Delhi HC Grants Bail to Dubai-based Businessman Ramesh Mangalani in PMLA Case Alleging Siphoning off Amount through Fake Invoices.

By way of the present petition under section 439 (of Income Tax Act, 1961) of the Code of

Criminal Procedure, 1973 („Cr.P.C.‟ for short) read with section 45 (of Income Tax Act, 1961) of

the Prevention of Money Laundering Act, 2002 („PMLA‟ for short),

the petitioner seeks regular bail in proceedings arising from ECIR No.

DLZO-II/35/2020/721 dated 24.09.2020 registered by the

Enforcement Directorate („ED‟ for short) under Sections 3 (of Income Tax Act, 1961) and 4 of

the PMLA.

2. The matter arises from FIR No. 1/2020 dated 01.01.2020 registered at

P.S. Economic Offences Wing („EOW‟ for short), in respect of the

predicate offences alleged under sections 409 (of Income Tax Act, 1961), 467, 468, 471, 477A

and 120B of the Indian Penal Code, 1860 („IPC‟ for short). The FIR

was registered on the complaint of one Mr. Vinod Rajagopalan in his

capacity as the Authorised Signatory of M/s. Malav Holdings Private

Limited („MHL‟ for short), alleging that the accused persons had

siphoned-off an amount of Rs.18.88 crores from one M/s. Ligare

Aviation Limited („Ligare Aviation‟ for short) in 2014-15 on the basis

of fake/fictitious invoices.

3. The complainant company is stated to be aggrieved since it is an

indirect shareholder in Ligare Aviation, in that the complainant

company statedly holds 50% shares in RHC Holding Pvt. Ltd., which

in turn holds a 30% stake in Ligare Aviation. Further, RHC Holding

Pvt. Ltd. also holds 67.27% in RHC Finance Pvt. Ltd., which in turn

holds the rest 70% in Ligare Aviation.

4. The petitioner, who is admittedly a resident of Dubai, arrived in India

on 02.04.2022, when he was intimated by the immigration authorities

about a look-out-circular issued against him. The petitioner was

summonsed by the ED on 05.04.2022 to join investigation. He joined

investigation on 07.04.2022. The petitioner was subsequently arrested

by the investigating agency on 03.08.2022 from his residence in

Mumbai.

5. The petitioner had previously filed a petition seeking bail before the

learned trial court, which came to be dismissed on 31.08.2022.

Thereafter, the petitioner filed a petition bearing Bail Application No.

2658/2022 before this court, which was withdrawn by the petitioner

vide order dated 13.10.2022 with liberty to file for the same relief

before the learned ASJ, Patiala House Courts, New Delhi since the

respondent had filed the prosecution complaint before that court on

01.10.2022. A second bail application filed before the learned ASJ

was also dismissed on 26.11.2022.

Brief Facts

6. A brief conspectus of the facts and allegations leading-up to the filing

of the present bail petition is as follows :

6.1. As per the FIR, the accused persons hatched a conspiracy “to

cheat the complainant company” by siphoning-off funds from

the bank accounts of Ligare Aviation, causing a loss to the tune

of Rs.18.88 crores to the complainant company.

6.2. The FIR was registered against 16 individuals and companies,

inter-alia against one Sanjay Godhwani (former Managing

Director of Ligare Aviation) and his close associate Sunil

Godhwani, and a company by name M/s. Phoenix International

FZC („Phoenix FZC‟ for short), with which company, the

petitioner is alleged to be connected.

6.3. The petitioner however, was not named as an accused in the

FIR.

6.4. Sections 467, 471 and 120B IPC mentioned in the FIR are

offences under Part-A of the Schedule to the PMLA; and

accordingly, ECIR bearing No. ECIR/DLZO-II/35/2020/721

was registered on 24.09.2020, which culminated in the filing of

prosecution complaint dated 01.10.2022.

6.5. The petitioner was also not named as an accused in the ECIR;

but stands accused in the prosecution complaint as Accused No.5.

6.6. The allegation against the petitioner in the present case is in

relation to his role in Phoenix FZC, which company was

incorporated on 08.04.2013 with three Directors and

Shareholders, viz. Rajesh Bhatia, Kunal Desai and

Sandeepkumar Vipinchandra Maniar having 25%, 50% and

25% equity shareholding respectively. The substratum of the

allegation is that the petitioner exercised ultimate control over

Phoenix FZC, in which company his wife, Darshana Manglani,

was appointed as the General Manager. It is further the

allegation that subsequently, Darshana Manglani became the

owner of Phoenix FZC, whereupon the company became M/s.

Phoenix International FZE („Phoenix FZE‟ for short).

6.7. Shorn of unnecessary detail, based on its investigation, the ED

has alleged the following against Phoenix FZC; and it is alleged

in the prosecution complaint that since the petitioner exercised

ultimate control over Phoenix FZC, he is implicated in the

offending transactions that are subject matter of the complaint:

“21.6 Phoenix International FZC: It is established that M/s

Phoenix International FZC had assisted and conduit for

laundering USD 1.3 million. It transferred USD 1.3 million to

Eximius Business Middle East FZC which ultimately vested with

Sanjay Godhwani and Sandeep Bhatt. It siphoned off money to the

tune of Rs.1.85 million USD which was derived out of the criminal

activities relating to scheduled offence and assisted in projecting it

as untainted on the strength of fictitious invoices knowingly fully

well that they neither had the capability nor did they supply such

product/services. Therefore, M/s Phoenix International is involved

in assisting and utilization of proceeds of crime generated out of

criminal activity and its projection as untainted property, thereby

has committed the offence of money laundering as defined under

Section 3 (of Income Tax Act, 1961) of the PMLA,2002 and the accused Phoenix

International is liable to be prosecuted and punished under

Section 4 (of Income Tax Act, 1961) read with Section 70 (of Income Tax Act, 1961) and attached property, if

any, involved in the money laundering are liable to be confiscated

in terms of Section 8(5) (of Income Tax Act, 1961) of the PMLA,2002.‖

(emphasis in original)

The Allegedly Offending Transactions

7. The allegations against the petitioner in the prosecution complaint are

founded on certain allegedly offending transactions, which may be

summarised as follows :

7.1. On 04.12.2014 an amount of USD 954,751.79 was received by

Phoenix FZC from one M/s. Metal and Steel Solutions FZC.

The money was received against an invoice bearing No.

PHX/001/2014-15 dated 03.12.2014 raised towards ―Supply of

Spares and Equipment for HS – 125‖ for the amount of USD

960,000.00.

7.2. On 24/25.12.2014, an amount of USD 599,995.00 was received

by Phoenix FZC from Ligare Aviation against an Invoice

bearing No. Phoenix/001/2014 dated 22.12.2014 towards ―slot

co-ordination and Easy II kit procurement for Falcon 7X Easy

2 Registration No. VT-RGX‖ for the amount of USD 600,000.00.

7.3. On 13.01.2015, an amount of USD 299,995.00 was received by

Phoenix FZC from one M/s. Eximius Business Aviation Pvt.

Ltd., against which no invoice has been recovered.

