IMPORTANT POINT
Money laundering – Mens rea is an essential element of every offence – Exclude mens rea and person cannot be mulcted with criminal liability.

JUDGMENT

The petitioner is questioning the ongoing investigation by Enforcement Directorate, Hyderabad in ECIR/05/HYZO/2014.

2. A criminal complaint was registered by the CBI under Section 13 of the Prevention of Corruption Act against this petitioner and others on 03.01.2013. Thereafter, the company of the petitioner filed arbitration application and also MMTC filed civil suits. On 25.02.2014, present ECIR/05/HYZO/2014 was registered under Section 3 of Prevention of Money- Laundering Act, 2002 on the basis of FIR that was registered by CBI.

3. The crux of the allegation is that the petitioner being Director of MBS group of companies, received gold from MMTC on buyers Credit loan basis by keeping the forex position open. On account of the rupee fluctuation, lowering the value of the rupee, the petitioner was liable to pay additional 5% margin money in accordance with the MOU. According to MMTC, the company suffered a loss to the tune of Rs.220 Crores. CBI in its charge sheet alleged that this petitioner entered into criminal conspiracy with public servants of MMTC and received gold.

4. Having heard the arguments at the stage of admission on 20.01.2023 my findings were:—

“10. Even according to the investigation done by the CBI and also the case projected by ED, the outstanding liability of the petitioner’s company stood at Rs.181.39 Crores due to the forex exchange fluctuation and the rupee value crashing by 27% and on account of such fluctuation, the alleged liability arose. However, the said liability under such circumstances was accepted by this petitioner and MMTC company in accordance with the MOU.

11. The core question that arises for consideration and not discussed earlier in the Criminal Petition No.5196 of 2019 is with regard to the outstanding claim by MMTC, whether such outstanding falls within the definition of ‘proceeds of crime’. In the said circumstances, when the basis for prosecution under PML Act is projecting proceeds of crime as untainted money, the following point arises for consideration.

12. Point: On account of any agreement or condition in an MOU between parties, with respect to forex fluctuation (depending on crashing or gaining of rupee value) results in an outstanding or liability payable by one of the parties, whether such an accrual of ‘outstanding’ or ‘liability’ amounts to ‘Proceeds of Crime’ as defined under the Act.

13. In the scenario of the rupee value gaining in the process of forex fluctuation, the petitioner would have gained and MMTC would have been liable to whatever extent.

14. In the said circumstances, when the alleged outstanding by the Petitioner prima facie is not on account of any criminal activity but on account of accepting liability with regard to forex fluctuation, this Court deems it appropriate to stay all further proceedings in the present case ECIR/05/HYZO/2014, until the point for consideration is determined.”

5. Heard Sri S. Niranjan Reddy, Sri Avinash Desai, Sri Ravi Kiran Rao, learned Senior Counsel for the petitioner and Sri A.R.M. Sundaresam, learned Senior Counsel/Additional Solicitor General of India, appearing for Sri V. Rama Krishna Reddy, learned Central Government Standing Counsel appearing for the respondent/Enforcement Directorate.

6. The undisputed facts are;—

(i) Gold was delivered by MMTC only against the payments made by the petitioner’s company and not on credit;

(ii) There was an understanding in between MMTC and MBS that the gold would be bought on buyers credit policy and MMTC also collected 5% extra margin money to cover fluctuation of rupee and then delivered gold.

(iii) The outstanding of Rs.181.39 Crores as claimed by MMTC is reflected in the agreement that was entered into between MMTC and MBS Impex Private Limited on 25.11.2005 whereby the petitioner accepted an outstanding of Rs.181.39 Crores on account of devaluation of rupee by 27%.

(iv) Around 5800 kgs of gold was supplied to MBS group over a period of nearly 6 years t