Punjab-Haryana High Court
Chetan Gupta vs Directorate Of Enforece And Others on 29 April, 2024
Author: Anoop Chitkara
Bench: Anoop Chitkara
Neutral Citation No:=2024:PHHC:057900
CRM-M-39214-2020
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CRM-M-39214-2020
Reserved on: 16.04.2024.
Pronounced on: 29.04.2024.
Chetan Gupta ...Pe++oner
Versus
Directorate of Enforcement and others ...Respondents
CRM-M-30807-2021
Ashwajit Singh ...Pe++oner
Versus
Directorate of Enforcement and others ...Respondents
CRM-M-30808-2021
Kamal Kumar Verma ...Pe++oner
Versus
Directorate of Enforcement and others ...Respondents
CORAM: HON'BLE MR. JUSTICE ANOOP CHITKARA
Present: Mr. Vikram Chaudhri, Sr. Advocate (through V.C.) with
Ms. Hargun Sandhu, Advocate and
Mr. S.S. Saron, Advocate
for the pe++oner(s).
Mr. S.V. Raju, Sr. Adv., Addl. Solicitor General of India (through V.C.) with
Mr. Arvind Moudgil, Sr. Counsel- Government of India
Mr. Shahil Rangra, Advocate
Mr. Zoheb Hossain, Special Counsel- ED (through V.C.)
Mr. Naveen Kumar, Advocate and
Ms. Bhawna Gandhi, Legal Consultant (through V.C.)
for respondent No.1- ED.
Mr. Sukhdev Singh, A.A.G., Punjab.
****
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Neutral Citation No:=2024:PHHC:057900
CRM-M-39214-2020
ANOOP CHITKARA, J.
ECIR No. Dated Sec+ons JLZO/01/2013 - Sec+on 3 r/w 4 of Preven+on of Money Laundering Act, 2002 [PMLA] Predicate Dated Police Sta+on Sec+ons offence FIR No.5 23.03.2007 Vigilance Bureau, 409, 420, 465, 467, 471, 201, 120-B IPC Ludhiana and 7, 8,9, 13(1) (c), 13(1) (d) r/w 13(2) and 14 of PC Act, 1988
1. All these pe++ons, CRM-M No.39214 of 2020, CRM-M No.30807 of 2021 and CRM-M No.30808 of 2021 are being disposed of by this common order.
2. Aggrieved by registra+on of ECIR cap+oned above under 'The Preven+on of Money-Laundering Act, 2002' [PMLA], based on a predicate offence, which now stands closed, the pe++oner has come up before this Court under Sec+on 482 CrPC mainly with the following prayer: -
"(a) Quash ECIR NO. JLZO/01/2013 registered by the Respondent No.1 Directorate of Enforcement for an offence under Sec*on 3 read with Sec*on 4 of Preven*on of Money Laundering Act, 2002 ('PMLA') and all consequen*al proceedings arising therefrom including: -
i) Show Cause No*ce dated 05.08.2020 (Annexure P-25) purportedly issued under Sec*on 63(3) PMLA for alleged viola*on of Sec*on 63(2)(c) thereof.
ii) Summon(s) dated 13.08.2020 & 15.10.2020 (Annexure P-
27 and P-29) purportedly issued under Sec*on 50(2) and (3) of PMLA;
iii) Communica*on dated 09.11.2020 (Annexure P-31) issued by the Respondent No.1 ED informing the pe**oner that the respondent No.1 ED has decided to pass an order under Sec*on 63 of the PMLA."
3. I have heard counsel for the par+es and have gone through the record. The submissions, counter submissions, and their analysis are being answered para-wise.
4. Pe++oner's stand is being taken from following sub paras of para no.3 of the pe++on which reads as follows: -
"(3.1) FIR No. 5 dated 23.03.2007 was registered by Respondent No.3 Vigilance Bureau, Ludhiana under Sec*on 409, 2 2 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 420, 465, 467, 471, 201, 120-B of IPC and Sec*on 7, 8, 9, 13(1)
(c), 13(1)(d) read with Sec*on 13(2) and 14 of the Preven*on of Corrup*on Act, 1988 pertaining to alleged payment of illegal gra*fica*on in the seDng up and development of Ludhiana City Centre passed by Improvement Trust, Ludhiana (LIT) in the year 1999. Copy of FIR No. 5 dated 23.03.2007 is annexed herewith as ANNEXURE P-1.
(3.2) While trea*ng the said FIR registered by Vigilance Bureau, Ludhiana as scheduled offence, impugned ECIR No.JLZO/01/2013 was registered by ED, Jalandhar against the Pe**oner etc. for alleged commission of offence under Sec*on 3 read with Sec*on 4 of PMLA in the year 2013.A copy of the said ECIR has not been supplied to either the Pe**oner or the court concerned.
