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JSA Newsletter | Anti-Corruption, White Collar Crimes and Investigations Practice | October 2023

Please click here to download the Newsletter as PDF.

This edition of the Anti-Corruption, White Collar Crimes and Investigations newsletter sets out the key developments in India’s enforcement, regulatory and judicial landscape for the period July-September 2023. These developments include notable enforcement actions, and updates on the G20 New Delhi Summit and G20 Anti-Corruption Ministerial Meeting held in India. This issue also sets out legislative developments such as amendments to the Goods and Services Tax (“GST”), Prevention of Money Laundering Act 2002 (“PMLA”) as well judicial pronouncements in the white-collar crimes practice.

Regulatory Developments

India hosted the G20 summit on September 9^th and 10^th of 2023 at the end of which the “G20 New Delhi Leaders’ Declaration” (“Delhi Declaration”) was released. The Delhi Declaration unequivocally recognized fighting corruption and money laundering as one of the main priorities of G20 nations. The declaration underscored the commitment of the member states to FATF and global standards for transparency and asset recovery, while endorsing various G20 High Level Principles related to international cooperation and preventing corruption.

The third and final G20 Anti-Corruption Ministerial Meeting was held in Kolkata on August 12, 2023, which saw the endorsement of multiple G20 High Level Principles against corruption and money laundering, adoption of the G20 ACWG Accountability Report on Mutual Legal Assistance and detailed discussions on gendered dimensions of corruption.

Enforcement Landscape

The Enforcement Directorate (“ED”) in July 2023 arrested a Chhattisgarh cadre IAS officer in connection with a coal levy and mining revenue case pursuant to raids across 18 (eighteen) locations. The officer who is currently the director of the state’s agriculture department previously served as the collector of coal-rich districts where the alleged offences took place.

September was a particularly active month for the authorities, with some key enforcement actions:

The ED arrested Jet Airways founder Naresh Goyal on September 1, 2023 after questioning. Goyal is accused of defrauding Canara Bank of approximately INR 540,00,00,000 (Indian Rupees five hundred and forty crores). A money laundering case against Goyal was filed on the basis of a previous Central Bureau of Investigation (“CBI”) case filed against him in May 2023.
The CBI arrested the executive director and a chief general manager of Gas Authority of India Ltd of Gas Authority of India Ltd along with 3 (three) private persons in an alleged bribery case of INR 50,00,000 (Indian Rupees fifty lakh).
The owner and director of M/s Met Technologies Pvt Ltd was arrested by the ED for allegedly operating an illegal call center from Kolkata’s Salt Lake area engaged in targeting people by offering them bogus tech support, sham loan offers and deceptive sales via counterfeit mobile apps domestically and internationally.
The ED filed a chargesheet under the PMLA against Akshaya Gold Farms and Villas India and its promoter-directors accused of running a Ponzi Scheme defrauding lakhs of investors of hundreds of crores. The ED initiated probe on basis of an FIR against the firm for cheating people and working without a permit from the RBI and SEBI.

Legislative Developments

The Centre issued a notification dated July 7, 2023, to bring Goods and Services Tax Network (“GSTN”) under PMLA. The order aims to plug tax evasion by facilitating sharing of information or materials in possession of ED and GSTN and enabling them to check any violation of GST provisions such as fake input tax credit, fake invoices etc.
Centre issued a notification dated September 4, 2023, amending the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Key changes brought in by the amendment are:
- Only an officer at the management level can now be appointed as the ‘Principal Officer’;
- The threshold for beneficial ownership of a company has been reduced from 15% to 10%. The amended rule provides that partners with a 10% stake in a firm will be considered as beneficial owners;
- To broaden the scope of beneficial owners, a person ‘who exercises control through other means’ would also be considered a beneficial owner provided “control” includes the ‘right to control the management or policy decision’;
- In case of a trust, the reporting entity shall ensure that trustees disclose their status at the time of commencement of an account-based relationship or when carrying out specified transactions.
The Center issued a notification dated October 17, 2023, further amending the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Key changes brought are:
- Every reporting entity that is a part of a group shall implement group wide programs against money laundering and terror financing. This includes group wide policies for information sharing as well as implementation of obligations under Chapter IV of PMLA;
- On satisfaction of the principal officer of a reporting entity that a transaction is suspicious, he may furnish such information in writing by fax or email to the Director of ED; and
- The amendment creates an obligation on the Directors, Officers and employees of reporting entities to ensure that maintenance of records and furnishing of information to the Director is kept confidential.
On August 12, 2023, the Central Government published the Jan Vishwas (Amendment of Provisions) Act, 2023 (“Jan Vishwas Act”). The Jan Vishwas Act will come into force on such date as the Central Government may appoint by notification in the Official Gazette. The Jan Vishwas Act decriminalizes 180 (one hundred and eighty) offences across various laws including the PMLA. The Jan Vishwas Act seeks to introduce changes to Part A of the schedule under the PMLA that lists offences and its penalties under various acts. All scheduled offences under Environment Protection Act, 1986, Air (Prevention and Control of Pollution) Act, 1981 have been removed from the Schedule to the PMLA by virtue of the amendment. Some specific offences such as penalty for falsely representing a trademark as registered and penalty for breach of confidentiality and privacy (under the IT Act, 2000) have also been removed.

