A loan of Rs. 1 crore was extended to Anil Ramrao Naik (accused)
to pay for a property for which a Memorandum of Understanding (MoU)
for repayment was entered into between the parties. The accused
issued two cheques to the complainant which did not mention any
date or the name of the payee. The construction of the building on
the plot could not get completed and the complainant opted for
refund along with interest. The accused filed a civil suit praying
for the extension of time to repay the amount to the complainant in
terms of the MoU.
After the suit was filed by the accused, the complainant
deposited the two cheques which were dishonoured. Subsequently, the
complainant filed two complaints under section 138 of the
Negotiable Instruments Act, 1881 (NI Act) before the trial court
while admitting that she had filled in the name of the payee and
date. The trial court acquitted the accused, holding that when the
civil suit was pending, the complainant was not justified in
completing the cheques without authority of the accused.
The question before the High Court was whether the complainant
was justified in putting name of the payee and date on the
cheques.
The court did not find filling in the name of the payee improper
as the cheques were given to the complainant for this reason in the
first place. The court referred to Section 87 of the NI Act and
held that unilaterally filling in the dates on the cheques without
the authority of the accused would amount to "material
alterations" rendering the negotiable instrument (cheques)
void. The prosecution under Section 138 NI Act therefore could not
have been initiated for want of valid cheque.
M/s. Pinak Bharat and Company v. Anil Ramrao
Naik, Criminal Appeal Nos. 1630 and 1631 of 2021
[Bombay High Court]
14.12.2022
The Hon'ble Supreme Court has issued notice in the Special
Leave Petition against the order of NCLAT, wherein the NCLAT had
upheld the decision of NCLT holding that NCLT is not empowered to
deal with matters falling under the purview of PMLA and that
moratorium under Section 14 of the Insolvency and Bankruptcy Code,
2016 (IBC) would not apply to actions initiated by the ED.
On the last date of hearing, the Hon'ble Supreme Court
granted interim relief to the petitioner permitting the CIRP of
Corporate Debtor to be conducted on 'as is where is' and
'whatever there is' basis, during the pendency of the
petition challenging the provisional attachment order passed
against the Corporate Debtor under PMLA. The Bench also cautioned
that the Resolution Plan would not be approved by the Adjudicating
Authority without the permission of the Supreme Court.
A Drug Inspector inspected the appellant's premises and
alleged contravention of Section 18(c) of the Drugs and Cosmetics
Act, 1940 read with Rule 65(5)(1)(b) of the Drugs and Cosmetics
Rules, 1945. It was alleged that the appellants broke up the bulk
quantities of raw material chemicals and sold it to different
distributors. The Drug Inspector issued a show cause memo to the
appellants after nearly three years. After the lapse of one year
and four months, a complaint was filed against the appellants.
In the High Court of Madras, the appellants sought quashing of
the complaint which was dismissed with the observation that a trial
was necessary to ascertain the facts of the case and an order was
passed to expedite the trial. Aggrieved, the appellants filed an
appeal before the Hon'ble Supreme Court of India.
While allowing the appeal, the Supreme Court held that the High
Court had failed to take into consideration the peculiar facts and
circumstances of the case wherein the respondent provided no
explanation for the extraordinary delay of more than four years
between the initial site inspection, the show cause notice and the
complaint.
Hasmukhlal D. Vohra & Anr. v. The State of Tamil
Nadu, Criminal Appeal No. 2310 of 2022
[Supreme Court of India]
19.12.2022
A case was registered under Foreign Exchange Management Act
(FEMA) against Southern Agrifurane Industries Pvt. Ltd. (Company)
alleging outward foreign remittances in violation of Foreign
Exchange Management Rules and investigation was taken up by the ED.
Subsequently, the ED passed provisional attachment order for
seizure of certain movable and immovable properties of the company.
Since the overseas remittances were made through the company's
bank account in Axis Bank, the bank registered a complaint with the
Central Crime Branch alleging cheating under Sections 417 and 420
Indian Penal Code, 1860 (IPC). In pursuance of the same, the ED
registered a case under the Prevention of Money Laundering Act,
2002 (PMLA) in furtherance of commission of a scheduled offence
under Section 420 IPC.
