2023 (5) TMI 1241 - HC - Money Laundering

Court quashes FIRs in commercial dispute, citing lack of criminal elements

Shri. Ashish Singh, Hemal Arun Mehta, Abhay Gupta, Anupam Gupta, Atul Narender Malik, Bhavesh, Rohit Arora, Smt. Kalpana Singh, Ramesh Chand Arora, Mrs. Suman Arora Versus State Inspector of Police, Central Crime Branch - I, Chennai, Shri. Suresh Venkatachari

The court quashed two FIRs against the accused related to alleged cheating and forgery, as the disputes were deemed predominantly commercial with civil ... Money Laundering - proceeds of crime - transfer of shares by committing the offence of cheating, breach of trust, falsification and forgery - new offence unearthed by the Enforcement Directorate - power of police to investigate the case - compromise entered into between parties. What is the nature of the new offence unearthed by the Enforcement Directorate, who are the accused in the said offence, who can investigate that offence and as to whether the first respondent police can investigate that offence arise in the instant case? - HELD THAT:- There cannot be any dispute that the Enforcement Directorate officials can neither investigate offences committed under the other acts nor interfere in the investigation conducted by another agency. However, this Court is of the view that would not mean that they have no right to file an impleading petition and oppose a quash petition filed against the FIR in the predicate offence. Since the Enforcement Directorate is concerned with the proceeds of the crime, it cannot be said as a rule that they have no right to intervene and assist the Court in a quash petition challenging the proceedings relating to the crime (i.e) the predicate offence. Though they cannot supervise the investigation of another agency or interfere in their investigation, their views cannot be shut, while this Court is hearing a petition to quash the proceedings relating to the predicate offence. Hence, this Court is of the view that the Enforcement Directorate’s impleading petition Crl.M.P.No. 4883 of 2023 deserves to be allowed and hence allowed. Whether the impugned FIRs can be quashed on the basis of a compromise arrived at between the parties? - HELD THAT:- It is well settled that if the dispute arises out of a commercial transaction and has a predominant civil flavour, then the proceedings can be quashed on the basis of compromise. It is also settled that if the case relates to economic offences involving large-scale fraud or when there are other victims or persons involved besides the defacto complainant, then quashing on the basis of compromise may not be allowed. In the instant case, it is seen that the dispute between the defacto complainant and the accused is private in nature - That apart, it is the admitted case of the Enforcement Directorate that the offence alleged by the defacto complainant is not made out and that the defacto complainant had suppressed certain vital facts. Thus, under normal circumstances, this Court would have quashed the impugned FIRs for the aforesaid reasons without any further discussion. However, the Enforcement Directorate have now in their impleading petition, stated that the petitioners and defacto complainant have committed other offences. Thus it is seen that the Enforcement Directorate’s opposition to the quashing of the FIRs cannot be accepted. The Enforcement Directorate cannot resist the quashing of the FIRs prayed on the basis of compromise since the allegations in the FIRs have a predominant civil flavour which discloses a commercial dispute and is private in nature. There are no other victims or other persons involved in the offence alleged in the FIRs - The new offence said to have been committed by the petitioners alleged by the Enforcement Directorate has been the subject matter of the proceedings before the SEBI Act, 1992. This Court is of the view that the impugned FIRs are liable to be quashed not only on the basis of the compromise but also since no offence has been made out on the allegations - Petition allowed. Issues Involved:1. Quashing of FIRs based on compromise.2. Role of Enforcement Directorate in the investigation.3. Nature of the dispute (commercial vs. criminal).4. Jurisdictional authority over the alleged offences.Summary:Quashing of FIRs Based on Compromise:The petitions sought to quash two FIRs registered against the accused for alleged cheating, breach of trust, falsification, and forgery. The defacto complainant had borrowed substantial sums from companies by pledging shares and later accused the petitioners of transferring shares without consent. The court had initially stayed the investigation and granted anticipatory bail, noting that the transactions occurred in the normal course of business and were governed by a Memorandum of Understanding (MOU) that allowed share transfers without notice in case of loan default. The defacto complainant later filed affidavits to withdraw the FIRs, acknowledging the civil nature of the dispute and opting for civil remedies instead.Role of Enforcement Directorate:The Enforcement Directorate (ED) opposed the quashing of FIRs, citing new offences under the Prevention of Money Laundering Act (PMLA) and alleging manipulation of share prices and suppression of nationality for loan availing purposes. The ED argued that these offences needed further investigation and could not be dismissed based on a compromise. However, the court noted that the ED's role does not extend to supervising investigations by other agencies and their opposition to the quashing was not sufficient to prevent the FIRs from being quashed.Nature of the Dispute:The court observed that the dispute was predominantly commercial with a civil flavor, arising from business transactions governed by MOUs. The allegations of share manipulation and loan availing were already addressed by the Securities and Exchange Board of India (SEBI), which had issued directions and penalties but did not initiate criminal prosecution. The court emphasized that the primary ingredient for a criminal offence under Section 420 IPC (cheating) was not established, as the transactions were part of regular business dealings.Jurisdictional Authority:The court referenced multiple judgments to assert that the police could not investigate offences that fall under the jurisdiction of specialized agencies like SEBI. The SEBI Act provides a comprehensive mechanism for dealing with such violations, and the police's role is limited to informing SEBI of any violations. The court also noted that the ED had not formally informed the police of any new offences under Section 66(2) of the PMLA.Conclusion:The court concluded that the FIRs were to be quashed based on the compromise between the parties and the lack of any substantial criminal offence. The petitions were allowed, and the connected miscellaneous petitions were closed.