Madras High Court
Anil Jain vs Directorate Of Enforcement Rep. ... on 14 September, 2023
2023:MHC:4314
W.P.No.3167 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 14.09.2023
Coram
THE HONOURABLE MR.JUSTICE M.SUNDAR
and
THE HONOURABLE MR.JUSTICE R.SAKTHIVEL
W.P.No.3167 of 2023
Anil Jain .. Petitioner
vs
Directorate of Enforcement rep. By its
Assistant Director,
Chennai I Zonal Office,
2nd 3rd Floors, C-Block,
Murugesa Naicker Office Complex,
No.84, Greams Road, Thousand Lights,
Chennai – 6. .. Respondent
Petition filed under Article 226 of the Constitution of India
praying for issuance of a writ of mandamus directing the respondent
to close/drop all proceedings against the petitioner in connection
with the ECIR in F.No.ECIR/CEZO-1/19/2021.
For Petitioner : Mr.C.Manishankar,
Sr. Counsel
for Mr.R.Palaniandavan
For Respondent : Mr.N.Ramesh,
Special Public Prosecutor (ED)
assisted by Mr.Logesh
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W.P.No.3167 of 2023
ORDER
[Order of the Court was made by M.SUNDAR, J.]
This order will now dispose of the captioned 'Writ Petition'
(hereinafter 'WP' for the sake of brevity, convenience and clarity).
2. This order has to be read in conjunction with and in
continuation of earlier proceedings made in the captioned WP when
it was listed on 26.06.2023. To be noted, the proceedings/orders
made by this Court on 26.06.2023 reads as follows:
'W.P.No.3167 of 2023
M.SUNDAR, J.,
and
R.SAKTHIVEL, J.,
[Order of the Court was made by M.SUNDAR. J.,]
Captioned writ petition has been filed with a
mandamus prayer seeking a direction to the
respondent to close / drop the proceedings against the
petitioner in connection with ECIR in F.No.ECIR/CEZO-
1/19/2021.
2. Mr.C.Manishankar, learned Senior counsel
appearing on behalf of counsel on record for writ
petitioner submits that pursuant to the aforementioned
ECIR [to be noted ECIR stands for 'Enforcement Case
Information Report'], a summon dated 27.06.2022
calling upon the petitioner to appear before the
respondent on 08.07.2022 at 10.00 a.m. along with
certain documents set out in the schedule to summons
was issued. Learned Senior counsel submits that ECIR
in summon is predicated on FIR No.278 of 2020 dated
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W.P.No.3167 of 2023
17.09.2020 on the file of CCB-I (Chennai-CCB) for
alleged offences under Sections 406, 419, 420, 465,
468 and 471 of 'Indian Penal Code, 1860 (Act 45 of
1860)' ['IPC' for the sake of brevity]. To be noted,
summon does not refer to this FIR but this is averment
of the petitioner that ECIR in summon is predicated on
aforementioned FIR. Learned Senior counsel submits
that the aforementioned FIR has since ended in a
closure on 01.07.2021 vide proceedings before
jurisdictional Metropolitan Magistrate Court i.e., 'Court
of the Special Court of CCB & CBCID Metropolitan
Magistrate, Egmore, Chennai-8' [hereinafter 'predicate
offence Court' for the sake of brevity]. Adverting to
principle laid down by Hon'ble Supreme Court in Vijay
Madanlal Choudhary case [Vijay Madanlal
Choudhary and others Vs. Union of Indian and
Others reported in 2022 SCC OnLine SC 929],
more particularly, paragraph No.467(v)(d) thereat,
learned Senior counsel submits that authorities under
'the Prevention of Money-Laundering Act, 2002'
[hereinafter 'PMLA' for the sake of convenience and
clarity] cannot prosecute any person when closure has
been given to predicate offence. To be noted,
paragraph No.467(v)(d) of Vijay Madanlal
Choudhary case reads as follows:
'467 In light of the above analysis, we now
proceed to summarise our conclusion on seminal
points in issue in the following terms:—
(i) ....................................
(ii) ...................................
(iii) .................................
(iv) .................................
(v) (a) ....................................
(b) .........................................
(c) ........................................
(d) The offence under Section 3 of the 2002
Act is dependent on illegal gain of property as a
result of criminal activity relating to a scheduled
offence. It is concerning the process or activity
connected with such property, which constitutes the
offence of money-laundering. The Authorities under
the 2002 Act cannot prosecute any person on
notional basis or on the assumption that a
scheduled offence has been committed, unless it is
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W.P.No.3167 of 2023
so registered with the jurisdictional police and/or
pending enquiry/trial including by way of criminal
complaint before the competent forum. If the
person is finally discharged/acquitted of the
scheduled offence or the criminal case against him
is quashed by the Court of competent jurisdiction,
there can be no offence of money-laundering
against him or any one claiming such property
being the property linked to stated scheduled
offence through him.'