The company approached the Hon'ble High Court seeking
quashing of the PMLA case on the ground that the provisions of FEMA
were not a scheduled offence under the PMLA and that the ED was
merely taking advantage of the FIR registered on the complaint of
the bank and also, that while there has been a violation of FEMA,
an offence of cheating could not be made out.
The Madras High Court while dismissing the plea held that an
offence of cheating under Section 420 IPC was indeed made out as
the company had made false declaration which induced the authorised
dealer to deliver valuable foreign exchange and remittances to the
wholly owned subsidiaries of the company. The Hon'ble Court
also observed that there are two requirements to start an
investigation by the ED: (i) commission of a predicate offence
(which was a schedule offence) and (ii) prima
facie material to show that such schedule offence has
generated proceeds of crime.
Southern Agrifurane Industries Private Ltd., v. The
Assistant Director, Directorate of Enforcement, WP
No. 28140 of 2022
[Madras High Court]
20.12.2022
An FIR was registered against one Debabrata Halder for offences
under Sections 420/406/408/409/467/468/120B of the Indian Penal
Code, 1860 (IPC) and an ECIR was registered for investigation of
offences punishable under Prevention of Money Laundering Act, 2002
(PMLA).
During the course of investigation, Debabrata Halder was
arrested under Section 19 of PMLA. Meanwhile, the ED filed its
final report under Section 45 of PMLA against other accused persons
including Debabrata Halder alleging commission of offence under
Section 3 of PMLA punishable under Section 4 of PMLA. The special
court granted bail to Debabrata Halder observing that there is no
prayer for further investigation in the case and no purpose would
be served by keeping the accused in the custody for indefinite
period. The other accused who had surrendered were also granted
bail by the Special Court on the ground that they were on a
different footing than the accused who was arrested.
The High Court while setting aside the bail granted observed
that there is difference with regard to releasing a person on bail
who has appeared in response to summons and a person who was
arrested in the course of investigation under PMLA by the
investigating authorities invoking their powers under Section 19
PMLA.
Enforcement Directorate v. Shri Debabrata
Halder, CRM (SB) 93 of 2022
[Calcutta High Court]
DATE
DETAILS OF THE RECENT DEVELOPMENTS
CASES
13.12.2022
A loan of Rs. 1 crore was extended to Anil Ramrao Naik (accused)
to pay for a property for which a Memorandum of Understanding (MoU)
for repayment was entered into between the parties. The accused
issued two cheques to the complainant which did not mention any
date or the name of the payee. The construction of the building on
the plot could not get completed and the complainant opted for
refund along with interest. The accused filed a civil suit praying
for the extension of time to repay the amount to the complainant in
terms of the MoU.
After the suit was filed by the accused, the complainant
deposited the two cheques which were dishonoured. Subsequently, the
complainant filed two complaints under section 138 of the
Negotiable Instruments Act, 1881 (NI Act) before the trial court
while admitting that she had filled in the name of the payee and
date. The trial court acquitted the accused, holding that when the
civil suit was pending, the complainant was not justified in
completing the cheques without authority of the accused.
The question before the High Court was whether the complainant
was justified in putting name of the payee and date on the
cheques.
The court did not find filling in the name of the payee improper
as the cheques were given to the complainant for this reason in the
first place. The court referred to Section 87 of the NI Act and
held that unilaterally filling in the dates on the cheques without
the authority of the accused would amount to "material
alterations" rendering the negotiable instrument (cheques)
void. The prosecution under Section 138 NI Act therefore could not
have been initiated for want of valid cheque.
M/s. Pinak Bharat and Company v. Anil Ramrao
Naik, Criminal Appeal Nos. 1630 and 1631 of 2021
[Bombay High Court]
14.12.2022
The Hon'ble Supreme Court has issued notice in the Special
Leave Petition against the order of NCLAT, wherein the NCLAT had
upheld the decision of NCLT holding that NCLT is not empowered to
deal with matters falling under the purview of PMLA and that
moratorium under Section 14 of the Insolvency and Bankruptcy Code,
2016 (IBC) would not apply to actions initiated by the ED.
On the last date of hearing, the Hon'ble Supreme Court
granted interim relief to the petitioner permitting the CIRP of
Corporate Debtor to be conducted on 'as is where is' and
'whatever there is' basis, during the pendency of the
petition challenging the provisional attachment order passed
against the Corporate Debtor under PMLA. The Bench also cautioned
that the Resolution Plan would not be approved by the Adjudicating
Authority without the permission of the Supreme Court.
