PMLA proceedings can't continue for quashed scheduled offences: Delhi HC

The Delhi high court's order came on a petition by a money laundering accused seeking to quash the ECIR registered against him on the basis of two Delhi Police FIRs

Prosecution for money laundering cannot continue for a scheduled offence under an FIR which is compounded and quashed, the Delhi High Court has said.

It, however, clarified that the Enforcement Case Information Report (ECIR) by the Enforcement Directorate (ED) in such a case cannot be quashed completely if there is another FIR with respect to the same cause of action to legitimise the existence of the money laundering probe.

The high court's order came on a petition by a money laundering accused seeking to quash the ECIR registered against him on the basis of two Delhi Police FIRs in connection with alleged siphoning funds collected by him for the development of a real-estate project.

The petitioner said the jurisdictional fact which formed the basis of the ED investigation has now come to an end with the compounding and quashing of the FIRs pursuant to a settlement, and hence, the ECIR and the subsequent proceedings cannot continue any longer.

The ED opposed the petition on the ground that during the pendency of the probe, a third FIR came into existence on the basis of similar allegations as in the previous FIRs, and the same was taken on record for further investigation in the already opened ECIR.

The court was informed that several complainants were yet to settle their dispute with the petitioner and 79 complaints were still pending before RERA, Uttar Pradesh.

Justice Amit Sharma, in a recent judgement, said that in the absence of a predicate offence, there can be no offence of money laundering but in the present case, there was no dispute with regard to the fact that there was a third FIR for the same project which was the subject matter of the two previous FIRs.

"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 (Prevention of Money Laundering Act) with respect to the 'scheduled offences' in the first two FIRs," the court opined.

"(However) ECIR/09/HIU/2019 dated 27.06.2019 cannot be quashed in view of registration of FIR No. 55/2023 (third FIR) dated 10.07.2023 under Sections 409/420/120B of the IPC at PS EOW as this would constitute 'scheduled offences' legitimizing the existence of the said ECIR," the court added.

The court said that even if separate FIRs were registered at the instance of separate home-buyers/ investors, each of these FIRs cannot be considered as a separate cause of action for registration of different ECIRs.

"The third FIR in the present case relates to the commission of a 'scheduled offence' in respect of the complainant therein, but for the purposes of an investigation under the PMLA, it would be the part of the same ECIR which related to investigation pertaining to 'proceeds of crime' under the PMLA in the previous FIRs," stated the court.

The court also said that since an ECIR is not an FIR but an internal document, there cannot be any restriction to bringing on record on any subsequent 'scheduled offence' registered by way of an FIR alleged to have been committed in respect of the same transaction.

As far as the earlier compounded and quashed FIRs were concerned, the court directed that the department cannot initiate or continue any proceeding, including investigation in connection with them.