7.4. Subsequently, a sum of USD 1,300,000.00 was transferred by

Phoenix FZC to M/s. Eximius Business Middle East FZC in the

following three tranches:

i. On 11.01.2015, an amount of USD 300,000.00 was

transferred, against which no invoice has been recovered;

ii. On 14.01.2015, an amount of USD 500,000.00 was

transferred against an invoice dated 12.01.2015 for USD

500,000.00 towards Management Fees For Consultancy

Services Provided‖; and

iii. On 19.01.2015, USD 500,000.00 was transferred against

an invoice dated 14.01.2015 for USD 500,000.00 towards

Management Fees For Consultancy Services Provided‖

7.5. The allegedly offending transactions are summarised in a table

at page 84 of the prosecution complaint, which reads as

follows:

Role Ascribed to the Petitioner

8. The role ascribed to the petitioner in the prosecution complaint is

extracted below :

“21.1. Ramesh Manglani:

Investigation so far has established that the accused Ramesh

Manglani has complete control over Phoenix International FZC and

was handling all the financial transactions and banking

transactions as Power of Attorney. He was instrumental in

executing the fraudulent transactions by way of fake and false

invoices and submitting the same to banks.

Various transactions have taken place in the bank account of

Phoenix International FZC against services of repair and

maintenance and supply of materials/equipment/spares for any

aircraft which is not in line with the business activity of Phoenix

International FZC which he knowingly entered into despite being

completely aware that he was neither a vendor nor equipped and

entitled to carry such services. Thus, he actively assisted and

knowingly aided in being a partner in siphoning off money from

Ligare Group of companies.

He feigned ignorance of the transactions and deliberately tried to

cover the identity of the individuals involved and thus delayed the

investigation and concealed the nature of transactions carried out

by Sanjay Godhwani and his close associates.

Further, it has been established that Ramesh Manglani not only

received proceeds of crime generated by Sanjay Godhwani and his

close associates out of criminal activities into his company‘s bank

account but also allowed his company‘s bank accounts to be used

for money laundering activities by Sanjay Godhwani and his close

associates. Therefore, Ramesh Manglani has knowingly assisted in

acquisition, possession, concealment, use of Proceeds of Crime

and projected the proceeds of crime as untainted thereby, Ramesh

Manglani has committed the offence of money laundering under

section of PMLA, 2002 punishable under section 4 (of Income Tax Act, 1961) of the said

Act.‖

(emphasis supplied)

9. The court has heard Mr. Siddharth Aggarwal, learned senior counsel

appearing for the petitioner and Mr. Zoheb Hossain, learned counsel

for the ED at length.

Submissions on behalf of the Petitioner

10. The main thrust of the petitioner's submission is that the petitioner

exercised no control over the affairs of Phoenix FZC; and that he was

neither an employee, nor did he hold any key position in the

management of the company. Moreover, it is contended that the

petitioner had no knowledge as regards the nature of the transactions

and was only functioning as an „Authorised Signatory‟ to operate the

bank account of Phoenix FZC, and was acting on instructions

received from Sahil Mehta and Sohan Mehta, who were his family

friends.

11. To substantiate this submission, attention has been drawn to the

structure of Phoenix FZC, which was incorporated in the UAE on

08.04.2013 as a Free Zone Company (FZC) by Sahil Mehta and

Sohan Mehta, who are the owners of the Sovika Group along with

three de-jure directors and shareholders, viz. Rajesh Bhatia, Kunal

Desai and Sandeepkumar Vipinchandra Maniar, who (latter) are stated

to have had prior connection with Sahil Mehta/Sovika Group. It is

argued, that Sahil Mehta closely managed the affairs of Phoenix FZC.

12. It is further submitted that the petitioner‟s wife was appointed as the

General Manager of Phoenix FZC at the time of establishing the

company, since a „resident‟ of the UAE is required for purposes of

setting-up a company in that country. The petitioner was only

appointed as the Authorised Signatory for managing the banking

operations of Phoenix FZC as he was residing in the UAE. However,

it is argued that the petitioner was never involved in the affairs of

Phoenix FZC, other than executing banking transactions through its

bank account on instructions of the persons mentioned above.

13. It is also submitted that the petitioner‟s wife was not the owner of the

company - Phoenix FZC - at the time when the allegedly offending

transactions took place, and she only became the owner on

17.02.2015, whereupon the company became Phoenix FZE.

14. It is further pointed-out that it is not the ED‟s case that the petitioner was in possession of any „proceeds of crime‟. The offending

transactions took place between December 2014 and January 2015;

and the petitioner was only involved to the limited extent of executing

banking transactions through the company‟s bank account, acting as

its Authorised Signatory.

15. With respect to the first allegedly offending transaction whereby an

amount of USD 599,995.00 was paid by Ligare Aviation to Phoenix

FZC, which transaction was made on the basis of a statedly false

Invoice bearing No. Phoenix/001/2014 dated 22.12.2014, the

petitioner submits that the said invoice was never issued by the

petitioner but by Sahil Mehta.

16. In support of the above, attention is drawn to the petitioner‟s

statements dated 07.04.2022 and 19.05.2022 recorded by the ED

under section 50 (of Income Tax Act, 1961) of the PMLA, in which the petitioner has frankly

stated that the said invoice was false. It is submitted that in fact, the

ED only came to know that the invoice was bogus and false by reason

of statement dated 07.04.2022 made by the petitioner before the

investigating agency. Furthermore, attention is drawn to Sahil Mehta‟s

statement dated 28.06.2022, wherein he has clearly said that the

invoice in question was prepared by Sandeep Bhatt and Sanjay

Godhwani and the invoice was sent by him to the petitioner under

instructions of the aforementioned two persons. More importantly,

Sahil Mehta has also admitted that his signature, as appearing on the

invoice, was forged by Sanjay Godhwani or Sandeep Bhatt. It is thus

the submission, that evidently, the petitioner was not the person who

prepared the said bogus invoice; and that Sahil Mehta was the person

who was managing the transactions of Phoenix FZC.

17. Additionally, the petitioner buttresses the aforesaid submission by

placing on record orders dated 10.11.2022 and 14.11.2022 made by

the learned ASJ, wherein the court records that when it queried the

I.O. as to who signed the questioned invoices, the I.O. stated that ―he

does not know the name of who signed the invoices‖.

18. Apropos the second allegedly offending transaction stated to have

been carried-out on the basis of Invoice No. PHX/001/2014-15 dated

03.12.2014, pursuant to which the amount of USD 954,751.79 was

transferred from M/s. Metal and Steel Solutions FZC to Phoenix FZC,

it is submitted that this invoice was also issued on instructions of

Sahil Mehta and that the petitioner was not involved in issuing the

same.

19. In this regard, attention is drawn to e-mail dated 01.12.2014, by which

Sahil Mehta had asked one Iqlaque Khan to get M/s. Metal and Steel

Solutions FZC to transfer USD 300,000.00 to one M/s. Tumas Group

Finance Company Limited and USD 960,000.00 to Phoenix FZC on

an urgent basis. Attention is further drawn to statements dated

15.06.2022, 16.06.2022 and 13.09.2022 made by Sunil Mangelal

Aggarwal (who was a director of M/s. Metal and Steel Solutions

FZC), wherein he has unequivocally confirmed that he transferred the

sum of USD 960,000.00 to Phoenix FZC on instructions of Iqlaque

Khan and against an invoice received from him; which was the

invoice earlier received from Sahil Mehta. It is argued that this shows

that the petitioner had no role to play in the issuance of that invoice.

