The Punjab and Haryana High Court has clarified that a stay on a First Information Report (FIR) related to a predicate offense does not inhibit the Enforcement Directorate (ED) from registering an Enforcement Case Information Report (ECIR) under the Prevention of Money Laundering Act, 2002 (PMLA). This significant ruling sheds light on the autonomous operational domain of the ED, distinct from the conventional criminal investigation processes.
The case emerged from allegations against builders accused of defrauding investors in a housing project in Gurugram. Following the allegations, FIRs were directed to be registered by a CJM Court under Section 156(3) of the Cr.P.C. However, subsequent legal developments saw a Single Bench of the High Court staying the operation of the CJM’s orders and the further proceedings of the consequential FIRs.
Addressing the plea for quashing the money laundering case, the division bench comprising Justice Arun Palli and Justice Vikram Aggarwal stated,
“stay of proceedings in the FIRs would, at best, mean no further investigation in the FIRs during the operation of the interim order but cannot be stretched to mean that even an ECIR could not have been recorded.”
This observation delineates the scope of the stay, limiting it to the FIRs and not extending to the ED’s proceedings under the PMLA.
The bench further elaborated that the ECIR, recorded much later than the High Court’s stay on FIR registration, faced “no bar to record.” This statement underscores the court’s recognition of the ED’s independent authority to initiate investigations under the PMLA, irrespective of the status of related FIRs.
The accused, Sikander Singh and others, had contested the ECIR, arguing that the stay on FIR registration by the High Court should preclude the ED from registering a money laundering case against them. They contended that the FIRs, being the foundation of the ECIR, were rendered non-existent due to the High Court’s stay, thereby invalidating the ECIR itself.
However, the court refuted this argument, clarifying that the stay of proceedings in the FIRs does not equate to a prohibition against recording an ECIR. It emphasized that the ED was “nowhere in the picture” in the initial complaints or the petitions challenging the CJM’s order, thus “was not bound” by the High Court’s decision to stay the FIRs.
The court also referenced the Vijay Madanlal Choudhary case to highlight that an individual could be prosecuted under the PMLA as long as the scheduled offense exists, regardless of the status of the FIRs. This reinforces the notion that money laundering investigations can proceed independently of the foundational criminal cases.
In conclusion, the Punjab and Haryana High Court’s ruling clarifies the legal landscape surrounding the initiation of money laundering investigations in India. It asserts that a stay on FIRs does not impede the ED’s ability to record ECIRs, ensuring that investigations into financial crimes continue unabated, even in the face of legal challenges to predicate offenses. This judgment not only delineates the boundaries between criminal and financial investigations but also reinforces the robust framework India has against money laundering and related financial crimes.
CASE DETAILS
Case title- Sikander Singh v. Directorate of Enforcement and another.
Represented petitioners –Senior Advocates Ashok Aggarwal and Vikram Chaudhari with Advocates Hari Pal, Mukul Aggarwal, Shrenik Jain and Hargun Sandhi.
Represented the ED- Additional Solicitor General SV Raju, Deputy Solicitor General JS Lalli, and Senior Panel Counsel Lokesh Narang and Shobit Phutela.
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