A Drug Inspector inspected the appellant's premises and
alleged contravention of Section 18(c) of the Drugs and Cosmetics
Act, 1940 read with Rule 65(5)(1)(b) of the Drugs and Cosmetics
Rules, 1945. It was alleged that the appellants broke up the bulk
quantities of raw material chemicals and sold it to different
distributors. The Drug Inspector issued a show cause memo to the
appellants after nearly three years. After the lapse of one year
and four months, a complaint was filed against the appellants.
In the High Court of Madras, the appellants sought quashing of
the complaint which was dismissed with the observation that a trial
was necessary to ascertain the facts of the case and an order was
passed to expedite the trial. Aggrieved, the appellants filed an
appeal before the Hon'ble Supreme Court of India.
While allowing the appeal, the Supreme Court held that the High
Court had failed to take into consideration the peculiar facts and
circumstances of the case wherein the respondent provided no
explanation for the extraordinary delay of more than four years
between the initial site inspection, the show cause notice and the
complaint.
Hasmukhlal D. Vohra & Anr. v. The State of Tamil
Nadu, Criminal Appeal No. 2310 of 2022
[Supreme Court of India]
19.12.2022
A case was registered under Foreign Exchange Management Act
(FEMA) against Southern Agrifurane Industries Pvt. Ltd. (Company)
alleging outward foreign remittances in violation of Foreign
Exchange Management Rules and investigation was taken up by the ED.
Subsequently, the ED passed provisional attachment order for
seizure of certain movable and immovable properties of the company.
Since the overseas remittances were made through the company's
bank account in Axis Bank, the bank registered a complaint with the
Central Crime Branch alleging cheating under Sections 417 and 420
Indian Penal Code, 1860 (IPC). In pursuance of the same, the ED
registered a case under the Prevention of Money Laundering Act,
2002 (PMLA) in furtherance of commission of a scheduled offence
under Section 420 IPC.
The company approached the Hon'ble High Court seeking
quashing of the PMLA case on the ground that the provisions of FEMA
were not a scheduled offence under the PMLA and that the ED was
merely taking advantage of the FIR registered on the complaint of
the bank and also, that while there has been a violation of FEMA,
an offence of cheating could not be made out.
The Madras High Court while dismissing the plea held that an
offence of cheating under Section 420 IPC was indeed made out as
the company had made false declaration which induced the authorised
dealer to deliver valuable foreign exchange and remittances to the
wholly owned subsidiaries of the company. The Hon'ble Court
also observed that there are two requirements to start an
investigation by the ED: (i) commission of a predicate offence
(which was a schedule offence) and (ii) prima
facie material to show that such schedule offence has
generated proceeds of crime.
Southern Agrifurane Industries Private Ltd., v. The
Assistant Director, Directorate of Enforcement, WP
No. 28140 of 2022
[Madras High Court]
20.12.2022
An FIR was registered against one Debabrata Halder for offences
under Sections 420/406/408/409/467/468/120B of the Indian Penal
Code, 1860 (IPC) and an ECIR was registered for investigation of
offences punishable under Prevention of Money Laundering Act, 2002
(PMLA).
During the course of investigation, Debabrata Halder was
arrested under Section 19 of PMLA. Meanwhile, the ED filed its
final report under Section 45 of PMLA against other accused persons
including Debabrata Halder alleging commission of offence under
Section 3 of PMLA punishable under Section 4 of PMLA. The special
court granted bail to Debabrata Halder observing that there is no
prayer for further investigation in the case and no purpose would
be served by keeping the accused in the custody for indefinite
period. The other accused who had surrendered were also granted
bail by the Special Court on the ground that they were on a
different footing than the accused who was arrested.
The High Court while setting aside the bail granted observed
that there is difference with regard to releasing a person on bail
who has appeared in response to summons and a person who was
arrested in the course of investigation under PMLA by the
investigating authorities invoking their powers under Section 19
PMLA.
Enforcement Directorate v. Shri Debabrata
Halder, CRM (SB) 93 of 2022
[Calcutta High Court]
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