2025 (2) TMI 14 - HC - Money Laundering

Money Laundering - challenge to summons issued by the Enforcement Directorate to the petitioners under Section 50(2) of the Prevention of Money Laundering Act 2002 - petitioners challenge the summons on the ground that they had responded to the earlier summons issued by the Enforcement Directorate the Enforcement Directorate ought not to have issued the impugned summons. HELD THAT - Section 44(1)(d) Explanation (ii) enumerates that the complaint shall be deemed to include any subsequent complaint in respect of further investigation that may be conducted to bring any further evidence oral or documentary against any accused person involved in respect of the offence for which complaint has already been filed whether named in the original complaint or not . Although the alleged offence occurred prior to the amendment impugned summons were issued after insertion of Explanation Clause under Section 44(1)(d)(ii). Therefore there is no impediment for the authorities to issue summons for the purpose of collecting further information documents etc. Courts at no circumstances shall dilute the rigor of investigation in money laundering cases instituted under the provisions of PMLA. Any judicial interference at the summons issuance stage may cause prejudice to an effective investigation. Therefore the Courts should allow Investigating Agencies to function fairly and freely enabling them to cull out the truth by collecting all necessary evidence obtaining statements from the concerned individuals and initiate all appropriate actions by following the due procedures as contemplated under the provisions of PMLA - Therefore granting any leniency regarding appearance or otherwise by the Courts based on misplaced sympathy or taking a lenient view would undoubtedly hamper the investigation process. This would inevitably result in allowing individuals to escape from the clutches of PMLA proceedings which is undesirable. Conclusion - The validity of the summons issued by the Enforcement Directorate affirmed. The petitioners must comply with the summons and provide any additional explanations or documents required. Petition dismissed.

Summary

The judgment revolves around the challenge to the summons issued by the Enforcement Directorate to the petitioners under Section 50(2) of the Prevention of Money Laundering Act, 2002 (PMLA). The core issues considered by the Court include the validity of the summons issued after the petitioners had already responded to an earlier summons and the interpretation of the legal provisions under the PMLA, particularly after the amendment introduced by Act 23 of 2019.

Issues Presented and Considered:

The primary issue is whether the Enforcement Directorate can issue a new summons under Section 50(2) of the PMLA after the petitioners had already responded to a previous summons. This involves examining the scope of the Directorate's powers post-amendment to Section 44(1)(d) of the PMLA, which includes Explanation (ii) introduced by Act 23 of 2019.

Issue-Wise Detailed Analysis:

Legal Framework and Precedents: The relevant legal framework includes Section 50(2) and Section 44(1)(d) of the PMLA. Section 50(2) empowers the Directorate to summon individuals for evidence or document production. Section 44(1)(d) Explanation (ii), inserted by the 2019 amendment, clarifies that complaints can include further investigations to gather additional evidence. The Supreme Court's decision in Vijay Madanlal Choudhary and Others vs. Union of India and Others was cited, which emphasizes the continuing nature of money laundering offenses.

Court's Interpretation and Reasoning: The Court interpreted the provisions to mean that the Enforcement Directorate retains the power to issue summons for further investigation even after a complaint has been filed. The amendment to Section 44(1)(d) supports this interpretation by allowing for additional evidence collection post-complaint. The Court emphasized that the summons issuance is a procedural step necessary for a thorough investigation under the PMLA.

Key Evidence and Findings: The Court noted that the petitioners had previously responded to a summons, but the subsequent summons was issued after the legislative amendment, which explicitly allows for further investigation. The Court found no procedural irregularities in the issuance of the summons.

Application of Law to Facts: The Court applied the amended provisions of the PMLA to the facts, concluding that the Enforcement Directorate acted within its powers by issuing the summons. The petitioners' previous compliance with an earlier summons did not preclude the Directorate from seeking additional information under the amended legal framework.

Treatment of Competing Arguments: The petitioners argued that the summons was unwarranted as they had already complied with an earlier one. The respondent countered that the summons was necessary for further investigation, as permitted by the amended PMLA. The Court sided with the respondent, highlighting the importance of allowing investigative agencies to conduct thorough investigations without undue interference.

Conclusions: The Court concluded that the summons issued under Section 50(2) of the PMLA was valid and necessary for further investigation. The petitioners were directed to comply with the summons and provide any additional information or documents required by the Enforcement Directorate.

Significant Holdings:

The Court held that the Enforcement Directorate's power to issue summons for further investigation is supported by the amended provisions of the PMLA. It emphasized that judicial interference at the summons stage could hinder effective investigations. The Court reiterated that money laundering is a continuing offense, and the Directorate's actions were consistent with the legislative intent to combat such offenses effectively.

Core Principles Established:

The judgment reinforces the principle that investigative agencies must be allowed to conduct comprehensive investigations into money laundering offenses. The Court underscored that judicial intervention should be minimal at the summons stage unless the authority issuing the summons lacks jurisdiction.

Final Determinations on Each Issue:

The Court dismissed the writ petitions, affirming the validity of the summons issued by the Enforcement Directorate. It concluded that the petitioners must comply with the summons and provide any additional explanations or documents required. The Court's decision was guided by the need to uphold the integrity of investigations under the PMLA and ensure that the legislative amendments are effectively implemented.