TaxTMI 
TaxTMI 
2023 (11) TMI 1085
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....2019 dated 27.06.2019." Background 2. Briefly stated, the facts of the case, relevant for adjudication of the present petition are as under: i. Two FIRs, i.e., FIR No. 16/2018 dated 24.01.2018 and FIR No. 49/2021 dated 12.03.2021 were registered under Sections 420/406/120B of the Indian Penal Code, 1860 ('IPC') at PS Economic Offences Wing ('EOW'). The said FIRs were registered against the persons accused therein, including the petitioner and arose out of a similar set of facts and circumstances. ii. In both the FIRs, the respective complainants, inter-alia, alleged that despite payment of monies in 2006-07, they did not receive possession of flats, as was promised by accused company M/s Uppal Chadha Hi-Tech (hereinafter referred to as the 'company'). It was alleged that in his capacity as a Director of the said firm, the petitioner was responsible for siphoning of the funds collected from the complainants. iii. During the pendency of the respective trials in FIRs No. 16/2018 and 49/2021, the accused persons therein settled the dispute with the respective complainants amicably. iv. In FIR No. 16/2018, the accused persons moved an application for compounding under Section....
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....t is thus clear, that the ECIR was initiated on account of the aforesaid two FIRs, which no longer exist and therefore, the ECIR cannot continue either. In support of the said argument, learned Senior Counsel for the petitioner placed reliance on the following judgments: i. Vijay Madanlal Choudhary & Ors. v. Union of India & Ors., 2022 SCC OnLine SC 929. ii. Harish Fabiani and Ors. v. Enforcement Directorate & Ors., 2022 SCC OnLine Del 3121. iii. Naresh Goyal v. The Directorate of Enforcement, Judgment dated 20.02.2023 passed by the Hon'ble High Court of Bombay in Criminal Writ Petition No. 4037 of 2022. iv. Prakash Industries Limited v. Union of India and Ors., 2023:DHC:481. v. Parvathi Kollur and Anr. v. State by Directorate of Enforcement, Order dated 16.08.2022 passed by the Hon'ble Supreme Court in Criminal Appeal No. 1254/2022. vi. Directorate of Enforcement v. M/s Obulapuram Mining Company, Order dated 02.12.2022 passed by the Hon'ble Supreme Court in Criminal Appeal No. 1269/2017. vii. EMTA Coal v. Deputy Director, Directorate of Enforcement, 2023/DHC/000277. viii. M/s Nik Nish Retail and Anr. v. Assistant Director, Enforcement Directorate, Government of In....
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.... "proceeds of crime" under Section 2(1)(u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2(1)(u) as it stands today. On the other hand, in the trial in connection with the scheduled offence, the Court would be obliged to direct return of such property as belonging to him. It would be then paradoxical to still regard such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce on that matter. 467. In light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms:- *** *** *** (v) *** *** *** (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain o....
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...." has also no existence after quashing of the FIR. When there is no "Scheduled Offence", the proceeding initiated under the provisions of Prevention of Money Laundering Act, 2002 cannot stand alone." It was further submitted that the aforesaid judgment in Nik Nish Retail (supra) was carried in appeal before the Hon'ble Supreme Court and was not interfered with. The said Special Leave Petition (Criminal) Diary No. 24321/2023 titled 'Assistant Director Enforcement Directorate v. M/s Nik Nish Retail Ltd. & Ors.' was disposed of by the Hon'ble Supreme Court vide order dated 14.07.2023 in the following terms: "In paragraph 187 (v)(d) of the decision in the case of Vijay Madanlal Chowdhury & Ors. v. Union of India & Ors. (2022) SCC OnLine SC 929, it is held that even if predicate offence is quashed by the Court of competent 1 jurisdiction, there can be no offence of money laundering against the accused. Appropriate proceedings can be always filed by the concerned parties for challenging the order by which predicate offence was quashed. If the said order is set aside and the case is revived, it will be always open for the petitioner to revive the proceedings under the Prevention of M....
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....plainants. It was pointed out that so far as regarding compounding of offences is concerned, in the order dated 19.11.2019 passed by the learned Magistrate compounding FIR No. 16/2018, it has been recorded that the petitioner had undertaken to settle the dispute with the remaining complainants as well. It was further pointed out that thereafter, fresh complaints were received and the EOW registered another FIR No. 49/2021 dated 12.03.2021 and the said FIR was also taken on record in the existing ECIR/09/HIU/2019. Thereafter, the petitioner approached this Court seeking quashing of FIR No. 49/2021 and the same was allowed by a coordinate bench of this Court vide order dated 22.12.2022 passed in CRL.MC. 7083/2022. 5. It was submitted on behalf of the department that as per the chargesheet dated 14.02.2022, filed by the EOW in FIR No. 49/2021, there were a total of 77 complainants and the petitioner had only settled the dispute with 55 complainants. It was further pointed out that there are 22 more complainants/victims with whom the petitioner has not settled the dispute. It was further submitted that 79 complaints are still pending before RERA, Uttar Pradesh against the company. 6.....
