Bombay HC discharges CA of Chhagan Bhujbal, family in money laundering case by ED

A single-judge bench of Justice Rajesh N Laddha observed that “mere absence of due diligence by applicant does not amount to the commission or omission of an offence under Section 3 (money laundering) of the Prevention of Money Laundering Act (PMLA).”

The ED had lodged a case against Chhagan Bhujbal and others based on a complaint filed by the state Anti-Corruption Bureau (ACB) in 2015. It was alleged that land belonging to the Regional Transport Office (RTO) in Andheri was handed over to a developer firm when Chhagan Bhujbal was the deputy chief minister and the state Public Works Department (PWD) minister of Maharashtra from 2004 to 2014.

As per the agency, the said project was awarded to the developer in lieu of the construction of Maharashtra Sadan in Delhi and the RTO building in Tardeo. The ED had arrested Chhagan Bhujbal in 2015 for alleged money laundering, and he remained in custody until 2018, when the Bombay High Court granted him bail.

Chhagan Bhujbal, his son Pankaj Bhujbal, nephew and former MP Sameer Bhujbal and five others were discharged by a special court in 2021 from the ACB case.

In the case of Malpani, the ED had alleged that he actively participated in the offence of money laundering while serving as the CA for the entities controlled by the Bhujbals. As per the central agency, Malpani was responsible for auditing financial records and was aware of the suspicious transactions and sham arrangements carried out by these entities.

Advocate Hiten Venegaonkar for ED argued that the applicant conducted audits of companies controlled by Bhujbals and, in doing so, camouflaged illicit transactions and concealed the unlawful flow of proceeds of crime generated by the Bhujbals.

However, senior advocate Pranav Badheka for Malpani submitted that Chhagan Bhujbal and his family members were discharged by the special court in two predicate offences on which ED had lodged its case.

Badheka argued that Malpani, who was a statutory auditor, had a limited role to form an opinion on whether company accounts are properly maintained or not and the auditor is not expected to function as an investigator.

The plea claimed that Malpani audited financial accounts only for a period from the financial year ending March 2012 to 2015, and alleged proceeds of crime are claimed to have originated around 2007-08.

Badheka argued that there was no evidence or material on record or in complaint to show that Malpani failed in his duties as auditor, and so he should be discharged from the case.

Justice Laddha, in his order, observed that “the role of the auditor is inherently distinct from that of the investigating agency.”

“The complaint lacks material to establish a nexus between the applicant and the alleged criminal conspiracy or money laundering activities. Moreover, the applicant has neither been named nor charge-sheeted in the related crimes, which further reinforces the absence of any direct or indirect involvement in the purported criminal conduct,” the high court held and set aside a special court order, discharging Malpani from the money laundering case.