Moreover, it is submitted, that the said transaction was a local

transaction within the UAE, as both the entities involved are based in

Dubai. Also, it is contended that the transaction has no relevance to

the amounts received by Phoenix FZC from Ligare Aviation, since it

is between M/s. Metal and Steel Solutions and Phoenix FZC.

20. It is also pointed-out that in statement dated 12.09.2022 made by

Sanjay Godhwani, he categorically states that Sandeep Bhatt was the

person co-ordinating the transactions between Ligare Aviation, M/s.

Metal and Steel Solution FZC and Phoenix FZC.

21. The third allegedly offending transaction is the receipt of USD

300,000.00 by Phoenix FZC from M/s. Exemius Business Aviation

Ltd. and payment of USD 1,300,000.00 by Phoenix FZC in three

tranches of USD 300,000.00, USD 500,000.00 and USD 500,000.00

to M/s. Exemius Business Middle East FZC. It is submitted that all

these transactions were done by the petitioner on instructions of Sahil

Mehta. To support this submission, the petitioner has placed reliance

on e-mails dated 09.01.2015, 14.01.2015 and 16.01.2105 sent by

Sahil Mehta to the petitioner, from which it is seen that Sahil Mehta

had instructed the petitioner to carry-out the abovementioned outward

transactions.

22. Pertinently, is submitted that no invoice has been recovered for the

inward transaction of USD 300,000.00 from M/s. Eximius Business

Aviation Ltd.

23. It is also pointed-out that in reply to e-mail dated 09.01.2015 received

from Sahil Mehta, instructing the petitioner to transfer the sum of

USD 300,000.00, the petitioner had queried Sahil Mehta as to the

purpose of the transfer, to which query however, the petitioner did not

receive a response; and yet, the petitioner went ahead and made the

transaction in any case. The submission is that this clearly shows that

the petitioner was acting merely as an Authorised Signatory for

Phoenix FZC and had no personal interest, in or control over, the

transactions.

24. Furthermore, by e-mail dated 22.01.2015 sent by Sahil Mehta, he

asked the petitioner to send the bank account statement of Phoenix

FZC for the last 03 months, indicating the transactions made and

approximate balance available in the bank account, which again

shows that it was Sahil Mehta and not the petitioner who exercised

control over Phoenix FZC.

25. Attention is also drawn to statements dated 09.08.2022, 15.09.2022

and 21.09.2022 made by Sahil Mehta stating that the above

transactions were effectuated at the behest of Sandeep Bhatt and

Sanjay Godhwani who had sought to transfer the amounts first to a

local company in the UAE viz. Phoenix FZC; and once funds were

received by Phoenix FZC, he further instructed the petitioner to make

outward transfers; again upon instructions of the same persons viz.

Sandeep Bhatt and Sanjay Godhwani.

26. Senior counsel submits that even before the questioned transactions

were carried-out by the petitioner on instructions of other persons,

ever since the institution of Phoenix FZC, from November 2013 till

November 2014, regular instructions were issued to the petitioner

inter-alia by the erstwhile directors and by Sahil Mehta to make

transfers to various third parties on the basis of invoices shared by

them.

27. Importantly, it is pointed-out that as per statements dated 04.08.2022

and 21.09.2022 made by Sahil Mehta, he has clearly stated that he had

no knowledge as regards the real intentions and motives behind the

incriminating transactions; and therefore, knowledge of the true

nature of the transactions cannot possibly be imputed to the petitioner.

28. It is submitted that Sahil Mehta‟s statements dated 28.06.2022 and

27.06.2022 bear-out the fact that the co-accused persons did not even

know who the petitioner was, since in those statements Sahil Mehta

admits that the petitioner was never in contact with Ligare Aviation

and all communications were always facilitated through him i.e.

through Sahil Mehta.

29. It is urged that the petitioner did not issue any of the invoices, and the petitioner had neither any knowledge nor control over the inward

remittances, until the amounts were actually received.

30. To make good their submission that if mens rea is not established by

the prosecuting agency, the petitioner ought to be released on bail,

learned senior counsel has drawn the attention of this court to the para

388 of the seminal decision of the Supreme Court in Vijay Madanlal

Choudhary & Ors. vs. Union of India and Ors., which has been

extracted below.

31. Senior counsel has also placed reliance on the recent judgment of the

Supreme Court in Mohd. Muslim alias Hussain vs. State (NCT of

Delhi), to elaborate the role of the court at the time of considering a

bail petition when „twin-conditions‟ under a special statute apply. It is

argued that the court must not interpret the twin-conditions in a way

that would altogether exclude the option of granting bail. It is

submitted that this court is required to view the material on record in a

broad manner‖ and .reasonably see whether the accused‘s guilt

may be proved.‖

32. It is vehemently argued by senior counsel for the petitioner that other

similarly placed persons who were involved in similar transactions

have not even been made accused, and in any case have not been

arrested by the ED. For instance, the owner of M/s. Metal and Steel

Solutions, Sunil Mangelal Aggarwal, has not been made an accused

but has only been cited as a witness, though M/s. Metal and Steel

Solutions had received USD 1,300,000.00 from Ligare Aviation

against an invoice that has been found not to be genuine by the

investigating agency. Furthermore, Sunil Mangelal Aggarwal has

admitted in his statement that services mentioned in the invoice were

not provided and that he actually helped in discounting

LC/transferring money for a commission. Even Sahil Mehta, who was

the only point-of-contact between the petitioner and other accused

persons has not been named as an accused but has instead been cited

only as a witness.

33. On the conduct of the ED not arresting similarly placed persons, or

others involved with the offence, senior counsel has drawn the

attention of this court to the judgment of the Supreme Court in State

of Madhya Pradesh vs. Sheetla Sahai and Ors.to submit that the

investigating agency cannot arbitrarily choose persons against whom

it wishes to proceed. It is stated that such exercise of power amounts

to the investigating agency arrogating to itself the court‟s powers

under sections 306 (of Income Tax Act, 1961) and 307 CrPC. Attention has specifically been

drawn to the following observations in this judgment :

49. It is also interesting to notice that the prosecution had

proceeded against the officials in a pick-and-choose manner. We

may notice the following statements made in the counter-affidavit

which had not been denied or disputed to show that not only those

accused who were in office for a very short time but also those who

had retired long back before the file was moved for the purpose of

obtaining clearance for payment of additional amount from the

Government viz. M.N. Nadkarni who worked as Chief Engineer till

24-3-1987 and S.W. Mohogaonkar, Superintending Engineer who

worked till 19-6-1989 have been made accused but, on the other

hand, those who were one way or the other connected with the

decision viz. Shri J.R. Malhotra and Mr R.D. Nanhoria have not

been proceeded at all. We fail to understand on what basis such a

discrimination was made.

