# Satyendar Kumar Jain v. Directorate of Enforcement

- **Citation:** 2024 INSC 217
- **Court:** Supreme Court of India
- **Decided:** 2024-03-18
- **Case number:** Criminal Appeal No. 1638 of 2024
- **Bench:** Bela M. Trivedi, Pankaj Mithal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/satyendar-kumar-jain-v-directorate-of-enforcement-37626
- **Pages:** 34

## Headnote

Whether the appellants have been able to satisfy the twin conditions
laid down in s. 45 of the Prevention of Money Laundering Act, 2002,
that there are reasonable grounds for believing that the persons
accused of the offence under the PMLA is not guilty of such offence;
and that he is not likely to commit any offence while on bail.
Headnotes
Prevention of Money Laundering Act, 2002 - s. 45 - Offence
of money laundering - Conditions to be satified for grant of
bail - Appellant-Minister in the Govt. of NCT of Delhi was the
conceptualizer, initiator, fund provider and supervisor for the
entire operation of the accommodation entries against cash
totalling to around Rs. 4.81 crores received through entry
operators in the bank accounts of the four companies, by
paying cash and the said companies controlled and owned
by him and his family - Other two appellants assisted the
Minister by making false declarations under the IDS each of
them declaring alleged undisclosed income of Rs.8.26 crores
in order to protect the Minister - Prosecution complaint filed
by the Enforcement Directorate against the appellants for the
commission of the offence of Money laundering - Prosecution
complaint fixed for framing of charge against the appellants -
Bail applications - Denial of, by the High Court - Correctness:
Held: Though a company is a separate legal entity from its
shareholders and directors, the lifting of corporate veil is permissible
when such corporate structures have been used for committing
fraud or economic offences or have been used as a facade or a
sham for carrying out illegal activities - Declarations made by the
other two appellants under the IDS though were held to be void, the
observations and proceedings recorded in the said orders passed
[2024] 3 S.C.R.
779
Satyendar Kumar Jain v. Directorate of Enforcement
by the Authorities and by the High Court cannot be brushed aside
merely because of the said declarations - Said proceedings clearly
substantiates the case of the ED as alleged in the prosecution
complaint - Appellants could not be permitted to take advantage of
their own wrongdoing of filing the false declarations to mislead the
Income Tax authorities, and now to submit that the said declarations
under the IDS were void - Having regard to the totality of the facts
and circumstances of the case, the appellants miserably failed to
satisfy that there are reasonable grounds for believing that they
are not guilty of the alleged offences - On the contrary, there is
sufficient material collected by the ED to show that they are prima
facie guilty of the alleged offences - Thus, it is not possible to hold
that appellants complied with the twin mandatory conditions laid
down in s. 45 - High Court also prima facie found the appellants
guilty of the alleged offences under the PMLA, and the judgment
does not suffer from any illegality or infirmity - Appellants were
released on bail for temporary period after their arrest and the
appellant-Minister was released on bail on medical ground which
continued till date - Appellant to surrender forthwith before the
Special Court. [Paras 28-33]
Prevention of Money Laundering Act, 2002 - ss. 3 and 2(1)
(u) - Offence of money laundering u/s. 3 - Words "proceeds
of Crime" in s. 2(1)(u) - Definition:
Held: Offence of money laundering captures every process and
activity in dealing with the proceeds of crime, directly or indirectly,
and is not limited to the happening of the final act of integration
of tainted property in the formal economy to constitute an act of
money laundering - Authority of the Authorised Officer under the
Act to prosecute any person for the offence of money laundering
gets triggered only if there exists proceeds of crime within the
meaning of s. 2(1)(u) and further it is involved in any process
or activity - Property must qualify the definition of "proceeds of
crime" u/s. 2(1)(u) - In all or whole of the crime property linked to
scheduled offence need not be regarded as proceeds

## Text

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* Author
[2024] 3 S.C.R. 778 : 2024 INSC 217
Satyendar Kumar Jain
v.
Directorate of Enforcement
(Criminal Appeal No. 1638 of 2024)
18 March 2024
[Bela M. Trivedi* and Pankaj Mithal, JJ.]
Issue for Consideration
Whether the appellants have been able to satisfy the twin conditions
laid down in s. 45 of the Prevention of Money Laundering Act, 2002,
that there are reasonable grounds for believing that the persons
accused of the offence under the PMLA is not guilty of such offence;
and that he is not likely to commit any offence while on bail.
Headnotes
Prevention of Money Laundering Act, 2002 - s. 45 - Offence
of money laundering - Conditions to be satified for grant of
bail - Appellant-Minister in the Govt. of NCT of Delhi was the
conceptualizer, initiator, fund provider and supervisor for the
entire operation of the accommodation entries against cash
totalling to around Rs. 4.81 crores received through entry
operators in the bank accounts of the four companies, by
paying cash and the said companies controlled and owned
by him and his family - Other two appellants assisted the
Minister by making false declarations under the IDS each of
them declaring alleged undisclosed income of Rs.8.26 crores
in order to protect the Minister - Prosecution complaint filed
by the Enforcement Directorate against the appellants for the
commission of the offence of Money laundering - Prosecution
complaint fixed for framing of charge against the appellants -
Bail applications - Denial of, by the High Court - Correctness:
Held: Though a company is a separate legal entity from its
shareholders and directors, the lifting of corporate veil is permissible
when such corporate structures have been used for committing
fraud or economic offences or have been used as a facade or a
sham for carrying out illegal activities - Declarations made by the
other two appellants under the IDS though were held to be void, the
observations and proceedings recorded in the said orders passed
[2024] 3 S.C.R.
