15 Sep 2023 4:58 AM GMT
The Kerala High Court on Thursday granted bail to the Managing Director of Popular Finance, Thomas Daniel, who is alleged to have committed offences under the Prevention of Money Laundering Act, 2002 (PMLA). Daniel had been accused of cheating several depositors by collecting fixed deposits without authority, after promising to pay interest and thereafter failing to pay the interest and...
The Kerala High Court on Thursday granted bail to the Managing Director of Popular Finance, Thomas Daniel, who is alleged to have committed offences under the Prevention of Money Laundering Act, 2002 (PMLA).
Daniel had been accused of cheating several depositors by collecting fixed deposits without authority, after promising to pay interest and thereafter failing to pay the interest and the amounts collected. It was further alleged that amounts so collected by Daniel were used as untainted money for the acquisition of property. He was thus alleged to have committed the offence of money laundering under Section 3 of PMLA.
Justice Bechu Kurian Thomas observed that when there is only a remote possibility of conviction sometime later in the future, the liberty of the individual must be given preference.
"The constitutional courts are entrusted with the solemn function of protecting the liberty of the individual, which manifests as fundamental rights. Punishment before conviction is the antithesis of the rule of law. When the liberty of an individual is pitted against the remote possibility of a conviction much later, the scales of balance must lean in favour of the former".
Daniel was initially arrested in connection with the Popular Finance fraud on August 29, 2020. As many as 1368 crimes were later registered against him, which formed the basis for the predicate offences. Subsequently, the investigation was transferred to the CBI, which also registered offences under the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act), apart from Sections 406 and 420 IPC. That investigation is still underway, and no final report has yet been filed for the alleged predicate offences.
Meanwhile, the ED initiated proceedings under Sections 3 and 4 of the PMLA, arrested the petitioner, and submitted a complaint alleging the offence of money laundering on the 58th day of his arrest.
The petitioner's earlier bail applications before the High Court and the Sessions Court were dismissed by the respective courts.
He thus filed the present plea for regular bail contending that he was innocent of the allegations levelled against him and that he had not committed money laundering. He submitted that he had been conducting the business since 1965 without any complaint. He averred that only the interest had become payable, and not the fixed deposits given by the complainants, and added that he could not cater to the interests due on the deposits from April 2020 onwards due to the lockdown imposed on account of the outbreak of the COVID-19 pandemic and not due to any fraudulent act.
It was also pointed out that it was the complaint of the first complainant that triggered all other depositors to demand the return of their money, while adding that there had been no default in interest payment or failure to return the deposit to the said complainant.
The petitioner submitted that discussions were currently underway with other potential business concerns to restructure the business and to repay the deposits of the investors under a settlement scheme to be worked out, and his presence was thus necessary for the negotiations.
The counsel for the petitioner further submitted that the predicate offences for which the petitioner proceeded against under PMLA were still under investigation by the CBI, and the final report had not been filed even after three years, due to which it would be impermissible to proceed under the Act.
The counsel for the respondents however argued that the petitioner ought not to be granted bail, in view of the restriction on the right of courts to grant bail under Section 45 PML Act, and in the absence of any finding by the court that the petitioner is not guilty of the offence. It was also argued that since the petitioner had defrauded a large number of investors and the proceeds of the crime ran into more than rupees thousand crores, releasing him on bail at this juncture would prejudice the prosecution as well as the investors. Additionally, it was submitted that the twin conditions under Section 45 of the PML Act were not satisfied for granting bail to the petitioner since there were explicit materials to conclude his guilt.
Findings of the Court
The Court at the outset noted that of the predicate offences alleged against the petitioner under Sections 420 ('Cheating and dishonestly inducing delivery of property'), 406 ('Punishment for Criminal Breach of Trust'). 409 ('Criminal breach of trust by public servant, or by banker, merchant or agent'), 421 ('Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors'), 465 ('Punishment for Forgery'), and 471 ('Using as Genuine a Forged Document'), read with 120B IPC, that under Sections 406, 409 and 465 were not predicate offences, and the inclusion could only have been inadvertent.