3. In the light of the narrative thus far, prima
facie case made out.
4. Admit. Issue Rule nisi.
5. Mr.N.Ramesh, learned Special Public
Prosecutor accepts notice for lone respondent and
requests for time to get instructions and revert to this
Court.
6. List four weeks hence. List on 24.07.2023.'
3. The aforementioned 26.06.2023 proceedings/orders
shall now be read as an integral part and parcel of this order. The
aforementioned 26.06.2023 proceedings captures essentials that
are imperative for appreciating this final order and therefore we are
not setting out the same again and burdening this final order with
further facts. To be noted, the short forms, abbreviations and short
references used in the 26.06.2023 proceedings shall continue to be
used in the instant final order also for the sake of convenience and
clarity. To be noted, in the aforementioned 26.06.2023 proceedings
an inadvertent typographical / secretarial error has crept in, the
same is 'ECIR in summon is predicated'. This expression should read
as 'ECIR and summon are predicated'. This shall now be read as an
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W.P.No.3167 of 2023
Errata / Corrigendum and aforementioned 26.06.2023 which is now
an integral part and parcel of this final order shall be read
accordingly.
4. Today, Mr.Mani Shankar, learned senior counsel
instructed by Mr.R.Palaniandavan, learned counsel on record for the
writ petitioner and Mr.N.Ramesh, learned Special Public Prosecutor
(ED) for the lone respondent are before us.
5. Adverting to the aforementioned earlier proceedings,
learned senior counsel for petitioner reiterated the same and
pressed into two case laws and they are as follows:
Sl. Date Name and number of the Court
No. Case
1 01.11.2022 S.Jagathrakshakan Vs. another Hon'ble Co-
Deputy Director, ordinate Division
Directorate of Bench of this Court
Enforcement, Chennai (P.N.Prakash, J. and
(W.P.No.10854 of 2020) RMT.Teekaaraman, J.)
2 26.09.2022 Harish Fabiani and Others a Hon'ble Division
Vs. Enforcement bench of Hon'ble Delhi
Directorate and Others High Court (Mukta
reported in 2022 SCC Gupta, J. and Anish
OnLine Del 3121 Dayal, J.)
6. Learned senior counsel submitted that the aforesaid two
case laws follow the Vijay Madanlal Choudhary principle [Vijay
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W.P.No.3167 of 2023
Madanlal Choudhary and others Vs. Union of Indian and Others
reported in 2022 SCC OnLine SC 929] that if a person is finally
discharged/acquitted qua scheduled offence there can be no offence
of money laundering against him or claiming such property being
the property linked to the scheduled offence through him.
7. Learned senior counsel also drew our attention to the
counter affidavit of the respondent, more particularly paragraph XI
thereat which reads as follows:
'XI. During the investigation a letter dated
14.07.2021 was sent to the Police seeking
statement recorded by CCB and evidences
collected
therei
n
. It was informed in reply vide letter dated
23.11.2021 that case has been closed. Vide the
said letter, the order dated 02.07.2021 passed
by the Hon'ble Metropolitan Magistrate,
Egmore, Chennai was enclosed.' (underlining
made by this Court for ease of reference and
for emphasis)
8. It was submitted by learned senior counsel that in the
light of the certain stated position of the respondent, prayer in the
captioned WP has to be answered in the affirmative.
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W.P.No.3167 of 2023
9. In response to the aforementioned argument,
Mr.N.Ramesh, learned Special Public Prosecutor for respondent
adverting to the counter affidavit submitted that money laundering
is independent qua scheduled offence in the light of Section 44 of
PMLA. However, as regards paragraph XI of counter affidavit, the
same is the obtaining fact scenario and stated position of
respondent as regards closure of predicate offence.
10. In the light of the narrative thus far, it is clear that in
the case on hand, there is closure of predicate offence and there is
no disputation or contestation that this closure of predicate offence
has attained finality and has been given legal quietus.
11. Reverting to two case laws relied on by the learned
senior counsel, facts and questions are similar i.e., whether PMLA
proceedings will survive on the teeth of closure of predicate offence
when such closure has attained finality/given legal quietus. In
Jagathrakshakan's case, relevant paragraphs are paragraphs 3 and
4 and the same read as follows:
'3. While so, when the matter was taken
up for hearing, both sides represented that this
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W.P.No.3167 of 2023
court has allowed Crl.O.P.Nos.12985 and 12986
of 2020 on 23.09.2022 quashing the two First
Information Reports in CBCID Crime Nos.2 and
3 of 2016.
