TaxTMI 
TaxTMI 
2023 (11) TMI 1085
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....ase Information Report bearing number ECIR/09/HIU/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....
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....ated that the ECIR in question was registered on account of FIRs No. 16/2018 and 49/2021. It was submitted that it 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. De....
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....ction 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 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 analysi....
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....of Calcutta in Nik Nish Retail (supra) and in particular, on the following paragraph thereof: "34. The quashing of FIR of regular case automatically created a situation that the offences, stated and alleged in the FIR has no existence; thus the "Scheduled Offence" 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. ....
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....e aforesaid FIR, the department recorded ECIR/09/HIU/2019 on 27.06.2019. It was further pointed out that initially, in the FIR, there were 20 complainants/victims, however, at the time of filing of chargesheet, there were 60 more complainants and as per the petitioner, they had settled the dispute only with 61 out of aforesaid 80 complainants. 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 wer....
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....ere is nothing like investigation of a crime of money-laundering as per the scheme of 2002 Act. The investigation, however, is to track the property being proceeds of crime and to attach the same for being dealt with under the 2002 Act. Stricto sensu, it is in the nature of an inquiry in respect of civil action of attachment. Nevertheless, since the 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 dra....
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....nce the inquiries/investigation under PMLA culminate into a complaint and the same being a complaint case, at this stage, raising an argument that ECIR is to be quashed because some of the FIRs are compromised, is pre-mature since the scheduled offence continues to exist. It was submitted that once the inquiry/investigation is concluded and the respondent files a complaint, the petitioner 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 o....
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.... complied with. In the present case, the hard-earned money of innocent home-buyers was at stake, and the company i.e., M/s UCHDPL failed to settle the matter with every complainant, rather new FIRs by aggrieved home-buyers continued to be filed like the FIR 55/2023. 13. Similarly, it was submitted that in the relied upon judgement of Manturi Shashi Kumar (supra), the Hon'ble Court observed - "In the meanwhile, in view of the settlement arrived at between 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 Chau....
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....econd limb of arguments raised by the learned Special Counsel for respondent to the effect "that possibility of commission of scheduled offence cannot be ruled out" is also not tenable in view of the observation made by the Hon'ble Supreme Court in Vijay Madanlal (supra) at Para 467 (v)(d) that "the authorities under the 2002 act cannot prosecute any person on a notional basis or on the assumption that a scheduled offence has been committed". It was submitted that 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 D....
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....e two FIRs, i.e., FIR No. 16/2018 dated 24.01.2018 and FIR No. 49/2021 dated 12.03.2021 registered at PS EOW, have been compounded and quashed, respectively, on the ground of compromise. It is pertinent to note that the State has not challenged the aforesaid orders on the ground that the matter was not settled with all the complainants. It is also noted that the remaining complainants, if any, have also not challenged the aforesaid orders on the ground that settlement was not 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. ....
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....rd the scheduled offences registered vide FIR No. 49/2021 in the same ECIR, inter-alia, on the ground that it related to the same transaction and involved the same accused persons. The fact that FIR No. 49/2021 was taken on record by the department in the present ECIR despite an order of compounding and acquittal was not challenged by the petitioner. 29. Hon'ble Supreme Court in Vijay Madanlal Choudhary (supra) has held that there is no corresponding provision to Section 154 of the CrPC in the PMLA requiring registration of an offence of money laundering. 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 furni....
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....ort being field by the police in respect of the complaint on the basis of which FIR was registered, or the Magistrate not accepting the final report/charge-sheet and discharging the accused. (See Bhagwat Singh v. Commissioner of Police, (1985) 2 SCC 537 : AIR 1985 SC 1285). Their right to oppose, or to seek cancellation of bail that the accused may seek in relation to their particular transaction would also be denied. If the accused enters into a settlement/compromise with the complainant on whose complaint the FIR stands registered, and he chooses not to diligently participate in the 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, an....
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....part of the same ECIR which related to investigation pertaining to 'proceeds of crime' under the PMLA in the previous FIRs. Needless to state, the Hon'ble Supreme Court, in Vijay Madanlal Choudhary (supra), has categorically held that the offence under PMLA is an independent offence. Since the ECIR has not been equated with an FIR and has been held to be an internal document, there cannot possibly be a restriction to bringing on record on any subsequent 'scheduled offence' registered by way of an FIR alleged to have been committed in respect of the same transaction which was the subject matter of such 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 submis....
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....tion, 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." In light of the aforesaid judgment of the Hon'ble Supreme Court and in view of the judgments relied upon by learned Senior Counsel for the petitioner, the principle that can be culled out is that a 'scheduled offence', after an FIR has been quashed, cannot exist and therefore, if there is no 'scheduled offence', there can be no offence of money laundering with respect to the same. Thus, in the considered opinion of this Court, in the present case, there can be no prosecution 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 Telangan....