Judicial Developments

Senthil Balaji v. State represented by Deputy Directors and Ors.[1]

The Supreme Court of India (“Supreme Court”), while relying on Vijay Madanlal Choudhary v. Union of India & Ors. opined on various aspects of the PMLA:

- Writ of habeas corpus will not be maintainable in cases of detention by ED in cases under PMLA. The legislature has, in its wisdom, created the necessary safeguards in PMLA for an arrestee, keeping in mind his liberty, and need for external approval and supervision. Therefore, such writ will only be maintainable when there is a non-compliance of the mandatory provisions along with a total non-application of mind.
- Compliance of Section 41A of the Code of Criminal Procedure, 1973 (“CrPC”) is not mandatory in PMLA cases so long as procedure laid down under Section 19 of PMLA is adhered to.
- The maximum period of 15 (fifteen) days police custody under section 167 of CrPC is to be applied to the entire period of investigation – 60 (sixty) or 90 (ninety) days, as a whole. The word ‘custody’ used in Section 167(2) of CrPC would include not only police custody but also custody of other investigating agencies including the ED.
- It is the bounden duty of the authorized officer to record the reasons for his belief that a person is guilty and needs to be arrested.
- Section 167(3) of CrPC warrants a magistrate to record reasons by speaking and reasoned order while granting remand. When a Magistrate remands an accused to an authority under the PMLA, the safeguards under Section 19 of PMLA have to be followed.
- The Court has referred the issue as to whether police custody or remand under Section 167(2) of CrPC can be restricted to 15 (fifteen) days to a larger bench for re-consideration.
Ameena Begum v. State of Telangana & Ors.[2]

The Supreme Court reiterated the principles applicable while deciding the constitutionality of orders of preventive detention and laid down the following criteria to test the legality of such orders:

- There has to be satisfaction of the detaining authority upon which validity of exercise of power of preventive detention is predicated;
- The detaining authority has to apply its mind to all relevant circumstances and is required to not base its satisfaction on extraneous material. The satisfaction is required to be based on rationally probative material and statutory mandate;
- The detaining authority has to apply its mind independently and exercise power for a proper purpose;
- Non-application of mind by the detaining authority;
- The satisfaction has to be arrived at bearing in mind existence of a live and proximate link and past conduct and the need to detain the detenue; and
- Timelines under the law are required to be adhered to.
Central Bureau of Investigation v. R.R. Kishore & Ors.[3]

In this case, the issue before the Supreme Court was whether Section 6A of the Delhi Special Police Establishment Act, 1946 (“DSPE Act”) being held unconstitutional would have a retrospective effect. Relying on Article 13 of the Constitution of India, the Court held that once an act is held unconstitutional, it is required to have retrospective effect. Therefore, the judgment in the case of Subramanian Swamy v. Central Bureau of Investigation (“CBI”) was held to apply retrospectively.

For a detailed analysis, please refer to the JSA Prism of October 13, 2023.

Sarangapani v. State Of Andhra Pradesh[4]

The Supreme Court held that once undue advantage i.e., any gratification whatever, other than the legal remuneration is proved to have been accepted by a public servant, the Court is entitled to raise the presumption under Section 20 of the Prevention of Corruption Act, 1988 (“POCA”) that he accepted the undue advantage as a motive or reward under Section 7 of POCA for performing or to cause the performance of a public duty improperly or dishonestly.

Pankaj Bansal v. Union of India & Ors.[5]

The Supreme Court, while relying on Vijay Madanlal Choudhary v. Union of India & Ors. and V. Senthil Balaji v. State represented by Deputy Directors and Ors. held as follows:

- In terms of Section 19(3) of PMLA, Section 167 of CrPC would necessarily have to be complied with once an arrest is made under Section 19 of PMLA.
- Court issuing the remand has a duty to verify and ensure that the conditions in Section 19 of PMLA are duly satisfied and the arrest is valid and lawful.
- Accused person will need to be apprised of the grounds of arrest and the reasons to believe his guilt under PMLA. However, it is not mandatory for the accused to be supplied with all the material that is forwarded to the Adjudicating Authority under Section 19(2) of PMLA.
Ambuj Hotels & Real Estate Pvt. Ltd. v. Central Bureau of Investigation[6]

The Delhi High Court has said that in an offence involving private persons as well as public servants, mere lack of sanction to prosecute a public servant under Prevention of Corruption Act would not defeat proceedings otherwise maintainable against private persons.

Manthena Srinivasa Raju v. Directorate of Enforcement, 2023 SCC OnLine TS 2822

The Telangana High Court held that to constitute an offence of money laundering, the Enforcement Directorate must prove a reasonable basis to believe that the offence has been committed and generation of direct or indirect crime proceeds as a result of criminal activity which can be related to the offence. The Court interpreted the phrase ‘reason to believe’ enshrined in PMLA to not merely mean suspicion, gossip or humour. It was held that there must be some material to suggest the formation of conclusion. The reasons to believe must be founded on sufficient material and it is not on basis of suspicion, but on basis of some evidence.

Other Developments

Former Cognizant President Gordon Coburn and former Chief Legal Officer Steven Schwartz have been charged with violating the US Foreign Corrupt Practices Act (FCPA) over an alleged bribe of $2.5 million paid to government officials in Chennai for construction of Cognizant’s campus.

In September, the Albemarle Corporation agreed to pay more than $ 218,000,000 (US Dollars two hundred and eighteen million) to resolve investigations by the United States Department of Justice and SEC. Albemarle, admitted to engaging in paying bribes to government officials in Vietnam, Indonesia, and India between 2009 and 2017 aimed to secure and maintain chemical catalyst contracts with state-owned oil refineries.

