Delhi High Court
Vishal Moral vs Directorate Of Enforcement, … on 17 September, 2024
$~77 to 79
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 17.09.2024
+ BAIL APPLN. 3056/2023
ADNAN NISAR ..... Petitioner
Through: Mr. Tanveer Ahmed Mir, Mr. Kartik
Venu, Mr. Shashwat Sarin and Mr.
Ariana D. Ahluwalia Advs.
versus
DIRECTORATE OF ENFORCEMENT ..... Respondent
Through: Mr. Zoheb Hossain, Special Counsel
for ED with Mr. Vivek Gurnani Mr.
Kartik Sabharwal and Mr. Abhipriya
Rai, Advs.
+ BAIL APPLN. 3168/2023
SHIVANG MALKOTI ..... Petitioner
Through: Mr. Tanveer Ahmed Mir, Mr. Kartik
Venu, Mr. Shashwat Sarin and Mr.
Ariana D. Ahluwalia Advs.
versus
DIRECTORATE OF ENFORCEMENT & ANR. ..... Respondent
Through: Mr. Zoheb Hossain, Special Counsel
for ED with Mr. Vivek Gurnani Mr.
Kartik Sabharwal and Mr. Abhipriya
Rai, Advs.
+ BAIL APPLN. 3529/2023, CRL.M.(BAIL) 1468/2023, 7861/2024
VISHAL MORAL ..... Petitioner
Through: Mr. Amit Shukla, Mr. B.S. Pundir,
Mr. Deva Shukla, Mr. Atul Mishra,
Ms. Neha Shukla, Ms. Kumudini
Signature Not Verified
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Digitally Signed
By:NARENDRA SINGH
ASWAL
Signing Date:18.09.2024
14:30:06
Shukla, Mr. Rahul Ranjan and Mr.
Amit Kumar, Advs.
versus
DIRECTORATE OF ENFORCEMENT, GOVERNMENT OF INDIA
THROUGH ASSISTANT DIRECTOR & ANR. ..... Respondents
Through: Mr. Zoheb Hossain, Special Counsel
for ED with Mr. Vivek Gurnani Mr.
Kartik Sabharwal and Mr. Abhipriya
Rai, Advs.
CORAM:
HON'BLE MR. JUSTICE VIKAS MAHAJAN
JUDGMENT
VIKAS MAHAJAN, J.
1. The present petitions have been filed under Section 439 of the Code
of Criminal Procedure, 1973 (hereinafter ‗CrPC’) read with Section 45 of
the Prevention of Money Laundering Act, 2002 (hereinafter ‗the Act’ or
‗PMLA’) seeking grant of regular bail arising out of ECIR No. DLZO-
II/15/2023 dated 07.02.2023 registered under Sections 3 & 4 of PMLA at
P.S. E.D. Delhi Zone-II, pending before learned Special Court, PMLA,
Central District, Tis Hazari Court, Delhi.
2. Since the present petitions have been filed by co-accused persons and
the factual background, as well as the questions of law before this Court are
on the same lines having arisen from the same complaint, all three bail
petitions are being decided vide this common judgment.
3. The relevant facts giving rise to the present petitions are as follows:
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Digitally Signed
By:NARENDRA SINGH
ASWAL
Signing Date:18.09.2024
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a. The Enforcement Directorate had received a letter dated
23.12.2022 forwarding therewith a Mutual Legal Assistance Request
(hereinafter ‗MLA’) No. CRM-182-85785 dated 04.12.2022 from the
U.S. Department of Justice, Washington wherein request for legal
assistance was sought. In the said MLA, it is alleged that one Mr.
Vishal Moral (petitioner/accused), an Indian National, has committed
an offence under Title 18, US Code, Section 1343 (Wire Fraud), Title
18, US Code, Section 1029 (Access Device Fraud), Title 18, US Code,
Section 1030 (Computer Fraud) and Title 18, US Code, Section 1956
(Money Laundering).
b. As per MLA, a person (victim) living in Leawood, Kansas,
U.S.A. reported to the U.S. authorities that between August 14, 2022
and August 15, 2022, crypto currencies worth approximately US$
527,615.45 had been fraudulently transferred from the virtual currency
addresses of the victim’s Ledger Hardware Wallet.
c. On 13.08.2022, the victim downloaded and installed the Ledger
Live software, a companion software for managing crypto wallets like
the Ledger Hardware Wallet maintained by the victim, from the internet
onto a laptop. The victim, thereafter, connected the Ledger Hardware
Wallet to the laptop and made certain cryptocurrency transactions
through the said software. After completing the aforesaid transfers, the
victim promptly disconnected the Hardware Wallet from laptop.
d. On or about 14.08.2022, while the Hardware Wallet of the
victim was disconnected, 0.995275351 Ethereum (hereinafter ‗ETH’)
valued at US$ 1,926.87, was fraudulently transferred from the wallet of
the victim to the address
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Digitally Signed
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ASWAL
Signing Date:18.09.2024
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0xC992AE8D0994468e7CC45d0CE0E85ad4eade0cEb (hereinafter
‗0xC99…0cEb’). Thereafter, on the same day, 0.48349150649972 ETH
valued at US$ 959.39 was transferred from ‗0xC99…0cEb’ to the
address 0x0380d5c5c23551a109f5d3aaf76ced9e65d96a24 (hereinafter
‗0x038…6a24′) which is associated with India-based cryptocurrency
exchange and trading platform WazirX.
e. On 15.08.2022 as well, Ledger Hardware Wallet of the victim
remained disconnected when 21.63831975 Bitcoins (hereinafter
‗BTC’) valued at US$ 526,656.06 were again fraudulently transferred
to the address bc1qlqmlw0e7cyljum6w8fn5c4he5462f2ckjtzl72
(hereinafter ‗bc1ql…zl72′) which is also associated with WazirX.
f. The aforesaid transfers were confirmed by the investigators via
blockchain analysis, and a request was made by them to WazirX to
furnish the records pertaining to the account associated with
―0x038…6a24‖ and ―bc1ql…zl72‖. As per the information received
from WazirX, it was found that both the said addresses were linked to
an account belonging to petitioner/accused Vishal Moral bearing User
ID 11093186, registered on 27.11.2021 with the email address
[email protected]. WazirX also provided information regarding
the IP addresses from where the said account was accessed at the time
of the fraudulent transfers which were later found out to be hosted by
Reliance Jio Infocomm Limited and Bharti Airtel Limited.
g. Upon inspection of the laptop, onto which the victim had
downloaded and installed the Ledger Live software on 13.08.2022, the
U.S. Investigators identified a compressed folder with legitimate
Ledger Live installer, a file containing installation instructions and a
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ASWAL
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file having a SHA1 hash that matched a known malware capable of
obtaining credentials and other information such as private keys or seed
phrases, from an infected computer.
h. It is alleged that the said malware is known to be distributed to
victims through websites that are designed to closely resemble the
legitimate Ledger Live website. It is said that the U.S. Investigators
have confirmed the victim had downloaded the malware from a website
closely resembling the legitimate website of Ledger Live.
i. After receipt of the MLA, ED was satisfied that the offences
being investigated by the U.S. Department of Justice under their
relevant laws correspond to Section 75 of the Information Technology
Act, 2000 and Sections 420 & 424 IPC in India, which fall under the
Schedule of the Act and therefore, recorded ECIR DLZO-II/15/2023
dated 07.02.2023 for further investigation, search, seizure, attachment
and confiscation of proceeds of crime under the Act.
j. During investigation, ED received documents related to User
ID 11093186 from WazirX vide letter dated 30.01.2023 which revealed
that the said account, in fact, belonged to petitioner/accused Vishal
Moral residing in Bangali Colony, Sant Nagar, Delhi-110084.
k. Search was conducted under Section 17 PMLA at the residence
of Vishal Moral. A mobile phone, laptop and Ledger Hardware Wallet
along with cash amount of Rs.25,60,000 were seized from the premises
of Vishal Moral.
l. From the evidence collected by ED, including the chats
recovered from the seized phone, it was revealed that the accused had
been committing the said offences along with many individuals, Indian
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ASWAL
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and foreign nationals, including the co-accused/petitioners, Shivang
Malkoti and Adnan Nisar who had been assisting Vishal Moral. During
investigation, ED also found that the accused persons were converting
the stolen cryptocurrency into cash and utilizing the same for various
purposes including creation of immoveable assets.
m. Summons were issued by the ED to the accused Vishal Moral
under Section 50 of PMLA and his statements were recorded.
Thereafter, Vishal Moral was placed under arrest on 26.04.2023 under
Section 19 of PMLA. Likewise, summons were issued to Shivang
Malkoti and Adnan Nisar as well. Subsequently, they were also arrested
on 09.05.2023.
n. Information regarding the aforesaid offences was shared with
the Delhi Police which resulted in the registration of FIR No. 124/2023
dated 10.05.2024 under Section 420 IPC and Section 66C of the
Information Technology Act, 2000 at PS Special Cell, Delhi.
o. Complaint Case No. 02/2023 under Sections 44 and 45 of
PMLA was filed inter alia against the petitioners/accused Vishal Moral,
Shivang Malkoti and Adnan Nisar, before the learned Special Court,
Tis Hazari District Court, on 23.06.2023.
p. Vide order dated 01.08.2023, the learned Additional Sessions
Judge-03, Central District, Tis Hazari Courts, Delhi took cognizance of
the complaint filed by the Directorate of Enforcement and summoned
the accused persons.
q. Thereafter, on 16.08.2023, Adnan Nisar filed an application
before the learned Special Court seeking retraction of his statements
made under Section 50 PMLA. A similar application along with the
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By:NARENDRA SINGH
ASWAL
Signing Date:18.09.2024
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statement of retraction was filed by Shivang Malkoti which was taken
on record by the Ld. ASJ vide order dated 16.09.2023.
4. The case of the prosecution as borne out from the complaint is that
during investigation, stolen cryptocurrencies as mentioned in the MLA i.e.
0.48349150649972 ETH and 21.63831975 BTC were confirmed to have
been received on 14.08.2022 and 15.08.2022 in the account bearing User ID
11093186 belonging to the accused/Vishal Moral. Further, it is their case
that Vishal Moral has given inconsistent statements under Section 50 PMLA
and has been unable to provide a legitimate source for the said amount.
5. As per complaint, Vishal Moral was associated with one Jack Let and
a Turkish national who ran a scamming syndicate wherein there were four
teams assigned to do specific tasks. First team used to develop malicious
software; the second team used to do fake clicks on competitor’s ads and
websites (DDOS attack); the third team used to run and promote their own
ads on websites and search engines (digital marketing); and the fourth team
used to drain the wallets of the victims. Jack Let used to supervise the
developer and fake clicks team while doing the draining himself. Vishal
Moral was responsible for digital marketing. It is also the case of the
prosecution that Shivang Malkoti and Jack Let used to supply Bing Ad
accounts to Vishal Moral. One Mr. Murat @ Moorad from Turkey was head
of the developer team and one Mr. Ghenry from Ukraine was heading the
fake clicks team. After developing the malicious software, the second team
used to execute ―DDOS attacks‖ on the legitimate ads and websites of the
competitors to suppress them. Thereafter, the third team used to promote
their own ads to reach maximum audience. Finally, the fourth team used to
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ASWAL
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drain the wallets and distribute shares from the proceeds to all the other
teams.
