* Author
[2024] 3 S.C.R. 778 : 2024 INSC 217
Satyendar Kumar Jain
v.
Directorate of Enforcement
(Criminal Appeal No. 1638 of 2024)
18 March 2024
[Bela M. Trivedi* and Pankaj Mithal, JJ.]
Issue for Consideration
Whether the appellants have been able to satisfy the twin conditions
laid down in s. 45 of the Prevention of Money Laundering Act, 2002,
that there are reasonable grounds for believing that the persons
accused of the offence under the PMLA is not guilty of such offence;
and that he is not likely to commit any offence while on bail.
Headnotes
Prevention of Money Laundering Act, 2002 – s. 45 – Offence
of money laundering – Conditions to be satified for grant of
bail – Appellant-Minister in the Govt. of NCT of Delhi was the
conceptualizer, initiator, fund provider and supervisor for the
entire operation of the accommodation entries against cash
totalling to around Rs. 4.81 crores received through entry
operators in the bank accounts of the four companies, by
paying cash and the said companies controlled and owned
by him and his family – Other two appellants assisted the
Minister by making false declarations under the IDS each of
them declaring alleged undisclosed income of Rs.8.26 crores
in order to protect the Minister – Prosecution complaint filed
by the Enforcement Directorate against the appellants for the
commission of the offence of Money laundering – Prosecution
complaint fixed for framing of charge against the appellants –
Bail applications – Denial of, by the High Court – Correctness:
Held: Though a company is a separate legal entity from its
shareholders and directors, the lifting of corporate veil is permissible
when such corporate structures have been used for committing
fraud or economic offences or have been used as a facade or a
sham for carrying out illegal activities – Declarations made by the
other two appellants under the IDS though were held to be void, the
observations and proceedings recorded in the said orders passed
[2024] 3 S.C.R. 779
Satyendar Kumar Jain v. Directorate of Enforcement
by the Authorities and by the High Court cannot be brushed aside
merely because of the said declarations – Said proceedings clearly
substantiates the case of the ED as alleged in the prosecution
complaint – Appellants could not be permitted to take advantage of
their own wrongdoing of filing the false declarations to mislead the
Income Tax authorities, and now to submit that the said declarations
under the IDS were void – Having regard to the totality of the facts
and circumstances of the case, the appellants miserably failed to
satisfy that there are reasonable grounds for believing that they
are not guilty of the alleged offences – On the contrary, there is
sufficient material collected by the ED to show that they are prima
facie guilty of the alleged offences – Thus, it is not possible to hold
that appellants complied with the twin mandatory conditions laid
down in s. 45 – High Court also prima facie found the appellants
guilty of the alleged offences under the PMLA, and the judgment
does not suffer from any illegality or infirmity – Appellants were
released on bail for temporary period after their arrest and the
appellant-Minister was released on bail on medical ground which
continued till date – Appellant to surrender forthwith before the
Special Court. [Paras 28-33]
Prevention of Money Laundering Act, 2002 – ss. 3 and 2(1)
(u) – Offence of money laundering u/s. 3 – Words “proceeds
of Crime” in s. 2(1)(u) – Definition:
Held: Offence of money laundering captures every process and
activity in dealing with the proceeds of crime, directly or indirectly,
and is not limited to the happening of the final act of integration
of tainted property in the formal economy to constitute an act of
money laundering – Authority of the Authorised Officer under the
Act to prosecute any person for the offence of money laundering
gets triggered only if there exists proceeds of crime within the
meaning of s. 2(1)(u) and further it is involved in any process
or activity – Property must qualify the definition of “proceeds of
crime” u/s. 2(1)(u) – In all or whole of the crime property linked to
scheduled offence need not be regarded as proceeds of crime, but
all properties qualifying the definition of “proceeds of crime” u/s.
2(1)(u) will necessarily be the crime properties. [Para 21]
Case Law Cited
Vijay Madanlal Choudhary and Others v. Union of India
and Others [2022] 6 SCR 382 : (2022) SCC OnLine
SC 929; Karnail Singh v. State of Haryana and Another
780 [2024] 3 S.C.R.
Digital Supreme Court Reports
(1995) Supp (3) SCC 376; Neelu Chopra and Another
v. Bharti [2009] 14 SCR 1074 : (2009) 10 SCC 184;
Myakala Dharmarajam & Ors. v. State of Telangana &
Anr. (2020) 2 SCC 743; Gautam Kundu v. Directorate
of Enforcement (Prevention of Money-Laundering Act),
Government of India [2015] 15 SCR 499 : (2015) 16
SCC 1; Rohit Tandon v. Directorate of Enforcement
[2017] 13 SCR 156 : (2018) 11 SCC 46 – referred to.
List of Acts
Prevention of Money Laundering Act, 2002; Prohibition of Benami
Property Transactions Act, 1988; Finance Act, 2016.
List of Keywords
Prevention of Money Laundering; Bail; Money laundering;
Accommodation entries; Undisclosed income; Company, separate
legal entity from its shareholders and directors; Lifting of corporate
veil; False declarations; Surrender; Proceeds of Crime; Property;
Beneficial owner.
Case Arising From
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.1638
of 2024
From the Judgment and Order dated 06.04.2023 of the High Court
of Delhi at New Delhi in BA No.3590 of 2022
With
Criminal Appeal Nos.1639 and 1640 of 2024
Appearances for Parties
Dr. Abhishek Manu Singhvi, N. Hari Haran, Mrs. Meenakshi Arora, Sr.
Advs., Vivek Jain, Abhinav Jain, Amit Bhandari, Rajat Jain, Sharian
Mukherji, Mueed Shah, Siddhant Sahay, Dr. Sushil Kumar Gupta,
Mrs. Sunita Gupta, Dr. Sushil Satrawala, Chandratanay Chaube,
Ankit Shah, Manan Verma, Advs. for the Appellant.
S.V. Raju, A.S.G., Mukesh Kumar Maroria, Zoheb Hussain, Rajat
Nair, Annam Venkatesh, Padmesh Mishra, Ms. Sairica S Raju,
Vinayak Sharma, Kshitiz Agarwal, Vivek Gurnani, Vivek Gaurav,
Kartik Sabharwal, Ms. Abhipriya, Advs. for the Respondent.
[2024] 3 S.C.R. 781
Satyendar Kumar Jain v. Directorate of Enforcement
Judgment / Order of the Supreme Court
Judgment
Bela M. Trivedi, J.
1. Leave granted.
2. All the three appeals arise out of the common impugned judgment
and order dated 06.04.2023 passed by the High Court of Delhi at
New Delhi, in the Bail Application Nos. 3590 of 2022, 3705 of 2022
and 3710 of 2022, whereby the High Court has rejected all the bail
applications of the appellants.
3. Earlier the Special Judge (PC Act) (CBI) -23 (MPs/MLAs cases) vide
the separate detailed orders dated 17.11.2022 had rejected the bail
applications of all the appellants – accused.
FACTUAL MATRIX
4. An FIR being case No.RC-AC-1-2017-A-0005 dated 24th August,
2017 came to be registered at the CBI AC-1, New Delhi against
Shri Satyendar Kumar Jain, Minister in the Government of National
Capital Territory of Delhi & Others, for the offences under Section
109 IPC and 13(2) read with Section 13(1)(e) of the PC Act, 1988
at the instance of the Dy. Superintendent of Police, CBI who had
conducted a Preliminary Enquiry, being PE AC-1-2017-A0003
dated 10.04.2017 registered at the said office of the CBI. After the
investigation, a Charge-sheet came to be filed by the CBI in respect
of the said FIR on 03.12.2018 in the Court of Special Judge, CBI,
Patiala House Courts, New Delhi against the six accused viz. Sh.
Satyendar Kumar Jain, Smt. Poonam Jain, Sh. Ajit Prasad Jain, Sh.
Sunil Kumar Jain, Sh. Vaibhav Jain and Sh. Ankush Jain.
5. Since Section 13(2) read with Section 13(1)(e) of the PC Act in the
said FIR dated 24th August, 2017 were scheduled offences under the
Prevention of Money Laundering Act, 2002 (hereinafter referred to
as the “PMLA”) and since it was alleged inter alia that Sh. Satyendar
Jain with the help of his family members and other persons had
acquired disproportionate assets during the period from 14.02.2015
to 31.05.2017, while he was functioning as Minister of Govt. NCT of
Delhi, and had laundered tainted cash amounts through Kolkata based
shell companies, the Directorate of Enforcement had registered an
ECIR bearing No. ECIR/HQ/14/2017 dated 30th August, 2017 against
782 [2024] 3 S.C.R.
