PMLA court refuses to drop FEO proceedings against Mehul Choksi

Once the central government had, in February 2018, entrusted investigation into the affairs of companies linked to Choksi to the Serious Fraud Investigation Office (SFIO), the ED could not continue with proceedings arising from the same set of allegations, Choksi contended

MUMBAI: A special Prevention of Money Laundering Act (PMLA) court on Monday rejected two applications filed by fugitive diamantaire Mehul Choksi seeking to stall proceedings initiated by the Enforcement Directorate (ED) under the Fugitive Economic Offenders (FEO) Act.

Fugitive diamantaire Mehul Choksi (HT Photo)

Choksi had, in one of the applications, argued that following the liquidation of his company Gitanjali Gems Ltd under the Insolvency and Bankruptcy Code (IBC) and the appointment of an official liquidator by the National Company Law Tribunal (NCLT), only the liquidator was competent to represent the company and that no director or former management could continue to do so. Accordingly, he sought issuance of notices to the official liquidator to represent Gitanjali Gems Ltd in the ongoing FEO proceedings.

In another plea, Choksi contended that once the central government had, in February 2018, entrusted investigation into the affairs of companies linked to him to the Serious Fraud Investigation Office (SFIO), the ED could not continue with proceedings arising from the same set of allegations. The defence relied on the Delhi High Court’s ruling in the Ashish Bhalla v State case, arguing that the SFIO’s mandate excluded parallel probes by other agencies.

“As the said order has become final, there is no need to reconsider the prayer of the applicant,” the judge held while rejecting the plea.

As regards the other plea, the court held that neither the pendency of the SFIO probe nor the liquidation of Gitanjali Gems Ltd had created any legal bar to continuation of the FEO proceedings. This was because section 212(2) of the Companies Act, 2013 restricts parallel investigation by other agencies only in respect of offences under the Companies Act, and does not prohibit proceedings under other statutes such as the FEO Act, the judge said.

“The sub-section 2 of section 212 of the Companies Act does not bar the investigation of the offence under other Acts,” the judge held, adding that the ED’s application under the FEO Act was for declaration of Choksi as a fugitive economic offender and did not amount to investigation of Companies Act offences.

The court relied on the Delhi High Court order in the Sanjay Aggarwal v Union of India case, which held that transfer of investigation to the SFIO does not bar proceedings under other special statutes. The judge recorded that the High Court had observed that section 212 “does not preclude other agencies, in their own domain, from probing offences under separate laws”.