Sukesh Gupta vs Government Of India
2022 Latest Caselaw 853 Tel

          THE HON'BLE Dr. JUSTICE SHAMEEM AKTHER

              CRIMINAL PETITION No.5196 of 2019


ORDER:

This Criminal Petition, under Section 482 of the Code of

Criminal Procedure, 1973, is filed by the petitioner, seeking to

quash the complaint and investigation in ECIR/05/HYZO/2014,

dated 25.02.2014 on the file of Joint Director, Enforcement

Directorate, Hyderabad Zonal Office, Hyderabad.

2. Heard the submissions of Sri M.P.Chandramouli, learned

senior counsel and Sri Dil Jit Singh Ahluwalia, learned counsel,

appearing on behalf of Sri H.Rajesh Kumar, learned counsel for the

petitioner, Sri T.Surya Karan Reddy, learned Additional Solicitor

General of India appearing on behalf of respondent No.1, Sri

Manu, learned counsel for respondent No.2 and perused the

record.

3. Learned senior counsel appearing on behalf of the petitioner

would inter alia submit that the petitioner is the Director of M/s.

MBS Group of companies. The subject ECIR registered against the

petitioner and others is liable to be quashed, as the ingredients of

Section 3 of Prevention of Money Laundering Act, 2002 (for short, Dr.SA, J

'PMLA') are not made out. Sine qua non for Section 3 of PMLA is,

firstly, it has to be connected to 'proceeds of crime', as defined

under Section 2(u) of PMLA and secondly, it has to be projected as

'untainted property'. Further, to constitute offence under PMLA,

three ingredients should be satisfied - (i) Placement, which

surreptitiously injects the 'dirty money' into the legitimate financial

system; (ii) Layering, which conceals the source of the money

through a series of transactions and bookkeeping tricks; and (iii)

Integration, where the laundered money is withdrawn from the

legitimate account to be used for whatever purposes the criminals

intend. There is distinction between commission of offence under

PMLA and commission of scheduled offence. In the instant case,

the CBI, ACB, Hyderabad, registered a case in FIR

No.RC.01(A)/2013, dated 03.01.2013, against the petitioner and

others for the offences under Sections 120B r/w 409, 420, 465,

471, 477A of IPC and Section 13(2) read with Section 13(1)(d) of

The Prevention of Corruption Act, 1988 (for short, 'PC Act'), for

allegedly causing wrongful loss to respondent No.2/MMTC Limited,

a public sector enterprise, to a tune of Rs.194 crores. Though the

CBI registered FIR against ten accused persons, the subject ECIR

was registered against nine accused persons only. A perusal of the

subject ECIR would show that there is no whisper about any Dr.SA, J

property connected/acquired with 'proceeds of crime'. On

25.11.2005, MMTC sent the first MOU for signatures of MBS Impex

Pvt. Ltd with the terms already agreed to be put into writing for its

record. For the years 2005-11, gold was purchased by MMTC from

foreign buyers in USD, with a credit period of 90/180 days. As per

the bullion drill, MMTC was mandated to hedge its exposure,

subsequently debiting the expenses from the account of the

purchaser. It was also mandated to monitor all open rupee

transactions on a daily basis and in case the margin is reduced

from 5% to 2%, then to either take more margin or to close the

transaction. From the Financial Year 2005-11 to 2010-11, MBS

purchased gold amounting to over Rs.20,000 Crores from MMTC

without any dispute, whatsoever. During July, 2011, Foreign

Exchange fluctuation occurred and the rupee value suddenly

crashed up to 27%, due to which the alleged liability arose. On

05.10.2012, the second MoU was signed between MBS & MMTC,

whereby, the MMTC, after due diligence, fixed the total liability of

MBS as Rs.181.39 crores as on 31.03.2012 and estopped itself

from altering the said liability further. Thereafter, MMTC engaged

M/s.KPMG to conduct forensic audit to ascertain liability of MBS.

On 31.12.2012, the MMTC lodged a complaint with the CBI, which

was registered as RC No.1(A)/CBI/Hyd, for the offences under Dr.SA, J

Sections 120B r/w 409, 420, 465, 471 & 477A of IPC and Section

13 of PC Act. Further, there was no rendition of accounts by

MMTC. In fact, MMTC itself owes nearly Rs.270 crores to MBS, as

per Project Flash Report submitted by M/s.KPMG. Default on the

part of MBS in making payments to MMTC due to losses on account

of rupee difference, does not, ipso facto, make its funds as

'proceeds of crime' under Section 3 of PMLA. Further, the amount

derived by the petitioner by selling gold cannot be termed as

'proceeds of crime'. Further, the Enforcement Directorate has

issued provisional attachment order, wherein, 45 items of

immovable property are mentioned in the schedule, which are

alleged to be 'proceeds of crime'. In fact, all the said properties

were acquired by MBS prior to 25.04.2011, which is the starting

point of the crime, according to the Enforcement Directorate.

