Punjab-Haryana High Court
M/S Ireo Private Limited vs Union Of India And Another on 4 September, 2024
Author: Anil Kshetarpal
Bench: Anil Kshetarpal
In the High Court of Punjab and Haryana, at Chandigarh
Civil Writ Petition No. 29265 of 2023 (O&M)
Reserved On: 22.08.2024
Pronounced On: 04.09.2024
M/s IREO Private Limited
... Petitioner(s)
Versus
Union of India and Another
... Respondent(s)
CORAM: Hon'ble Mr. Justice Sheel Nagu, Chief Justice.
Hon'ble Mr. Justice Anil Kshetarpal.
Present: Mr. Vikram Chaudhri, Senior Advocate
with Mr. Keshavam Chaudhri and Ms. Hargun Sandhu,
Advocates, for the petitioner.
Mr. Puneet Bali, Senior Advocate
with Mr. Sandeep Singh, Mr. Arshdeep Singh,
Ms. Neha Nagpal and Mr. Karan Sirohi, Advocates
for the petitioner.
Mr. Zoheb Hussain, Advocate (through Video Conferencing)
and Mr. Lokesh Narang, Senior Panel Counsel
for the respondent-ED
Anil Kshetarpal, J.
1. Brief Facts of the Case
1.1 While invoking the extraordinary writ jurisdiction under Article
226 and jurisdiction of Superintendence under Article 227 of the
Constitution of India, the petitioner – a corporate entity prays for the
following reliefs:-
“I) In consonance with the principles laid down by the
Hon’ble Supreme Court in “Vijay Madanlal Choudhary
Versus Union of India & Others 2022 SCC OnLine SC
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929″ Read down and/or Read into Sub-Section (2) of
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Civil Writ Petition No. 29265 of 2023 (O&M) 2Section 66 Prevention of Money Laundering Act, 2002
and hold that:-
a) The only power conferred under Sub-Section 2 of
Section 66 to the “Director or any other authority
specified by him” is confined to “share the
information with the concerned agency for
necessary action” in the event of forming opinion
“on the basis of information or material in his
possession that the provisions of any other law for
the time being in force are contravened” and
nothing beyond;
b) No power or authority vests with the “Director or
any other authority specified by him” to prompt,
compel, coerce, force, browbeat or pressurize any
private individual to lodge criminal case(s) against
any person or entity as contemplated under
Section 2(1)(s) of the Prevention of Money
Laundering Act, 2002 as any such act would
tantamount to blatant illegality, arbitrariness and
thus unconstitutional;
II) Set aside and quash the impugned communication dated
14.12.2023 (Annexure P-16) issued by Respondent No. 2,
whereby, a questionnaire has been sent to various
customers of the petitioner company in a veiled and
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circuitous attempt to virtually prompt, compel, coerce,
Civil Writ Petition No. 29265 of 2023 (O&M) 3force, browbeat, overawe and pressurize them to lodge
criminal cases against the company, as such a
communication has no legal sanctity under the Act and
the same cannot qualify the test of fairness or equity
either.”
1.2 The various FIRs were registered against the companies
established by the IREO Fund in India. Keeping in view certain facts, the
Enforcement Case Information Report (ECIR) No. GNZO/10/2021 dated
15.06.2021 was registered by the Enforcement Directorate (ED) and the
prosecution complaint was filed by the ED before the Special Court against
Lalit Goyal, the petitioner company and five other companies. A Provisional
Attachment Order (PAO) attaching various properties as well as the bank
accounts of the petitioner company under Section 5 of the Prevention of
Money Laundering Act, 2002 (hereinafter referred to as “the 2002 Act”) was
issued on 14.12.2022 which was challenged before this Court in Civil Writ
Petition No. 6121 of 2023 wherein the passing of final order by the
Adjudicating Authority was stayed.
1.3 On 21.02.2022, the Special Court took cognizance of the
offence and summoned the accused. The ED filed the supplementary
prosecution complaint on 04.08.2023 against as many as 52 accused. The
co-accused in the first supplementary prosecution complaint filed Civil Writ
Petitions No. 27342 of 2023 and 27920 of 2023 seeking quashing and
annulment of the proceedings against them in which all further proceedings
before the Trial Court were stayed. On 14.12.2023, the ED in order to
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gather information sent the following questionnaire along with a
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Civil Writ Petition No. 29265 of 2023 (O&M) 4
communication to the various customers of seven incomplete projects of the
petitioner:-
“(i) What was the nature of booking done in the projects of
IREO Group Companies?
(ii) What is the built-up / carpet area and purchase price of
the said unit?
(iii) What was the delivery date promised?
(iv) Whether the payment is made in full / part and what is
balance amount, if paid in part?
(v) Whether delivery of unit booked is made as promised? If
yes, when was it made? and if no, since when it is
outstanding?
(vi) If delivery was not made, was there any negotiation for
return of money? If yes, what is the outcome of such
negotiation?
(vii) Was the money returned? Yes or No.
(viii) If no, is any FIR / Complaint has been filed before any
forum? If yes, then it’s details thereof.
(ix) If not filed, then do you wish or plan to file such
complaint with respect to your booking with IREO
Group?”
1.4 The petitioner has immediately filed the present writ petition.
On the basis of the information gathered/complaints received, the Joint
Director, ED, shared information under Section 66 (2) of the 2002 Act with
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the Special Commissioner of Police, Economic Offences Wing, Police
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Civil Writ Petition No. 29265 of 2023 (O&M) 5
Station Mandir Marg Complex, New Delhi, leading to the registration of FIR
No. 14, dated 12.03.2024, which is pending investigation.