4. In the light of the law laid down by the
Supreme Court in Vijay Madanlal Choudhary
and Others Vs. Union of India and Others (2022
SCC OnLine SC 929), the learned counsel for
the petitioner prayed for quashment of the
proceedings before the Enforcement
Directorate.'
12. In Harish Fabiani's case, relevant paragraphs (as in 2022
SCC Online Del 3121) are paragraphs 4, 21 and 26 which read as
follows:
'4. The crux of this conclusion in Vijay
Madanlal Choudhary (supra) by the Hon'ble
Supreme Court, in context of these petitioners,
is that if the person accused of any scheduled
offence is finally discharged/acquitted or the
criminal case against him is quashed by a court
of competent jurisdiction, there can be no case
of money laundering against him or anyone
claiming such property (which is linked to the
stated scheduled offence) through him.'
'21. In this regard reference may also be
placed on para 253 of Vijay Madanlal
Choudhary (supra) which reads as under:
“253. Tersely put, it is only such property
which is derived or obtained, directly or
indirectly, as a result of criminal activity relating
to a scheduled offence can be regarded as
proceeds of crime. 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 offence
has been committed, unless the same is
registered with the jurisdictional police or
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W.P.No.3167 of 2023
pending inquiry by way of complaint before the
competent forum. For, the expression “derived
or obtained” is indicative of criminal activity
relating to a scheduled offence already
accomplished. Similarly, in the event 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 because of quashing of
the criminal case (scheduled offence) against
him/her, there can be no action for money-
laundering against such a person or person
claiming through him in relation to the property
linked to the stated scheduled offence. This
interpretation alone can be countenanced on
the basis of the provisions of the 2002 Act, in
particular Section 2(1)(u) read with Section 3.
Taking any other view would be rewriting of
these provisions and disregarding the express
language of definition clause “proceeds of
crime”, as it obtains as of now.” (emphasis
supplied)'
'Conclusion
26. In light of the above analysis and
discussion this Court concludes as under:
a) The relief sought regarding
constitutionality or vires of various provisions of
the Prevention of Money Laundering Act, 2002
is infructuous having been decided by the
Hon'ble Supreme Court in Vijay Madanlal
Choudhary v. Union of India, 2022 SCC OnLine
SC 929.
b) The ECIR no. ECIR/07/HIU/2021
registered by the Directorate of Enforcement,
Department of Revenue, Ministry of Finance,
Government of India, under FIR No. 129/2021
dated 13 April, 2021 registered by P.S. Wada,
Dist. Palghar, Maharashtra stands quashed.
c) All proceedings arising from the ECIR
No. ECIR/07/HIU/2021 are set aside and there
would be no further coercive action or search
and seizure or summons arising from the said
ECIR.
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W.P.No.3167 of 2023
d) The Look out Circulars issued by
respondents pursuant to the ECIR
No.ECIR/07/HIU/2021 are also set aside.'
13. This Bench also notices that Parvathi Kollur's case
(Parvathi Kollur and Another Vs. State by Directorate of
Enforcement) reported in 2022 SCC OnLine SC 1975 in a similar
fact situation has restated paragraph 187 (d) of Vijay Madanlal
Choudhary which reads as follows:
'187. .... (d) The offence under Section 3 of the
2002 Act is dependent on illegal gain of
property as a result of criminal activity relating
to a scheduled offence. It is concerning the
process or activity connected with such
property, which constitutes the offence of
money-laundering. The Authorities under the
2002 Act cannot prosecute any person on
notional basis or on the assumption that a
scheduled offence has been committed, unless
it is so registered with the jurisdictional police
and/or pending enquiry/trial including by way of
criminal complaint before the competent forum.
If the person is finally discharged/acquitted of
the scheduled offence or the criminal case
against him is quashed by the Court of
competent jurisdiction, there can be no offence
of money-laundering against him or any one
claiming such property being the property
linked to stated scheduled offence through him.'
14. The discussion thus far leaves us with the 'stand alone
offence' point. As regards stand alone offence point qua PMLA, the
same was considered by Hon'ble Delhi High Court in Emta Coal
case (The Deputy Director, Directorate of Enforcement Vs.
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W.P.No.3167 of 2023
Emta Coal Limited & Ors., etc.,) where also the facts are similar
i.e., where the closure report was accepted by the Trial Court and
the question was whether PMLA offence can proceed. In Emta Coal
case, as regards 'stand alone offence point', the most relevant
discussion is contained in paragraph 16 and the same reads as
follows:
'16. On the other hand, Mr.Sharma, ld.
