2023 (11) TMI 1085 - HC - Money Laundering

Money laundering - predicate offence - some of the FIRs are compromised while the scheduled offence continues to exist - HELD THAT - In the present case the two FIRs i.e. FIR No. 16/2018 dated 24.01.2018 and FIR No. 49/2021 dated 12.03.2021 registered at PS EOW have been compounded and quashed respectively on the ground of compromise. It is pertinent to note that the State has not challenged the aforesaid orders on the ground that the matter was not settled with all the complainants. It is also noted that the remaining complainants if any have also not challenged the aforesaid orders on the ground that settlement was not arrived at with them. It is pertinent to note that the aforesaid FIRs were registered at the instance of investors who were aggrieved by the non-completion of a project by the company. A perusal of the aforesaid list of dates reflect that although the impugned ECIR was registered initially on the basis of scheduled offences registered vide FIR No. 16/2018 dated 24.01.2018 which stood compounded vide order dated 19.11.2019 the second FIR No. 49/2021 which was registered on 12.03.2021 was taken on record in the impugned ECIR by the department and the proceedings continued under the same. The department chose not to register a separate ECIR but took on record the scheduled offences registered vide FIR No. 49/2021 in the same ECIR inter-alia on the ground that it related to the same transaction and involved the same accused persons. The fact that FIR No. 49/2021 was taken on record by the department in the present ECIR despite an order of compounding and acquittal was not challenged by the petitioner. Hon ble Supreme Court in Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT has held that there is no corresponding provision to Section 154 of the CrPC in the PMLA requiring registration of an offence of money laundering. In the peculiar facts and circumstances of the case ECIR cannot be quashed in view of registration of FIR No. 55/2023 dated 10.07.2023 under Sections 409/420/120B of the IPC at PS EOW as this would constitute scheduled offences legitimizing the existence of the said ECIR. However since scheduled offences in FIR No. 16/2018 dated 24.01.2018 under Sections 420/406/120B of the IPC and FIR No. 49/2021 dated 12.03.2021 under Sections 420/406/120B of the IPC registered at PS EOW have been compounded and quashed respectively the department cannot initiate or continue any proceeding including investigation in connection with the said two FIRs. Accordingly the proceedings undertaken with respect to the said two FIRs qua the present petitioner in the present ECIR stand quashed. Petition allowed in part.

Summary

Issues Involved:
1. Quashing of ECIR and subsequent proceedings.
2. Validity of continuing ECIR based on subsequent FIR.
3. Jurisdictional fact and its implications on the ECIR.

Summary:

Issue 1: Quashing of ECIR and Subsequent Proceedings
The petitioner sought to quash the ECIR/09/HIU/2019, arguing that the predicate offences in FIRs No. 16/2018 and 49/2021 now stand compounded and quashed, respectively. The petitioner relied on precedents such as Vijay Madanlal Choudhary & Ors. v. Union of India & Ors., Naresh Goyal v. The Directorate of Enforcement, and Nik Nish Retail and Anr. v. Assistant Director, Enforcement Directorate to argue that without a predicate offence, the ECIR and subsequent proceedings under the PMLA cannot continue.

Issue 2: Validity of Continuing ECIR Based on Subsequent FIR
The department argued that the ECIR can continue based on FIR No. 55/2023, which was registered during the pendency of the petition. The department asserted that the PMLA allows for the continuation of proceedings if any scheduled offence exists. The court noted that the third FIR related to the same project and involved the same accused persons, justifying the continuation of the ECIR.

Issue 3: Jurisdictional Fact and Its Implications on the ECIR
The petitioner argued that the jurisdictional fact, which formed the basis of the department's investigation, has ceased to exist with the compounding and quashing of the initial FIRs. The court, however, held that the registration of the third FIR provided the necessary jurisdictional fact for the department to continue its investigation under the PMLA.

Analysis and Findings:
The court acknowledged that in the absence of a predicate offence, there can be no offence of money laundering, as established in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors.. However, the court also noted that the third FIR (No. 55/2023) provided a valid basis for continuing the ECIR. The court distinguished the present case from the precedents cited by the petitioner, emphasizing that the existence of the third FIR legitimized the continuation of the ECIR.

Conclusion:
The court partly allowed the petition, quashing the proceedings in the ECIR related to FIRs No. 16/2018 and 49/2021 but upheld the continuation of the ECIR based on FIR No. 55/2023. The judgment highlighted that while the ECIR cannot be quashed entirely, the department cannot continue proceedings related to the compounded and quashed FIRs.