2024 (9) TMI 934 - HC - Money Laundering

Money Laundering - proceeds of crime - scheduled offence - conspiracy - siphoning of crores of rupees deposited by innocent depositors of the Bank - Whether the subsequent FIR can be subsumed into an existing ECIR also deserve consideration - HELD THAT - Since the offence under Section 3 of the Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence, and the existence of a predicate offence, is a sine qua non for prosecution under the 2002 Act, which has been held to be not permissible on notional basis, or on the assumption that the scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending inquiry/trial including by way of a criminal complaint before the competent forum, it is only if the person is finally discharged/acquitted of the scheduled offence, or the criminal case against him is quashed by the court of competent jurisdiction, the predicate offence having come to an end, there can be no offence of money laundering against him or any one claiming such property be linked to the scheduled offence through him. The question whether the subsequent FIR can be subsumed into an existing ECIR also deserve consideration. The term subsumption or subsuming is not defined under the statute, but in the normal parlance, it means to include something or someone. As per Merrium Webster s dictionary, subsume is defined as to include a place within something larger or more comprehensive; encompasses as a sub-ordinate or a component element. The word subsume would therefore be indicative of combining, comprehending, comprising, covering, inserting etc. The pronouncement of law in Vijay M. Chaudhary 2022 (7) TMI 1316 - SUPREME COURT to the effect that if the person accused of any scheduled offence is finally discharged/acquitted or the criminal case against him, is quashed by the Court of competent jurisdiction, no case of money laundering against him or anyone claiming such property through him, was presented in favour of the petitioners. Admittedly, the ECIR is based on the subject FIR as it contained an accusation against Rosary Education Group, which had obtained loan and secured the loan by mortgaging the property and they deceived the Seva Bank and their shareholders, and the accused persons i.e. Aranhas Group was alleged of amassing illegal wealth to the tune of Rs.11.5 crores as it did not repay the loan of Rs.11.5 crores obtained from Seva Bank against the mortgage property - Section 420 of the IPC being included as a scheduled offence in the Schedule to the PMLA Act, 2002, the subject ECIR was registered. It is now well settled that offence under Section 3 of the Act of 2002, is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence and it is concerning the process or activity connected with such property which constitute the offence of money laundering. The provisions of the Act of 2002, cannot be set into motion, and it do not permit prosecution of any person thereunder on notional basis, or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including filing of a criminal complaint before the competent forum. The grievance of the petitioners do not deserve any consideration. Necessarily, the Writ Petitions filed by different accused, seeking similar relief cannot be entertained. Hence, the Petitions are dismissed.

Issues Involved:
1. Validity of ECIR/MBZO-II/10/2021.
2. Subsumption of subsequent FIRs into an existing ECIR.
3. Impact of acceptance of 'C' Summary on the ECIR.
4. Authority and procedure under the Prevention of Money Laundering Act (PMLA).
5. Continuation of proceedings under PMLA post-closure of predicate offences.

Detailed Analysis:

1. Validity of ECIR/MBZO-II/10/2021:
The ECIR (Enforcement Case Information Report) was registered based on FIR No. 163/2018, which accused members of the Aranha family and bank officials of financial fraud involving Seva Vikas Co-operative Bank. The FIR alleged that the accused mortgaged already sold property to secure loans, thus deceiving the bank and its shareholders. The ECIR was initiated to investigate the suspected money laundering activities under the PMLA, 2002.

2. Subsumption of Subsequent FIRs into an Existing ECIR:
The court examined whether subsequent FIRs (Nos. 525, 526, and 527 of 2021) could be subsumed into the existing ECIR/MBZO-II/10/2021. These FIRs were based on an audit report revealing significant financial irregularities and misappropriation of funds by the bank's board of directors and various borrowers. The court found a causal link between the original FIR and the subsequent FIRs, justifying their subsumption into the existing ECIR. The practice of subsuming FIRs into an existing ECIR was noted to be a common procedure adopted by the Enforcement Directorate (ED) for comprehensive investigation.

3. Impact of Acceptance of 'C' Summary on the ECIR:
The acceptance of a 'C' Summary in FIR No. 163/2018, which indicated no offence had been committed, was argued to render the ECIR a "dead letter." However, the court distinguished between closure reports under Section 173(2) of the CrPC and 'C' summaries. It held that while 'C' summaries amount to acquittal, the ECIR could still subsist if other FIRs with a proximate connection to the proceeds of crime were subsumed into it before the 'C' summary was accepted. The court concluded that the ECIR could continue to exist and be valid despite the acceptance of the 'C' summary, as the subsequent FIRs provided a continuous basis for the investigation.

4. Authority and Procedure under the PMLA:
The court elaborated on the special nature of the PMLA, emphasizing its purpose to prevent money laundering and provide for the attachment and confiscation of proceeds of crime. The PMLA's procedures for attachment, adjudication, and confiscation of property were highlighted, along with the distinct nature of ECIRs compared to FIRs. The ECIR is an internal document for administrative purposes and does not require the same formalities as an FIR under the CrPC.

5. Continuation of Proceedings under PMLA Post-Closure of Predicate Offences:
The court discussed the implications of the Supreme Court's decision in Vijay Madanlal Chaudhary, which held that proceedings under the PMLA could continue unless the predicate offence resulted in acquittal, discharge, or quashing. The court found that the ECIR could still be valid if other FIRs related to the same criminal activity were subsumed into it, even if the original FIR was closed with a 'C' summary. The court concluded that the ECIR/MBZO-II/10/2021 remained valid due to the subsumption of FIR Nos. 525, 526, and 527 of 2021, which provided a continuous basis for the investigation into money laundering activities.

Conclusion:
The court dismissed the petitions challenging the validity of ECIR/MBZO-II/10/2021 and the subsumption of subsequent FIRs into it. It held that the ECIR remained valid despite the acceptance of the 'C' summary in the original FIR, as the subsequent FIRs provided a continuous basis for the investigation into money laundering activities under the PMLA. The court emphasized the distinct nature of ECIRs and the comprehensive investigative powers of the Enforcement Directorate under the PMLA.

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