50. In Soma Chakravarty [(2007) 5 SCC 403 : (2007) 2 SCC (Cri)

514], whereupon strong reliance has been placed by Mr Tulsi, this

Court opined: (SCC p. 411, para 23)

23. In a case of this nature, the learned Special Judge also

should have considered the question having regard to the

doctrine of parity‘ in mind. An accused similarly situated

has not been proceeded against only because, the

departmental proceedings ended in his favour. Whether an

accused before him although stands on a similar footing

despite he having not been departmentally proceeded against

or had not been completely exonerated also required to be

considered. If exoneration in a departmental proceeding is

the basis for not framing a charge against an accused person

who is said to be similarly situated, the question which

requires a further consideration was as to whether the

applicant before it was similarly situated or not and/or

whether the exonerated officer in the departmental

proceeding also faced same charges including the charge of

being a party to the larger conspiracy.‖

(emphasis supplied)

34. Senior counsel has also relied upon the judgments of Co-ordinate

Benches of this court in Dr. Bindu Rana vs. Serious Fraud

Investigation Office and Chandra Prakash Khandelwal vs.

Directorate of Enforcement to point-out that the non-arrest of

similarly placed co-accused persons has weighed with the court which

granted bail to the petitioner in those cases.

Submissions on behalf of the ED

35. Opposing grant of bail, Mr. Zoheb Hossain, learned counsel appearing

for the respondent/Enforcement Directorate argues, first and foremost,

that the present petition, being one that arises from scheduled offences

under the PMLA, is required to be considered by this court strictly in

terms of the twin-conditions contained in section 45 (of Income Tax Act, 1961) of that statute.

Attention in this behalf is drawn to judgments of the Supreme Court

in Vijay Madanlal (supra), The Directorate of Enforcement vs. M

Gopal Reddy and Anr., Union of India vs. Varinder Singh alias

Raja and Anr., Union of India vs. Rattan Mallik, as also judgments

of this Court in Bimal Kumar Jain and Anr. vs. Directorate of

Enforcement, Gautam Thapar vs. Directorate of Enforcement,

Christian Michel James vs. Directorate of Enforcement, Sajjan

Kumar vs. Directorate of Enforcement12 and Raj Singh Gehlot vs.

Directorate of Enforcement.

36. In particular, Mr. Hossain relies on Vijay Madanlal14 (supra) to argue

that the scope of section 3 (of Income Tax Act, 1961) of the PMLA is wide and far-reaching such

that every process and activity in dealing with the proceeds of

crime, directly or indirectly, and not limited to the happening of the

final act of integration of tainted property in formal economy

would constitute the act of money laundering. It is thus submitted that

there are reasonable grounds to believe that the petitioner is guilty of

the offence under section 3 (of Income Tax Act, 1961) for the reasons stated hereunder.

37. It is argued that though Phoenix FZC was incorporated in the UAE

with Rajesh Bhatia, Kunal Desai and Sandeepkumar Vipinchandra

Maniar as its Directors and Shareholders, the petitioner was given the

mandate to run banking operations of Phoenix FZC; and his wife,

Darshana Manglani, was the General Manager of the company. It is

submitted that thereby, the petitioner exercised ultimate control over

the company Phoenix FZC and is a „beneficial owner‟ in terms of

Section 2(fa) (of Income Tax Act, 1961) of the PMLA.

38. The ED submits that the offending transaction of USD 600,000.00

took place on the basis of a fake invoice dated 22.12.2014 raised by

Phoenix FZC allegedly for aircraft maintenance services but

investigation has revealed that there existed no formal agreement

between Ligare Aviation and Phoenix FZC for providing any services

for which the invoice was raised. In fact, it is pointed-out that Ligare

Aviation already had an agreement in place with one Dassault

Aviation for all scheduled and unscheduled maintenance relating to

the aircraft.

39. Furthermore, as per the log-book maintained for this aircraft, there is

no reference to Phoenix FZC having provided any services for its

repair and maintenance. Moreover, even Ligare Aviation‟s software,

Flypal, wherein the company would keep track of all their invoices

had no record of any invoice having been raised by Phoenix FZC

upon Ligare Aviation. It is thus submitted that no services or goods

were supplied by Phoenix FZC to Ligare Aviation against Invoice

dated 22.12.2014 for USD 600,000.00.

40. Similarly, the ED argues that no services or goods were supplied by

Phoenix FZC to M/s. Metal & Steel Solution FZC against Invoice No.

Phoenix/001/2014-15 dated 03.12.2014 for USD 960,000.00.

41. It is further alleged that there exists no invoice and no goods or

services were provided by Phoenix FZC against the payment of USD

299,995.00 made to it by M/s. Eximius Business Aviation Ltd.

Moreover, Phoenix FZC has made payments of USD 1,300,000.00 to

Eximius Business Middle East FZC against two invoices of USD

500,000.00 each, while no invoice has been issued for the transaction

of USD 300,000.00. It is argued that these transactions have been

carried-out by the petitioner, as is evident from the e-mails exchanged

between the petitioner and other third parties. These amounts have

been routed from Ligare Aviation to M/s. Eximius Business Middle

East FZC (incorporated by Sanjay Godhwani and Sandeep Bhatt) via

M/s. Phoenix FZC; and the petitioner‟s role in effectuating these

transactions falls within the wide definition of the offence of money

laundering under section 3 (of Income Tax Act, 1961) of the PMLA.

42. In fact, the ED argues, that Sahil Mehta was a mere messenger looped

in to relay information from Sanjay Godhwani and Sandeep Bhatt to

the petitioner.

43. It is the ED‟s submission that since the petitioner was given the

mandate to manage the bank account of Phoenix FZC, he was

involved in the day-to-day operations of the company, and was aware

that money was being transferred to third parties (companies) for the

benefit of co-accused Sanjay Godhwani and Sandeep Bhatt.

44. Furthermore, counsel argues that to test whether the accused was

possessed of the requisite mens rea for commission of the offence

under section 3 (of Income Tax Act, 1961) of the PMLA, the court may consider the following

bundle of facts of the present case, which establish mens rea:

44.1. The petitioner is not an employee of Phoenix FZC. There exists

no Board Resolution appointing him as an Authorized

Signatory of Phoenix FZC or to authorize the payments made

from, or received by him, into the bank account that company;

44.2. Since the inception of Phoenix FZC on 08.04.2013, Darshana

Manglani has been the „Person-in-Charge‟ of the company

being its „General Manager‟;

44.3. The petitioner‟s close involvement with Phoenix FZC is

evident from the fact that on 19.12.2014 he was made the

power of attorney holder on behalf of the three directors to

transfer shares in Phoenix FZC to his wife, Darshana Manglani.

Counsel has drawn attention to a letter dated 02.09.2013 issued

by the three erstwhile directors of the company to Fujairah Free

Zone Authority in this behalf;

44.4. It is evident from the e-mail exchanges between the petitioner

and Sahil Mehta that he was not a mere „Yes-Man‟ to Sahil

Mehta but was in fact in the know of the nature of the

transactions that he was being instructed to make. For instance,

in relation to an e-mail dated 09.04.2022 sent by Sahil Mehta

instructing him to transfer money, the petitioner enquired about

the purpose of the said transaction.

44.5. In any case, the ED argues, the fact that the petitioner was

taking instructions from Sahil Mehta, who is an alien to the

company, is in itself an inexplicable circumstance which

indicates that the petitioner ought to have known of the nature

of transactions.

44.6. It is also submitted that the petitioner‟s role in Phoenix FZC is

also evident from his statement dated 19.05.2023 made under

section 50 (of Income Tax Act, 1961) of the PMLA, wherein he accepts that he helped his

wife, Darshana Manglani in “...Opening a company in the

name of Phoenix International FZC in which she was 100%

shareholder...‖. Attention in this behalf is also drawn to the

statement dated 07.04.2022 made by Darshana Manglani, who

has also made a statement to the same effect.

