9911796707
TMI Blog2022 (6) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, the existence of jurisdiction is one aspect, and the manner of its exercise is quite another. The power of a High Court to issue high prerogative writs like a mandamus, certiorari, etc., flows from its plenary power under Article 226 of the Constitution of India and is discretionary in nature. Therefore, it does not imply that because the High Court is vested with jurisdiction to issue an appropriate writ, it must necessarily follow that a writ must issue in all cases. The remedy is discretionary in nature and must be exercised in consonance with sound judicial principles. On perusing the order in MANOHAR LAL SHARMA VERSUS THE PRINCIPAL SECRETARY OTHERS [ 2014 (7) TMI 1380 - SUPREME COURT] passed by the Supreme Court. What is discernable is that the CBI is conducting a Courtmonitored investigation into the coal block allocations, by issuing various directions from time to time. The Court had taken note of the fact that a Special Judge had been notified by the Chief Justice of the Delhi High Court to try the coal block allocation cases. It is noticed that the CBI and the Enforcement Directorate have been periodically filing detailed status reports of the various prosecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 226 of the Constitution of India seeking a mandamus forbearing the respondents from investigating Ref.No.ECIR/CEZO- 1/PMLA/2015 under the Prevention of Money-Laundering Act, 2002 (for brevity the PML Act ) on the premise that the investigation is without jurisdiction. 2 The undisputed facts are as under: i. Five women entrepreneurs incorporated a company which went by the name of R.K. Powergen Pvt. Ltd., Chennai (for brevity RK Company ) and established a bio-mass power generation plant in Hiriyur, Karnataka sometime in 1991. The plant is stated to be functional as on date. On 15.12.2004, RK Company and Mudajaya Corporation, a Malaysian company (for brevity Mudajaya ), joined hands and incorporated R.K.M. Powergen Pvt. Ltd., the petitioner herein (for brevity RKM Company ) under the Companies Act, 1956, having its registered Office in Chennai, with the object of setting up coal-based power plants in India. ii. On 13.07.2005, RK Company and Mudajaya entered into a joint venture agreement, in and by which, Mudajaya agreed to invest in the shares of RKM company at a premium. iii. While so, on 13.11.2006, the Ministry of Coal invited applications for allotment of 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be undertaken. Ergo, they were haggling with the Central Government to re-classify the allotted area and there was an exchange of communication between the two in this regard. x. While so, a public interest litigation was filed by one Manohar Lal Sharma in the Supreme Court alleging that the coal block allocations made by the Central Government were riddled with corruption. A three-Judge Bench, vide order dated 24.09.2014 Manohar Lal Sharma v. Principal Secretary others - (2014) 9 SCC 516, held that coal block allocations made through the screening committee route as well as the government dispensation route were illegal. Vide further proceedings dated 24.09.2014, all coal block allocations, barring two allocations made to Sasan Power Limited (UMPP) and two allocations made to a Central Government public sector undertaking not having any joint venture, were cancelled. xi. Accordingly, the CBI started registering FIRs qua each coal block allotment in order to find out if there was any irregularity in the allotment process. One such FIR registered by the CBI is FIR No.RC 219 2014E 0018 dated 07.08.2014 for the offences under Section 420 read with Section 120-B IPC and Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r at par value and whereas 26% of shares was allotted to M/s. Mudajaya Corporation Berhad, Malaysia at a premium of Rs.240/- per share. Accordingly, the Malasian promoter had paid Rs.1,174.92 crores for acquiring the said 26% of the equity and on the other hand, the Indian promoter had only paid Rs.133.75 crore that too for acquiring 74% equity of M/s. RKM Powergen Private Ltd. thereby resulting in substantial financial benefit to Indian promoter viz., M/s. R.K. Powergen Private Ltd. In view of the above, prima facie, there appears to be an offence of Money Laundering defined u/s 3 of the Prevention of Money Laundering Act, 2002. Simultaneously, the CBI and the Enforcement Directorate began their investigations by summoning the officers of RKM Company for interrogation from time to time. xiv. The Enforcement Directorate passed an order dated 20.02.2015 freezing all the bank accounts of RKM Company paralyzing their business operations. xv. Ergo, RKM Company filed writ petitions in W.P. Nos.7854, 10643, 14448 and 15317 of 2015, before this Court challenging the action of the Enforcement Directorate, which were allowed vide a common order dated 26.08.2015 RKM Powergen Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no role to play. However, suddenly from November 2019 onwards, the Enforcement Directorate started summoning the officers of RKM Company and also the officials of financial institutions who lent money to RKM Company, from time to time. Unable to withstand the continued harassment of the Enforcement Directorate, RKM Company has filed the present writ petition for the reliefs stated, supra. 