[PMLA] Quashing FIR On Technical Grounds In Predicate Offence Would Not Lead To Automatic Quashing Of ECIR: Madras High Court

The bench of Justice SM Subramaniam and Justice V Sivagnanam ruled that the judgments in the case of Vijay Madanlal Choudhary cannot have a blanket application and shall be applied depending on the facts of each case. The court observed that when the FIR is quashed on mere technicalities or procedural irregularities, the ECIR would not be automatically quashed.

“Hence, the moot point for consideration whether all cases where FIR has been quashed can pave way for quashing of ECIR? This Court feels that each case must be tested on its own, in consonance with the Vijay madanlal judgement and a blanket application of the principle without due regard to the facts of each and every case shall render both the judgement and the object of the PMLA ineffective,” the court observed.

The court observed that when the courts are dealing with applications to quash the ECIR, it should look into the grounds on which the FIR concerning the scheduled offense is quashed and after careful examination, if it is found that the FIR was quashed on substantive grounds such as absence of prima facie offense, the ECIR would also lose its significance and could be quashed. The court added that if, on careful examination, the court finds that the FIR was quashed purely on technical grounds or procedural irregularities, then the PMLA proceedings would not end.

“The rationale here is to cull out the level of bearing that a quashed FIR has on an proceedings challenging the ECIR. This Court feels that all cases where FIR is quashed shall not automatically become a ground for quashing an ECIR. Instead a case to case analysis is a pre requisite for deciding on the sustenance of an ECIR,” the court said.

The court added that its conscience was shocked when it observed a pattern in recent PMLA proceedings, where the FIR is quashed through minor technical glitches which is then taken as a ground for quashing the ECIR. The court added that if the principles of automatic quashing of ECIR are adopted mechanically, the very purpose and objective of the PMLA is defeated.

The court added that the FIR could not be equated with the ECIR as the two were on different footing. The court remarked that though the scheduled offence is quintessential for the initiation of proceedings, the PMLA proceedings are distinct and the Act is a code in itself. The court added that the ECIR is born out of the FIR, but once born, the umbilical cord loses its relevance and becomes an independent document in itself.

The court made the observations while hearing a petition filed by Vijayraj Surana and others seeking to quash the ED proceedings against them. The main ground raised by the petitioners was that the FIR filed by the CBI which set the ED proceedings in motion was already quashed by the Karnataka High Court and though an appeal was pending in the Supreme Court, the same would not extend any protection to the ECIR.

The court however noted that in the present case, the FIR against the petitioner was alone quashed for want of jurisdiction and the FIR against other accused was still pending. The court noted that the Karnataka High Court had quashed the FIR on the ground that the investigation pertaining to the same allegation was entrusted to the Serious Fraud Investigation Office (SFIO) and since SFIO alone had jurisdiction to try the offenses, the FIR was quashed.

The court noted that when the SFIO proceedings were pending in scheduled offense, it would give jurisdiction to the ED to investigate the matter and the ECIR could not be said to be without a predicate offense. The court thus noted that the department's action was not vitiated as the predicate offense under Section 447 of the Companies Act was still pending and which was also included by the ED in its supplementary complaint.

Thus, noting that the petitioners had not made out any case for quashing the ECIR, the court dismissed the petitions.

Counsel for Petitioner: Mr.T.R.Ragavacharyulu and Mr.M.R.Venkatesh, for Mr.G.Guruprasath

Counsel for Respondent: Mr.A.R.L.Sundarasan. ASGOI, Assisted by Mr.N.Ramesh, Special Public Prosecutor for ED

Citation: 2024 LiveLaw (Mad) 348

Case Title: Vijayraj Surana v Assistant Director

Case No: W.P.Nos.14782, 14786 & 14787 of 2024