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TMI Blog2024 (9) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... fence, 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 ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PPLICATION ST NO. 15945 OF 2023 IN WRIT PETITION NO. 731 OF 2023 WITH WRIT PETITION NO. 690 OF 2023 WITH INTERIM APPLICATION NO. 2330 OF 2023 AND INTERIM APPLICATION NO. 1118 OF 2023 AND INTERIM APPLICATION NO. 1120 OF 2023 IN WRIT PETITION NO. 690 OF 2023 WITH WRIT PETITION NO. 711 OF 2023 WITH INTERIM APPLICATION NO. 1117 OF 2023 AND INTERIM APPLICATION NO. 1122 OF 2023 IN WRIT PETITION NO. 711 OF 2023 WITH WRIT PETITION NO. 746 OF 2023 WITH INTERIM APPLICATION NO. 1755 OF 2023 AND INTERIM APPLICATION NO. 1753 OF 2023 IN WRIT PETITION NO. 746 OF 2023 WITH WRIT PETITION NO. 1030 OF 2023 WITH INTERIM APPLICATION NO. 1751 OF 2023 AND INTERIM APPLICATION NO. 1750 OF 2023 IN WRIT PETITION NO. 1030 OF 2023 WITH WRIT PETITION NO. 961 OF 2023. For the petitioner in WP No. 612/690/711 of 2023 : Mr. Ravi Kadam, Senior Advocate with Mr. Karan Kadam, Mr. S.R. Phanse and Mr. S.S. Bedekar. For the Petitioner in WP 961/2023 : Mr. Sanjeev Kadam with Mr. Shantanu Phanse. For the petitioner in WP 731/2023, WP 746/2023 and WP 1030/2023 : Mr. Ajay Bhise with Deepali Kedar, Sagar Kursija. For the Intervenor in IA No.917/2023 : Ms. Minal Chandnani, Prashant Kenjale,. For the Petitioner in WP 646/2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spected to be raised was Rs. 11.5 crores, GIVING a reason to believe, that an offence of money laundering has been committed. ECIR registered by Assistant Directorate of Enforcement, Mumbai Zonal Office-II, referred to the offence invoking Section 420 and 34 of IPC, and considering that Section 420 IPC, is in paragraph 1 of Part A , a scheduled offence under the Schedule to the Prevention of Money Laundering Act, 2002, on recording that prima facie a case for Money Laundering under Section 3 of the Prevention of Money Laundering Act, 2002, punishable under Section 4 of the Act, appears to have been made out, which required investigation by the Directorate of Enforcement, the subject ECIR under the provisions of Prevention of Money Laundering Act, 2002 was registered. 3. In the interregnum, an audit report was submitted by Rajesh Jadhawar, Joint Registrar (Audit), Commissionerate of Sugar, Pune, in terms of Section 81 of the Maharashtra Co-operative Societies Act, as by order dated 14/2/2019, passed by the Commissioner Co-operation and Registrar Co-operative Societies, Maharashtra State, Pune, he was appointed as a test auditor to conduct the audit of loan accounts of Seva Bank. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hable under Section 420, 406, 409, 465, 467, 468, 471 r/w Section 34 of IPC with Pimpri Chinchwad police station against the Bank and its officials. The said FIR No.806/2019 was premised on a purported report of investigation conducted by the Bank through Assistant Registrar, Co-operative Bank (Audit), Sugar Commissionerate, Maharashtra State, Pune, Shri Rajesh Jadhawar. The FIR inter alia alleged that there were improprieties in about 104 loans that were disbursed from different branches of the Bank, which were declared Non Performance Account (NPA) as on 31/3/2018 and it was alleged that the loans were granted without appropriate mortgage/ hypothecation and in some cases, without verifying repayment capacity of the borrowers and since the accounts were declared NPA, it had caused heavy financial loss to the Bank depositors and the shareholders. 7. Aggrieved by the registration of this FIR, the Chief Executive Officer of the Bank Mr. Amarjeetsingh Mohindersingh Basi, filed a Criminal Writ Petition (WP No.4134/2019) for quashing of the said FIR and by order dated 27/8/2019, the Court stayed the further investigation in relation to the said FIR and also directed that no coercive act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t against the alleged accused and also attributing imputations to the Officers of Seva Bank, so that he could avoid repayment of loan. He therefore, concluded that no offence has been committed by the alleged accused and therefore, C Summary was filed. The 13th Judicial Magistrate First Class, Pune, by order dated 18/4/2022, accepted the C Summary by recording thus :- From the registered documents on record, 7/12 extract of the property, statement of officials of Seva Vikas Co-operative Bank, and the documents regarding loan of alleged accused with Seva Vikas Co-operative Bank, it appears that the alleged accused had all the right to mortgage the property with the Bank. Accordingly, the loan had been disbursed to them. There is nothing on record to indicate that the alleged accused persons had any intention to cheat or has cheating the Seva Vikas Co-operative Bank or its shareholders. 