2025 (10) TMI 1134 - HC - Money Laundering

Section 482 Cr.P.C. petition maintainable where searches/seizures occurred; BUDS Act doesn't bar IPC charges; PMLA probe upheld

M/s. Humara India Credit Cooperative Society Ltd. Thru. its Dir. Dhananjay Subramanium and 3 others Versus The Directorate of Enforcement (Ed) Deptt. of Revenue Thru. Direct. And 3 others.

HC held it has territorial jurisdiction at Lucknow because searches/seizures and part of the cause of action occurred there, so the petition under Section ... Money Laundering - attachment of properties - territorial jurisdiction - jurisdiction of the Court to entertain the present petition - entire proceedings of search and seizure conducted at the petitioners’ offices at Lucknow and other locations in pursuance of an authorization order issued by the Deputy Director, Kolkata - petitioners has submitted that the place of registration of ECIR would not determine the jurisdiction of this Court as the ED has itself stated in the provisional attachment order that M/s Sahara India served as the operational backbone for all deposit taking entities in the Sahara Group - Nature of offence - non-payment of returns on investments - offence under Section 4 of the Banning of Unregulated Deposits Scheme Act, 2019 (BUDS Act) which is punishable under Section 22 of the Act or not. Territorial jurisdiction - jurisdiction of the Court to entertain the present petition - entire proceedings of search and seizure conducted at the petitioners’ offices at Lucknow and other locations in pursuance of an authorization order issued by the Deputy Director, Kolkata - HELD THAT:- The petitioners have approached this Court being aggrieved by the attachment of their properties, they have their offices at Lucknow and they carry on business for gain at Lucknow. Therefore, they can file an appeal under Section 42 PMLA at Lucknow. When an appeal would lie at Lucknow, applying the same principle, a petition under Section 482 Cr.P.C. can also be filed at Lucknow. In Y. Abraham Ajith Vs. State [2004 (8) TMI 738 - SUPREME COURT], the Hon’ble Supreme Court has held that 'The expression “cause of action” is generally understood to mean a situation or state of facts that entitles a party to maintain an action in a court or a tribunal; a group of operative facts giving rise to one or more bases for sitting; a factual situation that entitles one person to obtain a remedy in court from another person.' As searches and seizures have been conducted at the petitioners’ premises situated at Lucknow, a part of cause of action has accrued to them at Lucknow and for this reason also, they can file this petition at Lucknow - the preliminary objection raised by the ED that this Court lacks territorial jurisdiction to entertain the petition cannot be entertained. Nature of offence - non-payment of returns on investments - offence under Section 4 of the Banning of Unregulated Deposits Scheme Act, 2019 (BUDS Act) which is punishable under Section 22 of the Act or not - HELD THAT:- As BUDS Act specifically states that the Act shall be in addition to, and not in derogation of, the provisions of any other law, it is obviously in addition to the provisions contained in the Penal Code. Therefore, merely because an act makes out commission of an offence under the BUDS Act, it cannot be said that although the act is punishable as an offence under IPC also, the offender cannot be prosecuted for commission of the offence punishable under IPC. Therefore, there are no force in the second submission of the learned Counsel for the petitioner. The maturity amount of one scheme of Sahara Group was redeposited in the existing new scheme and for that no bank account transfer used to take place. The depositors were left with no option but to redeposit in its other existing scheme since the branch office of M/s Sahara India was not making repayment. The maturity amount paid during a year by M/s Sahara India on behalf of all entities is always less than the deposits received by it meaning thereby that the maturity amount was always paid from the new deposits received. The petitioners have claimed in the present petition that they could not make repayment because of an embargo order dated 21.11.2013 issued by Supreme Court, but even after that the petitioners have collected fresh deposits from public knowing that they are not in position to repay even their existing liabilities. There is no illegality in continuance of proceedings under PMLA against the petitioner - there is no ground to interfere in the proceedings under the PMLA against the petitioners in exercise of the inherent powers of this Court under Section 482 Cr.P.C. The petition is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the High Court at the forum where searches/seizures occurred has territorial jurisdiction to entertain a petition under Section 482 Cr.P.C. challenging search, seizure and other consequential proceedings initiated under the PMLA when the ECIR was registered at a different zonal office. 