The Allahabad High Court has declined to quash proceedings initiated by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) in connection with FIR relating to the “Grand Venice Project”, while making significant observations on the jurisdictional preconditions and statutory safeguards governing the exercise of powers under the Act.
The writ petition under Article 226 challenged the registration of the ECIR, search and seizure conducted under Section 17 PMLA, and the issuance of Non-Bailable Warrants (NBWs), contending that the sole surviving predicate offence against the petitioner was under Section 406 IPC, which is not a scheduled offence under the PMLA. The petitioner further relied on the fact that proceedings in the predicate FIR stood stayed and consolidated pursuant to orders of the Supreme Court.
While declining to interfere with the proceedings at this stage, the Division Bench reiterated that the existence of a scheduled offence constitutes the jurisdictional foundation for initiation and continuation of proceedings under the PMLA. The Court observed that once Section 420 IPC was dropped in the supplementary charge-sheet and only Section 406 IPC remained, serious questions arose as to the continuance of PMLA jurisdiction, which would have to be examined at the appropriate stage.
The Bench also took note of the effect of the stay of proceedings in the principal FIR and the Supreme Court’s order consolidating multiple FIRs arising out of the Grand Venice Project. It observed that such consolidation orders have a bearing on the operative field of the predicate offence and cautioned that investigating agencies cannot act in disregard of binding judicial directions.
On the issue of expansion of the ECIR, the Court observed that jurisdiction under the PMLA is offence-specific and transaction-specific, and cannot be enlarged in an open-ended manner by clubbing unrelated FIRs through addendums, particularly where such an exercise runs contrary to directions issued by the Supreme Court.
The Court further observed that the issuance of Non-Bailable Warrants prior to the filing of a prosecution complaint under Section 44 of the PMLA raises serious jurisdictional concerns, as the PMLA is a self-contained statute and does not envisage the issuance of coercive process at the investigation stage. It also reiterated that the power of search and seizure under Section 17 PMLA is conditioned upon the mandatory requirement of recording a valid “reason to believe”.
The Division Bench comprising Justice Chandra Dhari Singh and Justice Lakshmi Kant Shukla observed that in the absence of a subsisting scheduled offence, serious jurisdictional issues arise with respect to the continuation of proceedings under the PMLA. The Court further cautioned that coercive measures adopted in disregard of Supreme Court consolidation orders and statutory safeguards may violate the scheme of the PMLA and the guarantee of personal liberty under Article 21 of the Constitution.