In a major setback to the Enforcement Directorate (ED), a sessions court in Mumbai on Friday rejected an ED plea for the remand of Hasan Ali Khan, saying that the case against the alleged money launderer was based on documents that did not come from authentic sources.
Special judge M L Tahaliyani also said that ED’s submissions on Khan’s alleged foreign bank accounts were contradictory and did not prove that he held those accounts.
Leaving the investigative agency red-faced, the judge added that some of the contents of the ED’s “confidential” documents “were available in Wikipedia”. The judge also said that it was not proved that Khan issued orders to transfer $700,000 from a Swiss bank to the United Kingdom.
The billionaire Khan (59) was arrested on Monday under the Prevention of Money Laundering Act (PMLA) and the ED sought his custody for 14 days for interrogation. He was released on conditional bail of Rs 75,000 and two sureties of Rs 40,000 each. He must not leave Mumbai for five days and must report to ED officials for three hours a day during this period. The court also indefinitely barred Khan from travelling abroad.
The ED, who had arrested Khan after four years of investigation, will be appealing before the Bombay high court.
Tahaliyani, who passed his order after three days of arguments, raised questions about the investigations into two accounts Khan allegedly holds in UBS Zurich, which were said to have had a balance of $8 billion. ED counsel Rajiv Awasthi reiterated that documents found at Khan’s residence during a raid showed that balance. But Tahaliyani said that those documents may have been created for some other purpose. The ED also argued that Khan wrote to UBS Zurich to transfer funds from the two accounts, but the court observed that another document showed that these accounts were not operated and no money was deposited in them. “These submissions are contradictory,” the judge said.
Tahaliyani also questioned the probe into an account held by Khan’s wife Rheema in UBS. In that account, over $600,000 were deposited, but the bank was not satisfied with her credentials and closed that account.
The judge also said that there was no material evidence to back the ED’s contention that Khan gave instructions to transfer $700,000 from an account in Sarasin Bank, Switzerland, to the account of S K Financial Services in Barclays Bank, London. The US justice department had confirmed the transfer. Defence lawyer I P Bagadia held that the account holder was one H A Kahn and not his client.
The court said the ED was not relying on original documents and not making an effort to authenticate the documents it was producing.
The judge said, “The whole investigation seems to be based on 400 copies of documents given to the investigative agency by a witness. There seems to be a heavy reliance on these documents.” Awasthi had submitted 16 confidential documents in a sealed cover on Thursday. The judge read the documents and said, “It was noticed by me that contents of some of the documents were available in Wikipedia.”
The judge was also not satisfied with the ED’s argument that a notarized document bearing Khans signature linked him to Khashoggi. The document was notarized in London and the judge said no one had authenticated it.
Under the PMLA, a criminal offence must be made out against an accused for generating tainted money and then laundering it to create untainted currency. The judge said there was no proof to show that money was transferred to Khan’s alleged UBS accounts and that this tainted money was later projected as untainted.
The court said there was no evidence to show that Khan committed a scheduled offence, a requirement to invoke the PMLA. The only criminal offence registered against Khan was forgery of documents to obtain multiple passports in Mumbai and Patna.
Awasthi argued that Khan used these passports to travel abroad and transfer money. The judge said, “I think this is stretching things too much to fit into the scheme of PMLA.” The court said there was no material evidence to prove that any scheduled offence was committed within the country and its proceeds were transferred out of the country.
On ED’s claim that Khan had an accomplice in Kolkata-based Kashinath Tapuriah, the judge observed that it appeared the documents were created by Khan to impress Tapuriah. “It seems that Tapuriah wanted heavy loans to revive his sick industrial unit and Khan created false documents to impress him,” he said.
The judge also asked the ED what progress had been made in an investigation that had begun in 2007.
Khan is accused of money laundering, stashing over $8 billion in Swiss banks and tax evasion of Rs 50,329 crore. Including relatives and associates, the total tax demand is Rs 71,845 crore.