(3.3) The record now reveals that though, ini*ally a challan in terms of Sec*on 173(2) of Cr.P.C. was filed on 12.12.2007 against various accused including the Pe**oner however, subsequently, Supplementary Challan/Cancella*on Report in terms of Sec*on 173(8) of Cr.P.C was filed by the SSP, Vigilance Bureau, Ludhiana on 11.08.2017 before the Learned Special Judge (Vigilance), Ludhiana.
(3.4) During the course of inves*ga*ons, the ED had been issuing various summons in purported exercise of powers under Sec*on 50 (2) & (3) of PMLA.
(3.9) As stated above, on 11.08.2017, Respondent No.2 Vigilance Bureau, Ludhiana through its SSP filed a Supplementary Challan/Cancella*on Report under Sec*on 173(8) of Cr.P.C. before the Learned Special Court (Vigilance), Ludhiana/Learned Trial Court which was seized of the maJer pertaining to the FIR No. 5/ Scheduled Offence. In the said Supplementary Challan/Cancella*on Report, it was clearly stated that no substan*ve evidence or fact came on record to prove any offence as alleged.
(3.17) Thus, vide order dated 27.11.2019, pe**oner etc. had been discharged in the scheduled offence alleged to have been 3 3 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 commiJed by him, on the basis of which the ECIR in ques*on was registered by the respondent ED. Therefore, the proceedings ini*ated against the pe**oner under the PMLA were rendered non-est."
5. The pe++oner's grievance is that despite such closure, the Enforcement Directorate con+nued to call the pe++oner, and it would be relevant to refer to para 3.25 of the pe++on, which reads as follows: -
"(3.25) Pe**oner is now in receipt of impugned communica*on F. No. ECIR/JLZO/01/2013/AD (GS)/3317 dated 09.11.2020 issued by the Respondent ED rejec*ng the detailed reply dated 20.08.2020 given by the Pe**oner to Show Cause No*ce dated 05.08.2020. Vide the impugned Communica*on dated 09.11.2020, the Respondent ED has categorically stated that "it has been decided to pass an order in the maJer" asked the Pe**oner to appear/cause appearance through authorised representa*ve before the Assistant Director (the Respondent) on 24.11.2020 or 25.11.2020 at 12:00 PM for personal hearing. Respondent ED has also specified that this would be last and final opportunity given to the Pe**oner to cause appearance before it for personal hearing failing which "further proceedings shall be ex-parte". Copy of impugned Communica*on bearing F. No. ECIR/JLZO/01/2013/AD(GS)/3317 dated 09.11.2020 is annexed as ANNEXURE P-31".
6. Aggrieved by the ac+on of the Enforcement Directorate not to close the proceedings and to con+nue summoning him, the pe++oner had come up before this Court under Sec+on 482 CrPC mainly because, as per the scheme of PMLA, the offense under Sec+on 3 of PMLA is interlinked, intertwined, and interwoven with the scheduled offense and therefore, the offense or inves+ga+ons under PMLA have no independent existence. The occurrence of a scheduled offense resul+ng in the genera+on of 'proceeds of crime' has to be established before any inves+ga+on under PMLA can even commence, and therefore, there is a direct & inextricable link between the 'proceeds of crime' contemplated under the PMLA and scheduled offense.
7. Mr. Vikram Chaudhri, Ld. Sr. Advocate argued that in the instant case, not only has the pe++oner been discharged in the Scheduled Offence, but the Learned Trial Court has also accepted the Supplementary Report/Closure Report dated 11.08.2017 under 4 4 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 Sec+on 173(8) of Cr.P.C., which shows that the prosecu+on did not dispute the lack of substance in the accusa+on. Thus, in the absence of the commission of a scheduled offense in the present case, the ques+on of the genera+on of proceeds of crime and subsequent laundering thereof can never arise. The bare defini+on of the proceeds of crime under Sec+on 2(1)(u) of PMLA postulates the deriving of proceeds from any ac+vity rela+ng to a scheduled offense. Therefore, the offenses under PMLA can only exist with the predicate/scheduled offense being alive and pending. When the primary Inves+ga+ng Agency inves+ga+ng scheduled/Predicate Offence has concluded that no offense has been commiOed and no proceeds of crime have been generated, the ques+on of ED proceedings under PMLA can never arise.
8. The pe++oners' counsel further submiOed that a cumula+ve reading of the provisions would leave no doubt that the offenses under PMLA depend on the Scheduled/Predicate Offences. Offenses under PMLA are, thus, equivalent to a child in the womb of a mother, and once the scheduled/predicate offense ceases to exist, the survival of the child cannot be countenanced. Once the principal/predicate offense that falls under the Schedule of PMLA has failed to establish any offense or 'proceeds of crime,' the ques+on of the independent con+nua+on of an inves+ga+on by the ED will not arise. Given the scheme and objects of the PMLA, the absence of a scheduled offense renders non-existent and without founda+on both "proceeds of crime," hence the very offense of money laundering. Therefore, the very applicability and opera+on of the PMLA, which depends upon a scheduled offense, or the predicate offense as men+oned, would also be non-est where the accused has been discharged from the predicate/scheduled offense. In such circumstances, the con+nua+on of inves+ga+ons & serving of summons/communica+on under Sec+on 50 or 63 is untenable & grossly viola+ve of the pe++oner's fundamental rights under Ar+cles 14, 19, and 21 of the Cons+tu+on. The ECIR, the subsequent show cause no+ce dated 05.08.2020, summons dated 13.08.2020 and 15.10.2020, and communica+on dated 09.11.2020, and any/all such similar no+ces/summons issued by the Respondent have been rendered illegal, absent jurisdic+on, as nullity in law and hence liable to be quashed by this Hon'ble Court.