6. It is stated in the complaint that co-accused/Shivang Malkoti,
knowing fully well the intentions of Vishal Moral, assisted him by providing
Bing Ad accounts for running crypto ads from September 2022 to March
2023. Further, co-accused/Adnan Nisar is said to be assisting Vishal Moral
in conversion of cryptocurrencies into cash between September 2022 to
March 2023.
7. It is further stated that a portion of the proceeds of crime have been
utilized by Vishal Moral in acquiring and setting up a liquor shop which is
registered in the name of his brother, Lalit Moral. Lalit Moral has been
unable to explain any legitimate source for the funds that were used to
purchase the said shop.
SUBMISSIONS
8. Mr. Amit Shukla, learned Counsel for the petitioner/accused Vishal
Moral submits that the proceedings under Sections 3 & 4 of the Act initiated
by the Respondent against the accused persons are contrary to law inasmuch
as the learned Special Court, while taking cognizance of the complaint filed
by ED and issuing summons to the accused persons, was not even aware of
the identity of the victim, nor the MLA request sent by the U.S. authorities
was filed by ED before the learned Court. He further submits that the
learned Court was not even apprised of the contents of either the MLA
request or the alleged complaint filed by the unknown victim in the United
States, or the subsequent communications between the Government of India
and the Respondent. He submits that the prosecution is also not aware of the
contents of the alleged complaint in U.S. According to Mr. Shukla, the
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Digitally Signed
By:NARENDRA SINGH
ASWAL
Signing Date:18.09.2024
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learned Special Court mechanically took cognizance of the present case and
issued summoning order without considering giving a prima facie finding as
to what the complaint in the United States is about or its contents thereof.
9. Mr. Shukla submits that although MLA request sent by the U.S.
Department of Justice has not been made available to accused persons, but
as per the complaint of ED itself, assistance sought in the MLA request is
limited to seizure and freezing of the WazirX accounts mentioned therein.
However, ED has gone beyond the specific request in MLA by lodging the
ECIR and initiating a separate investigation in India based on an offence
committed abroad.
10. Relying upon the judgment of the Hon’ble Supreme Court in Vijay
Madanlal Choudhary & Ors. vs. Union of India & Ors., 2022 SCC OnLine
SC 929, he submits that it is settled law that prosecution under the Act
cannot be initiated on notional basis and upon an assumption that a
scheduled offence has been committed. He submits that in the present case,
there is nothing on record before the learned Special Court to establish
existence of a scheduled offence. He further relies on the judgment of P.
Chidambaram vs. Directorate of Enforcement, (2019) 9 SCC 24 to contend
that registration of a scheduled offence is a sine qua non for an offence
under the Act.
11. Referring to Section 2(1)(y) of the Act, Mr. Shukla submits that
scheduled offences are only those that are listed in the Schedule of PMLA.
He submits that as per the case of prosecution, predicate offence is being
investigated by the U.S. Attorney’s office for the District of Kansas in the
United States of America and relying upon the same as the scheduled
offence under Part C of the Schedule, ED has initiated its own proceedings
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ASWAL
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in India. He submits that for an offence to be read into Part C of the
Schedule, two conditions need to be satisfied. Firstly, the offence must be of
cross border implications as defined under Section 2(1)(ra) of PMLA.
Secondly, it should be mentioned in Part A of the Schedule or under Chapter
XVII of IPC. He submits that even if it is accepted that the alleged offence
has been committed abroad and the proceeds of the crime have been
transferred to India, bringing the offence under the definition of cross border
implications, the second condition under Part C of the Schedule is still not
satisfied as the alleged predicate offence under the U.S. statute is neither
specified under Part A nor under Chapter XVII of IPC.
12. He submits that ED has relied upon Section 2(1)(ia) of PMLA which
recognizes the laws of foreign countries that correspond to the provisions of
the Act and scheduled offences. He submits that it is the case of the
prosecution that the predicate offences in U.S. correspond to the offences
mentioned in Part A of the Schedule. However, he points out that the phrase
‗corresponding law’ has only been used 11 times in the PMLA, and the
legislature has been quite specific as to where the said phrase is to be used.
Elaborating further, he submits that the phrase has exclusively been
mentioned in provisions which are in relation to attachment and not in those
relating to penal action under Sections 3 & 4. He, therefore, contends that
the legislative intent behind limiting the use of ‗corresponding law’ in the
Act to the provisions for attachment is to enable the relevant authority in
India to seize and protect the proceeds of crime of an offence committed
abroad till the investigation and trial in the foreign country is concluded. He
contends that contingent upon the agreements between the two countries, the
contracting state may request Indian authorities to confiscate the proceeds,
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ASWAL
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and the provisions of the Act would merely allow the Indian authority to
recognize the foreign law and exercise the limited power of safeguarding the
proceeds of crime that have travelled to Indian territory.
13. Without prejudice to above contention, he submits that if
corresponding laws in foreign countries are construed to be included under
Part C of the Schedule, then ED will have to prove the said law as a matter
of fact and to further establish that provisions invoked in U.S., correspond to
Indian enactments/provisions mentioned in the Schedule. He submits that in
complaint, the ED has not even quoted the alleged corresponding law.
Merely certain sections of a Code in the U.S. have been mentioned and it is
stated that they correspond to Sections 420 and 424 of IPC as well as
Section 75 of the Information Technology Act, 2000 in India.
14. He further submits that if corresponding law is interpreted to be
within the ambit of the Schedule, as mooted by the prosecution, then
provisions like Section 44(1)(c) would be rendered otiose. Relying upon the
decision in Rana Ayyub vs. Directorate of Enforcement, (2023) 4 SCC 357,
he submits that under the said section, if the scheduled or predicate offence
is being tried by a Court other than the Special Court which has taken
cognizance of the offence under PMLA, then upon application, the
scheduled offence may be transferred and tried alongside the offence under
PMLA by the same Special Court. He submits that in the present case, since
the trial of the predicate offence is being held in the Court at Kansas, U.S.A.
and cannot be transferred to the Special Court in India, therefore, the
provisions of Section 44(1)(c) would become redundant in such a situation,
which cannot be the intent of the legislature.
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Digitally Signed
By:NARENDRA SINGH
ASWAL
Signing Date:18.09.2024
14:30:06
15. Mr. Shukla invites the attention of this Court to Chapter IX of PMLA.
He submits that the Chapter is entitled ―Reciprocal Arrangement for
Assistance in Certain Matter and Procedure for Attachment and
Confiscation of Property‖. As per Section 56 of the said Chapter, the Central
Government may enter into an agreement with a foreign country for
enforcement of the provisions of the Act and for exchange of information
with regard to the offences under the Act or corresponding laws or
investigation relating to the laws under the Act. Under Section 58, the
contracting foreign country may send a letter of request to the Central
Government seeking assistance in accordance with the provisions of the Act.
After receipt of a letter of request from a contracting state, the Central
Government is bound by Section 61 of PMLA to forward the said request to
the concerned Court in India. He submits that in breach of the entire
Chapter, no part of the request was sent to the Court, rather the MLA request
was directly forwarded to ED. He submits that assuming arguendo that an
offence of cross border implications has been committed, in such a situation
sanction of the Central Government was required under Section 188 of
CrPC, which has not been obtained.
16. He refers to paragraph 3.2 of the complaint filed before the learned
Special Court. He submits that it is the case of the prosecution that on 14th
of August 2022, approximately 0.9952 ETH which is valued at around US$
1,926 was transferred from the account of the victim to an address
admittedly not associated with Vishal Moral. He submits that as per the
complaint, out of the said amount approximately 0.48 ETH valued at around
US$ 959 was transferred to the account of Vishal Moral. He further submits
that according to the complaint, another transaction on 15th of August 2022
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ASWAL
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took place wherein approximately 21.63 BTC were transferred from the
account of the victim to the account of Vishal Moral. He points out that it is
the case of the prosecution itself that the second transaction relating to
Bitcoin was an act of theft. He submits that the first transaction relating to
Ethereum is the only transfer that can be considered as the laundered
amount, if any, whereby the total amount was first transferred to an account
abroad and then a small portion came to the account of Vishal Moral.
Therefore, he presses that as per the prosecution’s own case, the alleged
amount of US$ 959 which converts to approximately Rs.80,000/- is the only
amount which can be considered proceeds of crime, if any.
17. He submits that the second transaction, which pertains to the transfer
of Bitcoins valued at approximately Rs.4,00,00,000/- cannot, by any
imagination, fall under Section 3 of PMLA. He contends that an offence
under Section 3 of the PMLA consists of three steps, i.e. placement, layering
and integration. He argues that any amount obtained through commission of
theft or robbery cannot be termed as money laundering as the same would
entail that every financial offence will attract the rigors of PMLA, which
cannot be the intent of the legislature.
18. He contends that the said crypto currencies have not even come to the
hands of Vishal Moral as he did not have access to the account after the
commission of the alleged offence. Adverting to the email exchanges from
19.08.2022 onwards between Vishal Moral and WazirX, he submits that the
WazirX account in which the crypto currencies were allegedly received has
subsequently been frozen.
19. Furthermore, he submits although ED has mentioned the value of
Ethereum and Bitcoins that are the subject matter of the complaint, however,
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they have not provided the basis of such calculation. No data in this regard
has been produced before this Court nor before the learned Special Court.
ED has merely relied upon the MLA request and the calculations made by
the U.S. authorities without any application of mind. He submits that in the
context of United States of America, crypto currencies are valid currencies,
however, in India, crypto currencies are not recognized as valid legal tender,
they merely have notional value. He submits that determining the actual
value of the alleged proceeds of crime is pertinent in view of the provisions
of PMLA. He submits that the twin conditions envisaged under Section 45
for grant of bail are only applicable in cases where the laundered amount is
Rs.1 crore or more. It is his contention that given the alleged laundered
amount is only to the extent of Rs.80,000/-, the twin conditions are not
applicable in the present case.
20. Mr. Tanveer Ahmed Mir, learned counsel for the petitioners/co-
accused Adnan Nisar and Shivang Malkoti, invites the attention of this Court
to the FIR bearing No.124/2023 dated 10.05.2023. He submits that the
predicate offence has been lodged after the arrest of the petitioners on
09.05.2023 by the ED. Relying upon the judgment in Vijay Madanlal
Choudhary (supra) he contends that scheduled offence must already be
registered with the jurisdictional police or pending enquiry by way of a
complaint before the competent forum pursuant to which the ED can
proceed to investigate an offence under Sections 3 & 4 of PMLA. He further
relies upon Prakash Industries Limited vs. Union of India & Anr., 2023
SCC OnLine Del 336.
21. He submits that ED has not been able to establish commission of the
predicate offence qua Shivang Malkoti and Adnan Nisar. He submits that the
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prosecution has purported in the FIR that the predicate offence has been
committed under Section 66C of the IT Act. The ingredients of Section 66C
include fraudulent or dishonest use of electronic signature, password or any
other unique identification feature of any other person and admittedly, no
such acts have been committed by the petitioners.
