REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1883 OF 2011
(Arising out of SLP(Crl.) No.6114 OF 2011)
Union of India ... Appellant
Vs.
Hassan Ali Khan & Anr. ... Respondents
O R D E R
ALTAMAS KABIR, J.
1. Leave granted.
2. The Special Leave Petition out of which this
Appeal arises has been filed against the judgment
2
and final order dated 12th August, 2011, passed by
the Bombay High Court in Crl. Bail Application
No.994 of 2011, whereby the High Court granted bail
to the Respondent No.1, Hassan Ali Khan, in
connection with Special Case No.1 of 2011, wherein
the Respondent No.1 is the Accused No.1.
3. The allegation against the Respondent No.1 and
the other accused is that they have committed an
offence punishable under Section 4 of the
Prevention of Money Laundering Act, 2002,
hereinafter referred to as `the PML Act’. The said
case has been registered on the basis of a
complaint filed by the Deputy Director, Directorate
of Enforcement, Ministry of Finance, Department of
Revenue, Government of India, on 8th January, 2007,
on the basis of Enforcement Case Information Report
No.02/MZO/07 based on certain information and
documents received from the Income Tax Department.
3
On the said date, the Income Tax Department carried
out a search in the premises owned and/or possessed
by the Respondent No.1 and a sum of Rs.88,05,000/-
in cash was found in his residence at Peddar Road,
Mumbai, and was seized. A number of imported
watches and some jewellery were also found and
seized during the search.
4. The search also revealed that the Respondent
No.1 had purchased an expensive car, worth about
Rs.60 lakhs, from one Anil Shankar of Bangalore
through one Sheshadari and that he had paid till
then a sum of Rs.46 lakhs towards purchase of the
said car. It also appears that the documents which
were recovered by the Income Tax Department
contained several transfer instructions said to
have been issued by the Respondent No.1 for
transfer of various amounts to different persons
from the bank accounts held by him outside India.
4
The said amounts forming the subject matter of the
instructions issued by the Respondent No.1 ran into
billions of dollars. The Income Tax Department
assessed the total income of the Respondent No.1
for the Assessment Years 2001-02, 2006-07 and
2007-08 as Rs.110,412,68,85,303/-. Furthermore,
during the investigation, the Directorate of
Enforcement also obtained a document said to have
been signed by the Respondent No.1 on 29th June,
2003, which was notarized by one Mr. Nicolas Ronald
Rathbone Smith, Notary Public of London, on 30th
June, 2003.
5. Further, an investigation was conducted under
the Foreign Exchange Management Act, 1999,
hereafter referred to as `FEMA’. Show-cause notices
were issued to the Respondent No.1 for alleged
violation of Sections 3A and 4 of FEMA for dealing
in and acquiring and holding foreign exchange to
5
the extent of US$ 80,004,53,000, equivalent to
Rs.36,000 crores approximately in Indian currency,
in his account with the Union Bank of Switzerland,
AG, Zurich, Switzerland.
6. Inquiries also revealed that Shri Hassan Ali
Khan had obtained at least three Passports in his
name by submitting false documents, making false
statements and by suppressing the fact that he
already had a Passport. In addition to the above,
it was also indicated that investigations had
revealed that he had sold a diamond from the
collection of the Nizam of Hyderabad and had routed
the sale proceeds through his account in Sarasin
Bank in Basel, Switzerland, to the Barclays Bank in
the United Kingdom.
