2026 (2) TMI 129 - HC - Money Laundering

Quashing of FIR and ECIR in moneylaundering challenge where writ petitions dismissed for lack of merit and prima facie evidence.

High Court principles require that a petition to quash an FIR or chargesheet be assessed on the face of allegations to determine whether they disclose a ... Quashing of FIR and challenge to ECIR - taking cognizance - primacy of special statute over general law - mala fide and ulterior motive - proceeds of crime - High Court writ jurisdiction under Article 226/227 - role of Enforcement Directorate and ECIR as investigative source - Special Court / cognizance by Magistrate - HELD THAT:- A petition seeking quashing of an FIR or the charge-sheet must be examined on the basis of the allegations of commission of a cognizable offence. There cannot be a roving inquiry into the matter and the merits of such allegations cannot be examined in a writ proceeding. The probative or evidentiary value of the materials collected in course of the investigation cannot be examined by the writ Court except in cases where it is demonstrable that the allegations assuming to be true and on its face value do not constitute a cognizable offence or the allegations disclose a purely civil dispute or the criminal proceeding is found manifestly attended with mala fide, malicious or instituted with an ulterior motive. The offence of money-laundering is attracted where the Court finds prima facie evidence that the accused person indulged himself in any manner whatsoever with the proceeds of crime and it is not necessary that on such date the criminal activity was notified as a scheduled offence. Section 2(1)(u) of the PMLA defines the expression “proceeds of crime” to mean any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, including its value. The offence of money-laundering as defined under section 3 of the PMLA requires the involvement of the accused persons in any process or activity connected with the proceeds of crime derived or obtained as a result of the criminal activity relating to or in relation to a scheduled offence. The definition of money-laundering encompasses every possible manner of involvement of the person with the proceeds of crime derived or obtained as a result of that crime. The expression “criminal activity” covers all activities of an accused person concerning the predicate offence and the use of the expression “every attempt” in section 3 signifies its wide scope and ambit. The ED alleges that there was no further valuation of the shares and the ESOPs were valued at Rs. 45.32 per share which was the valuation in December 2021. The proposal to raise Rs.300 crores through the rights issue @ Rs. 110 per share was made by the petitioner on behalf of the REL and the price was decided by the CHIL in which REL held 64% stakes and it was controlled by the petitioner. It is alleged that Rs. 192 crores out of Rs. 250 crores were invested by the REL where the petitioner and Nitin Aggarwal were key decision makers. The funds of REL were diverted to subscribe to the rights issue of CHIL @ Rs. 110/- per share whereas the ESOPs of the same company were given to the petitioner and others at substantially low price of Rs. 45.32 per share. Quite apparently, there is abundance of incriminating materials collected by the ED to file a Prosecution Complaint against the petitioner. Thus, we do not find any substance in these writ petitions which are, accordingly, dismissed. Issues: Whether the registration of FIR No.355 of 2024, the consequent ECIR/MBZO-I/27/2024 under the Prevention of Money Laundering Act, 2002 and related provisional attachment and prosecution proceedings against the petitioner are legally unsustainable and liable to be quashed.Analysis: The challenge raised multiple legal questions including (i) jurisdiction and competence to register the FIR at Matunga Police Station; (ii) permissibility of lodging a police FIR based on information supplied by the Directorate of Enforcement (ED) arising from its ECIR; (iii) applicability and primacy of special statutes (PMLA and Companies Act regime including SFIO/Special Court provisions) vis-à-vis general criminal law and whether those statutes preclude filing of FIRs or parallel proceedings; (iv) sufficiency of materials to take cognizance and the requirement (or absence) of a speaking order at the cognizance stage; and (v) whether allegations disclosed only civil or regulatory grievance or were otherwise prima facie non-cognizable or vitiated by mala fide.Analysis: The legal framework under the PMLA (including definitions of 'proceeds of crime' and the offence under section 3), the non-obstante effect in section 65, and incorporation of CrPC provisions under sections 44-46 were applied to assess scope of investigation and attachment powers. Provisions of the Companies Act concerning investigation by SFIO and restrictions on cognizance (including sections 212 and 436/447) were examined but found distinguishable on the facts where distinct allegations and separate conspiratorial acts were alleged and where the ED had recorded witness statements and collected materials indicating unlawful gain and diversion of funds. Authorities addressing the need for detailed reasons at the stage of taking cognizance and the limited role of the Magistrate at the summons/ cognizance stage were applied to assess the impugned cognizance order.Analysis: Factual materials relied upon by enforcement and prosecuting agencies (including witness statements, ESOP allotment and valuation details, rights issue transactions, provisional attachment orders and adjudicating authority confirmation) were considered relevant to determine whether cognizable offences and prima-facie linkage to proceeds of crime were disclosed. Allegations of mala fide conduct or selective reliance were found to raise questions of fact inappropriate for writ adjudication and insufficient to demonstrate that registration of the FIR or ED action was barred by law.Conclusion: The petition challenging the registration of FIR No.355 of 2024, the related ECIR/MBZO-I/27/2024 and associated proceedings is without merit and is dismissed.