TaxTMI 
TaxTMI 
2025 (10) TMI 1134
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.... Section 482 Cr.P.C/528 BNSS has been filed by four petitioners, namely, (i) M/s Humara India Credit Cooperative Society Limited, (ii) M/s Sahara Credit Cooperative Society Limited, (iii) M/s Stars Multipurpose Cooperative Society Limited, and (iv) M/s Saharayan Universal Multipurpose Society Limited jointly. The petitioner no. 1 has its registered office at Kolkata and the local office at Sahara India Centre, 2 Kapoorthala Complex, Aliganj, Lucknow. The petitioners no. 2, 3 and 4 have their registered office at Sahara India Bhawan, 1 Kapoorthala Complex, Aliganj, Lucknow. The petition seeks quashing of entire proceedings of search and seizure conducted by the Directorate of Enforcement at the petitioners' offices at Lucknow and other locations during 03.07.2024 to 05.07.2024 in pursuance of an authorization order dated 02.07.2024 issued by the Deputy Director, Enforcement Directorate, Zonal Office, CGO Complex, Vidhan Nagar, Kolkata. 3. The Prayer No. B made by the petitioners is for quashing of ECIR No. KLZO-1/21/2023, dated 31.03.2023 and the subsequent proceedings of investigation undertaken by the respondents in pursuance thereof. However, during hearing held on 05.11.2024 ....
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....r production of documents, records and books of accounts relating to the issue of OFCDs (Optionally Fully Convertible Debentures) by companies of the group. 6. On 02.07.2024 the Deputy Director, Enforcement Directorate, Kolkata Zonal Office issued eight different letters nos.71/24 to 78/24 of authorization for search, seizure and freezing under sub section (1) and sub section (1-A) and Section 17 of the Act and on 04.07.2024 another authorization letter no.79/24 was issued to conduct search and seizure of the premises specified in the schedule appended to the letters under Section 17(1) of PMLA and Rule 3 of PML Rules (Forms, search and seizure and the manner of forwarding the reasons and material to the adjudicating authority, impounding and custody of records and the period of retention) Rules, 2005. The letters directed the Authorized Officer to conduct search and seize or freeze any record of property which is considered relevant for the purposes of proceeding under the Act as per the procedure specified in Rule 4. The search and seizure conducted in furtherance of the aforesaid authorization letters has been challenged by way of this petition. 7. Sri. S. V. Raju, the lea....
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....learned counsel for the petitioners has submitted that the jurisdictional officer at Bhubaneswar has not registered the ECIR in respect of the scheduled offences allegedly committed at Bhubaneswar and the ECIR has been lodged at Kolkata, which does not appeal even to ordinary prudence. 12. Shri Chaudhary has submitted that the ED is indulging in forum hunting. The ED had registered the first ECIR against the petitioners at Mumbai. The second ECIR has been registered at Kolkata alleging that one of the petitioner's societies has its offices at Kolkata. 13. The learned counsel for the 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. It was responsible for the collection of funds and facilitating re-investments other than ensuring proper repayment to the depositors. The registered offices of M/s Humara India Credit Cooperative Society Limited, M/s Sahara Partner India and M/s Sahara India Commercial Corporation Limited are situated at Luc....
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.... Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. Explanation.-For the purposes of this section, "High Court" means- (i) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and (ii) where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personally works for gain." 18. 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 ....
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....In a wider and more comprehensive sense, it has been used to denote the whole bundle of material facts. 17. 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. In Black's Law Dictionary a "cause of action" is stated to be the entire set of facts that gives rise to an enforceable claim; the phrase comprises every fact, which, if traversed, the plaintiff must prove in order to obtain judgment. In Words and Phrases (4th Edn.), the meaning attributed to the phrase "cause of action" in common legal parlance is existence of those facts, which give a party a right to judicial interference on his behalf. 18. In Halsbury's Laws of England (4th Edn.) it has been stated as follows:- "'Cause of action' has been defined as meaning simply a factual situation, the existence of which entitles one person to obtain from the court a remedy against another person. The phrase has been held fro....
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.... against the petitioners under the PMLA are unsustainable in law. 24. The third submission of the learned counsel for the petitioners is that the mere non-payment of returns on investments made in the petitioners societies would not make out commission of an offence punishable under Section 420 I.P.C. as the failure to pay the returns was neither fraudulent nor dishonest. The petitioner's societies could not pay returns to their investors because of a restraint order passed by the Hon'ble Supreme Court. The reasons due to which the petitioners' societies could not pay returns to their investors, were not within the control of the petitioners and it was due to force majeure. 25. Sri. Chaudhary has submitted that although, a closure report has been filed in F.I.R. No. 142/20-the solitary offence mentioned in the ECIR, the Enforcement Directorate has taken into consideration numerous other FIRs lodged in various districts/States on similar allegations. The closure reports have been filed regarding FIR No.69/21 under Sections 406, 409, 420, 467, 468, 471, 120-B I.P.C., Police Station Malviya Nagar, Jaipur, Rajasthan and F.I.R. No. 249/21, under Section 420, 406, 34 I.P.C., Police....
