Quashing FIR On Technical Or Procedural Issue Shall Not Warrant Automatic Quashing Of ECIR: Madras HC
The Madras High Court observed that quashing an FIR (First Information Report) on technical or procedural issue and not on substantive grounds shall not warrant an automatic quashing of ECIR (Enforcement Case Information Report).
The Court observed thus in a batch of petitions preferred against the proceedings of the Enforcement Directorate (ED) in a money laundering case.
A Division Bench of Justice S.M. Subramaniam and Justice V. Sivagnanam remarked, “The Court has not dealt with the allegations nor tested the merits of the offences charged in the FIR. The Court restricted itself only to the ground of want of jurisdiction. Hence the FIR was quashed purely on this technical or procedural issue and not on substantive grounds and has not made any findings as to the offences or the prima facie allegations in the FIR. Therefore, the quashing of the FIR shall not warrant an automatic quashing of ECIR.”
Advocate T.R. Ragavacharyulu appeared for the petitioners while Additional Solicitor General of India (ASGI) A.R.L. Sundaresan appeared for the respondents.
In this case, the allegations against the petitioners under the Prevention for Money Laundering Act, 2002 (PMLA) were that, they had obtained loans from IDBI Bank to the tune of Rs. 1,301.76 Crores and Rs. 1,495.76 Crores and SBI Bank to the tune of Rs. 1,188.56 Crores. The loan borrowed by the companies, facilitated misappropriation, manipulation of books of accounts through fictitious accounts, and conversion of property. Thereafter, the petitioner and the company for the purpose of routing of funds, borrowed money for three enterprises.
The similar transaction was done in the name of the petitioner and another person. Subsequently, the properties acquired, were attached and the petitioner was also made a defendant in the proceedings. The same were confirmed by the Adjudicating Authority and against this, the petitioner filed an appeal before the Tribunal. With reference to the allegations, the ED formed an opinion that the offence of money laundering under Section 3 of PMLA is present. Therefore, the petitioner challenged the said proceedings.
The High Court after hearing the contentions of the counsel noted, “In cases as such where on initiation of PMLA proceedings, prima facie proceeds of crime has been traced, there arises a pertinent question as to whether this Court can stall such proceedings inspite of preliminary findings of the existence of proceeds of crime. The conscience of this Court is directed towards delivery of justice and though the FIR of scheduled offence stands quashed, it is merely on technicalities without analysing the merit of the scheduled offence.”
The Court added that when “proceeds of crime” is traced in a parallel investigation by the ED, this gives rise to another question that, once proceeds of crime is prima facie unearthed, can ECIR be quashed on the ground that FIR was quashed.
“In the present case, the FIR against the petitioner alone was quashed by the Karnataka High Court, whereas the FIR against the other accused are still pending. The FIR No.11/2019 dated 01.11.2019 registered by the CBI was quashed on the ground of want of jurisdiction. Since for the same offence the investigation was handed over to the SFIO, whereby the SFIO conducted the investigation and filed a complaint / chargesheet before the Special Court, which is still pending”, it further noted.
The Court observed that since the SFIO was already entrusted with the investigation by the Central Government on the same set of allegations, the FIR registered by the CBI was quashed by the High Court and hence, it is amply clear that the High Court has quashed the FIR only on the ground that another Investigating Agency is seized off the matter.
“… the predicate offence under Section 447 of the Companies Act, 2013, which is also a scheduled offence under the PMLA still stands good and requires further investigation. Therefore, in view of the above ECIR is not liable to be quashed”, it said.
The Court concluded that the petitioners have not made out any case for quashing of ECIR filed by Enforcement Directorate, however, it clarified that the Trial Court shall proceed uninfluenced by the observations, if any, made on factual aspects and decide the issues based on documents and evidence available on record and by following the due process.
Accordingly, the High Court dismissed the writ petitions.
Cause Title- Vijayraj Surana v. Assistant Director, Enforcement Directorate (Neutral Citation: 2024:MHC:3345)
Appearance:
Petitioners: Advocates T.R. Ragavacharyulu, M.R. Venkatesh, and G. Guruprasath.
Respondents: ASGI A.R.L. Sundarasan and SPP N. Ramesh.