9. The Enforcement Directorate's stand is that there can be no objec+on to proceedings ini+ated strictly in terms of the provisions of PMLA. The pe++oner is only trying to escape from the clutches of Law, and due to his malafide inten+on, he had not cooperated at all with the Enforcement Directorate by not appearing before it as provided by the PMLA. The pe++oner must give his statements and documents to the Enforcement Directorate to show his innocence first to avoid further proceedings under 5 5 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 the Preven+on of Money Laundering Act, 2002. However, the pe++oner has consistently failed to do so. Several summons have been sent to the pe++oner on various occasions, as admiOed by the pe++oner in his pe++on, and the pe++oner has avoided appearing before the Authority on one or the other pretext for more than five years. To bring a PMLA Case to a logical conclusion, the only way provided in Law is the prepara+on of a report by the Inves+ga+on Officer of the case, which should be submiOed before the Ld. Special PMLA Court for considera+on. To prepare such a report, sec+on 44 of the Act, the Inves+ga+ng Officer must inves+gate the case in all respects to enable the PMLA Court to exercise its jurisdic+on consciously and judiciously. Thus, concluding the inves+ga+ons independently by the Respondent No. 1 Directorate of Enforcement is a necessary legal condi+on to bring the money laundering case to a Logical Conclusion. No foregone conclusion can be arrived at this nascent stage, and the possibility of a closure report cannot be ruled out without any inves+ga+on under PMLA. The pe++oner is thus legally bound to cooperate with the Directorate of Enforcement as provided under the PMLA.
10. Mr. S.V. Raju, Sr. Adv., Addl. Solicitor General of India, Ld. Counsel for respondent No.-1 ED has filed a reply and opposed the pe++on and submiOed that the pe++on filed by the pe++oner is at a very premature stage as the proceedings ini+ated under PMLA are at the ini+al stage of the adjudica+on, i.e., the summoning of the accused and produc+on of documents and evidence, etc. He further submiOed that ECIR is an internal document and cannot be quashed like FIR under CrPC, 1973. He further stated that quashing an ECIR complaint or proceedings at an ini+al stage is neither desirable nor legally permissible as the proceedings have been ini+ated strictly as per the provisions of PMLA.
11. The E.D.'s counsel's further conten+ons are that the pe++on filed under sec+on 482 of Cr. P.C. is not permissible for the reliefs as claimed in the pe++on. The ends of jus+ce would be beOer served if the process under PMLA were allowed to be completed. The en+re thrust of the argument, as men+oned in detail in the rejoinder filed by the pe++oner, is that once there is an acquiOal in the scheduled offense, that ipso facto would entail the closure /quashing of all the proceedings ini+ated under the Preven+on of Money Laundering Act, 2002. Such a general proposi+on of Law is not only against the very purpose and scheme of enactment of PMLA but is also legally unsustainable given the express provisions of the PMLA. If the pe++oner's legal proposi+on is accepted, it would amount to a strike of Sec+on 44 (d) (i) of the PMLA without its legality having been examined in detail by this Hon'ble Court. It is relevant to men+on here that the vires of Sec+on 44 (d) (i) can only be challenged in a civil writ 6 6 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 pe++on under Ar+cle 226 of the Cons+tu+on of India and not in a pe++on under Sec+on 482 of Cr. P.C. It is submiOed that Sec+on 44 of the PMLA encompasses the provisions for offenses that Special Courts can try. Sec+on 44(1)(b) of the PMLA talks about submiRng a 'Closure Report' upon conclusion of the inves+ga+on. It states that if no offense of money laundering can be determined aSer inves+ga+on, the Authority shall submit a Closure Report' before the Special Court. It assists in closing cases where the inves+ga+on was completed, and no offense was found.
12. An analysis of the submissions noted above, the applica+on of the provisions of PMLA, and its scope in the light of the judicial precedents would lead to the following outcome.
13. It would be relevant to refer the appropriate provisions of 'The Preven+on of Money-Laundering Act, 2002' [PMLA]
14. [S. 3 PMLA]. Offence of money-laundering.--Whosoever directly or indirectly aOempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or ac+vity connected with the [proceeds of crime including its concealment, possession, acquisi+on or use and projec+ng or claiming]1 it as untainted property shall be guilty of offence of money-laundering.
