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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 ..... ION NO. 917 OF 2023 WITH INTERIM APPLICATION NO. 918 OF 2023 AND INTERIM APPLICATION 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.917/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63/2018 was the source for registration of ECIR/MBZO-II/10/2021 and the proceeds of crime, suspected 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 806/2019 on 19/7/2019 at the instance of one Dhanraj Aswani, alleging commission of offences punishable 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 Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mortgaged the same with the Bank. The Investigating Officer concluded that informant had filed false complaint 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 atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Petitioner in connection with ECIR/MBZO-II/10/2021. c. Issue a writ of certiorari and/or writ in the nature of certiorari and/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04/2022. It is, therefore, the contention of Mr. Kadam that as on 18.04.2022 the impugned ECIR ceased to exist and it was, therefore, rendered a dead letter and no further 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 atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmit that the criminal breach of trust is not a scheduled offence under the PMLA and, therefore, the Respondent, cannot rely on FIR nos.525, 526 and 527 of 2021, which has failed to make out an offence 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 FI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of the subsumed FIRs. Relying upon the decision of this Court in case of Naresh Goyal (supra), Mr. Bhise has urged before us that the existence of the scheduled predicate offence is a prerequisite for an 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 registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fence of money laundering, which is a different and independent class of offence. He would place reliance upon the decision of this Court in case of Anil Deshmukh vs. Enforcement Directorate 2021 SCC Online Bom 3641, and the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny of loan accounts of various borrowers of the Seva Bank and reported in its order dated 02/02/2021 as below : "Bank had not ensured regular monitoring of end use of funds in the accounts of borrower. Despite knowing that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of an accused, or quashment of scheduled offences will not affect the proceedings under PMLA. However, the Apex Court in the case of Vijay Chaudhary (supra) has contemplated three eventualities, when the proceedings under PMLA would be 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to this on the basis of multiple complaints regarding malpractices in the bank, Rajesh Jadhawar, Joint Registrar (Audit Cooperation Department), as per the direction of Commissioner of Co-operation Maharashtra State, conducted a test audit of the loan accounts and he reported 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of Rosary Education Group, being disbursed the loan without complying the requisite formalities for grant of loan and in the subsequent FIRs, which are filed subsequent to the audit report of Mr. Rajesh Jadhawar, which divulged misappropriation, alleged that the Board of Directors, including Shri Amar Mulchandani in connivance 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 residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routinely shifted for other purposes. Mr. Amar Mulchandani, along with Mr. Ashok Mulchandani continued to be the director from 2007 to 2020, and within the total span of time that was available, the same modus operandi continued in sanction of loans from the bank without assessing the security value of the Mortgaged property and ever 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure followed by the Enforcement Directorate, while enquiring into/investigating the offences under the PMLA, as being violative of the Constitutional mandate was placed before the three Judge Bench of the Apex Court in case of Vijay Mandanlal Chaudhary & Ors vs Union of India and various concerns, as regards the provisions and its implementation came 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of the 2002 Act, though the offence of money-laundering is otherwise regarded as cognizable offence (cognizance whereof can be taken only by the authorities referred to in Section 48 of this Act and not by jurisdictional police) and punishable under Section 4 of the 2002 Act, special complaint procedure is prescribed by law. This procedure overrides the 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 compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equiring Authority referred to in Section 48 to record ECIR or to furnish copy thereof to the accused unlike Section 154 of the 1973 Code. The fact that such ECIR has not been recorded, does not come in the way of the authorities referred to in Section 48 of the 2002 Act to commence inquiry/investigation for initiating civil action of attachment of property being 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 En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utes offence of money-laundering under Section 3 of the Act. Paragraph No. 252, in case of Vijay Chaudhary offered a infallible test to ascertain, when a property would amount to 'proceeds of crime' "252. Be it noted that the definition clause includes any property derived or obtained "indirectly as well. This would include property derived or obtained from the sale proceeds or in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court in case of Vijay Madanlal Chaudhary, made the following observations:- "363. Coming to the proviso inserted in this