22. He further submits that it is the admitted position of the prosecution,
as well as the U.S. Authorities, that the petitioners at no point of time have
ever interacted with the victim based out of USA or had made any
representations in any manner to him to cause any kind of deceit or fraud by
any means, therefore, there cannot be a question of the petitioners having
cheated the victim. He submits that admittedly, the petitioners were not
involved in either development of the malicious software, or fake clicks on
competitor’s ad website, or running advertisements on the websites/search
engines, or draining the wallets/accounts of victims.
23. He submits that the allegation of the prosecution that Shivang Malkoti
was responsible for running crypto ads on Bing search engine has no merit
inasmuch as Bing does not permit advertisements relating to
cryptocurrencies and cryptocurrency related products including, but not
limited to initial coin offerings, cryptocurrency exchanges and
cryptocurrency wallets. He points out that till date no advertisement
accounts have been recovered by the prosecution.
24. Mr. Mir submits that with respect to the allegation of converting
cryptocurrency to cash by Adnan Nisar, the prosecution has not divulged any
incriminating material indicating that he assisted Vishal Moral or anyone
else in conversion of stolen cryptocurrencies to cash, besides certain
WhatsApp/Telegram chats which the prosecution claims to be between the
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petitioner and Vishal Moral. That apart, the prosecution also relies on
statements of the co-accused persons, which thereafter stand retracted.
25. He submits that the WhatsApp/Telegram chats placed on record by
the prosecution do not establish the identity of the persons involved in the
chat and whether it is, in fact, Adnan Nisar in conversation with Vishal
Moral. Without prejudice, even if it is assumed that Adnan Nisar is the
person in the chat, he submits that the chats merely reveal that it was Vishal
Moral who asked the petitioner to get in touch with some unknown person
and collect their cryptocurrency IDs. He submits that there is no evidence to
indicate that the petitioner/Adnan Nisar at any point knew the identity of the
aforementioned traders, their locations, their business operations, or any of
their agents/associates. He submits that the petitioner had no knowledge of
the length and breadth of the business operation of the main accused/Vishal
Moral. He further submits that WhatsApp/Telegram chats are virtually
verbal communications which are a matter of evidence with regard to their
meaning and its contents are to be proved during trial. In this regard, he
places reliance in the judgment of Ambalal Sarabhai Enterprise Limited vs.
KS Infraspace LLP Limited &Anr., (2020) 5 SCC 410.
26. Mr. Mir submits that it cannot be said that any act of money
laundering under Sections 3 & 4 of PMLA have been committed by the
petitioners from the point of view of criminal mens rea, broad probabilities
as well as there being any reasonable material on record. He submits that the
allegation against Shivang Malkoti is to the effect that he was working with
Vishal Moral for the purpose of promotion of ads. He submits that Shivang
Malkoti was at best, working on a limited professional basis with the main
accused for promotion of ads. There is no evidence on record to indicate that
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Shivang Malkoti had any knowledge of Vishal Moral’s other activities, and
the prosecution has not recovered any formal account statements or digital
wallet ledgers, let alone any proceeds to show that he is a beneficiary to the
alleged offence. He submits that the entire investigation rests upon the
WhatsApp chats. He places reliance on the judgments in Pooja Singh vs.
Directorate of Enforcement, 2023 SCC OnLine Del 5285 and Pinky Irani
vs. State (NCT of Delhi), 2023 SCC OnLine Del 6722 to contend that this
Hon’ble Court, at the stage of bail, is only required to examine whether the
accused/petitioners were possessed of the requisite mens rea.
27. He submits that with respect to the hawala activities alleged to have
been performed by Adnan Nisar, it would only amount to commercial
activities as the case of the prosecution is that he merely received crypto
currency IDs sent by traders to Vishal Moral. Without prejudice, he submits
that even if it is assumed as per the allegations of prosecution, that Adnan
Nisar has received proceeds of crime to the tune of Rs.1,70,000/-, since
there are no allegations of money laundering against him apart from receipt
of the said financial benefit, it would be a perversity of justice to continue
his pre-trial incarceration. Reliance is placed on the judgment in Hartej
Singh vs. State of Punjab & Anr., 2023 SCC OnLine P & H 6651.
28. Mr. Mir argues that the registration of ECIR has not been done in
compliance with Section 58 of PMLA and Section 188 of CrPC. The
mandate of Section 58 requires that the letter of request received by the
Central Government from a contracting state must be forwarded to the
Special Court or any authority under the Act for execution of such request.
29. He further submits that the prosecution has relied on the statements of
the accused persons under Section 50 of PMLA to establish the involvement
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of the petitioners. He submits that in the case of Preeti Chandra vs.
Enforcement Directorate, 2023 SCC OnLine Del 3622, this Court has held
that the statements recorded under Section 50 can only be analyzed once the
parties have entered the witness box. Further, in Manish Sisodia vs.
Directorate of Enforcement, 2023 SCC OnLine Del 3770, this Court held
that although the statements recorded under Section 50 of PMLA are
admissible in evidence, however, their evidentiary value has to be weighed
at the time of trial. He submits that at this stage, evidence cannot be
appreciated meticulously, and the statements cannot be taken as gospel truth,
only broad probabilities have to be considered. Learned counsel for the
petitioners also brings attention of this Court to the judgment in Sanjay Jain
vs. Directorate of Enforcement, 2024 SCC OnLine Del 1656, wherein it
was held by this Court that statement of co-accused under Section 50 of
PMLA is not a substantive piece of evidence and can only be used for the
purpose of corroboration in support of other evidence to lend assurance to
the Court in arriving at a conclusion of guilt. He submits that even
otherwise, the statements under Section 50 have subsequently been retracted
and are not reliable to form a basis of the guilt of the petitioners for the
offences as alleged. Moreover, it is his submission that any statements made
under Section 50 post arrest would be in the teeth of Article 20(3) of
Constitution of India, rendering the said statements inadmissible in
evidence.
30. Lastly, he submits that merely because of the gravity of offence, bail
cannot be denied. He submits that the petitioners are not at risk to tamper
with any evidence or influence any witnesses. He submits that no useful
purpose would be served by further incarceration of the petitioners. He
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submits that the constitutional right to a speedy trial must be protected in
view of the fact that trial is likely to take a long time.
31. Per contra, Mr. Zoheb Hossain, learned Special Counsel for the
respondent opposes the contention of the learned counsel for the petitioners
that there is no scheduled offence in the present case. During the course of
arguments, he handed over a copy of the MLA Request in a sealed cover.
Taking the Court through the contents of the MLA, Mr. Hossain submits that
the said document mentions at several places that the U.S. Attorney’s Office
for the District of Kansas is investigating Vishal Moral for the offences
enumerated therein. Moreover, in the first paragraph of the MLA itself, it is
stated that the assistance requested is ―to obtain evidence for use in a
criminal investigation and any related proceedings.‖ He submits that
investigation, across the world, is a corollary to registration of a complaint
and requisite provisions having been triggered.
32. He submits that a seizure warrant has also been issued by the United
States District Court for the District of Kansas in respect of the entire
contents of the WazirX account bearing user ID 11093186 held in the name
of Vishal Moral. He submits that a copy of the said warrant has been sent
along with the MLA. Therefore, he submits, the counsel for the petitioners
cannot presume that there is no corresponding scheduled offence in the US
as the information collected by the U.S. Authorities regarding details of
Vishal Moral have been corroborated by ED and the said information could
not have been obtained without investigation into the offences.
33. He further invites the attention of this Court to the ‗Treaty Between
The Government of The Republic of India and The Government of The
United States of America On Mutual Legal Assistance in Criminal Matters’
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(hereinafter ‗Treaty’). He submits that the preamble of the Treaty expressly
provides the intent of the said Treaty which is to extend assistance to each
other with investigation, prosecution, prevention and suppression of crimes
relating to inter alia economic crimes. He further relies on Article I of the
Treaty wherein it is contemplated that the contracting states shall provide the
widest measure of mutual assistance to each other in connection with the
investigation, prosecution, prevention and suppression of offences. He
submits that once the Government of India has received a request for legal
assistance under the Treaty and decides to act upon it, exercise of such
discretion by the government and its powers under the Treaty cannot be
questioned by the petitioners.
34. He submits that as held in Vijay Madanlal (supra), PMLA is a sui
generis legislation, and it is directly traceable to Entry 13 & 14 of List I in
the Seventh Schedule of the Constitution. He brings the attention of this
Court to the preamble of the Act which states that the enactment of the
legislation is in furtherance of the global efforts to fight the menace of
money laundering. He submits that therefore, the intent of the legislation can
solely be interpreted as being so that the entire regime of PMLA would get
triggered upon receipt of information that an offence has been committed in
the jurisdiction of a contracting state and the proceeds of such offence have
reached India. He elaborates that by virtue of the proceeds having travelled
in Indian jurisdiction, the standalone offence of money laundering would be
deemed to be committed in India as well.
35. In support of the above contention, he further invites the attention of
the Court to Section 2(1)(ra) of PMLA which provides for two separate
scenarios in respect of offences of cross border implications. First, when the
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offence has been committed outside India and the proceeds therefrom have
been transferred to India and second, when the offence has been committed
in India and the proceeds have travelled outside India.
36. Mr. Hossain controverts the argument of the petitioners that the phrase
―corresponding law‖ has been used in the PMLA only under those sections
that relate to attachment and not Sections 3 & 4. In addition to the above, he
submits that the request of the U.S. Authorities in the MLA is to obtain
evidence and when such a request is received, the ED is empowered to do
everything required to gather all evidence that may be available. He submits
that arrest is an inherent part of investigation for the purpose of collection of
evidence and in support places reliance in the judgements of H.N. Rishbud
vs. State (Delhi Admn.), (1954) 2 SCC 934 and P. Chidambaram (supra).
37. Without prejudice to the aforestated contentions, he submits that once
a scheduled offence is brought to the attention of the ED, the exclusive
jurisdiction over investigation of money laundering in respect of the said
scheduled offence has been given to ED under the PMLA. Mr. Hossain
refers to Section 2(2) of PMLA which provides that ―any reference, in this
Act or the Schedule, to any enactment or any provision thereof shall, in
relation to an area in which such enactment or such provision is not in force,
be construed as a reference to the corresponding law or the relevant
provisions of the corresponding law, if any, in force in that area.‖ He
submits that in the present case, since the Indian Penal Code, 1860 is not in
force in the U.S., but offences akin to cheating under Section 420 of IPC
have been committed in US jurisdiction, then it must be construed that a
scheduled offence under a corresponding law has been committed in the
U.S. In this regard, he places reliance on the judgment of the Hon’ble High
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Court of Jammu & Kashmir in Ahsan Ahmad Mirza & Ors. vs.
Enforcement Directorate & Anr., 2019 SCC OnLine J&K 1026. He
submits that the ambit of Section 2(2) is wide enough to read foreign laws
within the meaning of corresponding law. He therefore submits that upon
receipt of the information regarding the same by ED through the MLA
request, the entire provisions of PMLA would get triggered.
38. It is his submission that only the offence of money laundering is being
investigated by the ED in India and not the predicate offence. Since the
proceeds of crime have travelled to the jurisdiction of ED, as a result the
offence of money laundering has also occurred in its jurisdiction.
