TMI Blog2022 (9) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... istered 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. 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. The relief sought regarding constitutionality or vires of various provisions of the Prevention of Money Laundering Act, 2002 is infructuous having been decided by the Hon ble Supreme Court in Vijay Madanlal Choudhary Ors. Vs. Union of India Ors. - All proceedings set aside - application disposed off. - W.P.(CRL) 408/2022, CRL.M.A. 3495/2022, CRL.M.A. 5002/2022 CRL.M.A.10739/2022, CRL.M.A.14801/2022, CRL.M.A. 17030/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19(1)(g), 19(6), 20(3) and 21 of the Constitution of India; ii. Quash and set aside the impugned ECIR no. ECIR/07/HIU/2021 and stay all proceedings arising therefrom; iii. Quash the summons issued in respect of ECIR No. ECIR/07/HIU/2021; iv. Issue a Writ of Certiorari or any Writ, Order or Direction of like nature directing the calling of records in relation to ECIR No. ECIR/07/HIU/2021; v. Issue a Writ of Prohibition or any Writ, Order or Direction of like nature restraining the Respondents from taking any coercive action in respect of the ECIR No. ECIR/07/HIU/2021 including conducting search and seizures at residences/office or issuing look out circulars or any other restrictive order; vi. Quash and set aside Look out Circulars issued against some of the petitioners. 2. While these petitions were pending before this Court, the Hon ble Supreme Court of India delivered its judgement in Vijay Madanlal Choudhary Ors Vs. Union of India Ors., 2022 SCC OnLine SC 929 on 27th July, 2022 deciding on the issue of constitutionality and vires of various provisions of the Prevention of Money Laundering Act, 2002 ( PMLA ) inter alia Section 2(1)(u), Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the competent forum. 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, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him . (emphasis supplied) 4. The crux of this conclusion in Vijay Madanlal Choudhary (supra) by the Hon ble Supreme Court, in context of these petitioners, is that if the person accused of any scheduled offence is finally discharged/acquitted or the criminal case against him is quashed by a court of competent jurisdiction, there can be no case of money-laundering against him or anyone claiming such property (which is linked to the stated scheduled offence) through him. 5. Senior Counsel appearing for the petitioners have thus contended that the petitioners before this Court are either accused in the said FIR (now quashed by High Court of Bombay) or are otherwise not accused in the said FIR and therefore applying the ratio and finding of the Hon ble Supreme Court, the ECIR against these petitioners and consequential proceedings do not survi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the event 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 because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence . The respondents have contended that use of the phrase finally absolved by a Court of competent jurisdiction would therefore include the adjudication by the Hon ble Supreme Court in the SLP filed by the ED as well. The petitioners rebutted this by contending that a Court of competent jurisdiction for order of discharge, acquittal or quashing can only be finally the High Court and the SLP before the Supreme Court is really in the nature of an extraordinary remedy and therefore mere filing of SLP cannot provide a handle to the respondents to sustain the said ECIR. vi) Reliance was placed on page 14 of the reply in CRL.M.A. 14801/2022 in W.P. (CRL) 408/2022 which shows that there were complaints of deliberate acts by the petitioner Harish Fabiani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said ECIR being sustained does not arise. This is undeniably clear from a reading of para 467 (v) (d) of Vijay Madanlal Choudhary (supra). ii) The Hon ble Supreme Court in its conclusion articulated in the aforementioned paragraph clarifies that the authorities under the PMLA cannot prosecute any person on a notional basis or on the assumption that a scheduled offence has been committed unless it is so registered within the jurisdiction of the police and/or pending inquiry/trial including by way of criminal complaint before the competent forum. iii) The Hon ble Supreme Court has further embellished this by clarifying that in the event a person is finally discharged or acquitted of the scheduled offence or the criminal case against him is quashed by a Court of competent jurisdiction, no offence of money-laundering against him or anyone claiming such property (being property linked to the scheduled offence). iv) Responding to the specific arguments of the learned ASG that authorities have the liberty to disclose facts under Section 66(2) of the PMLA if any contravention is noticed by a person, it was contended by the Senior Counsel for the petitioners, that at an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FIR in relation to the petitioners therein, the Writ Petition filed by Atul Chordia had a larger and broader prayer of quashing the FIR per se. These prayers having been granted the question of the said FIR being quashed only with respect with certain petitioners before the High Court of Bombay does not arise. viii) Notwithstanding the above, the ECIR was premised on allegations of connivance , criminal conspiracy and common intention . Therefore the respondents contention that the said FIR would only stand partially quashed and therefore the said ECIR should be sustained is untenable. ix) Reference was also made to para 32 of the Bombay High Court order dated 4th May, 2022 in relation to Mr. Harish Fabiani which reads as under: 32. There is also merit in the submissions of learned Counsel appearing for Petitioners that though it was alleged in the complaint that one Mr. Harish Fabiani had obtained loan and misutilized the loan amount, the document placed on record and relied on by Mr. Rohatgi, learned Senior Counsel demonstrates that the said loan was repaid. It was contended on behalf of Mr. Harish Fabiani that in any event the loan taken by Mr. Harish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Analysis It is now therefore imperative to examine the factual matrix and contentions of the parties in relation to the relief sought by the petitioners. 