Further, it is brought to the notice of this Court that since the

interim stay granted by this Court was not extended for some

time, during the interregnum period, the Provisional Order of

Attachment was passed. On extension of interim stay granted by

this Court, the said Provisional Order of Attachment was kept in

abeyance. Further, the role of the petitioner is in the capacity of

representative of the MBS, but not in his individual capacity. MBS

filed Arbitration Application No.5 of 2013 seeking appointment of Dr.SA, J

Arbitrator for redressal of disputes with MMTC qua rendition of

accounts, which is presently sub judice before the Hon'ble

Supreme Court of India. Further, the subject ECIR was registered

on 25.02.2014 and the CBI filed charge sheet on 27.11.2014, i.e.,

after lapse of 9 months. Since none of the alleged scheduled

offences are prima facie made out against the petitioner,

registration of the subject ECIR, which is based on the scheduled

offences, is unsustainable. Further, except the offences under

Sections 120B, 420 and 471 IPC, none of the remaining offences

alleged against the petitioner are scheduled offences. Further, this

Court, vide order, dated 17.09.2019, was pleased to direct that no

coercive steps shall be taken against the petitioner in the subject

ECIR, including lookout circular. Further, this Court, by order,

dated 30.09.2019, was pleased to grant stay of all further

proceedings in the subject ECIR. The petitioner is innocent and did

not commit any offence, much less offence under PMLA.

Continuation of proceedings in the subject ECIR against the

petitioner is nothing but abuse of process of law. Registration of

the subject ECIR and investigating into the same is liable to

quashed to secure the interests of justice and ultimately prayed to

allow the Criminal Petition as prayed for. In support of his Dr.SA, J

contentions, the learned senior counsel had relied on the following

decisions.

1. Binod Kumar and others Vs. State of Bihar and another1

2. Rishipal Singh Vs. State of Uttar Pradesh and another2

3. State of Haryana and others Vs. Bhajan Lal and others3

4. Naresh Prasad Agarwal and another Vs Inspector of Police, ACB, CBI, Chennai4

4. On the other hand, the learned Additional Solicitor General of

India appearing on behalf of respondent No.1, while taking this

Court through several factual aspects involved in the matter,

vehemently contended that though the commission of scheduled

offence is a fundamental pre-requisite for initiating proceedings

under the PMLA, the offence of money laundering is independent

of the scheduled offences. The scheme of the PMLA indicates that

it deals only with laundering of money acquired by committing the

scheduled offence. In other words, PMLA deals only with the

process or activity of proceeds of crime, including its concealment,

possession, acquisition or use and it has nothing to do with the

launch of prosecution for scheduled offence and continuation

thereof. Scheduled offence is only a trigger point to initiate

investigation under PMLA and once ECIR is recorded, case

registered under PMLA is independent, distinct and stand alone.

2014 (10) Supreme Court Cases 663

2014 (7) Supreme Court Cases 215

1992 Supp (1) Supreme Court Cases 335 Dr.SA, J

Even if the predicate/scheduled offences are compromised,

compounded, quashed or even in case the accused is acquitted, it

does not affect proceedings under PMLA. In a recent judgment in

Dalmia Cement (Bharat) Ltd, New Delhi and another Vs.

Assistant Director, Enforcement Directorate, Hyderabad5,

the erstwhile High Court for the State of Telangana and Andhra

Pradesh, observed that "when ECIR is lodged with the Directorate

of Enforcement, there is no Magisterial Intervention unlike a FIR

and mere registration of ECIR against the suspects of offence

under Section 3 of PMLA cannot go to mean that such persons are

accused under Section 3 of PMLA. Consequently, the protection

against testimonial compulsion as under Cr.P.C as well as under

Article 20(3) of the Constitution of India, would not be available".

In the instant case, unless the attachment of property is initiated

under Section 5 of the PMLA, or arrest is made under Section 19 of

PMLA, or complaint is made under Section 44(b) of PMLA before

the designated Special Court, no cause of action arises for the

petitioner to approach this Court. Directorate of Enforcement is

not a recovery agent, but it is duty bound to investigate the fraud

committed by the petitioner in active connivance with MMTC

officials. Section 2(1)(y), 2(1)(u) & 2(1)(na) of the PMLA,

2017 SCC Online Mad 21346 Dr.SA, J

mandates that once a predicate/scheduled offence is registered by

the predicate agency, the 'proceeds of crime' is required to be

investigated under PMLA. As per Sec.2(1)(y)(ii), 'scheduled

offence' means the offences specified in Part-B of the schedule, if

the total value involved in such offence is Rs.30 lakhs or more.

