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Petitioner: MUHAMMAD HANIF S. KALIA and 2 others VS Respondent: THE STATE
Court Name: Sindh High Court Judge(s): Faisal Arab, Muhammad Karim Khan Agha Title: MUHAMMAD HANIF S. KALIA and 2 others vs THE STATE Case No.: Bail Application No,571 of 2009 Date of Judgment:2009-07-06 Reported As: 2009 P Cr. L J 1192 Result: Application dismissed
Judgment ORDER ' MUHAMMAD KARIM KHAN AGHA, J.--- By this order we intend to dispose of Criminal Bail Application No,571 of 2009, arising out of F.I.R. No,76 of 2008, lodged on 15-11-2008 at about 15-10 hours, (the "F.I.R."), under sections 5, 8 and 22/23 of Foreign Exchange Regulation Act, 1947 ("FERA, 1947") read with sections 7, 8 and 20 of Prevention of Electronic Crimes Ordinance, 2007 ("PECO, 2007") and sections 420, 467, 471, 477-A/34, P.P.C. At F.I.A. Crime Circle, Karachi. 2. The applicants applied for bail in Special Court (Offences in Banks) Sindh at Karachi, (the "Special Court") in Sessions Case No,56 of 2008, who declined bail to all the applicants vide its order, dated 21-4-2009 ("Impugned Order"). Hence this application for bail. 3. The brief facts of the prosecution case, as disclosed in the F.I.R., are as follows:--- "Consequent upon Enquiry No,118 of 2008 of F.I.A., Crime Circle, Karachi, initiated on a complaint of State Bank of Pakistan against illegal foreign exchange operators it has transpired that the Directors, Partners and Franchisees of Messrs Khanani and Kalia International, being licensed Exchange Company, besides their authorized exchange business, have also been indulged in the huge illegal transfer of money to the tune of billions of rupees, in collusion with different banks, exchange companies, money changers, businessmen and private parties. ' The enquiry has further revealed that in order to conduct this illegal business of foreign exchange racketeering, the Partners/Directors of Messrs Khanani and Kalia International, besides their official websites for transactions i,e, www.Remitton.Com and www.Kkionline.Com also created fraudulently with criminal intention replica website www.Clickpak.Net without the knowledge of State Bank of Pakistan to effect illegal transfers of money from -and into Pakistan in a clandestine manner. This illegal exchange system worked side by side, with their legal/declared system, being controlled
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from their Head Office network situated at 110-1105, Saima Trade. Tower, I.I. Chundrigar Road, Karachi, throughout Pakistan in collusion with their Franchisees as well as a number of other offices all over Pakistan. For the purpose, a very huge computer system having sophisticated heavy duty machines was installed at the premises of this Head Office having a network of numerous client stations inside and outside Pakistan having direct automated access through internet codes and passwo rds. In order to facilitate the business of illegal exchange, the accused persons used the services of Messrs Al-Zarooni Exchange, UAE, having Atif Polani and Javed Qasim as the focal persons to facilitate and execute all such transactions in UAE. ' As per modus operandi discovered during the course of enquiry, a large number of Exchange Companies/firms and agents outside Pakistan used to receive the amounts from Overseas Pakistanis on behalf of accused persons; for remitting the same to Pakistan but instead of transferring these amounts to Pakistan through the authorized Banks duly declared to State Bank of Pakistan, they either used to retain the same abroad, or used to transfer them to any of the foreign currency accounts/Benami accounts in Pakistan opened and operated in collusion with the other persons/employees. Secretly and illegally to conceal these remittances. These remittances were illegally held in these foreign currency accounts and were never sold/declared to State Bank of Pakistan, while the equivalent amounts payable against these remittances were disbursed in Pak. Rupees to the relatives/ receipients of such overseas Pakistanis from their "own" resources in Pakistan. Thus, the accused person and their franchisees/agents deprived Government of Pakistan of foreign exchange to the tune of billions of dollars in past few years. ' In order to further misuse this foreign exchange retained in these foreign currency accounts, the accused persons, with common objectives and criminal intentions, in collusion with the concerned bank officers and others, manipulated the transfer back of this foreign exchange to different foreign companies, individuals and exporters as "Hawala transfers" on behest of a large number of businessm en, to meet the under-invoiced amounts required to be paid illegally to such foreign exporters in connection with their "misdeclared" imports, to evade import duties and taxes. Besides, huge Hawala transfers were made to different banks, construction companies and institutions abroad illegally, after taking substantial commissions being illegal gains. Thus, this huge foreign exchange which should have been earned