[Explana*on. --For the removal of doubts, it is hereby clarified that,--
(i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly aOempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or ac+vi+es connected with proceeds of crime, namely: --
(a) concealment; or
(b) possession; or
(c) acquisi+on; or
(d) use; or
(e) projec+ng as untainted property; or
(f) claiming as untainted property, in any manner whatsoever;
(ii) the process or ac+vity connected with proceeds of crime is a con+nuing ac+vity and con+nues +ll such +me a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisi+on or use or projec+ng it as untainted property or claiming it as untainted property in any manner whatsoever.]2
15. [S.2(p) PMLA]. "money-laundering" has the meaning assigned to it in sec+on 3.
16. [S. 2(u) PMLA]. "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal ac+vity rela+ng to a scheduled offence or the value of any such property 1 Subs. by Act 2 of 2013, s. 3, for "proceeds of crime and projec+ng" (w.e.f. 15-2-2013).
2Ins. by Act 23 of 2019, s. 193 (w.e.f. 1-8-2019).
77 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 [or where such property is taken or held outside the country, then the property equivalent in value held within the country]3 [or abroad]4;
[Explana+on. --For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal ac+vity relatable to the scheduled offence;]5
17. [S. 4 PMLA]. Punishment for money-laundering. --Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine ***6:
Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this sec+on shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been subs+tuted.
18. [S. 2(y) PMLA]. "scheduled offence" means--
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or
(iii) the offences specified under Part C of the Schedule.
19. It would be appropriate to also refer to the relevant judicial precedents that are applicable in the given facts.
20. In Vijay Madanlal Chaudhary v. Union of India, 2022 SCC OnLine SC 929, a three- member bench of Supreme Court holds:
[457]. Suffice it to observe that being a special legisla+on providing for special mechanism regarding inquiry/inves+ga+on of offence of money-laundering, analogy cannot be drawn from the provisions of 1973 Code, in regard to registra+on of offence of money-laundering and more so being a complaint procedure prescribed under the 2002 Act. Further, the authori+es referred to in Sec+on 48 of the 2002 Act alone are competent to file such complaint. It is a different maOer that the materials/evidence collected by the same authori+es for the purpose of civil ac+on of aOachment of proceeds of crime and confisca+on thereof may be used to prosecute the person involved in the process or ac+vity connected with the proceeds of crime for offence of money-laundering. Considering the mechanism of inquiry/inves+ga+on for proceeding against the property (being proceeds of crime) under this Act by way of civil ac+on (aOachment and confisca+on), there is no need to formally register an ECIR, unlike registra+on of an FIR by the jurisdic+onal police in respect of cognizable offence under the ordinary law. There is force in the stand taken by the ED that 3 Ins. by Act 20 of 2015, s. 145 (w.e.f. 14-5-2015).4
Ins. by Act 13 of 2018, s. 208 (w.e.f. 19-4-2018).5
Ins. by Act 23 of 2019, s. 192 (w.e.f. 1-8-2019).6
The words "which may extend to five lakh rupees" omiOed by Act 2 of 2013, s. 4 (w.e.f. 15-2-2013).8
8 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 ECIR is an internal document created by the department before ini+a+ng penal ac+on or prosecu+on against the person involved with process or ac+vity connected with proceeds of crime. Thus, ECIR is not a statutory document, nor there is any provision in 2002 Act requiring Authority referred to in Sec+on 48 to record ECIR or to furnish copy thereof to the accused unlike Sec+on 154 of the 1973 Code. The fact that such ECIR has not been recorded, does not come in the way of the authori+es referred to in Sec+on 48 of the 2002 Act to commence inquiry/inves+ga+on for ini+a+ng civil ac+on of aOachment of property being proceeds of crime by following prescribed procedure in that regard.
21. ASer that a Division Bench of Madras High Court in N. Dhanraj Kochar and others v. Director Directorate of Enforcement and others, 2022 SCC OnLine Mad 8794, observed as under: -
"[9]. ...It is to be borne in mind that an ECIR is not registered under the Code of Criminal Procedure and it is not akin to an FIR, which is registered under Sec+on 154 CrPC and sent to the jurisdic+onal Magistrate in terms of Sec+on 157 CrPC.
[14]. Thus, viewed from any angle, the registra+on of an ECIR by the officers of the Enforcement Directorate, cannot be a subject maOer of judicial review under Sec+on 482 CrPC."
22. Similarly, in Jitendra Nath Patnaik v. Enforcement Directorate Bhubaneswar, CRLMC No.2891 of 2023, Orissa High Court observed as under: -
"........ [9]. As can be seen, the ECIR is an internal document created by the Department before ini+a+ng penal ac+on or prosecu+on against the person involved with process or ac+vity connected with the proceeds of crime. In other words, registra+on of ECIR is not akin to launching of prosecu+on, which can only be done by way of lodging a complaint under Sec+on 44 of the PML Act. Thus, a document or an act, which is administra+ve in nature, cannot partake the nature of criminal prosecu+on so as to aOract judicial review.