Further, as per Technical Circular No.03/2020, dated 13.02.2020,

the money laundering investigation is to be done in cases where

the amount involved exceeds Rs.25 Crores. Later, by amendment

of Finance Act, 2015, the amount of Rs.30 lakhs was substituted

with Rs.1 crore. In the instant case, as on today, the petitioner is

not charged with any offence under Section 3 of the PMLA. On the

basis of material available in predicate offence, the investigation

under PMLA is being undertaken, pursuant to which, the petitioner

was summoned under Section 50 of PMLA for examination. The

petitioner, instead of cooperating with the investigation, filed this

quash petition, which is nothing but a premature attempt to

escape from his criminal liability. Till date, twelve summons were

issued to the petitioner, but however, he attended before the

authorities only once. Since the petitioner obtained stay in this

criminal petition, the investigation is being stalled. ECIR is only

step-in-aid to take up investigation and it cannot be compared or

2016 (4) ALD 47 Dr.SA, J

equated with FIR. The present stage of the case is only at the

summoning of the accused for the purpose of examination. After

fulfilling the requirements under Section 3 of the PMLA, prima facie

the Enforcement Directorate registered the subject ECIR and is

proceeding with the investigation. ECIR is an administrative

document, which is like a GD entry in police station. Further, as

per Section 44(1)(b) of the PML Act, a Special Court may, upon a

complaint made by an authority authorised in this behalf under

this Act, take cognizance of the offence for which, the accused is

committed to it for trial. Section 3 of PMLA comes into play when

complaint is filed before the designated Special Court. The

petitioner is required to appear before the ED authorities in

relation to the subject ECIR to prove his innocence. If the

petitioner could substantiate that he is innocent, he will not be

charged with any offence under PMLA. A statutory duty is cast

upon the petitioner to appear before the ED authorities, pursuant

to the subject ECIR. Further, the so called One Time Settlement

said to have been entered between the petitioner and MMTC would

not absolve the criminal liability of the petitioner. No grounds,

much less valid grounds, are made out by the petitioner to quash

the subject ECIR and ultimately prayed to dismiss the criminal Dr.SA, J

petition. In support of his contentions, learned Additional Solicitor

General of India had relied on the following decisions.

1. Smt. Soodamani Dorai Vs. The Joint Director of Enforcement, Chennai and others6

2. Mr.J.Sekar @ Sekar Reddy and another Vs. Directorate of Enforcement, Chennai7

3. Babulal Verma and another Vs. Enforcement Directorate, Mumbai and another8

4. Mr.Radha Mohan Lakhotia Vs. Deputy Director, Directorate of Enforcement, Mumbai9

5. Usha Agarwala Vs. Union of India10

6. Dalmia Cement (Bharat) Ltd, New Delhi and another Vs. Assistant Director, Enforcement Directorate, Hyderabad11

5. Learned counsel for respondent No.2/MMTC, made similar

submissions as made by the learned Additional Solicitor General of

India appearing for respondent No.1.

6. In view of the above submissions of both sides, the points

that arise for determination in this Criminal Petition are as follows:

1. Whether the registration of subject ECIR/05/HYZO/2014, dated 25.02.2014, by the Enforcement Directorate, Hyderabad Zonal Office, Hyderabad, is legally sustainable?

2. Whether the subject ECIR/05/HYZO/2014, dated 25.02.2014 on the file of Joint Director,

Decided vide order dated 04.10.2018 in WP Nos.8383 and 8384 of 2013 by High Court of Madras

Decided vide order dated 04.02.2021 in Crl.O.P.No.24200 & 24202 of 2017 by High Court of Madras

Decided vide order dated 16.03.2021 in Crl.Bail Application No.974 of 2021 by Bombay High Court

Decided vide order dated 05.08.2010 in First Appeal Nos.527 & 529 of 2010 by Bombay High Court

Decided vide order dated 29.08.2017 in WP(C) No.23 of 2015 by Sikkim High Court Dr.SA, J

Enforcement Directorate, Hyderabad Zonal Office, Hyderabad, is liable to be quashed by exercising the inherent power of this Court under Section 482 of the Code of Criminal Procedure, 1973?

POINTS:-

7. I have given anxious consideration to the submissions made

by both the sides and carefully gone through the material placed

on record. Before proceeding further, it is apt to state that this

Court, while exercising jurisdiction under Section 482 of Cr.P.C.,

has to only look at the uncontroverted allegation in the complaint

whether prima facie discloses an offence or not, but it should not

convert itself to that of a trial Court and dwell into the disputed

questions of fact. When a prosecution is asked to be quashed at

an initial state, the tests to be applied by the Court is as to

whether the uncontroverted allegations as made in the complaint

prima facie establish the case. Though the powers of this Court

under Section 482 Cr.P.C., are very wide, those powers are

required to be exercised sparingly and with abundant caution. The

Courts have to see whether the continuation of criminal

proceedings would amount to abuse of process of law or would

2016 (4) ALD 47 Dr.SA, J

result in miscarriage of justice or that quashing of criminal

proceedings would secure ends of justice.

8. The material placed on record and the submissions made

reveal that on 31.12.2012, Mr.T.S.Rao, General Manager of MMTC,

lodged a complaint with the Deputy Inspector General of Police,

Central Bureau of Investigation, Anti Corruption Zone, Sultan

Bazar, Hyderabad, alleging certain irregularities with regard to the

gold transactions committed by the officials of MMTC in active

connivance with the petitioner and other Directors of MBS, causing

wrongful loss to MMTC to a tune of Rs.194 crores. Basing on the

said complaint, the CBI, ACB, Hyderabad, registered a case in RC

No.1(A)/CBI/Hyd, dated 03.01.2013, for the offences under

Sections 120B r/w 409, 420, 465, 471 & 477A of IPC and Section

13(2) r/w 13(1)&(d) of PC Act against the petitioner and the other

persons, investigated the case and filed charge before the Principal

Special Judge for CBI Cases, Hyderabad, against the petitioner and

the other persons. The role of the petitioner, as alleged in the

charge-sheet filed by CBI, is as follows:

"The MBS Group of Companies consisting of MBS Jewellers Pvt. Ltd. and MBS Impex Pvt. Ltd. represented by Sri Sukesh Gupta, Managing Director has received gold from MMTC on Buyers Credit loan basis by keeping the forex position open without paying the additional 5% margin money because of which MMTC suffered exposure to the tune of Rs.220 crores. He has also given a letter to MMTC Dr.SA, J

asking them to keep the forex open and received the gold knowingly though the outstanding dues were there, in connivance with the public servants. He also gave cheques for Rs.10 crores for resumption of business knowingly that there was no balance in his bank account for receiving the gold. His company dues were paid by public servants using the MMTC funds/FDs without the approval of the Corporate Office of MMTC, New Delhi."

9. Further, the material placed on record reveals that MMTC

has sent a letter along with the Memorandum of Understanding,

dated 25.11.2005, to MBS Impex Pvt. Ltd., requesting the

petitioner to sign the original MoU and return the same to MMTC.

While it is the case of the petitioner that the said MOU dated

25.11.2005 was validly executed at the instance of MMTC, it is the

case of MMTC that the said MOU has not emanated from their

office, much less signed by an authorized official of MMTC.

However, a perusal of the copy of the MOU dated 25.11.2005 filed

as material papers reveal that it contains only the signature of the

petitioner and there is no signature of any official of the MMTC on

the same. Whether the said MOU, dated 25.11.2005, was validly

executed or not is a disputed question of fact, which cannot be

gone into in this criminal petition. However, there is an arbitration

clause in the said MOU, which reads as follows:

12.Arbitration: In case of dispute arising out of the construction or meaning of any of the clauses of this Memorandum of Understanding, the matter shall be referred to a sole arbitrator to be appointed by General Dr.SA, J

Manager, Hyderabad. The decision of the arbitrator so appointed shall be final and binding on both the parties and the venue of the arbitration is at Hyderabad."

10. Pursuant to the disputes that arose between the petitioner

and the MMTC, the petitioner filed Arbitration Application No.5 of

2013 before this Court invoking the aforementioned arbitration

clause in the MOU, dated 25.11.2005, seeking appointment of sole

arbitrator for adjudicating the disputes between the petitioner and

the MMTC. MMTC filed counter and contested the said Arbitration

Application. This Court, vide order, dated 29.04.2020, dismissed

the said Arbitration Application No.5 of 2013. Aggrieved by the

same, the petitioner preferred SLP before the Hon'ble Supreme

Court of India and the same is at the stage of admission and no

interim orders have been passed in the said SLP. While so,

another MOU, dated 05.10.2012, has been entered in between the

petitioner and MMTC, which is not in dispute. Relevant clauses of

the said MOU reads as under:

1. That the first party (MMTC) acknowledges the fact that the acceptance of liability by the second party (MBS), without prejudice, is based on the facts and circumstances of the case.

2. That the first party acknowledges and confirms without prejudice that it has, with due diligence fixed the total final liability of the second party to be Rs.181.39 crores as on 31.3.2012, and the first party is hereby stopped from altering this liability any further. Interest thereon shall accrue from 1.04.2012 as per applicable rate of interest and the second party accepts the same.

Dr.SA, J

11. While the matter stood thus, MMTC initiated OTS (One Time

Settlement) scheme for resolving the disputes with its business

associates. The settlement in each case was a onetime

settlement, as a package. Vide letter, dated 30.09.2019, MMTC

informed the petitioner about processing of OTS only upon receipt

of unconditional payment of Rs.11.45 crores. Though the OTS

came to an end, upon the insistence of the petitioner, the MMTC

Regional Office, Hyderabad, took the approval from the Corporate

office for providing OTS facility to the petitioner, as the petitioner

promised to remit the initial amount by letter, dated 14.10.2019,

towards upfront payment of 5% of the outstanding amount,

i.e.,11.45 crores. However, the petitioner paid Rs.2 crores, i.e.,

Rs.1 crore on 08.11.2019 and another Rs.1 crore on 25.11.2019

and issued two postdated cheques for Rs.1.5 crore each towards

non-refundable deposit money, before proceeding further with the

OTS negotiations. When MMTC presented those two cheques for

payment, they got dishonoured stating the reason 'payment

stopped by the drawer'. Further, there is record to show that

summons were issued to the petitioner by the Enforcement

Directorate to appear before it and offer explanation with regard to

the subject ECIR taken on record against the petitioner. There is Dr.SA, J

also record to show that provisional order of attachment attaching

the properties of the petitioner was also issued by the Enforcement

Directorate. Further, since the interim relief granted in favour of

the petitioner in this criminal petition was extended after issuance

of provisional order of attachment, the said order was kept in

abeyance.