7. Based on the aforesaid material, the
Directorate of Enforcement, Mumbai Zonal Office,
arrested the Respondent No.1 on 7th March, 2011,
6
and, thereafter, he was produced before the Special
Judge, PMLA, Mumbai, on 8th March, 2011, and was
remanded in custody. Subsequently, by an order
dated 11th March, 2011, the Special Judge, PMLA,
rejected the prayer made on behalf of the
Directorate of Enforcement for remand of the
Respondent No.1 to its custody and released him on
bail. However, since a Public Interest Litigation
was pending in this Court in which the Directorate
of Enforcement was required to file a status report
in respect of the investigations carried out in
connection with the case, the fact that the
Respondent No.1 had been released on bail was
brought to the notice of this Court and this Court
stayed the operation of the bail order and
authorized the detention of the Respondent No.1 in
custody, initially for a period of four days. The
Union of India thereupon filed Special Leave
Petition (Crl.) No.2455 of 2011 and upon observing
7
that the material made available on record prima
facie discloses the commission of an offence by the
Respondent No.1 punishable under the provisions of
the PML Act, this Court vide order dated 29th March,
2011, disposed of the appeal as well as the Special
Leave Petition and set aside the order dated 11th
March, 2011, of the Special Judge, PMLA, Mumbai,
and directed that the Respondent No.1 be taken into
custody. Thereafter, the Respondent No.1 was
remanded into custody from time to time and the
complaint came to be filed on 6th May, 2011. A
further prayer for bail was thereafter made on
behalf of the Respondent No.1 on 1st July, 2011, but
the same was dismissed by the Special Judge, PMLA,
Mumbai, on the same day.
8. The said order of the Special Judge, PMLA,
Mumbai, rejecting the Respondent No.1’s prayer for
bail was challenged before the Bombay High Court in
8
Bail Application No.994 dated 2nd July, 2011. After
a contested hearing, the Bombay High Court by its
order dated 12th August, 2011, granted bail to the
Respondent No.1 and the said order is the subject
matter of the present proceedings before this Court.
9. Learned Additional Solicitor General, Mr. Haren
P. Raval, appearing for the Union of India,
submitted that the High Court failed to appreciate
the astronomical amounts of foreign exchange dealt
with by the Respondent No.1, for which there was no
accounting and in respect whereof the Income Tax
Department had for the Assessment years 2001-02 to
2007-08 assessed the total income as
Rs.110,412,68,85,303/-. The learned ASG also
submitted that transfer of the huge sums from one
bank to another was one of the methods adopted by
persons involved in money-laundering to cover the
trail of the monies which were the proceeds of
9
crime. The learned ASG contended that the large sums
of unaccounted money, with which the Respondent No.1
had been dealing, attracted the attention of the
Revenue Department and on investigation conducted
under the Foreign Exchange Management Act, 1959,
(FEMA), show cause notices were issued to the
Respondent No.1 for alleged violation of Sections 3A
and 4 thereof for acquiring and holding foreign
exchange and dealing with the same to the extent of
US$ 80,004,53,000, equivalent to Rs.36,000/- crores,
approximately, in Indian currency, in his account
with the Union Bank of Switzerland, AG, Zurich,
Switzerland.
10. Mr. Raval submitted that the Respondent No.1,
Shri Hassan Ali Khan, used the different passports
which he had acquired by submitting false documents,
to open bank accounts in foreign countries to engage
in the laundering of tainted money which brought
10
such transactions squarely within the scope and
ambit of Section 3 of the PML Act, 2002. Mr. Raval
submitted that Section 3 of the aforesaid Act by
itself was an offence since it provides that any
person directly or indirectly attempting to indulge
in or knowingly assisting or knowingly being a party
or actually involved in any process or activity
connected with the proceeds of crime and projecting
it as untainted property, would be guilty of the
offence of money-laundering. The learned ASG
submitted that the key expressions used in Section 3
are “proceeds of crime” and “projecting it as an
untainted property”. In other words, in order to
prove an offence of money-laundering, it has to be
established that the monies involved are the
proceeds of crime and having full knowledge of the
same, the person concerned projects it as untainted
property. The process undertaken in doing so,
amounts to be offence of money-laundering.