779
Satyendar Kumar Jain v. Directorate of Enforcement
by the Authorities and by the High Court cannot be brushed aside
merely because of the said declarations - Said proceedings clearly
substantiates the case of the ED as alleged in the prosecution
complaint - Appellants could not be permitted to take advantage of
their own wrongdoing of filing the false declarations to mislead the
Income Tax authorities, and now to submit that the said declarations
under the IDS were void - Having regard to the totality of the facts
and circumstances of the case, the appellants miserably failed to
satisfy that there are reasonable grounds for believing that they
are not guilty of the alleged offences - On the contrary, there is
sufficient material collected by the ED to show that they are prima
facie guilty of the alleged offences - Thus, it is not possible to hold
that appellants complied with the twin mandatory conditions laid
down in s. 45 - High Court also prima facie found the appellants
guilty of the alleged offences under the PMLA, and the judgment
does not suffer from any illegality or infirmity - Appellants were
released on bail for temporary period after their arrest and the
appellant-Minister was released on bail on medical ground which
continued till date - Appellant to surrender forthwith before the
Special Court. [Paras 28-33]
Prevention of Money Laundering Act, 2002 - ss. 3 and 2(1)
(u) - Offence of money laundering u/s. 3 - Words "proceeds
of Crime" in s. 2(1)(u) - Definition:
Held: Offence of money laundering captures every process and
activity in dealing with the proceeds of crime, directly or indirectly,
and is not limited to the happening of the final act of integration
of tainted property in the formal economy to constitute an act of
money laundering - Authority of the Authorised Officer under the
Act to prosecute any person for the offence of money laundering
gets triggered only if there exists proceeds of crime within the
meaning of s. 2(1)(u) and further it is involved in any process
or activity - Property must qualify the definition of "proceeds of
crime" u/s. 2(1)(u) - In all or whole of the crime property linked to
scheduled offence need not be regarded as proceeds of crime, but
all properties qualifying the definition of "proceeds of crime" u/s.
2(1)(u) will necessarily be the crime properties. [Para 21]
Case Law Cited
Vijay Madanlal Choudhary and Others v. Union of India
and Others [2022] 6 SCR 382 : (2022) SCC OnLine
SC 929; Karnail Singh v. State of Haryana and Another
780
[2024] 3 S.C.R.
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(1995) Supp (3) SCC 376; Neelu Chopra and Another
v. Bharti [2009] 14 SCR 1074 : (2009) 10 SCC 184;
Myakala Dharmarajam & Ors. v. State of Telangana &
Anr. (2020) 2 SCC 743; Gautam Kundu v. Directorate
of Enforcement (Prevention of Money-Laundering Act),
Government of India [2015] 15 SCR 499 : (2015) 16
SCC 1; Rohit Tandon v. Directorate of Enforcement
[2017] 13 SCR 156 : (2018) 11 SCC 46 - referred to.
List of Acts
Prevention of Money Laundering Act, 2002; Prohibition of Benami
Property Transactions Act, 1988; Finance Act, 2016.
List of Keywords
Prevention of Money Laundering; Bail; Money laundering;
Accommodation entries; Undisclosed income; Company, separate
legal entity from its shareholders and directors; Lifting of corporate
veil; False declarations; Surrender; Proceeds of Crime; Property;
Beneficial owner.
Case Arising From
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.1638
of 2024
From the Judgment and Order dated 06.04.2023 of the High Court
of Delhi at New Delhi in BA No.3590 of 2022
With
Criminal Appeal Nos.1639 and 1640 of 2024
Appearances for Parties
Dr. Abhishek Manu Singhvi, N. Hari Haran, Mrs. Meenakshi Arora, Sr.
Advs., Vivek Jain, Abhinav Jain, Amit Bhandari, Rajat Jain, Sharian
Mukherji, Mueed Shah, Siddhant Sahay, Dr. Sushil Kumar Gupta,
Mrs. Sunita Gupta, Dr. Sushil Satrawala, Chandratanay Chaube,
Ankit Shah, Manan Verma, Advs. for the Appellant.
S.V. Raju, A.S.G., Mukesh Kumar Maroria, Zoheb Hussain, Rajat
Nair, Annam Venkatesh, Padmesh Mishra, Ms. Sairica S Raju,
Vinayak Sharma, Kshitiz Agarwal, Vivek Gurnani, Vivek Gaurav,
Kartik Sabharwal, Ms. Abhipriya, Advs. for the Respondent.
[2024] 3 S.C.R.
781
Satyendar Kumar Jain v. Directorate of Enforcement
Judgment / Order of the Supreme Court
Judgment
Bela M. Trivedi, J.
1.
Leave granted.
2.