12. Various contentions have been raised by both the learned

counsel with regard to the factual matrix of the matter. The core

contentions raised on behalf of the petitioner are that since none

of the alleged scheduled offences are prima facie made out against

the petitioner, registration of the subject ECIR, which is based on

the scheduled offences, is unsustainable; continuation of

proceedings against the petitioner in the subject ECIR amounts to

abuse of process of law and that the registration of the subject

ECIR against the petitioner and investigating into the same is liable

to be quashed in the interest of justice. On the other hand, the

prime contentions raised on behalf of the respondents are that

commission of scheduled offence is only a trigger point to initiate

investigation under PMLA and once ECIR is recorded, case

registered under PMLA is independent, distinct and stand alone;

There is no magisterial intervention unlike a FIR and mere

registration of ECIR against the suspects of offence under Section Dr.SA, J

3 of PMLA cannot go to mean that such persons are accused under

Section 3 of PMLA; The petitioner is not an accused, but only a

suspect of commission of offence under Section 3 of PMLA and

therefore, all the contentions raised on behalf of the petitioner, as

if he is accused, are misconceived; The petitioner is required to

appear before the ED authorities in relation to the subject ECIR to

prove his innocence; If the petitioner could substantiate that he is

innocent, he will not be charged with any offence under PMLA; A

statutory duty is cast upon the petitioner to appear before the ED

authorities, pursuant to the subject ECIR.

13. Here, it is apt to state that trial of money laundering offence

is independent trial and it is governed by its own provisions and it

need not get interfered with the trial of scheduled offence. The

PMLA, being a special enactment, contemplates a distinct

procedure at the initial stage and thereafter provides for initiation

of prosecution, in order to achieve the special purpose envisaged

under the Act and as such, it cannot be construed that proceedings

under the PMLA are to be equated with prosecution initiated under

the criminal proceedings for predicate/scheduled offences. Thus,

initiation of action under the PMLA cannot have any implication or

impact in respect of registration of other cases, either under the

Indian Penal Code or any other penal laws. The offence of money Dr.SA, J

laundering contemplated under Section 3 of the PMLA is an

independent offence. A reference to criminal activity relating to

offence under PMLA has a wider connotation, and it may extend to

a person, who is connected with criminal activity relating to

scheduled offence, but may not be the offender of scheduled

offence. It is in this background that it has to be necessarily held

that offence under PMLA is a stand-alone offence. Keeping in view

the same, if we look at sub-section (b) of Section 44 of the PMLA,

it would clearly indicate that the Special Court may take

cognizance of the offence upon a complaint by authorized

signatory, which means that cognizance would be taken of an

offence, which is separate and independent. Even in case of a

person who is initially not booked for a scheduled offence but

booked later, and subsequently acquitted of the said scheduled

offence, still such person can be proceeded under PMLA. It is not

necessary that a person has to be prosecuted under the PMLA only

in the event of such person having committed scheduled offence.

Prosecution can be independently initiated under PMLA only for the

offence of money laundering.

14. Further, a careful perusal of Section 2(1)(u) of PMLA and the

explanation thereof makes it clear that a wider definition is given

to 'proceeds of crime' including property not only derived or Dr.SA, J

obtained from the scheduled offence, but also any property which

may directly or indirectly be derived or obtained as a result of

criminal activity relatable to a scheduled offence. Section 3 of

PMLA further clarifies that 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 assists or knowingly is

a party or is actually involved in concealment, possession,

acquisition, use, projecting as untainted property, claiming as

untainted property and the process or activity connected with the

proceeds of crime is a continuing activity, which itself shows the

offence of money laundering is a continuing offence. Thus, a bare

reading of Sections 2(1)(u), 3 and 44(1)(d) of PMLA along with

explanations thereof makes it clear that the offence of money

laundering is a stand-alone offence and the trial proceedings are

completely different to that of the scheduled offence.

15. Similar question came up for consideration before the

Hon'ble High Court of Madras in Smt.Soodamani Dorai's case (6

supra) relied by the respondents, wherein, it was held that

adjudication, prosecution and trial under PMLA is independent of

scheduled offence. It was held as follows:

"In respect of the question whether criminal proceedings initiated by the police is a bar for proceedings under the Prevention of Money Laundering Act, the provisions of PMLA, 2002 are independent and having self-contained code. Before Amendment Dr.SA, J

Act, 2012, the proceedings of PMLA, 2002 were fully depending upon the scheduled offence. However, after Amendment Act, 2012, with effect from 15.2.2013, the amendments were made in Sections 5(1), 8(3), 8(5), 8(6), 8(7) and 8(8) of the Act, which are very well evident that the proceedings are independent from scheduled offence proceedings. It would not be out of place to humbly submit herein that the provision of Section 5(1)(b) that "such person has been charged of having committed a scheduled offence and" was deleted by the Amendemnt Act, 2012, with effect from 15.2.2013. In the case of Samsuddin v. Union of India, it has been held that the offence of money laundering is independent of scheduled offences and it has been further held that the time of commission of the scheduled offence is not relevant to the context of the prosecution under the Act.