11
11. In this connection, the learned ASG referred to
Section 2(u) of the PML Act, which describes
“proceeds of crime” to mean any property derived or
obtained, directly or indirectly by any person as a
result of criminal activity relating to a scheduled
offence or the value of any such property. He,
thereafter, referred to the definition of “scheduled
offence” in Section 2(y) of the above Act to mean
(i) the offences specified under Part A of the
Schedule; or (ii) the offences specified under Part
B of the Schedule if the total value involved in
such offences amounted to Rs.30 lakhs or more.
12. The learned ASG submitted that the enormous
sums of money held by Shri Hassan Ali Khan in
foreign accounts in Switzerland, United Kingdom and
Indonesia and the transactions in respect thereof,
prima facie indicated the involvement of the
Respondent No.1 in dealing with proceeds of crime
12
and projecting the same as untainted property, which
was sufficient to attract the provisions of Section
3 of the PML Act, 2002. The learned ASG submitted
that under Section 24 of the aforesaid Act, when a
person is accused of having committed an offence
under Section 3, the burden of proving that the
monies involved were neither proceeds of crime nor
untainted property, is on the accused. It was urged
that once a definite allegation had been made
against Shri Hassan Ali Khan on the basis of
documents seized, that the monies in his various
accounts were the proceeds of crime, the burden of
proving that the money involved was neither the
proceeds of crime nor untainted, shifted to him and
it was upto him to prove the contrary. The learned
ASG submitted that Shri Hassan Ali Khan had failed
to discharge the said burden and hence the large
sums of money in the several accounts of the
Respondent No.1 would have to be treated as tainted
13
property, until proved otherwise. The learned ASG
submitted that the Respondent No.1 had himself made
certain statements which were recorded under Section
50 of the PML Act, parts whereof were not hit by the
provisions of Section 27 of the Indian Evidence Act.
13. The learned ASG also referred to the provisions
of Section 45 of the aforesaid Act which make
offences under the said Act cognizable and non-
bailable and also provides that notwithstanding the
provisions of the Code of Criminal Procedure, no
person accused of an offence punishable for a term
of imprisonment of more than three years under Part
A of the Schedule to the Act, is to be released on
bail or on his own bond, unless the Public
Prosecutor has been given an opportunity to oppose
the application for such release and where the
Public Prosecutor opposes the application, the
Court is satisfied that there are reasonable
14
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. The learned ASG
submitted that an exception had been made for
persons under the age of 16 years or a woman or a
person who is sick or infirm.
14. Referring to Part A of the Schedule to the PML
Act, the learned ASG submitted that the same had
been divided into paragraphs 1 and 2. While
paragraph 1 deals with offences under the Indian
Penal Code under Sections 121 and 121-A thereof,
paragraph 2 deals with offences under the Narcotic
Drugs & Psychotropic Substances Act, 1985. The
learned ASG submitted that, on the other hand, Para
B is divided into five paragraphs. Paragraph 1
deals with offences under the Indian Penal Code,
while paragraph 2 deals with offences under the
Arms Act, 1959. Paragraph 3 deals with offences
15
under the Wild Life (Protection) Act, 1972,
paragraph 4 deals with offences under the Immoral
Traffic (Prevention) Act, 1956, and paragraph 5
deals with offences under the Prevention of
Corruption Act, 1988. The learned ASG submitted
that the facts of the case attracted the provisions
of paragraph 1 of Part A of the Schedule, since the
money acquired by Shri Hassan Ali Khan, besides
being the proceeds of crime, is also connected with
transactions involving the international arms
dealer, Adnan Khashoggi. The learned ASG submitted
that the same became evident from the notarized
document which had been obtained by the Directorate
of Enforcement during the course of investigation
which had been signed by the Respondent No.1 on 29th
June, 2003, at London and notarized by Mr. Nicolas
Ronald Rathbone Smith, Notary Public of London,
England, on 30th June, 2003. It was also submitted
that the said document certified the genuineness of
16
the signature of the Respondent No.1 and also
mentioned his Indian Passport No. Z-1069986. The
learned ASG further contended that the said
notarized document also referred to Dr. Peter
Wielly, who was a link between Mr. Adnan Khashoggi,
and one Mr. Retro Hartmann on whose introduction
the Respondent No.1 opened an account at UBS,
Singapore, and was also linked with Mr. Kashinath
Tapuriah. The learned ASG submitted that there
were other materials to show the involvement of Dr.
