Court Refuses Bail to Broker in Money Laundering Case Due to Lack of Plausible Explanation for High Commission Rates

Case Details: Udhaw Singh v. Enforcement Directorate - [2024] 164 taxmann.com 291 (HC-Allahabad)

Judiciary and Counsel Details

• Jaspreet Singh, J.
• Dheeraj Awasthi for the Applicant.
• Rohit Tripathi, Manoj Kumar Srivastava & Satyendra Nath Srivastava for the Respondent.

Facts of the Case

In the instant case, numerous FIRs against real estate firm ‘S’ for criminal breach of trust were filed. An ECIR was registered by ED, wherein ‘S’ and various accused persons, including the applicant, were arraigned. The ECIR alleged that ‘S’ and other accused cheated home-buyers/investors of ‘S’ by alluring them to invest in ‘S’ through various lucrative schemes.

An investigation was conducted, and it was found that money collected from purchasers was diverted to various associates and group companies under the guise of commission. Further, a large amount of money, ranging from 5% to 12%, was transferred to the applicant under the head of the commission. However, the majority of funds were received from ‘S’.

The ED discovered that the applicant was in actual possession of proceeds of crime, which he used to purchase properties. The applicant attempted to project the proceeds of crime as untainted money by layering them through his accounts.

ED arrested accused persons, including the applicant. The applicant filed an instant bail application and submitted that he was neither named nor charged with any offence in the FIR lodged.

It was found that the applicant and his firms generated wealth only through business transactions with a select few customers of ‘S’. This, coupled with the fact that the applicant’s statements given to ED were at variance with the accounts statements of ‘S’ and the applicant’s meteoric rise with business aid from ‘S’, indicated the applicant’s complicity.

Further, it was found that the amount in the applicant’s accounts and related firm was derived from business transactions and business relations with ‘S’.

High Court Held

The High Court held that there was no explanation as to why and for which special services the applicants would receive high rates of brokerage, which assumed significance because payment of such a high percentage of the commission was not prevalent in the business of real estate brokerage.

Further, the High Court held that since satisfaction in terms of section 45 of the Prevention of Money Laundering Act, 2002 was not formed, the applicant was not guilty or that he may not commit an offence on bail and, thus, the instant bail application was to be rejected.