MANU/DE/3707/2022

True Court CopyTM

IN THE HIGH COURT OF DELHI

W.P. (Crl.) 408/2022, Crl. M.A. 3495/2022, Crl. M.A. 5002/2022, Crl. M.A. 10739/2022, Crl. M.A.
14801/2022, Crl. M.A. 17030/2022, W.P. (Crl.) 440/2022, Crl. M.A. 3811/2022, Crl. M.A. 14894/2022, W.P.
(Crl.) 443/2022, Crl. M.A. 3845/2022, Crl. M.A. 4639/2022, Crl. M.A. 9001/2022, Crl. M.A. 14896/2022,
Crl. M.A. 14897/2022, W.P. (Crl) 919/2022, Crl. M.A. 7761/2022, Crl. M.A. 14900/2022, Crl. M.A.
14901/2022, W.P. (Crl) 1299/2022, Crl. M.A. 11196/2022, Crl. M.A. 14898/2022, Crl. M.A. 14899/2022, W.P.
(Crl) 1316/2022, Crl. M.A. 11317/2022, Crl. M.A. 15145/2022, W.P. (Crl) 1350/2022, Crl. M.A. 11534/2022,
Crl. M.A. 14891/2022, Crl. M.A. 14892/2022, W.P. (Crl.) 1691/2022 and Crl. M.A. 14723/2022

Decided On: 26.09.2022

Appellants: Harish Fabiani and Ors.

Hon'ble Judges/Coram:
Mukta Gupta and Anish Dayal, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: Vikram Nankani, Sidharth Agarwal, Sr. Advs., Dheeraj Nair, Vishrutyi
Sahni, Abinav Sekhri, Aishna Jain, Advs., Mahesh Jethmalani, Sr. Adv., Hitesh Jain, Siya Chaudhary, Subhash
Jadhav, Advs., Kapil Sibal, Rajiv Nayar, Sr. Advs., Rishi Agrawala, Karan Luthra, Ankit Banati, Shravan
Niranjan, Advs., Gaurav Mishra, Jaiyesh Bakshi, Ravi Tyagi, Daman Popli, Mayuri Shukla and Neetu
Devrani, Advs.

For Respondents/Defendant: S.V. Raju, ASG, Zoheb Hossain, SPP, Vivek Gurnani, Adv., Rajendra Singh,
Anurag Ahluwalia, CGSC, Danish Faraz Khan, Adv., Ajay Digpaul, CGSC, Kamal R. Digpaul, Swati Kwatra,
Advs., Asheesh Jain, CGSC , Keshav Mann, Vedansh Anand, Advs., Kirtiman Singh, CGSC, Waize Ali Noor,
Kunjala Bhardwaj, Madhav Bajaj, Yash Upadhyay, Advs., Apoorv Kurup, CGSC, Nidhi Mittal and Ojaswa
Pathak, Advs.

Subject: Criminal

Catch Words

Mentioned IN

Acts/Rules/Orders:
Code of Criminal Procedure, 1973 (CrPC) - Section 156 (3); Code of Criminal Procedure, 1973 (CrPC) -
Section 156(3); Code of Criminal Procedure, 1973 (CrPC) - Section 482; Constitution Of India - Article 14,
Constitution Of India - Article 19(1), Constitution Of India - Article 19(6), Constitution Of India - Article
20(3), Constitution Of India - Article 21; Indian Penal Code 1860, (IPC) - Section 120(B); Indian Penal Code
1860, (IPC) - Section 120B; Indian Penal Code 1860, (IPC) - Section 420; Indian Penal Code 1860, (IPC) -
Section 465; Indian Penal Code 1860, (IPC) - Section 467; Indian Penal Code 1860, (IPC) - Section 468;
Indian Penal Code 1860, (IPC) - Section 469; Indian Penal Code 1860, (IPC) - Section 470; Indian Penal
Code 1860, (IPC) - Section 471; Prevention Of Money-laundering Act, 2002 - Section 2(1), Prevention Of
Money-laundering Act, 2002 - Section 3, Prevention Of Money-laundering Act, 2002 - Section 4, Prevention
Of Money-laundering Act, 2002 - Section 44, Prevention Of Money-laundering Act, 2002 - Section 50,
Prevention Of Money-laundering Act, 2002 - Section 66, Prevention Of Money-laundering Act, 2002 -
Section 66 (2), Prevention Of Money-laundering Act, 2002 - Section 66(2)