[12]. From the conspectus of the analysis made hereinbefore, this Court is of the considered view that the act of registra+on of ECIR against the pe++oner and the inves+ga+on/enquiry said to be in progress on such basis are not amenable to judicial review by this Court in exercise of its inherent power under Sec+on 482 of Cr.P.C.. Further, the present mo+on, which is at a stage when the inves+ga+on/enquiry ini+ated on the basis of the ECIR registered against the pe++oner has not culminated in lodging of a complaint under Sec+on 44 of the PML Act, is premature. In view of such finding, the conten+ons raised by the par+es touching upon merits of the case are not required to be gone into [13]. In the result, the CRLMC is dismissed being not maintainable in the eye of law."9
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23. A Single Bench of this Court in Pawan Insaa vs Directorate of Enforcement, Government of India, Chandigarh Zonal Office, Chandigarh, 2024:PHHC:049512 holds as under: -
"[6] ..... It is crucial to note that an ECIR is not registered under the Cr.P.C., unlike a First Informa+on Report (FIR), which is mandatorily registered under Sec+on 154 of the Cr.P.C., and subsequently forwarded to the Illaqa Magistrate as per the provisions of Sec+on 157 of the Cr.P.C.. Addi+onally, there exists no legal obliga+on to provide a copy of the ECIR to an accused, and the absence of such provision does not in any manner impinge upon any cons+tu+onal or statutory rights of a person. Thus, an ECIR is an administra+ve document prepared by the officers of the ED. It precedes the commencement of the prosecu+on against individuals involved in the offence of money laundering, which in turn is governed by special statute i.e. PMLA.
[7]. This Court unhesita+ngly concurs with the conten+ons made by the learned counsel for the respondent-ED that the ECIR is an internal administra+ve document of the ED. Consequently, in the considered opinion of this Court, since the ECIR precedes the stage of criminal prosecu+on and proceedings, it thus falls outside the purview of the inherent jurisdic+on conferred upon this Court by Sec+on 482 of the Cr.P.C. Therefore, the prayer of the pe++oner for quashing of the ECIR under Sec+on 482 of the Cr.P.C. cannot be entertained.
[8]. Though the learned senior counsel for the pe++oner has empha+cally argued that mere technicali+es should not come in the way of entertaining the instant pe++on under Sec+on 482 Cr.P.C. keeping in view the amplitude of the powers conferred upon this Court, however, it cannot be over- emphasized that the powers of this Court are not unbridled and can be exercised under Sec+on 482 Cr.P.C. only to give effect to any order under the Cr.P.C.; or to prevent abuse of the process of any Court; or to secure the ends of jus+ce in rela+on to a criminal proceeding. Since the ECIR is not a statutory document under the Cr.P.C. and thus, cannot be equated to ini+a+on of any criminal proceeding, aforemen+oned argument advanced by the learned senior counsel cannot be accepted as it would result in this Court exceeding its jurisdic+on under Sec+on 482 Cr.P.C."
24. A perusal of the judgments passed by a Division Bench of Madras High Court in N. Dhanraj Kochar, 2022 SCC Online Mad 8794; and by Orissa High Court in Jitendra Nath Patnaik v. Enforcement Directorate Bhubaneswar, CRLMC No.2891 of 2023; and by this Court in Pawan Insaa v. Directorate of Enforcement, 2024:PHHC:049512, clearly points out that in these cases quashing of ECIR was sought, whereas in the present case, the pe++oner is not only seeking quashing of ECIR but also all consequent proceedings. There is no legal bar that restricts the powers of this Court under sec+on 482 CrPC by 10 10 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 ignoring the prayers to quash ECIR but to consider the remaining prayers to quash the complaint as well as all subsequent proceedings.
25. In Pavana Dibbur v. The Directorate of Enforcement, Criminal Appeal No.2779 of 2023 decided on 29 November 2023, Hon'ble Supreme Court holds: -
[16]. In a given case, if the prosecu+on for the scheduled offence ends in the acquiOal of all the accused or discharge of all the accused or the proceedings of the scheduled offence are quashed in its en+rety, the scheduled offence will not exist, and therefore, no one can be prosecuted for the offence punishable under Sec+on 3 of the PMLA as there will not be any proceeds of crime. Thus, in such a case, the accused against whom the complaint under Sec+on 3 of the PMLA is filed will benefit from the scheduled offence ending by acquiOal or discharge of all the accused. Similarly, he will get the benefit of quashing the proceedings of the scheduled offence. However, an accused in the PMLA case who comes into the picture aSer the scheduled offence is commiOed by assis+ng in the concealment or use of proceeds of crime need not be an accused in the scheduled offence. Such an accused can s+ll be prosecuted under PMLA so long as the scheduled offence exists. Thus, the second conten+on raised by the learned senior counsel appearing for the appellant on the ground that the appellant was not shown as an accused in the chargesheets filed in the scheduled offences deserves to be rejected."
