PMLA cases totally independent of base offences: Bombay HC

In an important ruling, the Bombay high court (HC) on Tuesday held that investigations by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA), 2002, are totally independent of the scheduled base offences and ED can continue the probe even if the base offences are closed, compounded or quashed.

In an important ruling, the Bombay high court (HC) on Tuesday held that investigations by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA), 2002, are totally independent of the scheduled base offences and ED can continue the probe even if the base offences are closed, compounded or quashed.

Bombay high court. (HT FILE)

A single-judge bench of justice AS Gadkari said for probing a money laundering case, registration of a scheduled offence - one of the offences mentioned in the Schedule to the PMLA - is necessary, but once an enforcement case information report (ECIR) is registered under the PMLA is registered, the ECIR stands on its own and it thereafter does not require the support of the scheduled offence.

HC clarified that ED’s probe thereafter does not depend even on the ultimate result of the scheduled offence. “Even if the scheduled offence is compromised, compounded, quashed or the accused therein is/are acquitted, ED’s investigation is not affected.

The ruling will enable ED to continue its investigation unabated in where base cases are closed, like the one filed by Akbar Travels of India Pvt Ltd (ATIPL) against Jet Airways and its directors, Naresh Goyal and his wife Anita. Similar was the situation in the alleged fraud at Maharashtra State Cooperative Bank in which several political leaders are suspected to be involved and in which a closure report is filed by the economic offences wing of the Mumbai Police.

Justice Gadkari was hearing a petition filed by Babulal Verma and Kamal Kishore Gupta, both promoters of a realty firm in Mumbai, against whom ED has started investigation under PMLA. eD’s probe was based on an offence of criminal breach of trust and cheating, registered at City Chowk police station at Aurangabad on March 7, 2020.

Based on the offence, ED on December 16, 2020, registered an ECIR and started an investigation. Verma and Gupta thereafter cleared all dues of the complainant and accordingly, the offence against them was compounded and closed by a judicial magistrate on February 10, 2021

In this backdrop, the accused, promoters of Omkar Realtors and Developers, had sought their release on bail on the ground of closure of the scheduled offence. They moved HC after the special PMLA court in Mumbai rejected their plea on February 15, 2021.

Before HC, his counsel submitted that the moment scheduled offence comes to an end, the PMLA proceedings also comes to an end. bail. The lawyer added that it was a settled legal proposition that if initial action does not align with law, all subsequent and consequential proceedings would fall through for the reason that the illegality strikes at its root and the applicants could not have been remanded to further custody and were entitled to be released on bail.

Justice Gadkari rejected the argument, observing that the investigation under the PMLA is totally independent of the scheduled offence.

“PMLA is a special statute enacted with a specific object i.e. to track and investigate cases of money laundering,” said HC. “Therefore, after lodgment of the scheduled offence, its ultimate result will not have any bearing on the investigation of a crime under the PMLA and the offence under the PMLA will survive and stand on its own.”

HC said if the argument of the petitioners was accepted, getting the base case closed would be the easiest mode for the accused to scuttle and/or put an end to the investigation under the PMLA.