2024 (9) TMI 320 - HC - Money Laundering

Money Laundering - Proceeds of crime - Invocation of extraordinary writ jurisdiction under Article 226 and jurisdiction of Superintendence under Article 227 of the Constitution of India - Quashing of ECIR based on quashed/closed FIRs - HELD THAT - It is evident that Section 3 of PMLA 2002 Act defines the offence of money laundering and it is not narrowly focused. The proceeds of crime is a pivotal ingredient constituting the offence of money laundering. Section 3 of the 2002 Act has been explained elaborately in VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. 2022 (7) TMI 1316 - SUPREME COURT . It is evident that the definition of the offence of money laundering is wide and expansive. It makes liable not only the person who directly or indirectly indulges with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property, but even the person who knowingly assists or knowingly is a party or is actually involved in any process or activity connected shall also be liable. Explanation (i) further explains the position. Explanation (ii) to Section 3 of the 2002 Act provides that the process or activity connected with the proceeds of crime is a continuing activity and it continues till the time a person is directly or indirectly enjoying the proceeds of crime. While defining the expression proceeds of crime , it has been provided that any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to the said property shall constitute the proceeds of crime. Where the property is taken or held outside the country, then the property equivalent in value held within the country or abroad shall be included in such proceeds. In the explanation attached to the definition, it has been added that if the property is directly or indirectly derived or obtained as a result of any criminal activity related to the scheduled offence, the same shall also be included in the proceeds of crime. According to Explanation II to Section 44 of the 2002 Act, any subsequent complaint should be incorporated into the pending complaint for further investigation to gather additional evidence against any accused, as reflected in the statutory language. The legislative intent in cases involving multiple FIRs is thus quite clear. Consequently, it can be concluded that even if all FIRs except one have been resolved through compromise or other means, the investigation under the same ECIR will continue. Though, the ECIR is not an FIR, however, the ED is an Investigating Agency that has been constituted to investigate the various offences including the offence of money laundering. In these circumstances, after the filing of ECIR in the year 2022, the ED continued to investigate. This Bench does not find substance in the present writ petition and hence, the same is dismissed.

Summary

Issues Involved:
1. Quashing of ECIR based on quashed/closed FIRs.
2. ED's authority under Section 66 of the Prevention of Money Laundering Act, 2002.
3. Legality of ED's questionnaire sent to customers.
4. Inclusion of new FIRs in the existing ECIR.
5. ED's power to solicit information from allottees.

Detailed Analysis:

1. Quashing of ECIR based on quashed/closed FIRs:

The petitioner argued that out of 32 FIRs, 31 have been quashed or closed, and the remaining FIR has resulted in a settlement. Hence, the ECIR should be quashed as the predicate offences no longer exist. The court noted that one FIR remains open, and according to Explanation II to Section 44 of the 2002 Act, any subsequent complaint should be incorporated into the pending complaint for further investigation. The legislative intent is clear that even if all FIRs except one have been resolved, the investigation under the same ECIR will continue. Registration of an FIR in the scheduled offence is not sine qua non for initiating proceedings under the 2002 Act.

2. ED's authority under Section 66 of the Prevention of Money Laundering Act, 2002:

The petitioner contended that the ED has no power to register the FIR and that Section 66 only allows sharing information with concerned agencies. The court held that Section 66(2) of the 2002 Act enables the Director or other authority to share information if he is of the opinion that provisions of any other law are contravened. The ED's actions were within its jurisdiction, and the investigation of crime is the exclusive domain of the Investigating Agency. The court emphasized that the scope of judicial interference in the manner of investigation is extremely limited unless the exercise of powers by the authorities is arbitrary.

3. Legality of ED's questionnaire sent to customers:

The petitioner argued that the ED's questionnaire sent to customers was an attempt to coerce them into lodging complaints. The court found that the questionnaire was sent to gather information and material to locate the proceeds of crime. The ED has the power to summon or compel the production of documents and to give evidence under Section 50 of the 2002 Act. The court held that the manner and method of collecting information during investigation is the exclusive domain of the Investigating Agency, and there was no transgression of powers by the ED.

4. Inclusion of new FIRs in the existing ECIR:

The petitioner contended that it is not permissible to add new FIRs in the ECIR. The court held that Explanation II to Section 44 of the 2002 Act specifically provides for the inclusion of subsequent complaints in respect of further investigation. The provisions of the 2002 Act should be interpreted to advance the object sought to be achieved by the enactment. The argument that the ED cannot add new FIRs in the existing ECIR lacks substance.

5. ED's power to solicit information from allottees:

The petitioner argued that the ED is not authorized to solicit information from the allottees. The court held that Section 50 of the 2002 Act enables the Director to collect information and material to locate the proceeds of crime. The ED has the power to solicit information from the allottees who have not been delivered possession of the plots/flats. The court emphasized that the investigation process should be left to the Investigating Agency, and the courts are not expected to interfere in general.

Decision:

The court dismissed the writ petition, finding no substance in the arguments presented by the petitioner. The miscellaneous application(s) pending, if any, were also disposed of. The court upheld the ED's actions and emphasized that the investigation and collection of information were within the precincts of law.