26. In Parvathi Kollur v. State [2022 SCC OnLine SC 1975] Hon'ble Supreme Court holds: -
[9]. The result of the discussion aforesaid is that the view as taken by the Trial Court in this maOer had been a jus+fied view of the maOer and the High Court was not right in seRng aside the dis- charge order despite the fact that the accused No. 1 had already been acquiOed in rela+on to the scheduled offence and the present appellants were not accused of any scheduled offence.
27. In Yash Tuteja v. Union of India, 2024 INSC 301 [Writ Pe++on (Criminal) No.153 of 2023, decided on 08.04.2024], the Hon'ble Supreme Court holds as under: -
"[4]. ...In paragraph 15 of the decision in the case of Pavana Dibbur, this Court held that:
"The condi+on precedent for the existence of proceeds of crime is the existence of a scheduled offence."
Therefore, in the absence of the scheduled offence, as held in the decision men+oned above of this Court, there cannot be any proceeds of crime within the meaning of clause (u) of sub- Sec+on (1) of Sec+on 2 of the PMLA. If there are no proceeds of crime, the offence under Sec+on 3 of the PMLA is not made out. The reason is that existence of the proceeds of crime is a condi+on precedent for the applicability of Sec+on 3 of the PMLA.
1111 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 [6]. The only mode by which the cognizance of the offence under Sec+on 3, punishable under Sec+on 4 of the PMLA, can be taken by the Special Court is upon a complaint filed by the Authority authorized on this behalf. Sec+on 46 of PMLA provides that the provisions of the Cr.PC (including the provisions as to bails or bonds) shall apply to proceedings before a Special Court and for the purposes of the Cr.PC provisions, the Special Court shall be deemed to be a Court of Sessions. However, sub-sec+on (1) of Sec+on 46 starts with the words "save as otherwise provided in this Act." Considering the provisions of Sec+on 46(1) of the PMLA, save as otherwise provided in the PMLA, the provisions of the Code of Criminal Procedure, 1973 (for short, Cr. PC) shall apply to the proceedings before a Special Court. Therefore, once a complaint is filed before the Special Court, the provisions of Sec+ons 200 to 204 of the Cr.PC will apply to the Complaint. There is no provision in the PMLA which overrides the provisions of Sec+ons 200 to Sec+ons 204 of Cr.PC. Hence, the Special Court will have to apply its mind to the ques+on of whether a prima facie case of a commission of an offence under Sec+on 3 of the PMLA is made out in a complaint under Sec+on 44(1)(b) of the PMLA. If the Special Court is of the view that no prima facie case of an offence under Sec+on 3 of the PMLA is made out, it must exercise the power under Sec+on 203 of the Cr.PC to dismiss the complaint. If a prima facie case is made out, the Special Court can take recourse to Sec+on 204 of the Cr. PC.
[7]. In this case, no scheduled offence is made out the basis of the complaint as the offences relied upon therein are not scheduled offences. Therefore, there cannot be any proceeds of crime. Hence, there cannot be an offence under Sec+on 3 of the PMLA. Therefore, no purpose will be served by direc+ng the Special Court to apply its mind in accordance with Sec+on 203 read with Sec+on 204 of the Cr.PC. That will only be an empty formality.
[9]. Hence, we pass the following order:
(i) Writ Pe++on (Crl.) Nos.153/2023 and
217/2023 are disposed of;
(ii) The complaint based on
ECIR/RPZO/11/2022, as far as the second pe++oner (Anwar Dhebar) in Writ Pe++on (Crl.) No.208/2023 is concerned, is hereby quashed. The Writ Pe++on is, accordingly, partly allowed;
(iii) The complaint based on ECIR/RPZO/11/2022, as far as the pe++oner (Arun Pa+ Tripathi) in Writ Pe++on (Crl.) No.216/2023 is concerned, is hereby quashed. The Writ Pe++on is, accordingly, allowed;
(iv) There will be no order as to costs; and 12 12 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 (v) Pending applica+ons, including those
seeking impleadment, are disposed of accordingly.
[10]. At this stage, the learned ASG stated that, based on another First Informa+on Report, which, according to him, involves a scheduled offence, criminal proceedings under the PMLA are likely to be ini+ated against the pe++oners. It is not necessary for us to go into the issue of the legality and validity of the proceedings that are likely to be ini+ated at this stage. Therefore, all the conten+ons in that regard are leS open to be decided in appropriate proceedings."
28. In Indrani Patnail and another v/s Enforcement Directorate and others, Writ Pe++on (Civil) No.368 of 2021, the Hon'ble Supreme Court holds as under: -
"...... [4]. The record as it stands today, the pe++oners stand discharged of the scheduled offence and therefore, in view of the law declared by this Court, there could arise no ques+on of they being prosecuted for illegal gain of property as a result of the criminal ac+vity rela+ng to the alleged scheduled offence. [5]. That being the posi+on, we find no reason to allow the proceedings against the pe++oners under PMLA to proceed further.
