PMLA | Freezing Order Under Section 17(1-A) Not Valid If ECIR Quashed & FIR Not Registered: Kerala High Court

The Kerala High Court recently laid down that where the Enforcement Case Information Report (ECIR) has been quashed and no subsequent FIR has been registered against the accused, further proceedings under the Prevention of Money Laundering Act ('PML Act') shall be dropped and an order issued under Section 17(1A) would not stand. 

Section 17(1A) empowers an authorized officer to freeze a property, where it would not practically be possible for such authority to search or seize the record or property. 

 Justice Devan Ramachandran observed. 

"...when there is no FIR registered, hypostised on which an 'ECIR' is also not available, any further investigation against the petitioner under the 'PMLA' will have to cease....in view of quashing of the 'ECIR' and in the absence of any further FIR being registered against the petitioner, Ext.P12 cannot be allowed to hold the field, particularly when it causes sure prejudice to the person against which it is issued."

The petitioner had approached the Court assailing an order under Section 17(1A) on the ground that since the ECIR registered against the petitioner itself had been quashed, the order had lost its footing and ought to be set aside. 

The Standing Counsel for ED Jaishankar V. Nair however countered that the impugned order had been issued when the petitioner was facing a criminal charge under Section 420 IPC (cheating). The counsel argued that since Section 420 IPC is one of the scheduled offenses in the PML Act, and since the ECIR had been registered in September 2023, it became imperative that the properties covered by the impugned order that was issued in May 2023, ought to be protected from depletion or destruction. 

The counsel added that money laundering is an independent offense, as settled in the case of Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. (2022), and that during the investigation by the ED, vital information against the petitioner had been obtained which had been handed over to the police for further investigation. He thus emphasized that unless the police completed the investigation on such additional inputs, made available to them by the ED officials, the impugned order could not be vacated. 

The Court, however, was of the view that any investigation against the petitioner under the PML Act would be possible only if it is edified on a crime registered. The Court also took note of Advocate Nair's statement that as of present, the ED had not received any information from the Kerala Police qua such investigation on the additional inputs, nor were they aware of any new FIR having been registered.

It was thus held that since there was no new FIR registered, and the ECIR had also been quashed, there could be no further investigation against the petitioner and that the impugned order under Section 17(1A) would also not stand. 

The Court further took note of another Single Judge's Order that in the event of the revival of the predicate offense, it would be open for the ED to revive proceedings under the PML Act, as well. 

The Single Judge thus observed in the present case that in case of such revival, the ED would be at full liberty to issue orders akin to that of the impugned order issued under Section 17(1A) PML Act. 

The Court further directed the respondent to return all the original documents of the properties covered by the impugned order, within three weeks from the date of the judgment. 

The impugned order was thus set aside. 

Counsel for the Petitioner: Advocates D. Kishore, Meera Gopinath, and R. Muraleekrishnan

Citation: 2023 LiveLaw (Ker) 514

Case Title: V.P. Nandakumar v. Assistant Director 

Case Number: WP(C) NO. 15651 OF 2023

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