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Satyendar Jain, Vaibhav Jain, Ankush Jain and others for investigation
into the commission of the offence of Money laundering as defined
under Section 3 and punishable under Section 4 of the PMLA. On
the completion of the said investigation, the Prosecution Complaint
came to be filed on 27.07.2022 by the Directorate of Enforcement
in the Court of District and Sessions Judge, Rouse Avenue District
Court, New Delhi, against the accused Sh. Satyendar Jain and
others with a prayer to take cognizance of the offences of money
laundering under Section 3 punishable under Section 4 of PMLA. The
said Prosecution Complaint being CC No.23/2022 is now pending
at the stage of framing of charge against the appellants – accused.
6. During the course of investigation, the appellant- Satyendar Kumar
Jain was arrested on 30th May, 2022 and the appellants-Vaibhav
Jain and Ankush Jain were arrested on 30th June, 2022. The gist of
the allegations made against the appellants-accused as mentioned
in the said Prosecution Complaint is as under: -
S.No. Name of the
Accused
Role in the case (in brief)
1. Satyendar
Kumar Jain
Based on the discussion and material herein
above, it is clear that Satyendar Kumar
Jain hatched the criminal conspiracy and
conceptualized the idea of accommodation
entries against cash. To get his idea
implemented, he recommended appointing his
old friend Sh. Jagdish Prasad Mohta, Chartered
Accountant as the auditor of Akinchan
Developers Pvt. Ltd., Paryas Infosolution
Pvt. Ltd., Indo Metalimpex Pvt. Ltd. and
Mangalayatan Projects Pvt. Ltd. He (Satyendar
Kumar Jain) first approached Sh. Jagdish
Prasad Mohta for taking accommodation
entries in lieu of cash in his aforesaid four
companies. Shri Mohta arranged a meeting
between Satyendar Kumar Jain and Rajendra
Bansal, Kolkata based accommodation entry
provider. In this meeting all the nitty gritties
of these entries was finalized like percentage
of commission, process of cash transfer,
documents to be maintained etc.
[2024] 3 S.C.R. 783
Satyendar Kumar Jain v. Directorate of Enforcement
In this way Satyendar Kumar Jain was the
conceptualizer, initiator, and supervisor for
the entire operation of these accommodation
entries. By taking the accommodation entries in
various companies, Satyendar Kumar Jain was
hiding behind the Corporate Veil. Investigation
into the transactions and facts prove that
Satyendar Kumar Jain initiated, managed
and controlled the companies in which these
accommodations entries were received.
Accordingly, the accommodation entries
totalling to Rs.4.81 Crore (Rs.4.75 crores
as entries + Rs.5.32 lakhs as commission)
were received during the period 2015-16 from
Kolkata based entry operators in the bank
accounts of the aforesaid companies and
cash totalling to Rs.4,65,99,635/- i.e. (sum of
Rs.4,60,83,500/- + Rs.5,16,135/- commission
paid to entry operators), for this purpose, was
paid to them. He also received accommodation
entry of Rs.15,00,000/- in his company J.J.
Ideal Estate Pvt. Ltd. during the year 2015-16
from Kolkata based entry operators by paying
cash amounts of Rs. 15,00,000 + commission
of Rs.16,800/-. By this criminal activity, he while
holding the public office of and functioning as
a Minister of Government of National Capital
Territory of Delhi, during the period 14.02.2015
to 31.05.2017, acquired assets to the tune of
Rs.4,81,16,435/- i.e. (sum of Rs.4,60,83,500/-
+ Rs.15,00,000/- received in J.J. Ideal Estate
Pvt. Ltd. + Rs.5,16,135/- & Rs.16,800/-
commission paid to entry operators) - , as
discussed in above paragraphs, in his name
and in the name of his family member/ friends,
with the help of his business associates, which
are disproportionate to his known sources
of income for which he has not satisfactorily
accounted for and laundered the proceeds of
crime through a complex web of companies
controlled by him.
784 [2024] 3 S.C.R.
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Satyendar Kumar Jain has thus committed
the offence of money laundering as defined
under Section 3 of PMLA by actually
acquiring, possessing, concealing and
using the proceeds of crime to the tune
of Rs.4,81,16,435/- and projecting and
claiming the same as untainted in the mode
and manner as provided in the preceding
paragraphs in the present complaint.
2. Ankush Jain Ankush Jain has knowingly assisted Satyendar
Kumar Jain by making declaration under IDS,
2016 for declaring undisclosed income of
Rs.8.6 crore (including Rs.1,53,61,166/-
during check period) for the period from
2010-11 to 2015-16 in order to save and
shield Sh. Satyendar Kumar Jain. He also
prepared back dated documents with the
help of Vaibhav Jain, Sunil Kumar Jain and
Jagdish Prasad Mohta with regard to his
directorship in Akinchan Developers Pvt.
Ltd., Paryas Infosolution Pvt. Ltd. and Indo
Metalimpex Pvt. Ltd. by becoming directors
of aforesaid companies from back date for
showing his IDS declaration as genuine.
Ankush Jain has thus committed the offence
of money laundering as defined under Section
3 of PMLA by being actually involved in and
knowingly assisting Satyendar Kumar Jain in
projecting his proceeds of crime to the tune
of Rs.4,81,16,435/- as untainted in the mode
and manner as described in the preceding
paragraphs in the present complaint and is
therefore, liable for punishment under Section
4 of PMLA.
3. Vaibhav Jain Vaibhav Jain is involved in knowingly
assisting Satyendar Kumar Jain by making
declaration under IDS, 2016 for declaring
undisclosed income of Rs.8.6 crore (including
Rs.1,53,61,166/- during check period) for
the period from 2010-11 to 2015-16 in
order to save Sh. Satyendar Kumar Jain.
[2024] 3 S.C.R. 785
Satyendar Kumar Jain v. Directorate of Enforcement
He also prepared back dated documents with
the help of Sunil Kumar Jain, Ankush Jain and
Sh. Jagdish Prasad Mohta with regard to his
directorship in Akinchan Developers Pvt. Ltd.,
Indo Metalimpex Pvt. Ltd. and Mangalayatan
Projects Pvt. Ltd. by becoming directors of
aforesaid companies from back date for
showing his IDS declaration as genuine.
Vaibhav Jain has thus committed the offence
of money laundering as defined under Section
3 of PMLA by being actually involved in and
knowingly assisting Satyendar Kumar Jain in
projecting his proceeds of crime to the tune
of Rs.4,81,16,435/- as untainted in the mode
and manner as aforesaid in the complaint
and is therefore, liable for punishment under
Section 4 of PMLA.
SUBMISSIONS
7. The learned counsels for the parties made their respective
submissions at length. The learned senior advocate Mr. Abhishek
Manu Singhvi broadly made following submissions on behalf of the
appellant Satyendar Kumar Jain:
(i) The appellant was already granted bail in the predicate offence
registered by the CBI, and the arrest of the appellant was made
by the ED almost five years after the registration of the ECIR,
though the appellant was cooperating the ED by remaining
present in response to the summons issued under Section 50
of the PMLA. The appellant was in custody from 30.05.2022
to 26.05.2023 and since then has been granted interim bail on
the medical ground.
(ii) No shares of companies as alleged by the ED were acquired
by the appellant within the check period and even otherwise
the assets held by the company could not be attributed to its
shareholders.
(iii) Even if the accommodation entries amounting to Rs. 4.61 crores
are attributed to the appellant through his wife’s shareholdings,
it would come only to Rs. 59,32,122/- which is less than 1 crore,
786 [2024] 3 S.C.R.
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and therefore the appellant is entitled to bail under the proviso
to Section 45 of the PMLA.
(iv) There is gross discrepancy in the amount of proceeds of
crime calculated by the ED and the amount mentioned
in the Chargesheet of the CBI in as much as the alleged
disproportionate amount is Rs.1,62,50,294/- as per the FIR
whereas as per the ED the amount is Rs. 4,81,16,435/-.
