Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1198 OF 2023
(Arising out of SLP (Crl.) No.1655 of 2023)
SANJAY RAGHUNATH AGARWAL …APPELLANT
VERSUS
THE DIRECTORATE OF ENFORCEMENT …RESPONDENT
J U D G M E N T
PANKAJ MITHAL, J.
1. Leave granted.
2. Heard Shri R. Basant, senior counsel and Shri S.V. Raju,
learned Additional Solicitor General for the parties.
3. A criminal complaint in FIR No.664/2013 was registered on
29.10.2013 with the Cyberabad Police, against six persons,
including the appellant herein for alleged offences under Sections
406, 407, 415 to 420, 120B read with Section 34 IPC. The FIR
was registered on the basis of a complaint lodged by one M.
Signature Not Verified
Srinivas Reddy, who was the Managing Director of a Company by
Digitally signed by
POOJA SHARMA
Date: 2023.04.20
16:51:14 IST
Reason:
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name M/s Farmax India Limited . The gist of the complaint was,
1 hereinafter referred to as “ ”
Farmax
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that Farmax availed the services of the accused in raising Global
Depository Receipts (GDRs), to the tune of USD 71.09 millions
that
equivalent to INR 318 crores; though the accused raised the
said amount, they transferred to Farmax only a sum of USD 0.4
millions equivalent to INR 2.20 crores; and that upon enquiry
with the bank, the complainant company came to know that the
accused has misappropriated the balance amount by forging the
signatures, with the help of the pledged documents.
It is relevant to note here that the aforesaid FIR was
4.
registered, pursuant to an Order passed by the VI Metropolitan
Magistrate, Cyberabad at Medchal, Rangareddy District, under
Section156(3) of the Code of Criminal Procedure, 1973.
5. Though the FIR was registered more than nine years ago, no
final report has been filed so far. However, the raising of GDR by
Farmax became the subject matter of enquiry by Securities and
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Exchange Board of India . SEBI passed an Order dated
14.07.2020 holding that there were violations of various
provisions of Securities and Exchange Board of India Act, 1992
and various regulations of Securities and Exchange Board of
India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 2003. More
2 For Short “ ”
SEBI
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particularly, SEBI found one Mr. Arun Panchariya and a few
others guilty of misleading Indian investors through 14 identical
GDR issues involving fraudulent schemes.
6. Pursuant to the aforesaid, the Enforcement Directorate filed
an information report in ECIR No.HYZO/26/2022 dated
05.05.2022, naming six individuals and nine entities, as persons
suspected of committing the offence of money-laundering under
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Section 3 of the Prevention of Money-laundering Act, 2002 .
7. After the lodging of the Enforcement Case Information
Report, the appellant was arrested by the Enforcement
Directorate on 26.09.2022. By an Order dated 27.09.2022, the
appellant was remanded to judicial custody by the Metropolitan
Sessions Judge, Hyderabad. The Court also granted the custody
of the appellant to the Enforcement Directorate for a period of six
days from 06.10.2022 to 11.10.2022.
8. Subsequently, the Enforcement Directorate filed a
prosecution complaint under Sections 44 and 45 of PMLA against
four individuals and two entities, namely , (i) Shri Sanjay
(ii) (iii)
Aggarwal, Shri Morthala Malla Reddy, Shri Arun
Panchariya, (iv) Shri Mukesh Chauradiya, (v) M/s La Richesse
Advisors Private limited represented by Shri Sanjay Aggarwal and
3 For short “ PMLA ”
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(vi) M/s Vintage FZE, UAE represented by Shri Arun Panchariya.
The sum and substance of the complaint was, that Farmax
availed the services of the appellant herein and the other accused
in raising GDRs to the tune of USD 71.09 millions equivalent to
INR 318 crores; that Vintage FZE, a wholly owned entity of Arun
Panchariya solely subscribed to these GDRs, after availing a loan
from EURAM Bank, under a loan agreement dated 05.05.2020;
that Farmax executed a pledge agreement with EURAM Bank,
undertaking that the entire proceeds will be pledged to secure the
loan granted by EURAM Bank; that though Farmax issued GDRs,
the proceeds were not credited to Farmax’s credit in India, as the
same had been kept as collateral; that Vintage FZE repaid only
part of the loan and, hence, the balance amount alone got
released by the bank to Farmax; that this diversion of funds
caused a loss to Farmax to the extent of USD 15.60 millions; that
the GDRs were thereafter converted into equity shares and sold in
the Indian Stock Market; that when Farmax was advised by the
appellant to go for GDRs, Farmax was not eligible for the amount
of GDR; that therefore, the appellant herein and the entity owned
by him took the lead role in coordinating the offering; that the
appellant was the central figure in the entire drama; that the
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appellant is a qualified Chartered Accountant, having had
experience of working with stock exchange filings related to GDRs;
that
the appellant was introduced by Arun Panchariya to Srinivas
Reddy; and that the appellant and the others had committed the
offence of money-laundering.
9. According to the Enforcement Directorate, the appellant was
responsible for creating the entire infrastructure for Farmax and
Arun Panchariya to bring about the fraudulent GDR issue and
that the appellant provided formats for Board Resolutions and
also helped in transferring the funds from the account of Farmax
with EURAM Bank to the Farmax subsidiary, namely, M/s.
Farmax International FZE in UAE.