All the three appeals arise out of the common impugned judgment
and order dated 06.04.2023 passed by the High Court of Delhi at
New Delhi, in the Bail Application Nos. 3590 of 2022, 3705 of 2022
and 3710 of 2022, whereby the High Court has rejected all the bail
applications of the appellants.
3.
Earlier the Special Judge (PC Act) (CBI) -23 (MPs/MLAs cases) vide
the separate detailed orders dated 17.11.2022 had rejected the bail
applications of all the appellants - accused.
FACTUAL MATRIX
4.
An FIR being case No.RC-AC-1-2017-A-0005 dated 24th August,
2017 came to be registered at the CBI AC-1, New Delhi against
Shri Satyendar Kumar Jain, Minister in the Government of National
Capital Territory of Delhi & Others, for the offences under Section
109 IPC and 13(2) read with Section 13(1)(e) of the PC Act, 1988
at the instance of the Dy. Superintendent of Police, CBI who had
conducted a Preliminary Enquiry, being PE AC-1-2017-A0003
dated 10.04.2017 registered at the said office of the CBI. After the
investigation, a Charge-sheet came to be filed by the CBI in respect
of the said FIR on 03.12.2018 in the Court of Special Judge, CBI,
Patiala House Courts, New Delhi against the six accused viz. Sh.
Satyendar Kumar Jain, Smt. Poonam Jain, Sh. Ajit Prasad Jain, Sh.
Sunil Kumar Jain, Sh. Vaibhav Jain and Sh. Ankush Jain.
5.
Since Section 13(2) read with Section 13(1)(e) of the PC Act in the
said FIR dated 24th August, 2017 were scheduled offences under the
Prevention of Money Laundering Act, 2002 (hereinafter referred to
as the "PMLA") and since it was alleged inter alia that Sh. Satyendar
Jain with the help of his family members and other persons had
acquired disproportionate assets during the period from 14.02.2015
to 31.05.2017, while he was functioning as Minister of Govt. NCT of
Delhi, and had laundered tainted cash amounts through Kolkata based
shell companies, the Directorate of Enforcement had registered an
ECIR bearing No. ECIR/HQ/14/2017 dated 30th August, 2017 against
782
[2024] 3 S.C.R.
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Satyendar Jain, Vaibhav Jain, Ankush Jain and others for investigation
into the commission of the offence of Money laundering as defined
under Section 3 and punishable under Section 4 of the PMLA. On
the completion of the said investigation, the Prosecution Complaint
came to be filed on 27.07.2022 by the Directorate of Enforcement
in the Court of District and Sessions Judge, Rouse Avenue District
Court, New Delhi, against the accused Sh. Satyendar Jain and
others with a prayer to take cognizance of the offences of money
laundering under Section 3 punishable under Section 4 of PMLA. The
said Prosecution Complaint being CC No.23/2022 is now pending
at the stage of framing of charge against the appellants - accused.
6.
During the course of investigation, the appellant- Satyendar Kumar
Jain was arrested on 30th May, 2022 and the appellants-Vaibhav
Jain and Ankush Jain were arrested on 30th June, 2022. The gist of
the allegations made against the appellants-accused as mentioned
in the said Prosecution Complaint is as under: -
S.No.
Name of the
Accused
Role in the case (in brief)
1.
Satyendar
Kumar Jain
Based on the discussion and material herein
above, it is clear that Satyendar Kumar
Jain hatched the criminal conspiracy and
conceptualized the idea of accommodation
entries against cash. To get his idea
implemented, he recommended appointing his
old friend Sh. Jagdish Prasad Mohta, Chartered
Accountant as the auditor of Akinchan
Developers Pvt. Ltd., Paryas Infosolution
Pvt. Ltd., Indo Metalimpex Pvt. Ltd. and
Mangalayatan Projects Pvt. Ltd. He (Satyendar
Kumar Jain) first approached Sh. Jagdish
Prasad Mohta for taking accommodation
entries in lieu of cash in his aforesaid four
companies. Shri Mohta arranged a meeting
between Satyendar Kumar Jain and Rajendra
Bansal, Kolkata based accommodation entry
provider. In this meeting all the nitty gritties
of these entries was finalized like percentage
of commission, process of cash transfer,
documents to be maintained etc.
[2024] 3 S.C.R.
783
Satyendar Kumar Jain v. Directorate of Enforcement
In this way Satyendar Kumar Jain was the
conceptualizer, initiator, and supervisor for
the entire operation of these accommodation
entries. By taking the accommodation entries in
various companies, Satyendar Kumar Jain was
hiding behind the Corporate Veil. Investigation
into the transactions and facts prove that
Satyendar Kumar Jain initiated, managed
and controlled the companies in which these
accommodations entries were received.
Accordingly, the accommodation entries
totalling to Rs.4.81 Crore (Rs.4.75 crores
as entries + Rs.5.32 lakhs as commission)
were received during the period 2015-16 from
Kolkata based entry operators in the bank
accounts of the aforesaid companies and
cash totalling to Rs.4,65,99,635/- i.e. (sum of
Rs.4,60,83,500/- + Rs.5,16,135/- commission
paid to entry operators), for this purpose, was
paid to them. He also received accommodation
entry of Rs.15,00,000/- in his company J.J.