(v) The appellant had neither served as a Director nor had signed
any financial document during the check period, and the
appellant had already resigned from the directorship of the
allegedly involved Companies two years before the commission
of the alleged offence. It was Vaibhav Jain and Ankush Jain
and their family members who had a significant influence and
control over the said companies.
(vi) The appellant’s role in the companies has been delineated in the
MOU seized from Vaibhav Jain’s locker, which underscores the
business relations and shows that the appellant’s architectural
expertise was to be employed for the investment to be financed
by the families of Vaibhav Jain and Ankush Jain. Through the
quashing of the provisional attachment order by the Delhi High
Court, the allegation against the appellant being the beneficial
owner had stood refuted.
(vii) The alleged proceeds of crime through accommodation entries
were directed to the families of Vaibhav Jain and Ankush
Jain, and the fresh shares issued to the Kolkata based Shell
Companies were promptly transferred to Vaibhav Jain and
Ankush Jain during the check period. The appellant therefore
was not in possession of any proceeds of crime.
(viii) The appellant could not be held to be in constructive possession
of the property, if there was no dominion or control of the
appellant over the said property. As per the ED’s complaint
also the appellant was not in possession of the proceeds of
crime and therefore also the appellant could not be said to be
in constructive possession of the same.
(ix) There was no shred of evidence collected by the ED to show
that the appellant had provided cash to Kolkata companies
during the check period. It was Vaibhav Jain and Ankush Jain
[2024] 3 S.C.R. 787
Satyendar Kumar Jain v. Directorate of Enforcement
who had explained on their Fragrance business as the legitimate
source of the cash during their recording of statements under
Section 50 of the PMLA.
(x) The Kolkata companies and the persons allegedly providing
accommodation entries were not made the accused by the ED.
(xi) The allegation of the ED in its complaint that the appellant had
committed a predicate offence of hatching a criminal conspiracy
and by committing criminal activity had acquired assets to the
tune of Rs. 4.81 crore in his name and in the name of his family
members while holding the public office, was not the allegation
made by the CBI in the FIR registered against the appellant
and others with regard to the disproportionate assets charged
under Section 13(1)(e) of the Prevention of Corruption Act.
(xii) The assumptions of proceeds of crime on the sole basis of
accommodation entries is completely contrary to the concept
of proceeds of crime as explained in the judgment of Vijay
Madanlal Choudhary and Others vs. Union of India and
Others1
. Such allegation could be a tax violation but could not
be considered as proceeds of crime.
(xiii) The Prosecution Complaint is silent as to when the scheduled
offence was committed and as to how and in what manner the
proceeds of crime was laundered within the meaning of Section
3 of the PMLA.
(xiv) As regards the Income Disclosure Scheme (IDS) declaration
made by Vaibhav Jain and Ankush Jain for about Rs.16 crores
for the period 2010-2016, it has been submitted that the said
IDS declarations were rejected by the PCIT vide the order dated
09.06.2017, on the ground of misrepresentation/suppression of
facts. The said order of PCIT was challenged by Vaibhav Jain
and Ankush Jain before the Delhi High Court, however the
High Court had also rejected that petition vide the order dated
01.08.2019. Neither the PCIT nor the High Court had given
any finding that the said amount of Rs. 16 crores belonged to
the appellant.
1 [2022] 6 SCR 382 : 2022 SCC OnLine SC 929
788 [2024] 3 S.C.R.
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(xv) The reliance placed by the ED on the appellant’s letter dated
27.06.2018 was misleading and incorrect, in as much as the
appellant vide the said letter had explicitly denied the appellant
being the beneficial owner. Since Vaibhav Jain and Ankush
Jain had already deposited the tax on the said income, the
appellant in the said letter had only requested the authorities
to adjust the said tax and not to make a demand again for the
same amount from the appellant, however from the said letter
it could not be assumed that the appellant had accepted the
additions made in the assessment order.
(xvi) As held in Vijay Madanlal Choudhary (supra), the courts ought
not to conduct mini trial and should consider only the broad
probability of the matter. The appellant is not a flight risk, there is
no risk of tampering of documents or witnesses. The jail violation
as alleged by the ED has not been accepted by the concerned
Jail visiting Judge and the Jail authorities. The appellant being
sick and infirm, having undergone a spine surgery, is entitled
to bail as per the proviso to Section 45 of PMLA.
8. The learned ASG Mr. SV Raju made the following submissions in
the appeal preferred by the appellant Shri Satyendar Kumar Jain:
(i) It was revealed during the course of investigation that the
appellant Satyendar Kumar Jain while posted and functioning
as the Minister in the Government of National Capital Territory
of Delhi, during the period from 2015 to 2017 had acquired
assets in the form of movable and immovable properties in
his name and in the name of his family members, which were
disproportionate to his known source of income.
(ii) During the check period, the accommodation entries against
cash of about 4.81 crores was received in the companies – M/s
Akinchan Developers Pvt. Ltd., M/s Paryas Infosolutions Pvt.
Ltd., M/s. Manglayatan Projects Pvt. Ltd., and M/s JJ Ideal
Estate Pvt. Ltd., beneficially owned/ controlled by the appellant
from Kolkata based entry operators through Shell Companies.
(iii) From the statements of Rajendra Bansal, Jivendra Mishra, both
residents of Kolkata, and from Shri J.P. Mohta, the Chartered
Accountant, it was revealed that Shri Rajendra Bansal had
arranged accommodation entries in the companies of the
[2024] 3 S.C.R. 789
Satyendar Kumar Jain v. Directorate of Enforcement
appellant. Shri Vaibhav Jain in his statement under Section 50
had also stated that the cash was provided by the appellant
himself and had also explained about the modus operandi of
transferring the cash from Delhi to Kolkata through Hawala
operators and as to how in lieu of cash, accommodation entries
were layered and received from Kolkata based shell companies
into the companies owned by the appellant, and agricultural
lands were purchased from the said funds.
(iv) From the documents obtained from the Income Tax Department
it was revealed that the appellant had submitted the application
before the income tax authorities requesting that the income
tax paid by Vaibhav Jain and Ankush Jain under IDS, 2016
be adjusted against the demands raised in his individual
assessments by the IT authorities, which established that the
IDS declaration made by Vaibhav Jain and Ankush Jain were
made for the appellant and that the amount paid in IDS as well
as the tax paid thereon belonged to the appellant Satyendar
Kumar Jain.
(v) The Special Court having taken the cognizance of the PMLA
case vide the order dated 29.07.2022 and having held that there
was prima facie evidence incriminating about the involvement
of the appellant Satyendar Kumar Jain was sufficient to show
the existence of the scheduled offence and also the existence
of proceeds of crime.
(vi) The appellant Satyendar Kumar Jain was the main person
behind the bogus shell companies based in Kolkata, which
never did any real business. He had either incorporated them
or was having majority shareholdings alongwith his wife. The
accommodation entries of Rs. 16.50 crores (approx.) were
received in the said companies during the financial years 2010-
11, 2011-12 and 2015-16 with the modus operandi as revealed
from the statements of the Auditor/Chartered Accountant Shri
J.P. Mohta as well as the accommodation entry provider Shri
Rajendra Bansal and also from the statement of Vaibhav Jain.
(vii) Though the principle of company being a separate legal entity
from its shareholders is an established principle of Company
law, the lifting of corporate veil has been upheld in the cases
where the corporate structures have been used for committing
790 [2024] 3 S.C.R.
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fraud, economic offences or have been used as a facade or a
sham for carrying out illegal activities.
(viii) The bogus nature of IDS declarations was substantiated by
the fact that the entire amount of Rs.16.50 Crores received
as accommodation entry was split between Vaibhav Jain and
Ankush Jain. The said declarations showed their modus operandi
to shield Satyendar Jain and his family members, and assume
the entire liability upon themselves to give it a colour of a tax
evasion simplicitor, rather than a criminal activity relating to
disproportionate assets. This modus operandi also showed
that the appellants themselves had disregarded the corporate
entities of these companies.
(ix) The disproportionate pecuniary resources earned by the
appellant by the commission of scheduled offence, were used
as accommodation entries for concealing and layering the
tainted origins of the money, and therefore would qualify to
be the proceeds of crime as defined under Section 2(1)(u) of
the PMLA.
