PMLA Update - Subsequent FIR can legitimise subsistence of an already existing ECIR

The Delhi High Court on 24th November 2023, in a judgment in the case of Rajinder Singh Chadha v. Union of India & Anr. (W.P. (Crl.) 562/2023), has held that a subsequently registered First Information Report (“FIR”) could justify subsistence of an already existing Enforcement Case Information Report (“ECIR”) under the Prevention of Money Laundering Act, 2002 (“PMLA”).

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Facts

On the basis of FIR No. 16 of 2018 registered on 24.01.2018 at Economic Offences Wing (“EOW”) Police Station (“PS”) under Sections 420/406/120B of the Indian Penal Code, 1860 (“IPC”) against a real estate developer entity and its key managerial personnel including the accused petitioner for duping investors and siphoning away their monies, an ECIR bearing number ECIR/09/HIU/2019 was recorded by the Directorate of Enforcement (“ED”) on 26.07.2019 against the accused petitioner and others. The proceedings in the first scheduled offence FIR were compounded by the jurisdictional magistrate court on 19.11.2019 and accordingly the accused persons in the said FIR were acquitted.

Thereafter, another FIR bearing FIR No. 49 of 2021 was registered on 12.03.2021 at PS EOW, under Sections 420/406/120B of the IPC against the real estate developer entity and three of its key managerial personnel including the accused petitioner. This second FIR was taken on record for further investigation in the already opened ECIR by the ED. Subsequently, the proceedings in the second scheduled offence FIR stood quashed by the Delhi High Court on 22.12.2022 in light of the settlement arrived at by the accused persons chargesheeted in relation to the said FIR with the complainant investors.

Since no scheduled offence in relation to which the ECIR was recorded subsisted, the petitioner accused approached the Delhi High Court seeking quashing of all proceedings and actions taken pursuant to the ECIR dated 27.06.2019. During the pendency of the petition, a third FIR bearing FIR No. 55/2023 was registered on 10.07.2023 under Sections 409/420/120B IPC at PS EOW in relation to the same builder project, while not accusing the petitioner as a named accused.

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Arguments

The major contention of the petitioner was that since the scheduled offences on basis of which the ECIR was recorded no longer existed since the first scheduled offence FIR stood compounded and the second scheduled offence FIR stood quashed, the prosecution for offence of money laundering could not continue. Reliance in this regard was placed on paragraphs 253 and 467(d) of the Supreme Court judgment in Vijay Madanlal Choudhary (2022) SCC Online SC 929 wherein it was held that when a person named in the criminal activity relating to a scheduled offence is discharged / acquitted / has the scheduled offence quashed against himself / herself, there could be no action of money laundering against such person. It was also argued that the scheduled offence constituted a jurisdictional fact for a money laundering investigation i.e. something which had to exist prior in time for the subsistence of a money laundering investigation, and hence the investigation in the ECIR could not continue on the strength of an FIR registered subsequent to the ECIR.?

The ED on the other hand argued that the ECIR could not be quashed, and the investigation in pursuance of the ECIR could continue, since the scheduled offence was still in existence. To substantiate this argument, it was submitted that FIR No. No. 55/2023 which was registered qua the same project and same company, was still in existence. It was further submitted that multiple FIRs in relation to scheduled offences were registered, out of which, only some, and not all, were settled by the accused. Accordingly, the ED prayed that the ECIR and the money laundering investigation in relation to the ECIR, could not be set aside.

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Decision

Relying on the relevant paragraphs of the judgment in Vijay Madanlal as referred to by the petitioner, the Court held that the money laundering investigation done so far qua the accused in relation to the two scheduled offences which no longer stood in existence could not be sustained, and accordingly quashed the proceedings undertaken with respect to the said two FIRs qua the petitioner in the ECIR.

At the same time, the Court rejected the petitioner’s plea to quash the ECIR, holding that the registration of FIR No. 55/2023 constituted a scheduled offence legitimizing the existence of the ECIR recorded prior in time to the registration of the said FIR. The rationale given by the Court for such a ruling was that during the pendency of the ECIR, the registration of the third FIR with respect to the scheduled offences gave jurisdiction to the ED to investigate the matter under PMLA by taking the third FIR on record. According to the Court, once such FIR was taken on record, it could not be said that the ECIR was without a scheduled offence.??

The Court’s judgment, as on the date of sharing this post, does not seem to be challenged before the Supreme Court.

It is one thing to say that an ECIR could subsist even if a scheduled offence becomes non-existent post registration of the ECIR, and another to say that an ECIR can only exist if there is a supporting scheduled FIR (in existence). Once the latter stance is taken, what is the status of the ECIR when the earlier existing FIR became non-existent and the subsequent FIR was yet to be registered, is an important question which may require further elaboration.