39. He submits that the arguments raised by the petitioners with respect to
the veracity of the statements under Section 50 of the Act, are all liable to be
rejected as it is well settled that such statements are admissible and can be
relied upon at the stage of remand or even to reject bail. In this regard, he
places reliance on the judgments in Vijay Madanlal (supra), Tarun Kumar
vs. Directorate of Enforcement, 2023 SCC OnLine Del 4173, Tarun
Kumar vs. Directorate of Enforcement, 2023 SCC OnLine Del 1486, Rohit
Tandon vs. Directorate of Enforcement, (2018) 11 SCC 46, Amanatullah
Khan vs. Directorate of Enforcement, 2024 SCC OnLine Del 1658,
Satyendar Kumar Jain vs. Directorate of Enforcement, 2023 SCC OnLine
Del 1953, and Satyendar Kumar Jain vs. Directorate of Enforcement,
(2024) 6 SCC 715. He submits that merely by way of filing belated
applications for retraction, the said statements cannot be resiled from and
such a retraction is a matter of trial. At this stage, a mini trial cannot be
conducted.
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40. With respect to the admissibility of the WhatsApp/Telegram chats, he
submits that the said chats have been retrieved from the mobile phone of
Vishal Moral during search at his residence and extraction from the said
mobile phone was carried out by the cyber lab of ED. Panchnama was duly
drawn and the same have now been sent for forensic analysis. He further
submits that it is well settled law that at the stage of bail, this Court does not
have to go into the credibility or reliability of the evidence. He submits that
at this stage, this Court need only consider whether based on the material
available on record, there are reasonable grounds for believing that the
person may not be guilty of the offence. He places reliance in the judgment
of Gurcharan Singh & Ors., vs. State (Delhi Administration), (1978) 1
SCC 118, Mohan Singh vs. Union Territory, (1978) 2 SCC 366, Satish
Jaggi vs. State of Chhattisgarh, (2007) 11 SCC 195, Vijay Madanlal
(supra), CBI vs. V. Vijay Sai Reddy, (2013) 7 SCC 452.
41. Mr. Hossain, in response to the contention of the learned counsel for
the petitioners that foreign law relied upon by the prosecution as the
scheduled offence will have to be proved during trial, submits that public
documents of foreign countries are to be proved in accordance with Section
78(6) of the Evidence Act, 1872.
42. Lastly, Mr. Hosssain submits that the apprehension of the petitioners
that the trial is likely to take a long time is not well founded. In light of the
judgment of the Hon’ble Supreme Court in Tarun Kumar (supra), he
submits that the nature of offence in the present case, which is a
sophisticated cryptocurrency fraud, committed by only a few clicks of a
button, it cannot be said that the petitioners are not likely to commit any
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offence while on bail. He submits that Section 436A of CrPC is a sufficient
safeguard available to the petitioners.
43. Mr. Vivek Gurnani, learned counsel appearing on behalf of the ED
brought to the notice of the Court the incriminating material contained in the
relied upon documents.
44. While reserving the present judgment, inadvertently judgment was
also reserved in connected petitions i.e. Crl.M.C. 6730/2023 and W.P.(Crl.)
2789/2023, which were continuously being listed with the captioned bail
applications, despite no arguments having been addressed by the parties on
the said petitions. Accordingly, the matters including aforesaid Crl.M.C. and
Writ Petitions were listed for clarification on 06.09.2023. The learned
counsel for parties were ad idem that they had confined their submissions
only to the bail applications and no arguments were addressed qua Crl.M.C.
and Writ Petitions. The said two petitions were thus, released and directed to
be listed before the Roster Bench.
45. Mr. Mir on 06.09.2023 also sought to place before this Court the
recent judgments of the Hon’ble Supreme Court in (i) Ramkripal Meena vs.
Directorate of Enforcement, 2024 SCC OnLine 2276; (ii) Manish Sisodia
vs. Directorate of Enforcement, 2024 SCC OnLine SC 1920; and (iii) Prem
Prakash vs. Union of India through the Directorate of Enforcement, 2024
SCC OnLine SC 2270. Accordingly, all the parties were allowed to make
their further submissions confined only to the said decisions.
46. I have heard the learned counsel for the petitioners, as well as the
learned Special Counsel for the ED and have perused the material on record.
47. The point wise analysis of the rival contentions of the learned counsel
for the parties is as under:
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OFFENCE UNDER FOREIGN LAW AS SCHEDULED OFFENCE
48. The registration of a scheduled offence with the jurisdictional police
and/or pending investigation or trial, including by way of criminal complaint
before the competent forum, is a sine qua non for prosecution of any person
under the PMLA. The authorities under the PMLA cannot prosecute any
person on notional basis or on the assumption that a scheduled offence has
been committed1.
49. It is the case of the respondent/ED that scheduled offence in the
present case has been committed in the United States of America and the ED
had received a Mutual Legal Assistance (MLA) request from the U.S.
Department of Justice, Washington, stating that the petitioner/accused Vishal
Moral, an Indian national has committed an offence under the U.S. statutes
mentioned therein, which according to the ED, correspond to Section 75 of
IT Act, 2000 and Sections 420 and 424 of IPC.
50. It is also the case of the ED that the victim of the offence was
navigated to a malicious website closely resembling that of ‗Ledger Live’,
containing a malware, with the aid of which Ethereum and Bitcoins were
transferred from the address of victim’s Ledger Hardware Wallet to the
petitioner/accused Vishal Moral’s account maintained with WazirX in India,
in violation of U.S. laws. It is thus, the case of the ED that the offence
committed in U.S. has cross border implications.
51. The expression “offence of cross border implications” has been
defined under Section 2(1)(ra) of the PMLA to mean –
“(i) any conduct by a person at a place outside India which
constitutes an offence at that place and which would have
constituted an offence specified in Part A, Part B or Part C of the1
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Schedule, had it been committed in India and if such
person transfers in any manner the proceeds of such conduct or
part thereof to India; or
(ii) any offence specified in Part A, Part B or Part C of the
Schedule which has been committed in India and the proceeds of
crime, or part thereof have been transferred to a place outside
India or any attempt has been made to transfer the proceeds of
crime, or part thereof from India to a place outside India.”
(emphasis supplied)
52. Clearly, offences having cross border implications contemplated
under the above quoted provision are of two categories. First, when any
offence has been committed at a place outside India which would have
constituted an offence specified in Part A, Part B or Part C of the Schedule
had it been committed in India, and the proceeds have been transferred to
India; and second when the Scheduled offence has occurred in India and the
proceeds have travelled to a place outside India. For the purpose of present
case, first category defined in sub-clause (i) of Section 2(1)(ra) is of
relevance, since the case of ED is that proceeds of crime have been
transferred from the account of victim in U.S. to the account of
petitioner/accused Vishal Moral in India.
53. Section 2(1)(y) of PMLA defines scheduled offence to mean offences
specified under the Schedule of PMLA. The Schedule has been trifurcated
into Part A, Part B and Part C. The ED’s case is that offences committed
under U.S. laws are being investigated by the U.S. Attorney’s Office for the
District of Kansas in the United States of America and treating the same as a
predicate offence under Part C of the Schedule, it has registered a case under
Sections 3 and 4 of the PMLA in India and initiated proceedings thereunder.
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54. At this juncture, apposite would it be to refer to Part C of the
Schedule, the relevant extract of which reads thus:
“PART C
An offence which is the offence of cross border implications and is
specified in,–
(1) Part A; or
*****
(3) the offences against property under Chapter XVII of the Indian
Penal Code (45 of 1860).
(4) The offence of wilful attempt to evade any tax, penalty or
interest referred to in section 51 of the Black Money (Undisclosed
Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of
2015).”
55. A bare reading of Part C of the Schedule shows that it encompasses
offences specified under Part A, if the said offences have cross border
implications. Further, all the offences against property under Chapter XVII
of IPC having cross border implications also become scheduled offences
under the Act. In other words, some of the offences included under Chapter
XVII, which are though not included in Part A like theft, will become
scheduled offences by virtue of Part C, if they have cross border
implications.2
56. In the second category described under sub-clause (ii) of Section
2(1)(ra) there is no confusion as the predicate offence occurs inside the
territory of India, therefore, the laws mentioned in the Schedule would
directly be applicable. However, the conundrum needs to be resolved in
case of first category specified under sub-clause (i) of Section 2(1)(ra) as
neither the offences enumerated under Part A, nor the IPC are globally
enacted provisions, rather each foreign country has its own laws inside its
2
Pavna Dibbur (supra)
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territory, albeit they may have similarities with the laws in other
jurisdictions. To reconcile this situation reference may be had to Section
2(1)(ia) which defines the expression ―corresponding law‖ as well as sub-
section (2) of Section 2 of PMLA which provides as to when any reference
to the Scheduled offence under the Act can be construed as reference to the
―corresponding law‖. The said provisions read thus:
“2(1)(ia)”corresponding law” means any law of any foreign
country corresponding to any of the provisions of this Act or
dealing with offences in that country corresponding to any of the
scheduled offences.
XXXX XXXX XXXX
2(2) Any reference, in this Act or the Schedule, to any enactment
or any provision thereof shall, in relation to an area in which
such enactment or such provision is not in force, be construed as
a reference to the corresponding law or the relevant provisions
of the corresponding law, if any, in force in that area.”
57. Expression ‗area’ in Section 2(2) has not been defined under the Act.
However, the definition of ‗corresponding law’ has been inserted by an
amendment of 2013 which clarifies the position that corresponding law
would mean any law of any foreign country dealing with the offences of that
country which correspond to the scheduled offences. Therefore, by virtue of
the definition of ‗corresponding law’ it is clear that expression ‗area’ in sub-
section (2) of Section 2 of PMLA would also mean ‗any foreign country’.
The effect of the said sub-section is that it creates a deeming fiction wherein
the corresponding law of any foreign country dealing with the offences in
that country will have to be read into the schedule of PMLA.
58. Further, a conjoint reading of Section 2(2); Section 2(1)(ia); Section
2(1)(ra) and Part C of the Schedule, makes it plain that if an offence has
been committed in a foreign country under the laws of that country, the same
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can be treated as a predicate offence provided such offence corresponds to
any of the offences specified under Part C of the PMLA and it has cross
border implications in the sense that the proceeds of such crime has travelled
to India.
59. Therefore, there is no substance in the submission of Mr. Amit
Shukla, the learned counsel for the petitioner/accused Vishal Moral that
expression ‗corresponding law’ has been used only in relation to the
provisions providing for attachment to enable the relevant authority in India
to seize and protect the proceeds of crime of an offence committed abroad
till the investigation and trial in the foreign country is concluded, and the
same is not to be read in the context of initiating penal action in India under
Sections 3 and 4 of the PMLA.
60. This Court also does not find merit in the contention of Mr. Shukla
that since the trial of the alleged predicate offence is being held in the Court
at Kansas, U.S.A. and the same cannot be transferred to the Special Court in
India, therefore, the provisions of Section 44(1)(c) would become redundant
in such a situation, which cannot be the intent of legislature. The Hon’ble
Supreme Court in Vijay Madanlal Choudhary (supra) has held that the
provision of Section 44(1)(c) of the Act only bestow enabling power on the
Special Court to examine the request of the Authority authorised for transfer
of trial to predicate offence to itself and such request will be examined on
case-to-case basis. Thus, the provision is not mandatory. In the context of a
predicate offence under the corresponding law of a foreign country, the same
can only be tried as per the procedure in force in that foreign country and
Section 44(1)(c) of the Act will have no application in such a situation.