11. As far as the Petitioner, Amar Mulchandani is concerned, he was released on bail in connection with the FIR registered by Enforcement Directorate and he received summons to attend the office of Enforcement Directorate on 13.02.2023. When he approached the High Court on 21.02.2023, the Court direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/or any other writ/order/direction calling for records and proceedings of letter/order/permission dated 10.08.2021 issued by the Commissioner of Co-operation and Registrar of Co-operative Societies and after satisfying itself as to its legality, veracity and propriety, be pleased to quash and set aside the same. d. Issue a writ of mandamus and/or writ in the nature of mandamus and/or any other writ/order/direction directing the Respondents herein and their instrumentalities to not take any coercive action against the present Petitioner on the basis of Test Audit Report, Special report and Specific Report dated 06.08.2021 submitted by the Jt. Registrar Audit, Commissionerate of Sugar, to the office of the Commissioner of Co-operation and Registrar of Co-operative Societies. Seven other Petitions are filed by different accused, the details of which are as under:- Writ Petition No. Party Name 612/2023 Amar Mulchandani 690/2023 Sadhana Manohar Mulchandani 711/2023 Ashok Mulchandani 1030/2023 Girish Tejwani 731/2023 Sagar Maruti Mulchandani 746/2023 Sheetal Tejwani 646/2023 Vinay Vivek Aranha 961/2023 Rajesh P Sawant The above Chart would reveal the details of the Petitioners in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action would have been taken under it. 18. In support of this proposition, he would rely upon the following decisions :- i) Naresh Goyal vs. The Directorate of Enforcement Anr. Criminal WP No.4037 of 2022. ii) Emta Cola Limited Ors. vs. The Deputy Director, Directorate of Enforcement WP (C) No. 2821/2022. iii) Harish Fabiani Ors. Vs Enforcement Directorate Ors WP (CRL) No.408/2022. iv] Prakash Industries Limited vs. Union of India Anr. 2023 SCC Online Del 336. He has urged before us that on the curtains being drawn upon FIR No.163/2018 which was the foundation of ECIR/MBZO-II/10/2021, the subsequent subsuming of FIR bearing Nos. 525, 526 and 527 of 2021, registered with Pimpri Chinchwad Police Station on 11/12.08.2021, by Rajesh Jadhawar, into the subject ECIR ought not to be permitted, since on the Closure Report being accepted in the subject FIR, the ECIR was a dead letter and it could not have absorbed any fresh actions including subsuming of the FIR s. 19. Mr. Kadam, by inviting our attention to the scheme of Act of 2012, has urged before us that it being a penal statute, it shall be construed strictly and the Directorate of Enforcement ought to have acted within its confines a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Section 420 of the IPC. It is his further contention that the accusation in the two FIRs is as regards the loan disbursed by Seva Bank to Vinay Arhana and Sagar Suryawanshi and their connected entities and it is alleged that it has been misappropriated and the funds are siphoned off and embezzled. The said FIR contain an accusation that the transactions have been done in an environment of irregularities and ambiguities, and this at the most, according to Mr. Kadam, would make out an offence under Section 406 and 409 of the IPC, but not an offence under Section 420 of the IPC, and in any case, it is his submission that since the petitions for quashing of FIR Nos. 526/2021 and 527/2021 are pending before this Court, this Court will not go into the merits of the allegations made in the predicate offence and come to a particular conclusion as to whether the particular provisions attracted in the predicate FIR, are made out or not. In support of his submission that the subsumed FIRs were not existing on date of ECIR, Mr. Kadam would place reliance upon the decision in the case of Prakash Industries Ltd. Union of India Anr. 2023 SCC OnLine Del, 336., 20. In short, the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ED investigation and the impugned ECIR is dated 31/03/2021, whereas, the subsumed FIRs are subsequence to the registration of the ECIR, and according to him, after the C summary was excepted, no new complaint came to be lodged. He would place reliance upon the decision of the Apex Court in case of Pavana Dibbur vs. Directorate of Enforcement 2023 SCC Online SSC 1586, in submitting that it is the intention of the legislature which must be assimilated for ascertaining the Purpose and Object or Reason and Spirit prevailing through the statute and the words of a statute are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme and object of the Act and the intention of the Parliament is to be given effect to. Mr. Bhise has placed before us a chart reflecting the allegations of the loan accounts mentioned in the subsumed FIRs, and according to him, in respect of the same, the Enforcement Directorate has already registered an ECIR/MBZO-II/32/2021 based upon the predicate offence in form of FIR No. 806/2019. He would submit that Enforcement Directorate had registered two ECIRs in the year 2021 with respect to Seva Vikas Co-operative B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he observations in Para 18 and 35, highlighting the gravity of the offence of money laundering and the manner in which the special enactment deal with the offences. He would also lay emphasis upon the observations of the Apex Court in case of Vijay Madanlal Chaudhary (supra) to point out to us that the offence of money laundering is an independent offence, which is dependent on existence of proceeds of crime and laundering thereof. According to him, the proceeds of crime may be generated through a scheduled offence committed by anyone, and need not be necessarily the one committed by the petitioner. It is his submission that, test for the offence under PMLA would be laundering the proceeds of crime and not whether the petitioner committed the scheduled offence. He would also invite our attention to Section 44 of the Act, which envisages filing of Closure Report and according to him, only upon such report being filed, an investigation under the Act would be closed. He would specifically invoke Para 296 read with Para 363 of the Judgment in case of Vijay Choudhary (supra). Reflecting upon the nature of an ECIR, Mr. Venegavkar has submitted that it is an internal file maintained by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceeds of credit facilities sanctioned to above mentioned persons, were deployed for purpose/activities or creation of assets other than those for which the loan was sanctioned, bank did not take any steps to recover the said loans, charge penal interest etc. It is also pointed out that continuing irregularity in sanction of loans by Amar Mulchandani alongwith the Board of Directors and other Bank Officials, resulted in high NPA, and it diminished the net worth of the Bank. Resultantly, the Reserve Bank of India appointed an Administrator in June, 2021 and finally the license of the bank is also cancelled in October, 2022. 