This Newsletter has been prepared by:

Rupinder Malik
Partner

Kumar Kislay
Partner

Archit Sehgal
Associate

Vedika Gandhi
Associate

Ridhima Sharma
Associate

For more details, please contact [email protected]

[1] 2023 SCC OnLine SC 934

[2] 2023 SCC OnLine SC 1106

[3] 2023 SCC OnLine SC 1146

[4] 2023 SCC OnLine SC 1200

[5] 2023 SCC OnLine SC 1244

[6] (2023) 3 HCC (Del 242)

Tags Anti-Corruption, GST, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, White Collar Crimes

NFRA’s new guidelines: Auditors mandated to proactively report corporate fraud

The Government wants to tackle the menace of corporate fraud head-on and there could be more such measures on their way soon

The dark underbelly of the otherwise vibrant corporate world comes to the forefront whenever allegations or investigations of financial irregularities, fraud, or corporate governance issues make headlines. The infamous Satyam scandal is a prime example, which sent shockwaves through India Inc. and reminded us that even the most successful companies can be brought down in a blink of the eye due to allegations pertaining to corporate fraud.

Please click here to read the full article by Kartik Jain and Debottam Chattopadhyay, published in ET Edge Insights.

Tags Corporate, Corporate Governance, Frauds, Investigation, JSA, Leading Law Firm, Leading Lawyers

India: White-Collar Crime

In summary

This article offers an overview of India’s white-collar crime landscape, recent regulatory developments and enforcement measures. It examines the central legislation governing white-collar offences and explores judicial trends in interpreting and expanding financial crime laws. The article also delves into penalties for contravention, international case studies concerning Indian subsidiaries, and the obligations and risks that companies face in relation to white-collar crime and compliance within the country.

Discussion points

Overview of legal framework governing white-collar crime in India
Penal consequences for violations of key laws
Judicial precedents that have shaped the jurisprudence of white-collar crime regulations
Key developments in laws and regulations

Please click here to read the full publication by Rupinder Malik, published in GIR.

Tags Anti Corruption, JSA, Leading Law Firm, Leading Lawyers, Legislation, Regulatory Developments, White Collar Crime

JSA Prism | Jan Vishwas Amendment Bill | August 2023

Please click here to download the Prism as PDF.

The Government of India passed Jan Vishwas (Amendment of Provisions) Bill, 2023 (“Jan Vishwas Bill”) on August 2, 2023. The Jan Vishwas Bill aims to boost ease of doing business and ease of living. Jan Vishwas Bill is an extension of Jan Vishwas (Amendment of Provisions) Bill, 2022 which was first introduced before the lower house of the Parliament. The 2022 Bill was subsequently referred to the Joint Committee for detailed examination, which gave its report early this year, pursuant to which Jan Vishwas Bill was passed by the Parliament.

Highlights of Jan Vishwas Bill

The main objective of the Jan Vishwas Bill is to decriminalize minor offences that do not involve any harm to the public interest or national security and replace them with civil penalties or administrative actions.
For effective implementation of the Jan Vishwas Bill, certain measures have been proposed such as:
Periodic increase in quantum of fines and penalties;
Revisions of existing fines and penalties;
Establishment of Adjudicating Officers; and
Establishment of Appellate Authorities.
Jan Vishwas Bill aims to decriminalise provisions of 42 (forty two) central acts, the list of which can be found here.
The Jan Vishwas Bill has proposed revisions inter alia to the following legislations:
The Information Technology Act, 2000; and
The Payment and Settlement Systems Act, 2007;

Information Technology Act, 2000

Jan Vishwas Bill proposes to introduce revised monetary penalties and decriminalise penalties under the Information Technology Act, 2000 (“IT Act”). Some of the key provisions that would be amended once the Jan Vishwas Bill is implemented are as follows:

Services by an intermediary under lawful contract: Section 72-A of the IT Act stipulates both punishment and penalty for an intermediary which is providing services under a lawful contract and has secured access to personal information of a person with the intent to cause wrongful loss or wrongful gain without such person’s consent.

Jan Vishwas Bill has proposed to decriminalize this provision and instead propose penalties up to INR 25,00,000 (Indian Rupees twenty five lakhs).

Omission of Section 66A: The Jan Vishwas Bill seeks to omit Section 66A of the IT Act in full. Section 66A of the IT Act provides punishment for sending offensive messages through communication service or a computer resource. If a person sends any information that (a) causes annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred or ill will – knowing such information to be false; (b) is grossly offensive or has menacing character – such person is punishable with imprisonment of up to 3 (three) years.

Once the Jan Vishwas Bill is implemented, a person who (a) causes annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred or ill will – knowing such information to be false; (b) is grossly offensive or has menacing character, will be punishable in accordance with Section 45 (described below) of the IT Act.

Preservation and retention of data: Section 67-C of the IT Act mandates an intermediary to preserve and retain data as the Government may specify. In case an intermediary fails to retain such information, he/she/it may be punishable with imprisonment up to 3 (three) years and a fine.

Jan Vishwas Bill has proposed to remove the criminal punishment under this provision of the IT Act and impose a monetary penalty up to INR 25,00,000 (Indian Rupees twenty five lakh).

Powers with CERT-In: Section 70-B empowers the Government to appoint the Indian Computer Emergency Response Team (“CERT-In”) pursuant to which CERT-In is entitled to request information from any service provider; intermediary; data centres, body corporate or person. In case they fail to provide the requested information, they must be punishable with imprisonment of 1 (one) year or a fine of INR 1,00,000 (Indian Rupees one lakh only).

Jan Vishwas Bill has proposed to decriminalise this provision and instead include a hefty monetary penalty of INR 1,00,00,000 (Indian Rupees one crore only).

Suspension of license: Section 33 of the IT Act states that a certifying authority whose license is suspended or revoked must surrender its license immediately. In case a certifying authority fails to surrender its license, it must be punishable with imprisonment up to 6 months or a fine up to ten thousand rupees or both.

Jan Vishwas Bill has proposed to limit this non-compliance to a fine of INR 5,00,000 (Indian Rupees Five Lakhs Only).