(x) The two entry operators namely Rajendra Bansal and Jivendra
Mishra had expressed a fear that Shri Satyendar Kumar Jain
being an influential politician will create danger to them.
(xi) The mandatory twin conditions of Section 45 of PMLA having
not been satisfied, the appellant should not be released on bail.
9. So far as the appellants Ankush Jain and Vaibhav Jain are concerned,
the Learned Senior Advocate Ms. Menakshi Arora with Learned
Advocate Mr. Sushil Kumar Gupta made the following submissions: -
(i) The Scheduled offence in the present case i.e. the disproportionate
assets case under Section 13(1)(e) of the PC Act is a period
specific offence and gets accomplished only at the end of
the check period (14.02.2015 to 31.05.2017). As stated in
Vijay Madanlal Choudhary (supra), the proceeds of crime
is indicative of criminal activity related to a scheduled offence
already accomplished, and therefore the offence of money
laundering can be initiated only after the Scheduled Offence
is accomplished. However, in the instant case, the appellants
have been roped in for benami transactions from 2015-2016
which was well before the end of check period i.e 31.05.2017.
[2024] 3 S.C.R. 791
Satyendar Kumar Jain v. Directorate of Enforcement
(ii) The offence of money laundering against the appellants is
attributed to their act of filing IDS on 27.09.2016 much before
the end of check period i.e. 31.05.2017. Hence, the same cannot
be considered as an act of assisting someone in the offence of
money laundering as the proceeds of crime could have been
generated after the end of the check period and not before that.
(iii) The act of declaring IDS by the appellants in respect of
undisclosed income for the period from 2010-2011 to 2015-2016
cannot be considered as an act of assisting Satyendar Jain in
committing the offence of money laundering, in as much as the
possession of unaccounted property acquired by legal means
may be actionable for tax violation, but cannot be regarded
as the proceeds of crime unless the concerned tax legislation
prescribes such violations as an offence and such an offence
is included in the Schedule of the PML Act. In the instant case,
the total amount of 16 crores has not been considered as the
proceeds of crime as the ED is relying on the accommodation
entries received during the check period.
(iv) The IDS filed u/s 183 of the Finance Act, 2013 was declared
void u/s 193 of the said Act by the Income Tax authorities.
Hence, the said act of the appellants filing the IDS cannot
be construed as basis for levelling charges under Section 3
of PMLA. Reliance is placed on Karnail Singh vs. State of
Haryana and Another2 for understanding the meaning of “void.”
(v) It is not made clear by the ED as to the declaration of which IDS,
whether the one filed by Vaibhav Jain or that filed by Ankush
Jain has led to the assistance of Satyendar Jain for making out
the offence under PMLA. Since the allegations are vague, the
benefit of the same should go to the accused. In this regard,
reliance is placed on Neelu Chopra and Another vs. Bharti3
and
Myakala Dharmarajam & Ors. Vs. State of Telangana & Anr.4
(vi) Since, the generation of proceeds of crime is not an offence
under Section 3 of PMLA and the said offence could be
2 (1995) Supp (3) SCC 376
3 [2009] 14 SCR 1074 : (2009) 10 SCC 184
4 (2020) 2 SCC 743
792 [2024] 3 S.C.R.
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committed only after the accomplishment of the Scheduled
Offence, the alleged act could not be said to be an offence
under Section 3 of PMLA. The act of the appellants assisting
Satyendar Jain for accumulating assets as alleged by the CBI,
cannot be said to be an offence under the PMLA.
(vii) The control of the entire records of the companies was with
the appellants, including the bank accounts. They were the
main decision- makers being the Directors, in respect of the
acts performed on behalf of the Companies, and Mr. Satyendar
Jain had nothing to do with the said Companies after 2013.
The prosecution has unnecessarily tried to link the appellants
with Satyendar Jain from the statements of witnesses recorded
under Section 50 of the PMLA.
(viii) The Scheduled Offence does not allege conspiracy. The day
Mr. Satyendar Jain decided to enter into politics, all the relations
with him whether in respect of the Companies or any business
transactions were severed, and since July 2013 he was neither
a Director nor a shareholder nor had any relation with the
Companies which were the Companies of the appellants.
(ix) The appellants are in custody since 30.06.2022 except for the
period when they were released on the interim bail (Vaibhav Jain
on 18.08.2023 to 27.12.2023 and Ankush Jain on 12.09.2023
to 27.12.2023).
(x) The appellants have not violated any conditions imposed by
the Court when on interim bail, and have also not tried to delay
the proceedings before the trial court in any manner.
10. The learned ASG Mr. S.V. Raju appearing on behalf of the respondentDirectorate of Enforcement made his submissions in the appeals
preferred by the appellants- Ankush Jain and Vaibhav Jain as under: -
(i) The appellants-Ankush Jain and Vaibhav Jain were actively
involved in the commission of the offence of money laundering
by assisting the accused-Satyendar Kumar Jain. The appellant
Ankush Jain was the Director of M/s. Mangalayatan Projects Pvt.
Ltd. during the check period. The said company is one of the
accused in the Prosecution Complaint filed on 27.07.2022. The
said company had received the proceeds of crime amounting
to Rs.1,90,00,000/- during the check period in the form of
[2024] 3 S.C.R. 793
Satyendar Kumar Jain v. Directorate of Enforcement
accommodation entries from Kolkata based shell companies.
The said appellant-Ankush Jain transferred the land possessed
by M/s. Mangalayatan Projects Pvt. Ltd. in the name of his
mother Indu Jain to frustrate the proceeds of crime.
(ii) Similarly, the appellant-Vaibhav Jain was the Director of M/s.
Paryas Infosolution Pvt. Ltd. during the check period. The
said company is also one of the accused in the Prosecution
Complaint filed on 27.07.2022. The said company had received
proceeds of crime amounting to Rs.69,00,300/- during the
check period in the form of accommodation entries from the
Kolkata based shell companies. The said appellant-Vaibhav
Jain had transferred the land possessed by M/s. Mangalayatan
Projects Pvt. Ltd. in the name of his mother Sushila Jain and
wife-Swati Jain to frustrate the proceeds of crime. He also took
back the shares without consideration from shell companies
and thus both the appellants helped Satyendar Kumar Jain in
projecting the tainted money as untainted in the process of
money laundering.
(iii) Both the appellants had made declarations in their individual
capacity under the IDS, 2016 for declaring undisclosed income
of Rs.8.6 Crores during check period i.e. from 2010-11 to 2015-
16, in order to shield Satyendar Kumar Jain for concealing the
true nature of proceeds of crime.
(iv) Both the appellants prepared back dated documents with the
help of each other and with the help of Sunil Kumar Jain and
Jagdish Prasad Mohta for becoming directors in their respective
companies i.e. Mr. Ankush Jain in M/s. Akinchan Developers
Pvt. Ltd., and M/s. Indo Metalimpex Pvt. Ltd., and Mr. Vaibhav
Jain in M/s. Akinchan Developers Pvt. Ltd., M/s. Mangalayatan
Projects Pvt. Ltd. and M/s. Indo Metalimpex Pvt. Ltd. for showing
the IDS declarations as genuine.
(v) The income sought to be disclosed by the appellants under
the IDS declarations belonged to the appellant- Satyendar
Jain, and the said IDS declarations were rejected by the
Income Tax authorities under Section 193 of the Finance Act,
2016 on the ground of misrepresentation and suppression of
facts. The said order was upheld by the High Court and the
Supreme Court.
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(vi) The declarations of the appellants were held void under Section
193 of the Finance Act, 2016, which applied only for the purpose
of the said scheme, however, if the making of such declarations
was an offence under a separate Act, namely, PMLA, then such
an act would not be effaced merely because of Section 193.
(vii) The very fact that such declarations were made by the said
appellants, was the relevant fact for the purposes of the
alleged offence under the PMLA, as both the appellants are
being prosecuted in their individual capacities for allegedly
actively assisting the appellant- Satyendar Jain in concealing
the proceeds of crime and projecting the proceeds of crime
as untainted.
(viii) Section 13(1)(e) and Section 13(2) are both scheduled offences
under the PMLA, and Section 3 of PMLA ropes in any person
who may or may not have any role to play in the scheduled
offence but has directly or indirectly attempted to indulge or
knowingly assisted or knowingly is a party involved in any
process or activity connected with the proceeds of crime.
