2022 (12) TMI 977 - HC - Money Laundering

Money Laundering - proceeds of crime - forbearing respondent from proceeding further on the ground that the respondent is acting beyond the jurisdiction conferred by the provisions of Prevention of Money Laundering Act, 2002 - contravention of the provisions of FEMA - HELD THAT - Various contentions were raised on either side on the merits of the case and by pointing out to various provisions under FEMA and relevant regulations. We do not want to deal with any issue touching upon the merits of the case by taking the role of the investigation agency. We have to satisfy ourselves as to whether the respondent is acting within the four corners of PML Act and not misusing the powers of investigation. If we are convinced that the investigation taken up by the respondent is within their powers and there is no misuse of powers, we cannot act as a stumbling block in the further progress of the investigation conducted by the respondent. It is left open to the petitioner Company to submit their explanation to the respondent along with all supporting documents and we expect the respondent to proceed further with the investigation within the scope of PML Act. The Apex Court time and again has frowned upon interference into investigations conducted by the Investigation Agency since Courts are not expected to stall investigations, which falls within the exclusive domain of the executive, unless such an investigation is found to be without jurisdiction or there is misuse of power of investigation or such an investigation is an abuse of process of law. There are no ground to interfere with the investigation conducted by the respondent - petition dismissed.

Summary

Issues:
1. Jurisdiction of the respondent under the Prevention of Money Laundering Act, 2002 (PML Act).
2. Allegations of contravention of FEMA rules against the petitioner company.
3. Misdeclaration by the petitioner company leading to siphoning off of funds.
4. Validity of the investigation under the PML Act based on the FIR filed by AXIS bank.
5. Prima facie establishment of a predicate offence under Section 420 IPC for money laundering investigation.

Jurisdiction under PML Act:
The petitioner sought a writ to restrain the respondent from proceeding in a case under ECIR/CEZO-II/26/2022, alleging the respondent exceeded jurisdiction under the PML Act. The respondent initiated the investigation under PML Act based on an FIR filed by AXIS bank regarding FEMA contraventions by the petitioner. The court analyzed the legality of the investigation, emphasizing the need for a predicate offence and proceeds of crime under the PML Act. The court held that the respondent's investigation was within the Act's scope, dismissing the petitioner's claim of lack of jurisdiction.

FEMA Contravention Allegations:
The petitioner company faced allegations of contravening FEMA rules by remitting funds abroad without proper disclosure to AXIS bank. The bank filed a complaint, stating the petitioner misled them, resulting in remittances under false pretenses. The petitioner's misdeclaration led to an investigation revealing siphoning off of funds, prompting the FIR under IPC sections 417 and 420.

Misdeclaration and Siphoning of Funds:
The petitioner's intentional concealment of ongoing investigations by enforcement agencies misled AXIS bank, facilitating the wrongful remittance of funds. AXIS bank accused the petitioner of cheating and siphoning off significant amounts abroad. The court noted the misdeclaration's impact on the bank's actions and the subsequent loss of valuable foreign exchange.

Validity of Investigation based on FIR:
The FIR by AXIS bank triggered an ECIR and PML Act investigation due to the scheduled offence under IPC Section 420. The court affirmed the legality of the investigation, citing the need for a predicate offence and proceeds of crime. The court rejected the petitioner's argument of jurisdictional limitations, emphasizing the prima facie establishment of the predicate offence.

Prima Facie Predicate Offence under Section 420 IPC:
The court found a prima facie case of the predicate offence under Section 420 IPC, supporting the investigation under the PML Act. The court differentiated the present case from precedents where offences did not fall under the PML Act's schedule, affirming the investigative jurisdiction based on the established offence.

Conclusion:
The court dismissed the writ petition, upholding the legality of the respondent's investigation under the PML Act. Emphasizing non-interference in ongoing investigations, the court directed the petitioner to cooperate and provide explanations, allowing the investigation to proceed within the Act's framework. The judgment highlighted the court's limited role in investigative matters, barring interference unless jurisdictional issues or misuse of power arise.