3 We have heard Mr. B. Kumar, learned Senior Counsel for Mr.S.Ramachandran, learned counsel on record for the petitioner/RKM Company and Mr. R. Sankaranarayanan, learned Additional Solicitor General for the Enforcement Directorate. 4 Mr.R.Sankaranarayanan, learned Additional Solicitor General, representing the Enforcement Directorate, raised a preliminary objection that this Court has no jurisdiction to entertain this writ petition and the remedy, if any, is before the Supreme Court. 5 On merits, Mr. Sankaranarayanan, learned Additional Solicitor General, stoutly defended the action of the Enforcement Directorate by contending that during investigation by the Enforcement Directorate, they stumbled upon round tripping transactions between the Indian and the overseas entities. He als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investigation relating to the allegation of round tripping , which is why, the Enforcement Directorate themselves, requested the CBI to expand the scope of their investigation and till date, the CBI has not thought it fit to do so, because, the CBI was convinced that there was no round tripping at all. 9 We have considered the rival submissions. 10 The sheet anchor of the Enforcement Directorate s case is that the writ petition under Article 226 of the Constitution is not maintainable. As the issue of maintainability was required to be tested at the threshold, we heard the learned counsel on either side and vide an order dated 15.02.2021, we concluded that the writ petition under Article 226 was maintainable. Our conclusions were as under: 14. Mr.B.Kumar contended that, challenging the directions issued by the Enforcement Directorate to the various banks, for freezing the accounts of the petitioner Company, the petitioner Company filed four writ petitions viz., W.P.Nos.7854, 10643, 14448 and 15317 of 2015 in this Court and when these writ petitions came up before a learned Single Judge, the Enforcement Directorate filed a counter and took a stand that the cases sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a writ petition has been entertained pursuant to the directions of the Supreme Court vide order dated 20.07.2015 in SLP (C) Nos.18293 to 18296 of 2015, there could be no bar for this Court, to entertain the present writ petition. 18. We are in agreement with the aforesaid submission of Mr.B.Kumar, since the issue as to the very maintainability of the writ petition in the High Court went up to the Supreme Court and when the Supreme Court, has, by order dated 20.07.2015, permitted the petitioner Company to raise all contentions before the High Court, we cannot wash our hands off and say that the petitioner Company should have to go to the Supreme Court. With the above finding of ours, on the question of maintainability, we adjourn this case to 07.03.2022. 11 Thereafter, we adjourned this case, from time to time, to enable the Enforcement Directorate to test the correctness of the aforesaid order. After giving sufficient opportunities, we had proceeded to hear the matter finally. 12 Though we have held that the writ petition is maintainable, the question is whether this finding must necessarily result in a writ being issued in terms of the prayer sought by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the light of the submissions made at the bar that a writ petition under Article 226 was not maintainable in view of the order of the Supreme Court in Manohar Lal Sharma v Union of India (2015) 13 SCC 35. 15 We have carefully perused the order dated 25.07.2014 passed by the Supreme Court. What is discernable is that the CBI is conducting a Courtmonitored investigation into the coal block allocations, by issuing various directions from time to time. The Court had taken note of the fact that a Special Judge had been notified by the Chief Justice of the Delhi High Court to try the coal block allocation cases. The Court had also appointed a Special Public Prosecutor to conduct the prosecutions of the cases filed by the CBI and had proceeded to issue the following direction: 10. All cases pending before different courts in Delhi pertaining to coal block allocation matters shall stand transferred to the Court of the Special Judge as aforenoted. We also make it clear that any prayer for stay or impeding the progress in the investigation/trial can be made only before this Court and no other court shall entertain the same. 16 We also notice that the CBI and the Enforcement Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. 19 The expression proceeds of crime is defined in Section 2(u) of the PML Act, 2002 as under: proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property 3 [or where such property is taken or held outside the country, then the property equivalent in value held within the country] 4 [or abroad]; Explanation. For the removal of doubts, it is hereby clarified that proceeds of crime include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. 