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MLA REQUEST & POWERS OF THE AUTHORITY UNDER THE
ACT
61. Next, it was argued by Mr. Shukla that the MLA request received
from the U.S. Authorities, as per the complaint of ED, seeks limited
assistance to the extent that WazirX accounts mentioned therein may be
seized and frozen, but the ED has gone beyond the mandate of specific
request in the MLA and lodged the present ECIR to initiate a separate
investigation in India based on an offence committed abroad, which was
impermissible.
62. To appreciate this argument, reference to the preamble of PMLA is
imperative, which makes it plain that legislation has been enacted to
implement the resolution and declaration adopted by United Nations General
Assembly (UNGA) in the year 1990 and 1998, respectively in furtherance of
global efforts, to control and prevent money laundering.
63. Chapter IX has been incorporated in PMLA specifically providing for
reciprocal arrangement for assistance in certain matters and procedure of
attachment and confiscation of property. Section 56 under Chapter IX
envisages that the Central Government may enter into an agreement with the
Government of any country outside India for – (a) enforcing the provisions
of PMLA; (b) exchange of information for the prevention of any offence
under PMLA or under the corresponding law in force in that country or
investigation of cases relating to any offence under PMLA, and may, by
notification in the official gazette, make such provisions as may be
necessary for implementing the agreement.
64. It appears that pursuant to the provisions of Section 56 of the Act, the
Government of India and the Government of United States of America,
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desiring to improve the effectiveness of law enforcement authorities in both
the States in the investigation, prosecution, economic crimes, through
cooperation and mutual legal assistance in criminal matters, agreed on
various aspects by way of a treaty entitled “On Mutual Legal Assistance in
Criminal Matters” (hereinafter ‗Treaty’). The preamble of Treaty reads as
under:
“The Government of the Republic of India and the Government
of the United States of America, hereinafter referred to as the
Contracting Parties, desiring to improve the effectiveness of the
law enforcement authorities of both states in the investigation,
prosecution, prevention and suppression of crimes, including
those relating to terrorism, narcotics trafficking, economic
crimes, and organized crime, through cooperation and mutual
legal assistance in criminal matters,
Have agreed as follows:”
65. Article I of the Treaty which deals with the scope of assistance that is
to be provided by the contracting parties, reads as under:
“Article 1
Scope of Assistance
1. The Contracting Parties shall provide the widest measure of
mutual assistance to each other, in accordance with the
provisions of this Treaty, in connection with the investigation,
prosecution, prevention and suppression of offenses, and in
proceedings related to criminal matters.
2. Assistance shall include:
a) taking the testimony or statements of persons;
b) providing documents, records, and items of evidence;
c) locating or identifying persons .or items;
d) serving documents;
e) transferring persons in custody for testimony or other
purposes;
f) executing requests for searches and seizures;
g) assisting in proceedings related to seizure and forfeiture of
assets, restitution, collection of fines; andSignature Not Verified
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h) any other form of assistance not prohibited by the laws of the
Requested State.
3. Assistance shall be provided without regard to whether the
conduct that is the subject of the investigation, prosecution, or
proceeding in the Requesting State would constitute an offense
under the laws of the Requested State.
4. This Treaty is intended solely for mutual legal assistance
between the Contracting Parties. The provisions of this Treaty
shall not give rise to a right on the part of any private person to
obtain, suppress, or exclude any evidence, or to impede the
execution of a request.”
(emphasis supplied)
66. As noted above the ED had received a letter dated 23.12.2022
forwarding therewith a Mutual Legal Assistance Request (‗MLA’) from the
U.S. Department of Justice, Washington wherein legal assistance was
sought. A copy of MLA request was handed over across the Bar during
course of the arguments with a caveat that the same is confidential.
Admittedly, said MLA request does not form part of the record either before
this Court or before the learned Special Court, nor a copy of the same has
been supplied to the accused persons, though reference of contents of said
MLA request has been made in the complaint in abridged form.
67. A perusal of MLA request reveals that the Central Authority of the
Republic of India has been requested with reference to the aforementioned
Treaty, to obtain evidence for use in a criminal investigation and any related
proceedings. Elaborating further, the MLA request also furnishes the details
of the information obtained by the U.S. Attorney’s Office for the District of
Kansas (‗the Prosecutor’), while investigating the alleged commission of
fraud and money laundering offences by petitioner/accused Vishal Moral.
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The request also points out that the above noted Prosecutor has obtained a
U.S. Seizure warrant authorizing the restraint of entire contents of the
relevant WazirX account, held in the name of Vishal Moral (Target Account)
and accordingly a request has, inter alia, been made to restraint or to seize
the entire contents of the said account with WazirX.
68. At this stage, it would also be relevant to refer to Section 60 of the
PMLA, which provides for attachment, seizure and confiscation of property
in contracting State of India. The provision reads as under:
“60. Attachment, seizure and confiscation, etc., of property in a
contracting State or India.–
(1) XXXX XXXX XXXX
(2) Where a letter of request is received by the Central
Government from a court or an authority in a contracting
State requesting attachment, seizure, freezing or confiscation
of the property in India, derived or obtained, directly or
indirectly, by any person from the commission of an offence
under a corresponding law committed in that contracting State,
the Central Government may forward such letter of request to
the Director, as it thinks fit, for execution in accordance with
the provisions of this Act.
(2A) XXXX XXXX XXXX
(3) The Director shall, on receipt of a letter of request under
section 58 or section 59, direct any authority under this Act to
take all steps necessary for tracing and identifying such
property.
(4) The steps referred to in sub-section (3) may include any
inquiry, investigation or survey in respect of any person,
place, property, assets, documents, books of account in any
bank or public financial institutions or any other relevant
matters.
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(5) Any inquiry, investigation or survey referred to in sub-
section (4) shall be carried out by an authority mentioned in
sub-section (3) in accordance with such directions issued in
accordance with the provisions of this Act.
(emphasis supplied)
69. From the wholesome reading of Section 60, it is abundantly clear that
though a request from the contracting state may be confined to attachment,
seizure, freezing or confiscation of the property in India, but the steps to be
taken for executing the said request may include conducting of an inquiry,
investigation or survey.
70. Investigation has been defined under Section 2(na) of the Act as
follows:
“Investigation” includes all the proceedings under this Act
conducted by the Director or by an authority authorized by the
Central Government under this Act for the collection of
evidence.”
71. The meaning assigned to investigation under section 2(h)3 of the Code
of Criminal Procedure is similar. The Hon’ble Supreme Court in H.N.
Rishbud (supra) observed that under the Code investigation consists
generally of the following steps:
“(1) Proceeding to the spot,
(2) Ascertainment of the facts and circumstances of the
case,
(3) Discovery and arrest of the suspected offender,
(4) Collection of evidence relating to the commission of the
offence which may consist of3
Section 2(h) -―investigation‖ includes all the proceedings under this Code for the collection of evidence
conducted by a police officer or by any person (other than a Magistrate) who is authorised by a Magistrate
in this behalf;
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(a) the examination of various persons (including
the accused) and the reduction of their statements
into writing, if the officer thinks fit,
(b) the search of places of seizure of things
considered necessary for the investigation and to
be produced at the trial, and
(5) Formation of the opinion as to whether on the material
collected there is a case to place the accused before a
Magistrate for trial and if so, taking the necessary steps for
the same by the filing of a charge-sheet under Section 173.”
(emphasis supplied)
72. Similarly, the Apex Court in P. Chidambaram (supra) observed that
ordinarily, arrest is a part of procedure of investigation to secure not only the
presence of the accused but several other purposes. In good number of
criminal cases, for collecting of evidence custodial interrogation becomes
imperative. Incidentally, there cannot be arrest without registration of a case
under the ordinary criminal law, except where arrest is under preventive
detention laws.
73. In the backdrop of this legal position, there appears to be substance in
the submission of Mr. Hossain that the request of the U.S. Authorities in the
MLA is to obtain evidence and when such a request is received, the ED is
empowered to do everything required including arrest of accused post
lodging of a case under section 3 and 4 of the PMLA, to gather all evidence
that may be available.
74. Even otherwise, once ED, on the basis of MLA request and other
material collected, was satisfied that the offences being investigated by the
U.S. Department of Justice under the relevant U.S. laws correspond to
offences falling under Schedule of the PMLA and the proceeds of crime
have found its way to India, it was well within its power to register an
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offence under Sections 3 and 4 of the PMLA, irrespective of the nature of
request in the MLA. This view finds support from the decision of the
Hon’ble Supreme Court in Vijay Madanlal Choudhary (supra) wherein it
has been held that the offence of money laundering under Section 3 of the
Act is an independent offence regarding the process or activity connected
with the proceeds of crime which had been derived or obtained as a result of
criminal activity relating to or in relation to a scheduled offence.
75. In light of the above discussion there is no merit in the submission of
Mr. Shukla that the MLA request received from the U.S. Authorities, as per
the complaint of ED, seeks limited assistance to the extent that WazirX
accounts mentioned therein may be seized and frozen and the same does not
warrant registration of an offence under the PMLA.
NON-COMPLIANCE OF PROCEDURAL REQUIREMEMTS
76. Insofar as contention of Mr. Shukla and Mr. Mir that after receipt of a
letter of request from a contracting state, the Central Government is bound
by Section 61 of PMLA to forward the said request to the concerned Court
in India, is concerned, it may be observed that a conjoint reading of Section
584, Section 60(2) and Section 615 of the Act, leaves no manner of doubt that
the Central Government upon receipt of a letter of request from a
contracting State has a discretion to forward the said request to any authority
4
Section 58 -Assistance to a contracting State in certain cases.–Where a letter of request is received by
the Central Government from a court or authority in a contracting State requesting for investigation into an
offence or proceedings under this Act and forwarding to such court or authority any evidence connected
therewith, the Central Government may forward such letter of request to the Special Court or to any
authority under the Act as it thinks fit for execution of such request in accordance with the
provisions of this Act or, as the case may be, any other law for the time being in force.
5
Section 61 – Procedure in respect of letter of request.–Every letter of request, summons or warrant,
received by the Central Government from, and every letter of request, summons or warrant, to be
transmitted to a contracting State under this Chapter shall be transmitted to a contracting State or, as the
case may be, sent to the concerned Court in India and in such form and in such manner as the Central
Government may, by notification, specify in this behalf.
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under the Act or to the Special Court as it thinks fit for the execution of such
request. Therefore, the Central Government was well within its power to
forward the MLA request in the present case directly to the ED. There is
thus, no breach of the provisions of Chapter IX of the Act, as contended by
the counsel for the petitioners/accused.
77. It was also argued both by Mr. Shukla and Mr. Mir that since it is the
case of the ED that an offence of cross border implications has been
committed, therefore, sanction of the Central Government was required
under Section 188 CrPC. To appreciate this submission, apposite would it
be to refer to Section 188 CrPC, which reads as under:
“188. Offence committed outside India.–When an offence
is committed outside India–
(a) by a citizen of India, whether on the high seas or
elsewhere; or
(b) by a person, not being such citizen, on any ship or
aircraft registered in India,
he may be dealt with in respect of such offence as if it had
been committed at any place within India at which he may
be found:
Provided that, notwithstanding anything in any of the
preceding sections of this Chapter, no such offence shall be
inquired into or tried in India except with the previous
sanction of the Central Government.”