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....e inquiry in due course ends in identifying the offender who is involved in the process or activity connected with the proceeds of crime and then to prosecute him, it is possible for the department to outline the situations in which that course could be adopted in reference to specific provisions of 2002 Act or the Rules framed thereunder; and in which event, what are the options available to such person before the Authority or the Special Court, as the case may be. Such document may come handy and disseminate information to all concerned. At least the feasibility of placing such document on the official website of ED may be explored. *** *** *** 457. Suffice it to observe that being a special legislation providing for special mechanism regarding inquiry/investigation of offence of money-laundering, analogy cannot be drawn from the provisions of 1973 Code, in regard to registration of offence of money-laundering and more so being a complaint procedure prescribed under the 2002 Act. Further, the authorities referred to in Section 48 of the 2002 Act alone are competent to file such complaint. It is a different matter that the materials/evidence collected by the same authorities....
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....can avail of his remedies under the CrPC. 10. Learned Special Counsel submitted that as on the present day, even if there exists a single complainant, who is aggrieved by the accused company and its directors, the two conditions laid down by the Hon'ble Supreme Court in Vijay Madanlal Choudhary (supra) for closing the PMLA proceedings, cannot be satisfied. The said two conditions are as under: "281. The next question is : whether the offence under Section 3 is a standalone offence? Indeed, it is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. Nevertheless, it is concerning the process or activity connected with such property, which constitutes offence of money-laundering. The property must qualify the definition of "proceeds of crime" under Section 2(1)(u) of the 2002 Act. As observed earlier, all or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of "proceeds of crime" under Section 2(1)(u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from alle....
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....etween the de facto complainant and appellant No. 1, the criminal court referred the matter to Lok Adalat and when the matter was settled in Lok Adalat, the criminal court discharged appellant No. 1 vide order dated 20.03.2018 leading to closure of the criminal case as well." However, in the present case it is an admitted fact that the petitioner/accused persons have not settled the matter with all the complainants, which is evident from the facts that on 10.07.2023 the EOW on the basis of a complaint received from one Mrs. Shobhna Gupta registered a FIR bearing No. 55/2023 against M/s Uppal Chadha Hi Tech Developers Ltd (M/s UDCHDPL), Manpreet Singh Chadha, Harmandeep Singh Kandhari, Rajiv Gupta, Ginni Chadha, Sanjeev Jain, Rahul Chauhan and others. 14. Learned Special Counsel further submitted that the petitioner has placed reliance on the judgement of Hon'ble High Court of Karnataka in Mantri Developers and Ors. vs. DOE in Writ Petition 20713 of 2022, however the same has no bearing on the present case as the scheduled offence exists till date. In the present case the scheduled offences took place pursuant to which multiple FIRs were registered, some of which were settled by th....
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....t the stand taken by the department is contrary to the aforesaid proposition since it is seeking to justify continuing an investigation on a notional basis that there exists a possibility of commission of a scheduled offence. 20. It was submitted that the third limb of the department's argument that the investigation in the impugned ECIR must be kept active on the basis of FIR No. 55/2023 dated 10.07.2023 registered at PS EOW is misplaced as a predicate offence is a jurisdictional fact which permits the department to carry out an investigation under the PMLA. Reliance was placed on a judgment dated 14.12.2022 passed by the Hon'ble High Court of Karnataka, Principal Bench at Bengaluru in WP No. 20713/2022 titled 'Mantri Developers Pvt. Ltd. v. Directorate of Enforcement', wherein it was held that because the predicate offence is a jurisdictional fact, if the investigation in the predicate offence is stayed, the investigation in the PMLA offence should also be stayed. 21. Reliance was further placed on Arun Kumar (supra) wherein it has been held that 'a jurisdictional fact is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular mat....
