TMI Blog2023 (11) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... initially on the basis of scheduled offences registered vide FIR No. 16/2018 dated 24.01.2018 which stood compounded vide order dated 19.11.2019, the second FIR No. 49/2021 which was registered on 12.03.2021 was taken on record in the impugned ECIR by the department and the proceedings continued under the same. The department chose not to register a separate ECIR, but took on record the scheduled offences registered vide FIR No. 49/2021 in the same ECIR, inter-alia, on the ground that it related to the same transaction and involved the same accused persons. The fact that FIR No. 49/2021 was taken on record by the department in the present ECIR despite an order of compounding and acquittal was not challenged by the petitioner. Hon ble Supreme Court in Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT] 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. In the peculiar facts and circumstances of the case, ECIR cannot be quashed in view of registration of FIR No. 55/2023 dated 10.07.2023 under Sections 409/420/120B of the IPC at PS EOW as this would constitute scheduled o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner was responsible for siphoning of the funds collected from the complainants. iii. During the pendency of the respective trials in FIRs No. 16/2018 and 49/2021, the accused persons therein settled the dispute with the respective complainants amicably. iv. In FIR No. 16/2018, the accused persons moved an application for compounding under Section 320 of the CrPC before the learned Trial Court, which was allowed vide order dated 19.11.2019 passed by Sh. Deepak Sherawat, Chief Metropolitan Magistrate, South-East, Saket and the accused persons were accordingly acquitted for offences under Sections 406/420/120B of the IPC. v. FIR No. 49/2021 was quashed by a coordinate bench of this Court, vid e order dated 22.12.2022 passed in CRL.MC. 7083/2022 titled Uppal Chadha Hi Tech Developers Pvt. Ltd. Ors. v. State Ors. . vi. The present ECIR was lodged on 26.07.2019 by the Directorate of Enforcement/respondent no. 2 ( the department ) against M/s Uppal Chadha Hi-Tech, Harmandeep Singh, Gurjit Singh Kochar, Kritika Gupta, Rajinder Singh Chadha the petitioner and other unknown persons. vii. After the ECIR was lodged, the department carried out a search an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the Hon ble Supreme Court in Criminal Appeal No. 1254/2022. vi. Directorate of Enforcement v. M/s Obulapuram Mining Company, Order dated 02.12.2022 passed by the Hon ble Supreme Court in Criminal Appeal No. 1269/2017. vii. EMTA Coal v. Deputy Director, Directorate of Enforcement, 2023/DHC/000277. viii. M/s Nik Nish Retail and Anr. v. Assistant Director, Enforcement Directorate, Government of India and Ors., 2022 SCC OnLine Cal 4044. ix. Manturi Shashi Kumar v. ED, 2023 SCC OnLine TS 1098. x. Arun Kumar and Ors vs. Union of India and Others, (2007) 1 SCC 732. 3.1. Reliance was placed on Vijay Madanlal Choudhary and Ors. v. Union of India, (supra), and in particular, the following paragraphs thereof: 253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act 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, unless t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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. 467. In light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms: *** *** *** (v) *** *** *** (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a 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. 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India Ors. (2022) SCC OnLine SC 929, it is held that even if predicate offence is quashed by the Court of competent 1 jurisdiction, there can be no offence of money laundering against the accused. Appropriate proceedings can be always filed by the concerned parties for challenging the order by which predicate offence was quashed. If the said order is set aside and the case is revived, it will be always open for the petitioner to revive the proceedings under the Prevention of Money Laundering Act, 2002. The Special Leave Petition is accordingly disposed of. Pending application also stands disposed of. 3.4. In support of his contentions, learned Senior Counsel drew the attention of this Court to Arun Kumar (supra), wherein it has been held as under: 74. A jurisdictional fact is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency s power to act depends. If the jurisdictional fact does not exist, the court, autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 22.12.2022 passed in CRL.MC. 7083/2022. 5. It was submitted on behalf of the department that as per the chargesheet dated 14.02.2022, filed by the EOW in FIR No. 49/2021, there were a total of 77 complainants and the petitioner had only settled the dispute with 55 complainants. It was further pointed out that there are 22 more complainants/victims with whom the petitioner has not settled the dispute. It was further submitted that 79 complaints are still pending before RERA, Uttar Pradesh against the company. 6. It was further pointed out that during the pendency of the present petition, on the basis of the complaint received from one Ms. Shobhna Gupta, FIR No. 55/2023 dated 10.07.2023 was registered against the aforesaid company and its Directors under Sections 409/420/120B of the IPC at PS EOW. The said FIR No. 55/2023 is stated to have been made on the basis of similar allegations as in the previous FIRs. It was further pointed that the aforesaid FIR was taken on record for further investigation in the already opened ECIR/09/HIU/2019, which is the subject matter of the present petition. 7. Learned Special Counsel for respondent further submitted that the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 457. Suffice it to observe that being a special legislation providing for special mechanism regarding inquiry/investigation of offence of money-laundering, analogy cannot be drawn from the provisions of 1973 Code, in regard to registration of offence of money-laundering and more so being a complaint procedure prescribed under the 2002 Act. Further, the authorities referred to in Section 48 of the 2002 Act alone are competent to file such complaint. It is a different matter that the materials/evidence collected by the same authorities for the purpose of civil action of attachment of proceeds of crime and confiscation thereof may be used to prosecute the person involved in the process or activity connected with the proceeds of crime for offence of money-laundering. Considering the mechanism of inquiry/investigation for proceeding against the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tech Developers Ltd (M/s UDCHDPL), Manpreet Singh Chadha, Harmandeep Singh Kandhari, Rajiv Gupta, Ginni Chadha, Sanjeev Jain, Rahul Chauhan and others. 