No PMLA Proceedings After Quashing Of FIR Against Accused: Delhi High Court Set Aside Proceedings Against IHFL And Its Employees

The Delhi High Court has set aside the proceedings under the Prevention of Money Laundering Act, 2002 against Indiabulls Housing and Finance Limited (IHFL) and its employees.

The division bench of Justice Anish Dayal and Justice Mukta Gupta relied on the decision of the Supreme Court in the case of Vijay Madanlal Choudhary & Ors Vs. Union of India & Ors. The supreme court held that authorities under the PMLA cannot resort to action against any person for money laundering on the assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed. The scheduled offence must be registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. In the event that there is already a registered scheduled offence but the person named in the criminal activity relating to a scheduled offence is finally absolved by a court of competent jurisdiction owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can be no action for money laundering against not only such a person but also any person claiming through him in relation to the property linked to the stated scheduled offence.

The court quashed the proceedings while noting that the Bombay High Court had quashed the scheduled offence on the basis of which the ECIR was registered, alleging offences under PMLA.

The court noted that the order of the Bombay High Court was final and any other allegation against the accused in the FIR or any other person not accused in the FIR is a matter which would be for the appropriate court of competent jurisdiction to decide in an appropriate proceeding before that court.

The petitioners have challenged the continuation of proceedings in relation to the Enforcement Case Information Report (ECIR) issued by the Directorate of Enforcement (ED) despite the predicate offence registered under FIR having been quashed by the judgement of the High Court of Bombay.

The petitioners contended that the summons issued by the ED to various petitioners in respect of the ECIR, the Look Out Circular (LOC), and any other consequential proceedings emanating from the ECIR may be set aside.

The department contended that the FIR still subsists since it has only been quashed by the petitioners before the Bombay High Court and not in toto.

The department submitted that Section 66 allows the ED to give an opinion on the basis of information or material in their possession that provisions of any other law are being contravened and accordingly share the information with the appropriate authorities for necessary action.

The petitioner contended that once the Bombay High Court has quashed the scheduled offence on the basis of which the ECIR was registered, alleging offences under PMLA, the question of the ECIR's being sustained does not arise.

The petitioner stated that under Section 66(2) of the PMLA if any contravention is noticed by a person, at any stage if any facts are indeed found or discovered, the authorities would have the liberty to exercise their rights under applicable law and file a fresh FIR if so necessitated.

The court set aside all proceedings arising from the ECIR and directed that there would be no further coercive action, search and seizure, or summons arising from the ECIR.

Case Title: Indiabulls Housing and Finance Limited v. Enforcement Directorate

Citation: 2022 LiveLaw (Del) 911

Citation: W.P.(CRL) 408/2022, CRL.M.A. 3495/2022, CRL.M.A. 5002/2022 CRL.M.A.10739/2022, CRL.M.A.14801/2022, CRL.M.A. 17030/2022

Date: 26.09.2022

Counsel For Petitioner: Advocates Vikram Nankani, Sidharth Agarwal, Dheeraj Nair, Vishrutyi Sahni, Abinav Sekhri, Aishna Jain

Counsel For Respondent: Advocates S.V. Raju, Zoheb Hossain, Vivek Gurnani, Rajendra Singh, Anurag Ahluwalia, Danish Faraz Khan

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