25. It is urged by Mr. Venegavkar that the Petitioner is Ex-chairman of Seva Bank and he, in collusion with the other accused persons, have siphoned off public money and duped the depositors of the Bank, and has illegally benefited himself and created irreparable loss in connivance, with the borrowers. He is, therefore, accused of laundering the proceeds of crime and is alleged to have invested it in the name of his family members and associates like Rajesh Sawant. The FIRs registered against the petitioner Mr. Amar Mulchandani accused him of playing an acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-existant i.e. acquittal, discharge of the accused and quashment of the schedule offence. It is also pointed out to us that CR No. 163/2018 was closed on 18/04/2022 when the decision of the Bombay High Court was holding the field, and subsequent thereto, came the decision of the Apex Court in case of Vijay Chaudhary in July, 2022. The alleged scheduled offences being CR Nos. 525, 526 and 527 of 2021 were registered prior to the Judgment of Vijay Chaudhary, and according to Mr.Venegavkar, the existence of proceeds of crime in case of Seva Bank which is the causal link , between the FIRs that continue to subsist and therefore, the submission that on closure of CR No.163/2018 the ECIR is a dead letter, is not an acceptable proposition, according to him. Mr. Venegavkar has placed reliance upon the decision of Delhi High Court in case of Rajendra Singh Chaddha vs. Union of India, Ministry of Home Affairs through its Chief Secretary Anr WP (Cri) No. 562/2023, as well as in case of Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra 2021 SCC Online SC 315 . 27. We have specifically enquired with Mr. Venegavkar as to whether the practice of subsumption of FIRs, which is adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the misappropriation to the tune of Rs. 429.57 crore involving 124 NPA loan accounts, which accounted for 92% of the loans of SVB. On the basis of the audit report, he filed 8 complaints, against distinct accused persons, which resulted in registration of 3 FIRs and a table indicating the gist of the accusations along with the accused in these FIRs is reproduced below, which would assist in dealing with the arguments advanced on behalf of the petitioner and the Enforcement Directorate:- Sr.No. FIR No. Date PS Name of Accused Gist of FIR 1 525/2021 dated 11.08.2021, Pimpri Police Station, Pune 1. Dharmendra Sonkar 2. Netra Sonkar 3. Shailendra Sonkar 4. Ratan Sonkar 5. Amar Mulchandani 6. 23 other bank officials / directors The said FIR was registered for misappropriation of loan amount to the tune of Rs.10.37 crore of Sonkar Group. 2 526/2021 dated 12.08.21, Pimpri Police Station, Pune 1. Vinay Vivek Aranha 2. Vivek Anthony Aranha 3. Deepti Vivek Aranha 4. Ambika Baldev Singh Dhinsa 5. Kishore Nathuram Chavan 6. Almaz Aziz Aladdin 7. Prasad Pandurang Nalavde 8. Amar Mulchandani 9. Ashok Mulchandani 10. Manohar Mulchandani 11. Daya Mulchandani 12. Suresh Shirode 13. 33 other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivance with other Directors and Borrowers, sanctioned favoured loans to them neglecting their credit worthiness, and the accusations set out that the loan amount was diverted, siphoned off and not utilized for the declared purpose. The report also revealed that the irregularity in the sanctioning of the loans by the Board of Directors/ Bank officials, diminishing it networth as large number loan accounts were rendered non-performing. The accused persons included the individuals, the members of the Board of Directors, and the office bearers of the Bank as well as different entities, like M/s Rosary Global Education Pvt Ltd, M/s Deepti Enterprises, proprietor Deepti Aranha, M/s Uniq Enterprises, M/s Paramount Infrastructure etc. During the course of investigation, search and seizure action under Section 17 of the PMLA was conducted, at the business and residential premises of Amar Mulchandani and Vijay Aranha, Sagar Suryawanshi and their family members and Associates on the reasonable belief that the premises had parked the proceeds of crime and the records related to money laundering. At this juncture, it is relevant to note that, obstruction at the end of Amar Mulchandani and his f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er greening of old loans was done to avoid audit objections, expressing them to conceal the true state of affairs of the bank. The ever greening was facilitated by Mr. Amar Mulchandani in connivance with the loan borrower. In return, Amar Mulchandani received kickbacks in form of cash to the extend of 20% of the loan amount and by obtaining signatures on blank cheques from borrowers, his commission money was withdrawn when the loan was disbursed and this was even noticed by RBI, while its scrutinized the loan accounts in Seva Bank. 33. The test audit of the loan accounts of Seva Bank brought about the whole modus