Cases Referred:
Vijay Madanlal Choudhary and Ors. vs. Union of India (UOI) and Ors. MANU/SC/0924/2022; D.K. Trivedi
and Sons and Ors. vs. State of Gujarat and Ors. MANU/SC/0636/1986; State of Bihar and Ors. vs. P.P. Sharma
and Ors. MANU/SC/0542/1992; Municipal Corporation of Delhi vs. Ram Kishan Rohtagi and Ors.
MANU/SC/0094/1982; State of Punjab vs. Davinder Pal Singh Bhullar and Ors. MANU/SC/1476/2011

Citing Reference:

Discussed    1

Mentioned    3

Relied On    1

Case Note:
Criminal - Provisions of PMLA - Vires of - Section 2(1)(u), 50 and Explanation to Section 44 of
Prevention of Money Laundering Act, 2002 (PMLA), Articles 14, 19(1)(g), 19(6), 20(3) and 21 of
Constitution of India, 1950 - Present petition filed for declaring Section 2(1)(u), Section 50 and
Explanation to Section 44 of PMLA to be unconstitutional as being in violation of Articles 14, 19(1)(g),
19(6), 20(3) and 21 of Constitution - Whether impugned provisions of PMLA are unconstitutional -
Held, relief sought regarding vires of various provisions of PMLA is infructuous having been decided by
Supreme Court in Vijay Madanlal Choudhary (MANU/SC/0924/2022) - Supreme Court held that no
action under PMLA can be resorted to unless there is substratum of scheduled offence for same - Said
substratum should legally exist in form of subsisting (not quashed) criminal complaint/inquiry - Petition
dismissed. [20]

JUDGMENT

Anish Dayal, J.

1. These writ petitions were heard together and have sought similar prayers. For ease of reference, various
reliefs sought in each of these writ petitions (and accompanying applications), presented in different
permutations and combinations, could effectively be enumerated as under:

i. Issue a Writ of Declaration or any Writ, Order or Direction of like nature declaring Section 2(1)(u),
Section 50 and Explanation to Section 44 of the Prevention of Money Laundering Act, 2002 to be
unconstitutional as being in violation of Articles 14, 19(1)(g), 19(6), 20(3) and 21 of the Constitution
of India;

ii. Quash and set aside the impugned ECIR no. ECIR/07/HIU/2021 and stay all proceedings arising
therefrom;

iii. Quash the summons issued in respect of ECIR No. ECIR/07/HIU/2021;

v. Issue a Writ of Prohibition or any Writ, Order or Direction of like nature restraining the
Respondents from taking any coercive action in respect of the ECIR No. ECIR/07/HIU/2021 including
conducting search and seizures at residences/office or issuing look out circulars or any other restrictive
order;

vi. Quash and set aside Look out Circulars issued against some of the petitioners.

2. While these petitions were pending before this Court, the Hon'ble Supreme Court of India delivered its
judgment in Vijay Madanlal Choudhary & Ors. Vs. Union of India & Ors., MANU/SC/0924/2022 on 27th
July, 2022 deciding on the issue of constitutionality and vires of various provisions of the Prevention of
Money Laundering Act, 2002 ("PMLA") inter alia Section 2(1)(u), Section 50 and Explanation to Section 44.
Considering that the Hon'ble Supreme Court in Vijay Madanlal Choudhary (supra) has already considered the
issue of constitutionality of various provisions of PMLA, the issue of granting relief for prayers in the nature
of para 1 (i) above does not arise. The judgment of the Hon'ble Supreme Court is binding on this Court and all
parties in these petitions before this Court and there is no reason for this Court to issue any further declaration
in that regard. Prayers sought in all these petitions before this Court in the nature of para 1 (i) above therefore
do not survive and are infructuous, having been dealt with by the judgment of the Hon'ble Supreme Court in
the matter of Vijay Madanlal Choudhary (supra).