1.5 The ED, in its reply, has stated that the information was sought
from the customers of seven incomplete projects of the petitioner company
in order to collect material information. On the basis of the material
gathered, the involvement of the petitioner, the Directors, the former
Directors, the key managerial persons of the IREO Group of companies
transpired as the above said key position holders have been involved/played
a major role in the criminal activities of cheating and defrauding the
customers/investors of the IREO Group of Companies and the IREO Private
Limited. The petitioner company on the pretext of purchase of land, plots,
booking of flats diverted the funds of the investors and also fudged of the
books of accounts so as to siphon off the buyers’ money; while concealing
the vital information. They also gave false assurance to prospective
customers of possessing the necessary permissions to sell and develop the
colonies wherein the money against the bookings was pocketed and
misappropriated.
1.6 A prosecution complaint under Section 44 and 45 of the 2002
Act for the commission of offence of money laundering is pending before
the Special Court at the stage of framing of the charges. Further, during the
course of investigation, it was revealed that in addition to the identified
proceeds of crime i.e. ₹1,376/- crores, the IREO Group further diverted its
funds of more than ₹400/- crores through M3M Group of Companies in
Bhiwadi land deal which has never been developed till date. The
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customers/receipt funds to the tune of ₹404/- crores, collected by the IREO
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Civil Writ Petition No. 29265 of 2023 (O&M) 6
Private Limited, were acquired and then projected as untainted by routing
these funds through some shell companies which were claimed to be
unrelated, but during the course of investigation were found to be related to
the companies of M3M Group of Companies wherein Basant Bansal is/was
the Managing Director while Roop Kumar Bansal and Pankaj were the
Directors. During the course of investigation, further survey was also carried
out at the business premises of the nine shell entities wherein it was revealed
that these entities are the shell companies without any actual business and
their offices are in a single narrow room managed by the one-two persons.
None of the directors of the said entities, had maintained proper records.
Apart from that, necessary workforce as required, as well as other
infrastructural facilities including the books of accounts were also found
lacking during the survey.
2. Submissions put forth by the Learned Counsels
representing the Petitioner
2.1 The learned senior counsels representing the petitioner have
made the following submissions:-
i) Out of 32 FIRs, 31 FIRs have been quashed/closed,
whereas in the last FIR, a settlement has been arrived at
and the proceedings have been stayed. They submit that
ECIR is based on the predicate offences in the various
FIRs, which no more exist. Hence, the ECIR is required
to be quashed.
ii) The ED is not repository of the powers which are beyond
DEEPAK KUMAR BHARDWAJ the Statute. They submit that under Section 66 of the
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Civil Writ Petition No. 29265 of 2023 (O&M) 72002 Act, the ED is only entitled to share information
which is in their possession with the concerned agency
for necessary action. Hence, the ED has no power to
register the FIR.
iii) An attempt to overreach the Statute has been made by the
ED as the 2002 Act does not provide for sending
questionnaire.
iv) It is not permissible to add new FIRs in the ECIR. It is
contended that the new FIR may result in registering of
new ECIR but it could not be added in the previous
ECIR.
v) The ED is not authorized to solicit information from the
allottees and hence, it cannot act as a Judge, Jury and
Executioner itself.
vi) A similar information sent to the EOW, Gurgaon, has not
been accepted by the police as it was found to be a civil
dispute. It is submitted that the ED was entitled to share
information with the jurisdictional police. In this case,
the jurisdictional Police Station is EOW, Gurgaon, which
has refused to register FIR. It is submitted that all the
seven projects are located in the area of Gurugram.
vii) The communication dated 14.12.2023 is not on the
format of notice as prescribed under Section 50 of the
2002 Act. It has been submitted that the ED has exceeded
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integrity of this document its jurisdiction by sending such communication. Hence,
Civil Writ Petition No. 29265 of 2023 (O&M) 8the same is liable to be quashed. Heavy reliance has been
placed on the judgment passed by the Supreme Court in
Vijay Madan Lal Chaudhary and Others v. Union of
India and Others (2022) SCConline SC 729. The
petitioner has also relied upon the following
judgments/orders passed by the Supreme Court from time
to time:-
Sr. No. Case Title and Citation
1. Pankaj Bansal v. Union of India and Others 2023
SCC Online SC 1244
2. Harish Fabiani v. Directorate of Enforcement 2022
SCC Online DEL 3121 Delhi High Court
3. Prakash Industries Ltd. v. Union of India and
Others 2023 SCC Online DEL 3336 Delhi High
Court
4. V.P.Nandkumar v. Enforcement Directorate 2023
SCC Online KER 6848 Kerala High Court
5. Parvathi Kollur and Another v. State by Directorate
of Enforcement Criminal Appeal No. 1254 of 2022,
Decided on 16.08.2022 (Supreme Court)
6. Indira Patnaik and Another v. Enforcement
Directorate and Others W.P (C) No. 368 of 2021
Decided on 03.11.2022 (Supreme Court)
7. M/s V.G.N Developers Pvt. Ltd. v. Directorate of
Enforcement S.P (Crl.) No. 10627/2019 Decided on
02.12.2022 (Supreme Court)
8. M.Nagarajan and Another v. Directorate of
Enforcement & Others SLP (Crl.) No. 10917/2022
Decided on 23.041.2023 (Supreme Court)
9. Selvi Pushpam Appala Naidu v. Directorate of
Enforcement Crl. O.P. No. 2279/2019 Decided on
12.09.2022
10. Directorate of Enforcement v. Selvi Pushpam
Appala Naidu and Others SLP (Crl.) Diary No.