operandi of Board of Directors, its officials, who were found to be responsible for misappropriation of bank s fund, thus jeopardizing the financial interest of its depositors and share holders. The commonality in the 3 FIRs, bearing 525, 526, and 527 arising out of the findings of the audit report with the FIR No.163 of 2018 is the modus operandi of the Board of Directors, resulting into loos to the bank, and in result adversely affecting the interest of the shareholders as well as the account holders in the Bank. It is the justification of the Enforcement Directorate tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to be answered and a pertinent observation in paragraph no.455 of the decision reads thus: 455. Needless to underscore that the 2002 Act is intended to initiate action in respect of money-laundering activity which necessarily is associated with the property derived or obtained by any person, directly or indirectly, as a result of specified criminal activity. The prosecution under this Act is not in relation to the criminal activity per se but limited to property derived or obtained from specified criminal activity. Resultantly, the inclusion of criminal activity which has been regarded as non-cognizable, compoundable or minor offence under the concerned legislation, should have no bearing to answer the matter in issue. In that, the offence of money-laundering is an independent offence and the persons involved in the commission of such offence are grouped together as offenders under this Act. There is no reason to make distinction between them insofar as the offence of money-laundering is concerned. In our opinion, therefore, there is no merit in the argument under consideration. 36. What amounts to an ECIR and how it is distinct from an FIR is also specifically deliberated upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he procedure prescribed under 1973 Code to deal with other offences (other than money-laundering offences) in the matter of registration of offence and inquiry/investigation thereof. This special procedure must prevail in terms of Section 71 of the 2002 Act and also keeping in mind Section 65 of the same Act. In other words, the offence of money-laundering cannot be registered by the jurisdictional police who is governed by the regime under Chapter XII of the 1973 Code. The provisions of Chapter XII of the 1973 Code do not apply in all respects to deal with information derived relating to commission of money-laundering offence much less investigation thereof. The dispensation regarding prevention of money-laundering, attachment of proceeds of crime and inquiry/investigation of offence of money-laundering upto filing of the complaint in respect of offence under Section 3 of the 2002 Act is fully governed by the provisions of the 2002 Act itself. To wit, regarding survey, searches, seizures, issuing summons, recording of statements of concerned persons and calling upon production of documents, inquiry/investigation, arrest of persons involved in the offence of money-laundering includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing proceeds of crime by following prescribed procedure in that regard. 37. In the wake of the distinction drawn, the further question which arose for consideration was, whether it is necessary to furnish the copy of ECIR to the person concerned apprehending arrest, or at least after his arrest and this question was answered in the negative, by holding that supply of ECIR in every case to a person concerned is not mandatory, as it cannot be equated with an FIR, which is mandatorily required to be recorded and supplied to the accused as per provisions of 1973 Code. Revealing a copy of an ECIR, if made mandatory would defeat the purpose sought to be achieved by the act of 2002, and it would amount to frustrating the attachment of the property and therefore, it was held that ECIR, which is essentially an internal document of Enforcement Directorate cannot be cited as violation of constitutional rights. 38. While we are called upon to decide the issue whether a subsequently filed FIR can be subsumed into an ECIR, despite the FIR which was the basis of the ECIR, having been resulting into a C summary, we will definitely have to keep in mind the legislative intent, its object and purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a given case in lieu of or in exchange of the property which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence. In the context of Explanation added in 2019 to the definition of expression proceeds of crime , it would inevitably include other property which may not have been derived or obtained as a result of any criminal activity relatable to the scheduled offence. As noticed from the definition, it essentially refers to any property including abroad derived or obtained directly or indirectly. The Explanation added in 2019 in no way travels beyond that intent of tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. Therefore, the Explanation is in the nature of clarification and not to increase the width of the main definition proceeds of crime . The definition of property also contains Explanation which is for the removal of doubts and to clarify that the term property includes property of any kind used in the commission of an offence under the 2002 Act or any of the scheduled offences. In the earlier part of this judgment, we have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring filing of such complaint. This provision is only to dispel the doubt that in the event the person has been arrested by the officer authorised under Section 19 of this Act on the basis