(ix) The money laundering need not commence only after the check
period, inasmuch as the offence under Section 13(1) (e) of the
PC Act contemplates that at any time the assets of the public
servant could be disproportionate to his income, which could
have been acquired by the public servant either at the beginning
or in the middle of the check period also.
(x) From the statements of bank accounts of the four companies
and various other Kolkata based shell companies controlled
by Kolkata based entry operators revealed that the amount
totalling to Rs. 4,60,83,500/- was received in M/s. Akinchan
Developers Pvt. Ltd., M/s. Mangalayatan Projects Pvt. Ltd.
and M/s. Paryas Infosolution Pvt. Ltd. from Kolkata based shell
companies during the period 01.04.2015 to 31.03.2016 (during
the check period) despite no business activities were carried
out by the said companies and the shares were purchased at
a very high premium.
(xi) The investigation revealed that the cash acquired by Satyendar
Jain was given to the Kolkata entry operators for the purpose
of accommodation entries contemporaneously during the check
[2024] 3 S.C.R. 795
Satyendar Kumar Jain v. Directorate of Enforcement
period as and when they were acquired and thereafter the same
were concealed and projected as untainted and sought to be
laundered in the form of share application money. The said
amount was also used for repayment of loan and purchase of
agricultural lands by the said companies.
(xii) Though the CBI in their chargesheet dated 03.12.2018 filed
in FIR No. RC-AC-I-2017-A 0005 (dated 24.08.2017) had
quantified the proceeds of crime to be Rs.1,47,60,497.67, in view
of the investigation conducted under PMLA it was established
that all the companies were beneficially owned and controlled
by Satyendar Jain, and the amount of Rs.4,81,16,435/- received
during the check period was the proceeds of crime in the hands
of Satyendar Jain. The said conclusion along with the facts
underlying the same, have also been conveyed to the CBI
under Section 66(2) of PMLA vide the letter dated 31.03.2022.
(xiii) Though the accommodation entries per se may not be the
proceeds of crime in a given case, since in the instant case,
it has been specifically alleged that the shares in the three
companies during the check period which were held by the
bogus share companies, were purchased by the Kolkata based
bogus companies as entries in lieu of cash, the source of which
cash was the public servant, namely, Saytendar Jain, he was the
beneficial owner of the shares which was a vehicle to introduce
the unaccounted cash or disproportionate pecuniary resources
which squarely fell within the meaning of proceeds of crime as
defined under Section 2(1)(u) of the PMLA.
11. During the course of arguments, the Court had sought clarification from
the learned ASG Mr. Raju with regard to the role of the appellantsAnkush Jain and Vaibhav Jain, as also the quantum of proceeds of
crime with which they were allegedly involved, specifically in respect
of the figures mentioned in the Prosecution Complaint against them.
Pursuant to the same, the Deputy Director, Directorate of Enforcement
has filed his affidavit clarifying the role of the appellants – Ankush
Jain and Vaibhav Jain and further stating inter alia that the figure
of Rs.1,53,61,166/- was inadvertently mentioned at page no.-248,
as it was the amount attributed by the CBI in its Chargesheet to
Satyendar Jain, Ankush Jain and Vaibhav Jain individually for the
purpose of receiving total accommodation entries in lieu of cash of
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Rs.4.61 Crores, however respondent’s investigation has revealed
that the entire Rs.4.81 Crores (Rs.4.61 Crores plus commission plus
Rs.15 lakhs in J.J. Ideal Estates Pvt. Ltd.) was entirely the property
of Satyendar Jain received in his companies as accommodation
entries in lieu of cash and this entire sum was sought to be declared
by the appellants Ankush Jain and Vaibhav Jain in the IDS as their
own income.
12. In the light of the said clarification, the Learned Senior Advocate
Ms. Arora had further submitted that the so-called inadvertent error
was not pointed out before the trial court and the High Court and
it was only during the course of arguments before this Court, the
said clarification/rectification was sought to be made, which is not
permissible. According to her, ED attains jurisdiction to investigate
only after the proceeds of crime is generated and when the same
is subjected to any process or activity as mentioned in Section 3 of
PMLA. Therefore, ED could not have increased the proceeds of crime
beyond what was taken as disproportionate assets by the CBI i.e.
1,47,60,497/-. She further submitted that as per the FIR, the figure
mentioned was Rs. 1,53,61,166/-, during the arguments and as per
the written submissions the figure mentioned was Rs. 4,81,16,435/-,
and the figure mentioned as per the affidavit is Rs.4,65,99,635/- which
does not find mention in the complaint. Thus, the allegations made
against the appellants being vague in nature, the benefit should go
to the appellants.
ANALYSIS
13. We are well conscious of the fact that the chargesheet has already
been filed in the predicate offence on 03.12.2018 for the offences
under the Prevention of Corruption Act allegedly committed by the
present appellants alongwith others, and the cognizance thereof
has already been taken by the concerned Court. The Prosecution
Complaint has also been filed by the respondent – ED against the
present appellants alongwith others for the commission of the offence
of Money laundering as defined under Section 3 read with Section
70 punishable under Section 4 of PMLA 2002. We have also been
apprised that the Special Court has fixed the Prosecution Complaint
for framing of charge against the appellants alongwith others. Under
the circumstances any observation made by us may influence the
process of trial. We, therefore would refrain ourselves from dealing
[2024] 3 S.C.R. 797
Satyendar Kumar Jain v. Directorate of Enforcement
with the elaborate submissions made by the learned counsels for the
parties on the merits of the case, we would rather confine ourselves
to deal with the bare minimum facts necessary for the purpose of
deciding whether the appellants have been able to satisfy the twin
conditions laid down in Section 45 of the PMLA, that is (i) there are
reasonable grounds for believing that the persons accused of the
offence under the PMLA is not guilty of such offence; and (ii) that
he is not likely to commit any offence while on bail.
14. In Gautam Kundu vs. Directorate of Enforcement (Prevention of
Money-Laundering Act), Government of India5
, while holding that
the conditions specified under Section 45 of PMLA are mandatory,
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.”
15. In Vijay Madanlal Choudhary (supra), a three-judge bench while
upholding the validity of Section 45 had observed as under: -
“387. Having said thus, we must now address the challenge
to the twin conditions as applicable post amendment of
5 [2015] 15 SCR 499 : (2015) 16 SCC 1
798 [2024] 3 S.C.R.
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2018. That challenge will have to be tested on its own
merits and not in reference to the reasons weighed with this
Court in declaring the provision, (as it existed at the relevant
time), applicable only to offences punishable for a term of
imprisonment of more than three years under Part A of the
Schedule to the 2002 Act. Now, the provision (Section 45)
including twin conditions would apply to the offence(s) under
the 2002 Act itself. The provision post 2018 amendment, is
in the nature of no bail in relation to the offence of moneylaundering unless the twin conditions are fulfilled. The
twin conditions are that there are reasonable grounds for
believing that the accused is not guilty of offence of moneylaundering and that he is not likely to commit any offence
while on bail. Considering the purposes and objects of the
legislation in the form of 2002 Act and the background in
which it had been enacted owing to the commitment made
to the international bodies and on their recommendations, it
is plainly clear that it is a special legislation to deal with the
subject of money-laundering activities having transnational
impact on the financial systems including sovereignty and
integrity of the countries. This is not an ordinary offence.
To deal with such serious offence, stringent measures
are provided in the 2002 Act for prevention of moneylaundering and combating menace of money-laundering,
including for attachment and confiscation of proceeds of
crime and to prosecute persons involved in the process or
activity connected with the proceeds of crime. In view of the
gravity of the fallout of money-laundering activities having
transnational impact, a special procedural law for prevention
and regulation, including to prosecute the person involved,
has been enacted, grouping the offenders involved in the
process or activity connected with the proceeds of crime
as a separate class from ordinary criminals. The offence
of money-laundering has been regarded as an aggravated
form of crime “world over”. It is, therefore, a separate class
of offence requiring effective and stringent measures to
combat the menace of money-laundering.
400. It is important to note that the twin conditions provided
under Section 45 of the 2002 Act, though restrict the right
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Satyendar Kumar Jain v. Directorate of Enforcement
of the accused to grant of bail, but it cannot be said that
the conditions provided under Section 45 impose absolute
restraint on the grant of bail. The discretion vests in the
Court which is not arbitrary or irrational but judicial, guided
by the principles of law as provided under Section 45 of
the 2002 Act.