to Pakistan was reversed back to other countries causing loss of billions of dollars to Pakistan in terms of foreign exchange to facilitate those who had earned money in Pakistan through illegal means. ' The enquiry has further revealed that the above accused persons, for the purpose of illegal transfer of money, had active connivance of some Directors/Partners of other exchange companies and money changers and they used to "facilitate, assist and accommodate" each other on "give and take" of illegal foreign exchange as per market requirements. ' The accused Directors/Partners of Messrs Khanani and Kalia International (Pvt.) Limited, in complexity with others contravened the provisions of sections 5, 8 and 22 of Foreign Exchange Regulation Act, 1947 and thereby caused huge loss of foreign exchange to the tune of billions of Rupees to Government of Pakistan and committed the offences of fraud/forgery through computer/internet punishable under section 23 of Foreign Exchange Regulation Act, 1947, read with sections 7, 8 and 20 of the Prevention of Electronic Crimes Ordinance, 2007 and under sections 420, 467, 471, 477-A/34, P.P.C. Hence this case is registered under the orders of the competent authority." 4. During the course of trial, interim Charge-Sheet bearing No,117 of 2008 was submitted on 4-12- 2008, supplementary Charge-Sheet bearing No,5 of 2009 was submitted on 6-1-2009 and the final Charge-Sheet bearing No,23 of 2009 was filed on 6-3-2009. All the applicants were arrested on 8- 11-2008 and since then they have been in judicial custody. 5. In a nutshell, the case against the applicants, who were Directors/Partners/share-holders in Messrs Khanani and Kalia International (Pvt.) Limited ("KKI"), is that they had setup an illegal parallel
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website, which enabled them to illegally and secretly engage in unreported forex and Hawala Trading. By this mechanism of the applicants there was no physical transfer of any forex from Pakistan and that as a result of this illegal forex/Hawala trading the applicants had breached and/or violated the rules and regulations of the State Bank of Pakistan ("SBP"), the terms of their license and also other laws such as FERA 1947, PECO, 1997 and P.P.C. Which had the result of depriving the national exchequer of huge amounts of forex which it would have earned in the shape of commission had the transactions been carried out through regular SBP channels. 6. The learned counsel for the applicants admit that the applicants were an authorized licensee of the SBP to carry out foreign exchange business but that they were doing so strictly in accordance with the terms and conditions of their license. He did not dispute that there may have been in existence a parallel website which was carrying out illegal/ unauthorized business of foreign exchange but such parallel website had nothing to do with the applicants. 7. During the arguments, learned counsel for the applicants contended that this case has been fabricated and foisted upon the applicants by the FIA in order to make the applicants scapegoats for the poor economic conditions prevailing in the country. He pointed out that under section 23 FERA, 1947, the maximum sentence is two years and fine or both and under section 7, PECO, 2007, the maximum sentence is seven years. According to him, the FIA had malafidely filed this case in the Special Court only to enable them to have the benefit of a maximum sentence of ten years which would make it more difficult for the applicants to be granted bail as the case would now fall into the non-bailable category under the proviso to section 497(2), Cr..P.C. 8. Learned counsel for the applicants emphasized that the Offences in Respect of Banks (Special Court) Ordinance, 1984 ("Ordinance, 1984"), which dealt with offences in respect of banks only, was not applicable and the special Court had no jurisdiction to hear this case under Ordinance, 1984 as the applicants were Directors/partners/shareholders of an Exchange Company and the alleged offences came under the purview of FERA, 1974 and PECO, 2007. He also argued that under section 2(d) of Ordinance, 1984 the offences, with which the applicants are charged, in the F.I.R., had not been mentioned as scheduled offences and, therefore, the Special Court had no jurisdiction to take cognizance of the offences. He further contended that under Ordinance, 1984 the investigation had to be initiated on a complaint but in this case no such complaint existed and the FIA had malafidely acted on their own initiative. In support of his contentions he has relied on the case of Muhammad Hashim v. Presiding Officer, Special Banking Court 2006 PCr.LJ 1886 and the case of A. Habib Ahmed v. M.K.G. Scott Christian PLD 1992 SC 353. 