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TMI Blog2024 (12) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to the scheduled offence was quashed - HELD THAT:- It is not in dispute that complaint under Sections 44 and 45 of PMLA has been filed. Thereafter, supplementary complaint was also filed invoking Section 447 of the Companies Act, 2013 on 12.06.2024. The FIR was challenged before the High Court of Karnataka. The High Court quashed the FIR on the ground that the investigation pertaining to the same allegation against the petitioner and other accused was entrusted to the Serious Fraud Investigation Office (SFIO), and the SFIO after investigation submitted a report and thereafter filed a chargesheet / complaint before the Special Court and the same is pending before XV Additional City Civil Court, Chennai. Therefore, the Court quashed the FIR No. 11/2019 dated 01.11.2019 on the ground that SFIO alone has jurisdiction to try the said offences. Scheduled offence of section 447 of the Act is still pending against the petitioner - HELD THAT:- The proceedings under section 447 of the Companies Act, 2013 is a scheduled offence under PMLA, 2002. It is not disputed that already chargesheet / complaint has been filed under Section 447 of the Companies Act, 2013 on 09.09.2022 and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ECIR becomes an independent document in itself. Consequently, a new life in the form of ECIR emerges, which can breath on its own without the support of FIR. So, the FIR and ECIR become two different documents and both tend to take shape on its own, independent of each other. Deliberations on the principle of automatic quashing of ECIR once FIR stands quashed - HELD THAT:- It shocks the conscience of the Court that in recent cases involving money laundering, a certain pattern has emerged, whereby, the FIR quashed through minor technical glitches or procedural irregularities and with that as a ground they seek for quashing of ECIR also - Any application of principle, even if in its literal form paves way for injustice, then the Court is allowed to take a detour to expound the law in such a way which serves the cause of justice. If the principles of automatic quashment of ECIR is adopted arithmetically, the very purpose and objective of PMLA is defeated. This Court is not venturing into the grounds of quashing an FIR as the principles pertaining to the same has already been laid down elaborately by the Hon ble Supreme Court. But the rationale here is to cull out the level of bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and all subsequent proceedings appears to be misplaced one. iii) The Respondent is the notified Investigative Authority for PMLA only and not for the scheduled offence. The live link between the scheduled offence and PMLA proceedings would be relevant for initiation of proceedings under PMLA. iv) If the principles of automatic quashment of ECIR is adopted arithmetically, the very purpose and objective of PMLA is defeated. The FIR and ECIR become two different documents and both tend to take shape on its own, independent of each other. v) keeping in line with the explanation to Section 44 of the PMLA, 2002, this Court comes to the irresistible conclusion that cases where FIR pertaining to the scheduled offence is quashed it does not automate the exoneration of the accused from the predicate offence. vi) The quashing of the FIR shall not warrant an automatic quashing of ECIR. All the more, the predicate offence under Section 447 of the Companies Act, 2013, which is also a scheduled offence under the PMLA still stands good and requires further investigation. Therefore, in view of the above ECIR is not liable to be quashed. Thus, the petitioners have not made out any case for quashing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation. Totally, Rs. 68,11,45,959. Similarly, from Mr. Shantilal Surana, a total sum of Rs. 62,65,19,112/- was borrowed from the above 3 companies, namely, for Global Industries, Prince Enterprises, and for Supreme Corporation. The similar transaction was done in the name of Mr. Vijayraj Surana to the tune of Rs. 74,65,14,732 /- and in the name of Mr. Dinesh Chand Surana to the tune of Rs. 80,99,23,739/-. 4. Thereafter, during the course of investigation, the properties acquired by M/s Karwalal and Company has been attached vide Provisional Attachment Order No. 09/2022, dated 01.08.2022, as it been derived from proceeds of crime and confirmed by Adjudicating Authority vide order dated 27.01.2023 (O.C.No. 1800/2022). The petitioner was also made as a defendant in the impugned proceedings in O.C.No. 1887 of 2023 because the properties in possession of Mrs. Alka Surana, w/o. Mr. Vijayraj Surana (defendant No. 7 in the OC No. 1887 of 2023) and Mr. Mitesh Surana S/o. Mr. Vijayraj Surana (defendant 20 in the OC No.1887 of 2023) have been attached vide provisional Attachment order No. 17/22 date 26.12.2022 on the reasonable belief that the same had been acquired out of the proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India