Ideal Estate Pvt. Ltd. during the year 2015-16
from Kolkata based entry operators by paying
cash amounts of Rs. 15,00,000 + commission
of Rs.16,800/-. By this criminal activity, he while
holding the public office of and functioning as
a Minister of Government of National Capital
Territory of Delhi, during the period 14.02.2015
to 31.05.2017, acquired assets to the tune of
Rs.4,81,16,435/- i.e. (sum of Rs.4,60,83,500/-
+ Rs.15,00,000/- received in J.J. Ideal Estate
Pvt. Ltd. + Rs.5,16,135/- & Rs.16,800/-
commission paid to entry operators) - , as
discussed in above paragraphs, in his name
and in the name of his family member/ friends,
with the help of his business associates, which
are disproportionate to his known sources
of income for which he has not satisfactorily
accounted for and laundered the proceeds of
crime through a complex web of companies
controlled by him.
784
[2024] 3 S.C.R.
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Satyendar Kumar Jain has thus committed
the offence of money laundering as defined
under Section 3 of PMLA by actually
acquiring, possessing, concealing and
using the proceeds of crime to the tune
of Rs.4,81,16,435/- and projecting and
claiming the same as untainted in the mode
and manner as provided in the preceding
paragraphs in the present complaint.
2.
Ankush Jain
Ankush Jain has knowingly assisted Satyendar
Kumar Jain by making declaration under IDS,
2016 for declaring undisclosed income of
Rs.8.6 crore (including Rs.1,53,61,166/-
during check period) for the period from
2010-11 to 2015-16 in order to save and
shield Sh. Satyendar Kumar Jain. He also
prepared back dated documents with the
help of Vaibhav Jain, Sunil Kumar Jain and
Jagdish Prasad Mohta with regard to his
directorship in Akinchan Developers Pvt.
Ltd., Paryas Infosolution Pvt. Ltd. and Indo
Metalimpex Pvt. Ltd. by becoming directors
of aforesaid companies from back date for
showing his IDS declaration as genuine.
Ankush Jain has thus committed the offence
of money laundering as defined under Section
3 of PMLA by being actually involved in and
knowingly assisting Satyendar Kumar Jain in
projecting his proceeds of crime to the tune
of Rs.4,81,16,435/- as untainted in the mode
and manner as described in the preceding
paragraphs in the present complaint and is
therefore, liable for punishment under Section
4 of PMLA.
3.
Vaibhav Jain
Vaibhav Jain is involved in knowingly
assisting Satyendar Kumar Jain by making
declaration under IDS, 2016 for declaring
undisclosed income of Rs.8.6 crore (including
Rs.1,53,61,166/- during check period) for
the period from 2010-11 to 2015-16 in
order to save Sh. Satyendar Kumar Jain.
[2024] 3 S.C.R.
785
Satyendar Kumar Jain v. Directorate of Enforcement
He also prepared back dated documents with
the help of Sunil Kumar Jain, Ankush Jain and
Sh. Jagdish Prasad Mohta with regard to his
directorship in Akinchan Developers Pvt. Ltd.,
Indo Metalimpex Pvt. Ltd. and Mangalayatan
Projects Pvt. Ltd. by becoming directors of
aforesaid companies from back date for
showing his IDS declaration as genuine.
Vaibhav Jain has thus committed the offence
of money laundering as defined under Section
3 of PMLA by being actually involved in and
knowingly assisting Satyendar Kumar Jain in
projecting his proceeds of crime to the tune
of Rs.4,81,16,435/- as untainted in the mode
and manner as aforesaid in the complaint
and is therefore, liable for punishment under
Section 4 of PMLA.
SUBMISSIONS
7.
The learned counsels for the parties made their respective
submissions at length. The learned senior advocate Mr. Abhishek
Manu Singhvi broadly made following submissions on behalf of the
appellant Satyendar Kumar Jain:
(i)
The appellant was already granted bail in the predicate offence
registered by the CBI, and the arrest of the appellant was made
by the ED almost five years after the registration of the ECIR,
though the appellant was cooperating the ED by remaining
present in response to the summons issued under Section 50
of the PMLA. The appellant was in custody from 30.05.2022
to 26.05.2023 and since then has been granted interim bail on
the medical ground.
(ii)
No shares of companies as alleged by the ED were acquired
by the appellant within the check period and even otherwise
the assets held by the company could not be attributed to its
shareholders.
(iii) Even if the accommodation entries amounting to Rs. 4.61 crores
are attributed to the appellant through his wife's shareholdings,
it would come only to Rs. 59,32,122/- which is less than 1 crore,
786
[2024] 3 S.C.R.
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and therefore the appellant is entitled to bail under the proviso
to Section 45 of the PMLA.
(iv) There is gross discrepancy in the amount of proceeds of
crime calculated by the ED and the amount mentioned
in the Chargesheet of the CBI in as much as the alleged
disproportionate amount is Rs.1,62,50,294/- as per the FIR
whereas as per the ED the amount is Rs. 4,81,16,435/-.
(v)
The appellant had neither served as a Director nor had signed
any financial document during the check period, and the
appellant had already resigned from the directorship of the
allegedly involved Companies two years before the commission
of the alleged offence. It was Vaibhav Jain and Ankush Jain
and their family members who had a significant influence and
control over the said companies.