of material in his possession and having reason to believe and recorded in writing of being guilty of an offence punishable under this Act, but after the inquiry done by him in exercise of powers under Chapters V and VIII of the 2002 Act, he forms an opinion that no offence of money-laundering is made out, requiring filing of complaint, it is open to him to file a closure report before the Special Court disclosing that position. The proviso would, thus, come into play in such cases where the complaint is yet to be filed owing to the pendency of inquiry before the authorities, under Chapters V and VIII of the 2002 Act. In that view of the matter and more so keeping in mind the purposes and objects behind the enactment of 2002 Act, such a provision must be regarded as having reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act. Accordingly, for the view taken by us, we do not find any dichotomy in these provisions, much less being manifestly arbitrary or unconstitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint was filed before the Metropolitan Magistrate, against Jet Airways (India Ltd) and its erstwhile Non-Executive Directors, including both the petitioners, alleging offences punishable under IPC and by passing an order under Section 156(3), the Senior Police Inspector, MRA Marg Police Station, was directed to register an FIR. Based on this FIR, ED registered the ECIR, under Section 3 and 4 of the PMLA. Admittedly, on 9/03/2020, a closure report was filed by the police on the ground that the dispute was civil in nature and in the matter of dues, which is payable to the complainant by Jet Airways, the claim in respect thereof, was already filed with Resolution Professional in the Insolvency proceedings, initiated under IBC, 2016. Enforcement Directorate filed an Intervention Application as well as Protest Petition, challenging the closure report and the trial Court rejected the same by observing that it had no locus to intervene. When the informant appeared in the matter, and a Criminal Revision was filed, it was also dismissed on the ground that ED has no locus to intervene. Thereafter, a Criminal Writ Petition was also filed, which was also dismissed, and the said decision wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the plaintiff-respondent in the present case, it was held that there is no automatic bar for holding departmental proceedings. The ultimate question whether acquittal in Criminal proceedings would bar holding of departmental enquiry was answered by recording that the departmental enquiry was not a trial and since a concession was given that C summary was a judicial order and amounted to acquittal, the Court proceeded upon the same, as it was not disputed that C summary report would amount to acquittal . 46. By relying upon the decision of the Division Bench in Naresh Goyal (supra), the ECIR was quashed as the predicate offence did not survive, as the accused was acquitted in the wake of acceptance of C summary. It is not in dispute that even in the present case before us C summary has been accepted, which amounts to acquittal of the accused in the predicate offence. In the case of Vijay Madanlal Chaudhary (supra), it is specifically held that in three contingencies, stipulated therei, if the FIR is quashed, then the ECIR shall not survive. An acquittal of an accused is one such contingency. 47. This principle is seriously doubted by Mr. Anturkar and he has relied upon the rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed persons and to substantiate the charge of possession of the disproportionate to the known sources of income of A-1 and A-2. Hence, it is just and necessary to re-open and further investigate the above case under Section 173 (8) Cr.P.C in the interest of justice The Special Court allowed the application, and the CBI continued its investigation and issued summons, when the affected party respondent no. 3 filed Criminal OP before the Madras High Court, seeking quashing of proceedings related to the summons received by him. The High Court on 11/09/2014, rejected the prayer of respondent no. 3 by holding that Under 173 (8) of the CrPC, a police officer can carry on further investigation even after a report under Section 173 (2) of the CrP.C is submitted, in view of Section 173 (8) of the CrP.C and held in Vinay Tyagi v. Irshad Ali alias Deepak reported in (2013) 5 SCC 762, with the only rider being that the police should seek formal permission from the Court. It was held that acceptance of the final report by the Magistrate does not debar him from taking cognizance if on further investigation, fresh material comes to light and since fresh material was received in the year 2013 it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid contention was not rebutted, what was deemed necessary to be examined was, whether an order accepting a final report, would bar further investigation by the police or the CBI, as in the present cases, in exercise of statutory powers under chapter XII of Cr.P.C. By placing reliance on the decision, in case of State of Rajasthan vs Aruna Devi, (1995) 1 SCC 1, in the facts where a final report was submitted stating that the complaint was false and this was accepted by the Magistrate, but since the Superintendent of Police had independently ordered further investigation, a challan was filed under Section 420 and 467 of IPC, and the Magistrate took cognizance, a challenge raised to the act of the Magistrate result in dismissal of the Revision, but the High Court allowed the Revision and the order of cognizance was set aside. 