2. Whether a closure report in the predicate FIR (relating to a scheduled offence) ousts the jurisdiction of the Enforcement Directorate to continue proceedings under the PMLA in respect of the same subject-matter. 3. Whether the registration of multiple ECIRs or a second ECIR on related allegations is impermissible or amounts to impermissible duplication when investigation on the same subject-matter is already pending with another zonal office/agency. 4. Whether non-payment of returns by deposit-taking entities, when actionable under the BUDS Act, precludes investigation/prosecution under IPC offences (including scheduled offences) and consequent PMLA proceedings. 5. Whether the materials seized in searches/seizures conducted without complying with the proviso formerly in Section 17(1) of PMLA (or Rule 3(2) PML Rules) render the search/seizure illegal after the proviso was deleted by legislative amendment. 6. Whether institution of an investigation by SFIO under the Companies Act bars simultaneous investigation by ED/PMLA against entities not included in SFIO's mandate. 7. Whether alleged violation of an interim order restraining coercive steps during cooperation with investigation can ground quashing of entire PMLA proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Territorial jurisdiction to entertain writ under Section 482 Cr.P.C. Legal framework: Section 42 PMLA (appeal to High Court) defines 'High Court' for appeals as that within whose jurisdiction the aggrieved person ordinarily resides or carries on business. Jurisdictional principles from criminal jurisprudence (cause of action; Section 177 CrPC) applied analogously. Precedent treatment: Reliance on authorities establishing 'cause of action' as a bundle of facts and on decisions applying Section 42 PMLA's territorial criteria for writ jurisdiction. Interpretation and reasoning: The Court held that searches and seizures taking place at the petitioners' premises in the forum gave rise to a part of the cause of action in that forum; petitioners carried on business and maintained records there; provisional attachments and seizure of documents and cash occurred there. Since an appeal under Section 42 PMLA could be filed in that High Court, a petition under Section 482 Cr.P.C. challenging investigative steps connected to the aggrieved party's business/residence was maintainable there. Ratio vs. Obiter: Ratio-where part of the cause of action and substantive investigative acts occur in a forum and aggrieved persons carry on business there, High Court territorial jurisdiction is established for a Section 482 petition challenging PMLA proceedings. Conclusions: The preliminary objection to territorial jurisdiction was rejected; the petition was maintainable in the forum where searches/seizures and business operations occurred. Issue 2 - Effect of closure report in predicate FIR on continuance of PMLA proceedings Legal framework: Definition of 'proceeds of crime' in PMLA and requirement that proceeds be derived 'as a result of' criminal activity relating to a scheduled offence; principles that PMLA actions depend on the existence of scheduled offences. Precedent treatment: Reliance on the principle that 'proceeds of crime' must be strictly construed and on the proposition that ECIR is an internal document not equivalent to FIR. Interpretation and reasoning: The Court noted that even if a particular FIR had a closure report accepted, the ED had taken into account numerous other FIRs across jurisdictions alleging scheduled offences. The Court accepted authorities that ECIR is internal and not an FIR, and that PMLA investigation can proceed where other predicate FIRs/complaints exist showing scheduled offences. Consequently, a closure in one FIR did not automatically preclude PMLA proceedings based on other FIRs/complaints. Ratio vs. Obiter: Ratio-PMLA proceedings are not automatically barred by a closure of a single predicate FIR where other cognizable predicate offences/FIRs exist forming the basis of investigation; ECIR's administrative character means it can be sustained by multiple FIRs. Conclusions: The plea that PMLA proceedings must cease on account of a closure report in one FIR was rejected where multiple FIRs/charge-sheets alleging scheduled offences were relied upon. Issue 3 - Permissibility of multiple ECIRs / second ECIR on same subject-matter Legal framework: Principles governing duplication of proceedings; distinction between FIR and ECIR; discretion of investigating agency to take additional FIRs/complaints on record. Precedent treatment: Court considered authorities distinguishing ECIR from FIR and rulings allowing taking additional FIRs on record where relevant. Interpretation and reasoning: The Court held that ECIR is an administrative record and that the department may take additional FIRs/complaints on record to enlarge the scope of investigation; multiple FIRs can form basis of a single ECIR. The fact that another zonal office had earlier