14. Learned Special Counsel further submitted that the petitioner has placed reliance on the judgement of Hon ble High Court of Karnataka in Mantri Developers and Ors. vs. DOE in Writ Petition 20713 of 2022, however the same has no bearing on the present case as the scheduled offence exists till date. In the present case the scheduled offences took place pursuant to which multiple FIRs were registered, some of which were settled by the accused. However fresh complaints were filed against the same accused, and on basis of that fresh FIR No. 55/2023 was filed registered qua the same project and same company, which is still in existence. 15. It was further contended on behalf of the department that the argument of the petitioner that FIR No. 55/2023 cannot be added to the existing ECIR, and the department should record an additional ECIR is against the scheme of the PMLA. In this regard it was submitted that the entire PMLA does not mention or define the term ECIR and the same is an internal departmental document for admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment dated 14.12.2022 passed by the Hon ble High Court of Karnataka, Principal Bench at Bengaluru in WP No. 20713/2022 titled Mantri Developers Pvt. Ltd. v. Directorate of Enforcement , wherein it was held that because the predicate offence is a jurisdictional fact, if the investigation in the predicate offence is stayed, the investigation in the PMLA offence should also be stayed. 21. Reliance was further placed on Arun Kumar (supra) wherein it has been held that a jurisdictional fact is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. . Similarly, reliance was placed on Badrinath v. Government of Tamil Nadu, (2000) 8 SCC 395 and on State of Kerala v. Puthenkavu N.S.S. Karayogam, (2001) 10 SCC 191 wherein the Hon ble Supreme Court has observed that once the basis of a proceeding is gone, all consequential acts, actions, orders would fall to the ground automatically and this principle is applicable to judicial, quasi-judicial and administrative proceedings equally. 22. Lastly, it was submitted that the final limb of argument of the department that it can commence an investigation is an existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r compounding of FIR No. 16/2018 registered at PS EOW based on an amicable settlement arrived at between the parties and acquitted the accused persons. iv. 12.03.2021 FIR No. 49/2021 under Sections 420/406/120B of the IPC is registered at PS EOW against the accused persons, including the petitioner. Consequently, the said FIR is taken on record in the existing ECIR/09/HIU/2019. v. 18.11.2022 The department carries out search and seizure in terms of Section 17(1) of the PMLA. vi. 19.11.2022, 22.11.2022 and 09.12.2022 The department carries out follow-up searches and seizures. vii. 22.12.2022 FIR No. 49/2021 is quashed by a coordinate bench of this Court. viii. 10.07.2023 FIR No. 55/2023 is registered at PS EOW under Sections 409/420/120B of the IPC and taken on record in impugned ECIR/09/HIU/2019. ix. 15.12.2022 An application under Section 17(4) of the PMLA is moved by the department for retention of records and digital devices seized on 18.11.2022, 19.11.2022, 22.11.2022 and 09.12.2022. x. 21.12.2022 A show-cause notice under Section 8(1) of the PMLA was issued by the Adjudicating Authority to the petitioner, for filing of a writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.... (emphasis supplied) 30. In the aforesaid context, it is pertinent to refer to a reference decided by a learned division bench of this Court in State v. Khimji Bhai Jadeha, 2019 SCC OnLine Del 9060, wherein, inter-alia, the following question of law was considered: a. Whether in a case of inducement, allurement and cheating of large number of investors/depositors in pursuance to a criminal conspiracy, each deposit by an investor constitutes a separate and individual transaction or all such transactions can be amalgamated and clubbed into a single FIR by showing one investor as complainant and others as witnesses? Answering the aforesaid question, the learned Division Bench of this Court held as under: 61. The practice followed by the Delhi Police/State of registering a single FIR on the basis of the complaint of one of the complainants/victims, and of treating the other complainants/victims merely as witnesses, even otherwise, raises very serious issues with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions cannot be amalgamated and clubbed into a single FIR by showing one investor as the complainant, and others as witnesses. In respect of each such transaction, it is imperative for the State to register a separate FIR if the complainant discloses commission of a cognizable offence.? The aforesaid judgment was challenged before the Hon ble Supreme Court in SLP (Crl.) No. 9198/2019 titled The State (NCT) of Delhi v. Khimji Bhai Jadeja and was stayed vide order dated 25.11.2019. 31. The significance of the aforesaid judgment is with respect to the scheme of the CrPC, and in particular, Section 154 of the said Code. As pointed out hereinabove, Hon ble Supreme Court, in Vijay Madanlal Choudhary (supra) has clearly carved out a distinction between an ECIR under the PMLA and an FIR under the provisions of the CrPC. The Hon ble Supreme Court accepted the statement of the department that the ECIR is an internal document created by them. The ECIR in the present case was registered on a prima facie satisfaction for commission of offence under Section 3 of the PMLA. The department, by way of the present ECIR, was not investigating the case of home-buyers/investors in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for quashing of the said FIR. However, partial compounding/quashing is permissible. 34. In so far as the submission of learned Senior Counsel with respect to the issue of the jurisdictional fact is concerned, it is noted that during the pendency of the impugned ECIR, the registration of a third FIR with respect to scheduled offences gives jurisdiction to the department to investigate by taking the said third FIR on record. The authorities cited by learned Senior Counsel for the petitioner are distinguishable with respect to the facts of the present cases. For the sake of repetition, it is noted that after the third FIR was taken on record, the impugned ECIR cannot be stated to be without a predicate offence. The issue before the Court, as explained hereinabove, is whether the investigation in the impugned ECIR can continue on the basis of registration of the third FIR. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anlal Choudhary (supra) and Nik Nish Retail (supra)observed and held as under: 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 money laundering under se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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