50. When the matter came up in an Appeal before the Apex Court under Article 136, it was held that, on further investigation being made, fresh materials came to light, which lead to the filing of further report, stating that a case has been made out. By relying upon the pronouncement flowing from two more decisions in case of K Chandrasekhar and S Papai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted under the provisions of the Prevention of Corruption Act. The Special Court, while considering the prayer to closed the FIR, accepted the final report and closed the same. The CBI itself sought reopening of the investigation under section 173 (8), since new evidence emerged against accused to substantiate the charge of possession of disproportionate income to his known sources. The decision of the Apex Court revolve around the closure report, since it was based on absence of any material against accused, which subsequently was received and therefore, CBI sought reopening of the closure report. It is worth to note that the Apex Court was conscious of Section 169 of the Code, which provided for release of an accused when the evidence was deficient, which definitely was not a report, but it contemplated filing of a report by the investigating officer in the manner provided in section 173 of the Code, as on completion of investigation, the officer-in-charge of the police station is duty bound to forward to the Magistrate report in the form prescribed, including the information whether the accused has been arrested, whether he has been released on his bond or whether he has been fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... True, undetected (where there is no clue whatsoever about the culprits or property or where the accused in known but there is no evidence to justify his being sent up to the Magistrate (for trial). B Maliciously false. C Neither true nor false, e. g., due to mistake of fact or being of a civil nature. Non-cognizable Police investigation reveals commission of only a non-cognizable offence. (4) A Superintendent of Police or a Sub-Divisional Officer is not bound to forward a final report to the Magistrate immediately. He may of his own motion direct further enquiry or he may for special reasons permit a case to remain pending under investigation. (5) When any further investigation is ordered and made subsequent to the submission of the final report the papers should, at each stage up to final disposal, be sent though the Superintendent of Police or the Sub-Divisional Officer. In urgent cases however, the Magistrate may return the papers, direct to the investigating officer. (6) When a final report of an officer-in-charge of a Police Station is returned to him for further investigation or other purpose, the date of the submission of the final report in its last and complete form should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed as Proceeds of Crime . 56. The argument advanced by Mr. Kadam that on acceptance of closure report in a predicate offence, the ECIR is rendered a dead letter, as it is non-est and it do not possess the potential of subsuming an FIR, is premised on the ground that there is no power or provision in PMLA to subsume subsequent FIRs into a pre-existing ECIR. While appreciating the said argument, the offence of money laundering, has to be the focus. Any person, who either directly or indirectly, attempts to indulge or knowingly assist or become part of, or is actually involved in any process or activity, connected with the proceeds of crime, which include its concealment, possession, acquisition or use, or its use and projection or claim that it is an untainted property, is guilty of an offence of money laundering. The proceeds of crime is any property derived or obtained as result of criminal activity, relating to a scheduled offence, or where such property is taken or held outside the country, and the offence of money laundering necessarily precedes commission of the scheduled offences, which cover a category of offences under the Indian Penal Code, under the NDPS Act, Unlawful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led, transferred or dealt with to frustrate its confiscation, by following the appropriate procedure as prescribed, the adjudicating authority shall either affirm the attachment of property or order it s retention or freezing of the same, or may release the property, depending upon the material placed before him. If the attachment of the property is confirmed, the Act also contemplate the procedure for its management while the trial is pending. 58. It is evident from the scheme of the enactment that a predicate offence shall precede the offence of money laundering, but it may not be necessary that if the predicate offence comes to an end, the ECIR itself shall come to an end. As noted by the Apex Court, in Vijay M. Chaudhary (supra), that the mechanism of proceeding against the property being proceeds of crime, is a sui generis procedure, and upon identification of the existence of the property being proceeds of crime, the Authority under the Act is expected to inquire into relevant aspects in relation to such property and take measures, as may be necessary, including attachment of the said property, for being dealt with, according to the scheme of the enactment. ECIR has a distinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, inserting etc. The term subsumption would be synonymous with colligate, type of: include, consider as part of something. There can be no doubt that for subsuming the subsequent FIR, there is a need to have a quasi link with the first FIR, which resulted into the recording of ECIR. 60. Mr. Kadam had heavily relied upon the decision in case of Naresh Goyal and since the said decision has recorded that grant of C summary amounts to acquittal and therefore, a conclusion was derived that since there was no scheduled offence against the petitioner in both the petitions, in view of the closure report filed which was accepted by the Court, the impugned ECIR will not survive. The premise on which Naresh Goyal is based, would bind us, as the decision of the Apex Court in case of State through CBI Vs. Hemendra Reddy Ors (supra), as it is dealing with closure report and not summary report. 