and others 2022 SCC online SC 929., It is contended that the Apex Court in Vijay Mathanlal's case held that the authorities under PMLA 2002 cannot prosecute any person 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 enquiry/trial including by way of criminal complaint before the competent forum. In the present case, the scheduled offence has been quashed against the petitioner. Mere pendency of an appeal before Hon'ble Supreme Court would not extend any protection to the ECIR, which is impugned in the present writ proceedings. The position has been further clarified by the Apex Court that in the event of restoration of FIR by the Apex Court, the ECIR would also stand restored and that being the legal position, the present writ petitions are to be considered. 7. Secondly it is stated that the supplementary complaint filed under 44 (1) (b) (ii) and 45 of the PMLA 2002 for the offence under Section 3 of PMLA is unsustainable, since it was not filed by following due procedures. Though Section 447 of the Companies Act has been inserted in the schedule to PML ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruled that ECIR cannot be the subject matter of judicial review under Section 482 of Cr.P.C. IV. DISCUSSIONS: A) LEGAL GROUNDS ON WHICH FIR PERTAINING TO THE SCHEDULED OFFENCE WAS QUASHED: 12. The petitioner mainly contended that the respondent cannot proceed under PMLA in view of the quashment of predicate offence in FIR No. 11/2019 dated 01.11.2019 by the Karnataka High Court vide order dated 15.04.2024. The relevant order portion is reiterated as under; (iii) The impugned proceedings in FIR No. 11/2019 dated 01.11.2019 registered by the CBI, BSFB, Bangalore insofar as it relates to the petitioner in Crl.P.No.5354/2023 is hereby quashed. Further Para-31 of the said order dated 15.04.2024 is reiterated below- 31. The Central Government in relation to the same allegation against the petitioner and other accused by order dated 9.4.2019 entrusted investigation to the SFIO, and the SFIO after investigation submitted a report, and thereafter, filed a complaint before the Special Court established under Section 435 of the Act, 2013. Therefore, the SFIO alone has jurisdiction to try the offences alleged against the petitioners. 13. The undisputed facts between the parties are that the FI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces specified under Part A of the Schedule; or (ii) the offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or (iii) the offences specified under Part C of the Schedule. 16. During the pendency of a Serious Fraud Investigation Office (SFIO) proceeding, which is scheduled offence, it gives jurisdiction to the Enforcement Directorate to investigate the matter and the ECIR cannot be stated to be without a predicate offence. 17. Therefore, the proceedings under section 447 of the Companies Act, 2013 is a scheduled offence under PMLA, 2002. It is not disputed that already chargesheet / complaint has been filed under Section 447 of the Companies Act, 2013 on 09.09.2022 and the same is pending before the XV Additional City Civil Court, Chennai. Further, it is submitted that the Petitioner was arrested by SFIO and is under judicial custody from 02.08.2022. 18. Therefore, the action of Respondent Department does not stand vitiated as the predicate offence under Section 447 of the Companies Act, 2013 is still pending and not quashed. Therefore the prayer of quashing of the ECIR and all subsequent proceedings appears to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the Hon'ble Supreme Court regarding the scope of Section 3 of PMLA. The discussion about Section 3 of PMLA commences from paragraph 263 of Vijay Madanlal's judgment. 23. Importantly, in paragraph 281 of Vijay Madanlal's case cited supra, the question discussed is, whether the offence under Section 3 is a standalone offence. The observations reveal that the property must qualify the definition proceeds of crime under Section 2 (1) (u) of PMLA. All or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of proceeds of crime under Section 2 (1) (u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the Court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property as ex-consequenti proceeds of crime within the meaning of Section 2 (1) (u) of PMLA. The deeper sense expressed by the Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial for initiation of proceedings and recording of ECIR but both the offences cannot be placed on the same footing. PMLA proceedings are distinct and the said Act is a complete code in itself, whereas scheduled offences are tried under other laws. When two documents are different and distinct in their own nature, a combined reading and implication cannot be adduced to them. 27. ECIR is born from FIR, but once the ECIR is born, the umbilical cord that connects the ECIR with FIR losses its relevance and the ECIR becomes an independent document in itself. Consequently, a new life in the form of ECIR emerges, which can breath on its own without the support of FIR. So, the FIR and ECIR become two different documents and both tend to take shape on its own, independent of each other. 