404. As aforementioned, similar twin conditions have
been provided in several other special legislations validity
whereof has been upheld by this Court being reasonable
and having nexus with the purposes and objects sought
to be achieved by the concerned special legislations.
Besides the special legislation, even the provisions in the
general law, such as 1973 Code stipulate compliance of
preconditions before releasing the accused on bail. The
grant of bail, even though regarded as an important right
of the accused, is not a mechanical order to be passed
by the Courts. The prayer for grant of bail even in respect
of general offences, have to be considered on the basis
of objective discernible judicial parameters as delineated
by this Court from time to time, on case-to-case basis.
406. It was urged that the scheduled offence in a given
case may be a non-cognizable offence and yet rigors
of Section 45 of the 2002 Act would result in denial of
bail even to such accused. This argument is founded on
clear misunderstanding of the scheme of the 2002 Act.
As we have repeatedly mentioned in the earlier part of
this judgment that the offence of money-laundering is
one wherein a person, directly or indirectly, attempts to
indulge or knowingly assists or knowingly is a party or
is actually involved in any process or activity connected
with the proceeds of crime. The fact that the proceeds of
crime have been generated as a result of criminal activity
relating to a scheduled offence, which incidentally happens
to be a non-cognizable offence, would make no difference.
The person is not prosecuted for the scheduled offence
by invoking provisions of the 2002 Act, but only when he
has derived or obtained property as a result of criminal
activity relating to or in relation to a scheduled offence and
then indulges in process or activity connected with such
800 [2024] 3 S.C.R.
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proceeds of crime. Suffice it to observe that the argument
under consideration is completely misplaced and needs
to be rejected.”
16. In the light of the aforestated position of law propounded by the
three Judge Bench, we have prima facie examined the case alleged
against the appellants and the prima facie defense put forth by the
appellants, to satisfy ourselves whether there are reasonable grounds
for believing that the appellants are not guilty of the alleged offences
under the Act and that they are not likely to commit any offence while
on bail. Though it was urged on behalf of the respondent – ED that
the appellant Satyendar Kumar Jain is a very influential political
leader and is likely to influence the witnesses if released on bail, we
would rather objectively decide the appeals on merits.
17. The case in nutshell put forth by the respondent – ED is that the appellant
Satyendar Kumar Jain had conceptualized the idea of accommodation
entries against cash and at this instance, his close associate Shri
Jagdish Prasad Mohta had arranged a meeting between Satyendar
Kumar Jain and Rajendra Bansal, a Kolkata based accommodation
entry provider in July/ August, 2010. In the said meeting the modalities
of carrying out accommodation entries, percentage of commission,
process of cash transfer and documents to be maintained etc. were
finalized. Thus, according to the ED, Satyendar Kumar Jain was the
conceptualizer, initiator and supervisor for the entire operation of the
accommodation entries. It has been alleged that the accommodation
entries totalling to Rs.4.81 crores were received during the period
2015-16 from Kolkata based entry operators in the bank accounts of
the four companies – Paryas Infosolution Pvt. Ltd., Indo Metalimpex
Pvt. Ltd., Mangalayatan Projects Pvt. Ltd. and Akinchan Developers
Pvt. Ltd., which companies were owned/controlled by him and his
family members, and the cash totalling Rs.4,65,99,635/- approximately
was paid to the said entry operators. It has been also alleged that
the appellant Satyendar Kumar Jain received accommodation entries
of Rs.15 lakhs in his company J.J. Ideal Estate Pvt. Ltd. during the
year 2015-16 from the said Kolkata based entry operators by paying
cash amounts of Rs.15 lakhs and commission of Rs.16,800/-. Thus,
it has been alleged that Satyendar Kumar Jain committed offence of
money laundering under Section 3 of PMLA by actually acquiring,
possessing, concealing and using the process of bank to tune of
Rs.4,81,16,435/- and projecting and claiming the same as untainted.
[2024] 3 S.C.R. 801
Satyendar Kumar Jain v. Directorate of Enforcement
18. The ED has also alleged against the appellants Ankush Jain and
Vaibhav Jain inter alia that they had assisted Satyendar Kumar
Jain in the commission of the alleged offence by making separate
independent declarations under IDS 2016 for declaring undisclosed
income of Rs.8.26 crores for period from 2010-11 to 2015-16 in order
to protect Satyendar Kumar Jain. As per the case of ED, the appellants
Ankush Jain and Vaibhav Jain had prepared ante dated documents
with the help of Sunil Kumar Jain and Jagdish Prasad Mohta with
regard to the Directorship in Akinchan Developers Pvt. Ltd. Paryas
Infosolution Pvt. Ltd., Indo Metalimpex Pvt. Ltd., and Mangalayatan
Projects Pvt. Ltd. by becoming the Directors of the said companies
from the back date for showing their IDS declarations as genuine.
Thus, the said appellants have also committed the offence of money
laundering as defined under Section 3 of PMLA by being actually
involved in and knowingly assisting Satyendar Kumar Jain in projecting
his proceeds of crime to the tune of Rs.4,81,16,435/- as untainted in
the mode and manner stated in the Prosecution Complaint.
19. It was vehemently argued by the Learned Senior Advocate Mr.
Singhvi, for the appellant Satyendar Jain that there was gross
discrepancy in the amount of proceeds of crime calculated by the
ED in the Prosecution Complaint and in the amount with regard to
disproportionate assets mentioned by the CBI in the chargesheet filed
in the predicate offence. According to him, the amount with regard to
disproportionate assets mentioned by the CBI is Rs. 1,47,60,497/-
whereas as per the ED the proceeds of crime is Rs.4,81,16,435/-.
Even if the accommodation entries amounting to about Rs.4.6 crores
are attributed to the appellant-Satyendar Kumar Jain through his
wife’s share holdings, it would come to only Rs.59,32,122/- which
is less than one crore. He has further submitted that the appellantSatyendar Kumar Jain neither served as a Director nor had signed
any financial document during the check period and that he had
already resigned from the Directorship of the companies two years
before the commission of the alleged offence. According to him, it
was the appellants- Vaibhav Jain and Ankush Jain, and their family
members who had the significant influence over the control of the
companies involved in the case.
20. In order to appreciate the submissions of Mr. Singhvi, let us have a
cursory glance over the definitions of the words “beneficial owner”
as contained in Section 2(1)(fa), “Money laundering” as defined in
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Section 2(1)(p), “Proceeds of Crime” in section 2(1)(u) and “Property”
in Section 2(1)(v), and the offence under Section 3 of the PMLA.
The said definitions read as under:
“Section 2 (1) (fa)
(fa) “beneficial owner” means an individual who ultimately
owns or controls a client of a reporting entity or the person
on whose behalf a transaction is being conducted and
includes a person who exercises ultimate effective control
over a juridical person;
Section 2 (1) (p)
(p) “money-laundering” has the meaning assigned to it
in section 3;
Section 2 (1)(u)
(u) “proceeds of crime” means any property derived or
obtained, directly or indirectly, by any person as a result
of criminal activity relating to a scheduled offence or the
value of any such property or where such property is taken
or held outside the country, then the property equivalent
in value held within the country or abroad;
Explanation. --For the removal of doubts, it is hereby
clarified that “proceeds of crime” include property not only
derived or obtained from the scheduled offence but also
any property which may directly or indirectly be derived
or obtained as a result of any criminal activity relatable to
the scheduled offence;
Section 2 (1)(v)
(v) “property” means any property or assets of every
description, whether corporeal or incorporeal, movable
or immovable, tangible or intangible and includes deeds
and instruments evidencing title to, or interest in, such
property or assets, wherever located;
Explanation. --For the removal of doubts, it is hereby
clarified that the term property includes property of any
kind used in the commission of an offence under this Act
or any of the scheduled offences;
[2024] 3 S.C.R. 803
Satyendar Kumar Jain v. Directorate of Enforcement
Section 3
Whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually
involved in any process or activity connected with the
proceeds of crime including its concealment, possession,
acquisition or use and projecting or claiming it as untainted
property shall be guilty of offence of money-laundering.