19592/2023 Decided on 18.08.2023
11. Indiabulls Housing Finance Limited and Others v.
Union of India and Another 2022 SCC Online DEL
3121
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integrity of this document
Civil Writ Petition No. 29265 of 2023 (O&M) 9
Enforcement Directorate CRR No. 2752 of 2018
Decided on 28.11.2022
13. Directorate of Enforcement v. Nik Nish Retail
Limited and Others SLP (Crl.) Diary No.
24321/2023 Decided on 14.07.2023
14. Dependra Kumar Panda v. Union of India Crl.
M.C. No. 3059 off 2019 Decided on 13.01.2023
15. Emta Coal Limited and Others v. Directorate of
Enforcement W.P.(C) No. 3821/2022 Decided on
10.01.2023
16. Directorate of Enforcement v. Emta Coal Limited
and Others SLP (Civil) 15235/2023 Decided on
06.07.2023
17. Muktanand Agro Farming Pvt. Ltd. v. Adjudicating
Authority and Others W.P.(C) No. 11474 of 2022
Decided on 16.02.2023
18. Directorate of Enforcement v. Muktanand Agro
Farming Pvt. Ltd. and Others SLP (Civil) Diary No.
24848/2023 Decided on 25.08.2023
19. Omkar Realtors & Developers Pvt. Ltd. v.
Adjudicating Authority and Others W.P.(C) No.
11473 of 2022 Decided on 16.02.2023
20. Directorate of Enforcement v. Omkar Realtors &
Developers Pvt. Ltd. and Others SLP (Civil) Diary
No. 23799/2023 Decided on 04.08.2023
21. Pratap Singh Tiwari and Another v. Directorate of
Enforcement CRLP No. 1928/2022 Decided on
07.09.2022
22. Directorate of Enforcement v. M/s Pratap Singh
Tiwari and Another SLP (Civil) Diary No.
19609/2023 Decided on 05.07.2023
23. Sri Jayanand Narasannavar and Another v.
Directorate of Enforcement CRLP No. 9685/2022
Decided on 25.09.2023
24. Directorate of Enforcement v. M/s Sri Jayanand
Narasannavar and Another SLP (Criminal) Diary
No. 13442/2023 Decided on 03.07.2023
25. S. Revanna and Another v. Directorate of
Enforcement Criminal Revision Petition No. 1010
of 2021 Decided on 25.0.2023
26. Directorate of Enforcement v. M/s S. Revanna and
Another SLP (Criminal) Diary No. 24029/2023
Decided on 14.07.2023
27. Pavana Dibbur v. Directorate of Enforcement
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Criminal Appeal No. 2779 of 2023 Decided on
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29.11.2023
Civil Writ Petition No. 29265 of 2023 (O&M) 10
28. Rajinder Singh Chadha v. Union of India W.P.
(Crl.) No. 562/2023 Decided on 24.11.2023
29. Anjaneya Hanumanthaiah v. Union of India
Criminal Appeal No. 1391 of 2024 Decided on
05.03.2024
30. Ram Ludhra v. Directorate of Enforcement
Criminal Appeal No. 382 of 2024 Decided on
22.01.2024
31. Yash Tuteja and Another v. Union of India and
Others Writ Petition (Criminal) No. 153 of 2023
Decided on 08.04.2024 (Supreme Court)
32. Rajiv Channa v. Union of India Misc. Appeal
(PMLA) No. 13/2024 Decided on 08.04.2024 (Delhi
High Court)
33. Nayati Healthcare and Research Private Limited
and Others v. Union of India and Another W.P.
(Crl.) No. 2871/2022 Decided on 11.10.2023 (Delhi
High Court)
34. Directorate of Enforcement v. Akhilesh Singh and
Others Criminal Revision Petition No. 1119/2023
Decided on 30.04.2024 (Delhi High Court)
35. Chetan Gupta v. Directorate of Enforcement and
Others CRM-M No. 39214 of 2020 Decided on
29.04.2024 (Punjab and Haryana High Court)
36. Shanmugam Ramachandran v. Union of India and
Others W.P. No. 3047 of 2024 Decided On
16.07.2024 (Madras High Court)
37. K.T.M.S.Mohd., v. Union of India (1992)3 SCC 178
38. Arvind Kejriwal v. Directorate of Enforcement
Criminal Appeal No. 2493 of 2024 Decided on
12.07.2024
2.2 Per contra, the ED’s counsel, namely Mr. Zoheb Hussain,
Advocate, contends that the ED has power to search ‘proceeds of the crime’
and hence, 1700 customers of the petitioner company and other related
companies who did not receive possession in the seven incomplete projects
were sent a questionnaire in order to gather information and material to find
out about the proceeds of crime. Moreover, further investigation in the case
reveals that in addition to the identified proceeds of crime of ₹1376/- crores,
DEEPAK KUMAR BHARDWAJ
the petitioner further diverted its funds of more than ₹404/- crores in
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Civil Writ Petition No. 29265 of 2023 (O&M) 11
Bhiwadi land deal which has never been developed. The aforesaid parcel of
land was purchased at a price more than the market value in order to launder
money. He places reliance on the judgment passed in V. Senthil Balaji v.