28. Proceeds of Crime is the focal point for an ECIR, whereas scheduled offence is dealt with under the FIR . Further reliance is also placed with the aid of judgments delivered by the Hon'ble Supreme Court of India in the case of Vijay Madanlal Choudhary vs. Union of India and Others cited supra and Rajinder Singh Chada vs. Union of India W.P. (CRL) 562/2023 CRL.M.A. 5126/2023. Both these judgments hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered by way of an FIR alleged to have been committed in respect of the same transaction which was the subject matter of such ECIR. 34 ...It is clarified that since this Court is of the opinion that the ECIR, as explained in Vijay Madanlal Choudhary (supra) cannot be equated with an FIR and as per the stand of the department, the same is only for administrative purposes, there is no impediment in taking the third FIR on record which related to the same project forming the basis for registration of the first two FIRs, resulting in initiation of the impugned ECIR. 31. When there are findings arrived at independently in both the FIR and ECIR, can the Court completely disregard those findings and bring the proceedings to an unjustified end just because one of the proceedings was quashed on procedural / technical grounds without due impetus to the substantive grounds? This question requires an in-depth consideration. F) DELIBERATIONS ON THE PRINCIPLE OF AUTOMATIC QUASHING OF ECIR ONCE FIR STANDS QUASHED: 32. It shocks the conscience of the Court that in recent cases involving money laundering, a certain pattern has emerged, whereby, the FIR quashed through minor technical glitches or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2 (1) (u) as it stands today . On the other hand, in the trial in connection with the scheduled offence, the Court would be obliged to direct return of such property as belonging to him. It would be then paradoxical to still regard such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce on that matter. 34. A blanket application of the observations made in the aforementioned judgement will not advance the object set out under the PMLA, 2002 and in turn will defeat its primary object. The Vijay Madanlal case is a binding precedent for all Courts below. And on careful application of the judgement, analysing on a case to case basis, the output shall defer for each case and not render the same resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loses its significance and is liable to be quashed. Since the scheduled offence itself is not made out, then automatically no predicate offence can hold good in the ECIR. However, if the FIR was quashed purely on technical grounds or procedural irregularities, then it is to be understood that mere quashing of the FIR does not absolve the accused under the PMLA proceedings and inturn cannot collapse the predicate offence in the PMLA proceedings. 39. Further, when the PMLA proceedings is set in motion and prima facie findings are already made, including completion of filing of chargesheet, then an FIR quashed after this stage cannot be a viable ground to quash the ECIR also. More so, the PMLA requires the presence of a scheduled offence to initiate proceedings under the Act. So it also becomes a mandate that the grounds on which scheduled offence was quashed is thoroughly examined before rendering the PMLA offence ineffective. 40. This Court is not venturing into the grounds of quashing an FIR as the principles pertaining to the same has already been laid down elaborately by the Hon ble Supreme Court. But the rationale here is to cull out the level of bearing that a quashed FIR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when proceeds of crime is traced in a parallel investigation by the Enforcement Directorate, this gives rise to another question that, once proceeds of crime is prima facie unearthed can ECIR be quashed on the ground that FIR was quashed. This clearly is an unjustified approach. 43. In the present case, the FIR against the petitioner alone was quashed by the Karnataka High Court, whereas the FIR against the other accuseds are still pending. The FIR No. 11/2019 dated 01.11.2019 registered by the CBI was quashed on the ground of want of jurisdiction. Since for the same offence the investigation was handed over to the SFIO, whereby the SFIO conducted the investigation and filed a complaint / chargesheet before the Special Court, which is still pending. 44. Due to the above development, since the SFIO was already entrusted with the investigation by the Central Government vide order dated 09.04.2019 on the same set of allegations, the present FIR registered by the CBI was quashed by the High Court citing the aforementioned reason. Hence, it is amply clear that the High Court has quashed the FIR only on the ground that another Investigating Agency is seized off the matter. The Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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