9. Learned counsel for the applicants vehemently denied the allegation that the applicants had opened the Benami accounts and contended that there was no evidence to connect the applicants with the alleged offence. The so-called Benami accounts had been opened by other people, who had no connection with the applicants. He further submitted that none of the alleged Benami account-holders listed in the charge-sheet mentioned the names of the applicants and that the applicants had no concern with the companies, which are mentioned in the final charge- sheet. Such documents may have mentioned Altaf Khanani, however, the applicants had nothing to do with him in any business dealings which he may have conducted in respect of this case. They cannot be held responsible for his actions simply because he is related to them. 10. Learned counsel for the applicants also submitted that according to the challan the applicants are involved in the offences of this case only in terms of colluding with the bank officials in the alleged scam and as such at best could be seen as playing a minor role. He drew the Courts' attention to the fact that the so-called major players like the bankers had already been granted bail by this Court and as such under the rule of consistency the applicants were also entitled to the grant of bai1. This is more so, since the role of the applicants, according- to the challan, is lesser than the bankers. In this respect he has relied on the following case-law:---
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(i) Shujat Hussain v. State 1995 SCMR 1249; (ii) Abdul Aziz ' Khan Niazi v. State PLD 2003 SC 668 (iii) Muhammad Daud v. State 2008 SCMR 173. 11. Learned counsel for the applicants referred to sections 420, 467, 471, 477-A/34, P.P.C. And submitted that none of these sections were attracted to the alleged actions of the applicants. He drew the Courts' attention to the fact that this case involves a white collar crime and huge documentary evidence is required, thus, it is a fit case for further enquiry within the meaning of section 497(2), Cr.P.C. And as such the applicants are entitled to the concession of bail. He further submitted that where the applicants have been charged under more than one offence then for the purposes of bail the charges having lesser sentence should be Considered. He has relied on the following case-law in support of his above contentions:--- (i) .Muhammad Saeed Mehdi v. State 2002 SCMR 282, (ii) Abdul Majid v. Judge Special Court (Offences in Banks) 1986 PCr.LJ 890, (iii) Saeed Ahmed v. State 1996 SCMR 1132, (iv) Amir Ahmed Hashmi v. State PLD 2004 Kar. 617, (v) Muzammil Niazi v. State PLD 2003 Kar. 526. 12. With regard to the impugned order, he submitted that the applicants had only been denied bail because the bankers had at that stage already been denied bail by the Special Court, however, since the bankers had now been granted bail by this Honourable Court this hurdle had now been overcome. 13. Learned counsel for the applicants submitted that bail could not be withheld as punishment and that the benefit of doubt was to go to the applicants and cited the general principle of bail, all of which applied to the applicants in this case. He placed reliance on the following authorities in this respect:--- (i) Manzoor v. State PLD 1972 SC 81, (ii) Amir v. State PLD 1972 SC 277, (iii) Muhammad Hanif v. State 1978 SCMR 69, (iv) Muhammad Aslam v. State 1992 MLD 880. 14. He further submitted that statements of the applicants recorded under section 161, Cr.P.C. Have no evidentiary value, that they had been recorded after coercion and that there were material contradictions not only in the section 161, Cr.P.C. Statements but also in the challan and the charge- sheet. He placed reliance on the following authorities:- (i) Asif Jameel v. State 2003 MLD 676(c), (ii) Salim Javed Durrani v. State 2005 PCr.LJ 22, (iii) Nusratullah v. State 1995 MLD 1635(b), (iv) Rukhsar , Ahmad v. State 2005 PCr.LJ 988(a), (v) Muhammad Farooq Afridi v. State 2003 YLR 2700(d), (vi) Muhammad Bashir Guraya v. Raja Muhammad Irshad 2005 YLR 1220(b), (vii) Sajjad Hussain v. State PLD 1996 Lah. 286(a), (viii) Khalil Ahmad v. State 2003 PCr.LJ 1754, (ix) Muhammad Riaz Munna v. State 1993 SCMR 1321, (x) Mazullah v. Abdur Rehman 1997 SCMR 1836, (xi) Suba Khan v. Muhammad Ajmal 2006 SCMR 66(c), (xii) Muhammad Khan v. State 2001 PCr.LJ 1766, (xiii) Maujan Jatoi v. State 2001 YLR 2849 and (xiv) Mir Hassan v. State PLD 2006 Kar. 472. 15. According to him, the documents relied upon by the prosecution had also been acquired as a result of an illegal seizure and as such they were liable to be excluded from consideration in the instant bail application. He placed reliance on the following authorities:--- (i) Collector of Sales Tax and Central Excise v. Mega Tech (Pvt.) Ltd. 2005 SCMR 1166, (ii) Collector of Sales Tax and Central Excise v. Mega Tech (Pvt.) Ltd. 2005 PTD 1933. 16. He submitted that the prosecution had failed to make out a prima facie case against the applicants as they had not been able to connect them to any of the offences, any of the transactions and the parallel website www.Clickpk.Net which allegedly was the hub for carrying out the illegal transactions. 17. For all the above reasons learned counsel for the applicants submitted that the applicants were entitled to be enlarged on bail.