The State represented by Deputy Director and Others (2024) 3 SCC 51 and
submits that the judgment passed in Vijay Madan Lal Chaudhary’s case
(supra) has also been explained in the said judgment. The Special Court has
also refused either to close or drop the proceedings vide two orders passed
on 17.07.2024. FIR No. 195 of 2018, out of the original 32 FIRs, is still
pending. Neither Section 50 nor Section 66 of the 2002 Act provides that
registration of an ECIR is a prerequisite to collect/gather information. The
learned counsel submits that Section 66 of the 2002 Act is not dependent on
predicate offence and that the communication (Annexure P16) was sent only
to ascertain the whereabouts of proceeds of crime while seeking information.
While relying upon the judgment passed in Rajinder Singh Chadha (supra),
he submitted that a subsequently registered FIR can be included in an ECIR
registered previously. He further submitted that on the careful examination
of the audited annual financial status of the petitioner company, it is revealed
that huge funds have been routed by the IREO Group to M3M Group of
companies apart from nine shell entities. He also referred to the auditors’
report to show that as on 31.03.2011, advance for purchase of development
rights have been shown at ₹6,771,001,709/- whereas advance from the
customers has been shown as ₹3,807,985,666/- and the complaints received
from the customers/investors were forwarded to the EOW, Delhi, which
resulted in the registration of FIR.
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3. Analaysis and Evaluation of the submissions of the learned
counsels representing the parties.
3.1 This Court has considered the submissions of the learned
counsel representing the parties while analyzing, evaluating and appreciating
the respective contentions.
3.2 The relevant provisions of the 2002 Act are reproduced as
under for better comprehension and context:-
2. Definitions.
2(1)(a) to (n) XXXX XXXX XXXX XXX
(na) “investigation” includes all the proceedings under this
Act conducted by the Director or by an authority authorised by
the Central Government under this Act for the collection of
evidence.
(o) XXXX XXXX XXXX XXXX XX
(p) “money-laundering” has the meaning assigned to it in
section 3.
(q) to (t)XXXX XXXX XXXX XXXX
(u) “proceeds of crime” means any property derived or
obtained, directly or indirectly, by any person as a result of
criminal activity relating to a scheduled offence or the value of
any such property or where such property is taken or held
outside the country, then the property equivalent in value held
within the country or abroad;
Explanation.–For the removal of doubts, it is hereby clarified
DEEPAK KUMAR BHARDWAJ that “proceeds of crime” include property not only derived or
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Civil Writ Petition No. 29265 of 2023 (O&M) 13
obtained from the scheduled offence but also any property
which may directly or indirectly be derived or obtained as a
result of any criminal activity relatable to the scheduled
offence.
(v) to (x)XXXX XXXX XXXX XXXX
(y) "scheduled offence" means-- (i) the offences specified
under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the
total value involved in such offences is one crore rupees or
more; or
(iii) the offences specified under Part C of the Schedule.
XXXX XXXX XXXX XXXX XXXX
3. Offence of money-laundering.–Whosoever directly or
indirectly attempts to indulge or knowingly assists or knowingly
is a party or is actually involved in any process or activity
connected with the proceeds of crime including its concealment,
possession, acquisition or use and projecting or claiming] it as
untainted property shall be guilty of offence of money-
laundering.
Explanation.–For the removal of doubts, it is hereby clarified
that,–
(I) a person shall be guilty of offence of money-
laundering if such person is found to have directly or
indirectly attempted to indulge or knowingly assisted or
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integrity of this document knowingly is a party or is actually involved in one or
Civil Writ Petition No. 29265 of 2023 (O&M) 14
more of the following processes or activities connected
with proceeds of crime, namely:–
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property,
in any manner whatsoever;
(ii) the process or activity connected with proceeds of crime is a
continuing activity and continues till such time a person is
directly or indirectly enjoying the proceeds of crime by its
concealment or possession or acquisition or use or projecting it
as untainted property or claiming it as untainted property in
any manner whatsoever.
XXXX XXXX XXXX XXXX XXXX
44. Offences triable by Special Courts.
(1) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974),
(a) an offence punishable under section 4 and any
scheduled offence connected to the offence under that
section shall be triable by the Special Court constituted
for the area in which the offence has been committed:-
Provided that the Special Court, trying a
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scheduled offence before the commencement of this Act,
Civil Writ Petition No. 29265 of 2023 (O&M) 15shall continue to try such scheduled offence; or
(b) a Special Court may, upon a complaint made by an
authority authorised in this behalf under this Act take
cognizance of offence under section 3, without the
accused being committed to it for trial.
Provided that after conclusion of investigation, if
no offence of money laundering is made out requiring
filing of such complaint, the said authority shall submit a
closure report before the Special Court; or
(c) if the court which has taken cognizance of the
scheduled offence is other than the Special Court which
has taken cognizance of the complaint of the offence of
money-laundering under sub-clause (b), it shall, on an
application by the authority authorised to file a
complaint under this Act, commit the case relating to the
scheduled offence to the Special Court and the Special
Court shall, on receipt of such case proceed to deal with
it from the stage at which it is committed.
(d) a Special Court while trying the scheduled offence
or the offence of money-laundering shall hold trial in
accordance with the provisions of the Code of Criminal
Procedure, 1 973, as it applies to a trial before a Court of
Session.