Counsel appearing for the Enforcement
Directorate relies upon paragraphs 281, 290
and 295 of the Vijay Madanlal Choudhary
(supra) judgment to argue that irrespective of
whether the predicate offence exists or not,
unless and until the Trial Court comes to a
conclusion that the assets are not proceeds of
crime, the attachment orders can continue and
the ED can in fact file an independent complaint
in such a case. On a query from the Court as to
whether there is even a single case where a
separate complaint has been registered under
the PMLA by the ED without a predicate offence
having existed, the ld. Counsel submits that this
could be the first case.'
15. We find from our research that Emta Coal case has
been carried to Hon'ble Supreme Court vide Special Leave Petition
(Civil) Diary No.15235/2023 and the same has been disposed of by
Hon'ble Bench of Hon'ble Supreme Court in and by an order dated
06.07.2023 which reads as follows:
'Delay condoned.
Learned Additional Solicitor General
submitted that since there is a closure report in
the predicate offence, therefore, no further
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W.P.No.3167 of 2023
proceedings under the PMLA Act could be
continued as per the observations of the High
Court in the impugned order(s).
He, however, submitted that in the event
any further action is taken in respect of the
predicate offence, then liberty may be reserved
to the petitioner herein to take further steps
under the said Act, including reviving these
proceedings. The submission of learned ASG is
placed on record.
The Special Leave Petitions are disposed
of in light of the aforesaid submission and
liberty is accordingly reserved to the petitioner.
Pending applications shall stand disposed
of.'
16. Applying Padma Sundara Rao principle, the ratio in
Jagathrakshakan's case, Harish Fabiani's case and Emta Coal's case,
all of which in turn turn on Vijay Madanlal's case of Hon'ble
Supreme Court would apply in all force to the case on hand. To be
noted, Padma Sundara Rao case [Padma Sundara Rao Vs.
State of Tamil Nadu reported in (2002) 3 SCC 533] is a
celebrated case law rendered by a Constitution Bench and therefore
it is declaration of law and the most relevant paragraph is
paragraph 9, which reads as follows:
'9. Courts should not place reliance on
decisions without discussing as to how the
factual situation fits in with the fact situation of
the decision on which reliance is placed. There
is always peril in treating the words of a speech
or judgment as though they are words in a
legislative enactment, and it is to be
remembered that judicial utterances are made
in the setting of the facts of a particular case,
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W.P.No.3167 of 2023
said Lord Morris in Herrington v. British
Railways Board [(1972) 2 WLR 537 : 1972 AC
877 (HL) [Sub nom British Railways
Board v. Herrington, (1972) 1 All ER 749
(HL)]]. Circumstantial flexibility, one additional
or different fact may make a world of difference
between conclusions in two cases.'
17. To be noted, we had already set out that facts in the
aforementioned four case laws, PMLA facts are similar to the case
on hand i.e., closure of predicate offence in the Trial Court and the
question as to whether PMLA offence can proceed.
18. As regards Emta Coal's case, we remind ourselves of the
Kunhayammed principle (Kunhayammed & Ors vs State Of
Kerala & Anr reported in (2000) 6 SCC 359) to say that Hon'ble
Supreme Court has declined to interfere with the Delhi High Court
order which vide paragraph 16 specifically deals with the stand
alone offence argument but the Hon'ble Supreme Court has put in a
caveat and the caveat is recording of statement of learned
Additional Solicitor General that in the event of any further action in
respect of the predicate offence liberty has to be preserved for the
Enforcement Directorate for reviving the proceedings. To be noted,
this is captured in the third paragraph of the 06.07.2023 order of
Hon'ble Supreme Court. We respectfully say that this caveat will
apply to the case on hand also and therefore when we accede to the
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W.P.No.3167 of 2023
prayer in the captioned WP it will clearly be with a similar caveat.
19. Captioned WP disposed of in the aforesaid manner i.e.,
answering the prayer of the writ petitioner in the affirmative albeit
with the caveat i.e., caveat that in the event of any further action in
respect of predicate offence then the rights/liberties of Enforcement
Directorate are preserved to take further steps under PMLA
including reviving of the instant proceedings which has been put in
by respectfully following the order of Hon'ble Supreme Court in
Emta Coal's case. There shall be no order as to costs.
(M.S.,J.) (R.S.V.,J.)
14.09.2023
Index : Yes/No
Neutral Citation : Yes/No
mmi
To
1.The Assistant Director,
Directorate of Enforcement,
Chennai I Zonal Office,
2nd 3rd Floors, C-Block,
Murugesa Naicker Office Complex,
No.84, Greams Road, Thousand Lights,
Chennai – 6.
2.The Public Prosecutor,
High Court, Madras.
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W.P.No.3167 of 2023
M.SUNDAR, J.,
and
R.SAKTHIVEL , J.,
mmi
W.P.No.3167 of 2023
14.09.2023
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