Residuary Penalty: Section 45 of the IT Act stipulates that for any non-contravention of the IT Act or rules thereunder for which no separate penalty is provided, a person must be liable to pay compensation up to INR 25,000 (Indian Rupees Twenty Five Thousand only) to the aggrieved person.
Jan Vishwas Bill has proposed to increase the monetary penalty up to INR 10,00,000 (Indian Rupees ten lakh) in case of breach by a corporate; and INR 1,00,000 (Indian Rupees one lakh) in case of breach by an individual.

The Payment and Settlement Systems Act, 2007

Jan Vishwas Bill has introduced new monetary penalties under the Payment and Settlement Systems Act, 2007 (“PSS Act”). The key provisions that would be amended once Jan Vishwas Bill is implemented are as follows:

Failure to furnish information: Section 26(3) of the PSS Act currently punishes a person with imprisonment in case a person fails to produce any information or documentation in relation to its operations of payment systems. Failure to furnish information must be punishable with a fine up to INR (Indian Rupees ten lakh) and in case on continuing contravention, the fine may extend to INR 25,000 (India Rupees twenty five thousand) per day.
Residuary information: Further Section 26 (6) of the PSS Act states that in case of any contravention or default for which the PSS Act does not provide a separate penalty, such non-compliance must be punishable with a fine up to INR 10,00,000 (Indian Rupees ten lakh) and in case of continuing contravention, the fine may extend to INR 25,000 (Indian Rupees twenty five thousand) per day.

Jan Vishwas Bill has proposed the revision of the penalties under the aforementioned Sections in accordance with Section 30 of the PSS Act. Therefore, once Jan Vishwas Bill comes into effect, the penalty for non-compliance with the abovementioned Sections 26(3) and 26(6) will be a penalty up to INR 10,00,000 (Indian Rupees ten lakh) and in case of continuing contravention, the penalty may extend up to INR 25,000 (Indian Rupees twenty five thousand) per day. Please note, Jan Vishwas Bill has proposed edits to Section 30 of the PSS Act as well as pursuant to which one time penalty of INR 5,00,000 (Indian Rupees five lakh) has been proposed to be revised to INR 10,00,000 (Indian Rupees ten lakh)

This Prism has been prepared by:

Probir Roy Chowdhury
Partner

Unnati Deva
Associate

For more details, please contact [email protected]

Tags CERT-In, IT Act, Jan Vishwas, JSA, Leading Law Firm, Leading Lawyer, Legal Updates

JSA Prism | Jan Vishwas Amendment Bill | August 2023

Please click here to download the Prism as PDF.

Jan Vishwas (Amendment of Provisions) Bill, 2023

The Jan Vishwas (Amendment of Provisions) Bill, 2023, (“Bill”) was passed in Lok Sabha on June 27, 2023 and the Rajya Sabha on August 2, 2023. With the intent to promote the easy of doing business in India, the Bill envisages the decriminalization of a total of 183 (one hundred eighty three) provisions in 42 (forty two) central acts administered by 19 (nineteen) ministries/departments.

For effective implementation of the above, the Bill proposes measures such as:

pragmatic revision of fines and penalties commensurate to the offence committed;
establishment of adjudicating officers;
establishment of appellate authorities; and
periodic increase in the quantum of fines and penalties.

The Bill also aims to ensure that the degree and nature of punishment are commensurate with the severity of the offence.

The amendments proposed in the below mentioned central acts in the Bill are broadly covered below.

The Cable Television Networks (Regulation) Act, 1955

The Bill proposes to amend section 16 of the Cable Television Networks (Regulation) Act, 1955 (“Cable Act”) that deals with the penalty for contravention of provisions of the Cable Act.

Earlier, the penalty for the first contravention was punishable with imprisonment and/or a fine which could extend to 2 (two) years or INR 1,000 (Indian Rupees one thousand) respectively. For every subsequent offence thereafter, the penalty was an imprisonment for a term which could extend to 5 (five) years in addition to a fine which could extend to INR 5,000 (Indian Rupees five thousand).

As per the proposed amendment, whoever contravenes the provisions of the Cable Act for the first time will be punishable with advisory, or censure, or warning, or a penalty which may extend to INR 20,000 (Indian Rupees twenty thousand), or with both, and for every subsequent contravention within a period of 3 (three) years, with advisory, or censure, or warning, or a penalty which may extend to INR 1,00,000 (Indian Rupees one lakh), or with both, by such designated officer, as may be prescribed.

The Bill empowers the designated officer to revoke or suspend the registration granted to the offending cable operator in the event the provisions of the Cable Act are contravened more than 3 (three) times spread over a period of 3 (three) years. However, no such order of revocation or suspension of the registration is to be made without giving the offender a reasonable opportunity to be heard.

The Bill also provides a provision for appeal, wherein the aggrieved party may appeal to the secretary to the Government of India or to such other officer as may be authorized by the secretary, within 30 (thirty) days from the date of the order. However, if the secretary to the government is satisfied that the appellant was prevented by sufficient cause from preferring the appeal, then the appeal may be entertained even after the expiry of the period of 30 (thirty) days.

The Cinematograph Act, 1952

The Bill proposes to prescribe penalties for the following offences under the Cinematograph Act, 1952;

Unlawful tampering or altering of already certified films;
Exhibiting uncertified films or video films;
Exhibiting films or video films with tampered or no prescribed mark of the Board of Film Certification (“Board”);
Exhibiting ‘A’ certified films to minors and ‘S’ certified films to persons not belonging to the specialized profession or class;
Failure to comply with any order passed by the central government or the Board or with provisions of the Cinematograph Act, 1952 in relation to notifying specified details of the film to the distributor or exhibitor, as the case may be;

In case of such contraventions, the District Magistrate or any such authority notified by the State Government (“Licensing Authority”), has the power to revoke or suspend the license granted to cinematograph exhibitions. In an instance where there are more than 3 (three) contraventions spread over a period of 3 (three) years, the Licensing Authority may, with reasons recorded in writing, revoke the license. However, the Licensing Authority is required to give the license holder a reasonable opportunity to be heard before making such an order.

