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[Raj HC] ECIR can neither be provided nor quashed even if persons not named in FIR or ED complaint

The Rajasthan High Court recently, in Sky Light Hospitality LLP v Union of India 2022 SCC OnLine Raj 2530, held that even though the persons named in the Enforcement Case Information Report (ECIR) and being investigated for the offence of money laundering may not be named in the FIR or the chargesheets for the predicate offences, it would automatically not lead to the quashment of the ECIR. The Court also rejected the plea to direct the Enforcement Directorate (ED) to provide the copy of the ECIR to such persons holding that it would be discretionary upon the ED to provide the same.


Brief facts

  • Sky Light Hospitality LLP ('Sky Light'), a limited liability partnership, purchased certain lands from various persons. Subsequently, it was found that the said lands were allotted on the basis of forged pattas and thus steps were taken to cancel the mutation entries of such lands in the revenue records. Sky Light instituted civil suits against the sellers from whom it purchased the said lands.

  • First Information Reports (FIRs) were lodged under sections 420, 467, 468, 471, and 120-B of the Indian Penal Code (IPC) against the sellers who were named as accused persons. Investigation was carried out and chargesheets were filed in the said FIRs. Sky Light or any of its partners were not named in either the FIRs or the chargesheets.

  • Subsequent to the filing of chargesheets by the police, the ED registered an Enforcement Case Information Report (ECIR) to investigate the offence of money laundering in relation to the said predicate offences.

  • Sky Light and one its partners, who were summoned by the ED, filed writ petitions before the Rajasthan High Court challenging the same and the High Court disposed of the writ petitions directing the ED to decide upon the objections of the petitioners.

  • Nearly three years later (in 2018), the investigation was transferred to the Central Bureau of Investigation (CBI). The said partner of Sky Light, as also Sky Light, approached the High Court and were granted interim protection that no coercive action be taken against him and also another partner of Sky Light who had been lately summoned by the ED.

  • In these writ petitions, the main prayers of the petitioners included (i) providing them with the copy of the ECIR, and (ii) quashment of the ECIR, since they were not named either in the FIRs or the chargesheets filed in the predicate offences.

Held

  • A preliminary objection was taken by the petitioners that since review petitions were pending in the Supreme Court against the decision in Vijay Madanlal Choudhary v Union of India 2022 SCC OnLine SC 929, the adjudication of the present petitions should not be made at this stage. However, the Court proceeded to adjudicate the petitions implicitly accepting the respondent's argument that though the review petitions may be pending, the said decision has not been stayed and holds the field.

  • Regarding supplying the copy of the ECIR to the petitioners, the Court held that it is at the discretion of the ED whether to give a copy of the ECIR to the persons seeking the same, and hence refrained from directing the ED to provide the same to the petitioners. The Court relied on the decision of the Supreme Court in Vijay Madanlal Choudhary (supra) wherein it was held in this regard that (i) ECIR cannot be equated with an FIR, and (ii) supply of a copy of the ECIR in every case to the person concerned is not mandatory and it was enough if the ED at the time of arrest, discloses the grounds of such arrest.

  • Regarding quashing the ECIR, the Court rejected the prayer noting the following reasons:

    • Though the petitioners were not named in the FIRs or the chargesheets, the predicate agency had filed supplementary chargesheets wherein permission was sought to continue with the investigation under section 173(8) of CrPC against the present petitioners. Also, the investigation in relation to the offences was still ongoing and had not reached its logical conclusion.

    • Since the case against the accused persons was at the stage of framing of charge, it was premature at this stage to seek the intervention of the court to quash the ECIR.

    • The argument that the element of mens rea is a pre-requisite for the offence of money laundering under section 3 of the Prevention of Money Laundering Act, 2002 (PMLA), was rejected.

    • The Court distinguished the decisions cited by the petitioners, as the situations involved were different e.g., the ECIR may have been quashed in a case where the person was discharged in the predicate offence, or the FIR may have been quashed.

Analysis


The decision is entirely based on the tenets and interpretations of the PMLA laid down in the decision of the Supreme Court in Vijay Madanlal Choudhary (supra). Interesting arguments and citations were made at the Bar, and the decision recapitulates recent litigious issues regarding the money laundering law.


As has now been held by the Supreme Court, the ECIR is an internal document and not a statutory document unlike an FIR under section 154 of the CrPC. An ECIR may even not be recorded or registered before an investigation is initiated by the ED. On these bases laid down by the Supreme Court and reaffirmed in the present digested decision, it would not be fruitful for litigants to press the court for providing a copy of the ECIR.


It is also known that many courts are reluctant to quash a case at the FIR stage itself (specially under section 482 of the CrPC, though through a writ petition under Article 226 one may hope for relief). At best, an ECIR is analogous (if not same or similar) to an FIR. It marks the initiation of investigation by the ED of an alleged offence of money laundering and / or proceeds of crime. Mere issuance of summons at the onset of such investigation needs to be simply complied with. It is often advised that writ petitions may be filed at such stage itself, with a sideline motive of getting a no-coercive-action protection from the High Court or Supreme Court. However, this way needs to be cautiously treaded because in case adverse findings are recorded in a dismissal order by the court, it may lead to adversity in the investigation.

Sky Light LLP - PMLA - Rajasthan HC - 22.12.2022
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Authored by the Editorial Team, Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.

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