2015 (4) TMI 1180 - HC - Money Laundering

Court quashes ECIR under PMLA, stresses need for predicate offence. Fresh proceedings if SIT establishes money laundering charges.

Arun Kumar Mishra Versus Directorate Of Enforcement

The court quashed the ECIR under PMLA against the petitioner, emphasizing the need for a predicate offence for such proceedings. The Enforcement ... Proceedings under sections 3 and 4 of the Prevention of Money Laundering Act, 2002 - The primary contention for the petitioner is that the entire basis of the ECIR has been the contents of the FIR filed by the CBI - Held that:- It is settled principle of law that the provisions of law cannot be retrospectively applied, as Article 20(1) of the Constitution bars the ex-post facto penal laws and no person can be prosecuted for an alleged offence which occurred earlier, by applying the provisions of law which have come into force after the alleged offence. The facts emerging from the aforesaid are as under: - (i) Closure report filed by the CBI in RC No. 0072011A0003 which was accepted by the learned Special Judge, CBI, Dehradun vide order dated 21.08.2014; (ii) The order of the High Court of Uttrakhand dated 13.10.2014, quashing the proceedings of CBI qua the petitioner; (iii) The retrospective application of the provisions of the PMLA which came into existence in 2009 for the offences alleged to have been committed in 2005-2006; (iv) Statements of witnesses under Section 164 of Cr.P.C. of namely Mr. Anil Vaid, Mr. Devki Nandan Taneja and Mr. Ravindra Taneja dated 04.08.2014 recorded by Special JM, CBI, Uttarakhand (Annexure A to C of rejoinder to the reply filed by the respondent) relied upon by the respondent, revealing the facts that they have no knowledge of the petitioner and were coerced to make statements for wrongfully indicting the petitioner; (v) Final report filed by SIT (UP) in case FIR No.01/2007 which was accepted by the learned Special Judge, CBI vide order dated 10.03.2014; and (vi) Charge-sheet filed by SIT (UP) in case FIR No.02/2007 exonerating the petitioner. In view of the above, the impugned ECIR No.03/DZ/2011/AD (SC)/SDS dated 24.02.2011 under Sections 3 and 4 of PMLA is quashed qua the petitioner only. Issues Involved:1. Quashing of proceedings under ECIR No.03/DZ/2011/AD(SC)/SDS dated 24.02.2011 under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA).2. Validity of the ECIR based on the closure of the predicate offence by CBI.3. Retrospective application of PMLA provisions.4. Allegations of coercion and wrongful implication by the Enforcement Directorate.5. Jurisdiction and power of the Enforcement Directorate to investigate independently of the CBI's findings.Detailed Analysis:1. Quashing of Proceedings under ECIR No.03/DZ/2011/AD(SC)/SDS:The petitioner sought the quashing of proceedings under ECIR No.03/DZ/2011/AD(SC)/SDS dated 24.02.2011, arguing that the basis of the ECIR was the FIR filed by CBI, which had been quashed by the High Court of Uttarakhand. The court observed that without the predicate offence, the proceedings under PMLA could not be sustained. The court noted that the CBI had filed a closure report for the predicate offence, which was accepted, and the High Court of Uttarakhand had quashed the proceedings against the petitioner. Consequently, the ECIR was quashed.2. Validity of the ECIR Based on Closure of Predicate Offence:The petitioner contended that the ECIR was based on the CBI's FIR, which had been quashed. The court agreed, stating that without the predicate offence, the ECIR could not be maintained. The court noted that the CBI had filed a closure report, and the High Court of Uttarakhand had quashed the proceedings against the petitioner, thus invalidating the basis of the ECIR.3. Retrospective Application of PMLA Provisions:The petitioner argued that the alleged offences occurred between 2005 and 2006, while the relevant provisions of PMLA were introduced in 2009. The court agreed, citing Article 20(1) of the Constitution, which prohibits retrospective application of penal laws. The court referred to the judgment in 'Tech Mahindra Ltd. vs. Joint Director of Enforcement,' which held that no person could be prosecuted for an offence that occurred before the introduction of the relevant provisions in the statute book. Thus, the court found that the retrospective application of PMLA provisions was not permissible.4. Allegations of Coercion and Wrongful Implication:The petitioner alleged that the Enforcement Directorate coerced witnesses to make statements implicating him. The court noted the statements of witnesses recorded under Section 164 Cr.P.C., which revealed that they had no knowledge of the petitioner and were coerced to make statements. The court found these allegations credible and noted that the Enforcement Directorate failed to establish any nexus between the petitioner and the alleged offences.5. Jurisdiction and Power of the Enforcement Directorate:The respondent argued that the Enforcement Directorate has independent power to investigate allegations under PMLA, irrespective of the CBI's findings. The court acknowledged this but emphasized that the ECIR was based on the CBI's FIR, which had been quashed. The court held that the Enforcement Directorate could not proceed with the investigation without the predicate offence being established. However, the court allowed the possibility of fresh proceedings if the SIT (UP) establishes the offence of money laundering against the petitioner in the ongoing investigation.Conclusion:The court quashed the ECIR No.03/DZ/2011/AD(SC)/SDS dated 24.02.2011 under Sections 3 and 4 of PMLA against the petitioner. The court emphasized that the Enforcement Directorate could initiate fresh proceedings if the SIT (UP) establishes the offence of money laundering against the petitioner in the ongoing investigation. The petition was disposed of accordingly.