TaxTMI 
TaxTMI 
2023 (11) TMI 263
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....f Prohibition of any Writ, Order or Direction of like nature restraining the Respondent from taking any coercive action against the Petitioner in respect of the ECIR No. 31/2022 including conducting further investigation & quashing summon dated 06.10.2023 qua the Petitioner; and/or iii. Issue a Writ of Declaration of any Writ, Order or Direction for quashing of the Enforcement Directorate case against the petitioner qua ECIR No. 31/2022 by quashing the impugned ECIR, summon dated 06.10.2023 and all the proceedings emanating therefrom; and iv. Pass any other order or directions that this Hon'ble Court may deem fit and proper in the facts and circumstances of the case in favor of the petitioner. THE CASE OF PETITIONER 2. The background facts, as disclosed in the petition, are that the family of petitioner owns Krrish group of companies and has been in business of Breweries and Distilleries since the year 1983, and in the real estate business also since 2008. It is stated that the company namely M/s Iceberg Industries Ltd. (previously known as Iceberg Consultants Limited) was incorporated in the year 1994 and the petitioner had become its whole-time director fr....
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....i had registered an RC bearing No. RC2202022E0007 dated 18.05.2022 under Section 120-B of Indian Penal Code, 1860 ('IPC') and Sections 11/12/13(2) read with 13(1) of Prevention of Corruption Act, 1988 ('PC Act') against the then Railway Minister Sh. Lalu Prasad Yadav and others, for entering into a criminal conspiracy to abuse official position in order to obtain pecuniary benefits in the form of land parcels being transferred to his family members and companies thereof in return for appointment to the post of substitute (Group-'D') under the various zones of the Indian Railways (commonly known as Job for Land Scam). It is stated that as per allegations in the RC, seven land parcels ad-measuring about 1,05,292 sq. feet, situated at Patna, Bihar were acquired by the family members of Sh. Lalu Prasad Yadav from different persons through five sale deeds and two gift deeds. It is further stated that Directorate of Enforcement had registered an ECIR bearing No. 31/DLZO/2022 on 16.08.2022 on the basis of predicate offences in the RC registered by CBI and had taken up investigation under the provisions of Prevention of Money Laundering Act, 2002 ('PMLA'). 5. It is the case of petitione....
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....ot related to the petitioner in any manner as he is no longer associated with any of the entities of which documents are summoned and those entities were sold long back in the year 2010-11 to other international and national companies and thus, the said documents could not be produced by him. It is stated that from the conduct of the respondent i.e. seizing the material and further issuing the Look Out Circular against the petitioner shows that the respondent is implicating the petitioner in the ECIR, which is not permissible under law and the proceedings are liable to be quashed. ARGUMENTS ADDRESSED ON BEHALF OF PETITIONER 9. Learned Senior Counsel for the petitioner argues that the petitioner has been absolved from the schedule offences in the RC registered by the CBI and thus, the proceedings under PMLA are not maintainable in terms of the law laid down in case of Vijay Madanlal Choudhary v. Union of India 2022 SCC OnLine SC 929. In this regard, it is submitted that the petitioner is not even an accused in the predicate offence and since there is no predicate offence against the petitioner, the question of the ECIR being sustained against the petitioner in isolation does n....
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....ho is not named in the ECIR has no locus to seek relief such as quashing of ECIR. It is further argued that in the garb of a petition filed under Article 226 of Constitution and Section 482 of Cr.P.C., the petitioner is essentially seeking anticipatory bail, and such a practice has time and again been frowned upon by the Hon'ble Apex Court. 13. It is argued by learned Special Counsel that the present ECIR pertains to the Railway Job for Land Scam and the respondent agency is investigating the trail of proceeds of crime, and the role of petitioner is also being investigated for which impugned summons have been issued to him to appear before the respondent with the necessary documents, etc. It is further submitted that the issue being raised by the petitioner stands settled in case of Vijay Madanlal Choudhary (supra) that the offence of money laundering is an independent offence and one need not be named as an accused in the predicate offence. 14. As regards the contention qua Section 44 of PMLA raised by the learned Senior Counsel for the petitioner and the argument that petitioner is a witness in the predicate offence, it is submitted by the learned Special Counsel for respon....