45. Insofar as the question of why other persons have either not been

made accused or have not been arrested, it is submitted that it is the

„right‟ of the prosecution to decide who it prosecutes. It can decline to

array a person as accused and instead examine them as a witness for

the prosecution. The considerations to make a person an accused are

at the discretion of the investigating agency; and the non-arrest or

non-prosecution of others cannot form the basis for grant of regular

bail to an arrested accused.

46. In this behalf, counsel also argues that clause (ii) of the Explanation to section 44 (of Income Tax Act, 1961) of the PMLA is a provision enabling further investigation

against any accused, whether named in the complaint or not. The

investigating agency relies on Vijay Madanlal 15 (supra) and Tahir

Hussain vs. Assistant Directorate of Enforcement16 to submit that a

„complaint‟ is deemed to include any subsequent „complaint‟ in

respect of which further investigation may be conducted. It is thus

argued, that it is the prerogative of the investigating agency to file an

additional complaint against any person who may not have been made

an „accused‟in the „complaint‟ previously filed.

47. The ED also seeks to draw attention to the petitioner‟s conduct,

alleging that the petitioner has attempted to mislead and derail the

investigation firstly, by not cooperating and making false medical

excuses so as not to be available for investigation; secondly, by

feigning ignorance as regards Phoenix FZC and its affairs; and thirdly,

by asking his son to delete e-mails concerning transactions with

Phoenix FZC from his e-mail ID ramesh1994@yahoo.com and

forwarding the same to another e-mail ID mainjhukekanahi@gmail.com. It is submitted that this shows the petitioner‟s guilty mind and also that the petitioner is likely to tamper with the evidence if granted bail.

Rejoinder Submissions on behalf of the Petitioner

48. In rejoinder to the submissions, the petitioner has offered the

following responses :

48.1. As regards the allegation that the petitioner was taking

instructions from Sahil Mehta who was an „alien‟ to Phoenix

FZC, the petitioner submits that this is factually incorrect and

misleading. The petitioner has placed on record several e-mails

exchanged in relation to the allegedly offending transactions to

show that the de jure owners of the company were involved in

the transactions; and moreover, there are several e-mails even

in the „relied upon documents‟ on which at least one of the de

jure owners was marked/copied.

48.2. It is contended that the petitioner cannot be termed as the

„beneficial owner‟ under the PMLA, since all documents and

correspondence only show that the petitioner was simply taking

instructions in relation to operating the bank account of the

company; and at no point was the petitioner involved in

running the affairs of the company. Additionally, it is submitted

that the ED‟s argument that the petitioner is the „beneficial

owner‟ but at the same time was taking instructions from an

„alien‟ to the company, are mutually contradictory. If the

petitioner were to be the beneficial owner, then he would not

have been receiving instructions from someone outside the

company.

48.3. On the submission that Phoenix FZC was only a conduit for

money laundering, it is submitted that this submission is false

and that the company regularly carried-out several other

business activities as is evident from the various documents,

including company correspondence, which show that business

activities were being carried-on by Phoenix FZC with several

third parties including Nexus India, Nexus Saudi, RAK Airport,

Casamia UAE, Jet Aviation Dubai LLC etc.

49. To show the lack of mens rea, it is reiterated that the petitioner did not knowingly‟ assist in any activity connected with the alleged proceeds

of crime. It is argued that the investigating agency has failed to show

any correspondence to establish that the co-accused persons even

knew the petitioner. It is pointed-out that admittedly, the petitioner

was not in direct contact with any of the co-accused and the

instructions were issued only through Sahil Mehta. Moreover, it is

submitted that the petitioner had no obligation to verify whether any

services were extended by the company in consideration of the

payments being received. Such obligation is not imposed by any law

and the petitioner was only processing payments as directed.

Discussion and Conclusions

50. In the prosecution complaint, the allegation against the petitioner is

under section 3 (of Income Tax Act, 1961) of the PMLA, which provision is reproduced below

for ease of reference:

3. Offence of money-laundering.—Whosoever directly or indirectly

attempts to indulge or knowingly assists or knowingly is a party or

is actually involved in any process or activity connected with

the proceeds of crime including its concealment, possession,

acquisition or use and projecting or claiming it as untainted

property shall be guilty of offence of money-laundering.

Explanation.—For the removal of doubts, it is hereby clarified

that,—

(i) a person shall be guilty of offence of money-laundering if such person

is found to have directly or indirectly attempted to indulge or knowingly

assisted or knowingly is a party or is actually involved in one or more of

the following processes or activities connected with proceeds of crime,

namely—

(a) concealment; or

(b) possession; or

(c) acquisition; or

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property,in any manner whatsoever;

(ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.

51. It cannot be gainsaid that the offence comprised in section 3 (of Income Tax Act, 1961) of the

PMLA is a grave and serious economic offence, and has been couched

in the widest of terms. However, before proceeding to consider the

rival submissions of the parties, it is necessary to briefly set-out the

position of law as enunciated by the Supreme Court as regards the

considerations that must inform the grant or denial of bail in matters

under the PMLA. The principles have been succinctly captured in the

below-noted three decisions of the Supreme Court relating to PMLA

and analogously worded statutory provisions, the relevant portions

whereof have been extracted :

51.1. Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra

and Anr.

44. The wording of Section 21(4) (of Income Tax Act, 1961), in our opinion, does not

lead to the conclusion that the court must arrive at a positive

finding that the applicant for bail has not committed an

offence under the Act. If such a construction is placed, the

court intending to grant bail must arrive at a finding that the

applicant has not committed such an offence. In such an

event, it will be impossible for the prosecution to obtain a

judgment of conviction of the applicant. Such cannot be the

intention of the legislature. Section 21(4) (of Income Tax Act, 1961) of MCOCA,

therefore, must be construed reasonably. It must be so

construed that the court is able to maintain a delicate

balance between a judgment of acquittal and conviction and

an order granting bail much before commencement of trial.

Similarly, the court will be required to record a finding as to

the possibility of his committing a crime after grant of bail.

However, such an offence in futuro must be an offence under

the Act and not any other offence. Since it is difficult to

predict the future conduct of an accused, the court must

necessarily consider this aspect of the matter having regard

to the antecedents of the accused, his propensities and the

nature and manner in which he is alleged to have committed

the offence.

45. It is, furthermore, trite that for the purpose of

considering an application for grant of bail, although

detailed reasons are not necessary to be assigned, the order

granting bail must demonstrate application of mind at least

in serious cases as to why the applicant has been granted or

denied the privilege of bail.

46. The duty of the court at this stage is not to weigh the

evidence meticulously but to arrive at a finding on the basis

of broad probabilities. However, while dealing with a

special statute like MCOCA having regard to the provisions

contained in sub-section (4) of Section 21 (of Income Tax Act, 1961), the

court may have to probe into the matter deeper so as to

enable it to arrive at a finding that the materials collected

against the accused during the investigation may not justify

a judgment of conviction. The findings recorded by the

court while granting or refusing bail undoubtedly would be

tentative in nature, which may not have any bearing on the

merit of the case and the trial court would, thus, be free to

decide the case on the basis of evidence adduced at the

trial, without in any manner being prejudiced thereby.‖

(emphasis supplied)

51.2. Vijay Madanlal Choudhary and Ors. vs. Union of India and

Ors.

