Case: Gautam Kundu Vs. Manoj Kumar Assistant Director, Eastern Region, Directorate Of Enforcement (Prevention Of Money Laun

3. The appellant is the Chairman of Rose Valley Real Estate Construction Ltd. (hereinafter referred to as the Rose Valley), a public company incorporated in the year 1999 and registered under the Companies Act, 1956. Certain non-convertible debentures were issued by the Rose Valley by private placement method. No advertisements etc. were issued to the public. The said debentures were issued to the employees of the Company and to their friends and associates after fulfilling the formalities for private placement of debentures. Thus, the appellant collected money by issuing secured debentures by way of private placement in compliance with the guidelines issued by the Securities and Exchange Board of India from time to time4. On 26.03.2013, the Adjudicating Officer, SEBI, passed an order imposing a penalty of Rs.1 crore upon the Rose Valley for violation of the provisions of Sections 11(C) of the Securities and Exchange Board of India Act, 1992 (hereafter referred to as the SEBI Act) which was reduced to Rs.10 lakhs by the Securities Appellate Tribunal, Mumbai. A letter was issued on 26.06.2013 by the Securities and Exchange Board of India (SEBI) to the appellant Rose Valley informing the appellant about the offences alleged to have been committed by it under the Companies Act, SEBI Act & Regulations, and Section 405 of the Indian Penal Code. The appeal filed by the appellant before the Securities Appellate Tribunal was allowed on 12.12.2013, holding that the appellant Company has repaid all the money collected from the investors. It was further held by the Securities Appellate Tribunal that there are no grounds for violation of Section 11(C)(3) of the SEBI Act5. On the basis of the aforementioned letter dated 26.06.2013 issued by SEBI, the respondent filed a report being ECIR No.KIZO/02/2014 dated 27.02.2014, alleging commission of offence by the Rose Valley and its officers, punishable under Section 24 of the SEBI Act. Thereafter, search and seizure was conducted at the offices of the Rose Valley6. A complaint was filed by the respondent authorities, being C/14214 of 2013, alleging that the Rose Valley transferred the money raised by issue of debentures from the account of one company to that of another company. It is also alleged that the money collected by issuing the debentures for the purpose of one business has been invested in some other business. The proceedings under Section 24 of the SEBI Act has been challenged in the High Court by way of revision and the said revision is pending for hearing and further proceeding of the complaint case, being C/14214 of 2013, has been stayed by the High Court. The High Court also directed the respondent not to take any coercive measure against the appellant7. Vide its order dated 18.06.2014, SEBI directed the appellant Rose Valley to refund the money to the customers of the Ashirbad Scheme. This order was challenged before the Securities Appellate Tribunal by way of Appeal No.233 of 2014. On 19.06.2014, a Show Cause Notice under Section 8(1) of the PMLA was served upon Rose Valley and its officials. Rose Valley filed a writ petition before the High Court of Calcutta challenging the said Show Cause Notice. The said writ petition was dismissed by the learned Single Judge of the High Court. Thereafter, the matter was taken in appeal before the Division Bench of the Calcutta High Court, being AST No.345 of 2014. The Division Bench of the High Court dismissed the said appeal and directed the appellant Rose Valley to appear before the Adjudicating Authority under Section 8 of the PMLA and directed the Adjudicating Authority to decide the preliminary objections as may be raised by the Rose Valley, including the applicability of the PMLA as also the validity of the search and seizure against Rose Valley. It was further directed that the Adjudicating Authority should pass a reasoned order in the matter and communicate the same to the appellant Rose Valley within two days from the date of passing such order8. A complaint was filed by the respondent on April 2, 2015, in the Court of learned Chief Judge, City Sessions Court at Kolkata, against the appellant under Section 4 of PMLA, though no offence is made out against the appellant under Section 3 of the PMLA. The said complaint has been registered as ML Case No.3 of 2015. Despite having fully cooperated with the investigation, the appellant was arrested on 25.03.2015 on suspicion of having committed an offence punishable under the provisions of the PMLA and is detained in custody since then9. While the appellant was in custody, his father expired on 06.04.2015 upon which he moved an application before the High Court of Calcutta for interim bail to perform the rituals for his deceased father. The High Court vide its order 08.04.2015, directed release of the appellant on provisional bail for two weeks on the conditions mentioned in the said order. On completion of the period of provisional bail, the appellant duly surrendered before the Court of learned Chief Judge, City Sessions Court at Kolkata10. On 06.07.2015, the appellant filed a fresh bail application under Section 439 of the Code of Criminal Procedure before the High Court of Calcutta, being CRM No.6285 of 2015. Vide impugned judgment and order the High Court has rejected the said application of the appellant holding that no order has yet been passed by any competent Court of law that no offence is made out against the appellant under Section 24 of the SEBI Act. It is pertinent to mention here that a criminal revision praying for quashing of the proceedings initiated against the appellant under Section 24 of the SEBI Act is still pending for decision before the High Court.

Court's reasoning:
There is no doubt that PMLA deals with the offence of money laundering and the Parliament has enacted this law as per commitment of the country to the United Nations General Assembly. PMLA is a special statute enacted by the Parliament for dealing with money laundering. Section 5 of the Code of Criminal Procedure, 1973 clearly lays down that the provisions of the Code of Criminal Procedure will not affect any special statute or any local law. In other words, the provisions of any special statute will prevail over the general provisions of the Code of Criminal Procedure in case of any conflict30. The conditions specified under Section 45 of the PMLA are mandatory and needs to be complied with which is further strengthened by the provisions of Section 65 and also Section 71 of the PMLA. Section 65 requires that the provisions of Cr.P.C. shall apply in so far as they are not inconsistent with the provisions of this Act and Section 71 provides that the provisions of the 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 Cr.P.C. 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 of Cr.P.C. 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 appellant32. We have heard the learned counsel for the parties. At this stage we refrained ourselves from deciding the questions tried to be raised at this stage since it is nothing but a bail application. We cannot forget that this case is relating to Money Laundering which we feel is a serious threat to the national economy and national interest. We cannot brush aside the fact that the schemes have been prepared in a calculative manner with a deliberative design and motive of personal gain, regardless of the consequence to the members of the societyTherefore, there is no doubt that the conditions laid down under Section 45A of the PMLA, would bind the High Court as the provisions of special law having overriding effect on the provisions of Section 439 of the Code of Criminal Procedure for grant of bail to any person accused of committing offence punishable under Section 4 of the PMLA, even when the application for bail is considered under Section 439 of the Code of Criminal Procedure38. In these circumstances, we do not find that the High Court has exercised its discretion capriciously or arbitrarily in the facts and circumstances of this case. We further note that the High Court has called for all the relevant papers and duly taken note of that and thereafter after satisfying its conscience, refused the bail. Therefore, we do not find that the High Court has committed any wrong in refusing bail in the given circumstances.