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....arrived at with them. 26. For the purpose of adjudication of the present petition, the following dates are relevant: i. 24.01.2018 - FIR No. 16/2018 under Sections 420/406/120B of the IPC is registered at PS EOW against the accused persons, including the petitioner. ii. 27.06.2019 - Impugned ECIR/09/HIU/2019 is registered by the departments on the basis of the scheduled offences in FIR No. 16/2018. iii. 19.11.2019 - The learned Trial Court allows an application under Section 320 of the CrPC moved on behalf of the accused persons for compounding of FIR No. 16/2018 registered at PS EOW based on an amicable settlement arrived at between the parties and acquitted the accused persons. iv. 12.03.2021 - FIR No. 49/2021 under Sections 420/406/120B of the IPC is registered at PS EOW against the accused persons, including the petitioner. Consequently, the said FIR is taken on record in the existing ECIR/09/HIU/2019. v. 18.11.2022 - The department carries out search and seizure in terms of Section 17(1) of the PMLA. vi. 19.11.2022, 22.11.2022 and 09.12.2022 - The department carries out follow-up searches and seizures. vii. 22.12.2022 - FIR No. 49/2021 is quashed by a coordina....
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....dering. While observing the same, the Hon'ble Supreme Court held as under: "457....there is no need to formally register an ECIR, unlike registration of an FIR by the jurisdictional police in respect of cognizable offence under the ordinary law. There is force in the stand taken by the ED that ECIR is an internal document created by the department before initiating penal action or prosecution against the person involved with process or activity connected with proceeds of crime. Thus, ECIR is not a statutory document, nor there is any provision in 2002 Act requiring Authority referred to in Section 48 to record ECIR or to furnish copy thereof to the accused unlike Section 154 of the 1973 Code...." (emphasis supplied) 30. In the aforesaid context, it is pertinent to refer to a reference decided by a learned division bench of this Court in State v. Khimji Bhai Jadeha, 2019 SCC OnLine Del 9060, wherein, inter-alia, the following question of law was considered: "a. Whether in a case of inducement, allurement and cheating of large number of investors/depositors in pursuance to a criminal conspiracy, each deposit by an investor constitutes a separate and individual transaction or a....
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....he trial, the complaints of other victims may go unaddressed. Thus, the practice adopted by the State/Delhi Police, and which is sought to be defended by them, is clearly erroneous and not sustainable in law. *** *** *** 63. Thus, our answer to Question (a) is that in a case of inducement, allurement and cheating of large number of investors/depositors in pursuance to a criminal conspiracy, each deposit by an investor constitutes a separate and individual transaction. All such transactions cannot be amalgamated and clubbed into a single FIR by showing one investor as the complainant, and others as witnesses. In respect of each such transaction, it is imperative for the State to register a separate FIR if the complainant discloses commission of a cognizable offence.?" The aforesaid judgment was challenged before the Hon'ble Supreme Court in SLP (Crl.) No. 9198/2019 titled 'The State (NCT) of Delhi v. Khimji Bhai Jadeja' and was stayed vide order dated 25.11.2019. 31. The significance of the aforesaid judgment is with respect to the scheme of the CrPC, and in particular, Section 154 of the said Code. As pointed out hereinabove, Hon'ble Supreme Court, in Vijay Madanlal Choudhary....
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....ECIR. 33. The proposition of law laid down in judicial precedents relied upon by learned Senior Counsel for the petitioner is not in dispute. In the said cases, the 'scheduled offence' was quashed or compounded in all respects. In the present case, 'scheduled offences' by way of the third FIR still exist. It is pertinent to note that even in an FIR being investigated by the local police involving multiple complainants, compounding with some of them will not be a ground for quashing of the said FIR. However, partial compounding/quashing is permissible. 34. In so far as the submission of learned Senior Counsel with respect to the issue of the 'jurisdictional fact' is concerned, it is noted that during the pendency of the impugned ECIR, the registration of a third FIR with respect to 'scheduled offences' gives jurisdiction to the department to investigate by taking the said third FIR on record. The authorities cited by learned Senior Counsel for the petitioner are distinguishable with respect to the facts of the present cases. For the sake of repetition, it is noted that after the third FIR was taken on record, the impugned ECIR cannot be stated to be without a predicate offence. Th....
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....tion under the PMLA with respect to the 'scheduled offences' in the first two FIRs, i.e., FIR No. 16/2018 and FIR No. 49/2021 registered at PS EOW. 35. More recently, a coordinate bench of this Court, in Nayati Healthcare and Research NCR Pvt. Ltd. and Ors. through its Authorised Representative Sh. Satish Kumar Narula & Ors. v. Union of India Ministry of Home Affairs through its Standing Counsel & Anr., 2023:DHC:7542, while relying upon Vijay Madanlal Choudhary (supra) and Nik Nish Retail (supra)observed and held as under: "13. The Telangana High Court in Manturi Shashi Kumar (supra) has also quashed a complaint under Section 3 of the PMLA on the grounds of the accused being discharged/acquitted of the scheduled offence. The relevant observations of the said judgment are set out below:- "28. Thus, according to Supreme Court, the offence under Section 3 of PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. If the person is finally discharged or 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 or anyone claiming such pro....