388. Notably, there are several other legislations where

such twin conditions have been provided for. Such twin

conditions in the concerned provisions have been tested from

time to time and have stood the challenge of the

constitutional validity thereof. The successive decisions of

this Court dealing with analogous provision have stated that

the Court at the stage of considering the application for

grant of bail, is expected to consider the question from the

angle as to whether the accused was possessed of the

requisite mens rea. The Court is not required to record a

positive finding that the accused had not committed an

offence under the Act. The Court ought to maintain a

delicate balance between a judgment of acquittal and

conviction and an order granting bail much before

commencement of trial. The duty of the Court at this stage

is not to weigh the evidence meticulously but to arrive at a

finding on the basis of broad probabilities. Further, the

Court is required to record a finding as to the possibility of

the accused committing a crime which is an offence under

the Act after grant of bail.

401. We are in agreement with the observation made by the

Court in Ranjitsing Brahmajeetsing Sharma. The Court

while dealing with the application for grant of bail need

not delve deep into the merits of the case and only a view of

the Court based on available material on record is

required. The Court will not weigh the evidence to find the

guilt of the accused which is, of course, the work of Trial

Court. The Court is only required to place its view based on

probability on the basis of reasonable material collected

during investigation and the said view will not be taken

into consideration by the Trial Court in recording its

finding of the guilt or acquittal during trial which is based

on the evidence adduced during the trial. As explained by

this Court in Nimmagadda Prasad, the words used in

Section 45 of the 2002 Act are ―reasonable grounds for

believing‖ which means the Court has to see only if there is

a genuine case against the accused and the prosecution is

not required to prove the charge beyond reasonable doubt.‖

(emphasis supplied)

51.3. Mohd. Muslim alias Hussain vs. State (NCT of Delhi)19

19. The conditions which courts have to be cognizant of are

that there are reasonable grounds for believing that the

accused is ―not guilty of such offence‖ and that he is not

likely to commit any offence while on bail. What is meant by

“not guilty” when all the evidence is not before the court ?

It can only be a prima facie determination. That places the

court's discretion within a very narrow margin. Given the

mandate of the general law on bails (Sections 436, 437 and

439, CrPC) which classify offences based on their gravity,

and instruct that certain serious crimes have to be dealt with

differently while considering bail applications, the

additional condition that the court should be satisfied that

the accused (who is in law presumed to be innocent) is not

guilty, has to be interpreted reasonably. Further the

classification of offences under Special Acts (NDPS Act,

etc.), which apply over and above the ordinary bail

conditions required to be assessed by courts, require that the

court records its satisfaction that the accused might not be

guilty of the offence and that upon release, they are not

likely to commit any offence. These two conditions have the

effect of overshadowing other conditions. In cases where

bail is sought, the court assesses the material on record such

as the nature of the offence, likelihood of the accused co-

operating with the investigation, not fleeing from justice :

even in serious offences like murder, kidnapping, rape, etc.

On the other hand, the court in these cases under such

special Acts, have to address itself principally on two facts:

likely guilt of the accused and the likelihood of them not

committing any offence upon release. This court has

generally upheld such conditions on the ground that liberty

of such citizens have to - in cases when accused of offences

enacted under special laws - be balanced against the public

interest.

20. A plain and literal interpretation of the conditions

under Section 37 (of Income Tax Act, 1961) (i.e., that Court should be satisfied that

the accused is not guilty and would not commit any

offence) would effectively exclude grant of bail altogether,

resulting in punitive detention and unsanctioned preventive

detention as well. Therefore, the only manner in which such

special conditions as enacted under Section 37 (of Income Tax Act, 1961) can be

considered within constitutional parameters is where the

court is reasonably satisfied on a prima facie look at the

material on record (whenever the bail application is made)

that the accused is not guilty. Any other interpretation,

would result in complete denial of the bail to a person

accused of offences such as those enacted under Section 37 (of Income Tax Act, 1961)

of the NDPS Act.

21. The standard to be considered therefore, is one, where

the court would look at the material in a broad manner,

and reasonably see whether the accused's guilt may be

proved. The judgments of this court have, therefore,

emphasized that the satisfaction which courts are expected

to record, i.e., that the accused may not be guilty, is only

prima facie, based on a reasonable reading, which does not

call for meticulous examination of the materials collected

during investigation (as held in Union of India v. Rattan

Malik). Grant of bail on ground of undue delay in trial,

cannot be said to be fettered by Section 37 (of Income Tax Act, 1961), given

the imperative of Section 436A (of Income Tax Act, 1961) which is applicable to

offences under the NDPS Act too (ref. Satender Kumar Antil

supra). Having regard to these factors the court is of the

opinion that in the facts of this case, the appellant deserves

to be enlarged on bail.

22. Before parting, it would be important to reflect that

laws which impose stringent conditions for grant of bail,

may be necessary in public interest; yet, if trials are not

concluded in time, the injustice wrecked on the individual is

immeasurable. Jails are overcrowded and their living

conditions, more often than not, appalling. According to the

Union Home Ministry's response to Parliament, the National

Crime Records Bureau had recorded that as on 31st

December 2021, over 5,54,034 prisoners were lodged in

jails against total capacity of 4,25,069 lakhs in the country.

Of these 122,852 were convicts; the rest 4,27,165 were

undertrials.‖

(emphasis supplied)

52. Furthermore, in its recent decision in Ashish Mittal vs. Serious Fraud

Investigation Office , in the context of section 212(6) (of Income Tax Act, 1961) of the

Companies Act, 2013 which contains a provision in pari materia to

section 45(1)(i) (of Income Tax Act, 1961) and (ii) of the PMLA, this court has held as under :

28. The above enunciation of the law clearly mandates that where

additional conditions are stipulated in a statute for grant of bail

relating to specified offences, it cannot be that the prosecution need

only recite from its complaint, or simply say that it has material

against the accused in respect of such offences. The prosecution

must show how the material collected during investigation supports

the allegations in the complaint, and most importantly, how the

allegations apply against the accused. To reiterate, the opposition

by the public prosecutor must be reasoned opposition, supported by

valid and relevant reasons. When the public prosecutor opposes a

bail plea, he would have to establish foundational facts sufficiently

to dislodge the presumption of innocence, and it is only then that the

onus of satisfying the stringent twin-conditions would shift onto the

accused. To be clear, there is no statutory mandate for the court to

depart from the presumption of innocence.

33. It is also important to articulate here, that though the general

principle is that parity with co-accused alone is not a ground to

claim bail as a matter of right; however, that principle is nuanced.