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18. On the other hand, learned Standing Counsel submitted that based on the F.I.R. Challan, statements recorded under section 161, Cr.P.C. And other documentary evidence on the Special Courts record, there was a strong case against the applicants in their capacity as Directors/partners of KKI. 19. According to the learned Standing Counsel, the applicants had a website authorized by the SBP for carrying out their business as licensed money-changers. By using this website all the applicants' transactions were disclosed to the SBP and SBP was able to collect information of these forex transactions and regulate its foreign exchange position by keeping a watch over inflow and outflow of forex both into and out of Pakistan. According to the learned Standing Counsel, KKI, which was run by the applicants as Directors/Partneis, created a parallel website known as www.Clickpk.Net which was not authorized by the SBP. This was an illegal website through which hundreds of illegal transactions took place about which the SBP had no knowledge. Learned Standing Counsel submitted that in effect KKI. Was using the illegal Hawala system, which was bypassing the SBP regulations and were causing colossal losses to SBP and the national exchequer in terms of forex. 20. In a nutshell, learned Standing Counsel submitted that there was sufficient evidence to show that www.Clickpk.Net had been established by the applicants and that Benami accounts belonging to others had been established by the applicants and operated by others through the applicants and that there was evidence gathered showing that there was a nexus between the www.Clickpk.Net and the applicants. In particular he pointed to the relationship between KKI and Kalsoft a sister company of KKI which had been used to purchase the sophisticated equipment needed to carryout the parallel website. 21. In support of his contentions, learned Standing Counsel took the Court through various portions of 161, Cr.P.C. Statements which confirmed that the Benami accounts had been opened in the names of employees of KKI without their knowledge and had been operated by the applicants without their knowledge. That www.Clickpk.Net had been set up by and was controlled by the applicants for the specific purpose of running an illegal banking system in parallel with their authorized website. In particular, he pointed out the statements recorded under section 161, Cr.P.C., which showed that the applicants had purchased the computer equipments (Software) to enable them to run a parallel website and pinpointed the role of Amir Zakaria, who was an employee of KKI, who had opened and had operated many of the Benami accounts. He further submitted that the documents on record show the link with the applicants to Messrs Polani Enterprises and Messrs Global Village Exchange through their shared directorships and relatives which were companies involved in the scam. 22. In respect of under-invoicing, learned Standing Counsel, in particular, referred to transactions in respect of Messrs Camozzi, and ran the Court through various documents connecting the under- invoicing to both KKI and Messrs Al-Zarooni Exchange, UAE, which according to him, was sister company of KKI, which was operating in Dubai, UAE and was the hub of the Dubai end of the Hawala operation. According to him other documents disclosed that there were six similar separate sets of transactions concerning such under-invoicing involving different companies. Again the net result of such transactions was the loss of precious forex to Pakistan. 23. With regard to the jurisdiction of Ordinance, 1984, learned Standing Counsel submitted that this was covered by preamble to the Ordinance and that all the sections applied by the prosecution are already given in the first schedule of Ordinance, 1984 and that the Special Court had jurisdiction in this matter. He further contended that the rule of consistency does not apply in this case as the case of the applicants is on different footings to that of the others, who had already been granted bail by this Court in this case. In those cases, he submitted the bankers had played a minor role whereas the applicants were the main beneficiaries of the scam.
