Benoy Babu v. Directorate of Enforcement

4. The role of the Petitioner has been discussed in detail in the complaint filed by ED and is not been discussed here for the sake of brevity.

B. SUBMISSIOINS ON BEHALF OF THE PETITIONER

5. Sh. Mukul Rohatgi, Sr. Advocate, Sh. Siddharth Luthra, Sr. Advocate with Sh. Madhav Khurana, learned Advocate on behalf of the petitioner have submitted that the petitioner is a mere employee being a Regional Manager of Pernod Ricard India (PRI). It has been submitted that PRI has a global presence and there are several level of employees over the petitioner and the Supreme board of companies is the Board of Directors.

6. It has been submitted that neither the Petitioner nor the Company is an accused in the Chargesheet dated 24.11.2022 filed by the CBI and petitioner was only a witness in the predicate offence, therefore, the petitioner has no role in the main predicate offence.

7. It has been submitted that the petitioner and the company have wrongly been arrayed/added as an accused in the Supplementary Prosecution Complaint dated 06.01.2023 filed by the E.D.

8. Learned senior counsel for the petitioner submitted that the Petitioner is not guilty of money laundering as defined in Section 3 read with Section 2(1)(u) of the Act. It has been submitted that no money in any form or manner has been given to the Petitioner by anybody and the Petitioner has accordingly not “laundered” any money.

9. Reliance has been placed on Vijay Madanlal Chaudhary V/s Union of India reported in 2022 SCC Online SC 929 wherein it was held that it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime.

10. Learned senior counsel for the petitioner further submitted that a conjoint reading of Section 3 of PMLA with Section 2(1)(u) of the PMLA shows that the Section 2(1)(u) defines PoC as that property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. It was submitted that therefore, first there must be scheduled offence, from which proceeds of crime must be generated and it is only that person who assists in the generation of PoC or its concealment, possession, acquisition, use or projection or claiming it as untainted property can be held liable for committing the offence of Money laundering. It has been submitted that the allegation of grant of Corporate Guarantee by PRI to the other accused persons does not fall within the ambit of Proceeds of Crime (PoC) because the act of giving of Corporate Guarantee is not the alleged Scheduled Offence in the present case.

11. Learned senior counsel for the petitioner submitted that it is not the case of the ED that the funds of the Corporate Guarantee were derived or obtained as a result of a criminal activity. It was submitted that the grant of Corporate Guarantee is prior to even grant of the L[7] licence by the Excise Department. Learned senior counsel for the petitioner submitted that role of E.D. commences post the commission of a crime, i.e. to investigate the proceeds generated from a crime and it’s laundering and the Petitioner has no such link.

12. Learned senior counsel for the petitioner submitted that the corporate guarantee of Rs. 200 Crores by the Company was granted through the Board of Directors in favor of 5 retailers. It has been submitted that extension of financial comfort can never be termed as a crime. It has been submitted that the allegation that the hands of Indospirits (Sameer Mahandru-Wholesaler) were strengthened by grant of Corporate Guarantee is baseless. It has been submitted that the Petitioner got no money from anywhere and nor he has passed on any money to anybody. It has been submitted that it is Rs. 200 Crores worth of Corporate Guarantee by itself is not a PoC. This guarantee is based on the balance sheets of the Company. It has been submitted that the wholesaler may or may not sell products of PRI which will result in the profits to the Company and further the sale of products of PRI depends solely on the discretion of the customer.

13. Learned senior counsel for the petitioner submitted that in respect of the allegations of the E.D. that the petitioner got the copy of the draft of Excise Policy before it was announced can also not be termed as an offence under PMLA. It has been submitted that the leakage on media of various things is today an accepted position in society. It has been submitted that even in the ED’s own case that the Excise Policy even before it was announced became viral. It has been submitted that obtaining and being privy to the Policy is not either PoC or laundering thereof. It has further been submitted that the Petitioner officially attended meetings called by the Delhi Government where various stakeholders were present.

14. Learned senior counsel for the petitioner submitted that the M/s Indospirits was authorized by PRI on the basis of L[1] license granted by the Excise Department. The appointment also can neither be termed as PoC and nor does it amount to money laundering. It has been submitted that the infact PRI had in his its comments to the Government had stated that the wholesaler should be a Government agency while the manufacturer and the retailer could be private persons. This plea of the PRI was accepted by the Expert Committee. However, the wholesaler was also made as a private party by the Government.