[6]. However, taking note of the submissions made by the learned Addi+onal Solicitor General and in the interest of jus+ce, we reserve the liberty for the respondents in seeking revival of these proceedings if the order discharging the pe++oners is annulled or in any manner varied, and if there be any legi+mate ground to proceed under PMLA.
[7]. Subject to the observa+ons and liberty foregoing, this pe++on is allowed while quashing the proceeding in Complaint Case No.05 of 2020 dated 10.01.2020 pending in the Court of Sessions Court, Khurdha at Bhubaneswar cum Special Court under the Preven+on of Money-laundering Act, 2002".
29. In Naresh Goyal vs Directorate of Enforcement, 2023 SCC OnLine Bom 2121, a Division Bench of Bombay High Court observed as under: -
"[19]. ...Although, the learned counsel for the respondent No.1- ED tried to impress upon this Court that the ECIR is a private internal document and not at par with an FIR, as such is not required to be quashed, the said submission was not pressed, when the learned senior counsel for the pe++oner in both the pe++ons showed a copy of the order passed by the Apex Court in the case of Obulapuram Mining Company Pvt. Ltd. (supra). In the said case, the learned Solicitor General appearing for the appellant- ED made a statement that since the proceedings before the Court (Apex Court) arose from an order of aOachment and there is acquiOal in respect of the predicate offence, the ED proceeding really would not survive."
[21]. As noted above, admiOedly there is no scheduled offence as against the pe++oner in both the pe++ons, in view of the closure report filed by the police, which was accepted by 13 13 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 the Courts as stated aforesaid. There being no predicate offence i.e. scheduled offence, the impugned ECIR registered by the respondent No.1- ED will not survive and as such the said ECIR will have to be quashed and set aside."
30. In Nik Nish Retail Ltd. and another v. Assistant Director, Enforcement Direc- torate, Govt. of India, 2022 SCC OnLine Cal 4044, CalcuOa High Court observed, [34]. The quashing of FIR of regular case automa+cally created a situa+on that the offences, stated and alleged in the FIR has no existence; thus the "Scheduled Offence" has also no existence af- ter quashing of the FIR. When there is no "Scheduled Offence", the proceeding ini+ated under the provisions of Preven+on of Money Laundering Act, 2002 cannot stand alone.
31. In Debendra Kumar Panda v. Union of India and Others, CRLMC No.3059 of 2019, Orissa High Court observed, [12]. ...In the plain language, if the founda+on does not exist, how the edifice can survive. In other words, when the predicate offence fails, the founda+on having been demolished, the super- structure is to fall and crumble.
32. In Rajiv Channa v. Union of India, Misc Appeal (PMLA) 13 of 2023, decided on 08 April 2024, a Division Bench of Delhi High Court observed, [40]. A sequitur of the abovemen+oned judicial pronouncements would make it sufficiently clear that since the appellant-Jeevan Kumar has already been acquiOed of the scheduled offence, there can be no ac+on for money-laundering against the other appel- lants in rela+on to the property linked to the stated scheduled of- fence. An inference can plausibly be drawn from the legal maxim sublato fundamento cadit opus which means that upon removal of the founda+on, the work collapses. Thus, the plain and literal interpreta+on of Sec+on 2(1)(u) read with Sec+on 3 of PMLA, 2002 which has been enunciated in Vijay Madanlal Choudhary (supra) and reiterated by the Hon‟ble Supreme Court in Pavana Dibbur (supra) and by this Court in Prakash Industries (supra), sug- gests that if the elementary founda+on i.e., the scheduled offence is itself removed, consequen+al proceedings emana+ng there- from shall also fall.
33. In the light of the judicial precedents referred to above, coupled with the given facts, this court reasons as follows:
34. The full form of ECIR is the "Enforcement Case Informa+on Report," and the full form of the FIR is the "First Informa+on Report." The difference between the two is that ECIR is a term given to itself by the Enforcement Directorate through some administra+ve order, whereas, to the contrary, FIR is a crea+on of a statute under Sec+on 154 CrPC, 1973. Given this statutory origin, it is mandatory to register FIR when an offense discloses the commission of the cognizable offense. On the contrary, when the Enforcement Directorate starts an inquiry based on some predicate offense, they 14 14 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 decide to assign an ECIR to an inquiry/inves+ga+on at some point in the given stage. For this reason, the courts have usually quashed the FIR, which would automa+cally cancel all subsequent proceedings. Since ECIR is not a condi+on precedent for star+ng an inves+ga+on or inquiry/inquiry by the Enforcement Directorate and is only an internal record of the department, its quashing would serve no purpose whatsoever. However, it would not imply that if one of the prayers made by the accused also includes quashing of ECIR, then the Courts will not look at other prayers like quashing of complaint and quashing of further proceedings or any other proceedings pending before the Enforcement Directorate. If such a view is taken, then it would give untrammeled arbitrary powers to the Enforcement Directorate to con+nue and keep pending the inquiry/inves+ga+on against the accused under the pretext or disguise that even if an accused has been acquiOed in the predicate offense, a decision is yet to be taken regarding the filing of a complaint against acquiOal or such appeal is pending, or even when they do not find any evidence against the accused, at that stage, instead of absolving them, they con+nue to sit over the inquiry/inves+ga+on which would have unparalleled bearing on the accused mental health.