Wielly in the various transactions of the
Respondent No.1, Hassan Ali Khan.
15. Further submissions on behalf of the Appellant
were advanced by Mr. A. Mariarputham, learned
Senior Advocate, who referred to the purported
theft of the jewellery of the Nizam of Hyderabad
and the sale of the same by the Respondent No.1, on
17
account whereof US$ 700,000 had been deposited by
the Respondent No.1 in the Barclays Bank in London.
16. Mr. Mariarpurtham then submitted that although
the High Court had relied on the provisions of
Section 167(2) Cr.P.C. in granting bail to the
Respondent No.1, the said provisions were not
attracted to the facts of this case since charge
sheet had already been filed within the statutory
period and the High Court could not, therefore,
have granted statutory bail to the Respondent No.1
on the ground that it had been submitted on behalf
of the Appellant that it would still take some time
for the Appellant to commence the trial. Mr.
Mariarputham submitted that while the Respondent
No.1 had been arrested on 7th March, 2011 and had
been produced before the Special Judge and remanded
to custody on 8th March, 2011, the charge sheet had
been filed on 6th May, 2011 within the prescribed
18
period of 60 days. It was submitted that the High
Court had wrongly interpreted the provisions of
Section 167(2) Cr.P.C. in granting bail to the
Respondent No.1.
17. In support of his submissions, the learned
counsel referred to the Constitution Bench decision
of this Court in Sanjay Dutt Vs. State through CBI,
Bombay (II) [(1994) 5 SCC 410], wherein it was held
that the indefeasible right of an accused to be
released on bail by virtue of Section 20(4)(bb) of
the Terrorist and Disruptive Activities
(Prevention) Act, 1987, was enforceable only prior
to the filing of the challan and it did not survive
or remain enforceable on the challan being filed,
if not already availed of. Their Lordships held
further that if the right to grant of statutory
bail had not been enforced till the filing of the
challan, then there was no question of its
19
enforcement thereafter, since it stood extinguished
the moment the challan was filed because Section
167(2) Cr.P.C. ceased to have any application.
Reference was also made to the decision of a Three
Judge Bench of this Court in Uday Mohanlal Acharya
Vs. State of Maharashtra [(2001) 5 SCC 453],
wherein the scope of Section 167(2) Cr.P.C. and the
proviso thereto fell for consideration and it was
the majority view that an accused had an
indefeasible right to be released on bail when
investigation is not completed within the specified
period and that for availing of such right the
accused was only required to file an application
before the Magistrate seeking release on bail
alleging that no challan had been filed within the
period prescribed and if he was prepared to offer
bail on being directed by the Magistrate, the
Magistrate was under an obligation to dispose of
the said application and even if in the meantime a
20
charge-sheet had been filed, the right to statutory
bail would not be affected. It was, however,
clarified that if despite the direction to furnish
bail, the accused failed to do so, his right to be
released on bail would stand extinguished.
18. It was, therefore, submitted that the Bombay
High Court had granted bail to the Respondent No.1
on an incorrect interpretation of the law and the
said order granting bail was, therefore, liable to
be set aside.
19. Appearing for the Respondent No.1, Hassan Ali
Khan, learned counsel, Shri Ishwari Prasad A.
Bagaria, firstly contended that an offence which
did not form part of the scheduled offences
referred to in Section 45 of the PML Act would not
attract the provisions of Section 3 of the said
Act. It was submitted that whatever be the amounts
involved and even if the same had been unlawfully
21
procured, the same might attract the provisions of
the Income Tax Act or FEMA, but that would not
satisfy the two ingredients of Section 3 which
entails that not only should the money in question
be the proceeds of crime, but the same had also to
be projected as untainted property. Mr. Bagaria
submitted that in the instant case all that has
been disclosed against the Respondent No.1 is that
he dealt with large sums of money, even in foreign
exchange and operated bank accounts from different
countries, which in itself would not indicate that
the monies in question were the proceeds of crime.