15. Learned senior counsel for the petitioner submitted that the petitioner is a mere employee in PRI and had no autonomy to take decisions solely at his end. It has been submitted that the E.D. has traversed beyond its jurisdiction as it cannot investigate allegations other than those which form part of the scheduled offence. Reliance has been placed upon Prakash Industries v. ED (II), 2023 SCC Online Del 336.

16. Learned senior counsel for the petitioner submitted that the petitioner is a witness in the scheduled offence and therefore being a witness, it is evident that the Agency investigating the Scheduled Offence has arrived at a conclusion that the Petitioner is in no form or manner involved in the commission of the scheduled offence. It has been submitted that the it is not the ED’s case that any part of the PoC has come to the Petitioner. Reliance has been placed upon: i. TD Tataji v. ED (Order dated 21.11.2022 passed by the Hon’ble Apex Court in Spl. Leave to Appeal Criminal NO. 10360/2022) i. TD Sonia v. ED (Order dated 02.12.2022 passed by the Hon’ble Apex Court in Spl. Leave to Appeal Criminal NO. 10667/2022) ii. Dilip Lalwani v. CBI, CRM. M. No. 50475/2021 (O&M) iii. Emta Coal v. ED,W.P. (C) 3821/2022 iv. Naresh Goyal v. ED, Crl. W.P. 4037/2022

17. It has been submitted that the petitioner has always cooperated in the investigation and is not a flight risk. It has been submitted that the petitioner has no authority to influence the witnesses or tamper with the evidence.

18. The learned senior counsels for the petitioner have placed reliance Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. 2022 SCC OnLine SC 929 and Subramanian Swamy v. A. Raja (2012 9 SCC 257) to buttress the point that merely attending the official meetings as PRI representative at the express invitation of Delhi Excise Department does not constitute any sought of criminality.

19. It has been submitted that in Subramanian Swamy (supra) it was inter alia held that Criminal conspiracy cannot be inferred on the mere fact that there were official discussions between the officers of the MoF and that of DoT and between two Ministers, which are all recorded. It has been submitted that suspicion, however, strong, cannot take the place of legal proof and the meeting.

C. SUBMISSIONS ON BEHALF OF ENFORCEMENT

DIRECTORATE

20. Sh. Zoheb Hossain, learned special counsel for the E.D. submitted that petitioner Benoy Babu had prior knowledge of liquor policy 2021 before it was made public which enabled Pernod Ricard to arrange finances even before the public announcement of the policy to create vehicle which was later on used for generating parking and use of proceeds of crime.

21. Sh. Zoheb Hossain, learned special counsel for the E.D. submitted that petitioner Benoy Babu was able to arrange and provide financial support to two companies (namely M/s Khao Gali and M/s Bubbly Beverages) who had no business at that time when Mr Benoy Babu chose them to give financial support, which were part of South Group and were expected to get L[7] License. It has been submitted that the loan availed by M/s Bubbly Beverages even was further used for cross funding another entity of the South group. The financial support was in form of bank guarantee to these companies. It has been submitted that the financial support to other three companies were made in order to maximize control over retail market. It has been submitted that on the strength of the bank guarantees, the companies took loan of Rs.140 Crore and as per the record, these companies not only availed the loan, but have not repaid full loan till the investigation was taken up by CBI & ED.

22. Sh. Zoheb Hossain, learned special counsel for the E.D. submitted that due to the financial support provided by Pernod Ricard, the 2 out these 5 companies directly got the L[7] license and 1 company used it from cross funding of the EMD of another South Group entity, further not only that, but they were also able to maximize their profit due to tailormade liquor policy which resulted in not only parking of proceeds of crime but also its use by other stake holders including the South Group.

23. Sh. Zoheb Hossain, learned special counsel for the E.D. submitted that there was an involvement of petitioner Benoy Babu in selecting M/s Indo Spirit as wholesale distributor of M/s Pernod Ricard at the instance of another prime accused Vijay Nair which have helped South Group to recover the kickback given to leaders of AAP.

24. Sh. Zoheb Hossain, learned special counsel for the E.D. submitted that despite several complaints, Indospirits was given L-1 License. The letter appointing M/s Indo Spirits as its exclusive distributor to register and sell the brands mentioned in authorisation letter was signed by Sh. Benoy Babu. It is also the case of the ED the petitioner signed the letter even before the formal approval from the PRI.