Prevention of Money-laundering Act, 2002

The Bill seeks to introduce changes to Part A of the schedule under the Prevention of Money-laundering Act, 2002 that lists offences and its penalties under various acts. While sections under the Trade Marks Act, 1999 in relation to applying false trademarks, selling goods or providing services to which false trademark or false trade description is applied, punishment of abetment in India of acts done out of India, etc., have been retained, section 107 of the Trade Marks Act, 1999 that deals with provisions in relation to penalties for falsely representing a trademark as registered, has not been covered under the list of offences. Similarly, while section 75 of the Information Technology Act, 2000 that deals with offences committed outside India has been retained, section 72 of the Information Technology Act, 2000 that deals with penalties for breach of confidentiality and privacy does not find a place under the list of offences, according to the Bill.

Additionally, paragraphs in the schedule that deal with offences under the Environment Protection Act, 1986 and offences under the Air (Prevention and Control Of Pollution) Act, 1981, have been omitted.

The Copyright Act, 1957

The Bill proposes to omit the section that deals with penalties for making false statements for the purpose of deceiving or influencing any authority or officer.

Trade Marks Act, 1999

In addition to enhancing the penalties for certain offences, the Bill seeks to introduce 2 (two) new sections that deal with the adjudication of penalties and appeal. The registrar of trademarks may authorize an officer appointed by the Central Government to act as an adjudicating officer for holding an inquiry and imposing penalties for contraventions of the Trade Marks Act, 1999. Section 112B that is proposed to be inserted deals with the form and manner of preferring an appeal against the order of the adjudicating officer. The aggrieved party is required to prefer an appeal within 60 (sixty) days from the date of receipt of the order, and after having given an opportunity of being heard to the aggrieved party, the appellate authority is required to dispose the appeal within 60 (sixty) days from the date of filing. The Bill also empowers the Central Government to make rules in relation to the manner in which the aforementioned inquiry is to be made and the manner in which an appeal is to be preferred.

Further, the Trade Marks Act, 1999 empowers the Commissioner of Customs to seek documents or information in relation to goods imported where he has to believe that the goods so imported bear false trademarks. The importer is required to comply with such requirements within 14 (fourteen) days and is liable to a penalty of INR 10,000 (Indian Rupees ten thousand) for non-compliance. The Bill seeks to empower the authority constituted under the Customs Act, 1962 to levy and recover such penalties.

Legal Metrology Act, 2009

The Bill seeks to enhance the penalties of the following offences under the Legal Metrology Act, 2009:

use of non-standard weight or measure;
manufacture or sale of non-standard weight or measure;
making any transaction, deal or contract in contravention of the prescribed standards,;
quoting or publishing, etc., of non-standard units;
non-production of documents;
sale or delivery of commodities, etc., by non-standard weight or measure;
rendering services by non-standard weight, measure or number.

This Prism has been prepared by:

Tony Verghese
Partner

Radhika Gupta
Principal Associate

Shruthi Shekar
Associate

For more details, please contact [email protected]

Tags Amendment Rules, Jan Vishwas, JSA, Leading Law Firm, Leading Lawyer, Legal, Legal Updates, Lok Sabha, Money Laundering, Regulatory, Trademark

AML & CFT Guidelines for professionals with certificates of practice from SRBs

Please click here to download the Prism as PDF.

The Financial Intelligence Unit-India (“FIU-IND”) under the Ministry of Finance introduced Anti-Money Laundering (“AML”) and Countering the Financing of Terrorism (“CFT”) Guidelines (“Guidelines”) effective from June 19, 2023. The Guidelines are for professionals with certificates of practice from statutory bodies such as Institute of Chartered Accountants of India, Institute of Company Secretaries of India, and Institute of Cost Accountants of India (“SRBs”).

These Guidelines have been issued pursuant to the Central Government notification dated May 3, 2023 (“Notification”), wherein practicing chartered accountants, company secretaries, and cost and management accountants (“Relevant Persons”) fall within the scope of designated businesses or professions under the Prevention of Money Laundering Act, 2002 (“PMLA”) when carrying out specified financial transactions by becoming reporting entities which are required to comply with certain record-keeping and reporting obligations. The Guidelines prescribe the necessary steps to be taken by reporting entities / Relevant Persons to prevent, detect, and report money laundering, terrorist financing, or proliferation financing (“ML, TF, PF”) activities.

