PMLA | Enforcement Directorate Is Well Within Rights To Challenge Closure Report In Predicate Offence: Madras High Court

“During the pendency of complaint under PMLA, if the predicate offence is closed, in the present case, it resulted in miscarriage of justice, the Enforcement Directorate is well within its rights to place the facts before the High Court by instituting petition under Section 482 of Criminal Procedure Code to meet the ends of justice,” the court observed.

The bench of Justice SM Subramaniam and Justice V Sivagnanam reiterated that the PMLA was a standalone offence and that when a closure report was filed in the predicate offence, it would not automatically close the PMLA proceedings also.

“Once the “proceeds of crime” is traced out by the Enforcement Directorate and a complaint under PMLA has been filed before the Competent Court, the offence under PMLA has become stand alone offence and stand alone process, which is to be proceeded by following the procedures as contemplated under PMLA,” the court said.

The court thus quashed a closure report filed by the State police and taken on file by the Magistrate in connection with a cases involving lottery baron Santiago Martin and his wife.

An FIR was registered against Martin, his wife and one Nagarajar for offences punishable under Sections 294N, Section 420 and 120B of Indian Penal Code for possessing unaccounted money. Of this, since offence under Section 420 was a scheduled offence, the PMLA proceedings were also initiated.

While seeking anticipatory bail, Martin produced an agreement of sale to claim that the money recovered was a sale consideration. It was later however found that the stamp paper in which the sale agreement was printed was ante dated. The investigating officer then filed an alteration report. However a closure report was later filed by the state police which was accepted by the Magistrate. This was challenged by the ED.

Additional Solicitor General ARL Sundaresan, appearing for ED, argued that the cryptic order of the Magistrate accepting the closure report was against all canons of justice. He argued that the closure report itself stated that the genuineness of the sale certificate could not be established. He submitted that the Magistrate had failed to consider the materials available on record and the earlier investigation.

Per contra, Advocate General PS Raman appearing for the State and Senior Advocate NR Elango, appearing for the respondents questioned the maintainability of the present petition and submitted that when the predicate offence itself had been closed, the PMLA could not be sustained. It was also argued that the ED was not an aggrieved person and thus had no locus standi to file the present petition.

The court noted that since the ED had already attached the proceeds of crime provisionally, it was necessary for the ED to challenge the correctness of the order to give finalty to the confiscation of proceeds of crime. The court also noted that since the action of the ED was dependent on the predicate offence, the closure of predicate offence needed to be challenged to proceed with PMLA.

“if the Investigating Agency dealing with a predicate offence is not taking appropriate action as per law and on account of the same an accused is allowed to go scot free with the proceeds of crime, the Enforcement Directorate, for the purpose of achieving the objects under PMLA and to deal with the proceeds of crime under PMLA is entitled to take recourse to the remedies available under law,” the court said.

The court further noted that under Section 482 of CrPC, any person who was connected with the issues or concerned with the outcome of the case could approach the High Court stating that an illegality had occured and needed to be corrected in the interest of justice.

The court thus refused to agree with the contention of the respondents that the ED was not an aggrieved person to file the present petition. The court observed that ED was not alien to the issues concerned in the case and thus the petition was maintainable.

The court also opined that the closure report appeared to be wrong as an ante dated false document was created on stamp paper which itself proved existence of the predicate offence and the scheduled offence.

The court thus held that the order passed by the Magistrate was a mechanical order passed without taking note of all relevant facts and materials available on record. The court also observed that the State Agency had attempted to burt the predicate offence in a suspicious manner and on extraneous considerations which was visible through their action of filing the final closure report.

Thus, the court directed the State Investigation Agency and the ED to proceed with the case in tandem and to ensure that the criminal case is proceeded in accordance with law.

Counsel for the Petitioner: Mr.AR.L.Sundaresan Additional Solicitor General of India Assisted by Mr.S.Sasikumar Special Public Prosecutor

Counsel for the Respondents: Mr.P.S.Raman, Advocate General Assisted by Mr.R.Muniyapparaj, Additional Public Prosecutor (for R1) Mr.N.R.Elango, Senior Counsel for Mr.T.Vijay (for R2) and Mr.A.S.Aswin Prasanna (for R3) and Mrs.Aruna Elango (for R4) and Mr.Agilesh Kumar (for R5)

Citation: 2024 LiveLaw (Mad) 409

Case Title: The Assistant Director v The State and Others

Case No: CRL.O.P.No.28289 of 2023