25. Sh. Zoheb Hossain, learned special counsel for the E.D. submitted that the financial support in the form of corporate guarantee in fact helped in formation of cartel of Pernod Ricard and thus received exponential financial gain. It has further been submitted that the petitioner was deeply involved in the conspiracy of the south group and facilitated their recoupment by his extended retail cartel formed through the financial support provided by M/s Pernod Ricard, which resulted in the huge profits accruing to M/s Indospirits.

26. Learned special counsel for the E.D. has placed reliance upon Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. 2022 SCC OnLine SC 929, Union of India v. Rattan Mallik (2009) 2 SCC 624, State of Gujarat v. Mohanlal Jitamalji Porwal (1987) 2 SCC 364, Y. S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439, Anil Kumar Yadav v. State (NCT of Delhi) (2018) 12 SCC 129, Sunil Dhaiya v. State (Govt. of NCT of Delhi) (2016) SCC OnLine Del 5566 Nimmagadda Prasad v. CBI, (2013) 7 SCC 466, Gautam Kundu v. Directorate of Enforcement (2015) 16 SCC 1 and Rohit Tandon v. Directorate of Enforcement (2018) 11 SCC 46.

D. FINDING AND ANALYSIS

27. The offence of money laundering has been defined in section 3 of the PMLA, which reads as under: “3. Offence of money-laundering.—Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of moneylaundering.”

28. The 'proceeds of crime' has been defined under Section 2 (u) of PMLA, which reads as under: (u) “proceeds of crime” means 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 3 [or where such property is taken or held outside the country, then the property equivalent in value held within the country] 4 [or abroad]; …

29. In this regard the proceeds of crime and the scope and ambit of Section 3 of PMLA has been well laid down in Vijay Madanlal Chaudhary (supra) wherein it has been held as under: “263.Coming to Section 3 of the 2002 Act, the same defines the offence of money-laundering. The expression “moneylaundering”, ordinarily, means the process or activity of placement, layering and finally integrating the tainted property in the formal economy of the country. However, Section 3 has a wider reach. The offence, as defined, captures every process and activity in dealing with the proceeds of crime, directly or indirectly, and 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. This is amply clear from the original provision, which has been further clarified by insertion of Explanation vide Finance (No. 2) Act, 2019. Section 3, as amended, reads thus:

265. To put it differently, the section as it stood prior to 2019 had itself incorporated the expression "including", which is indicative of reference made to the different process or activity connected with the proceeds of crime. Thus, the principal provision (as also the Explanation) predicates that if a person is found to be directly or indirectly involved in any process or activity connected with the proceeds of crime must be held guilty of offence of moneylaundering. If the interpretation set forth by the petitioners was to be accepted, it would follow that it is only upon projecting or claiming the property in question as untainted property, the offence would be complete. This would undermine the efficacy of the legislative intent behind Section 3 of the Act and also will be in disregard of the view expressed by the FATF in connection with the occurrence of the word "and" preceding the expression "projecting or claiming" therein. This Court in Pratap Singh v. State of Jharkhand, enunciated that the international treaties, covenants and conventions although may not be a part of municipal law, the same be referred to and followed by the Courts having regard to the fact that India is a party to the said treaties. This Court went on to observe that the Constitution of India and other ongoing statutes have been read consistently with the rules of international law. It is also observed that the Constitution of India and the enactments made by Parliament must necessarily be understood in the context of the present-day scenario and having regard to the international treaties and convention as our constitution takes note of the institutions of the world community which had been created. In Apparel Export Promotion Council v. A.K. Chopra, the Court observed that domestic Courts are under an obligation to give due regard to the international conventions and norms for construing the domestic laws, more so, when there is no inconsistency between them and there is a void in domestic law. This view has been restated in Githa Hariharan as a, as also in People's Union for Civil Liberties 82, and National Legal Services Authority v. Union of India.

266. In the Core Recommendations of the FATF referred to above, the same clearly mention that the word "and" in Section 3 of the 2002 Act would not be fully in line with the Vienna and Palermo Conventions. This doubt has been ably responded and elucidated by India to the international body by referring to the jurisprudence as evolved in India to interpret the word "and" as "or" in the context of the legislative intent - to reckon any (every) process or activity connected with the proceeds of crime constituting offence of money-laundering. To buttress the stand taken by India before the FATF, reliance has been justly placed on reported decisions of this Court amongst other Sanjay Dutt, which had occasion to deal with the expression "arms and ammunition" occurring in Section 5 of the TADA Act. The Court noted that if it is to be read conjunctively because of word "and", the object of prohibiting unauthorised possession of the forbidden arms and ammunition would be easily frustrated by the simple device of one person carrying the forbidden arms and his accomplice carrying its ammunition so that neither is covered under Section 5 when any one of them carrying more would be so liable. The principle underlying this analysis by the Constitution Bench must apply proprio vigore to the interpretation of Section 3 of the 2002 Act. To the same end, this Court in the case of Ishwar Singh Bindra v. The State of U.P.165, Joint Director of Mines Safety and Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., interpreted the word "and" in the concerned legislation (s) as word "or" to give full effect to the legislative intent.