Explanation.–For the removal of doubts, it is clarified
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Civil Writ Petition No. 29265 of 2023 (O&M) 16
(I) the jurisdiction of the Special Court while dealing
with the offence under this Act, during investigation,
enquiry or trial under this Act, shall not be dependent
upon any orders passed in respect of the scheduled
offence, and the trial of both sets of offences by the same
court shall not be construed as joint trial;
(ii) the complaint shall be deemed to include any
subsequent complaint in respect of further investigation
that may be conducted to bring any further evidence, oral
or documentary, against any accused person involved in
respect of the offence, for which complaint has already
been filed, whether named in the original complaint or
not.
(2) Nothing contained in this section shall be deemed to
affect the special powers of the High Court regarding bail
under section 439 of the Code of Criminal Procedure, 1973 (2
of 1974) and the High Court may exercise such powers
including the power under clause (b) of sub-section (1) of that
section as if the reference to Magistrate in that section includes
also a reference to a Special Court designated under section
43.”
XXXX XXXX XXXX XXXX XXXX
50. Powers of authorities regarding summons, production
of documents and to give evidence, etc.–(1) The Director
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shall, for the purposes of section 13, have the same powers as
Civil Writ Petition No. 29265 of 2023 (O&M) 17
are vested in a civil court under the Code of Civil Procedure,
1908 (5 of 1908) while trying a suit in respect of the following
matters, namely:–
(a) discovery and inspection;
(b) enforcing the attendance of any person, including
any officer of a reporting entity and examining him on
oath;
(c) compelling the production of records;
(d) receiving evidence on affidavits;
(e) issuing commissions for examination of witnesses
and documents; and
(f) any other matter which may be prescribed.
(2) The Director, Additional Director, Joint Director, Deputy
Director or Assistant Director shall have power to summon any
person whose attendance he considers necessary whether to
give evidence or to produce any records during the course of
any investigation or proceeding under this Act.
(3) All the persons so summoned shall be bound to attend in
person or through authorised agents, as such officer may direct,
and shall be bound to state the truth upon any subject
respecting which they are examined or make statements, and
produce such documents as may be required.
(4) Every proceeding under sub-sections (2) and (3) shall be
deemed to be a judicial proceeding within the meaning of
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Civil Writ Petition No. 29265 of 2023 (O&M) 18
1860).
(5) Subject to any rules made in this behalf by the Central
Government, any officer referred to in sub-section (2) may
impound and retain in his custody for such period, as he thinks
fit, any records produced before him in any proceedings under
this Act: Provided that an Assistant Director or a Deputy
Director shall not–
(a) impound any records without recording his reasons
for so doing; or
(b) retain in his custody any such records for a period
exceeding three months, without obtaining the previous
approval of the Joint Director.
XXXX XXXX XXXX XXXX XXXX
66. Disclosure of information.–(1)The Director or any
other authority specified by him by a general or special order in
this behalf may furnish or cause to be furnished to–
(i) any officer, authority or body performing any
functions under any law relating to imposition of any tax,
duty or cess or to dealings in foreign exchange, or
prevention of illicit traffic in the narcotic drugs and
psychotropic substances under the Narcotic Drugs and
Psychotropic Substances Act, 1985 (61 of 1985); or
(ii) such other officer, authority or body performing
functions under any other law as the Central Government
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may, if in its opinion it is necessary so to do in the public
Civil Writ Petition No. 29265 of 2023 (O&M) 19
interest, specify, by notification in the Official Gazette, in
this behalf, any information received or obtained by such
Director or any other authority, specified by him in the
performance of their functions under this Act, as may, in
the opinion of the Director or the other authority, so
specified by him, be necessary for the purpose of the
officer, authority or body specified in clause (i) or clause
(ii) to perform his or its functions under that law.
(2) If the Director or other authority specified under sub-
section (1) is of the opinion, on the basis of information or
material in his possession, that the provisions of any other law
for the time being in force are contravened, then the Director or
such other authority shall share the information with the
concerned agency for necessary action.”
3.3 It is evident that Section 3 of the 2002 Act defines the offence
of money laundering and it is not narrowly focused. The proceeds of crime
is a pivotal ingredient constituting the offence of money laundering. Section
3 of the 2002 Act has been explained elaborately in Vijay Madan Lal
Chaudhary’s case (supra). It is evident that the definition of the offence of
‘money laundering’ is wide and expansive. It makes liable not only the
person who directly or indirectly indulges with the proceeds of crime
including its concealment, possession, acquisition or use and projecting or
claiming it as untainted property, but even the person who knowingly assists
or knowingly is a party or is actually involved in any process or activity
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connected shall also be liable. Explanation (i) further explains the position.
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Similarly, Explanation (ii) to Section 3 of the 2002 Act provides that the
process or activity connected with the proceeds of crime is a continuing
activity and it continues till the time a person is directly or indirectly
enjoying the proceeds of crime. While defining the expression ‘proceeds of
crime’, it has been provided that any property derived or obtained directly or
indirectly by any person as a result of criminal activity relating to the said
property shall constitute the proceeds of crime. Where the property is taken
or held outside the country, then the property equivalent in value held within
the country or abroad shall be included in such proceeds. In the explanation
attached to the definition, it has been added that if the property is directly or
indirectly derived or obtained as a result of any criminal activity related to
the scheduled offence, the same shall also be included in the proceeds of
crime.