Relief sought by the Petitioners

3. The immediate concern of the petitioners relates to prayers in the nature of para 1 (ii)-(vi), whereby the
petitioners are concerned about the continuation of proceedings in relation to the ECIR No.
ECIR/07/HIU/2021 ("the said ECIR") issued by the Directorate of Enforcement ("ED") despite the predicate
offence registered under FIR No. 129/2021 ("the said FIR") having been quashed by the judgment dated 4th
May, 2022 of the High Court of Bombay. The petitioners pray for issue of a writ of certiorari setting aside
summons issued by the ED to various petitioners in respect of the said ECIR, the Look Out Circular ("LOC")
and any other consequential proceedings emanating out of the said ECIR, and quash the same in view of the
predicate offence having been quashed by judgment dated 4th May, 2022 passed by the High Court of
Bombay in relation to the said FIR. The thrust of the petitioners' contention is based upon the conclusion of
the Hon'ble Supreme Court in Vijay Madanlal Choudhary (supra) in para 467 (v)(d) which reads as under:

"(v)(d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result
of criminal activity relating to a scheduled offence. It is concerning the process or activity connected
with such property, which constitutes the offence of money-laundering. The Authorities under the 2002
Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has
been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial
including by way of criminal complaint before the competent forum. If the person is finally
discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the
Court of competent jurisdiction, there can be no offence of money-laundering against him or any one
claiming such property being the property linked to stated scheduled offence through him."

(emphasis supplied)

4. The crux of this conclusion in Vijay Madanlal Choudhary (supra) by the Hon'ble Supreme Court, in context
of these petitioners, is that if the person accused of any scheduled offence is finally discharged/acquitted or the
criminal case against him is quashed by a court of competent jurisdiction, there can be no case of money-
laundering against him or anyone claiming such property (which is linked to the stated scheduled offence)
through him.

5. Senior Counsel appearing for the petitioners have thus contended that the petitioners before this Court are
either accused in the said FIR (now quashed by High Court of Bombay) or are otherwise not accused in the
said FIR and therefore applying the ratio and finding of the Hon'ble Supreme Court, the ECIR against these
petitioners and consequential proceedings do not survive.

Submissions on behalf the Respondents

6. Mr. S.V. Raju, the learned Additional Solicitor General, appearing for the ED, objected to this plea by the
petitioners and contended inter alia that:

i) The said FIR still subsists since it has only been quashed qua the petitioners before the Bombay
High Court and not in toto. In support of this the learned ASG relies upon the concluding para 38 of
the High Court of Bombay in its decision of 4th May, 2022.

ii) Relying upon the para 311 of Vijay Madanlal Choudhary (supra) it was contended that Hon'ble
Supreme Court has stated that before resorting to an action and provision of attachment, registration of
a scheduled offence or a complaint is not a precondition. The Hon'ble Supreme Court has stated that
"authorised officer can still invoke power of issuing order of provisional attachment and
contemporaneously send information to the jurisdictional police about the commission of scheduled
offence and generation of property as a result of criminal activity relating to a scheduled offence,
which is being made subject matter of provisional attachment." Therefore, even though there may not
be any scheduled offence registered, the ED can still move for provisional attachment and therefore
the said ECIR may not be quashed.

iii) Since the prayer in the writ petitions seeking declaration regarding unconstitutionality of various
provisions of the PMLA does not survive due to Vijay Madanlal Choudhary (supra), the basis of these
writ petitions being before the Division Bench of this Court also gets eroded and therefore these writ
petitions be transferred to a single bench of this Court.

iv) Since the ED has filed a Special Leave Petition vide Diary No. 26629 of 2022 on 25th August,
2022 before the Hon'ble Supreme Court which is yet to be adjudicated by the Hon'ble Supreme Court,
in light of accepted principles (inter alia per D.K. Trivedi & Sons & Ors. Vs. State of Gujarat & Ors.,
MANU/SC/0636/1986 : 1986 Supp SCC 20) and in consonance with a decision of this Hon'ble Court
in Asst. Director, Directorate of Enforcement Vs. Kewal Krishna Kumar, CRL. M.C. 1455/2021 order
dated 10th November, 2021, this Court should stay their hand and not pass any order as prayed for by
the petitioners.