273. On a bare reading of Section 3, we find no difficulty in encapsulating the true ambit, given the various arguments advanced. Thus, in the conspectus of things It must follow that the interpretation put forth by the respondent will further the purposes and objectives behind the 2002 Act and also adequately address the recommendations and doubts of the international body whilst keeping in mind the constitutional limits. it would, therefore, be just to sustain the argument that the amendment of way or the explanation has been brought about already present words, only to clarity the any" and "including" which manifests the true meaning of the definition and clarities the mist around its true nature.”

30. Section 45 of PMLA provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973, no person accused of an offence under this Act shall be released on bail or on his own bond unless—(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. It is also pertinent to mention here that Section 45 also provides that twin conditions are in addition to the limitation under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail. It is settled proposition Section 45 PMLA do not impose an absolute restraint on the grant of bail and the court at this stage is to prima facie consider whether applying the standard of broad probabilities the material against the applicant would result in conviction. It is also a settled proposition that at this stage the Court is only required to examine the matter to find out whether the accused was possessed of the requisite mens rea. It is also no longer res integra that the court is not required to record a positive finding that the accused had not committed the offence under the Act. It is also a settled proposition that the court at this stage is not required to weigh the evidence meticulously. The court is only required to arrive at a finding on the basis of broad probabilities. It is also a settled proposition that the court is not required to hold a mini trial at this stage and is required to examine the case on the basis of broad probabilities. It is also to be kept in mind that while exercising the jurisdiction under Section 45 of PMLA, the court is required to take into consideration the limitations prescribed under Section 439 Cr.P.C.

31. In regard to the limitation under Section 439 Cr.P.C. in Kalyan Chandra Sarkar vs Rajesh Ranjhan (2004) 7 SCC 528 it has been held as under: “The law in regard to grant or refusal of bail is very well settled. The court granting bail should exercise its discretion in a judicious manner and not as a matter of course. Though at the stage of granting bail a detailed examination of evidence and elaborate documentation of the merit of the case need not be undertaken, there is a need to indicate in such orders reasons for prima facie concluding why bail was being granted particularly where the accused is charged of having committed a serious offence. Any order devoid of such reasons would suffer from nonapplication of mind. It is also necessary for the court granting bail to consider among other circumstances, the following factors also before granting bail; they are: (a) The nature of accusation and the severity of punishment in case of conviction and the nature of supporting evidence. (b) Reasonable apprehension of tampering with the witness or apprehension of threat to the complainant.

(c) Prima facie satisfaction of the court in support of the charge.”

32. Before proceeding further, it is also necessary to remind the scope of jurisdiction to be exercised while granting bail in the economic offence. The Hon’ble Supreme Court in the case of Y.S. Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439 528 held as under: “Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations."

33. In Nimmagadda Prasad v. CBI, (2013) 7 SCC 466, it was inter alia held as under: “Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep-rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as a grave offence affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.”

34. The bare reading of Section 3 of PMLA would make it clear if a person is involved in any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty offence of money laundering. Therefore, it is not necessary to attribute section 3 of the PMLA that the alleged person must have acquired or in possession of the proceeds of the crime. If a person has actually been involved in any process or activity connected with the proceeds of crime, it would be sufficient to prosecute him under Section 3 of PMLA. The argument that the proceeds of crime have not been received or the proceeds of crime have not been recovered and therefore section 3 of the PMLA will not come into operation is totally fallacious and is liable to be rejected. It is necessary to keep in mind that such crimes are committed under a deep conspiracy and under the dark cover. An act may not be an offence at all if it is done in relation to any process or activity not connected with the proceeds of crime, but if such an act is done in relation to any process or activity connected with the proceeds of crime it will certainly be an offence under Section 3 of PMLA. The scope and ingredients of offence of money laundering under Section 3 of PMLA has been defined in Vijay Madanlal Chaudhary (supra).