3.4 Explanation (ii) to Section 44(1) of the 2002 Act provides that
the complaint shall be deemed to include any subsequent complaint in
respect of further investigation that may be conducted to bring any further
evidence, oral or documentary, against any accused person involved in
respect of the offence, for which the complaint has already been filed,
whether named in the original complaint or not.
3.5 Section 50 of the 2002 Act enlists the powers of authorities
regarding summons, production of documents and to give evidence.
3.6 Section 66(2) of the 2002 Act enables the Director or other
authority specified by a general/special order under sub-section (1) to share
information if he is of the opinion that the provisions of any other law for the
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time being in force are contravened on the basis of information or material
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in his possession.
3.7 Both the learned senior counsels for the petitioner have laid
emphasis on the ground that out of 32 FIRs, 31 have either been quashed or
closed except FIR No,. 195 of 2018 in which the settlement has been arrived
at between the parties and the quashing petition on that basis is pending
before the High Court. The proceedings before the Trial Court have already
been stayed. Thus, it is the contention of the learned senior counsels that
ECIR was registered on the basis of 32 FIRs which stand closed or quashed.
Hence, the predicate offences have ceased to exist and as a result, ECIR
shall be quashed. They submitted that the proceedings cannot continue in
view of the interpretation of law by the Supreme Court in Vijay Madan Lal
Chaudhary’s case (supra).
3.8 In the considered opinion of this Bench, this argument of the
learned counsels suffer from a fundamental flaw. It is evident that out of 32
FIRs, one remains open. According to Explanation II to Section 44 of the
2002 Act, any subsequent complaint should be incorporated into the pending
complaint for further investigation to gather additional evidence against any
accused, as reflected in the statutory language. The legislative intent in
cases involving multiple FIRs is thus quite clear. Consequently, it can be
concluded that even if all FIRs except one have been resolved through
compromise or other means, the investigation under the same ECIR will
continue. This is because Explanation II to Section 44 of the 2002 Act
mandates that subsequent complaints be considered part of the original
complaint by the Special Court. Moreover, sine qua non to proceed under
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the 2002 Act is the offence of money laundering which is wholly dependent
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upon the proceeds of crime. It is evident that the proceeds of crime should
be the result of criminal activity related to a scheduled offence included in
the Schedule attached to the Act which includes offence under Section 420
of the Indian Penal Code, 1860 (hereinafter referred to as “IPC”). In that
context, the offence of money laundering is dependent upon the proceeds of
crime from criminal activity relating to a scheduled offence, however, the
registration of FIR in the scheduled offence is not sine qua non for initiating
the proceedings under the 2002 Act. Section 66 of the 2002 Act is not
dependent on the predicate offence as explained by the Supreme Court in
Pavana Dibbur v. Directorate of Enforcement 2023 SCC Online SC 1586.
3.9 After having made the elaborate submissions, Mr. Puneet Bali,
Senior Advocate, representing the petitioner, submitted that he is not praying
for quashing of ECIR in this writ petition. In the considered opinion of this
Bench, after having made elaborate submissions, it was not appropriate for
the learned counsel to make such submission.
3.10 The investigation of crime is exclusive domain of the
Investigating Agency similar to the powers of police in the cases that are
governed by the provisions of Code of Criminal Procedure, 1973
(hereinafter referred to as “Cr.P.C.”). It is evident that the word
‘investigation’ has been defined in Section 2(na) of the 2002 Act which has
already been extracted in para 3.2 of this judgment. It includes all the
proceedings under this Act conducted by the Director or by an authority
authorized by the Central Government for the collection of evidence. Section
50 of the 2002 Act enables the authorities to summon or compel production
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of documents and to give evidence etc. including discovery and inspection,
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enforcing attendance of any person compelling production of record,
receiving evidence on affidavits, issuing commissions for examination of
witnesses and documents and any other matter which may be prescribed.
The scope of Court’s interference in the manner of investigation is extremely
limited unless the Court finds that the exercise of powers by the authorities
is totally arbitrary.
3.11 In Dukhishyam Benupani, Assistant Director, Enforcement
Directorate (FERA) v. Arun Kumar Bajoria (1998) 1 SCC 52, the Supreme
Court held that it is not the function of the Court to monitor the investigation
process as long as the investigation does not transgress any provision of law.
The questions and manner of asking such questions to likely victims of
crime should be left to the Investigating Agency. The ED has the enabling
power to search for proceeds of crime in scheduled offence. In order to
collect information and related material, the ED has the powers as enlisted
in Section 50. The questionnaire as sent to the customers of incomplete
projects of the petitioner company is an attempt in that direction. After
collecting the information, the same has been shared with EOW, Delhi,
which has already registered an FIR. This FIR has been challenged in a
pending petition before the Delhi High Court. Hence, there is no substance
in the arguments of the learned counsel that the ED has transgressed its
powers or overreached the Statute.
3.12 It would be noted here that once the ECIR has been filed in the
Special Court, Explanation (ii) of Section 44(1) of the 2002 Act does enable
the Special Court to include any subsequent complaint in respect of further
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investigation. Moreover, if the process or activity connected with the
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proceeds of crime is a continuing activity i.e. the person is directly or
indirectly enjoying the proceeds of crime, then the same is included in the
offence of ‘money laundering’.