61. Another decision on which reliance is placed in case of Indrayani Patnaik Vs. Enforcement Directorate 2022(SCC) Online SC 2167, where relying upon the decision in case of Vijay M. Chaudhary, the discharge of the petitioners from the scheduled offence, was pressed into service in support of the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein. During the pendency of this petition, Supreme Court delivered its judgment in Vijay Chaudhary on 27/7/2022, deciding upon the constitutionality of various provisions and therefore the said prayers were declared to be infructuous. For the purpose of quashing of the ECIR, the petitioners urged that despite the predicate offence registered under FIR No.129/2021 having been quashed by the judgment dated 4/5/2022, by the High Court of Bombay, the petitioners were issued summons in respect of the ECIR and therefore, the other relief in the petitions were prayed for. The pronouncement of law in Vijay M. Chaudhary 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. The Addl. Solicitor General contested the said plea by contending that the FIR still subsists since it has only been quashed qua the petitioners before the Bombay High Court and not in toto. Reliance was also placed upon para 311 of Vijay M. Chaudhary (supra), b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; secondly, the scheduled offence must be registered with the jurisdictional police or pending inquiry by the way of complaint before the competent forum; thirdly, in the event there is already a registered scheduled offence but the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent Jurisdiction owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can be no action for money laundering against not only such a person but also any person claiming through him in relation to the property linked to the stated scheduled offence. In other words no action under PMLA can be resorted to unless there is a substratum of a scheduled offence for the same, which substratum should legally exist in the form of a subsisting (not quashed) criminal complaint/inquiry or if it did exist the accused has since been discharged or acquitted by a Court of competent jurisdiction. There was no dispute in the said case before the Delhi High Court that the scheduled offence on the basis of which the ECIR was registered was itself quashed and therefore, it was held that the action under the PMLA can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2018 and Rs. 4.5 Crores in April 2018 as loan and gave the said property as mortgage to them as per mortgage deed no. 4407/14 5171/18. Thus, they have deceived Seva Vikas Co-op Bank Ltd. and their shareholders. Accordingly, a case has been registered against them for financial fraud. D. On the basis of the aforesaid information, it appears that proceeds amounting to Rs. 11.5 crores have been generated out of criminal activities related to the scheduled offence and the same appears to have been utilized and parked by Vivek Anthony Ahana and others and thus, projected the same as untainted. E. An ECIR bearing No. ECIR/MBZO-II/10/2021 is therefore recorded and investigation under the provisions of the Prevention of Money Laundering Act, 2002 and the Rules framed there-under is being initiated. 67. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular group i.e. ECIR/MBZO/II/10/2021, because of the commonality, as the Enforcement Directorate was investigating the affairs of Seva Bank, qua the individual groups which had availed the loan in collusion with the Board of Directors and the officials of the Bank. 68. The pronouncement of the Apex Court in Vijay Choudhary (supra), in no uncertain words has highlighted the purpose and object of the 2002 Act, by stating that it is not limited to punishment for offence of money laundering, but it also provide measures for prevention of money laundering and for attachment of proceeds of crime, which are likely to be concealed, transferred or dealt with, in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds under the Act of 2002. It is sui generis, which necessarily warrant a link between the scheduled offence defined under Section 2(1)(y) with proceeds of crime . The property derived or obtained as a result of a criminal activity relating to an offence, termed as scheduled offence , is regarded as tainted property and dealing or layering such property, in any manner, attracts the offence of money laundering. The scheduled offen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound facts in brief :- a) Two FIRs viz. 16/2018 dated 24/01/2018 and FIR No.49/2021 dated 12/03/2021 were registered under Section 420, 406, 120B of the IPC at PS, EOW against the accused persons, including the petitioner, arising out of similar set of facts and circumstances. The respective complainants alleged that despite payment of monies by them, they did not receive possession of flats, as promised by the Company, in which the Petitioner Rajinder Singh Chadha was acting as a Director, and it was alleged that he was responsible for siphoning off funds