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24. Learned Standing Counsel further contended that bail is not a matter of right and that the applicants cannot rely on the technical ground that the offences, with which the applicants are charged, do not fall under Ordinance, 1984 because they had not been listed as scheduled offences in the F.I.R. He also stated that this case was a heinous crime and applicants are not entitled to the concession of bail. He has placed reliance on the following case-law in support of his submissions:--- (i) Haq Nawaz Malik v. State 2002 PCr.LJ 739, (ii) Province of Punjab v. Muqrab Ali 2008 SCMR 572, (iii) Muhammad Hayat v. State 1999 PCr.LJ 1352, (iv) Tubbasam Ahmed Qureshi v. State 2000 PCr.LJ 105, (v) Khalid Hussain v. Kala Khan 2004 PCr.LJ 1080 and (vi) Muhammad Aziz v. Kamal Khan 2001 SCMR 1727. 25. We have carefully reviewed the dotuments on record and considered both the written and oral arguments of learned counsel as, well as the authorities cited by them. 26. We would like to deal with each of the issues one by one as follows:--- Complaint 27. We find no merit in the contention of the applicants' Advocate that the inquiry has not been initiated on a complaint made by the S.B.P. By letter dated 11-7-2008, the Governor, S.B.P. Wrote to the Advisor to the Prime Minister on Interior and Narcotics Controls, to take action against illegal foreign exchange operators. The contents of the said letter are reproduced hereinbelow:--- "Dear Malik Sahib, ' Subject: Action against Illegal Foreign Exchange Operators ' I would like to draw your attention to an issue of critical importance especially in backdrop of current crisis in exchange markets. Given complications and recent press the exchange markets, S.B.P. Has taken a number of steps including measures to unauthorized and illegal flight of capital. However, with the tightening of our rules and regulations governing banks and exchange companies, it is being apprehended that desirous of undertaking foreign exchange transactions which are otherwise not permitted may resort to unauthorized and illegal operators. ' With a view to stop these illegal operators, I request you to kindly advise the related agencies to initiate a special law-enforcement action campaign against the illegal foreign exchange operators in Pakistan I and my staff from the Exchange Policy Department very happy to provide any assistance in the matter. (italics added). ' With best regards. ' Yours sincerely (Sd.) Dr. Shamshad Akhtar ' Mr. Rehman A. Malik, Advisor to the Prime Minister, on Interior and Narcotics Controls Government of Pakistan, Islamabad. 28. This letter is a general authorization made by the S.B.P. To the Ministry of Interior ("MoI") to carry out inquiry against any foreign exchange operator in Pakistan as, more particularly, mentioned in the last paragraph of the aforesaid letter. Thus, as the FIA falls under the control of MoI we are of the view that the inquiry has been initiated by the FIA against the applicants in accordance with law. Jurisdiction 29. Ordinance IX of 1984 in its preamble states as under:- "Whereas it is expedient to provide for speedy trial of certain offences committed in respect of banks and for matters connected therewith or incidental thereto." (italics added). 30. Under section 2(a) of Ordinance, 1984, it is true that KKI, of which the applicants were partners/Directors, does -not all within the definition of Bank for the purposes of Ordinance of 1 984. KKI is a licensed Exchange Company.
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31. Ordinance, 1984, however, in its preamble makes it clear that Ordinance, 1984 should cover offences committed in respect of banks and for matters connected therewith or incidental thereto (italics added). The documents, on record, reveal that a large part of the allegedly illegal transactions involved the illegal and fraudulent opening and operation of various bank accounts in Banks covered by the definition of section 2(a) with various bank managers of such banks having also been charged for their involvement in the same case. In our view, therefore, the matter is directly connected to offences committed in respect of Banks. 32. Furthermore, based on the ejusdem gene ris rules, it can be said that the transactions or documentation used in the commission of the alleged offences -are matters which are connec ed with or incidental to offences committed in respect of Banks and, therefore, also fall within the purview of Ordinance, 1984. 33. The cases relied upon by the applicants' counsel are distinguishable on the basis that in none of those cases was the business of the accused in anyway involved in the business of banking, the bank was simply used to facilitate its transaction. In this case, however, the applicants' license(s) as an Exchange Company is closely connected with the whole banking system through its dealings with forex. The applicants could not even engage in such business without a license from the SBP which is the main regulator of the banking system in Pakistan. 34. In this respect we would refer to KKI's own webpage which in part states as under:- "To evolve a documented economy, in 2003, State Bank of Pakistan converted money changers throughout the country into exchange companies. Under the rules and regulations stated by the SBP, all the exchange companies have been granted permission to make home remittance transactions, making of travler's cheques, issuing demand drafts besides the core business of currency exchange catering the customers at national and international levels. KKI sincerely embraced the decision and holds the privilege to stand among the early birds to get…
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