35. The proceedings under PMLA are always subservient and secondary to the primary proceedings under some principal criminal offense, which is termed the predicate offense. If the viola+ons of the main criminal penal provisions are men+oned in the PMLA schedules, only then the Enforcement Directorate can inquire into such scheduled penal offenses against the persons who have laundered the money, including or excluding the persons named as accused in the primary offense. The following example will clear the concepts. Let's take an example of a wall and its plaster. First, a wall is required, and only then can it be plastered and in the absence of the wall, the plaster cannot be applied, and if the wall is broken, the plaster would automa+cally break off because it cannot stand on its own. The predicate offense is that wall only on which the plaster of the scheduled offense of PMLA can be applied. No wall no plaster. Similarly, for any prosecu+on under scheduled offense, the requirement of a predicate offense is the sine qua non. The Enforcement Directorate has no jurisdic+on to enter the foray without any primary penal offense. Further, if the predicate offense results in the filing of a closure report or the accused is discharged by the concerned Court or results in acquiOal, then it would imply that the wall has broken, and with it will also go the plaster if it has been put on it.
36. It would be relevant to extract Sec+on 65 of PMLA Act which reads as follows:-
"65. Code of Criminal Procedure, 1973 to apply.- The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, insofar as they 15 15 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 are not inconsistent with the provisions of this Act, to arrest, search and seizure, aOachment, confisca+on, inves+ga+on, prosecu+on and all other proceedings under this Act."
37. A plain and simple reading of Sec+on 65 clarifies that aSer arrest, Code of Criminal Procedure would apply to the inves+ga+on, prosecu+on and all other proceedings under PMLA Act.
38. Another significant factor which needs considera+on is that when aSer registering the inves+ga+on by assigning it as ECIR number, subsequently, the Inves+gator does not find evidence to proceed further or apprecia+on of evidence collected by them does not point towards accused's involvement but towards their absolu+on, in such a situa+on they might be closing their ECIR. Similarly, once a closure report is filed before the concerned Court, in such closure report, the fundamental prayer to the concerned Court is to accept the closure report which would eventually led to closure of ECIR. Given above, coupled with Enforcement Directorate's stand that ECIR is an internal document because it has no statutory force and cannot be equated with FIR on the face of it is blowing hot and cold.
39. The pe++oners have been acquiOed in the primary predicate offense in the present case. Consequently, secondary evidence, i.e., the offense being prosecuted by the Enforcement Directorate, would also go automa+cally. Thus, the complaint filed by the Enforcement Directorate has to be closed along with consequen+al proceedings. Once the complaint is closed, the Enforcement Directorate can keep such records in their ECIR record because if, later on, such closure, charge, or acquiOal is reversed, the objec+on can be reopened.
40. In Directorate of Enforcement v. Pratap Singh Tiwari & Anr., SLP (Crl) Diary No(s). 19609/2023, Hon'ble Supreme Court observed, We are not inclined to interfere with the impugned order and, therefore, the special leave pe++on is dismissed. However, we clarify that in case the appeal preferred in the predicate offence is allowed and the respondents are convicted, the pe++oner would be en+tled to seek revival of the proceedings in ques+on.
41. Given the above, the proceedings ini+ated by the ED against the pe++oners of the pe++ons men+oned above arising out of the ECIR detailed in para no.2 are closed, with the liberty to revive, in the following terms. This flexibility allows for the poten+al reversal of an acquiOal of the predicate offense, enabling the Enforcement Directorate to file a fresh complaint. The delay in filing such a complaint is deemed to be excluded, considering the +me consumed in a reversal of such a decision. The Directorate of Enforcement may also seek a review/recall of this order if any review pe++on pending 16 16 of 17 ::: Downloaded on - 30-04-2024 03:19:23 ::: Neutral Citation No:=2024:PHHC:057900 CRM-M-39214-2020 before the Hon'ble Supreme Court is allowed, changing the legal basis affec+ng this order. It is further clarified that in such a situa+on, the present order closing the proceedings shall become redundant and inconsequen+al given Sec+on 362 r/w 482 CrPC provisions. Pe++ons allowed. All pending applica+ons, if any, stand disposed of.
(ANOOP CHITKARA)
JUDGE
29.04.2024
Jyo+ Sharma
Whether speaking/reasoned YES
Whether reportable YES
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