(vi) The appellant's role in the companies has been delineated in the
MOU seized from Vaibhav Jain's locker, which underscores the
business relations and shows that the appellant's architectural
expertise was to be employed for the investment to be financed
by the families of Vaibhav Jain and Ankush Jain. Through the
quashing of the provisional attachment order by the Delhi High
Court, the allegation against the appellant being the beneficial
owner had stood refuted.
(vii) The alleged proceeds of crime through accommodation entries
were directed to the families of Vaibhav Jain and Ankush
Jain, and the fresh shares issued to the Kolkata based Shell
Companies were promptly transferred to Vaibhav Jain and
Ankush Jain during the check period. The appellant therefore
was not in possession of any proceeds of crime.
(viii) The appellant could not be held to be in constructive possession
of the property, if there was no dominion or control of the
appellant over the said property. As per the ED's complaint
also the appellant was not in possession of the proceeds of
crime and therefore also the appellant could not be said to be
in constructive possession of the same.
(ix) There was no shred of evidence collected by the ED to show
that the appellant had provided cash to Kolkata companies
during the check period. It was Vaibhav Jain and Ankush Jain
[2024] 3 S.C.R.
787
Satyendar Kumar Jain v. Directorate of Enforcement
who had explained on their Fragrance business as the legitimate
source of the cash during their recording of statements under
Section 50 of the PMLA.
(x)
The Kolkata companies and the persons allegedly providing
accommodation entries were not made the accused by the ED.
(xi) The allegation of the ED in its complaint that the appellant had
committed a predicate offence of hatching a criminal conspiracy
and by committing criminal activity had acquired assets to the
tune of Rs. 4.81 crore in his name and in the name of his family
members while holding the public office, was not the allegation
made by the CBI in the FIR registered against the appellant
and others with regard to the disproportionate assets charged
under Section 13(1)(e) of the Prevention of Corruption Act.
(xii) The assumptions of proceeds of crime on the sole basis of
accommodation entries is completely contrary to the concept
of proceeds of crime as explained in the judgment of Vijay
Madanlal Choudhary and Others vs. Union of India and
Others1. Such allegation could be a tax violation but could not
be considered as proceeds of crime.
(xiii) The Prosecution Complaint is silent as to when the scheduled
offence was committed and as to how and in what manner the
proceeds of crime was laundered within the meaning of Section
3 of the PMLA.
(xiv) As regards the Income Disclosure Scheme (IDS) declaration
made by Vaibhav Jain and Ankush Jain for about Rs.16 crores
for the period 2010-2016, it has been submitted that the said
IDS declarations were rejected by the PCIT vide the order dated
09.06.2017, on the ground of misrepresentation/suppression of
facts. The said order of PCIT was challenged by Vaibhav Jain
and Ankush Jain before the Delhi High Court, however the
High Court had also rejected that petition vide the order dated
01.08.2019. Neither the PCIT nor the High Court had given
any finding that the said amount of Rs. 16 crores belonged to
the appellant.
1
[2022] 6 SCR 382 : 2022 SCC OnLine SC 929
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(xv) The reliance placed by the ED on the appellant's letter dated
27.06.2018 was misleading and incorrect, in as much as the
appellant vide the said letter had explicitly denied the appellant
being the beneficial owner. Since Vaibhav Jain and Ankush
Jain had already deposited the tax on the said income, the
appellant in the said letter had only requested the authorities
to adjust the said tax and not to make a demand again for the
same amount from the appellant, however from the said letter
it could not be assumed that the appellant had accepted the
additions made in the assessment order.
(xvi) As held in Vijay Madanlal Choudhary (supra), the courts ought
not to conduct mini trial and should consider only the broad
probability of the matter. The appellant is not a flight risk, there is
no risk of tampering of documents or witnesses. The jail violation
as alleged by the ED has not been accepted by the concerned
Jail visiting Judge and the Jail authorities. The appellant being
sick and infirm, having undergone a spine surgery, is entitled
to bail as per the proviso to Section 45 of PMLA.
8.
The learned ASG Mr. SV Raju made the following submissions in
the appeal preferred by the appellant Shri Satyendar Kumar Jain:
(i)
It was revealed during the course of investigation that the
appellant Satyendar Kumar Jain while posted and functioning
as the Minister in the Government of National Capital Territory
of Delhi, during the period from 2015 to 2017 had acquired
assets in the form of movable and immovable properties in
his name and in the name of his family members, which were
disproportionate to his known source of income.
(ii)
During the check period, the accommodation entries against
cash of about 4.81 crores was received in the companies - M/s
Akinchan Developers Pvt. Ltd., M/s Paryas Infosolutions Pvt.
Ltd., M/s. Manglayatan Projects Pvt. Ltd., and M/s JJ Ideal
Estate Pvt. Ltd., beneficially owned/ controlled by the appellant
from Kolkata based entry operators through Shell Companies.
(iii) From the statements of Rajendra Bansal, Jivendra Mishra, both
residents of Kolkata, and from Shri J.P. Mohta, the Chartered
Accountant, it was revealed that Shri Rajendra Bansal had
arranged accommodation entries in the companies of the
[2024] 3 S.C.R.