10. In the background of the above facts, it is contended by Shri
R. Basant, learned senior counsel: (i) that the appellant has been
languishing in jail from 26.09.2022, without any charge-sheet
having been filed against him in the predicate offence for the past
more than nine years; that even Srinivas Reddy at whose
(ii)
instance a FIR was registered way back in the year 2013 for the
predicate offence was arrested by the Enforcement Directorate,
but the application filed by the Enforcement Directorate for his
remand was rejected by the Court; (iii) that the appellant is a
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Chartered Accountant by profession and that he offered only
professional services within the framework of law; and (iv) that
there is nothing in the prosecution complaint to show that the
the proceeds of crime
appellant is in possession of “ ”.
However, it is contended by Shri S.V. Raju, learned
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Additional Solicitor General that the appellant is the kingpin
(i)
and the master mind behind all the transactions; and that the
(ii)
petition for bail deserves to be dismissed in view of the twin
conditions prescribed in Section 45 of PMLA.
12. We have carefully considered the rival contentions.
13. Since the main contention of the learned Additional Solicitor
General revolves around Section 45 of PMLA, it is necessary to
see the specific role assigned to the appellant in the prosecution
complaint lodged by the Enforcement Directorate. The relevant
portion of paragraph 8 of the prosecution complaint reads as
follows:
“SPECIFIC ROLE OF THE ACCUSED/ CO-ACCUSED
PERSONS IN THECOMMISSION OF OFFENCE OF MONEY
LAUNDERING IN TERMS OFSECTION 3 OF PMLA:
Role of Shri Sanjay Aggarwal (A-1):-
a) Based on Sanjay Agarwal's assurances, M/s Farmax
India Limited decided to proceed with plans for a GDR
listing. At this point of time M/s Farmax India Limited
was not eligible for USD 72.20 million GDR. Sanjay
Agarwal and M/s La Richesse, accompanied by Nitish
Bangera took the lead role coordinating the offering.
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Sanjay Agarwal decided on all the participants,
including the Lead Arranger (Prospect Capital) and the
company's legal advisor ("Fox Mandal"). Although, Fox
Mandal acted as counsel to Farmax, the email
communications indicate that its role was limited to
preparing a due diligence report and the Listing
Prospectus ("Prospectus") to be filed with the
Luxembourg Exchange.
b) Sanjay Agarwal acted as an intermediary for almost all
communications with the various participants, and
gave instructions to M/s Farmax India Limited before
and after the offering. Notwithstanding that Agarwal
was the central figure who gave instructions to Farmax
which was duly followed by Morthala Srinivasa Reddy.
(A-1) being a qualified Chartered Accountant, had
experience of working with stock exchange filings
related to GDRs, and was introduced by Arun
Panchariya to MD of Farmax Ltd, Shri M. Sreenivasa
Reddy. (A-1) by representing Arun Panchariya's firm
Prospect Capital before the depositary, the Bank of New
York and being well aware of the relation Arun
Panchariya had with EURAM Bank insisted all
companies going through GDR to open a bank account
in that particular bank, (A-1) being well aware of the
arrangement between Arun Panchariya and the
Company promoters to share the proceeds of GDR,
took the lead role of coordinating the offering, by
purposely hiding the subscriber list from submitting to
Ahmedabad Stock Exchange and hence was directly
involved in the process and activity connected with the
proceeds of crime including its acquisition and hence
has committed the offence of money-laundering as
defined under section 3 of PMLA, 2002 and is liable for
punishment under Section 4 of PMLA, 2002.”
14. Keeping in mind the specific role attributed to the appellant,
let us now revert back to the facts pleaded and arguments
advanced. At the outset, there is no controversy about the
following facts:
(i) that the registration of the ECIR and the lodging of the
prosecution complaint in the year 2022 were a sequel
to the registration of the FIR for the predicate offence,
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way back in the year 2013, at the instance of one M.
Srinivas Reddy, Managing Director, Farmax and also a
sequel to the order passed by SEBI in the year 2020;
(ii) that no final report has been filed in the FIR for the
predicate offence, for the past nine years;
(iii) that even M. Srinivas Reddy, the de-facto complainant
in the FIR for the predicate offence, was sought to be
arrested as an accused in connection with the ECIR,
but the application of the Enforcement Directorate for
remand was rejected;
that the appellant is a Chartered Accountant by
(iv)
profession and has been in jail from 26.09.2022; and
(v) that the relevant portion of paragraph 8 of the
prosecution complaint filed by the Enforcement
Directorate, which we have extracted in the preceding
paragraph, gives room for a valid argument that the
second condition found in Clause (ii) of sub-section (1)
of Section 45 of PMLA is satisfied qua the appellant.
Therefore, the continued incarceration of the appellant, in our
opinion, may not be justified.
15. However, the apprehension of the Enforcement Directorate
that the appellant is a flight-risk and may go out of the country if
released on bail, has to be taken care of by imposing appropriate
conditions.
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16. In view of the above, the appeal is allowed and the appellant
is directed to be enlarged on bail in ECIR No.HYZO/26/2022
dated 05.05.2022, subject to such terms and conditions as may
be imposed by the Metropolitan Sessions Judge-cum-Special
Court under PMLA, Nampally, Hyderabad. The conditions to be
imposed by the Special Court shall include the following
additional conditions:
(i) The appellant shall surrender his passport before
the Special Court; and
(ii) The appellant shall regularly appear before the
Special Court without fail whenever the
prosecution complaint filed by ED is posted.
The appeal is allowed on the above terms. No costs.
……………………………….. J.
(V. RAMASUBRAMANIAN)
……………………………….. J.
(PANKAJ MITHAL)
New Delhi;
April 20, 2023
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