35. The present case is very peculiar in nature and may not have any parallel factual matrix. In brief, the allegations in the predicate offence was that the conspiracy was hatched between the political head and certain persons which included an individual allegedly representing the government with the manufacturer, liquor wholesaler and retailer. The conspiracy allegedly was hatched to introduce a new excise policy to benefit certain individuals who had given advance kickbacks to the AAP. The prominent players if we put names to the faces are Mr.Manish Sisodia, the then Deputy Chief Minister and Excise Minister, Mr.Vijay Nair, purportedly Media Incharge of AAP, Sameer Mahendru. Mr.Amit Arora, Mr.Dinesh Arora, Mr.Abhishek Boinapally, Mr.Sharad Reddy, Mr.Butchi Babu, Mr.Binoy Babu and others. This court is conscious of the fact that the investigation relating to the conspiracy to frame the excise policy allegedly with malafide intention and alleged misuse of official position was the subject matter of the CBI in which the charge-sheet has already been filed by the CBI. However, in view of the fact that allegedly the basic intention behind framing the new excise policy was to recoup the advance kickbacks and to further gain undue advantage from the excise policy, the facts are to be taken in totality.

36. Presently, this court is considering the bail application of the abovesaid accused person namely Mr.Benoy Babu, who was arrested for the offence under Section 3 of the PMLA. For the purpose of clarity Mr.Bonoy Babu was an employee of M/s Pernod Recard. Similarly, the allegations against Benoy Babu, an employee of M/s Pernod Recard is that he was also in a deep conspiracy from the stage of formulation of policy and extended corporate guarantee of 200 crores to enable the other stakeholders to generate the proceeds of crime.

37. The plea raised by the defence is the ED has no material other than an inconsistent and unreliable statement of either co-accused or the public servants. The defence has raised a plea that in absence of any independent corroboration or material on record to substantiate such statements under Section 50 PMLA, the court on the basis of probability should record a finding that accused persons are not guilty of such offence. The defence, during the course of their arguments, have repeatedly stated that the ED has cooked up the case merely on the basis of whims and fancies and there are contradictions in the testimonies of the witnesses. The defence has assailed the testimony of approver Dinesh Arora and has submitted that Dinesh Arora has made the statement under the influence of ED and to protect himself. It is also the case of the defence that the public servants who are under the direct control of Hon'ble LG, who is the complainant in the present case, have made their statements only to save their skin. In respect of Binoy Babu, Mr. Mukul Rohtagi and Mr.Siddharth Luthra, learned Senior counsels have submitted that he was a low-rank employee of Pernod Recard and had no authority to take decisions. The plea was that in any case, a grant of corporate guarantee cannot be taken as a process or an activity connected to the proceeds of crime.

38. This court is fully conscious of the fact that personal liberty is a sacrosanct right and pre-trial detention cannot be taken as a punitive measure. However such individual right has to be balanced with the rights of society at large. This court is also conscious of the fact that though the statements recorded under Section 50 PMLA are admissible in evidence but their evidentiary value has to be weighed at the time of trial. Mr. Mukul Rohatgi and Mr. Siddharth Luthra, learned senior counsels for Binoy Babu have argued that the ED is basing its case only on the statements of the witnesses recorded under Section 50 of PMLA. In case of Binoy Babu, the plea has also been raised that since he is a witness in the predicate offence and he could not have been made an accused in the PMLA case. The present case arises out of an alleged conspiracy wherein the government framed an excise policy with a malafide intention to recoup the kickbacks received in advance from certain individuals and to further generate the ill money from the liquor trade. There are witnesses and witnesses on record to show that certain outsiders were actively participating from the stage of drafting and formulation of the policy. The reference to the statements of the witnesses have been made during the course of recording the submission of the learned defence counsels and learned counsel for ED.

39. The statements of the witnesses clearly indicates that some extraneous factors were working since the time of conceptualization, formulation and drafting of the excise policy. The allegation regarding generating of the emails in support of the excise policy also raises the red flag that everything was not being done in a transparent and bonafide manner.

40. This court at this stage, would restrain itself to make any comment further on this as the trial is yet to take place. The option before this court is either to go into the meticulous examinations of the witnesses as being argued by the learned defence counsels or to take into account the statements recorded under Section 50 of PMLA by the ED. It is correct that the case of ED is based on the statements under Section 50 PMLA cannot be taken as gospel truth but at the same, the court has to take into account the legislative intent behind enacting Section 50 PMLA. The statements under Section 50 PMLA are not akin to Section 161 Cr.P.C. The bare perusal of Section 50 makes it clear that these are deemed to be judicial proceedings. There are consequences for making a false statement or not complying to the summons under Section 50 of PMLA as provided under Section 63 of the PMLA. This court at this stage cannot go into the probative value of the witnesses nor can it meticulously examine those facts. The involvement of the third parties in the formulating and drafting of the policy certainly points at mens rea.