The offence of money laundering is not covered under any other provisions of law. Section 3 enacted by 2002 Act is a new offence and stands by itself. Section 44(1)(c) of the Prevention of Money Laundering Act, 2002, it is provided that if the Court which takes cognizance of the scheduled offences is other than the Special Court under the PMLA, the Authority should move an application for tr4ansfer of the scheduled offence to the Special Court and the Special Court, on receipt of such case, proceed to deal with it from the stage at which it is committed. Therefore, it is clear from the provisions of the Act that the offence of money laundering stands by itself. As evident from Section 8(6) of the Act, the Court will release the property only if it is found on the conclusion of trial under PMLA that the offence of money laundering has not taken place or if the property is not involved in money laundering. Therefore, adjudication, prosecution, trial under PMLA is independent of scheduled offence. This is also clear in view of Section 24 of the PMLA, 2002, which deals with burden of proof as it clearly stated that the burden of proof relating to proceeds of crime involved in money laundering is on the accused whereas the burden of proof in the scheduled offences is on the prosecution. Therefore, though the ECIR may have been registered following a scheduled offence, the property in possession of the person, against whom allegations are made, is found to be involved in money laundering, then he can be punished independently of the scheduled offence. Therefore, mere stay of the predicate offence is not a ground for preventing the Directorate of Enforcement from proceeding under the PMLA, 2002.

16. Further, the burden of proof in the predicate/Scheduled

offences and the offence under PMLA is different. Section 24 of

the PMLA reads as follows:

Dr.SA, J

24. Burden of proof: In any proceeding relating to proceeds of crime under this Act--

a) In the case of a person charged with the offence of money- laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and

b) In the case of any other person the Authority or court, may presume that such proceeds of crime are involved in money- laundering.

17. In view of the aforesaid mandate, the requisite burden of

proof in both the cases is different. Further, Section 71 of PMLA

mandates that the provisions of PMLA have overriding effect on

any other law for the time being in force.

18. Here, it is apt to extract Section 50 of PMLA, which reads as

under:

"50. Powers of authorities regarding summons, production of documents and to give evidence, etc.-- (1) The Director shall, for the purposes of section 13, have the same powers as 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.

Dr.SA, J

(4) Every proceeding under sub-sections (2) and (3) shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code, 1860 (45 of 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 Director."

19. In a recent judgment in Dalmia Cement (Bharat) Ltd's

case (11 supra), the erstwhile High Court for the State of

Telangana and Andhra Pradesh, observed that when ECIR is

lodged with the Directorate of Enforcement, there is no magisterial

intervention unlike a FIR and mere registration of ECIR against the

suspects of offence under Section 3 of PMLA cannot go to mean

that such persons are accused under Section 3 of PMLA.

Consequently, the protection against testimonial compulsion as

under Cr.P.C as well as under Article 20(3) of the Constitution of

India, would not be available.

20. The above judgment of Dalmia Cement (Bharat) Ltd's

case (11 supra) has been upheld by a Division Bench of this Court Dr.SA, J

in Writ Appeal Nos.198 and 199 of 2016, vide order dated

27.01.2022.

21. Further, as rightly contended by the learned Additional

Solicitor General of India appearing on behalf of respondent No.1,

mere registration of ECIR and issuance of summons does not give

raise to any cause of action. A person who is called upon to make

statements before the authorities cannot be said to be an accused

of an offence and he is bound to comply with such direction.

Section 50(2) of PMLA vests power in the competent authority 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 the Act.

22. In M.Shobana Vs. The Assistant Director, Directorate of

Enforcement12, the Madras high Court held that initiation of

proceedings like issuance of summons etc., in PMLA are self-

contained, in-built and independent procedure, mainly to prevent

the act of money laundering and connected activities. In

paragraph Nos.59 and 60 of the said decision, it was held as

follows:

"59. To put it succinctly, the initiation of proceedings like issuance of summons etc. in Prevention of Money-Laundering Act are self- contained, in-built and independent procedure mainly to prevent

CDJ 2013 MHC 4134 Dr.SA, J

the act of money-laundering and connected activities. Furthermore, the Respondent has issued only summons dated 10.04.2013 to the Petitioners and the issuance of summons cannot be categorized as an act of prosecuting the Petitioners twice. As such, the plea of 'double jeopardy' taken on behalf of the Petitioners is not acceded to by this court.

60. In the light of foregoing discussions and on appreciation of the entire gamut of the facts and circumstances relating to the subject matters in issue, this Court comes to an inevitable conclusion that the present Writ Petitions filed by the Writ Petitioners are not maintainable because of the simple reason that through the summons dated 10.04.2013 they were directed to appear before the Respondent/Assistant Director, Directorate of Enforcement, Chennai with records mentioned therein for the purpose of enquiry/investigation under the Prevention of Money- Laundering Act to ascertain the proceeds of crime, in the considered opinion of this Court. The proceedings under the Prevention of Money-Laundering Act are deemed to be judicial proceedings within the meaning of Section 193 and under Section 228 of the Indian Penal Code. However, the charge sheet filed by the Police in C.C.No.88 of 2011 relates to investigation for predicate offences under Sections 419, 420 read with Section 34 I.P.C. for criminal offences. However, since the charged offences under Sections 419 and 420 I.P.C. are the Scheduled Offences under clause I of sub-section (y) of 2 of the Prevention of Money- Laundering Act 2002, the Respondent registered an Enforcement Case Information Report (ECIR) bearing No.CEZO/2/2013 dated 25.03.2013 to carry out investigation under the Prevention of Money-Laundering Act against the Petitioners. Moreover, the summons issued to the Petitioners is a preliminary one relating to the investigation under the Prevention of Money- Laundering Act by the authority concerned. The fact of the matter is that the Adjudicating Authority/machinery under the Prevention of Money- Laundering Act is designated to adjudge the breach of any statutory obligation and it is not a Court of Law or a Judicial Tribunal, in the considered opinion of this Court. Moreover, the Adjudicating Authority under the Prevention of Money-Laundering Act is not trying a criminal case. But only decides the effect of breach of obligations by the concerned."

