The Kerala High Court recently observed that if the Enforcement Case Information Report (ECIR) has been quashed and there is no subsequent FIR registered against the accused, then an order under Section 17 (1-A) of the Prevention of Money Laundering Act, 2002 (PMLA) cannot be ‘allowed to hold the field as it causes sure prejudice to the person against which it is issued’.

Section 17(1-A) of PMLA is an alternative to Section 17(1) for facilitating the measures which are required to be taken in the event search and seizure is not practicable. Under the provision, an authorised officer under Section 17(1) can issue a freezing order.

A bench of Justice Devan Ramachandran thus observed, “…when there is no FIR registered, hypostised on which an 'ECIR' is also not available, any further investigation against the petitioner under the 'PMLA' will have to cease…I am certain, without any doubt, that in view of quashing of the 'ECIR' and in the absence of any further FIR being registered against the petitioner, Ext.P12 cannot be allowed to hold the field, particularly when it causes sure prejudice to the person against which it is issued”.

Senior Advocate Mahesh Jethmalani instructed by D. Kishore, appearing for the petitioner argued that the case registered by the Enforcement Director under the provisions of the 'PMLA' was quashed by the Court in Crl.M.C.No.5167/2023, therefore Ext.P12 order had ‘lost its legs to stand on’ and should thus be set aside.

In the present matter, the Standing Counsel Jaishankar V. Nair appearing for ED had contended that the said order was issued at a time when the petitioner was facing a criminal charge under Section 420 of the Indian Penal Code (IPC), registered by the jurisdictional Police Authorities. Therefore, since Section 420 IPC is one among the scheduled offences under Section 2(1)(y) of the 'PMLA', and the 'ECIR' was registered on September 6, 2022, it was imperative that the properties covered by Ext.P12 be protected from depletion or destruction.

While referring to Vijay Madanlal Choudhary & others v. Union of India & others (2022 SCC OnLine SC 929 it was further averred that during investigation some additional information against the petitioner, which is now being investigated by the police and that unless the police complete their investigation on such additional inputs, Ext.P12 order cannot be vacated.

However, on that the bench categorically noted in the order, “Of course, the 'ED' now asserts that, during their investigation, they came to be in possession of certain other inputs, which would be sufficient to implicate the petitioner in various offences; and that they have handed over the same to the Kerala Police for further investigation. However, Sri. Jaishankar V. Nair was candid enough to admit that his clients have neither received any information from the Kerala Police qua such investigation yet; nor are they aware of any new FIR having been registered…Indubitably, therefore, when there is no FIR registered, hypostised on which an 'ECIR' is also not available, any further investigation against the petitioner under the 'PMLA' will have to cease”.

The bench while noting Crl.M.C.No.5167/2023 where the Court quashed the ECIR, even clarified that “…this Court has made it abundantly clear that ‘in the event of the predicate offence getting revived, it would always be open for the ED to revive the proceedings under the Prevention of Money Laundering Act, 2002 as well’. Indubitably, this is the best protection that the 'ED' can have; and apodictically, therefore, as and when any such revival is to take place in law, they will be at full liberty to issue orders akin to Ext.P12 under Section 17 (1A) of the PMLA, 2002; for which, none of my observations in this judgment would be a fetter”.

Consequentially, the bench allowed this writ petition and set aside Ext.P12.

Cause Title: V.P. Nandakumar v. The Assistant Director Directorate Of Enforcement

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Justice Devan Ramachandran

Agatha Shukla