collected from the complainant. During the pendency of the trial in both the FIRs, the accused persons settled their dispute with the complainants amicably. b) In FIR No.16/2018, the accused moved an application for compounding under Section 320 of Cr.P.C. which was allowed by the trial Court and the accused persons accordingly stood acquitted. FIR No.49/2021 was quashed by the co-ordinate Bench of the High Court on 22/12/2022 in the wake of the settlement arrived at. c) ECIR was lodged on 26/07/2019 by the Directorate of Enforcement against the Petitioner and unknown persons. A search and seizure was carried out under Section 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FIR No.49/2021, which was allowed. Even in this FIR, there were 77 complainants and the dispute was settled only with 55. Further, 79 complaints were informed to be pending before RERA, Uttar Pradesh against the Company. 72. During the pendency of the Petition, FIR No. 55/2023 was registered on 10/07/2023 against the Company and its Directors, invoking Sections 409, 420, 120B of the IPC with PS, EOW, which was based on similar allegations, as in previous FIR. On the FIR being registered, the investigation proceeded in the already open ECIR. 73. It was argued on behalf of the counsel for the Department that since the enquiry/investigation under PLMA culminated into a complaint, and the same being a complaint case, at this stage, raising an argument that ECIR has to be quashed because some of the FIRs are compromised, is premature since the scheduled offence continue to exist, and it was urged that once the enquiry/investigation is concluded and the Respondent file a complaint, the petitioner can avail all the remedies available under the Cr.P.C. . 74. Dealing with the aforesaid rival contentions, where reliance was also placed upon the decision in the case of Prakash Industries (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provision in 2002 Act requiring Authority referred to in Section 48 to record ECIR or to furnish copy thereof to the accused unlike Section 154 of the 1973 Code . 75. By relying upon the observations of the Supreme Court in Vijay Choudhary (supra) carving out a distinction between ECIR under PMLA and an FIR under the provisions of Cr.P.C., which had referred to the ECIR as an internal document , the learned Single Judge concluded that the ECIR was registered on prima facie satisfaction of commission of an offence under Section 3 of PMLA and the department, by way of the present ECIR, was not investigating the case of home buyers/investors in respect of the allegations in the first two FIRs, but with respect to the alleged proceeds of crime generated from commission of the alleged scheduled offences in the FIR registered at the instance of home buyers/investors. Holding that the third FIR i.e. FIR No. 55/2023 also related to the same project which was the subject matter of the two previous FIRs, it was categorically held as below :- In the present factual context, even if separate FIRs are registered at the instance of separate home-buyers/investors, each of the said FIRs cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madanlal Choudhary (supra) and Nik Nish Retail (supra), an observation was quoted in Para 35 to the following effect :- 13. The Telangana High Court in Manturi Shashi Kumar (supra) has also quashed a complaint under Section 3 of the PMLA on the grounds of the accused being discharged/acquitted of the scheduled offence. The relevant observations of the said judgment are set out below:- 28. Thus, according to Supreme Court, the offence under Section 3 of PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. If the person is finally discharged or acquitted of the scheduled offence or the criminal case against him is quashed by the court, there can be no offence of money laundering against him or anyone claiming such property being the property linked to the scheduled offence. It is immaterial for the purpose of PMLA whether acquittal is on merit or on composition. 14. In view of the aforesaid legal position, the present complaint filed by the ED and the proceedings arising therefrom cannot survive. Considering that the FIR has been quashed by this court and that it has not been challenged till date, there can be no offence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed in Remand Application by the learned Single Judge of Mumbai and sought direction to release applicant from confinement in Jail. The counsel for the Applicants by placing reliance upon Sub-section (b) of Section 44 of PMLA added by way of proviso urged that scheduled offence in the present case is a sine qua non for the offence of money laundering which would generate money (being laundered) and it also refer to as predicate offence. It was urged that the moment predicate/scheduled offence comes to an end, the offence lodged by Respondent No.1 on the said predicate offence also comes to an end and does not remain in existence. It was also urged that once scheduled offence is compromised/compounded, the structure of the present crime falls to the ground and does not survive and becomes non est. The Enforcement Directorate represented by the Additional Solicitor General Mr. Anil Singh urged that investigation of the crime by ED is an independent investigation and once ECIR is registered then the base/predicate/scheduled offence is no more required for taking it to its logical end under PMLA and the scheduled offence is necessary only for registration of an offene under PMLA an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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