO and IPL, respectively through Rajeev Saxena, who in order to justify the receipt of commission from M/s Urakali Trading Ltd. (Uralkali) would execute consultancy agreements without rendering any consultancy services. Middleman Pankaj Jain was also involved with such transactions.

 

The specific allegation against the petitioner was that he along with the co-accused acted as intermediaries who channelized the ill-gotten money through various firms and companies registered either in their names or in the names of the sons of the Managing Directors of IFFCO and IPL. It was further revealed that out of the total illegal commission, approximately Rs 481 Crore was channelized through Rare Earth Group and the remaining amount of Rs 204 Crore had been received by the sons of the Managing Directors of IFFCO and IPL. As per the case of the respondent, the petitioner received the proceeds of crime through  Direct Route/Ratul Puri Route and Indirect Route/Rayon Trading Route.

 

The petition, before the Delhi High Court had been filed under Section 45 of the Prevention of Money Laundering Act, 2002 read with Section 439 of the Code of Criminal Procedure, 1973 seeking regular bail in connection with the ECIR registered by the respondent/ED.

 

The Single-Judge Bench of Justice Vikas Mahajan was of the view that both offences under Section 120-B and Section 420 IPC find mention in Schedule-A of the PMLA, and such offences by themselves can be a predicate offence to trigger the offence of money laundering under the PMLA. Next, the Bench considered the issue as to what extent reliance could be placed on the statement u/s 50 of PMLA while considering bail application.

 

 Observing that statements under Section 50 of the Act are recorded in a proceeding which is deemed to be a judicial proceeding within the meaning of Section 193 and Section 228 of the Indian Penal Code and is admissible in evidence. However, when the statements recorded under Section 50 of PMLA are part of the material collected during investigation, such statements can certainly be looked into at the stage of considering bail application albeit for the limited purpose of ascertaining whether there are broad probabilities, or reasons to believe, that the bail applicant is not guilty.

 

The Bench further added, “…statements under Section 50 of the PMLA have to be taken at their face value, but in case any such statement is patently self-contradictory or two separate statements of the same witness are inconsistent with each other on material aspects, then such contradictions and inconsistencies will be one of the factors that will enure to the benefit of the bail applicant whilst ascertaining the broad probabilities, though undoubtedly the probative value of the statement(s) of the witnesses and their credibility or reliability, will be analyzed by the trial court only at the stage of trial for arriving at a conclusive finding apropos the guilt of the applicant.”

 

Another issue before the Bench was whether the confessional statement of co-accused recorded under Section 50 of the PMLA can be used against another accused. The Bench clarified that the proceedings under Section 50 of the PMLA may be judicial proceedings for the limited purpose mentioned therein but a confession made by an accused in his statement under Section 50 of the PMLA is not a judicial confession.

 

Section 30 of the Evidence Act has to be invoked for consideration of a confession of an accused against a co-accused, abettor or conspirator charged and tried in the same case along with the accused, the Bench opined while also adding, “…the confessional statement of a co-accused under Section 50 of the PMLA is not a substantive piece of evidence and can be used only for the purpose of corroboration in support of other evidence to lend assurance to the Court in arriving at a conclusion of guilt.”

 

It was further observed that for an offence of money laundering, there should be generation of proceeds of crime from the scheduled offence and the person sought to be prosecuted should be directly or indirectly involved in any process or activity connected with the said proceeds of crime. Thus, the existence of proceeds of crime is essential for initiation of prosecution under the PMLA.

 

It was the case of the respondent/ED that the petitioner had received proceeds of crime through two routes which before reaching the petitioner passed through the hands of various individuals/entities. Moreover, payment of inflated prices inclusive of commission/bribe money by IFFCO/IPL to Uralkali Trading for the import of fertilizers from it and payment of commission/bribe money by Uralkali to Rajeev Saxena were the two steps which were common to both the trails. The High Court also opined that the Alok Kumar Aggarwal, a co-accused, had not supported the case of the prosecution.

 

On the issue of claim of higher subsidy on inflated prices, the Bench observed that there was merit in the contention of the petitioner that post introduction of the NBS Scheme the case set up by the CBI and the Respondent itself appeared to have become improbable.

 

The High Court further opined that there was no material showing imports at inflated prices by IFFCO/IPL and consequent payment of higher subsidy. There appeared to be a break in the money trails and therefore, the evidence to prove conspiracy or wrongful loss to IFFCO/IPL, its shareholder and to the Public Exchequer and the resultant wrongful gain to the petitioner, was lacking. “Thus, at this stage based upon the material produced before the Court, it can be said that prima facie the predicate offence appears to be weak in nature and the petitioner is entitled to the benefit of the same”, it added.

 

The petitioner was also held to be entitled to the benefit of the fact that the main accused, as well as, some other accused had not been arrested and bail had already been granted to other co-accused. Thus, the petitioner was enlarged on bail subject to his furnishing a Personal Bond in the sum of Rs 2,00,000.

Add a Comment