clause [Section 44 (1) (b)] vide Finance (No. 2) Act, 2019, is, in fact, an enabling provision. It permits the Authority authorised to file a closure report before the Special Court in case it is of the opinion that no offence of money-laundering has been made out, requiring 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 VI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uled offence, which is a condition precedent for initiating ED proceedings as Mr. Shirsat, the learned counsel for ED, did not dispute the fact that there was no scheduled offence pending against either of the petitioners and he also did not dispute that registration of scheduled offence is a condition precedent for initiating ED proceedings. The facts placed before the Division Bench, reveal that a private complaint 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 Interven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' summary, which was granted. The question that was placed before the Court was whether a departmental enquiry need to be undertaken for deciding whether the delinquent is fit to be retained in public service even though he has been acquitted by the Criminal Court. In paragraph no.8, recording that it was not doubted that, "granting 'C' summary was a judicial order and that the granting of the summary amounts to an acquittal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal action against A1" 48. The CBI filed Criminal Miscellaneous Petition under Section 173 (8) of Cr.P.C, seeking to reopen and undertake further investigation by stating as below:- '....the prosecution has filed the final report under Section 173 Cr.P.C before this Hon'ble Court on 24.12.2008 with a prayer to close the FIR as a mistake of fact' ' It is humbly submitted that now new evidences emerge to prove the allegation leveled against the above said accused 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Section 190 (1) (c) of Code of Criminal Procedure is a judicial order, and not an administrative order, as when final report of the police is submitted to the Magistrate and the Magistrate passes an order, either agreeing with the report of the police and finalizing the proceedings; or not agreeing with the police report and holding that the evidence is sufficient to justify the forwarding of the accused to the Magistrate and taking cognizance of the offence complained off. Though the 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accepted, it is permissible for the investigating agency to carry out further investigation and prior to carrying out the investigation under Section 173 (8) of the Code of Criminal Procedure, it is not necessary that the order accepting the final report should be reviewed, recalled or quashed. 51. The decision of the Apex Court is delivered in the background that prayer was made to close the proceedings by CBI, since on completion of investigation, it came to the light that the accused cannot be prosecuted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally and should be accompanied by all the case papers numbered and indexed methodically. If the accused has been released on bail, the Magistrate should be requested to cancel the bail bond. He should also be requested to pass orders regarding the disposal of property attached, unless any of the articles, e. g., blood stained clothes, are required for further use in true but undetected cases. A request should also be made to the Magistrate to classify the case and to issue an appropriate summary of his order, viz. :- "A' 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty being the property linked to the scheduled offence. 55. In Vijay Chaudhary (supra), only three contingencies are contemplated; it being a trite position in law that offence under Section 3 of 2002 Act is dependent on illegal gain of property, as a result of criminal activity relating to a scheduled offence, but if the person is finally discharge/acquitted of the scheduled offence or the case against him is quashed, then there can be no continuation of proceedings of money laundering against him or anyone having linked with the said property, being described 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to believe on the basis of the material in his possession that any person is in possession of any proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with, in any manner, which may result in frustrating any proceedings relating to confiscation. The Act has also created mechanism for adjudication of the complaints by the Director or any other Officer, who had provisionally attached any property, by recording the reasons of his belief that a person is in possession of any proceeds of crime and which are likely to be concealed, 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 offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty be linked to the scheduled offence through him. 59. 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 indicative of combining, comprehending, comprising, covering, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aried, and if there be any legitimate ground to proceed under PMLA. 62. A further decision of the Delhi High Court in case of Harish Fabiani & Ors Vs. Enforcement Directorate & Ors 2022 SCC Online Delhi 3121, on which reliance is placed by the counsel for the petitioners, would disclose that the petitions sought a declaration for declaring certain provisions under the Act of 2002 to be unconstitutional, being in violation of the fundamental rights. In addition, a prayer was also made to quash and set aside the impugned ECIR and stay all the proceedings arising therefrom and quash the summons issued 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 pronounceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter against the accused as regards the allegations made in the said