9911796707
TMI Blog2024 (12) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... QUASHED: 23 G) IMPLICATIONS OF AUTOMATIC QUASHING OF ECIR BASED ON FIR QUASH: 30 V. CONCLUSION: 32 Under assail are the proceedings of the Enforcement Directorate in ECIR Nos. CEZO-I/05/2019 dated 27.12.2019, CEZO-I/37/2020-dated 25.09.2020 and CEZO-I/42/2020 dated 24.12.2020. I. FACTUAL MATRIX: 2. The crux of the allegations against the petitioner under Prevention of Money Laundering Act, 2002, [hereinafter referred as 'PMLA'] complaint are that they have obtained loans from IDBI Bank to the tune of Rs. 1301.76 Crores and Rs. 1495.76 Crores from the same IDBI Bank and from the SBI Bank, Rs. 1188.56 Crores. The loan borrowed by the said companies have facilitated mis-appropriation, manipulation of books of accounts through fictitious accounts and conversion of property of SIL by way of No. (1) Capital advances to potentially related party, (2) Sales and purchase with potentially related properties (3) bilateral transactions with properties related amongst themselves. 3. Thereafter, the petitioner and the company for the purpose of routing of funds borrowed money from one Mr. Gowtham Raj Surana to the tune of Rs. 33,09,80,860/- for Global Industries, Rs. 14,53, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fraud Investigation agency registered complaint under Section 212 (6) of Companies Act against M/s. Surana Industries Limited and 14 Group Companies on 28.03.2019. In February 2020, CBI handed over 296 Kgs gold to SBI as per the order of NCLT, Chennai. However, missing of 104 kgs of Gold was not reported to NCLT, Chennai by liquidator or SBI or CBI till August 2020. The petitioner claims to be the whistle blower for missing of 104 kgs of gold. He provided information regarding missing of gold and at that point of time the Enforcement Directorate registered the impugned ECIR on 27.12.2019, 25.09.2020 and 24.12.2020. 6. The learned counsel for the petitioner Mr. T.R. Ragavacharyulu, would mainly contend that the High Court of Karnataka quashed the FIR registered by CBI against the petitioner with reference to the scheduled offence on 15.04.2024. The CBI preferred an appeal before the Hon'ble Supreme Court of India, which is pending. Since the FIR has been quashed, the scheduled offence is not in existence and consequently, the petitioner is entitled to be exonerated from PMLA proceedings. The legal position has been well enumerated and reiterated in paragraph 467 (iv) (d) by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 281 to 284 and 349. The conclusion arrived at paragraph 467 by the Apex Court cannot be read in isolation so as to quash the ECIR. The findings, principles and the scope elaborately considered by the Hon'ble Supreme Court are to be taken into consideration with reference to the grounds raised by the petitioner. 10. The learned Additional Solicitor General would further contend that the process under PMLA was construed as standalone process. Once the scheduled offence is traced out and ECIR is filed, investigation commences and a complaint has been filed under Section 44 and 45 of PMLA. Therefore, the writ petition would be pre-mature since quashment of FIR has been challenged by the CBI before the Hon'ble Supreme Court of India, which is pending. The Enforcement Directorate in the present case has filed a supplementary prosecution complaint, wherein the proceeds of crime has been elaborately enumerated by the Enforcement Directorate in paragraph 3.2 of the Additional complaint. Thus, the writ petition is to be rejected. 11. The learned Additional Solicitor General relied on an order in the case of N. Dhanraj Kochar and others vs. The Director, Directorate of Enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction to try the said offences. B) SCHEDULED OFFENCE OF SECTION 447 OF THE COMPANIES ACT, 2013 IS STILL PENDING AGAINST THE PETITIONER: 14. It is pertinent to note that in respect of other accused persons, the FIR in predicate offence is still in force. And it is also to be noted that the SFIO complaint still stands good. This SFIO complaint was registered on 28.03.2019 much before registration of FIR by the CBI on 01.11.2019 and ECIR on 27.12.2019. Meanwhile, the CBI has preferred an Appeal against the FIR quash order passed in favour of the petitioner. In the time limit before the FIR was quashed, the Enforcement Directorate investigation process was conducted and a supplementary complaint was filed in the year 2024. 15. From the above facts, it is clear that the High Court of Karnataka quashed the FIR and not the SFIO complaint. Therefore, the scheduled offence under Section 447 of the Companies Act, 2013 still stands good against the companies namely M/s. Surana Industries Limited, M/s. Surana Power Limited, M/s. Surana Corporation Limited. Section 447 of the Companies Act, 2013 is also one of the scheduled offence under Part A of the schedule to PMLA. To elaborate further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is amply clear that the offence of money-laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form be it one of concealment, possession, acquisition, use of proceeds of crime as much as projecting it as untainted property or claiming it to be so. Thus, involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money-laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence derived or obtained as a result of that crime-except the proceeds of crime derived or obtained as a result of that crime." 