v) Reliance was also placed upon para 253 of Vijay Madanlal Choudhary (supra) wherein the Hon'ble
Supreme Court has stated that "... in the event the person named in the criminal activity relating to a
scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of
discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her,
there can be no action for money-laundering against such a person or person claiming through him in
relation to the property linked to the stated scheduled offence". The respondents have contended that
use of the phrase "finally absolved by a Court of competent jurisdiction" would therefore include the
adjudication by the Hon'ble Supreme Court in the SLP filed by the ED as well. The petitioners
rebutted this by contending that a Court of competent jurisdiction for order of discharge, acquittal or
quashing can only be finally the High Court and the SLP before the Supreme Court is really in the
nature of an extraordinary remedy and therefore mere filing of SLP cannot provide a handle to the
respondents to sustain the said ECIR.

vi) Reliance was placed on page 14 of the reply in CRL. M.A. 14801/2022 in W.P. (CRL.) 408/2022
which shows that there were complaints of deliberate acts by the petitioner Harish Fabiani of offshore
fraud. The respondents contended in light of these grave charges, the said ECIR ought not to be
quashed.

vii) Reliance was also placed in Section 66 (2) of the PMLA which permits the ED or any authority
specified by them to notify any other officer or authority or body of any information received or
obtained by the ED which in the opinion of the ED is necessary for that authority to perform its
functions under law. Thus, as per the respondents, Section 66 allows the ED to give an opinion on the
basis of information or material in their possession that provisions of any other law are being
 contravened and accordingly share the information with the appropriate authorities for necessary
action. The ED contends that door should remain open for them to trigger action by appropriate
authorities in case of any disclosure by the ED to them regarding contravention by the petitioners. To
rebut this contention, the petitioners submitted that Section 66 cannot provide an infinite, open ended
opportunity to the respondents to sustain the ECIR merely on a possibility of finding some
information.

viii) Reliance was also placed on State of Bihar & Anr. Vs. P.P. Sharma, IAS, & Anr.,
MANU/SC/0542/1992 : 1992 Supp (1) 222at para 23 to contend that even if, as per the petitioners,
there were mala fides of the informant/complainant which led to the registration of the said FIR it
should not impact investigation by the Investigating Officer.

ix) Reliance was also placed on Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi & Ors.,
MANU/SC/0094/1982 : (1983) 1 SCC 1 where the FIR was quashed against some of the accused. The
Hon'ble Supreme Court in para 19 held that if the prosecution can at any stage produce evidence
which satisfies the court that the other accused or those who have not been arrayed as accused against
whom proceedings have been quashed, have also committed the offence, the court can take cognizance
against them and try them along with the other accused.

Submissions in Rejoinder by the Petitioners

7. In response to the submissions of the learned ASG, Senior Counsels appearing for the petitioners advanced
submissions in rejoinder which, for ease of reference, are collectively enumerated as under:

i) Once the Bombay High Court has quashed the scheduled offence on the basis of which the said
ECIR was registered alleging offences under PMLA, the question of the said ECIR being sustained
does not arise. This is undeniably clear from a reading of para 467 (v) (d) of Vijay Madanlal
Choudhary (supra).

ii) The Hon'ble Supreme Court in its conclusion articulated in the aforementioned paragraph clarifies
that the authorities under the PMLA cannot prosecute any person on a notional basis or on the
assumption that a scheduled offence has been committed unless it is so registered within the
jurisdiction of the police and/or pending inquiry/trial including by way of criminal complaint before
the competent forum.

iii) The Hon'ble Supreme Court has further embellished this by clarifying that in the event a person is
finally discharged or acquitted of the scheduled offence or the criminal case against him is quashed by
a Court of competent jurisdiction, no offence of money-laundering against him or anyone claiming
such property (being property linked to the scheduled offence).

iv) Responding to the specific arguments of the learned ASG that authorities have the liberty to
disclose facts under Section 66(2) of the PMLA if any contravention is noticed by a person, it was
contended by the Senior Counsel for the petitioners, that at any stage if any such facts are indeed
found or discovered, the authorities would have the liberty to exercise their rights under applicable law
and file a fresh FIR if so necessitated.

v) It was contended that the following parts of the ECIR are dispositive of the fact that it was solely
and exclusively based on the FIR No. 129 dated 13th April, 2021 registered by P.S. Wada:

• Column No. 3 of the ECIR under "Source from which the information/material
received" states "FIR No. 0129 dated 13th April, 2021 registered by Police Station:
Wada, Dist. Palghar, Maharashtra".