Key Points

Establishing AML/CFT/CPF policies and controls: Relevant Persons are required to adopt robust policies (board-approved, in case of firms) and procedures to address risks of ML, TF, PF activities. Periodic reviews are necessary to ensure compliance with extant statutory requirements and guidelines. Client acceptance, KYC policies, and client due diligence (“CDD”) measures must be implemented for the notified financial transactions.
Designated director and principal officer: Relevant Persons (entities) are required to appoint a designated director and a principal officer. For others, i.e., individuals, they will be the principal officer for the purpose of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (“PML Rules). The principal officers and/or designated directors have specific compliances, such as the requirement to furnish relevant information to the FIU-IND and report suspicious transactions. SRBs are required to maintain a list of the principal officers and/or designated directors, updating the FIU-IND periodically and as changes occur.
Enhanced due diligence (“EDD”): Complex transactions, unusual patterns, and higher ML, TF, PF risks require EDD measures, such as frequent reviews, information from publicly available sources, and verifying the source(s) of funds. EDD is essential for high-risk jurisdictions or individuals, particularly tax havens and FATF grey/blacklisted countries. Filing a suspicious transaction report (“STR“) is necessary where EDD is not possible. Relevant Persons must maintain an accurate and current customer information, conduct robust due diligence, and store KYC data for up to 5 (five) years.
Sanctions screening for notified activities: Relevant Persons must conduct sanctions screening during customer onboarding, when carrying out notified activities, and when there are additions to designated lists.
Reporting obligations:
1. Reporting Mechanism: Relevant Persons are required to report to the FIU-IND through their respective SRBs, which will verify if they hold a certificate or practice. For this purpose, they must establish an internal mechanism.
2. Reporting suspicious transactions: Relevant Persons are required to promptly report suspicions related to funds suspected to be proceeds of crime or linked to ML, TF or PF to FIU-IND.
Training: Relevant Persons must train their employees (especially those in compliance roles) with instruction manuals covering KYC, CDD, sanctions, record-keeping, and transaction monitoring.
Other compliances:
1. Counterparty screening: Relevant Persons must assess emerging risks from their clients’ counterparties, including suspicious transaction history, adverse media, and regulatory or criminal penalties information.
2. Prohibition on tipping-off: The Guidelines prohibit tipping off, preventing reporting entities, their directors, officers, and employees from disclosing the submission of STRs or related information to FIU-IND.
3. Risk assessment: Relevant Persons must conduct risk assessments to understand their exposure to ML and TF risks and adopt a risk-based approach to allocate resources.

Summary

The Notification significantly expanded the ambit of the PMLA through inclusion of various professionals carrying out specified financial transactions. Given the extent of compliances required of individuals / firms that qualify as reporting entities, the Guidelines clarify the manner in which obligations under the PMLA and PMLA Rules are to be complied with. The Guidelines impose compliance requirements on SRBs as part of the reporting mechanism, such as establishing a Technical Committee and appointing a Nodal Officer. The Guidelines provide pointed instructions to Relevant Persons on implementing necessary institutional measures to adequately combat money-laundering and terrorism financing risks.

This Prism has been prepared by:

Rupinder Malik
Partner

Sriram SL
Senior Associate

For more details, please contact [email protected]

Tags Anti-Money Laundering, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

Sidharth Sethi | Book Launch | Sarkar – Hints on Modern Advocacy, Professional Ethics and the Art of Cross-Examination, 6/e | LexisNexis

JSA is happy to announce that ‘Sarkar – Hints on Modern Advocacy, Professional Ethics and the Art of Cross-Examination’ (6/e, LexisNexis) by Mr. Sudipto Sarkar, Senior Advocate and JSA Partner, Sidharth Sethi was released at a gala event organized on 22 July 2023 at The Oberoi, New Delhi.

This celebrated work was released by Hon’ble Mr. Justice Aniruddha Bose, Judge, Supreme Court of India in the distinguished presence of Hon’ble Mr. Justice Hemant Gupta, Former Judge, Supreme Court of India and Hon’ble Mr. Justice Vibhu Bakhru, Judge, High Court of Delhi.

About the book

Modern advocacy requires a combination of legal knowledge, critical thinking, persuasive skills, and effective communication. This book is a celebrated work aimed at (i) familiarizing the readers with the nuts and bolts of advocacy and cross-examination; (ii) acquainting them with the methods practiced and formulated by the great masters of the profession; and (iii) imparting training of the rules of conduct and etiquettes of the profession. There are many aspects relating to law practice which a practitioner will learn with experience and time. This book, however, is a reliable reference text to guide the readers with the do’s and don’ts of the profession; and will cater to practitioners, academics, and students alike.

Tags Book Launch, Court Practice, Disputes, JSA, Leading Law Firm, Leading Lawyers, Legal

SEBI Order in respect of Aditya Birla Money Limited pertaining to investigation of sale of shares using accounts opened using forged documents

JSA advised and successfully defended Aditya Birla Money Limited (“ABML”) in proceedings initiated by the Securities and Exchange Board of India (“SEBI”) under the SEBI (Intermediaries) Regulations, 2008 in an investigation pertaining to dematerialization and sale of shares through demat accounts opened using forged documents. By its order dated July 18, 2023, SEBI has exonerated ABML of all charges.

SEBI conducted an investigation pursuant to allegations of dematerialization and sale of shares of dormant accounts using forged documents by certain entities. Consequently, SEBI initiated proceedings against ABML under SEBI (Intermediaries) Regulations, 2008 and issued a Show Cause Notice (“SCN”) alleging that ABML failed to exercise due skill, care, diligence, professionalism, and efficiency in the conduct of its business, in relation to the dealings of one of its clients. It was alleged that ABML had failed to report its client’s transactions which were not commensurate with his annual income, as declared in the Know Your Customer (“KYC”) form, as “suspicious transactions” to the Financial Intelligence Unit (“FIU”), as required by SEBI Circulars and Prevention of Money-laundering Act, 2002 (“PMLA”) and rules made thereunder. Accordingly, it was recommended by SEBI that ABML’s registration as a stockbroker be suspended for a period of three months.

While defending the charge, it was submitted on behalf of ABML, inter alia, that there were no contemporaneous circumstances which could have raised suspicion in a reasonable person’s mind that Javlekar’s transactions in shares were “suspicious transactions”. It was further submitted that there was no material available on record to indicate that the client’s transactions involved proceeds of crime/ were made in circumstances of unusual or unjustified complexity/ had no economic rationale or bonafide purpose.