3.13 The learned senior counsels representing the petitioner has
failed to draw the attention of the Bench to any such provision which debars
the Court from adding a new FIR in the existing ECIR. The provisions of
the 2002 Act are required to be interpreted in a manner which advance the
object sought to be achieved by the enactment. Hence, in the absence of an
express prohibition, it would not be appropriate to hold that the subsequently
registered FIR cannot be included in the existing ECIR. Second Explanation
to Section 44 of the 2002 Act specifically provides for inclusion of
subsequent complaint. Similarly, the argument of the learned senior counsels
that the ED cannot solicit information from the allottees lacks any substance
because Section 50 of the 2002 Act enables the Director to collect
information and material to locate the proceeds of crime.
3.14 Moreover, the Supreme Court in para 467 of Vijay Madan Lal
Chaudhary’s case (supra) has held that the expression ‘investigation’ is not
limited to the offence under the Act. It is interchangeable with the “inquiry”
to be undertaken by the Authorities. The expression ‘proceedings’ occurring
in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to
be given expansive meaning to include inquiry. Hence, the ED has power to
solicit information from the allottees, who as promised, have not been
delivered possession of the plots/flats.
3.15 As far as the argument regarding refusal to register FIR by the
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EOW, Gurugram, is concerned, it is not conclusive. From the reading of FIR
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Civil Writ Petition No. 29265 of 2023 (O&M) 25
No. 14 dated 12.03.2024, registered in EOW, Police Station Mandir Marg
Complex, New Delhi, it becomes evident that the information was shared
because all the investors/complainants who had informed the ED were the
residents of Delhi. Apart from that, the ED had also shared information that
it has already registered ECIR on 15.06.2021 and during investigation, it
has been found that the various customers who made booking of the
properties in different projects were neither handed over the possession of
properties nor their amount was refunded. It was also alleged that diversion
of funds including the proceeds of crime outside India in the form of buying
the shares back, resumption and purchase of shares etc. have also been
found. In these circumstances, at this stage, it is not appropriate for this
Court to interfere particularly when the petition against the FIR registered in
Delhi is pending before the Delhi High Court.
3.16 The last submission of the learned senior counsels representing
the petitioner is insubstantial because the manner of investigation and the
questions which required to be posed in order to get information is the
exclusive domain of the Investigating Agency and the Courts are not
expected to interfere in general.
3.17 Though the petitioner in the writ petition, in its first prayer,
prays for reading down or reading into Section 66 of the 2002 Act, however,
during the course of arguments, the attention of the Bench has not been
drawn to the requirement of reading down the aforesaid provision. The
doctrine of reading down a statutory provision may be resorted only to avoid
holding the provision as unconstitutional or arbitrary. The aforementioned
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provision is not ambiguous, hence, the Court does not find it appropriate to
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Civil Writ Petition No. 29265 of 2023 (O&M) 26
avoid its literal interpretation. Usually, the words used by the Statute are
required to be interpreted in their plain grammatical meaning and unless
there is violation, the need to read down a provision does not arise.
Similarly, reading into the provision can be done in order to give meaningful
interpretation or to save the provision from being declared unconstitutional.
On a plain reading of Section 66 of the 2002 Act, it becomes evident that the
Statute enables the Director or any other officer authorized by him to share
information with any officer, authority or body performing any functions
under any law in public interest. Sub Section 2 of Section 66 of the 2002 Act
is also confined to sharing information if the Director or any other authority
is of the opinion that the provisions of any other law for the time being in
force are contravened; on the basis of information and the material in his
possession. In the opinion of the Court, the aforesaid provision has a
laudable object; as it enables exchange of information between the various
public authorities who are in the field of law enforcement, collection of tax,
duty or cess or prevention of illicit traffic in the narcotics and psychotropic
substances.
3.18 Similarly, the prayer made under Clause (b) of (II) has no
substance because by sending the questionnaire the Director or any other
authority has not compelled or coerced or browbeaten the allottees/investors
to file a complaint, but at the most, it has only asked question No.9 in the
questionnaire about the wish or plan to file any such complaint. The
questions posed to the allottees in the questionnaire are only to collect
information with an ultimate object to find the proceeds of crime relating to
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a scheduled offence.
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3.19 With respect to prayer (III), it would be noted that pursuant to
the information collected, EOW has already been shared the information
resulting in registration of FIR No. 14 dated 12.03.2024. Moreover, the
manner and method of collecting information during investigation and
inquiry is the exclusive domain of the Investigating Agency and it is not be
appropriate to interfere in the same. Moreover, the information and material
has already been collected and handed over to the concerned Law
Enforcement Agency.
3.20 While relying upon the judgments to persuade the Court to take
a particular view, it is incumbent upon the Court to distinguish between the
ratio decidendi and obiter dicta. A decision is only an authority for what it
actually decides. The essence in a decision is its ratio. Only law culled out
from a judgment is alone declaration for law.
3.21 The Supreme Court in Rajbir Singh Dalal v. Chaudhary Devi
Lal University, Sirsa and Others (2008) 9 SCC 284 held that a decision of
the Court cannot be treated as Euclid’s formula and read and understood
mechanically. A decision must be considered on the facts of the matter at
hand. The distinction between the ratio decidendi and obiter dicta is well
defined. The Supreme Court, in Vijay Madan Lal Chaudhary’s case
(supra), has examined the validity of certain provisions of the 2002 Act and
also interpreted them, while commenting on the procedure followed by the
ED while inquiring into or investigating the offence under the 2002 Act.