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Satyendar Kumar Jain v. Directorate of Enforcement
appellant. Shri Vaibhav Jain in his statement under Section 50
had also stated that the cash was provided by the appellant
himself and had also explained about the modus operandi of
transferring the cash from Delhi to Kolkata through Hawala
operators and as to how in lieu of cash, accommodation entries
were layered and received from Kolkata based shell companies
into the companies owned by the appellant, and agricultural
lands were purchased from the said funds.
(iv) From the documents obtained from the Income Tax Department
it was revealed that the appellant had submitted the application
before the income tax authorities requesting that the income
tax paid by Vaibhav Jain and Ankush Jain under IDS, 2016
be adjusted against the demands raised in his individual
assessments by the IT authorities, which established that the
IDS declaration made by Vaibhav Jain and Ankush Jain were
made for the appellant and that the amount paid in IDS as well
as the tax paid thereon belonged to the appellant Satyendar
Kumar Jain.
(v)
The Special Court having taken the cognizance of the PMLA
case vide the order dated 29.07.2022 and having held that there
was prima facie evidence incriminating about the involvement
of the appellant Satyendar Kumar Jain was sufficient to show
the existence of the scheduled offence and also the existence
of proceeds of crime.
(vi) The appellant Satyendar Kumar Jain was the main person
behind the bogus shell companies based in Kolkata, which
never did any real business. He had either incorporated them
or was having majority shareholdings alongwith his wife. The
accommodation entries of Rs. 16.50 crores (approx.) were
received in the said companies during the financial years 201011, 2011-12 and 2015-16 with the modus operandi as revealed
from the statements of the Auditor/Chartered Accountant Shri
J.P. Mohta as well as the accommodation entry provider Shri
Rajendra Bansal and also from the statement of Vaibhav Jain.
(vii) Though the principle of company being a separate legal entity
from its shareholders is an established principle of Company
law, the lifting of corporate veil has been upheld in the cases
where the corporate structures have been used for committing
790
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fraud, economic offences or have been used as a facade or a
sham for carrying out illegal activities.
(viii) The bogus nature of IDS declarations was substantiated by
the fact that the entire amount of Rs.16.50 Crores received
as accommodation entry was split between Vaibhav Jain and
Ankush Jain. The said declarations showed their modus operandi
to shield Satyendar Jain and his family members, and assume
the entire liability upon themselves to give it a colour of a tax
evasion simplicitor, rather than a criminal activity relating to
disproportionate assets. This modus operandi also showed
that the appellants themselves had disregarded the corporate
entities of these companies.
(ix) The disproportionate pecuniary resources earned by the
appellant by the commission of scheduled offence, were used
as accommodation entries for concealing and layering the
tainted origins of the money, and therefore would qualify to
be the proceeds of crime as defined under Section 2(1)(u) of
the PMLA.
(x)
The two entry operators namely Rajendra Bansal and Jivendra
Mishra had expressed a fear that Shri Satyendar Kumar Jain
being an influential politician will create danger to them.
(xi) The mandatory twin conditions of Section 45 of PMLA having
not been satisfied, the appellant should not be released on bail.
9.
So far as the appellants Ankush Jain and Vaibhav Jain are concerned,
the Learned Senior Advocate Ms. Menakshi Arora with Learned
Advocate Mr. Sushil Kumar Gupta made the following submissions: -
(i)
The Scheduled offence in the present case i.e. the disproportionate
assets case under Section 13(1)(e) of the PC Act is a period
specific offence and gets accomplished only at the end of
the check period (14.02.2015 to 31.05.2017). As stated in
Vijay Madanlal Choudhary (supra), the proceeds of crime
is indicative of criminal activity related to a scheduled offence
already accomplished, and therefore the offence of money
laundering can be initiated only after the Scheduled Offence
is accomplished. However, in the instant case, the appellants
have been roped in for benami transactions from 2015-2016
which was well before the end of check period i.e 31.05.2017.
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Satyendar Kumar Jain v. Directorate of Enforcement
(ii)
The offence of money laundering against the appellants is
attributed to their act of filing IDS on 27.09.2016 much before
the end of check period i.e. 31.05.2017. Hence, the same cannot
be considered as an act of assisting someone in the offence of
money laundering as the proceeds of crime could have been
generated after the end of the check period and not before that.
(iii) The act of declaring IDS by the appellants in respect of
undisclosed income for the period from 2010-2011 to 2015-2016
cannot be considered as an act of assisting Satyendar Jain in
committing the offence of money laundering, in as much as the
possession of unaccounted property acquired by legal means
may be actionable for tax violation, but cannot be regarded
as the proceeds of crime unless the concerned tax legislation
prescribes such violations as an offence and such an offence
is included in the Schedule of the PML Act. In the instant case,
the total amount of 16 crores has not been considered as the
proceeds of crime as the ED is relying on the accommodation
entries received during the check period.
(iv) The IDS filed u/s 183 of the Finance Act, 2013 was declared
void u/s 193 of the said Act by the Income Tax authorities.
Hence, the said act of the appellants filing the IDS cannot
be construed as basis for levelling charges under Section 3
of PMLA. Reliance is placed on Karnail Singh vs. State of
Haryana and Another2 for understanding the meaning of "void."