41. The jurisdiction of bail is a discretionary jurisdiction. But this discretion has to be exercised on the settled principles in a judicial manner. The court has to bring in its judicial experience to arrive at a conclusion, which should be rational and logical. It is pertinent to mention that the accused and complainant/prosecution are entitled to know the reasons on the basis of which their bail application has been decided, but at the same time such reason should not be detailed in such a manner that it may prejudice the trial.

42. The investigation under PMLA by the E.D. qua Benoy Babu as stated by E.D. has revealed as under:

(i) Pernod Ricard, one of the accused entities, through

(ii) The scheduled offence relates to a criminal conspiracy relating to the irregularities in framing and implementation of the excise policy with an intention to extend undue favours to the licences and diversion of undue pecuniary benefits collected from liquor licences to accused public servants and formation of cartel between manufacturers, wholesalers and retailers. The applicant is involved in at least 3 direct ways in the process or activity relating to generation of proceeds of crime. a. Benoy Babu is directly involved in Pernod Ricard wholesale business going to Indo Spirits (L[1]). b. Benoy Babu signed the approval letter for making Indo Spirits as its exclusive distributor even before the formal approval was received from the country head. c. Benoy Babu also was aware that no wholesaler can hold L[7] retail licence and despite being aware of Sh Sameer Mahandru being owner of Khao Gali and Bubbly Beverages to whom corporate guarantee was given without any collateral gave Pernod Ricard's distribution business to Sameer Mahandru's Indo Spirit. d. When Pernod Ricard hosted a diner at Taj Mansingh Delhi all members of super cartel were present in this meeting and the agenda of meeting was celebration of maximum retail zone and in principal agreement of Indo Spirit getting Pernod Ricard wholesale business. Sh Benoy Babu coordinated with Sh Arun Pillai (representative of South Group) for making Sh Sarath Reddy and Sh MSR the event hosted by Pernod Ricard. e. The role of Benoy Babu in the cartelization with retailers by making investment in the guise of corporate guarantee was Benoy Babu's brain child by granting financial assistance of 200 crore to select retailers including co-accused Khao Gali and Bubbly Beverages would ensure a larger market share. f. The fact that on 02.06.2021 a month before the announcement of excise policy a presentation was made by Benoy Babu, the plan to form cartel and control retail businesses was given as a slide and this was inserted on his specific instructions. g. Khao Gali is an accused in these complaints filed by ED and one of the successful retail bidders involved in the larger conspiracy and was part of the super cartel. Khao Gali's name features in the FIR of predicate agencies. h. The payment of corporate guarantee ensured that the retailers would buy 35% stocks from PRI which in turn would increase PRI market share 37% over a period of 3 years. This is corroborated by Bimal Khanna Strategy Head of PRI as well Benoy babu in his statement. i. The CFO of Pemod Ricard India, Richa Singh deposed that there should have been written request from the parties, due diligence should have been done and collateral should have been done, none of which was done. j. Furthermore, Benoy Babu was responsible for influencing policy formulation by sending 4000 doctored emails to government authorities by showing fake approval towards the policy.

(iii) The policy required all manufactures to register at the lowest EDP net of all discount/commission/rebate of any nature whatsoever, however, Pernod Ricard by way of conspiracy has got their price fixed without deducting the discounts/rebates they offer thus getting a much higher price fixed for their brands and thus earning a huge additional profit which was ineligible to them and should have been passed to the consumers as lower MRP. If the manufacturer had registered the brands at actually lowest EDP, the capacity of the manufacturers to give out credit notes would have been limited. However, Pernod Ricard paid Rs. 131.[9] Cr as credit notes to the retailers via the wholesalers, where the benefit of discounts was shifted to the retailers instead of the actual consumer at large.

(iv) In order to generate kickbacks in perpetuity, a novel method of recovery of the kickbacks formulated through passing of Credit Notes. Ordinarily the credit notes are passed to the person who had direct nexus with or has sold the goods, however, in this business, the manufacturers were giving credit notes to the retailers with whom they had no direct transactions with. Further, there was no apparent reason to give credit notes to businesses which are minting money with MRP being 3 times of the cost and having profit margin of 185% approx.