The nature of an offence may be such, that the fact that other

accused have been granted bail, may persuade the court to exercise

its discretion in favour of another co-accused in granting bail.‖

(emphasis supplied)

53. Upon a conspectus of the foregoing decisions, the principles for

application of the twin conditions for grant or denial of bail under

PMLA may be distilled and crystallised as under :

i. That while deciding a bail plea under the PMLA, the court need

not delve deep into the merits21 of the allegations or minutely

consider or assess the evidence collected by the investigating

agency;

ii. That the court is only to satisfy itself, on a prima-facie view of

the matter, based on broad probabilities22 discernible from the

material collected during investigation, whether or not there are

reasonable grounds for believing that the accused is not guilty

of the offence alleged. In doing so, the court would also

consider, in a similar manner, whether the accused was

possessed of the requisite mens rea in relation to the offence

alleged. The effort has to be to assess, again on a prima-facie

basis, if there is a genuine case against the accused

iii. That the court is also similarly to satisfy itself, whether or not

the accused is likely to commit any offence under the PMLA

while on bail; and since it is difficult to predict the future

conduct of an accused, the court must necessarily consider this

aspect of the matter having regard to the antecedents of the

accused, his propensities and the nature and manner in which

he is alleged to have committed the offence;

iv. That the court is not required to return a positive finding26 that

the accused has not committed an offence; and must therefore

maintain a delicate balance27 i.e. a clear distance between a

judgment of acquittal or conviction and an order granting or

denying bail; and

v. That since the assessment at the stage of granting or denying

bail would be tentative in nature, such assessment may not have

any bearing on the merits of the case; and the trial court

would be free to decide the case on the basis of evidence

adduced during trial, without in any manner being influenced

by the decision of the court granting or denying bail.

54. Needless to add, that the twin-conditions under section 45(1) (of Income Tax Act, 1961) of the

PMLA are to be applied in addition to the usual and ordinary

principles required to be considered for grant or denial of bail29

. These may very riefly be summarised in the words of the Supreme Court in

P. Chidambaram vs. CBI3:

21. The jurisdiction to grant bail has to be exercised on the basis

of the well-settled principles having regard to the facts and

circumstances of each case. The following factors are to be taken

into consideration while considering an application for bail:

(i) the nature of accusation and the severity of the punishment in

the case of conviction and the nature of the materials relied

upon by the prosecution;

(ii) reasonable apprehension of tampering with the witnesses or

apprehension of threat to the complainant or the witnesses;

(iii) reasonable possibility of securing the presence of the

accused at the time of trial or the likelihood of his abscondence;

(iv) character, behaviour and standing of the accused and the

circumstances which are peculiar to the accused;

(v) larger interest of the public or the State and similar other

considerations.

55. Upon a conspectus of the submissions made and based on the material

on record, prima-facie the following inferences may be drawn on

broad probabilities :

55.1. The allegedly offending transactions have been made through a

corporate entity called Phoenix FZC, which was in the business

of providing aviation related services. From 08.04.2013 to

17.02.2015 Phoenix FZC had three directors and shareholders,

viz. Rajesh Bhatia, Kunal Desai and Sandeepkumar Vipinchandra Maniar. The petitioner was neither a director nor a shareholder in the company. In fact, from the record it appears that the three shareholders of Phoenix FZC were employees of Sahil Mehta or were otherwise associated with him. As such,

Sahil Mehta was not an „alien‟to Phoenix FZC.

55.2. The petitioner was a resident of Dubai, UAE; and, it is common

ground, that the petitioner was appointed as the Authorised

Signatory to operate the bank account of Phoenix FZC. No

document evidencing his appointment as such is on record.

However, neither the petitioner nor the ED dispute that he was

so appointed.

55.3. On or about 17.02.2015, the three directors/shareholders of

Phoenix FZC resigned from their positions and transferred their

shares in the company to the petitioner‟s wife, Darshana

Manglani, who became the owner of the company, which now

came to be known as Phoenix International FZE. To effectuate

the transfer of shareholding of Phoenix FZC to Darshana

Manglani, the petitioner was appointed as a power of attorney

holder vide Power of Attorney dated 19.12.2014 by the three

directors. After the company changed from Phoenix

International FZC to Phoenix International FZE and Darshana

Manglani became its owner, no offending transaction has been

alleged.

55.4. The allegedly offending transactions were all conducted during

the period when the three aforementioned persons were

directors/shareholders of Phoenix FZC. Of these transactions,

03 were inward remittances, and there were 03 outward

remittances to the same company. These transactions are

summarised in a table appearing at page 84 of the prosecution

complaint, as extracted hereinbefore.

55.5. As is seen from the table, the 03 inward remittances happened

on 04.12.2014, 24.12.2014 and 13.01.2015. Since for an inward

remittance, no action is required on the part of the

beneficiary/recipient company, the petitioner had no role to play

in such transactions, even though he was the Authorised

Signatory for the bank account of the company at that time. It is

noteworthy that at the stage the inward remittances were

received into Phoenix FZC, the petitioner was neither

director/shareholder nor did he have any financial interest in the

affairs of the company. Same was the position at the time when

outward remittances were made from the company.

55.6. It is seen from the record that the petitioner was not involved in

issuance of the invoice against which the inward remittance of

USD 599,995.00 was received by Phoenix FZC, since when

shown invoice dated 22.12.2014, in his statement dated

28.07.2022 Sahil Mehta categorically states that “...it is a copy

of my signature and which has been signed by either Sanjay

Godhwani or Sandeep Bhat.‖ It is clear therefore that it was not

the petitioner who had signed the invoice. Furthermore, in his

statement dated 21.09.2022, Sahil Mehta also states that the

above transaction was facilitated on instructions from Sanjay

Godhwani and Sandeep Bhatt.

55.7. As regards the transaction of USD 954,751.79, as can be seen

from e-mail dated 01.12.2014 sent by Sahil Mehta to Iqlaque

Khan, the former issued the direction to effectuate the transfer.

Furthermore, the invoice for USD 960,000.00 can be traced

back to one Mahesh Bisht (of Sovika Group) who had shared it

with Iqlaque Khan. These communications go to show that the

petitioner was nowhere involved in the issuance of these

invoices and can in no way be made accountable for the

remittances received pursuant thereto in the bank account of

Phoenix FZC.

55.8. Furthermore, as has been pointed-out, the learned ASJ recorded

in order dated 14.11.2022 that when he questioned the I.O. as to

whose signatures appeared on invoice dated 03.12.2014 (for

USD 960,000.00) and invoice dated 22.12.2014 (for USD

600,000.00), the I.O. responded to say that he was unaware as

to who had signed the invoices.

55.9. As regards the third inward remittance, admittedly, no invoice

has been recovered; and therefore, the said transaction cannot

be traced back to the petitioner at least at this stage.

55.10. It is only in relation to the 01 set of transactions involving

outward remittance of money from Phoenix FZC, that the

petitioner was required to „conduct‟ the transaction as

Authorised Signatory for the bank account of the company. The

outward remittances were made on 11.01.2015, 14.01.2015 and

19.01.2015. In this behalf, instructions were received by the

petitioner from Sahil Mehta by e-mail instructing the petitioner

to conduct a specific remittance. E-mails dated 09.01.2015,

14.01.2015 and 16.01.2015 for the three remittances

respectively, are cited in evidence thereof. It is seen that each of

these e-mails was sent to the petitioner from the e-mail address

of Sahil Mehta.