registered an ECIR did not preclude competent authorities from registering related entries or considering additional FIRs relevant to the same project/operation. Ratio vs. Obiter: Ratio-registration of an additional ECIR or taking multiple FIRs on record is permissible where they pertain to related allegations and provide fresh predicate material; second ECIR is not automatically illegal solely because another office has earlier registered an ECIR. Conclusions: Registration/continuation of PMLA investigation based on multiple FIRs/ECIRs was not unlawful in the facts considered. Issue 4 - Overlap between BUDS Act and IPC/PMLA investigations Legal framework: BUDS Act provisions including non-derogation clause (application of other laws not barred); IPC offences; PMLA jurisdiction over scheduled offences. Precedent treatment: Consideration of statutory text and prior decisions on concurrent applicability. Interpretation and reasoning: The Court observed that Section 35 of the BUDS Act expressly states the Act is in addition to other laws and does not bar their applicability. Therefore, acts constituting offences under BUDS Act may also attract IPC provisions and PMLA where offences fall within the schedule. Ratio vs. Obiter: Ratio-commission of an offence under BUDS Act does not preclude investigation or prosecution under IPC or PMLA when statutory requirements are met. Conclusions: The argument that BUDS Act exclusivity bars PMLA/IPC proceedings was rejected. Issue 5 - Validity of searches/seizures in light of deletion of proviso to Section 17(1) and Rule 3(2) Legal framework: Proviso previously in Section 17(1) and its reproduction in Rule 3(2) PML Rules; amendment deleting the proviso by statute; principle that Rules are subordinate to Act. Precedent treatment: Reliance on statutory interpretation that an amendment to the Act overrides inconsistent rule provisions. Interpretation and reasoning: The Court held that after legislative deletion of the proviso in the principal Act by amendment, the continued presence of the proviso in the Rules does not resurrect the deleted statutory requirement. Rules subordinate to the Act cannot override amended statute. Ratio vs. Obiter: Ratio-searches/seizures conducted after deletion of proviso are not invalid merely because Rules still contain the repealed proviso; statutory amendment governs. Conclusions: The contention of invalidity on that ground was rejected. Issue 6 - Bar by SFIO investigation under Companies Act Legal framework: Section 212(2) Companies Act-bar on other investigating agencies where Central Government has assigned a case to SFIO; scope limitation to companies specifically entrusted. Precedent treatment: Application of statutory scope. Interpretation and reasoning: The Court observed that SFIO's investigation extended to certain companies of the group but did not include the petitioners (cooperative societies). Section 212(2) prohibits another agency only in respect of the case assigned to SFIO; it does not bar investigation of separate entities not included in the SFIO mandate. Ratio vs. Obiter: Ratio-SFIO assignment bars other agencies only with respect to the same case/entities assigned; where petitioners are outside SFIO's remit, PMLA investigation by ED is not barred. Conclusions: The SFIO assignment did not preclude ED proceedings against the petitioners not covered by SFIO's mandate. Issue 7 - Alleged violation of interim protection restraining coercive steps Legal framework: Interim orders restraining coercive action subject to compliance; contempt jurisdiction; remedies available to aggrieved party. Precedent treatment: Interim orders must be complied with; violation requires contempt or specific pleading. Interpretation and reasoning: The Court found no established violation of the interim order-no attachment post-order was shown and no contempt proceedings were instituted. Even if interim order were breached, such breach alone would not warrant quashing of the entire PMLA proceedings. Ratio vs. Obiter: Ratio-alleged breach of interim protection, absent proof and without prosecution by appropriate remedy (e.g., contempt), does not by itself justify quashing entire proceedings. Conclusions: The grievance of breach of interim order did not merit quashing of proceedings; petitioners failed to demonstrate violation or establish that such alleged violation should nullify the PMLA investigation. Overall Conclusion On the cumulative assessment of territorial jurisdiction, the administrative nature of ECIR, the existence of multiple FIRs/chargesheets alleging scheduled offences, the statutory amendments and concurrent applicability of other statutes, and absence of a bar by SFIO in respect of the petitioners, the Court found no jurisdictional or legal infirmity warranting interference under Section 482 Cr.P.C. and dismissed the petition. Observations on merits were left to the trial court; any assessment of factual allegations was held inappropriate in writ jurisdiction.