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....d a similar advisory. 27. The learned Counsel for the petitioners has submitted that the petitioners continued to pay money to the investors as per the mechanism evolved by the Hon'ble Supreme Court and approximately Rs. 10,02,00,00,000/- has been disbursed till 08.11.2024. On 08.11.2024 the Hon'ble Supreme Court passed an order providing that "further proceedings in the cases pending before various High Courts or District Consumer Disputes Redressal Commission, as per the details furnished in Annexure A2, appended with this application, shall remain stayed till further orders. However, the alleged investors, who have initiated these proceedings, shall be at liberty to raise their claim on the portal created by the Union of India". 28. In the present petition an interim order was passed by a coordinate Bench of this Court on 28.02.2025 providing that if the petitioners participate in the investigation, no coercive steps shall be taken against them till the next date of listing and this order has been extended from time to time. 29. On 15.04.2025, a provisional attachment order was issued regarding various assets of the petitioners in Aamby Valley City worth Rs. 31,44,49,94....
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....ference between the two is that ECIR is a term given to itself by the Enforcement Directorate through some administrative order, whereas, to the contrary, FIR is a creation of a statute under Section 154 CrPC, 1973. Given this statutory origin, it is mandatory to register FIR when an offense discloses the commission of the cognizable offense. On the contrary, when the Enforcement Directorate starts an inquiry based on some predicate offense, they decide to assign an ECIR to an inquiry/investigation at some point in the given stage. For this reason, the courts have usually quashed the FIR, which would automatically cancel all subsequent proceedings. Since ECIR is not a condition precedent for starting an investigation or inquiry/ inquiry by the Enforcement Directorate and is only an internal record of the department, its quashing would serve no purpose whatsoever. However, it would not imply that if one of the prayers made by the accused also includes quashing of ECIR, then the Courts will not look at other prayers like quashing of complaint and quashing of further proceedings or any other proceedings pending before the Enforcement Directorate. If such a view is taken, then it would....
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....l for the applicants have submitted that such investigation pursuant to the ECIR in question is not permitted as the schedule/predicate offence of the ECIR has been finalised, but the present petitioners/applicants are cooperating in the investigation. Learned counsels have given undertaking that the present petitioners/applicants shall further cooperate in the investigation strictly in accordance with law, therefore, some sort of protection may be given to the petitioners/applicant. On that the learned Additional Solicitor General of India has stated that since the present applicants/petitioners are cooperating in the investigation, therefore, the competent authority of the E.D. has not initiated any step to take any coercive step against the applicants at this stage, however, as and when such requirement arises, the authorities may do so strictly in accordance with law. Having considered the submission of the learned counsel for the parties and also the undertaking of the present applicants/petitioners to cooperate in the investigation, I find it appropriate that the matter may be heard finally on the next date and on the next date, both the aspects, i.....
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....ny such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad; Explanation.-For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence." 37. The learned counsel for the petitioners has placed reliance upon the following passage from the judgment in the case of Vijay Madanlal Choudhary: (2023) 12 SCC 1, wherein it was held that:- "105. The other relevant definition is "proceeds of crime" in Section 2(1)(u) of the 2002 Act. This definition is common to all actions under the Act, namely, attachment, adjudication and confiscation being civil in nature as well as prosecution or criminal action. The original provision prior to amendment vide the Finance Act, 2015 and Finance (No. 2) Act, 2019, took within its sweep any property [mentioned in Section 2(1)(v) PMLA] derived or obtained, directly or indirectly, by any person "as a result of" criminal....
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....sult of" criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a result of" criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the case (crime) concerned, it may still not be proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the tax legislation concerned prescribes such violation as an offence and such offence is included in the Schedule to the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the scheduled offence concerned. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or acti....
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....o second report of the commission of an offence can be registered as a second FIR would also apply to registration of an ECIR, and no second ECIR can be registered on the same allegation. In this regard, he has placed reliance on the judgment of the Hon'ble Supreme Court in the case of T.T. Antony Vs. State of Kerala, 2001(6) SCC 181, paragraphs 18 and 21. 40. He has submitted that there can be no second FIR and no fresh investigation and in support of this submission, he has relied on the judgments in the case of Amitbhai Shah, 2013(6) SCC 348, paragraphs 32, 58.3, and 58.5, Arnab Ranjan Goswami, 2020(14) SCC, page 1, paragraph 31, and Amish Devgan, 2021(1) SCC, page 1. 41. The learned counsel for the petitioner has next submitted that the second ECIR registered by ED conceals the fact that an ECIR has already been registered against the petitioner. The second ECIR has been registered without seeking permission of the Hon'ble Supreme Court. 42. The Enforcement Directorate, Mumbai, has also filed IA Nos. 251-252 of 2016 dated 21.11.2016, in Contempt (Civil) Nos. 412 and 413 of 2012 and 260 of 2013 before the Hon'ble Supreme Court and had sought permission of the Hon'ble Su....