43. The communication between Benoy Babu, Manoj Rai and Vijay Nair dated 01.08.2021 and 09.08.2021 also reveals that the petitioner was in conspiracy with Vijay Nair and other and the south group. It has also come on the record that petitioner had also travelled to Mumbai to meet Vijay Nair in context of appointing M/s Indo spirits as M/s PRI distributors. It has also come on record that as per the policy no L[1] wholesaler can hold L[7] retail license. The E.D.’s case is that Benoy Babu was fully aware that Sameer Mahendru is the actually beneficiary behind M/s Khao Gali and M/s Bubbly Beverages and despite that Binoy Babu in line with Vijay Nair directions facilitated the Pernod Ricard distribution business to Sameer Mahendru's Indospirits. The case of the E.D. is also that the Benoy Babu is directly involved in the generation of PoC of Rs.59.77 Cr which is the profit accrued to Pernod Ricard from the sales made to the retail zones of the cartel created via conspiracy with the South Group and Vijay Nair and with other companies to whom he provided financial support. Similarly, Benoy Babu was also directly and knowingly assisted in the generation of PoC of Rs. 163.[5] Cr which is the enhanced profit of Pernod Ricard due to increase in market share as a result of conspiracy with co-accused Vijay Nair.

44. It is a matter of the record that petitioner Benoy Babu was not only in constant touch with Vijay Nair but also to south group. It is also relevant to note that PW-Vimal Khanna in his statement dated 18.10.2022 has stated that the name of parties for financial assistance was given by Benoy Babu. On account of the purpose of granting corporate guarantee was to increase the market share in the operating segment from 15% to 35% which resulted in the increase in the profit of the Pernod Ricard Rs.33.[7] Crore (01.11.2020 to 31.08.2021) to 197.[2] Crore (16.11.2021 to 31.08.2022), which shows a huge increase of 163.[5] Crore (i.e. 485%).

45. It has also come on the record that the corporate guarantee of Rs.200 Crore was given without following any due diligence which indicates to the conspiracy. The investigation also reveals that Benoy Babu was a part of conspiracy to send 4,000 e-mails to the authorities through media agencies hired by ISWAI and most of these emails were sent by creating email Ids so that the same may be projected as sent by general public to the govt. authorities. It is also come on the record that Benoy Baby was in possession of the draft policy on 31.05.2021 whereas the policy was made public in July 2021. Further, he has forwarded the same to Manoj Rai (his senior in Pernod Ricard) on whatsapp on 31.05.2021 this was available in the phone of Manoj Rai but the same is not available/deleted by Benoy Babu from his phone. It has been submitted that the petitioner had stated that he had received the same from Aman Dhall. However, it is come on record that petitioner selectively deleted his individual whatsapp chats with Sameer mahandru of Indospirits for the period to 26.10.2021.

46. As per the E.D., the material evidences against Benoy Babu are as follows: i. Digital evidence of chats dated 28th March, 2021 wherein Sh Aman Dhall asked Benov Babu if he had sent the recommendations to Sh Vijay Nair, which reflects that Benoy Babu was involved in the formulation of Excise Policy. ii. Digital evidences in form of email communication dated 31.05.2021 of Sh. Benoy Babu, PRI which revealed that he was in possession of confidential documents of Excise Department including the GoM report (which was never officially released to the public) and the Draft Excise Policy of Delhi (which was officially released after more than a month. iii. Digital evidences in form of WhatsApp chat between Aman Dhall and BenoyBabu wherein it is seen that Benoy Babu has deleted the draft policy received from Aman Dhall. iv.Digital evidence in the form of WhatsApp chat between Arun Pillai and Benoy babu dated 04.09.2021, wherein Sh Arun Pillai has sought assistance from Benoy Babu for recruiting a CEO for the 5 zones of Sarath Reddy. v.Digital evidences in form of mail dated 20.05.2021 wherein Benoy Babuhas sent sensitive information like recommendation of changes by Hon'ble Lt. Governor to the policy and information regarding reworking of policy and submission to Hon'ble Lt. Governor for final approval to other employees of PRI and thereafter asked "Pls ensure we keep information in this mail strictly confidential" vi.Digital evidences in form of mail attaching the PPTs wherein it is mentioned that the Rs. 200 cr. (in the form of Corporate Guarantee) is an investment by Pernod Ricard in retail business. vii. The E.D. has also relied upon the statement of Dinesh Arora dated 18.11.2022 and statements of Arun Pillai dated 18.09.2022, 02.10.2022 and 08.12.2022 to highlight the role of petitioner Benoy Babu.