(emphasis supplied)
78. In terms of proviso to Section 188 CrPC, the section gets attracted
when the entirety of the offence is committed outside India; and it is the
grant of sanction that would enable such offence to be enquired into or tried
in India.6
6
Sartaj Khan vs. State of Uttarakhand, (2022) 13 SCC 136.
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79. Clearly, the predicate offence has been committed in U.S. and the
same is being tried there though it has cross border implications. It is only
the offence under PMLA that is being tried in India. Since the proceeds of
crime related to the predicate offence have travelled to India, the offence
under PMLA being a standalone offence, has been committed in India in its
entirety, therefore, no sanction as mandated under proviso to Section 188
CrPC is required for the said offence.
JUDICIAL NOTICE OF CORRESPONDING LAW
80. In the MLA request it is alleged that the petitioner/accused Vishal
Moral, an Indian national has committed an offence under the U.S. statutes
mentioned therein viz., (i) Title 18, United States Code, Section 1343 (Wire
Fraud); (ii) Title 18, United States Code, Section 1029 (Access Device
Fraud); (iii) Title 18, United States Code, Section 1030 (Computer Fraud)
and; (iv) Title 18, United States Code, Section 1956 (Money Laundering).
81. The provisions of U.S. statutes under which offences are alleged to
have been committed, have not been quoted in extenso in complaint filed by
the ED nor there is any reference made to the ingredients of such offences.
Even Title 18, United States Code has not been filed along with the
complaint, let alone filing of an opinion of an expert on the subject.
82. Under Section 577 of the Indian Evidence Act, 1872 the Courts in
India are obliged to take judicial notice of all laws in force in the territory of
India and other facts enumerated in the provision, however, foreign laws are
7
Section 57 -Facts of which Court must take judicial notice.–The Court shall take judicial notice of the
following facts: —
(1) All laws in force in the territory of India;
(2) xxxxx
…
(13) xxxxx
…
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not stated therein. The United States Code, being a foreign law, cannot be
taken judicial notice of by Indian Courts and the same has to be pleaded like
any other fact. Reference in this regard may be had to the decision of the
Hon’ble Supreme Court in Hari Shanker Jain vs. Sonia Gandhi, (2001) 8
SCC 233. In the said case dispute regarding the validity of certificate of
citizenship of the respondent therein arose and the issue before the Apex
Court was that whether the respondent could have renounced her Italian
citizenship and become a citizen of India, for which the appellants therein
had failed to provide any reference to the statutory enactment or other
provision on the issue, having force of law in Italy. The Hon’ble Supreme
Court in this context observed that the Courts in India cannot take judicial
notice of foreign law, therefore, it should be pleaded like any other fact. The
relevant part observations of the Court read as under:
“27. Italian law is a foreign law so far as the courts in India are
concerned. Under Section 57(1) of the Indian Evidence Act,
1872, the court shall take judicial notice of, inter alia, all laws
in force in the territory of India. Foreign laws are not included
therein. Sections 45 and 84 of the Evidence Act permit proof
being tendered and opinion of experts being adduced in
evidence in proof of a point of foreign law. Under Order 6 Rule
2 of the Code of Civil Procedure, 1908, every pleading shall
contain a statement in concise form of the material facts relied on
by a party but not the evidence nor the law of which a court may
take judicial notice. But the rule against pleading law is
restricted to that law only of which a court is bound to take
judicial notice. As the court does not take judicial notice of
foreign law, it should be pleaded like any other fact, if a party
wants to rely on the same (see Mogha’s Law of Pleadings, 13th
Edn., p. 22). In Guaranty Trust Co. of New York v. Hannay &
Co. it was held that: “Foreign law is a question of fact to an
English court … the opinion of an expert on the fact, to be
treated with respect, but not necessarily conclusive.”
In Beatty v. Beatty it was held that the American law in English
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courts must be proved by the evidence of experts in that law.
In Lazard Bros. and Co. v. Midland Bank, Ltd. Their Lordships
of the Privy Council observed that what the Russian Soviet law
is, is a question of fact, of which the English court cannot take
judicial cognizance, even though the foreign law has already
been proved before it in another case. The court must act upon
the evidence before it in that actual case. The statement of law
by Halsbury in Laws of England (3rd Edn., Vol. 15, para 610 at
p. 335) is that the English courts cannot take judicial notice of
foreign law and foreign laws are usually matters of evidence
requiring proof as questions of fact.”
(emphasis supplied)
83. Likewise, this Court in the case of Mundipharma AG vs. Wockhardt
Ltd., 1990 SCC OnLine Del 269 had also articulated the above legal
position. The question in this case was with regard to the enforceability of a
particular clause under the Swiss law. This Court held Swiss Law being
foreign law is a question of fact and opinion of an expert must be filed
before the Court if reliance is placed on such foreign law. Relevant part of
the judgment reads thus:
“18. The petitioner submitted that clause 27 of the agreement
containing prohibition during the subsistence of the agreement
and three years thereafter was enforceable under the Swiss law.
This submission was with reference to clause 34 which says that
the terms of the agreement were to be government by the laws of
Switzerland. I am of the view that for the purpose of deciding the
validity of clause 27 of the agreement I have to see if it passes the
test under section 27 of the Contract Act which makes every
agreement by which one is restrained from exercising a lawful
profession, trade or business of any kind to be void to that extent.
No one before me disputes that clause 27 is within the category
of agreements in restraint of trade. Law is against restrain of
trade and the courts have not locked upon such agreements with
favour. Such agreements sometimes are, however, required to be
tested on the ground of reasonableness. This court has to see if
clause 27 is valid as per laws of this country when the clause isSignature Not Verified
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under challenge in the proceedings before this Court. This is
particularly so when the agreement is to be performed in this
country. Whether the arbitrators are bound to apply the
substantive laws of switzerland relating to the contract is
question when the matter goes for arbitration in terms of
arbitration agreement between the parties is a different question
altogether. Even in that case the award which would be a foreign
award, if made would have to be tested on the touchstone of
public policy of this country, if that foreign award is sought to be
enforced in this country. (See clause (b) of Article V(2) of the
Schedule and section 7(1)(b)(ii) of the Foreign Awards Act).
Assuming, however, that it would be laws of Switzerland that
will govern the validity of clause 21, the question then arises
what is that law? The petitioner has filed an affidavit of a
lawyer practising in Switzerland. This is sought to be
introduced as opinion of an expert being relevant under section
45 of the Indian Evidence Act, 1972. Foreign law is no doubt a
question of fact. The opinion of an expert on the subject has to
be tested by cross-examination. When at an interim stage only
an affidavit is to be relied upon this affidavit has to be complete
in all respects. The affidavit must show the qualification and
experience of the expert. It must state if the law on the subject
is codified and must also refer to judicial precedents in support
of his views. It may perhaps be said that if the law is codified,
opinion is not necessary on the subject. But sometimes in such
cases also court would like to have the opinion of an expert as
to what interpretation has been put on the law in the courts in
the foreign country concerned. The opinion of the expert must
be clear and cogent. I find the opinion of Ms. Werner on the
question of foreign law quite obscure. It is more like a
certificate. I will not, therefore, take any notice of this affidavit.
Thus, there is nothing on record to show as to what is the swiss
law on the subject of restraint of trade.”
(emphasis supplied)
84. It is in the backdrop of above legal position that Mr. Hossain’s
submission that the MLA request received by the ED is a certified copy,
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therefore, the same may only be required to be proved in terms of Section
78(6) of the Evidence Act, 1872 is to be appreciated.
85. The aforesaid submission is noted to be rejected. Even assuming that
the MLA request is a certified copy as required under Section 78(6) of the
Evidence Act, 1872, the same is not a substitute for the statute or provision
of a corresponding law (United States Code) enacted in the United States of
America, which will have to be proved as a question of fact during the
course of trial by examining experts on the subject. At this stage no judicial
notice can be taken of corresponding law of U.S., therefore, in the absence
of material on record in the form of a relevant statute supported by the
opinion of experts, there is nothing to establish even prima facie that the
alleged predicate offence corresponds to the offences mentioned in the
Schedule of the PMLA. Incidentally, in the absence of commission of
scheduled offence, there cannot be any proceeds of crime.
86. At this juncture, it will also be relevant to note that the initial burden
is on the prosecution to establish prima facie the three basic or fundamental
facts as delineated in Vijay Madanlal Choudhary (supra). Firstly, that the
criminal activity relating to a scheduled offence has been committed.
Secondly, that the property in question has been derived or obtained, directly
or indirectly, by any person as a result of that criminal activity. Thirdly, the
person concerned is directly or indirectly involved in any process or activity
connected with the said property being proceeds of crime. On establishing
the fact that there existed proceeds of crime and the person concerned was
involved in any process or activity connected therewith, itself, constitutes an
offence of money laundering.
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87. It is only after three foundational facts are prima facie established in a
given case that the accused will assume the burden in terms of Section
24(a)8 of the Act to convince the Court within the parameters of the inquiry
under Section 45 that for the reasons adduced by him there are reasonable
grounds to believe that he is not guilty of such offence.9
88. In the present case, the foundational facts that the alleged crime
committed in U.S. is a scheduled offence and consequently the amount
which has come to the account of petitioner/accused Vishal Moral is
proceeds of crime have not been established even prima facie, therefore, the
burden will not shift on petitioners/accused to convince the Court in terms of
Section 45 that they are not guilty of an offence of money-laundering under
the Act.
NON-SPEAKING ORDER OF COGNIZANCE
89. A submission has also been made by Mr. Shukla, the learned counsel
appearing on behalf of petitioner/accused Vishal Moral, that the order taking
cognizance does not reflect any application of mind. The order dated
01.08.2023 vide which cognizance was taken by the learned Special Court
reads thus:
―The Court has heard SSP (ED). The Court has also perused
the file. The Court is taking cognizance of offence under Section
3 read with Section 4 of PML Act. The accused persons be
summoned for 16.08.2023.‖8
Section 24 – Burden of proof.-In any proceeding relating to proceeds of crime under this Act,-
(a) in the case of a person charged with the offence of money-laundering under section 3, the Authority or
Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-
laundering;
(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are
involved in money-laundering.
9
Prem Prakash (supra)
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90. Elaborating on his submission Mr. Shulka contends that the ED in the
complaint has not disclosed or placed on record – (i) the identity of the
victim; (ii) the complete contents of MLA; (iii) a complaint of the predicate
offence in the US; (iv) communications between the US Central Authority
and the Indian Central Authority; and (v) the communication between the
Central Government and the ED. Therefore, there was no material before the
learned Special Court with regard to commission of predicate offence in the
U.S. and MLA request having been made by the U.S. Authorities to the
Government of India.
91. In the present bail petitions, there is no challenge to the order vide
which cognizance was taken by the learned Special Court, therefore, this
Court need not delve deep into this submission, but certainly the absence of
material to establish commission of scheduled offence in the United States
of America, as noted in the foregoing part of the judgment, will enure to the
benefit of the petitioners in the scheme of broad probabilities.
BENEFIT OF FIRST PROVISO TO SECTION 45(1) OF PMLA
92. The first proviso10 to sub-section (1) of Section 45 of the Act, inter
alia, provides that a person who is accused either on his own or alongwith
other co-accused of money-laundering may be released on bail, if the sum of
laundered amount is less than one crore rupees.