SEBI, vide its order dated July 18, 2023, has accepted the submissions made on behalf of ABML and concluded that in the facts and circumstances of the matter, it would not have been possible for ABML to suspect that its client’s transactions were unusual or unjustified or involved proceeds of crime or were not bona fide in nature, requiring ABML to report the same. Accordingly, SEBI has disposed of the proceedings against ABML without any adverse observations/directions.

Our Securities Laws Team Partners – Vikram Raghani, Pulkit Sukhramani, Senior Associate – Vidhi Jhawar and Associate – Deepank Anand.

Tags Financial Intelligence Unit, JSA, Know Your Customer, Leading Law Firm, Leading Lawyers, Money Laundering Act, Regulations, SEBI, Show Cause Notice

JSA Newsletter | Anti-Corruption, White Collar Crimes and Investigations Practice | July 2023

Please click here to download the Prism as PDF.

This quarterly edition of the Anti-Corruption, White Collar Crimes and Investigations newsletter sets out key developments in India’s enforcement, regulatory and judicial landscape. These developments include notable enforcement actions, and relevant details of the recent meeting of the G20 Anti-Corruption Working Group in India. It also delves into significant amendments made to the Prevention of Money Laundering Act 2002 (“PMLA”) and various judicial decisions shaping the white-collar crimes space, including a judgement expanding the scope of the Prevention of Corruption Act,1988 (“PCA”) which will now be taken up by the Supreme Court for review.

Regulatory Developments

The PMLA underwent key amendments over the first half of 2023. On May 3, 2023, the Ministry of Finance via a notification broadened the scope of the term “Reporting Entity” under the PMLA to include certain corporate professionals, namely chartered accountants, company secretaries and cost and works accountants, when such professionals are undertaking certain financial transactions on behalf of their clients, including transactions of immovable property, managing securities and assets, and operating and managing companies. On May 9, 2023, in another such notification, the central government notified additional activities that would bring any individual performing them under the ambit of the PMLA as Reporting Entities. These activities include acting as a formation agent or acting / arranging for a director / secretary / partner, trustee or a nominee shareholder. It also includes providing a registered office, business address or accommodation, correspondence, or administrative address, with some limited exceptions.

This development places greater obligations and liabilities upon such professionals, including more stringent norms for identity verification, due diligence, and the maintenance of detailed records over the course of transactions. There is also an obligation to report certain spurious or fraudulent transactions that result in money laundering.

In March 2023, the Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2023 were issued by the Ministry of Finance, which made certain key changes including introducing the definition of the term “group” to include entities belonging to a multinational enterprise group or a group required to prepare consolidated financial statements under any law or regulation, in-line with the existing definition under the Income Tax Act, 1961, as well as introducing a definition for the term “Politically Exposed Persons”. The threshold of beneficial ownership for the purposes of the PMLA has been amended to mean ownership of 10% or more shares, capital, or profits of the entity in question, down from the earlier threshold of 25%.

Every banking company or financial institution or intermediary, as the case may be, is now required to register the details of a client, in case of client being a non-profit organisation, on the DARPAN Portal of NITI Aayog, if not already registered, and maintain such registration records for a period of 5 (five) years after the business relationship between a client and a reporting entity has ended or the account has been closed, whichever is later. Further, entities dealing in virtual digital assets (VDAs) such as crypto currencies are also considered Reporting Entities under the PMLA now.

In another salient regulatory development, the G20 Anti-Corruption Working Group held its second meeting in India in May 2023, with Italy as a co-chair. The Group’s overarching objective is to foster international economic cooperation, of which anti-corruption is a focal aspect. With attendance by delegations from across the world, the Working Group’s second meeting centred its efforts upon goals such as asset recovery, fugitive economic offenders, and institutional efforts to fight against corruption. A third meeting is scheduled to be held in August 2023.

Enforcement Landscape

The Enforcement Directorate (“ED”) in May 2023 arrested a Jharkhand-based IAS officer for land fraud. During a 2 (two) year term as Deputy Commissioner of Ranchi, Chhavi Ranjan facilitated the purchase and sale of land illegally, including of land belonging to the Indian Armed Forces through the use of forged papers. At the time of his arrest, Ranjan served as a Director of Social Welfare.

The ED, during an investigation into the IREO Group and the M3M Group made arrests alleging evidence of bribes paid by the promoters and senior executives of both companies to a Haryana judicial officer. The ED arrested a promoter of the M3M real estate group, along with his son in connection with the bribes. The judicial officer in question served as a Central Bureau of Investigation (“CBI”) and ED judge in Panchkula, and allegedly accepted bribes in exchange for favourable outcomes. The ED also previously made arrests following an investigation into similar allegations of corruption and money laundering by the IREO Group.

Notable Enforcement Actions:

In June 2023, the ED raided 14 (fourteen) premises in Mumbai and surrounding areas in connection with an alleged scam in the Brihanmumbai Municipal Corporation’s Jumbo Covid Care Facility Centres.
The ED in May 2023 arrested Satyendra Jain, former health minister of Delhi, over charges of laundering money through the mechanism of 4 (four) shell companies. The alleged money laundering took place over the course of his duty as a public servant.
In June 2023, the ED arrested Senthil Balaji, former Electricity Minister of Tamil Nadu, in an alleged ‘cash-for-jobs’ scam that took place over the pendency of his duty as Transport Minister.
In June 2023, a CBI court in Hyderabad sentenced two former Bank of India employees to 5 (five) years of rigorous imprisonment along with a fine in a bank fraud case. The two employees had helped facilitate housing loans on the basis of false documentation and without conducting adequate verifications. The loans were then utilized for purposes other than their stated use, prompting the CBI to conduct an investigation and arrest the involved parties.