(v)
It is not made clear by the ED as to the declaration of which IDS,
whether the one filed by Vaibhav Jain or that filed by Ankush
Jain has led to the assistance of Satyendar Jain for making out
the offence under PMLA. Since the allegations are vague, the
benefit of the same should go to the accused. In this regard,
reliance is placed on Neelu Chopra and Another vs. Bharti3 and
Myakala Dharmarajam & Ors. Vs. State of Telangana & Anr.4
(vi) Since, the generation of proceeds of crime is not an offence
under Section 3 of PMLA and the said offence could be
2
(1995) Supp (3) SCC 376
3
[2009] 14 SCR 1074 : (2009) 10 SCC 184
4
(2020) 2 SCC 743
792
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committed only after the accomplishment of the Scheduled
Offence, the alleged act could not be said to be an offence
under Section 3 of PMLA. The act of the appellants assisting
Satyendar Jain for accumulating assets as alleged by the CBI,
cannot be said to be an offence under the PMLA.
(vii) The control of the entire records of the companies was with
the appellants, including the bank accounts. They were the
main decision- makers being the Directors, in respect of the
acts performed on behalf of the Companies, and Mr. Satyendar
Jain had nothing to do with the said Companies after 2013.
The prosecution has unnecessarily tried to link the appellants
with Satyendar Jain from the statements of witnesses recorded
under Section 50 of the PMLA.
(viii) The Scheduled Offence does not allege conspiracy. The day
Mr. Satyendar Jain decided to enter into politics, all the relations
with him whether in respect of the Companies or any business
transactions were severed, and since July 2013 he was neither
a Director nor a shareholder nor had any relation with the
Companies which were the Companies of the appellants.
(ix) The appellants are in custody since 30.06.2022 except for the
period when they were released on the interim bail (Vaibhav Jain
on 18.08.2023 to 27.12.2023 and Ankush Jain on 12.09.2023
to 27.12.2023).
(x)
The appellants have not violated any conditions imposed by
the Court when on interim bail, and have also not tried to delay
the proceedings before the trial court in any manner.
10. The learned ASG Mr. S.V. Raju appearing on behalf of the respondentDirectorate of Enforcement made his submissions in the appeals
preferred by the appellants- Ankush Jain and Vaibhav Jain as under: -
(i)
The appellants-Ankush Jain and Vaibhav Jain were actively
involved in the commission of the offence of money laundering
by assisting the accused-Satyendar Kumar Jain. The appellant
Ankush Jain was the Director of M/s. Mangalayatan Projects Pvt.
Ltd. during the check period. The said company is one of the
accused in the Prosecution Complaint filed on 27.07.2022. The
said company had received the proceeds of crime amounting
to Rs.1,90,00,000/- during the check period in the form of
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Satyendar Kumar Jain v. Directorate of Enforcement
accommodation entries from Kolkata based shell companies.
The said appellant-Ankush Jain transferred the land possessed
by M/s. Mangalayatan Projects Pvt. Ltd. in the name of his
mother Indu Jain to frustrate the proceeds of crime.
(ii)
Similarly, the appellant-Vaibhav Jain was the Director of M/s.
Paryas Infosolution Pvt. Ltd. during the check period. The
said company is also one of the accused in the Prosecution
Complaint filed on 27.07.2022. The said company had received
proceeds of crime amounting to Rs.69,00,300/- during the
check period in the form of accommodation entries from the
Kolkata based shell companies. The said appellant-Vaibhav
Jain had transferred the land possessed by M/s. Mangalayatan
Projects Pvt. Ltd. in the name of his mother Sushila Jain and
wife-Swati Jain to frustrate the proceeds of crime. He also took
back the shares without consideration from shell companies
and thus both the appellants helped Satyendar Kumar Jain in
projecting the tainted money as untainted in the process of
money laundering.
(iii) Both the appellants had made declarations in their individual
capacity under the IDS, 2016 for declaring undisclosed income
of Rs.8.6 Crores during check period i.e. from 2010-11 to 201516, in order to shield Satyendar Kumar Jain for concealing the
true nature of proceeds of crime.
(iv) Both the appellants prepared back dated documents with the
help of each other and with the help of Sunil Kumar Jain and
Jagdish Prasad Mohta for becoming directors in their respective
companies i.e. Mr. Ankush Jain in M/s. Akinchan Developers
Pvt. Ltd., and M/s. Indo Metalimpex Pvt. Ltd., and Mr. Vaibhav
Jain in M/s. Akinchan Developers Pvt. Ltd., M/s. Mangalayatan
Projects Pvt. Ltd. and M/s. Indo Metalimpex Pvt. Ltd. for showing
the IDS declarations as genuine.
(v)
The income sought to be disclosed by the appellants under
the IDS declarations belonged to the appellant- Satyendar
Jain, and the said IDS declarations were rejected by the
Income Tax authorities under Section 193 of the Finance Act,
2016 on the ground of misrepresentation and suppression of
facts. The said order was upheld by the High Court and the
Supreme Court.
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(vi) The declarations of the appellants were held void under Section
193 of the Finance Act, 2016, which applied only for the purpose
of the said scheme, however, if the making of such declarations
was an offence under a separate Act, namely, PMLA, then such
an act would not be effaced merely because of Section 193.