(emphasis supplied)

23. I have gone through the decisions relied upon by the learned

senior counsel for the petitioner. The petitioner relied on Binod

Kumar's case (1 supra) for the preposition that civil liability

cannot be converted into criminal liability. In the cited decision,

the Hon'ble Apex Court referred to a decision in Indian Oil Dr.SA, J

Corpn. v. NEPC India Ltd., {(2006) 6 SCC 736}, wherein, it was

held that any effort to settle civil disputes and claims, which do

not involve any criminal offence, by applying pressure through

criminal prosecution, should be deprecated and discouraged. The

facts of the instant case and the facts of the cited decision are

entirely different. In the instant case, the dispute is not between

two private individuals. The petitioner is alleged to have caused

wrongful loss to MMTC, a public sector enterprise, to a huge

magnitude of Rs.194 crores. Basing upon the complaint lodged by

MMTC, the CBI registered a case against the petitioner and basing

upon the case registered by CBI, the Enforcement Directorate

registered the subject ECIR basing upon the scheduled offences

registered by the predicate agency. In the given facts and

circumstances of the case, in the subject dispute, it cannot be said

that civil liability is converted into criminal liability.

24. In Rishipal Singh's case (2 supra), wherein, Bhajan Lal's

case (3 supra) was also referred, the Hon'ble Apex Court, while

reiterating the settled legal position with regard to exercise of

inherent powers under Section 482 of Cr.P.C., held as follows:

"It is no doubt true that the courts have to be very careful while exercising the power under Section 482 CrPC. At the same time we should not allow a litigant to file vexatious complaints to otherwise settle their scores by setting the criminal law into motion, which is a pure abuse of process of law and it has to be interdicted at the threshold. A clear reading of the complaint does Dr.SA, J

not make out any offence against the appellant Branch Manager, much less the offences alleged under Sections 34, 379, 411, 417, 418, 420, 467, 458 and 477 IPC. We are of the view that even assuming that the Branch Manager has violated the instructions in the complaint in letter and spirit, it all amounts to negligence in discharging official work, at the maximum it can be said that it is dereliction of duty."

25. There cannot be any dispute with regard to the preposition

of law laid down by the Hon'ble Apex Court in the above cited

decision. However, the facts of the above cited decision are

distinguishable from the facts of the case on hand. In view of the

seriousness of the offence allegedly committed by the petitioner

and the modus operandi adopted by him in committing the alleged

offence, this Court is of the considered opinion that it is not a fit

case to quash the subject ECIR registered against him by

exercising the inherent power under Section 482 of Cr.P.C.

26. Naresh Prasad Agarwal's case (4 supra) is also a MMTC

case. The petitioner therein sought to quash the charge-sheet

filed against him in C.C. No.3 of 2014, on the file of the learned

Special Judge for CBI cases (XII Judge, City Civil Court), Chennai

under Section 482 of the Code of Criminal Procedure. The Hon'ble

Madras High Court, adverting to the facts of the case, the law

applicable and various case laws, ultimately quashed the charge-

sheet against the petitioner therein. In the instant case, charge-

sheet filed by the predicate agency is not yet quashed. Moreover, Dr.SA, J

the subject ECIR is registered to investigate into as to whether the

petitioner has committed an offence under Section 3 of PMLA.

Column 8 of the subject ECIR demonstrates the same. So, the

facts of the case on hand cannot be equated with the facts of the

case in the aforementioned decision.

27. Here, it is apt state that PMLA is a special enactment,

enacted with a specific purpose and object, i.e., to track and

investigate the cases of money laundering. The

predicate/scheduled offence is necessary only for launching

prosecution under PMLA. Once the crime is registered under

PMLA, then the Enforcement Directorate has to take it to a logical

conclusion, as contemplated under Section 44 of PMLA. So, after

registration of crime, the Enforcement Directorate has to

investigate into as to whether the offence, as enunciated under

Section 3 of PMLA, has been committed or not. The Enforcement

Directorate, after completion of investigation, detects that there

are proceeds of crime, the criminal activity relates to scheduled

offence/s, the petitioner is party to such crime and crime proceeds

or actually involved in any proceeds of crime which includes its

concealment, possession acquisition or use and projected or

claimed as untainted property, would proceed against the

petitioner under Section 3 of PMLA, by filing a complaint before the Dr.SA, J

Designated Special Court. If no offence is made out in terms of

Section 3 of PMLA, a 'closure report' would be filed before the

Designated Special Court. Whether the petitioner has committed

the offence under Section 3 of PMLA punishable under Section 4 of

PMLA, it is a matter of investigation, which has not been concluded

yet. The requirement under Section 154 of Cr.P.C. to issue FIR

and requirement to register an ECIR under PMLA stand on different

footings.