Mr. Bagaria also submitted that at no stage has it
been shown that the said amounts lying in the
accounts of the Respondent No.1 in Switzerland, the
United Kingdom and Indonesia had been projected as
untainted money. Furthermore, as far as the
allegation regarding the theft of the Nizam’s
jewellery is concerned, except for mere
22
allegations, there was no material in support of
such submission in the face of the case made out by
the Respondent No.1 that he had brokered the sale
of some portions of the jewellery for which he had
received a commission of US$30,000 which he had
spent in Dubai.
20. Mr. Bagaria submitted that in the complaint,
reference had been made in paragraph 13 thereof to
“scheduled offences” which have been set out in
sub-paragraphs 13.1 to 13.5. Mr. Bagaria pointed
out that the offences indicated related to alleged
offences under the provisions of the Indian Penal
Code, the Passport Act, 1967 and the Antiquities
and Art Treasures Act, 1972, which do not come
either under Part A or Part B of the Schedule to
the PML Act, 2002, except for the offences under
the Indian Penal Code, the sections whereof, which
have been included in paragraph 1 of Part B, are
23
not attracted to the facts of this case. Mr.
Bagaria submitted that as a result, none of the
offences mentioned as scheduled offences in the
charge-sheet were covered by the Schedule to the
PML Act, 2002, and could at best be treated as
offences under the Indian Penal Code, the Passport
Act and the Antiquities and Art Treasures Act,
1972. On the question of the alleged absconsion of
the Respondent No.1, Mr. Bagaria submitted that the
said Respondent had not gone to Singapore on his
own volition, but had there been taken by one
Amalendu Kumar Pandey and Shri Tapuriah. Shri
Pandey was subsequently made a witness and Shri
Tapuriah was made a co-accused with the Respondent
No.1.
21. Mr. Bagaria also contended that once bail had
been granted, even if the special leave petition is
maintainable, the power to cancel grant of such
24
bail lies with the High Court or the Court of
Sessions under Section 439(2) Cr.P.C. and,
consequently, all the principles laid down by this
Court relating to cancellation of bail, would have
to be considered before the order granting bail
could be cancelled. Mr. Bagaria submitted that
even though the offences were alleged to have been
committed by the Respondent No.1 as far back as in
the year 2007, till he was arrested on 7th May,
2011, there had been no allegation that he had in
any manner interfered with the investigation or
tampered with any of the witnesses. Mr. Bagaria
submitted that even the apprehension expressed on
behalf of the appellant that there was a
possibility of the Respondent No.1 absconding to a
foreign country on being released on bail, was
without any basis, since such attempts, if at all
made, could be secured by taking recourse to
various measures. Mr. Bagaria submitted that such
25
a submission could not be the reason for cancelling
the bail which had already been granted to the
Respondent No.1.
22. Mr. Bagaria submitted that in the absence of
any provisions in the PML Act that the provision
thereof would have retrospective effect, the
provisions of the PML Act could not also be made
applicable to the Respondent No.1. Mr. Bagaria
submitted that once it is accepted that the PML
Act, 2002, would not apply to the Respondent No.1,
the provisions of Section 45 thereof would also not
apply to the Respondent’s case and his further
detention would be unlawful. Mr. Bagaria concluded
on the note that, in any event, the PML Act had
been introduced in the Lok Sabha on 4th August,
1998, and all the offences alleged to have been
committed by the Respondent No.1, were long prior
to the said date.