21. In a case where based on the scheduled offence Enforcement Directorate initiated PMLA proceedings, conducted investigation, identified "proceeds of crime" and filed statutory complaint under Sections 44 and 45, then it is to be construed as Standalone Process within the parameters laid down by the Hon'ble Apex Court in the case of Vijay Madanlal. D) SECTION 3 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the PMLA. 25. Significantly, in paragraph 284 of Vijay Madanlal's judgment, it is reiterated that the authority under PMLA, is to prosecute a person for offence of money laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of " Proceeds of Crime". Only if that belief is further supported by tangible and credible evidence indicative of involvement of the person concerned in any process or activity connected with the proceeds of crime, action under the Act can be taken forward for attachment and confiscation of proceeds of crime and until vesting thereof in the Central Government, such process initiated would be a standalone process. Therefore, the live link between the scheduled offence and PMLA proceedings would be relevant for initiation of proceedings under PMLA. The Hon'ble Supreme Court elaborately considered initiation of PMLA proceedings, for which it is a pre-condition that a scheduled offence is to be registered. E) ECIR CANNOT BE EQUATED WITH FIR: 26. The ground of quashment of FIR to quash the ECIR cannot be taken as a matter of principles or as an automatic ground for quashing the ECIR due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property (being proceeds of crime) under this Act by way of civil action (attachment and confiscation), 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 connected 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. 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." 30. Further, in the case of Rajinder Singh Chada vs. Union of India cited supra, the Delhi High Court held as follows; "32... Since the ECIR has not been equated with a FIR and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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. 33. This point of contention in the present Petition falls within the contours of the judgement rendered by the Hon'ble Supreme Court in Vijay Madanlal case. The Vijay Madanlal case extensively dealt with the validity of different provisions in the PMLA, 2002. The observations made in the Paragraph No.281 relevant to the case on hand is extracted below: "281. The next question is: whether the offence under Section 3 is a standalone offence? Indeed, it is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. Nevertheless, it is concerning the process or activity connected with such property, which constitutes offence of money-laundering. The property must qualify the definition of "proceeds of crime" under Section 2 (1) (u) of the 2002 Act. As observed earlier, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as crime property and in consequence the PMLA offences loses its significance. Hence, to warrant a quashing of the ECIR, mere quashing of the FIR on technical grounds by itself does not make the ECIR liable to be quashed. That is not the observations set out in the Vijay Madanlal case. Rather in proceedings pertaining to the quashing of the FIR in a scheduled offence, the Court must have dealt with not mere procedural irregularities, but something more in the nature of substantive grounds. 37. The exact wordings of the Court culls out the object. That the accused person should have been acquitted or absolved from the allegations of criminal activity relating to the scheduled offence and that the crime property should be rightfully owned and possessed by him. So the essence of the observations made herein is that the accused person should be exonerated from the charges levelled against him. 38. Though there are multiple grounds for quashing an FIR, and in one of the many grounds an FIR can be quashed, when it comes to proceedings pertaining to quashing the ECIR, the Court must examine the grounds based on which FIR concerning the scheduled offence was quashed and after careful ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is quashed it does not automate the exoneration of the accused from the predicate offence. Rather FIR quashes on grounds of mere technicalities or procedural irregularities in the FIR, cannot by itself form a basis to grant an automatic quash of ECIR. Also in the aforementioned instance, there needs to be a case to case examination of the offence registered under the PMLA before the offence is rendered ineffectual. 41. Hence, the moot point for consideration whether all cases where FIR has been quashed can pave way for quashing of ECIR? This Court feels that each case must be tested on its own, in consonance with the Vijay madanlal judgement and a blanket application of the principle without due regard to the facts of each and every case shall render both the judgement and the object of the PMLA ineffective. G) IMPLICATIONS OF AUTOMATIC QUASHING OF ECIR BASED ON FIR QUASH: 42. In cases as such where on initiation of PMLA proceedings, prima facie proceeds of crime has been traced, there arises a pertinent question as to whether this Court can stall such proceedings inspite of preliminary findings of the existence of proceeds of crime. The conscience of this Court is directed tow ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