(vii) The very fact that such declarations were made by the said
appellants, was the relevant fact for the purposes of the
alleged offence under the PMLA, as both the appellants are
being prosecuted in their individual capacities for allegedly
actively assisting the appellant- Satyendar Jain in concealing
the proceeds of crime and projecting the proceeds of crime
as untainted.
(viii) Section 13(1)(e) and Section 13(2) are both scheduled offences
under the PMLA, and Section 3 of PMLA ropes in any person
who may or may not have any role to play in the scheduled
offence but has directly or indirectly attempted to indulge or
knowingly assisted or knowingly is a party involved in any
process or activity connected with the proceeds of crime.
(ix) The money laundering need not commence only after the check
period, inasmuch as the offence under Section 13(1) (e) of the
PC Act contemplates that at any time the assets of the public
servant could be disproportionate to his income, which could
have been acquired by the public servant either at the beginning
or in the middle of the check period also.
(x)
From the statements of bank accounts of the four companies
and various other Kolkata based shell companies controlled
by Kolkata based entry operators revealed that the amount
totalling to Rs. 4,60,83,500/- was received in M/s. Akinchan
Developers Pvt. Ltd., M/s. Mangalayatan Projects Pvt. Ltd.
and M/s. Paryas Infosolution Pvt. Ltd. from Kolkata based shell
companies during the period 01.04.2015 to 31.03.2016 (during
the check period) despite no business activities were carried
out by the said companies and the shares were purchased at
a very high premium.
(xi) The investigation revealed that the cash acquired by Satyendar
Jain was given to the Kolkata entry operators for the purpose
of accommodation entries contemporaneously during the check
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Satyendar Kumar Jain v. Directorate of Enforcement
period as and when they were acquired and thereafter the same
were concealed and projected as untainted and sought to be
laundered in the form of share application money. The said
amount was also used for repayment of loan and purchase of
agricultural lands by the said companies.
(xii) Though the CBI in their chargesheet dated 03.12.2018 filed
in FIR No. RC-AC-I-2017-A 0005
 (dated 24.08.2017) had
quantified the proceeds of crime to be Rs.1,47,60,497.67, in view
of the investigation conducted under PMLA it was established
that all the companies were beneficially owned and controlled
by Satyendar Jain, and the amount of Rs.4,81,16,435/- received
during the check period was the proceeds of crime in the hands
of Satyendar Jain. The said conclusion along with the facts
underlying the same, have also been conveyed to the CBI
under Section 66(2) of PMLA vide the letter dated 31.03.2022.
(xiii) Though the accommodation entries per se may not be the
proceeds of crime in a given case, since in the instant case,
it has been specifically alleged that the shares in the three
companies during the check period which were held by the
bogus share companies, were purchased by the Kolkata based
bogus companies as entries in lieu of cash, the source of which
cash was the public servant, namely, Saytendar Jain, he was the
beneficial owner of the shares which was a vehicle to introduce
the unaccounted cash or disproportionate pecuniary resources
which squarely fell within the meaning of proceeds of crime as
defined under Section 2(1)(u) of the PMLA.
11. During the course of arguments, the Court had sought clarification from
the learned ASG Mr. Raju with regard to the role of the appellants-
Ankush Jain and Vaibhav Jain, as also the quantum of proceeds of
crime with which they were allegedly involved, specifically in respect
of the figures mentioned in the Prosecution Complaint against them.
Pursuant to the same, the Deputy Director, Directorate of Enforcement
has filed his affidavit clarifying the role of the appellants - Ankush
Jain and Vaibhav Jain and further stating inter alia that the figure
of Rs.1,53,61,166/- was inadvertently mentioned at page no.-248,
as it was the amount attributed by the CBI in its Chargesheet to
Satyendar Jain, Ankush Jain and Vaibhav Jain individually for the
purpose of receiving total accommodation entries in lieu of cash of
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Rs.4.61 Crores, however respondent's investigation has revealed
that the entire Rs.4.81 Crores (Rs.4.61 Crores plus commission plus
Rs.15 lakhs in J.J. Ideal Estates Pvt. Ltd.) was entirely the property
of Satyendar Jain received in his companies as accommodation
entries in lieu of cash and this entire sum was sought to be declared
by the appellants Ankush Jain and Vaibhav Jain in the IDS as their
own income.
12. In the light of the said clarification, the Learned Senior Advocate
Ms. Arora had further submitted that the so-called inadvertent error
was not pointed out before the trial court and the High Court and
it was only during the course of arguments before this Court, the
said clarification/rectification was sought to be made, which is not
permissible. According to her, ED attains jurisdiction to investigate
only after the proceeds of crime is generated and when the same
is subjected to any process or activity as mentioned in Section 3 of
PMLA. Therefore, ED could not have increased the proceeds of crime
beyond what was taken as disproportionate assets by the CBI i.e.
1,47,60,497/-. She further submitted that as per the FIR, the figure
mentioned was Rs. 1,53,61,166/-, during the arguments and as per
the written submissions the figure mentioned was Rs. 4,81,16,435/-,
and the figure mentioned as per the affidavit is Rs.4,65,99,635/- which
does not find mention in the complaint.