Explanation. --For the removal of doubts, it is hereby
clarified that, --
(i) a person shall be guilty of offence of money-laundering if
such person is found to have directly or indirectly attempted
to indulge or knowingly assisted or knowingly is a party or is
actually involved in one or more of the following processes
or activities connected with proceeds of crime, namely: --
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property,
in any manner whatsoever;
(ii) the process or activity connected with proceeds of
crime is a continuing activity and continues till such time
a person is directly or indirectly enjoying the proceeds of
crime by its concealment or possession or acquisition or
use or projecting it as untainted property or claiming it as
untainted property in any manner whatsoever.”
21. The offence of money laundering as contemplated in Section 3
of the PMLA has been elaborately dealt with by the three Judge
Bench in Vijay Madanlal Choudhary (supra), in which it has been
observed that Section 3 has a wider reach. The offence as defined
captures every process and activity in dealing with the proceeds of
crime, directly or indirectly, and is not limited to the happening of
the final act of integration of tainted property in the formal economy
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to constitute an act of money laundering. Of course, the authority
of the Authorised Officer under the Act to prosecute any person for
the offence of money laundering gets triggered only if there exists
proceeds of crime within the meaning of Section 2(1)(u) of the Act
and further it is involved in any process or activity. Not even in case
of existence of undisclosed income and irrespective of its volume,
the definition of “Proceeds of Crime” under Section 2(1)(u) will get
attracted, unless the property has been derived or obtained as a result
of criminal activity relating to a scheduled offence. The property must
qualify the definition of “Proceeds of Crime” under Section 2(1)(u) of
the Act. As observed, in all or whole of the crime property linked to
scheduled offence need not be regarded as proceeds of crime, but
all properties qualifying the definition of “Proceeds of Crime” under
Section 2(1)(u) will necessarily be the crime properties.
22. So far as the facts of the present case are concerned, the respondent
ED has placed heavy reliance on the statements of witnesses
recorded and the documents produced by them under Section 50
of the said Act, to prima facie show the involvement of all the three
appellants in the alleged offence of money laundering under Section
3 thereof. In Rohit Tandon vs. Directorate of Enforcement6
, a three
Judge Bench has held that the statements of witnesses recorded
by Prosecution – ED are admissible in evidence in view of Section
50. Such statements may make out a formidable case about the
involvement of the accused in the commission of the offence of
money laundering.
23. Again, the three Judge Bench in Vijay Madanlal Choudhary (supra)
while examining the validity of the provisions contained in Section
50 held as under: -
431. In the context of the 2002 Act, it must be remembered
that the summon is issued by the Authority under Section 50
in connection with the inquiry regarding proceeds of crime
which may have been attached and pending adjudication
before the Adjudicating Authority. In respect of such action,
the designated officials have been empowered to summon
any person for collection of information and evidence to
be presented before the Adjudicating Authority. It is not
6 [2017] 13 SCR 156 : (2018) 11 SCC 46
[2024] 3 S.C.R. 805
Satyendar Kumar Jain v. Directorate of Enforcement
necessarily for initiating a prosecution against the noticee
as such. The power entrusted to the designated officials
under this Act, though couched as investigation in real
sense, is to undertake inquiry to ascertain relevant facts to
facilitate initiation of or pursuing with an action regarding
proceeds of crime, if the situation so warrants and for
being presented before the Adjudicating Authority. It is
a different matter that the information and evidence so
collated during the inquiry made, may disclose commission
of offence of money-laundering and the involvement of the
person, who has been summoned for making disclosures
pursuant to the summons issued by the Authority. At this
stage, there would be no formal document indicative of
likelihood of involvement of such person as an accused of
offence of money-laundering. If the statement made by him
reveals the offence of money-laundering or the existence
of proceeds of crime, that becomes actionable under the
Act itself. To put it differently, at the stage of recording of
statement for the purpose of inquiring into the relevant facts
in connection with the property being proceeds of crime
is, in that sense, not an investigation for prosecution as
such; and in any case, there would be no formal accusation
against the noticee. Such summons can be issued even
to witnesses in the inquiry so conducted by the authorised
officials. However, after further inquiry on the basis of other
material and evidence, the involvement of such person
(noticee) is revealed, the authorised officials can certainly
proceed against him for his acts of commission or omission.
In such a situation, at the stage of issue of summons, the
person cannot claim protection under Article 20(3) of the
Constitution. However, if his/her statement is recorded
after a formal arrest by the ED official, the consequences
of Article 20(3) or Section 25 of the Evidence Act may
come into play to urge that the same being in the nature
of confession, shall not be proved against him. Further,
it would not preclude the prosecution from proceeding
against such a person including for consequences under
Section 63 of the 2002 Act on the basis of other tangible
material to indicate the falsity of his claim. That would be
a matter of rule of evidence.
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24. In the instant case, it has been found during the course of
investigation from the statements of witnesses recorded under
Section 50 that the appellant Satyendar Jain and his family
directly or indirectly were owning/controlling the companies - M/s.
Akinchan Developers Pvt. Ltd., M/s. Paryas Infosolution Pvt. Ltd.,
M/s. Indo Metalimpex Pvt. Ltd. and M/s. Mangalayatan Projects
Pvt. Ltd. He was the conceptualizer, initiator and supervisor of the
accommodation entries totalling to Rs.4.81 Crores approximately,
which were received from the Kolkata based entry operators in
the Bank accounts of the said four companies. Shri J.P. Mohta
in his statement had stated inter alia that Mr. Satyendar Jain had
informed him in June/July, 2010 that he wanted to get investment/
accommodation entries in his companies against cash payment
and therefore he introduced Mr. Jain with his friend Mr. Rajendra
Bansal who was in the business of providing accommodation
entries against cash. Mr. Rajendra Bansal in his statement under
Section 50 had stated in detail as to how his companies provided
accommodation entries to the four companies owned/controlled by
Satyendar Jain from 2010-11 to 2015-16 against cash. Mr. Rajender
Bansal had also stated that the cash was being received from
Satyendar Kumar Jain/Jagdish Prasad Mohta at Kolkata through
Hawala operators, and he used to pass on the address of Hawala
operators to the other entry operators namely Jivendra Mishra and
Abhishek Chokhani for collecting cash after taking token from them.
He used to arrange entries for the companies of Satyendar Kumar
Jain as per the details provided by Jagdish Prasad Mohta through
his companies and other entry operators. He (Mr. Bansal) used to
issue cheque/RTGS to subscribe the shares of the four companies
of Satyendar Kumar Jain receiving the amounts in cash. He had
further stated that the accommodation entries were reflected in
the books of accounts of his companies as investments in shares.
He used to give signed share applications along with signed blank
transfer deeds to Jagdish Prasad Mohta. He had further stated that
he had received cash through Hawala operators of Kolkata 40-50
times during 2010-2016 totaling to approximately 17 crores on the
instructions of Satyendar Jain/Jagdish Prasad Mohta and he had
provided accommodation entries for Satyendar Jain’s Companies
of about 17 crores, for which he had earned commission of Rs
12,40,000/- for providing/arranging such accommodation entries
to the companies of Satyendar Jain.
[2024] 3 S.C.R. 807
Satyendar Kumar Jain v. Directorate of Enforcement
25. Mr. Pankul Agarwal had stated in his statement that though he was
appointed as a Director in M/s. J.J. Ideal Estate Pvt. Ltd., he did
nothing except signing of the documents and that the said company
was controlled by Satyendar Kumar Jain and Poonam Jain, and
that he was never informed about any business activity of the said
company by them. The appellant-Vaibhav Jain himself in his statement
recorded on 27.02.2018, had stated that the cash amount of Rs.16.50
crores (approx.) was paid by him, Sunil Kumar Jain, Ankush Jain
and Satyendar Kumar Jain for taking accommodation entries in M/s.
Akinchan Developers Pvt. Ltd., Paryas Infosolution Pvt. Ltd., Indo
Metalimpex Pvt. Ltd. and Mangalayatan Projects Pvt. Ltd. through
Kolkata based entry operators, and that the entire idea was mooted by
Satyendar Kumar Jain to use it for purchasing agricultural lands and
to develop the township. The said witnesses had clearly stated that
Satyendar Kumar Jain was the conceptualizer, initiator, fund provider
and supervisor for the entire operation to procure the accommodation,
share capital/premium entries. Though, the shareholding patterns of
the said four companies are quite intricate, they do show that Mr.