8. Consequent to directions in a petition filed under section 156 (3) Cr. PC by the complainant before the Judicial Magistrate First Class, Wada, FIR No. 129/2021 was registered in P.S. Wada (Thane) in District Palghar, Mumbai on 13th April, 2021 against following accused: 1. Indiabulls Housing Finance Ltd. (Petitioner before this Court) 2. Mr. Mukesh Talreja Companies LLPs 3. Harish Motiram Fabiani (Petitioner before this Court) 4. Jasol Investment and Trading 5. Americorp Capital 6. Nimir Kishore Mehta 7. Rana Kapoor and Bindu Kapoor 8. Atul Chordia of Chordia Group (Petitioner before this Court) 9. Writ Petition Nos. 1805/2021 and 6812/2021 were filed in High Court of Bombay by various petitioners seeking quashment of the order of 7th April, 2021 passed by the Judicial Magistrate First Class, Wada and FIR No. 129/2021 of P.S. Wada. 10. Para a of the prayer in Writ Petition No. 1805/2021 filed by Indiabulls Housing Finance Ltd. Ors. reads as under: a. Quash or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the FIR. 14. Reference in this regard may be made to the judgement of the Hon ble Supreme Court in State of Punjab v. Davinder Pal Singh Bhullar Ors., (2011) 14 SCC 770, brought to this Court s attention by Senior Counsel for one of the petitioners, where the Hon ble Supreme Court in paras 105, 107 and 111 has stated as under: 105. The FIR unquestionably is an inseparable corollary to the impugned orders which are a nullity. Therefore, the very birth of the FIR, which is a direct consequence of the impugned orders cannot have any lawful existence. The FIR itself is based on a preliminary enquiry which in turn is based on the affidavits submitted by the applicants who had filed the petitions under Section 482 CrPC. 107. It is a settled legal proposition that if initial action is not in consonance with law, all subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. In such a fact situation, the legal maxim sublato fundamento cadit opus meaning thereby that foundation being removed, structure/work falls, comes into play and applies on all scores in the present case. 111. Thus, in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and finding of the Hon ble Supreme Court in Vijay Madanlal Choudhary (supra) this Court finds no reason for the said ECIR to be sustained against them, without there being any evidence of a predicate offence or an FIR against them which is in existence or is legally alive. 17. In all these cases therefore, both of the employees against whom no complaint was ever filed for the scheduled offences and those against whom it was filed and has been quashed subsequently by a Court of competent jurisdiction, it would only be appropriate that the said ECIR against them under PMLA be quashed and all proceedings consequent thereto undertaken or directed by the Respondents or any authority are set aside. 18. As regards the contention of the respondents that since an SLP has been preferred by the ED assailing the judgement/order dated 4th May, 2022 of the High Court of Bombay this Court should stay its hands in the interim, this Court finds that judgment/order of the High Court of Bombay quashing the FIR and the preceding order of the Judicial Magistrate was complete in all respects and it was exactly this kind of situation that the Hon ble Supreme Court contemplated in para 467 (v) (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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. 21. As regards the contention of the learned ASG for the ED that Section 66 PMLA permits the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court reserving judgment, made a submission that one of the writ petitions before this Court, the one filed by Shri Atul Chordia, was part of a Transfer Petition (Criminal) No. 245/2022 filed before the Hon ble Supreme Court and was tagged along with the batch of matters in which the leading matter was Vijay Madanlal Choudhary Ors Vs .Union of India Ors., SLP (CRL.) 4634 of 2014 . According to the counsel for ED, the transfer petition was disposed of by the Hon ble Supreme Court on 9th September, 2022 in terms of the judgment dated 27th July, 2022 in Vijay Madanlal Choudhary (supra) and therefore the lis in the issue would not survive before this Court. Aside from the propriety of raising this contention during the last moments of the hearing, contending that this Court may not have jurisdiction, the submission itself is untenable since in the concluding paras of Vijay Madanlal Choudhary (supra), while dealing with the Transfer Petitions, the Hon ble Supreme Court has noted: 468. These transfer petitions are disposed of with liberty to the private parties to pursue the proceedings pending before the High Court. The contentions, other than dealt with in this judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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