26
23. Having carefully considered the submissions
made on behalf of the respective parties and the
enormous amounts of money which the Respondent No.1
had been handling through his various bank accounts
and the contents of the note signed by the
Respondent No.1 and notarized in London, this case
has to be treated a little differently from other
cases of similar nature. It is true that at present
there is only a nebulous link between the huge sums
of money handled by the Respondent No.1 and any
arms deal or intended arms deals, there is no
attempt on the part of the Respondent No.1 to
disclose the source of the large sums of money
handled by him. There is no denying the fact that
allegations have been made that the said monies
were the proceeds of crime and by depositing the
same in his bank accounts, the Respondent No.1 had
attempted to project the same as untainted money.
The said allegations may not ultimately be
27
established, but having been made, the burden of
proof that the said monies were not the proceeds of
crime and were not, therefore, tainted shifted to
the Respondent No.1 under Section 24 of the PML
Act, 2002. For the sake of reference, Section 24
is extracted hereinbelow :-
“24. Burden of proof. – When a person is
accused of having committed the offence
under Section 3, the burden of proving
that proceeds of crime are in tainted
property shall be on the accused.”
24. The High Court having proceeded on the basis
that the attempt made by the prosecution to link up
the acquisition by the Respondent No.1 of different
Passports with the operation of the foreign bank
accounts by the said Respondent, was not
believable, failed to focus on the other parts of
the prosecution case. It is true that having a
foreign bank account and also having sizeable
amounts of money deposited therein does not ipso
28
facto indicate the commission of an offence under
the PML Act, 2002. However, when there are other
surrounding circumstances which reveal that there
were doubts about the origin of the accounts and
the monies deposited therein, the same principles
would not apply. The deposit of US$ 700,000 in the
Barclays Bank account of the Respondent No.1 has
not been denied. On the other hand, the allegation
is that the said amount was the proceeds of the
sale of diamond jewellery which is alleged to have
been stolen from the collection of the Nizam of
Hyderabad. In fact, on behalf of the Respondent
No.1 it has been submitted that in respect of the
said deal, the Respondent No.1 had received by way
of commission a sum of US$ 30,000 which he had
spent in Dubai.
25. Although, at this stage, we are also not
prepared to accept the convoluted link attempted to
29
be established by the learned ASG with the opening
and operation of the bank accounts of the
Respondent No.1 in the Union Bank of Switzerland,
AG, Zurich, Switzerland, the amounts in the said
bank account have not been sought to be explained
by the Respondent No.1. We cannot also ignore the
fact that the total income of the Respondent No.1
for the assessment years 2001-02 to 2007-08 has
been assessed at Rs.110,412,68,85,303/- by the
Income Tax Department and in terms of Section 24 of
the PML Act, the Respondent No.1 had not been able
to establish that the same were neither the
proceeds of crime nor untainted property. In
addition to the above is the other factor involving
the notarized document in which the name of Adnan
Khashoggi figures.
26. Lastly, the manner in which the Respondent No.1
had procured three different passports in his name,
30
after his original passport was directed to be
deposited, lends support to the apprehension that,
if released on bail, the Respondent No.1 may
abscond.
27. As far as Mr. Bagaria’s submissions regarding
Section 439(2) Cr.P.C. are concerned, we cannot
ignore the distinction between an application for
cancellation of bail and an appeal preferred
against an order granting bail. The two stand on
different footings. While the ground for
cancellation of bail would relate to post-bail
incidents, indicating misuse of the said privilege,
an appeal against an order granting bail would
question the very legality of the order passed.
This difference was explained by this Court in
State of U.P. Vs. Amarmani Tripathi [(2005) 8 SCC
21].
31
28. Taking a different view of the circumstances
which are peculiar to this case and in the light of
what has been indicated hereinabove, we are of the
view that the order of the High Court needs to be
interfered with. We, accordingly, allow the appeal
and set aside the judgment and order of the High
Court impugned in this appeal and cancel the bail
granted to the Respondent No.1.
………………………………………………………J.
(ALTAMAS KABIR)
………………………………………………………J.
(SURINDER SINGH NIJJAR)
NEW DELHI
DATED: 30.09.2011