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....direct, and shall be bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required. (4) Every proceeding under sub-sections (2) and (3) shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Penal Code, 1860 (45 of 1860). (5) Subject to any rules made in this behalf by the Central Government, any officer referred to in sub-section (2) may impound and retain in his custody for such period, as he thinks fit, any records produced before him in any proceedings under this Act: Provided that an Assistant Director or a Deputy Director shall not- (a) impound any records without recording his reasons for so doing; or (b) retain in his custody any such records for a period exceeding three months, without obtaining the previous approval of the Joint Director." 19. The Hon'ble Apex Court in case of Vijay Madanlal Choudhary (supra) has made the following discussion on the scope of Section 50 and the power to issue summons therein: "425. Indeed, sub-section (2) of Section 50 enables the Director, Additional Directo....
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....s of crime, if the situation so warrants and for being presented before the Adjudicating Authority. It is a different matter that the information and evidence so collated during the inquiry made, may disclose commission of offence of money-laundering and the involvement of the person, who has been summoned for making disclosures pursuant to the summons issued by the Authority. At this stage, there would be no formal document indicative of likelihood of involvement of such person as an accused of offence of money-laundering. If the statement made by him reveals the offence of money-laundering or the existence of proceeds of crime, that becomes actionable under the Act itself. To put it differently, at the stage of recording of statement for the purpose of inquiring into the relevant facts in connection with the property being proceeds of crime is, in that sense, not an investigation for prosecution as such; and in any case, there would be no formal accusation against the noticee. Such summons can be issued even to witnesses in the inquiry so conducted by the authorised officials. However, after further inquiry on the basis of other material and evidence, the involvement of ....
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....uch flimsy averments contained in the writ petition, inasmuch as such averments cannot form the basis for a prima facie apprehension of arrest. We, therefore, also expressed that the writ petition does not merit any consideration to be dealt with on the various issues raised, inasmuch as it will be for the petitioner to work out his remedy as and when any appropriate positive action is taken against the petitioner. In the course of hearing, learned Senior Counsel appearing for the petitioner now seeks to withdraw the writ petition reserving petitioner's liberty to work out his remedy in future, if any such situation arises..." 21. In case of Commissioner of Customs, Calcutta v. M.M. Exports (2010) 15 SCC 647, the Hon'ble Apex Court, while dealing with a case of issuance of summons under Section 108 of Customs Act, had expressed that except in exceptional cases, High Courts should not interfere at the stage of issuance of summons. The relevant observations read as under: "1. By consent the impugned order is set aside. However, we wish to make it clear that as far as possible the High Court should not interfere at the stage when the Department has issued the summons. ....
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....or purposes of complete and effective investigation include the power to summon and examine "any person". The law declares that every such person who is summoned is bound to state the truth. At the time of such investigative process, the person summoned is not an accused. Mere registration of ECIR does not make a person an accused. He may eventually turn out to be an accused upon being arrested or upon being prosecuted. No person is entitled in law to evade the command of the summons issued under Section 50 PMLA on the ground that there is a possibility that he may be prosecuted in the future. The law declared in Nandini Satpathy (supra) concerning the statements under Section 161 Cr.P.C. recorded by the police, and in other pronouncements concerning similar powers of officers of the Customs Department, as noted earlier, provide a complete answer to the apprehensions that have been expressed. *** 146. There is nothing shown to the court from which it could be inferred that the issuance of summons by the respondents to the petitioners for investigation into the ECIR, in exercise of statutory powers, has caused, or has the effect of causing, any prejudice t....
