Introduction
In a significant legal development, the Delhi High Court ('DHC') recently delivered a consequential verdict in the case of Manish Sisodia v. Enforcement Directorate[i] (‘ED’), addressing alleged irregularities surrounding the formulation and execution of the excise policy of the Government of the National Capital Territory of Delhi (‘GNCTD’) for the year 2021-2022. This case pertains to allegations of corruption, manipulation, and money laundering involving prominent political figures and their associates. The central figure in question is Sh. Manish Sisodia, the Deputy Chief Minister of GNCTD. The case stems from a First Information Report (‘FIR’) filed by the Central Bureau of Investigation (‘CBI’) based on directives from the Ministry of Home Affairs (‘MHA’) of the Government of India. Subsequently, the ED initiated proceedings under the Prevention of Money Laundering Act, 2002 (‘PMLA’), aiming to trace the money trail and identify any illicit proceeds related to the alleged irregularities.
Facts of the case
On 17.08.2022, CBI’s Anti-Corruption Bureau (‘ACB’) lodged an FIR against Sh. Manish Sisodia ('Accused') and others, citing violations under ss. 120B and 477A of the Indian Penal Code, 1860 (‘IPC’), as well as s. 7 of the Prevention of Corruption Act, 1988 (‘PCA’). The accusations revolve around irregularities in the creation and execution of GNCTD’s excise policy for the financial year 2021-2022. The FIR emerged as a result of MHA’s directive[ii], which mandated an inquiry into alleged irregularities associated with the excise policy.
The FIR alleges that the Accused, in a position of authority, initiated policy actions without proper authorization, leading to licences being allocated post-tender processes. Additionally, associates of the Accused, namely Sh. Arjun Pandey, Sh. Dinesh Arora and Sh. Sameer Mahendru stands accused of channelling funds to public servants facing similar charges. Subsequent to the FIR, CBI filed a chargesheet on 25.11.2022, and the Trial Court acknowledged the same vide order dated 15.12.2022.
The chargesheet implicated six individuals, including Sh. Vijay Nair and Sh. Abhishek Boinpally, for allegedly orchestrating a conspiracy aimed at securing undue benefits by manipulating the excise policy. Sh. Dinesh Arora, closely linked to Sh. Vijay Nair was alleged to have coordinated cash transactions. These transactions, approximately amounting to 20-30 crores, were purportedly linked to stakes in businesses such as Indo Spirits. Furthermore, irregularities allegedly led to the issuance of L1 licences for Indo Spirits. Sh. Narender Singh is accused of misusing his political influence within the ruling party and obtaining advance funds of Rs. 20-30 crores to sway officials and secure distributorship.
Given that ss. 120B of IPC and 7 of PCA are scheduled offences under PMLA, the ED initiated investigations to uncover the money trail and detect potential proceeds of crime stemming from the alleged irregularities. In pursuit of this, the ED initiated proceedings and recorded Enforcement Case Information Report (‘ECIR’) No. ECIR/HIU-II/14/2022 on 22.08.2022. Subsequently, the ED lodged a prosecution complaint on 26.11.2022, listing Sh. Sameer Mahandru and others as principal accused. This was followed by the filing of a supplementary prosecution complaint dated 06.01.2023 against Sh. Abhishek Boinpally and others. An additional provisional attachment order (‘PAO’), issued on 24.01.2023, resulted in the seizure of properties worth Rs. 76.54 crores.
Held
The DHC, in dismissing the Accused’s bail application and upholding the Trial Court’s order, established the following legal determinations:
Citing the precedent set by the case of Vijay Madanlal Choudhary v Union of India[iii], the DHC held that prosecuting a person under s. 3 of PMLA is warranted even if any person or activity is connected with the proceeds of crime.
The DHC acknowledged the design of the excise policy as a vehicle to generate proceeds of crime. It asserted that the establishment of Indo Spirits was structured to facilitate proceeds of crime activities. Consequently, individuals, including the Accused, who played central roles in shaping the policy, were considered to fall within the purview of s. 3 of PMLA, signifying their involvement associated with proceeds of crime.
The DHC validated the Trial Court’s order, affirming that evidence unmistakably suggested that the excise policy was manipulated to illicitly generate proceeds of crime. Notably, the policy’s amendment to raise profit margins from 5% to 12% lacked proper discussions and stood open to scrutiny.
The DHC differentiated statements recorded under s. 50 of the PMLA from those under s. 161 of the Criminal Procedure Code, 1973 (‘CrPC’), clarifying the admissibility of the former as evidence while assessing their evidentiary value during trial.
Referring to evidence, the DHC acknowledged the diversion of portions of kickbacks obtained from the South lobby towards supporting the ruling party’s election campaign in Goa. Moreover, concerns emerged over the creation of fraudulent invoices designed to conceal cash transfers through hawala channels.
The DHC ultimately agreed with the Trial Court's reasoning, finding it free from infirmities and legal errors. Importantly, the DHC recognized its earlier dismissal of bail application no. 1097/2023, titled 'Manish Sisodia v. CBI,' reasoning that the Accused's influential political position carries the potential to influence witnesses. Therefore, it was established that the Accused did not satisfy the conditions outlined in s. 45 of PMLA or the triple test criteria.
Our Analysis
The DHC’s analysis hinges on pivotal legal provisions, specifically s. 3 of the PMLA, s. 120B of the IPC, and s. 7 of the PCA. It interprets s. 3 of the PMLA as encompassing not only direct involvement but also any connection with proceeds of crime, drawing from the precedent of Vijay Madanlal Choudhary (supra). This interpretation reinforces the DHC’s conclusion that both the excise policy and the establishment of Indo Spirits were instruments for generating proceeds of crime, rendering all stakeholders, including the Accused, liable under s. 3 of the PMLA.
Further, the DHC’s scrutiny of s. 120B of the IPC and s. 7 of the PCA underscores the complexity of the case. The Accused’s alleged policy actions without proper authorization, potentially facilitating kickbacks, align with the definition of criminal conspiracy. Similarly, the misuse of political influence for personal gains, as indicated by the case’s particulars, aligns with the allegations under s. 7 of the PCA. However, the DHC’s engagement with these provisions might warrant further exploration, particularly concerning the Accused’s level of intent and knowledge.
Notably, this decision raises the question of whether denying bail based on the Accused’s political position could be deemed unfair. The answer to this question would have to align with the principles of natural justice and a. 14 of the Constitution of India, asserting that an individual’s status should not be the sole criterion for denying their right to bail, thereby emphasizing equality before the law.
End Notes
[i] 2023 SCC OnLine Del 3770
[ii] Office Memorandum No. 14035/06/2022-Delhi-1 dated 22.07.2022.
[iii] 2022 SCC OnLine SC 929
Please read the related case law analysis here:
Authored by Prashant Singh, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.