28. In the instant case, the allegations against the petitioner are

that the petitioner, as the Director of the MBS group of companies,

has received the gold from MMTC on buyers Credit loan basis by

keeping the forex position open, without paying the additional 5%

margin money because of which MMTC suffered exposure to the

tune of Rs.220 crores; He has given a letter to MMTC asking them

to keep the forex open and received the gold knowing that there

are outstanding dues, in connivance with the public servants; He

also gave cheques for Rs.10 crores for resumption of business

knowingly that there was no balance in his bank account for

receiving the gold; His company dues were paid by public servants

using the MMTC funds/FDs without the approval of the Corporate

Office of MMTC, New Delhi; The petitioner accepted his liability and Dr.SA, J

gave three cheques in discharge of liability and those cheques

were dishonoured, which is borne by the record.

29. Furthermore, the Enforcement Directorate has issued only

summons under Section 50(3) of PMLA to the petitioner.

Summons are issued to a person under Section 50(3) of PMLA

requiring his attendance to give evidence or to produce any

records during the course of investigation or proceedings. Hence,

issuance of summons to the petitioner can neither be categorized

as an act of prosecuting him, nor would make him an accused

under PMLA. As rightly contended by the learned Assistant

Solicitor General of India, if the petitioner proves his innocence

before the ED authorities, he would not be charged with any

offence under PMLA. Even otherwise, Section 50(3) mandates

that all the persons so summoned 'shall' be bound to attend in

person or through authorized 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. Further, the proceedings under

PMLA are deemed to be judicial proceedings within the meaning of

Section 193 and under Section 228 of the Code of Criminal

Procedure, 1973. Further, since the offences under Sections

120B, 420, 471 of IPC charged against the petitioner are Dr.SA, J

Scheduled Offences under clause I of sub-section (y) of 2 of PMLA,

the Respondent registered the subject ECIR to carry out

investigation under PMLA against the petitioner. Moreover, the

adjudicating authority/machinery under PMLA is designated to

adjudge the breach of any statutory obligation and it is not a Court

of Law or a Judicial Tribunal. Furthermore, the adjudicating

authority under the PMLA is not trying a criminal case, but only

decides the effect of breach of obligations by the concerned.

Further, as mentioned above, ECIR registered by Enforcement

Directorate cannot be equated with an FIR under Section 154 of

Cr.P.C. The petitioner, instead of cooperating with the

investigation, filed this quash petition, which is nothing but a

premature attempt to escape from his criminal liability, if any.

The modus operandi adopted by the petitioner in causing wrongful

loss to MMTC in active connivance with MMTC officials is

specifically mentioned in the complaint as well as in the charge

sheet filed by the CBI. Though the petitioner was extended the

benefit of One Time Settlement and was asked to prove his bona

fides by paying 5% of the outstanding amount, he paid part

amount and gave cheques for the remaining amount and those

cheques were dishonoured. However, the payment done by the

petitioner under OTS is only a small fraction of total dues. The Dr.SA, J

allegation against petitioner is that he has caused a massive loss

of Rs.194 crores to MMTC, a public sector enterprise. Such

economic frauds adversely affect the financial and economic well-

being of the Nation and have implications which lie beyond the

domain of a mere dispute between the petitioner and MMTC. The

Apex Court, in a catena of judgments, held that in economic

offences, it is not proper for the High Court to exercise its inherent

powers under Section 482 of Cr.P.C., which is nothing but stalling

investigation/enquiry initiated by the authorized officer under the

provisions of PMLA. At the initial stage of issuance of process, it is

not open to the Courts to stifle the proceedings by entering into

the merits of the case. Hence, enquiry has to be necessarily held

to find out the truth or otherwise of the said allegations. Under

these circumstances, there is prima facie case for the Enforcement

Directorate to register the subject ECIR/05/HYZO/2014, dated

25.02.2014, against the petitioner and investigate into.

30. In view of the material available on record, this Court is of

the considered opinion that continuation of proceedings in the

subject ECIR against the petitioner would not amount to abuse of

process of law. In the interests of justice also, the proceedings

against the petitioner in the subject ECIR cannot be quashed. No

grounds, much less valid grounds, are made out by the petitioner Dr.SA, J

to quash the complaint and investigation in ECIR/05/HYZO/2014,

dated 25.02.2014 on the file of Joint Director, Enforcement

Directorate, Hyderabad Zonal Office, Hyderabad. The Criminal

Petition is devoid of merit and is liable to be dismissed.

31. Accordingly, the Criminal Petition is dismissed. It is needless

to state that the interim relief granted by this Court and extended

from time to time, stands vacated.

Miscellaneous petitions, if any, pending in this Criminal

Petition, shall stand closed.

____________________ Dr.Shameem Akther, J

_____February, 2022.

Bvv