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....n respect of such offenses under this Act to SFIO." 46. It has been stated in the short counter affidavit dated 28.11.2024, filed by the ED that the petitioners have admitted in the petition that the funds collected by them were received at Lucknow where their office is situated despite the fact that the petitioners have their registered offices at Kolkata, Lucknow, Bhopal and Hyderabad. The investigation conducted under PMLA has revealed that all the companies and societies of Sahara Group cheated their depositors through M/s Sahara India and the agents employed by it. The scheduled offence was also committed from the same set of branches. The petitioners have admitted in the present petition itself that the funds collected by them were received at Lucknow which they have themselves claimed to be their Head office despite having their separate registered addresses at Kolkata, Lucknow, Bhopal and Hyderabad. The investigation conducted under PMLA revealed that the OFCDs/ Advance in the case of companies and the scheme of members and contribution in Cooperative societies was only a façade to receive deposits from gullible public since the subscribers of OFCDs were never in ....
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....05. Replying to this contention, Sri S.V. Raju has submitted that prior to amendment, Section 17(1) of PMLA had the following proviso appended to it:- "Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under Section 157 of the Code of Criminal Procedure, 1973 (2 of 1974) or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or in cases where such report is not required to be forwarded, a similar report of information received or otherwise has been submitted by an officer authorised to investigate a scheduled offence to an officer not below the rank of Additional Secretary to the Government of India or equivalent being head of the office or Ministry or Department or Unit, as the case may be, or any other officer who may be authorised by the Central Government, by notification, for this purpose." 52. The provisions contained in the aforesaid proviso were reproduced in Rule 3(2) of the aforesaid rules. Section 17 has been amended and the provi....
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.... branch managers of M/s Sahara India branches and Subrata Roy and his family members are named as suspects. Further, numerous allegations of cheating have been raised across India against these cooperative societies, with several resulting in FIRs wherein not only Section 420 of IPC has been invoked but several other provisions such as Sections 120-B, 327, 418, 467 and 471 have been invoked too which are schedule offences as per the schedule of the PMLA., Since, the offences as mentioned in the FIRs/Chargesheets are scheduled offences, the proceeds of crime arising from these offences, along with the offences related to money laundering, must be investigated under the PMLA, 2002. 55. Shri Raju has submitted that multiple FIRs can form the basis of registration of a single ECIR. In support of this contention, he has placed reliance on the judgment of the Delhi High Court in the case of Rajinder Singh Chadha v. Union of India: (2023) 5 HCC (Del) 86 = 2023 SCC OnLine Del 7515. 56. Shri S.V. Raju has next submitted that merely because the offence under the IPC also makes out the commission of an offence under the BUDS Act, will not bar investigation and prosecution under the IPC.....
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....ntly runs contrary to the statutory provision contained in Section 35 of the BUDS Act, which reads as follows:- "35. Application of other laws not barred. - The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force." 60. 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, I find no force in the second submission of the learned Counsel for the petitioner. 61. The learned Counsel for the petitioners has submitted that mere non return of investments does not make out commission of an offence because money could not be refunded due to circumstances beyond the control of the petitioners. In this regard, the ED has stated in the counter affidavit that all the deposit taking entitie....
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....rstly, the petitioners have failed to make out violation of the interim order dated 28.02.2025 and secondly, violation of an interim order would not make out a ground for quashing of the entire proceedings under PMLA against the petitioners. 66. The learned Counsel for the petitioners has also submitted that the Central Government has instituted an investigation by the Serious Fraud Investigation Office ('SFIO') under Section 212(1) of the Companies Act, 2013, in respect of the entire affairs of three companies of the Sahara Group, namely M/s Sahara Housing Investment Corporation Limited, M/s Sahara Q Shop, Unique Products Range Limited, and M/s Sahara Q Gold Mart Limited. Subsequently, the scope of investigation against them has been extended so as to include the entire affairs of six other companies of the Sahara Group namely M/s Sahara India Real Estate Corporation Limited, M/s Sahara India Financial Corporation Limited, M/s Sahara India Commercial Corporation Limited, M/s Sahara Prime City Limited, M/s Aamby Valley Limited, and M/s Aamby Valley City Developers Limited and the issue of OFCDs-debentures by these companies is being investigated by SFIO. The learned counsel for ....