PMLA investigation may proceed on a scheduled offence and prima facie proceeds of crime, despite prior FEMA proceedings

Section 420 IPC being a scheduled offence under the Prevention of Money Laundering Act, 2002, the existence of an FIR for cheating and prima facie material of misdeclaration and concealment was sufficient to support initiation of an ED investigation. The Court treated the alleged foreign exchange remittances and possible generation of proceeds of crime as adequate statutory foundation for PMLA action. It also held that prior FEMA adjudication and related stay orders did not bar the investigation, because the bank was not a party to that adjudication and the FEMA dispute would not be examined in the writ petition. The challenge to ED jurisdiction therefore failed and the writ petition was rejected.

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Issues: Whether the Enforcement Directorate lacked jurisdiction to initiate investigation under the Prevention of Money Laundering Act, 2002 on the basis of the FIR alleging offences under Sections 417 and 420 of the Indian Penal Code, 1860, and whether the prior FEMA adjudication and related stay orders barred such investigation.

Analysis: The complaint lodged by the bank led to registration of an FIR for cheating offences, and Section 420 of the Indian Penal Code, 1860 is a scheduled offence for the purposes of the Prevention of Money Laundering Act, 2002. The material on record disclosed a prima facie predicate offence and an allegation that foreign exchange remittances were obtained by misdeclaration and concealment of pending investigation, giving rise to a possible generation of proceeds of crime. The order passed in FEMA proceedings did not bind the complainant bank, which was not a party to that adjudication, and the Court declined to examine the merits of the FEMA controversy in the writ petition. Since the statutory prerequisites for commencing an investigation under the Prevention of Money Laundering Act, 2002 were satisfied, the investigation could not be interdicted on the ground of want of jurisdiction or alleged misuse of power.

Conclusion: The challenge to the Enforcement Directorate's jurisdiction failed, and the writ petition was rejected.

Ratio Decidendi: Investigation under the Prevention of Money Laundering Act, 2002 can proceed when there is a scheduled predicate offence and prima facie material showing proceeds of crime, and writ interference is unwarranted absent clear want of jurisdiction or abuse of power.

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