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....rve to be quashed. 26. Even otherwise, as held in several judicial precedents discussed above, this Court cannot throttle the investigative process at the stage of issuance of summons to the petitioner. 27. The other alternate relief sought by the petitioner is for quashing of present ECIR qua the petitioner. However, having examined the records of the case and the law on point, this Court is of the opinion that the prayer for quashing of ECIR is highly premature in the present case, for the reasons discussed in the succeeding paragraphs. 28. Firstly, it is crucial to note that on one hand, the petitioner states that he is not in possession of the copy of ECIR and is not aware about its contents including as to whether he has been named in the ECIR or not, and on the other, he prays for quashing of ECIR insofar as it relates to him. Thus, the inherent contradiction lies in the fact that though the petitioner himself does not know whether he is accused or not in the ECIR and states that he apprehends his implication in the case merely because he is being repeatedly summoned, at the same time, he has filed this petition for quashing of ECIR. 29. Secondly, the petitioner h....
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....ffence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him." 34. Reliance was also placed upon judgments of Hon'ble Apex Court in case of Parvathi Kollur v. State 2022 SCC OnLine SC 1975, Indrani Patnaik v. Enforcement Directorate W.P.(C) No. 368/2021 and of Hon'ble Division Bench of this Court in case of Harish Fabiani (supra), in which the aforesaid principle laid down in....
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....rime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as accused in the complaint to be filed by the authorised officer concerning offence under Section 3 of the 2002 Act..." 36. There can be no two views about the law laid down by the Three-judge Bench of Hon'ble Apex Court in case of Vijay Madanlal Choudhary (supra) whereby it has been held that if a person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court, there can be no offence of money laundering against him, as argued on behalf of petitioner. 37. However, the facts of the present case are entirely distinguishable and the ratio of the aforesaid decisions cannot be made applicable to the present case for the following reasons: i. Firstly, though the learned Senior Counsel for the petitioner submitted during the course of arguments that the petitioner is a witness in the case registered by the CBI, the learned Special Counsel for the Directorate of Enforcement stated that he was not aware about the same. Further, as disclosed from petition, the petitioner states that he has been made as a witnes....
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....e presumed to culminate into the arrest of person being so summoned. By the decisions of Hon'ble Apex Court in cases of Vijay Madanlal Choudhary (supra), V. Senthil Balaji v. State 2023 SCC OnLine SC 934 and Pankaj Bansal v. Union of India 2023 SCC OnLine SC 1244, the law on exercise of power under Section 19 and the inherent safeguards therein and the duty of the concerned authority/officer to comply with the mandate of the Act also stands settled. 41. While adjudicating upon such a prayer, this Court deems it appropriate to refer to the decision of the Hon'ble Apex Court in case of Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra & Ors. 2021 SCC OnLine SC 315, whereby the Hon'ble Apex Court had cautioned the High Courts to not pass order of 'no-coercive steps' in petitions filed under Article 226 of Constitution of India or Section 482 of Cr.P.C. since the same essentially reduces such proceedings to the nature of anticipatory bails. The observations of the Hon'ble Apex Court in this regard read as under: "67. This Court in the case of Habib Abdullah Jeelani (supra), as such, deprecated such practice/orders passed by the High Courts, directing police not to ....
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....teps to be taken" till the investigation is completed and the final report is filed, while not entertaining quashing petitions under Section 482 Cr. P.C. and/or Article 226 of the Constitution of India. 42. A similar prayer seeking no-coercive steps upon issuance of summons under Section 50 of PMLA was sought by the petitioner in Ashish Mittal v. Directorate of Enforcement 2023 SCC OnLine Del 6678 and while declining to grant such a relief, the Co-ordinate Bench had observed that since the remedy under Section 438 of Cr.P.C. i.e. anticipatory bail was available to the petitioner in case he apprehended any arrest in the ECIR, the question of granting any interim relief of no-coercive steps did not arise. The relevant observations are reproduced hereunder for reference: "46. In the opinion of this court, section 438 Cr. P.C. does not require a formal accusation and the word 'may' preceding the words 'be arrested' and 'on accusation' signifies that both the arrest and accusation are anticipatory. That is to that, firstly, an application under section 438 can only be filed by a person who is yet to be arrested. Secondly, an application under section 438 can be filed irrespe....