93. The contention of Mr. Shukla, as noted above, is that as per the
complaint, out of the total Ethereum amount, approximately 0.48 ETH
valued at around US$ 959 was transferred to the account of
petitioner/accused Vishal Moral which converts to approximately
10
Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, or is
accused either on his own or along with other co-accused of money-laundering a sum of less than one crore
rupees may be released on bail, if the Special Court so directs.
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Rs.80,000/-. According to Mr. Shukla it is the said amount which can be
considered proceeds of crime, whereas another transaction on 15.08.2022
wherein approximately 21.63 BTC valued at approximately Rs.4,00,00,000/-
were transferred from the account of the victim directly to the account of
Vishal Moral was an act of theft and cannot, by any imagination, fall under
Section 3 of PMLA.
94. At this stage, without going into the question as to whether the
proceeds from the second transaction have been obtained by way of fraud or
theft or by commission of any other offence, suffice it to state that all the
offences against the property under Chapter XVII of the IPC, which includes
theft as well, are scheduled offences under Part C, if the same have cross
border implications. Therefore, prima facie there is no force in Mr. Shukla’s
submission that twin conditions envisaged under Section 45 for grant of bail
will not be applicable as the laundered amount is only to the extent of
Rs.80,000/-.
95. Insofar as the contention that in the complaint the ED has not
provided the basis of calculating the value of the subject matter, it may be
observed that basis of calculation is a matter of trial and the same cannot be
gone into while deciding the bail plea of the petitioners.
INCRIMINATING MATERIAL
(i) Petitioner/accused -Vishal Moral
96. The incriminating material pressed into service by the ED against
petitioner/Vishal Moral is in the form of – (i) statements of petitioner/Vishal
Moral recorded under Section 50 of the PMLA; (ii) the WhatsApp/Telegram
Chats; and (iii) seizure of cryptocurrency from Vishal Moral’s account on
the basis of MLA request.
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97. In the present case, the ED has recorded as many as 12 statements of
petitioner/accused Vishal Moral under Section 50 of the PMLA on various
dates viz., 29.03.2023, 26.04.2023, 28.04.2023, 29.04.2023, 30.04.2023,
01.05.2023, 02.05.2023, 03.05.2023, 04.05.2023, 05.05.2023 06.05.2023
and 07.05.2023.
98. It is the case of ED itself that the petitioner/Vishal Moral was arrested
on 26.04.2023. Clearly, except two statements of Vishal Moral recorded on
29.03.2023 and 26.04.2023, all remaining 10 statements have been recorded
post his arrest.
99. The crux of the statement of petitioner/Vishal Moral recorded on
29.03.2023 has been stated in the complaint filed by the ED and the same
reads thus:
“On being asked, Vishal Moral stated that he started working as
freelancer digital marketer and from the savings of his earnings,
he started a company called „Infosys Live‟ in the year 2019
which provided services like Search Engine Optimization, Search
Ads Marketing and Banner Design worldwide. In 2020, after
closing the office of „Infosys Live‟, he had joined M/s Addon Trip
Private Limited (Travel Agency) as Director and Digital
Marketing Strategist in mid of year 2020. There, he used to
promote the website of M/s Addon Trip Private Limited on google
search platform. Further, he also registered a company in USA
named „Infosys Live LLC‟ to provide services of digital
marketing in USA, (Statement dated 29.03.2023).”
100. Likewise, the essence of statement of petitioner/Vishal Moral
recorded on 26.04.2023 as set out in the complaint reads as under:
“On being asked, he stated further that he received
approximately 22 Bitcoin by mistake without providing any
services and that he hadn‟t informed any authority. He stated
that he had claimed these cryptocurrencies belonged to him and
that in order to claim the stolen cryptocurrencies, he sent a fakeSignature Not Verified
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and self-created screenshot to WazirX Crypto Exchange as
proof. However, WazirX Crypto Exchange blocked his account
because he couldn‟t provide a source of such funds. (Statement
dated 26.04.2023).”
101. A reading of above two statements goes to show that the statement
dated 29.03.2023 refers only to his professional credentials whereas the
statement dated 26.04.2023 contains admission of petitioner Vishal Moral
that he received certain Bitcoins by mistake and he claimed the same as
belonging to him and sent a fake and self-created screenshot to WazirX
Crypto Exchange as proof. There is nothing incriminating to establish
Vishal Moral’s involvement in commission of alleged fraud or in any kind of
scam or money laundering.
102. The other statements of petitioner/Vishal Moral have undisputedly,
been recorded post his arrest on 26.04.2023, therefore, such statements,
which according to the ED contains incriminating material, will be hit by
Section 25 of the Evidence Act and rendered inadmissible, as the same were
recorded whilst the petitioner/Vishal Moral was in custody. Reference in this
regard may be had to the decision of the Hon’ble Supreme Court in Prem
Prakash (supra). In the said case, the incriminating statements of the
appellant therein had been recorded by the ED under Section 50 of the
PMLA whilst the appellant therein was in custody in another case ECIR.
Thus, the argument put forth by the ED was that the appellant was not in
custody in the concerned case when his statement under Section 50 of the
PMLA was recorded. In this factual backdrop, the Hon’ble Supreme Court
formulated the following question and then referring to its various earlier
decisions observed as under:
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“22. The question that arises is when a person is in judicial
custody/custody in another case investigated by the same
Investigating Agency, whether the statements recorded (in this
case the statements dated 03.08.2023, 04.08.2023, 11.08.2023)
for a new case in which his arrest is not yet shown, and which
are claimed to contain incriminating material against the maker,
would be admissible under Section 50?
XXXX XXXX XXXX
27. In the facts of the present case, we hold that the statement
of the appellant if to be considered as incriminating against the
maker, will be hit by Section 25 of the Evidence Act since he
has given the statement whilst in judicial custody, pursuant to
another proceeding instituted by the same Investigating
Agency. Taken as he was from the judicial custody to record the
statement, it will be a travesty of justice to render the statement
admissible against the appellant.”
(emphasis supplied)
103. In so far as the WhatsApp/Telegram Chats between the petitioner and
co-accused Adnan Nisar and Shivang Malkoti are concerned, case of the ED
is that the said chats are with pseudo or dummy names. Even assuming that
the said chats are between the petitioner/accused and other co-accused, at
this stage suffice it to say that such chats cannot establish a live link between
the petitioner/Vishal Moral and other co-accused in the absence of scientific
reports. Reference in this regard may be had to the judgment of Hon’ble
Supreme Court in Bharat Chaudhary vs. Union of India, (2021) 20 SCC
50, the relevant part of which reads as under:-
“13. …Reliance on printouts of WhatsApp messages
downloaded from the mobile phone and devices seized from
the office premises of A-4 cannot be treated at this stage as
sufficient material to establish a live link between him and A-1
to A-3, when even as per the prosecution, scientific reports in
respect of the said devices is still awaited.”
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104. The Hon’ble Supreme Court in Ambalal Sarabhai (supra) also
observed that the WhatsApp messages which are virtual verbal
communications are matters of evidence with regard to their meaning and its
contents to be proved during trial by evidence-in-chief and cross-
examination.
105. On behalf of the ED, it was also argued that incriminating material in
the form of MLA request has been corroborated from the seizure of exact
amount from Vishal Moral’s account maintained with WazirX. However, in
view of the prima facie opinion of this Court that there is a missing link to
establish that the seized amount from WazirX account of petitioner/Vishal
Moral are proceeds of crime from an offence committed in U.S. which
corresponds to the scheduled offence(s), merely seizure of amount pursuant
an MLA request is not sufficient for the petitioner/accused Vishal Moral to
assume the burden to convince the Court in terms of Section 45 of the Act
that there are reasonable grounds to believe that he is not guilty of an
offence under the Act.
ii) Petitioner/accused – Adnan Nisar and Shivang Malkoti
106. Insofar as the other two petitioners namely Adnan Nisar and Shivang
Malkoti are concerned, the incriminating material available against them is
in the form of statements under Section 50 of PMLA, which were
subsequently retracted by the said accused persons, as well as, the same
WhatsApp/Telegram chats which have been pressed into service by the ED
against co-accused/Vishal Moral.
107. Notably, petitioner/accused Adnan Nisar retracted his statement under
Section 50 of PMLA by filing an application on 16.08.2023. Though
petitioner/accused Shivang Malkoti in his statement under Section 50 of
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PMLA has stated that he was maintaining temporary Telegram account with
pseudo name of Raman Kohli and WhatsApp number in the name of Raman
Sharma but this statement has been subsequently retracted by the
petitioner/Shivang by filing an application that was taken on record by the
learned Special Court vide order dated 16.09.2023.
108. The proceedings under Section 50 of the PMLA may be judicial
proceedings for the limited purpose mentioned therein but a confession
made by an accused in his statement under Section 50 of the PMLA is not a
judicial confession.11 Even with regard to the retraction of judicial
confession, the Hon’ble Supreme Court in Bhagwan Singh & Ors. vs. State
of M.P., (2003) 3 SCC 21 has observed that when such a confession is found
to be not voluntary and more so when it is retracted, the conviction cannot
be based on such retracted judicial confession, in the absence of other
reliable evidence. Relevant para of the said judgment is as under:
“30. It has been held that there was custody of the accused
Pooran Singh with the police immediately preceding the making
of the confession and it is sufficient to stamp the confession as
involuntary and hence unreliable. A judicial confession not given
voluntarily is unreliable, more so when such a confession is
retracted. It is not safe to rely on such judicial confession or even
treat it as a corroborative piece of evidence in the case. When a
judicial confession is found to be not voluntary and more so
when it is retracted, in the absence of other reliable evidence, the
conviction cannot be based on such retracted judicial
confession.”
109. Likewise, in Puran vs. State of Punjab, (1952) 2 SCC 454, it was
observed that it is settled rule of evidence that unless a retracted confession
11
Judicial confessions are those which are made before Magistrate or Court in course of judicial
proceedings [Ramanand @ Nandlal Bharti vs. State of Uttar Pradesh, AIR 2022 SC 5273]
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is corroborated in material particulars, it is not prudent to base a conviction
in a criminal case on its strength alone.
110. In regard to the reliability of retracted statements, a Coordinate Bench
of this Court in Raman Bhuraria vs. Directorate of Enforcement, 2023
SCC OnLine Del 657, referring to the decision of the Division Bench of this
Court has observed that such retracted statements are though admissible, but
the reliability of such statements is questionable. This Court took a view that
the retracted statements cannot form basis for the guilt of the applicant in the
offence as alleged and the question as to why such statements have been
retracted are questions of trial. The relevant part of the said decision reads
thus:
“58. The reliability of the retracted statements has been
discussed by the Division Bench of this Court CCE v. Vishnu
& Co. (P) Ltd.:
“40. In fact Ms. Sharma too insisted upon reading from
such retracted statements in order to persuade the court
to hold that the impugned order of the Cestat is perverse.
According to her the retraction made more than 20
months after the making of the initial statements „would
have no effect in the eye of the law‟. She too submitted
that the responsibility of ensuring the presence of such
persons for cross-examination was of the noticees
themselves.