47. The Enforcement Directorate has alleged that Benoy Babu was playing a key role in ensuring that Pernod Ricard L[1] license was given to Indospirits. The ultimate aim was to make Indospirits a vehicle for recoupment of the advance kickback paid to the AAP leaders on the directions of Vijay Nair.

48. It is correct that extending a corporate guarantee per se may not be a crime. However, if it is connected with any activity or process connected with the proceeds of crime, it would inevitably come within the purview of money laundering under section 3 of PMLA. In this regard, a reference can also be made to Vijay Madanlal Chaudhary (supra) wherein it has inter alia been held that while construing the expression “and” in Section 3 as “or”, to give full play to the said provision so as to include “every” process or activity indulged into by anyone, including projecting or claiming the property as untainted property to constitute an offence of money-laundering on its own. It was further inter alia held that the act of projecting or claiming proceeds of crime to be untainted property presupposes that the person is in possession of or is using the same (proceeds of crime), also an independent activity constituting offence of money-laundering.

49. The Learned Special judge in it’s order prima facie opined that Benoy Baby was the brainchild behind the decision of M/s Pernod Ricard for furnishing corporate guarantees of Rs. 200 crores for the loans availed by other members of the cartel from HSBC bank and this was considered to be an investment to take control of the retail liquor business and to achieve highest market share in the sale of liquor brands by the company and thus, to ensure that the retail vendors which were part of the above cartel kept at least 30% stock of the liquor brands owned by this company. It was noted that the above-said corporate guarantees were given without any collateral security nor any formal requests in this regard made. Further, Ld. Special Judge observed that M/s Pernod Ricard never issued such types of corporate guarantees before and it was at the instance of the Benoy Baby that these guarantees were issued to HSBC bank. Further, the applicant namely Benoy Baby was found to be actively involved in the formulation of a cartel between M/S Pernod Ricard, Wholesaler M/s Indospirits, and the nine other retail entities of other co-accused persons Sameer Mahendru, P.Sarath Chandra Reddy and Raghav Magunta.

50. Further, it was observed by the Ld. Special Judge that the applicant namely Benoy Baby was the signatory in the capacity of attorney of M/s Pernod Ricard to the documents pertaining to the grant of licenses to M/s Indospirit, and it was the applicant/accused who performed all the operations in respect to the appointment of wholesaler, furnishing corporate guarantees. Even though he was not the Director or major shareholder in the M/s Pernod Ricard, it was observed that in terms of the provisions contained under section 70 (2) of the PMLA he is equally liable for the offence of money laundering committed in the present case, apart from the company itself or any of its Directors, Secretaries or other Managers connected with the commission of the said offence, directly or indirectly. Further the Ld. Special Judge observed that like the other co-accused persons, the applicant/accused also came into the possession of the draft policy before its official publication and is alleged to have been instrumental in tampering with the evidence by way of destruction of his own mobile phones. Further, documentary evidence including call detail records and WhatsApp chats, etc. is also alleged to have surfaced, besides the other evidence, to show his involvement in the commission of the alleged offence of money laundering as a member of the said cartel. Allegedly applicant/accused is further being associated with some other amounts of proceeds of crime and the total proceeds being attributed to him are stated to be around Rs. 563 crores. Further, the Ld. Special Court, PMLA, vide the same order, also rejected the bail applications of Sameer Mahendru, P. Sarath Chandra Reddy, Vijay Nair, and Abhishek Boinpally.

51. As discussed above, the accused persons in the present case acting in furtherance of the conspiracy circumvented the policy and got framed the policy in such a manner to continuously generate and channel illegal funds. The allegations are that deliberate loopholes were left to facilitate illegal and criminal activities.

52. I consider that at this stage, there is sufficient material on the record that the petitioner was indulging or knowingly assisting in process or activity connected with the proceeds of crime and it cannot be said that there are reasonable grounds for believing that petitioner is not guilty of such offence and he is not likely to commit any offence well. It was allegedly a well spun conspiracy to generate P.O.C. In such cases every person who is connected with any process or activity relating to P.O.C. cannot avoid his/her responsibility. The allegations are very serious in nature. Learned Special Judge has dismissed the bail application by a well reasoned order and there is no ground to interfere in the same. Hence, the present bail application stands dismissed as the petitioner has failed to pass the twin conditions as provided under Section 45 of PMLA.

DINESH KUMAR SHARMA, J JULY 03, 2023