55.11. The essence of the allegation made by the ED is that at the time

that the petitioner undertook the transactions as Authorised

Signatory for the bank account of the company, he knew that

the transactions were bogus, in that the money was being

remitted-out of the company without any genuine services

having been provided by Eximius Business Middle Ease FZC to

Phoenix FZC. On the other hand, the petitioner contends that he

was neither a director, nor a shareholder, nor did he have any

financial interest in the company; and as such he had no reason

or business to enquire as to whether any services had been

rendered by Eximius Business Middle Ease FZC to Phoenix

FZC towards which money was being remitted to it by the

company. In one instance however, when he was instructed to

remit USD 300,000.00 out of Phoenix FZC, vide e-mail dated

09.01.2015 the petitioner did inquire from Sahil Mehta as to the

reason for the remittance; to which enquiry however, he

received no response. The petitioner made the transaction

nevertheless. Yet again, this would indicate, at least prima-

facie, that the petitioner had no financial interest in the

transaction that he was performing on instructions of Sahil

Mehta; and therefore, it was not his business to insist that he be

told what the transaction was for.

55.12. The petitioner accepts that he received a small commission, on

an ad-hoc basis, from Sahil Mehta or his father Sohan Mehta

for the transactions he conducted as Authorised Signatory of the

company, which however, had no correlation to any particular

transaction. In his statement dated 09.08.2022 recorded under

section 50 of the PMLA, the petitioner in fact has said this :

I was not getting paid any fixed income or commission on

transactions I was being paid on ad hoc basis by Mr Sohan Mehta

like once in 2/3 months or more in cash (withdrawal from Phoenix

International FZC or through transfer from Phoenix International

FZC in my personal account in Mashreq Bank as per the

directions of Mr Sohan Mehta or sometimes on the instructions of

Mr Sahil Mehta.‖

There is no allegation that the petitioner received

anything over-and above such ad-hoc commission.

55.13. Also, if the basis of the allegation is that the petitioner had a

financial interest in the transactions since he received ad-hoc

commission for them, such allegation would be counter-

intuitive inasmuch as if the petitioner was connected with the

transactions themselves i.e. the money belonged to the

petitioner, then it is unlikely that he would be given a

commission for undertaking such transactions.

55.14. It is also noteworthy, that the ED itself says that Phoenix FZC

undertook several other transactions during the period under

consideration, of which only the aforesaid sets of transactions

have been alleged to be offending. Therefore, it is not as if

Phoenix FZC was a vehicle solely for undertaking the allegedly

offending transactions.

55.15. Furthermore, it is seen that after a point, once the allegedly

offending transactions had been completed, the three original

directors/shareholders of Phoenix FZC transferred their

shareholding to the petitioner‟s wife and simply stepped-out of

the company. It may be noted that nothing has been shown to

the court to indicate the reason for the erstwhile directors

leaving the company. Yet again, if the petitioner had knowledge

that the transactions conducted through Phoenix FZC were

unlawful or even suspect, it is counter-intuitive that he would

facilitate the transfer of shareholding in that very company to

his own wife, thereby converting the company to Phoenix FZE

and putting his wife in a legally controversial position.

56. Insofar as the ED not having arrested similarly placed co-accused

persons; and not even having arraigned some other persons evidently

connected with the offending transactions as accused in the

prosecution complaint, though these aspects would not be dispositive

of a bail plea one way or the other, they are also not wholly irrelevant

and the „doctrine of parity‟is not immaterial. As held by this court in

Ashish Mittal (supra) considering the nature of the offence, where the

gravamen of the offence is that several persons acting in concert have

siphoned-off and „laundered‟ monies, it is manifestly arbitrary for the

ED to have made selective arrests and arraignments. It has also been

brought to the notice of this court that Sanjay Godhwani, who may be

viewed as one of the main accused in this case, has been granted bail

by the learned trial court vide order dated 09.05.2023 in Bail

Application No. 688/2023 “... on merits as well as on medical

grounds...‖. This circumstance must also weigh in favour of the

petitioner being granted bail, considering that his role in the allegedly

offending transactions is evidently far more peripheral than that of co-

accused, Sanjay Godhwani.

57. Lastly, insofar as the allegation of the ED as regards the petitioner‟s

conduct is concerned, it would appear that the petitioner has been

forthcoming with the investigating agency about information that he

did possess about the affairs of Phoenix FZC, as is seen from his

statements recorded under section 50 (of Income Tax Act, 1961) of the PMLA. As regards the

ED‟s submission that the petitioner asked his son to delete e-mails

concerning transactions of Phoenix FZC from his e-mail ID

ramesh1994@yahoo.com and forwarded the same to another e-mail

ID mainjhukekanahi@gmail.com, it is observed that such e-mails

have subsequently been recovered by the investigating agency and the

investigation has not suffered on that count. The prosecution

complaint having now been filed, there is no demonstrable risk as to

evidence tampering.

58. In the circumstances, for the purpose of grant of regular bail to the

petitioner, this court is satisfied that there are reasonable grounds to

believe that the petitioner is „not guilty‟ of the offence under section 3 (of Income Tax Act, 1961)

of the PMLA. Further, considering that the prosecution complaint has

been filed before the learned trial court; that the petitioner has

materially co-operated in the investigation; and in view of the nature

of the alleged role played by the petitioner in the allegedly offending

transactions, this court is also satisfied that the petitioner is not likely

to commit any offence under PMLA while on bail.

59. The usual and ordinary considerations as referred to inter-alia in P.

Chidambaram (supra), beyond what may be purely theoretical

apprehensions in this case, can be adequately addressed by imposing

appropriately stringent conditions for grant of bail.

60. Having regard to the above, this court is of the view that the petitioner deserves to be granted relief; and is hereby admitted to regular bail pending trial, subject to the following conditions:

60.1. The petitioner shall furnish a personal bond in the sum of

Rs.25,00,000/- (Rs. Twenty-five lacs Only) with 01 surety in

the like amount from a family member, to the satisfaction of the

learned trial court;

60.2. The petitioner shall furnish to the Investigating Officer/S.H.O.

a cell-phone number on which the petitioner may be contacted

at any time and shall ensure that the number is kept active and

switched-on at all times;

60.3. The petitioner shall surrender his passport(s) to the learned trial

court and shall not travel out of India without prior permission

of the learned trial court;

60.4. The petitioner shall ordinarily reside at his place of residence in

Mumbai, India as per records; and shall inform the Investigating Officer in writing at least 07 days in advance if heproposes to change his place of residence;

60.5. The petitioner shall co-operate in any further investigation or

proceedings by the Investigating Officer, as and when required;

60.6. In addition to the above conditions, it is specifically directed

that the petitioner shall also not, whether directly or indirectly,

contact or visit or have any transaction with any of the

officials/employees of the banks, financial institutions,

companies, entities etc., who are concerned with the

prosecution complaint in this case, whether in India or abroad;

60.7. The Investigating Officer is further directed to issue a request

to the Bureau of Immigration, Ministry of Home Affairs of the

Government of India or other appropriate authority to forthwith

open a „Look-out-Circular‟ in the petitioner‟s name, to prevent

the petitioner from leaving the country, without the permission

of the learned trial court;

60.8. The petitioner shall not contact, nor visit, nor offer any

inducement, threat or promise to any of the prosecution

witnesses or other persons acquainted with the facts of case.

The petitioner shall not tamper with evidence nor otherwise

indulge in any act or omission that is unlawful or that would

prejudice the proceedings in the pending trial.

61. The petition is disposed-of in the above terms.

62. Pending applications, if any, also stand disposed of.

63. A copy of this order be communicated to the learned jail

superintendent forthwith.

ANUP JAIRAM BHAMBHANI J

MAY 30, 2023