The Court further observed that since the offences registered against the petitioner under the Kerala Protection of Interests of Depositors in Financial Establishments Act, 2013, and the BUDS Act were not scheduled offences under the PMLA, they could thus not be termed as predicate offences either. In fact, the Court was of the considered opinion that the main predicate offences alleged against the petitioner were under Sections 420 and 421 IPC.
Regarding the twin conditions under Section 45 PML Act, as had been relied upon by the respondents as grounds to deny bail to the petitioner, the Court took note that if it is satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and that there is no possibility of the accused committing similar offences, the Court would be justified in granting bail. It therefore ascertained that the first step would be to determine whether there were reasonable grounds to believe that the accused was not guilty.
The Court observed that in order for the predicate offence under Section 420 IPC to arise, there ought to be dishonest or fraudulent intention from the beginning. Since the PML Act does not provide presumption of guilt for the predicate offences, the Court discerned that it would have to determine whether there were reasonable grounds to believe that the petitioner is not guilty of the offence of money laundering.
The Judge found that the predicate offence had been under investigation for the past three and a half years, and no charge sheet had been filed for the predicate offences, nor had the local police or CBI been able to file a final report regarding the predicate offences alleged.
It went on to observe that the petitioner's act of collecting deposits by individuals or firms or by unincorporated associations from the public without permission from the RBI, would not by itself would not amount to an offence under Section 420 of the IPC in the absence of an element of dishonesty or fraud existing from the inception.
"It is elementary that all deceptions do not amount to cheating under law. To constitute cheating, the deception must be done with a dishonest or fraudulent intent...To establish the offence of cheating, it must be evident that the accused had fraudulent or dishonest intentions when making the promise or the representation. Merely because there was a failure to keep a promise subsequently, culpability in the intention cannot be presumed to exist from the beginning," the Court added.
It further noted that the offences under the BUDS Act or the Kerala Protection of Interests of Depositors in Financial Establishments Act, 2013 would not be reason to assume that the offence of cheating under section 420 IPC was committed.
Additionally, the Court noted that the depositors themselves had received either a share of profits or interest until March 2020, when the lockdown occurred due to COVID-19.
"Bearing in mind the adversarial system of criminal jurisprudence and the presumption of innocence of an accused under the general law as far as the predicate offence of section 420 IPC is concerned, this Court is of the considered view that, at this stage when even the final report has not yet been filed, it is difficult to conclude that the accused is guilty of the offence of section 420 IPC. The corollary is that the petitioner can only be held to be not guilty at this juncture," the Court observed.
The Court took a similar view as regards the predicate offence under Section 421 - that the said offence had not been charge-sheeted yet, and that there was nothing to indicate any dishonest or fraudulent removal, concealment or delivery of any property without adequate consideration to prevent the distribution of property to creditors.
On taking into account the age of the petitioner as well as the fact that all his properties had been attached and that there was no possibility of his committing similar offences, was fortified in its view that the twin conditions under Section 45 of the PML Act were satisfied for releasing the petitioner on regular bail.
Daniel was thus enlarged on bail, subject to his executing a bond for Rs.2,00,000/- with two solvent sureties each for the like sum to the satisfaction of the court having jurisdiction.
Counsel for the Petitioner: Advocates C.S. Manu, C.A. Anupaman, T.B. Sivaprasad, C.Y. Vijay Kumar, Manju E.R., Dilu Joseph, Anandhu Satheesh, and Alint Joseph
Counsel for the Respondents: Deputy Solicitor General of India S. Manu, Standing Counsel for the ED Jaishankar V. Nair, and Advocates T.K. Rajeshkumar, G. Harikumar, Akhil Suresh, Au Balakrishnan Nambiar, Athul M.V., Manoj V. George, Aswin K.R., Mathews Benny, Keerthana V., Thushara Paily, Aparna Somarajan, and Archana Krishnan K.R.
Citation: 2023 LiveLaw (Ker) 480
Case Title: Thomas Daniel v. Enforcement Directorate & Ors.
Case Number: BAIL APPL. NO. 5921 OF 2022
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