J&K High Court Quashes PMLA Charges Against Dr Farooq Abdullah In Alleged Cricket Association Scam

Case Background:

The controversy stems from the alleged misappropriation of funds belonging to the JKCA. An FIR was initially registered at Police Station Ram Munshi Bagh, Srinagar under Sections 120-B, 406, and 409 of the Ranbir Penal Code (RPC) against Dr. Farooq Abdullah and another office bearer of JKCA, Mohammad Saleem Khan. Following the registration of the FIR, the investigation was transferred to the CBI, which subsequently filed a charge sheet accusing six individuals, including Dr. Abdullah, of the offences mentioned in the FIR.

The Enforcement Directorate later took cognisance of the CBI's investigation and registered an Enforcement Case Information Report (ECIR) under the PMLA, initiating prosecution against Dr. Abdullah for alleged money laundering.

The petitioner Ahsan Ahmad Mirza, a co-accused with Dr. Abdullah, represented by Advocate Mr. Shariq J. Reyaz, challenged the ED's complaint and the subsequent prosecution. The crux of the argument was that the offences cited in the CBI's charge sheet namely, Sections 120-B, 406, and 409 RPC did not constitute scheduled offences under the PMLA. It was asserted that the prosecution under PMLA requires the existence of proceeds of crime derived from a scheduled offence, which was not established in this case.

Mr. Reyaz relied heavily on the Supreme Court's ruling in Pavana Dibbur v. Directorate of Enforcement where it was held that conspiracy to commit an offence not listed as a scheduled offence under the PMLA does not suffice to bring the case within the ambit of the Act. He argued that the ED had overstepped its jurisdiction by assuming that Section 120-B RPC (criminal conspiracy) constituted a scheduled offence in the absence of an underlying scheduled offence.

On the other hand, Mr. S.V. Raju, Additional Solicitor General of India, representing the Directorate of Enforcement, contended that the CBI's charge-sheet, although primarily concerning non-scheduled offences, contained elements that could potentially bring the case within the scope of scheduled offences under Sections 411 and 424 RPC. He argued that the ED was justified in proceeding with the prosecution under the PMLA based on its independent evaluation of the evidence collected by the CBI.

Court's Observations:

Justice Sanjeev Kumar meticulously examined the arguments presented by both sides and noted that the PMLA prosecution was premised on the assumption that Section 120-B RPC is a scheduled offence, an interpretation previously upheld by a Single Bench of the High Court in Ahsan Ahmad Mirza v. Enforcement Directorate and others. However, this position was overturned by the Supreme Court in Pavana Dibbur's case, which clarified that Section 120-B RPC becomes a scheduled offence under the PMLA only if the conspiracy involves the commission of a scheduled offence.

The Court observed:

“The Enforcement Directorate is not an authority or investigating agency in any manner superior to CBI, nor is it vested with or conferred the power and jurisdiction to sit in appeal against the investigation made and the conclusion drawn by the latter.”

Justice Kumar further emphasized that the ED cannot independently infer the existence of a scheduled offence from the CBI's charge sheet when the CBI itself had not charged the petitioner with any scheduled offence under the PMLA.

The Court heavily relied on the Supreme Court's rulings in Pavana Dibbur v. Directorate of Enforcement and Vijay Madal Lal Choudhary v. Union of India 2022 LiveLaw (SC) 633 to underscore that the commission of a scheduled offense is a sine qua non for any PMLA prosecution. The Court reitrated,

“The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offense has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum.”

Commenting on the nature of the complaint and the misdirection on part of ED while launching the prosecution the bench observed,

“From a perusal of the complaint filed by the respondent before the Designated Special Court it clearly transpires that the ECIR was registered and prosecution was launched by the respondents only on the assumption that Section 120-B RPC in respect of which there was a case registered by the CBI against the petitioner was a scheduled offence”

In light of the observations and legal precedents, the Court quashed the ED's complaint and the charges framed by the Special Court under the PMLA. However, Justice Kumar clarified that this judgment does not preclude the ED from registering a fresh ECIR and launching prosecution if the Chief Judicial Magistrate, Srinagar, eventually frames charges for any scheduled offense under the PMLA.

Case Title: Ahsan Ahmad Mirza Vs Directorate Of Enforcement

Citation: 2024 LiveLaw (JKL) 234

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