41. What the above submission overlooks is the
„reliability‟ of such statements. Once it is shown that
the maker of such statement has in fact resiled from it,
even if it is after a period of time, then it is no longer
safe to rely upon it as a substantive piece of evidence.
The question is not so much as to admissibility of such
statement as much as it is about its „reliability‟. It is the
latter requirement that warrants a judicial authority to
seek, as a rule of prudence, some corroboration of such
retracted statement by some other reliable independent
material. This is the approach adopted by the Cestat andSignature Not Verified
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the court finds it to be in consonance with the settled
legal position in this regard.”
59. In the present case as well, the question is not regarding
the admissibility but the reliability. The statements had
concretely named the applicant. However, in their subsequent
retraction the reliability of the statements themselves become
doubtful. Statements of employees of SBFL, accommodation
entry operators (Devki Nandan Garg and Ashok Kumar Goel)
are a cut copy paste job with even the punctation marks of
commas, full stops not differing.
60. Prima facie in view of the retraction, the reliability of
these statements is questionable. The retracted statements
cannot form the basis of the guilt of the applicant of the
offences as alleged. Prima facie, I find it difficult to place the
guilt of the offence under PMLA on the applicant, based on
these statements. Further, the questions as to why the
statements were retracted are questions of trial.”
(emphasis supplied)
111. Having regard to the above legal position, the reliability of the
retracted statements of the co-accused Adnan Nisar and Shivang Malkoti is
questionable and conviction cannot be based solely on the basis of such
statements without corroborative evidence that would lend credence to such
retracted statements.
112. For the reasons already stated above while dealing with the
incriminating material against accused/Vishal Moral, the
WhatsApp/Telegram Chats cannot be pressed into service against accused
Adnan Nisar and Shivang Malkoti as well.
113. That apart, it is not the case of ED that any recovery has been made
from accused Adnan Nisar and Shivang Malkoti, or they were engaged in
development of any malicious software, fake clicks of competitors, ad
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website, running advertisements on the websites/search engines, or trading
the wallet or accounts of victims. It is also not the case of the ED any
advertisement accounts have been recovered from Shivang Malkoti.
114. Further, since the statements of accused/Vishal Moral post his arrest
are inadmissible, therefore, the same cannot be relied upon against the co-
accused Adnan Nisar and Shivang Malkoti. The confessional statement of a
co-accused under Section 50 of the PMLA is otherwise, not a substantive
piece of evidence and can be used only for the purpose of corroboration in
support of other evidence to lend assurance to the Court in arriving at a
conclusion of guilt.12
115. Furthermore, even assuming that petitioner/Adnan Nisar is the person
who was chatting with accused/Vishal Moral, the said chats merely reveal
that it was the main accused Vishal Moral who asked the petitioner Adnan
Nisar to get in touch with some unknown persons and collect their crypto
currency IDs. No evidence has been brought to the notice of this Court that
petitioner/Adnan Nisar at any point of time knew of the identity of the
unknown persons/traders or their location, their business operations or any
agent/association of the traders. Thus, there is merit in the contention of Mr.
Mir that Adnan Nisar had no knowledge, whatsoever, about the length and
breadth of the business operations of accused/Vishal Moral. Likewise, no
evidence has been brought to the notice of Court to show that co-accused
Shivang Malkoti was having any knowledge as to the nature of activities
which accused/Vishal Moral was indulging into at the relevant time. The
WhatsApp/Telegram Chats on the basis of which knowledge of Vishal
Moral’s activities could be ascribed to co-accused/Shivang Malkoti are
12
Sanjay Jain (supra)
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under pseudo/dummy names. As already observed, such chats are to be
proved during trial and at this stage co-accused/Shivang Malkoti cannot be
tied to such chats. Besides, the first statement of Shivang Malkoti dated
05.05.2023 under Section 50 of the Act in which he was confronted with the
chats has already been retracted. Thus, prima facie it cannot be said that the
petitioner/Adnan Nisar or Shivang Malkoti were possessed of requisite mens
rea.
116. In any case, the role ascribed to co-accused Adnan Nisar and Shivang
Malkoti is subsidiary to that of main accused/Vishal Moral, therefore, all the
factors discussed in favour Vishal Moral in the scheme of broad probabilities
shall enure to their benefit as well.
DELAY IN TRIAL
117. Section 45 of the PMLA provides that no bail in relation to offence of
money-laundering is to be granted unless twin conditions are fulfilled,
namely, (i) there are reasonable grounds for believing that accused is not
guilty of offence of money-laundering and (ii) he is not likely to commit any
offence while on bail. In recent pronouncements, the Hon’ble Supreme
Court has laid down in no uncertain terms that even under PMLA the
governing principle is that “bail is the rule and jail is the exception”.
Reference in this regard may be had to the decision in Manish Sisodia
(supra) and Prem Prakash (supra). The relevant extract from Prem Prakash
(supra) can beneficially be referred to at this stage, which reads thus:
“11. …..
In Vijay Madanlal Choudhary v. Union of India, 2022 SCC
OnLine SC 929, this Court categorically held that while
Section 45 of PMLA restricts the right of the accused to grant
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Section 45 impose absolute restraint on the grant of bail. Para
131 is extracted hereinbelow:–
“131. It is important to note that the twin conditions
provided under Section 45 of the 2002 Act, though restrict
the right 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. …”
These observations are significant and if read in the context
of the recent pronouncement of this Court dated 09.08.2024
in Criminal Appeal No. 3295 of 2024 [Manish Sisodia
(II) v. Directorate of Enforcement], it will be amply clear
that even under PMLA the governing principle is that “Bail
is the Rule and Jail is the Exception”. In para 53 of [Manish
Sisodia (II), this Court observed as under:–
“53…..From our experience, we can say that it appears that
the trial courts and the High Courts attempt to play safe in
matters of grant of bail. The principle that bail is a rule and
refusal is an exception is, at times, followed in breach. On
account of non-grant of bail even in straight forward open
and shut cases, this Court is flooded with huge number of
bail petitions thereby adding to the huge pendency. It is
high time that the trial courts and the High Courts should
recognize the principle that “bail is rule and jail is
exception.”
All that Section 45 of PMLA mentions is that certain
conditions are to be satisfied. The principle that, “bail is the
rule and jail is the exception” is only a paraphrasing of
Article 21 of the Constitution of India, which states that no
person shall be deprived of his life or personal liberty except
according to the procedure established by law. Liberty of the
individual is always a Rule and deprivation is the exception.
Deprivation can only be by the procedure established by law,
which has to be a valid and reasonable procedure. Section 45
of PMLA by imposing twin conditions does not re-write this
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principle to mean that deprivation is the norm and liberty is
the exception. As set out earlier, all that is required is that in
cases where bail is subject to the satisfaction of twin
conditions, those conditions must be satisfied.”
(emphasis supplied)
118. It was observed by the Hon’ble Supreme Court in Prem Prakash
(supra) that Article 21 being a higher constitutional right, statutory
provisions must align themselves to the said higher constitutional edict.
119. Incidentally, in Manish Sisodia (supra), the Hon’ble Supreme Court
considering the custody period of 17 months of the appellant therein and the
likely delay to be expected in conclusion of trial and regard being had to the
voluminous documents and number of witnesses, observed that the appellant
therein cannot be kept behind bars for an unlimited time in the hope of
completion of speedy trial which would deprive the fundamental right to
liberty under Article 21 of the Constitution.
120. Reference may also be had to yet another decision of Hon’ble
Supreme Court in Ramkripal Meena (supra), wherein considering the
custody period of the petitioner being more than one year and there being no
likelihood of conclusion of trial within a short span, it was observed that
rigours of Section 45 of the Act can suitably be relaxed to afford conditional
liberty to the petitioner.
121. Coming back to the facts of the present case, it is an admitted position
that the petitioner/Vishal Moral is in custody since 26.04.2023, therefore, he
has been incarcerated for more than 16 months, whereas co-
accused/petitioners namely Adnan Nisar and Shivang Malkoti are in custody
since 09.05.2023 and have likewise spent more than 16 months in custody,
whereas the maximum sentence which can be awarded for the offence under
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the PMLA is 07 years in the event the petitioners are found guilty. The
documents to be proved in the present case also runs into 2500 pages and
there are various witnesses to be examined by the ED. However, the present
status of the proceedings is that the trial has not commenced, inasmuch as,
the charges have not yet been framed. On behalf of the petitioners, it is
submitted that further investigations are pending which position was not
disputed by the learned Special Counsel for the ED.
CONCLUSION
122. The upshot of the above discussion is that this Court is satisfied that
there are reasonable grounds for believing that the petitioners are not guilty
of the offence. Further, on a conspectus of the custody period, the delay in
commencement of trial and no likelihood of conclusion of trial anytime in
near future, the rigors of Section 45 of the Act deserve to be relaxed.
Ordered accordingly.
123. Further, all relevant documents and devices including laptops, mobile
phones, Ledger, Hardware Wallet, etc., have already been recovered and
seized. The alleged proceeds of crime held in the accounts maintained with
WazirX have also been frozen. Thus, all material documents are already in
possession of the investigating agencies and no further recovery is to be
made from the petitioners. It is also not the case of the ED that the
petitioners have a criminal record or any criminal case is pending against
them. Therefore, petitioners/accused are not likely to commit any offence
while on bail.
124. Thus, the petitioners have made out a case for grant of regular bail.
Accordingly, the petitioners are enlarged on bail subject to the following
conditions :
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a. Petitioner/Vishal Moral will furnish a Personal Bond in the sum
of Rs.2,00,000/- and one surety of the like amount to the
satisfaction of the learned Special Court/learned Trial
Court/CMM/Duty Magistrate;
b. Petitioner/Adnan Nisar will furnish a Personal Bond in the sum
of Rs.50,000/- and one surety of the like amount to the
satisfaction of the learned Special Court/learned Trial
Court/CMM/Duty Magistrate;
c. Petitioner/Shivang Malkoti will furnish a Personal Bond in the
sum of Rs.50,000/- and one surety of the like amount to the
satisfaction of the learned Special Court/learned Trial
Court/CMM/Duty Magistrate;
d. Petitioners shall not leave the country during the bail period
without prior permission of this Court.
e. Petitioners shall appear before the Court as and when the matter
is taken up for hearing.
f. Petitioners shall provide a mobile number to the I.O. concerned
which shall be kept in working condition at all times and they
shall not change the mobile number without prior intimation to
the Investigating Officer concerned.
g. Petitioners shall join the investigation as and when directed and
shall report once in a month to the I.O. concerned.
h. Petitioners shall not dispose of any property without the
specific permission of the Special Court.
i. Petitioners shall not indulge in any criminal activity and shall
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of the prosecution witnesses or tamper with the evidence of the
case.
j. In case the petitioners change their addresses, they will inform
the I.O. concerned and the Special Court also.
125. The petitions stand disposed of alongwith all pending applications.
126. It is clarified that the observations made hereinabove are only for the
limited purpose of deciding the present bail applications and the same shall
not be construed as an expression of opinion on the merits of the case.
127. Copy of the order be forwarded to the concerned Jail Superintendent
for necessary compliance and information.
128. Order dasti under signatures of the Court Master.
129. Order be uploaded on the website of this Court.
VIKAS MAHAJAN, J.
SEPTEMBER 17, 2024
dss/MK
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