India: White-Collar Crimes News Updates

DATE

DETAILS OF RECENT DEVELOPMENTS

CASES

17.01.2023

A report was published in newspapers and aired on TV channels regarding allegations of disproportionate assets against former Uttar Pradesh, Chief Minister Mulayam Singh Yadav and his family. While CBI was enquiring the matter, a news article was published titled "CBI may admit Mulayam was framed-DIG's internal note says agency had not verified in PIL". A complaint was filed for generating a fake and fabricated report to tarnish the reputation of CBI. The CBI filed a closure report due to inability in establishing as to who forged the documents in question as the journalists did not disclose their source and therefore there was lack of sufficient material to bring charges against any person.

The Court observed that a bare perusal of the untrace report shows that the CBI has not chosen to take the investigation to its logical conclusion as "Merely because the concerned journalists denied to reveal their respective sources, as stated in the final report, the investigating agency should not have put a halt to the entire investigation." The court added that there is no statutory exemption to journalists from disclosing their sources to investigating agencies, specially where such disclosure is necessary for aiding and assisting in investigation. Accordingly, the court directed that CBI would be at liberty to carry out further investigation and file a supplementary report.

CBI v. Closure Report

CBI No. 99/19

[Rouse Avenue District Court, New Delhi]

The accused was acquitted by the Trial Court in a complaint under Section 138 Negotiable Instruments Act, 1881 (NI Act) which was challenged before the Madras High Court, and the High Court reversed the acquittal order and convicted the accused.

The accused had examined the Income Tax officer, during trial, who had produced certified copies of the Income Tax Returns (ITR) of the complaint for the relevant financial year to show that the complainant had not declared that he had lent Rs. 3 lakhs to the accused and that the complainant did not have the financial capacity to lend the money as alleged. The Trial Court found that the ITR of the complainant did not disclose that he had indeed lent the amount to the accused and that the declared income was not sufficient to give out a loan of Rs. 3 lakhs. The Trial Court, therefore found it highly doubtful that the complainant had actually lent an amount of Rs. 3 lakhs to the accused.

The Hon'ble Supreme Court agreed with the view of the Trial Court and observed that the standard of proof for rebutting the presumption under Section 139 of the NI Act is that of "preponderance of probability" which the appellant satisfies that once the execution of cheque is admitted, Section 139 of NI Act mandates a presumption that the cheque was for the discharge of any debt or other liability. It has however been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities and that inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances on which they rely.

Rajaram S/O Sriramulu Naidu (Since Deceased) Through L.R.S. v. Maruthachalam (Since Deceased) Through L.R.S., Criminal Appeal No. 1978 of 2013

[Supreme Court of India]

24.01.2023

An FIR was registered under Sections 120B and 420 of the Indian Penal Code, 1860 (IPC) along with Sections 13(2) and 13(1)(d) of Prevention of Corruption Act, 1988 (POCA). The FIR alleged that Prakash Industries had actively misrepresented in its application for allocation of a coal block, certain disclosures with respect to net worth. However, the allocation of coal block came to be cancelled after the Supreme Court ruling in Manohar Lal Sharma v. The Principal Secretary & Ors. On the heels of the CBI FIR, ED lodged an ECIR on identical allegations and proceeded to record that on the commission of criminal offences, ED has reason to believe that proceeds of crime were generated. While investigation was underway, a complaint was lodged by ED and impugned PAO was passed on the allegations of manipulation of share prices and inducements made for the purposes of allotment of preferential shares. A petition was moved before the Delhi High Court by M/S Prakash Industries Limited challenging the PAO.

The Delhi High Court quashed the PAO and noted that neither the chargesheet filed by CBI nor the ECIR contained allegations relating to allotment of preferential shares and benefits derived therefrom. It also observed that the ED can only 'investigate' offence of money laundering and cannot 'assume' a predicate offence stands committed from the material gathered by it during investigation.

The Hon'ble Court referred to the Supreme Court judgement inVijay Mandanlal Choudhary v. Union of India, wherein it was held that authorities under Prevention of Money Laundering Act, 2002 (PMLA) cannot resort to action against a person for money laundering on an assumption that a scheduled offence has been committed. The court also observed that initiation of action under Section 5 of PMLA is premised on the competent authority having reason to believe that a person is in possession of proceeds of crime and that formation of such opinion is not related to the commission of a scheduled offence. The court opined that ED is not empowered to either try or examine whether an offence under any other statute stands committed nor it can pass a PAO on a mere assumption that an offence independently created under any other statute is established to have been committed.

M/s Prakash Industries Ltd. v. Union of India & Anr.

W.P. (C) 13361/2018

[Delhi High Court]

25.01.2023

An application was preferred by the Respondent for seeking information relating to money laundering business, hawala money transactions, smuggling and tax evasion from the Central Economic Intelligence Bureau (CEIB). The RTI applicant sought information about the status of his complaint and action taken on the same.

The Petitioner refused the said information on the ground that the same is exempted under Section 24(1) read with Schedule II of the Right to Information Act, 2005 (RTI Act) which was challenged by the Respondent before the CIC. The CIC held that RTI act is not applicable to the Petitioner however, the Petitioner was directed to inform the Respondent about the status of his complaint. Aggrieved by the order of the Central Information Commissioner (CIC) the Petitioner filed a writ petition before the Delhi High Court.

The Hon'ble Delhi High Court held that the information about money laundering, hawala transactions, acts of tax evasion and smuggling do not relate to corruption or human rights violations and therefore, intelligence and security organisations are not bound to provide such information under RTI Act. The court concluded that the CEIB is exempted under Section 24(1) read with Schedule II of the RTI Act and the direction to provide the outcome of the complaint is not sustainable and contrary to law.

CPIO, Central Economic Intelligence Bureau v. G.S. Srinivasan, W.P. (C) 10124/2021 and CM Appl. 31234/ 2021

[Delhi High Court]

31.01.2023

The appellants had challenged an order passed by the High Court in a Petition under Section 482 Cr.P.C. seeking quashing of a F.I.R. registered against them under Sections 323, 384, 406, 423, 467, 468, 420 and 120B of Indian Penal Code (IPC). The FIR was registered in furtherance of an application under Section 156(3) of Cr.P.C. filed by the complainant alleging therein fabrication/forgery of a trust deed and subsequent criminal conduct of the accused persons. The High Court had declined to exercise its jurisdiction under Section 482 of Cr.P.C. on the ground that on perusal of the case diary as also the materials on record, prima facie case for investigation was made out.

The High Court had noted that jurisdiction under Section 482 of Cr.P.C. was to be exercised with care and caution and sparingly. After going through the application under Section 156(3) of Cr.P.C the court found sufficient material on record for police to investigate.

The Supreme Court while setting aside the judgment of the High Court, held that criminal proceedings can be quashed in exercise of powers under Section 482 Cr.P.C. when it is found that the attempt was to give a "cloak of criminal offence" to a dispute which is essentially of civil nature. The Court quashed the criminal proceedings after noting that the application filed under Section 156(3) Cr.P.C did not satisfy the essential ingredients to attract the alleged offences and that the allegations were vague. The court based its findings on a fact which the High Court had failed to consider, that the existence of a pending civil dispute on the causative incident was not disclosed in the application, which was held by the Apex Court to be a material concealment.

Usha Chakraborty & Anr. v. State of WB

SLP (Crl.) No. 5866 of 2022

[Supreme Court of India]