complaint and crystallized in the FIR. 64. Another pertinent observation is contained in paragraph no. 22 to the following effect 22. The Hon'ble Supreme Court has been clear and categorical in its reasoning as evident from the para extracted above. The undeniable sequitur of the above reasoning is that firstly, authorities under the PMLA cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed; 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 relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pti Vivek Arana on behalf of Rosary Education Group, again mortgaged the same property under Mortgage Deed No. 5171/18 registered at Deputy Registrar's Office, Havel No. 18, Pune to Seva Vikas Co-op Bank Ltd. Head Office near Seva Bhavan, near Sadhu Vaswani Garden Pimpri Pune (via Budhwar Peth Branch) and obtained a Term Loan Loan Amount of Rs. 2.5 Crore & Cash Credit Facility of Rs. 2 Crores. C. That, on the basis of the said rent agreement, the directors of Rosary Education Group, viz 1) Vivek Arana 2) Vinay Arana 3) Miss. Dipti Vivek Arana 4) Chandralekha Vivek Arana have obtained an amount of Rs. 7 Crores in 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, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted the same modus operandi which was the basis for registration of ECIR/MBZO/II/10/2021 and Unit-5 was already investigating into it, by arresting the main accused and even the properties/proceeds of crime under Section 5 of the PMLA Act, was also attached. In the wake of the above, since we could clearly notice the causa link between the FIR Nos. 525, 526 and 527 with the ECIR/MBZO/II/10/2021, we do not find substance in the submission advanced by Mr. Kadam that the subsumption could not have taken place, as when it is said that the three FIRs are subsumed in the existing ECIR, it only convey that they have been included in a 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 laund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptance of 'C' summary, the proceedings in the FIR No.163 of 2018 are only in state of Coma, but they do not deserve to 'rest in peace', as no curtains are finally drawn, but we do not subscribe to his submission, as though we accept that on acceptance of 'C' Summary, the FIR No.163 of 2018 has come to an end, but the ECIR, which had already subsumed three CRs i.e. 525, 526 and 527 of 2021, cannot be said to be nonest. 69. One decision on this point is the one delivered by Delhi High Court of Rajinder Singh Chadha vs. Union of India, Ministry of Home Affairs Through its Chief Secretary & Anr. (supra) pronounced on 24/11/2023. We must also refer to the background 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand alone." 71. The Enforcement Directorate opposed the contention, by submitting that on the basis of the FIR, the ECIR was recorded on 27/06/2019, and when the FIR was registered, there were 20 complainants, however, at the time of filing of charge-sheet, there were 60 more complainants and as per the petitioner, dispute was settled only with 61 out of 80 complainants. Before the Magistrate, it was recorded that the petitioner shall settle dispute with the remaining complainants as well. Thereafter, fresh complaints were received and EOW registered another FIR No.49/2021 and this was also taken on record in the existing ECIR 09/HIU/2019. The petitioner approached seeking quashment of 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 inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Vijay Madanlal Choudhary (supra) 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. While observing the same, the Hon'ble Supreme Court held as under : "457... there is no need to formally register an ECIR, unlike registration of an FIR by the jurisdictional police in respect of cognizable offence under the ordinary law. There is force in the stand taken by the ED that ECIR is an internal document created by the department before initiating penal action or prosecution against the person involved with process or activity connection with proceeds of crime. Thus, ECIR is not a statutory document, nor there is any 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'scheduled offence' was quashed or compounded in all respects. In the present case, 'scheduled offences' by way of the third FIR still exist. It is pertinent to note that even in an FIR being investigated by the local police involving multiple complainants, compounding with some of them will not be a ground for quashing of the said FIR. However, partial compounding/quashing is permissible. 76. Reliance was also placed upon the decision of a co-ordinate bench in Nayati Healthcare and Research NCR Pvt. Ltd. And Ors. Through the Authorised Representative Sh. Satish Kumar Narula & Ors. vs. Union of India Ministry of Home Affairs through its Standing Counsel and Anr., 2023 DHC, 7542, in which by relying upon Vijay 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the proceeds of crime generated and layered, they are capable and therefore, rightly subsumed into the said ECIR, which is still alive and kicking. 79. It is not unusual for the Enforcement Directorate to adopt this procedure and Mr. Venegavkar has placed before us distinct cases, where this methodology is adopted, to which we have referred as above. We must also refer to a decision of this Court delivered by the learned Single Judge (A.S. Gadkari, J) in Criminal Application (APL) No. 201/2021 dated 16.03.2021, in case of Babulal Verma S/o. Mulchand Varma & Anr. vs. Enforcement Directorate, Mumbai & Anr., which is equally a somehow similar thinking, when an Application filed under Section 482 read with 483 of the Cr.P.C. raised a challenge to the order 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 pred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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