Satyendar Kumar Jain through his family was controlling the said
companies directly or indirectly and that Mr. Satyendar Kumar Jain
was the “beneficial owner” within the definition of Section 2(1) (fa)
of PMLA.
26. At this juncture, it is extremely pertinent to note that the appellantsVaibhav Jain and Ankush Jain had sought to avail of the Income
Declaration Scheme, 2016 (IDS) by filing separate declarations under
Section 183 of the Finance Act, 2016 in Form-I on 27.09.2016, in
which both of the said appellants had individually declared an income
of Rs.8,26,91,750/- as investments in shares of various companies
in the assessment years 2011-12, 2012-13 and 2016-17. The
Principal Commissioner, Income Tax (IV), New Delhi vide the order
dated 09.06.2017 passed under Section 183 of the Finance Act,
2016 held that the said declaration of income of Rs.8,26,91,750/- by
each of the appellants- Vaibhav Jain and Ankush Jain was made
“by suppression and misrepresentation of facts”, and therefore they
were “void”. It is further pertinent to note that the said order of PCIT
was based on the report submitted by the ACIT, Special Range (IV)
dated 07.06.2017 with regard to the assessment proceedings in case
of M/s. Akinchan Developers Pvt. Ltd., M/s. Indo Metalimpex Pvt.
Ltd., M/s. Paryas Infosolution Pvt. Ltd. ,and Mr. Satyendar Kumar
808 [2024] 3 S.C.R.
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Jain. It was noted in the said report inter alia that the said companies
had taken accommodation entries in the form of share capital from
Kolkata based shell companies. On the basis of the said report,
the notices under Section 148 of the Income Tax Act for the year
2011-12 an 2012-13 were issued to Mr. Satyendar Kumar Jain. The
information regarding accommodation entries was also received by
the Initiating officer for further examination and necessary action
under the Prohibition of Benami Property Transactions Act, 1988
(for short “the PBPT Act). The Initiating officer had issued provisional
attachment orders under Section 24(4) of the PBPT Act on 24.05.2017
holding that Mr. Satyendar Kumar Jain was the beneficial owner of
the bogus share capital introduced in the companies. The said order
of PCIT dated 09.06.2017 passed under Section 183 of the FA, 2016
was challenged before the High Court of Delhi at New Delhi by the
appellants-Ankush Jain and Vaibhav Jain by filing Writ Petition (C)
Nos. 6541 of 2017 and 6543 of 2017 which came to be dismissed
by the High Court vide the order dated 21.08.2019. The High Court
in the said judgment had elaborately dealt with all these issues and
while dismissing the said writ petitions held as under:
“30. There are eight companies whose shares were
purchased by the two petitioners, whose names have
been included in the list. Admittedly, in respect of the
shares in ADPL, proceedings under section 24(4) of the
Prohibition of Benami Property Transaction Act, 1988 have
been initiated. The petitioners have themselves enclosed
a copy of the order dated May 24, 2017 passed in respect
of the “Benamidar”, i.e., ADPL, which inter-alia notes that
the cash that was routed through accommodation entries
in the garb of share capital/premium in fact belonged to
Mr. Satyender Kumar Jain and that it was at his direction
that the entire transaction was orchestrated. It was noted
that neither of these two petitioners was either a director
or shareholder in the said company. It was noted that the
declarants had not provided the name of the “Benamidar”
through whom the investment had been routed and that
these facts were all completely within the knowledge of
the two petitioners. These conclusions of the Principal
Commissioner of Income-tax have not been convincingly
countered by either of the petitioners. In the circumstances,
[2024] 3 S.C.R. 809
Satyendar Kumar Jain v. Directorate of Enforcement
the Principal Commissioner of Income-tax was right in
concluding that neither of the petitioners had made a full
and true disclosure of all material facts.”
27. The said order of the High Court was challenged by the appellantsAnkush Jain and Vaibhav Jain before the Supreme Court by filing
Special Leave Petitions being SLP(C)Nos. 27522 of 2019 and 27610
of 2019, however they came to be dismissed vide the order dated
29.11.2019.
28. From the above stated facts there remains no shadow of doubt
that the appellant- Satyendar Kumar Jain had conceptualized idea
of accommodation entries against cash and was responsible for
the accommodation entries totalling to Rs. 4.81 crores (approx.)
received through the Kolkata based entry operators in the bank
accounts of the four companies i.e. M/s. Akinchan Developers Pvt.
Ltd., M/s. Paryas Infosolution Pvt. Ltd., M/s. Indo Metalimpex Pvt.
Ltd. and M/s. Mangalayatan Projects Pvt. Ltd., by paying cash and
the said companies were controlled and owned by him and his family.
Though it is true that a company is a separate legal entity from its
shareholders and directors, the lifting of corporate veil is permissible
when such corporate structures have been used for committing fraud
or economic offences or have been used as a facade or a sham for
carrying out illegal activities.
29. It has also been found that the appellants - Ankush Jain and Vaibhav
Jain had assisted the appellant-Satyendar Kumar Jain by making
false declarations under the IDS each of them declaring alleged
undisclosed income of Rs.8.26 crores in order to protect Satyendar
Kumar Jain. Though it was sought to be submitted by the learned
counsel for the appellants that the said declarations under IDS having
been held to be “void” in terms of Section 193 of FA, 2016 by the
income tax authorities, the same could not be looked into in the
present proceedings, the said submission cannot be accepted. The
declarations made by the appellants-Ankush Jain and Vaibhav Jain
under IDS have not been accepted by the Income Tax authorities on
the ground that they had misrepresented the fact that the investments
in the said companies belonged to the said appellants, which in fact
belonged to Mr. Satyendar Kumar Jain. The appellants could not
be permitted to take advantage of their own wrongdoing of filing
the false declarations to mislead the Income Tax authorities, and
810 [2024] 3 S.C.R.
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now to submit in the present proceedings under PMLA that the said
declarations under the IDS were void. The declarations made by them
under the IDS though were held to be void, the observations and
proceedings recorded in the said orders passed by the Authorities
and by the High Court cannot be brushed aside merely because the
said declarations were deemed to be void under Section 193 of the
Finance Act, 2016. The said proceedings clearly substantiates the
case of the respondent ED as alleged in the Prosecution Complaint
under the PMLA.
30. Having regard to the totality of the facts and circumstances of the
case, we are of the opinion that the appellants have miserably failed
to satisfy us that there are reasonable grounds for believing that
they are not guilty of the alleged offences. On the contrary, there is
sufficient material collected by the respondent-ED to show that they
are prima facie guilty of the alleged offences.
31. Though Ms. Arora had faintly sought to submit that the so-called
inadvertent mistake committed by the ED with regard to the figures
mentioned in the Prosecution Complaint in respect of the role of the
appellants Ankush Jain and Vaibhav Jain should not be permitted
to be corrected, which otherwise show that the allegations against
the appellants were vague in nature, we are not impressed by the
said submission. We are satisfied from the explanation put forth in
the affidavit filed on behalf of the respondent-ED that it was only
an inadvertent mistake in mentioning the figure Rs.1,53,61,166/- in
the bracketed portion, which figure was shown by the CBI in its
chargesheet. The said inadvertent mistake has no significance in
the case alleged against the appellants in the proceedings under
the PMLA.
32. From the totality of facts and circumstances of the case, it is not
possible to hold that appellants had complied with the twin mandatory
conditions laid down in Section 45 of PMLA. The High Court also
in the impugned judgment after discussing the material on record
had prima facie found the appellants guilty of the alleged offences
under the PMLA, which judgment does not suffer from any illegality
or infirmity.
33. The appellants were released on bail for temporary period after their
arrest and the appellant-Satyendar Kumar Jain was released on
bail on medical ground on 30.05.2022, which has continued till this
[2024] 3 S.C.R. 811
Satyendar Kumar Jain v. Directorate of Enforcement
day. He shall now surrender forthwith before the Special Court. It is
needless to say that right to speedy trial and access to justice is a
valuable right enshrined in the Constitution of India, and provisions of
Section 436A of the Cr.P.C. would apply with full force to the cases
of money laundering falling under Section 3 of the PMLA, subject
to the Provisos and the Explanation contained therein.
34. In that view of the matter, all the appeals are dismissed.
Headnotes prepared by: Nidhi Jain Result of the case:
Appeals dismissed.
