PMLA Proceedings Cannot Continue With Respect To Scheduled Offences In 'Quashed' FIRs': Delhi HC

The Delhi High Court observed that prosecution under Prevention of Money Laundering Act (PMLA) cannot continue with respect to 'scheduled offences' in 'quashed' FIRs.

The Court was deciding a petition under Article 226 of the Constitution read with Section 482 of the Code of Criminal Procedure, 1973 (CrPC) seeking quashing of the PMLA proceedings and actions.

A Single Bench of Justice Amit Sharma said, “… the principle that can be culled out is that a ‘scheduled offence’, after an FIR has been quashed, cannot exist and therefore, if there is no ‘scheduled offence’, there can be no offence of money laundering with respect to the same. Thus, in the considered opinion of this Court, in the present case, there can be no prosecution under the PMLA with respect to the ‘scheduled offences’ in the first two FIRs, i.e., FIR No. 16/2018 and FIR No. 49/2021 registered at PS EOW.”

The Bench noted that even in an FIR being investigated by the local police involving multiple complainants, compounding with some of them will not be a ground for quashing of the said FIR.

Senior Advocate Sandeep Sethi appeared on behalf of the petitioner while Senior Panel Counsel Amit Tiwari and Special Counsel Zoheb Hossain appeared on behalf of the respondents.

In this case, two FIRs were registered under Sections 420, 406, and 120B of the Indian Penal Code, 1860 (IPC). The said FIRs were registered against the persons accused therein, including the petitioner and arose out of a similar set of facts and circumstances. In both the FIRs, the respective complainants alleged that despite payment of monies in 2006-07, they did not receive possession of flats, as was promised by the accused company. It was alleged that in his capacity as a Director of the said firm, the petitioner was responsible for siphoning of the funds collected from the complainants. During the pendency of the respective trials, the accused persons therein settled the dispute with the respective complainants amicably.

Thereafter, the department carried out a search and seizure under Section 17(1) of the Prevention of Money Laundering Act, 2002 at the office and residential premises of the petitioner. Various phones, documents, digital records, and cash were seized. Follow-up searches were conducted and pursuant to the search and seizure, the department filed an application under Section 17(4) of the PMLA for retention of records and digital devices seized. A show-cause notice under Section 8(1) of the PMLA, along with recording of reasons was issued by the Adjudicating Authority to the petitioner, for filing of a written response as to why the department’s application under Section 17(4) of the PMLA should not be allowed.

The High Court after hearing the contentions of the counsel observed, “The proposition of law laid down in judicial precedents relied upon by learned Senior Counsel for the petitioner is not in dispute. In the said cases, the ‘scheduled offence’ was quashed or compounded in all respects. In the present case, ‘scheduled offences’ by way of the third FIR still exist. It is pertinent to note that even in an FIR being investigated by the local police involving multiple complainants, compounding with some of them will not be a ground for quashing of the said FIR. However, partial compounding/quashing is permissible.”

The Court further said that the registration of a third FIR with respect to ‘scheduled offences’ gives jurisdiction to the department to investigate by taking the said third FIR on record and the authorities are distinguishable with respect to the facts of the case.

“… the third FIR was taken on record, the impugned ECIR cannot be stated to be without a predicate offence. The issue before the Court, as explained hereinabove, is whether the investigation in the impugned ECIR can continue on the basis of registration of the third FIR. It is clarified that since this Court is of the opinion that the ECIR, as explained in Vijay Madanlal Choudhary (supra) cannot be equated with an FIR and as per the stand of the department, the same is only for administrative purposes, there is no impediment in taking the third FIR on record which related to the same project forming the basis for registration of the first two FIRs, resulting in initiation of the impugned ECIR”, noted the Court.

Accordingly, the High Court partly allowed the petition.

Cause Title- Rajinder Singh Chadha v. Union of India Ministry of Home Affairs through its Chief Secretary & Anr. (Neutral Citation: 2023:DHC:8429)

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