After detailed deliberation, the conclusions were summarized in para 467 of
the Vijay Madan Lal Chaudhary’s case (supra). The judgment is required to
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be read in that context. The learned counsel admits that the validity of
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Section 66 of the 2002 Act was neither challenged nor addressed or dealt
with by the Supreme Court. Similarly, this Bench refuses to go into alleged
certain incongruities and different dimensions laid down in the judgment.
3.22 Reliance placed by the learned counsels representing the
petitioner on the judgment of the Division Bench of the Delhi High Court in
Harish Fabiani’s case (supra) is wholly misplaced because in that case the
High Court of Bombay had already quashed the proceedings in predicate
offences. In that context, the case was decided. Similarly, in Parkash
Industries Limited’s case (supra), the Delhi High Court has considered the
following two questions:-
“a) Can ED provisionally attach the properties under Section
5 even though no proceedings relating to the predicate
offence may have been initiated by the competent
agencies functioning under the Statute and in terms of
which the scheduled offence stands created?
b) Whether the ED would be recognized to have jurisdiction
to enforce the measures? The measures contemplated
under Section 5 of the 2002 solely upon being of the
opinion that the material gathered in the course of
investigation inquiry evidences the commission of
predicate offence?”
The matter was decided with respect to the aforesaid questions.
3.23 In V.P.Nandkumar’s case (supra), Parvathi Kollur’s case
(supra), Indira Patnaik’s case (supra), M/s V.G.N Developers Pvt. Ltd.’s
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case (supra), M.Nagarajan’s case (supra), Selvi Pushpam Appala Naidu’s
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case (supra), Indiabulls Housing Finance Limited’s case (supra), M/s Nik
Nish Retail Limited’s case (supra), the proceedings under the 2002 Act were
quashed as the foundational scheduled offence ceased to exist by virtue of
the Court’s order. There was no further registration of fresh FIR.
3.24 Similarly, in Dependra Kumar Panda’s case (supra), Emta
Coal Limited’s case (supra), Muktanand Agro Farming Pvt. Ltd.’s case
(supra), Omkar Realtors & Developers Pvt. Ltd.’s case (supra), Pratap
Singh Tiwari’s case (supra), Sri Jayanand Narasannavar’s case (supra), S.
Revanna’s case (supra), Anjaneya Hanumanthaiah’s case (supra), Ram
Ludhra’s case (supra), Yash Tuteja’s case (supra), Rajiv Channa’s case
(supra), Nayati Healthcare and Research Private Limited’s case (supra),
Akhilesh Singh’s case (supra), Chetan Gupta’s case (supra) and
Shanmugam Ramachandran’s case (supra), the Courts have quashed the
ECIRs only for the reason that either the FIR stood quashed on merits or the
accused have been acquitted or discharged in the predicate offence.
3.25 The judgment passed in Rajinder Singh Chadha’s case (supra)
in fact supports the case of ED. In the said case, ECIR was registered on
the basis of two FIRs which were either allowed to be compounded or
quashed by the Courts. However, in the meantime, third FIR was registered
disclosing scheduled offence. The same was included in the ECIR. It was
held that in such circumstances, ECIR cannot be quashed and the
investigation can continue on the basis of the third FIR. However, it was
declared that ECIR will not relate to the first two FIRs.
3.26 The judgment passed by the Supreme Court in Arvind
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Kejriwal’s case (supra) is in the context of the ED’s power of arrest under
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Section 19 of the 2002 Act. The Supreme Court has, in para 84 of Arvind
Kejriwal’s case (supra), referred three legal questions for consideration by
the Larger Bench while granting interim bail to the petitioner. Hence, the
observations made in the aforesaid judgment are in terms of Section 19 of
the 2002 Act. Consequently, the same is not applicable to the facts of the
present case.
3.27 This aspect can be examined from another perspective. Further
investigation even after filing of the charge sheet is a statutory right of the
Investigating Officer. Even in para 360 of Vijay Madan Lal Chaudhary’s
case (supra), the legal position was clarified. Similarly, in the State of
Andhra Pradesh v. A.S.Peter (2008)2 SCC 383, the Supreme Court held
that the law does not mandate taking of prior permission from the Magistrate
for further investigation. Similar views were expressed in Rama Chaudhary
v. State of Bihar (2009) 6 SCC 346. While making distinction between
further investigation, fresh investigation and re-investigation, the Court held
that the police has a right to further investigate under Section 173(8) Cr.P.C.
3.28 Though, the ECIR is not an FIR, however, the ED is an
Investigating Agency that has been constituted to investigate the various
offences including the offence of money laundering. In these
circumstances, after the filing of ECIR in the year 2022, the ED continued
to investigate. In that process, it collected information and material by
various methods including written communication (Annexure P16). After the
collection of the information, the jurisdictional police was informed
resulting in the registration of FIR No. 14 dated 12.03.2024. Hence, there is
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no occasion to either quash or declare that the communication (Annexure
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Civil Writ Petition No. 29265 of 2023 (O&M) 31
P16) is beyond the ED’s jurisdiction, as it is not violative of law and the
Investigating Agency has acted within the precincts of law, ensuring that all
procedures and actions taken during the course of investigation adhered to
law.
4. Decision
4.1 For the foregoing discussion, this Bench does not find
substance in the present writ petition and hence, the same is dismissed.
4.2 The miscellaneous application(s) pending, if any, shall stand
disposed of.
(Anil Kshetarpal) (Sheel Nagu)
Judge Chief Justice
September 04, 2024
"DK"
Whether speaking/reasoned :Yes/No
Whether reportable : Yes/No
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