Judicial Developments

A 3 (three) judge bench of the Supreme Court in Enforcement Directorate, Government Of India vs. Kapil Wadhawan & Anr[1]. (March 27, 2023) held that the stipulated 60 (sixty)/90 (ninety) days remand period under Section 167 of the Code of Criminal Procedure, 1973[2] (“CrPC”) ought to be computed from the date when a Magistrate authorizes remand. If the first day of remand is excluded, the remand period will extend beyond the permitted 60(sixty)/90 (ninety) days’ period, resulting in unauthorized detention beyond the period envisaged under Section 167 of the CrPC. Therefore, the moment the stipulated period of 60(sixty)/90 (ninety) days remand expires, the accused accrues an indefeasible right to default bail.
The Jharkhand High Court in Sanjay Kumar Agarwal vs. Central Bureau of Investigation[3] held that Resolution Professional will be considered a public servant under the PCA. The accused allegedly demanded bribes from the corporate debtors for showing leniency in the insolvency resolution process and for obtaining favourable forensic audit/valuation reports. The court held that the office of the resolution professional entails performance of functions that are in the nature of public duty and therefore will come within the meaning of public servant both under sections 2 (c) (v) & (viii) of the PCA. In June 2023, the Supreme Court issued notice in a special leave petition challenging the judgement which contends that the resolution professional neither performs a ‘public duty’ nor holds an office by virtue of which he is authorised/required to perform a public duty.
The Supreme Court in Anoop Bartaria & Etc. v. Dy. Director of Enforcement Directorate & Anr.[4] (April 21, 2023), held that the knowledge of an accused that he was dealing with the proceeds of crime would not be required to be proven by the prosecution in order to lodge a complaint under the PMLA. It further held that all offences under the PMLA are cognizable and non-bailable offences, notwithstanding any provision to the contrary contained in the CrPC. The officers authorized under the PMLA are empowered to arrest an accused without any warrant, subject to fulfilment of the conditions under Section 19 of the PMLA[5].
The Supreme Court in Directorate of Enforcement v. Aditya Tripathi[6] (May 12, 2023) held that an investigation by the ED into scheduled offences under the Prevention of Money Laundering (Amendment) Act, 2005, is distinct from an investigation conducted with respect to a predicated offence by the CBI. Merely because the chargesheet has been filed as a predicated offence, it cannot serve as grounds to release the accused on bail in connection with scheduled offences under the PMLA. It further held that when an enquiry/investigation is underway for money-laundering related offences, the rigours of Section 45 of the PMLA[7] must be considered.
The Supreme Court in Balaji v. Karthik Desari[8] (May 16, 2023), compared the offence of corruption and the generation of the proceeds of crime to ‘Siamese twins’ and held that mere registration of a First Information Report for a predicate offense, along with the generation of proceeds of crime, is sufficient to bring about money laundering charges. It further rejected the plea to refer the Vijay Madanlal Choudhary[9] judgment to a larger bench, as any such reference would bring the pending investigations in money laundering cases to a grinding halt. In the Vijay Madanlal judgement, the Supreme Court clubbed a batch of special leave petitions, writ petitions, and upheld the constitutional validity of the PMLA and powers of the ED.

Conclusion

While enforcement actions continue to hold steady, the regulatory wing of the government has been active in amending laws, particularly the PMLA to crack down on financial crimes and introduce more accountability to the system. Whether bringing in individuals providing professional services into the ambit of the PMLA will be an effective manner of doing so remains to be seen. Parallelly, various judicial developments have expanded written law through interpretive jurisprudence, the impact of which will continue to shape the landscape of white-collar law enforcement in the years to come.

This Newsletter has been prepared by:

Rupinder Malik
Partner

Kumar Kislay
Partner

Sriram SL
Senior Associate

Aishna Jain
Associate

For more details, please contact [email protected]

[1] Criminal Appeal Nos. 701 – 702 of 2020.

[2] Section 167 – Procedure when investigation cannot be completed in 24 (twenty four) hours.

[3] Cr. M.P. No. 1048 of 2021

[4] 2023 SCC Online SC 477.

[5] Section 19 – Power to arrest.

[6] Criminal Appeal Nos. 1401 – 1402 of 2023.

[7] Section 45 – Offences to be cognizable and non-bailable.

Section 45 of the PMLA prescribes twin conditions for grant of bail to the accused – first, the Public Prosecutor is given an opportunity to oppose the application for bail; and second, where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds to believe that the accused is not guilty of the offence and is not likely to commit any offence while on bail.

[8] 2023 SCC OnLine SC 645.

[9] Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929.

Tags Anti-Corruption, Investigations, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, White Collar Crime

Prestige Estates Projects Limited sells its stake in 8 retail mall assets to Blackstone sponsored Nexus Select Trust

JSA advised Bengaluru based real estate developer Prestige Estates Projects Limited in the sale of its minority stake in 8 retail mall assets to Blackstone sponsored Nexus Select Trust, India’s first retail focused real estate investment trust.

Definitive documents were executed in November 2022 between Prestige and Nexus Select Trust and pursuant to completion of the IPO, Prestige holds 4.34% of the units of Nexus Select Trust.

The Nexus Select Trust portfolio has 17 shopping malls, spanning 9.8 million sq. ft., across 14 cities, making it the largest shopping mall platform in the country.

JSA had also advised Prestige in the sale of a majority stake in the aforesaid retail mall assets to Blackstone as part of the $1.5 billion Prestige-Blackstone portfolio sale transaction in 2021 and 2022.

Our transaction team comprised Joint Managing Partner – Vivek K Chandy, Partner – K Z Kuriyan and Ajay G Prasad, Principal Associate – Aditi Aggarwal, and Senior Associate – Aishwarya B Shankar.

Tags Construction and Engineering, IPO, JSA, Leading Law Firm, Leading Lawyers, Merger and Acquisition, Stake sale

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