20 On a combined reading of Sections 3 and 2(u) of the PML Act, 2002, the following are the ingredients of the offence of money-laundering: i. There should have been a criminal activity relating to a scheduled offence under the PML Act; ii. The scheduled offence should have resulted in the generation of proceeds of crime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r over 9 months, they were unable to do any business transaction. 24 Coming to the allegation of round tripping which was strenuously pursued by the learned Additional Solicitor General, it is necessary to briefly notice the import of this expression. Round tripping can be defined as a practice by which funds are transferred from one country to another and transferred back to the origin country for purposes like black money laundering or to get the benefit of tax concession/evasion/avoidance from countries like Mauritius, which enjoy low taxes, etc. It is the case of the Enforcement Directorate, as discernable from the ECIR, that a 10 rupee share of RKM Company was sold at a premium of Rs.240. In this way, it is contended that the Malaysian promoter had paid only Rs.1174.92 crore for acquiring 26% equity, whereas, the Indian promoter paid Rs.133.75 crore for acquiring 74% of the equity in RKM Company which resulted in substantial financial benefit to the RKM Company. 25 In this connection, our attention was invited to the letters dated 04.07.2008 and 28.09.2012 issued by the Reserve Bank of India to RKM Company acknowledging the statutory declarations made by them under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence viz., the proceeds of crime, does not exist. 28 The allegation of round-tripping, even assuming there is one, as alleged by the Enforcement Directorate, is a criminal activity, falling within the domain of Foreign Exchange Management Act (FEMA), there is no arrest provision under the provisions of FEMA, whereas, threat of arrest looms large in an investigation under the PML Act with bail conditions being very stringent. 29 As regards the contention of the Enforcement Directorate that Customs Duty was not paid properly for the imports that were made by RKM Company, be it noted, this falls within the domain of the Customs authorities under the Customs Act. Moreover, these imports of plant and machinery were made by RKM Company for commissioning their power plant in Ucchpinda Village in Chhattisgarh during 2011 and after the said imports, the power plant itself has been commissioned, as stated above. In any event, as on date there is no predicate office under the Customs Act, 1962. The Enforcement Directorate cannot exercise its powers of investigation under the PML Act, 2002 to discover the existence of a predicate offence which is tantamount to putting the cart before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redicate offence. That apart, the amendment also clarifies that, the date of commission of the predicate offence is not relevant and that, if a person projects the proceeds of crime as untainted, it is a continuing offence. Hence, the aforesaid arguments fail. 33 There is a fallacy in the aforesaid submission, in that, in Yazhini Realtors (supra), on facts, there were proceeds of crime and those proceeds were projected as untainted property, whereas, in this case, the scenario is entirely different. In any event, as we have pointed out earlier in paragraph 16, we are not interdicting the investigation under the PML Act, 2002 insofar as they relate to the predicate offences in the FIR registered by the CBI for the coal block cases. 34 Therefore, on the facts and circumstances of the case, we find that the Enforcement Directorate cannot exercise its powers of investigation to discover the existence of a predicate offence under the FEMA or the Customs Act. In plainer terms, the jurisdictional condition for exercising the powers of investigation cannot be made the subject matter of investigation. The Enforcement Directorate s powers of investigation are statutory in nature. It m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes some such allegations. In the instant case, we see that the High Court without coming to a definite conclusion that there is a prima facie case established to direct an inquiry has proceeded on the basis of ifs and buts and thought it appropriate that the inquiry should be made by CBI. With respect, we think that this is not what is required by the law as laid down by this Court in the case of Common Cause [(1999) 6 SCC 667 : 1999 SCC (Cri) 1196]. (emphasis supplied) As held by the Supreme Court in the aforesaid judgment, everyone has a fundamental right to a peaceful life guaranteed under Article 21 of the Constitution of India, for, ours is not a police State. 36 From 2015 till today, the Enforcement Directorate has been unable to pin RKM Company to the ground by collecting evidence showing that they had committed an offence under the PML Act. Instead, the Enforcement Directorate has been freezing the bank accounts of RKM Company, summoning their officers, both present and former, including women, in order to find out if any offence has been committed by them under enactments other than the PML Act. A Constitutional Court cannot afford to shut its eyes when a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