• Para 7 (i) of the ECIR prefaces the complaint on the basis of FIR bearing No.
0129/2021 registered by the Officer in Charge, Wada Police Station against M/s.
Indiabulls Housing Finance Ltd. and other persons which was in turn based upon
criminal complaint filed by Mr. Ashutosh Vijay Kamble before the Hon'ble Court of
 Judicial Magistrate First Class, Wada, Dist. Palghar and order dated 7th April, 2021
in Complaint No. 105/2021 under Section 156(3) of Cr.P.C. for registration of FIR.

• Para 7 (ii), (iii) of the ECIR elaborate on the nature of the offences which were
alleged in the FIR against the accused inter alia for siphoning of huge amount of
public money and buying shares in an illegal manner at inflated rates and claiming
losses in such companies.

• Para 7 (iv) of the ECIR specifically states that the Section 120B, 420, 467, 471 of
IPC under which the FIR has been registered falls under paragraph 1 of Part A of the
scheduled offences under the Scheduled to PMLA.

• Para 8 of the ECIR is prefaced as "on the basis of the above, prime facie case of
money laundering u/s. 3 punishable u/s. 4 of PMLA, 2002 appears to have been
made out."

vi) Judgment/order dated 4th May, 2022 of the High Court of Bombay at para 38 has categorically
stated that powers under Section 482 of the Cr.P.C. were exercised to allow prayer clause 'a' in the writ
petitions before the court, and a perusal of the prayer clause 'a' in the two writ petitions before the
High Court of Bombay would show that that the relief sought was the quashing of the order of the
Judicial Magistrate and the said FIR in toto.

vii) As per the petitioners, it was therefore quite apparent that even though prayer in the Writ Petition
filed by Indiabulls Housing Finance Ltd. was seeking relief for quashing of the FIR in relation to the
petitioners therein, the Writ Petition filed by Atul Chordia had a larger and broader prayer of quashing
the FIR per se. These prayers having been granted the question of the said FIR being quashed only
with respect with certain petitioners before the High Court of Bombay does not arise.

viii) Notwithstanding the above, the ECIR was premised on allegations of "connivance", "criminal
conspiracy" and "common intention". Therefore the respondents' contention that the said FIR would
only stand partially quashed and therefore the said ECIR should be sustained is untenable.

ix) Reference was also made to para 32 of the Bombay High Court order dated 4th May, 2022 in
relation to Mr. Harish Fabiani which reads as under:

"32. There is also merit in the submissions of learned Counsel appearing for
Petitioners that though it was alleged in the complaint that one Mr. Harish Fabiani
had obtained loan and misutilized the loan amount, the document placed on record
and relied on by Mr. Rohatgi, learned Senior Counsel demonstrates that the said loan
was repaid."

It was contended on behalf of Mr. Harish Fabiani that in any event the loan taken by Mr. Harish
Fabiani has been totally repaid and on the contrary quite aside from siphoning money from India, Mr.
Harish Fabiani who was a foreign citizen of Indian origin, had in fact played a pivotal role to
strengthen economic and political ties between India and Spain and was the pioneer of private equity
financing in India (as stated in his writ petition).

x) Reference was also made to para 33 of the Bombay High Court order that recorded submissions of
the petitioners before the Bombay High Court and stated as under:

"33. We also find merit in the submissions of Dr. Chandrachud appearing for
Petitioner in WP/6812/2021 that the Respondent No. 2 failed to provide necessary
details in the complaint and only vague statements were made. Mr. Chandrachud
justified in submitting that if the Petitioner could have failed in repayment of the
loan the financial institution certainly would have initiated action against the
Petitioner treating him either as defaulter or would have initiated proceedings by
taking recourse to SARFEAST Act."
 xi) Support was also taken of the observations of the Hon'ble Supreme Court in para 467 (v) (d) of
Vijay Madanlal Choudhary (supra) that there cannot be mere "notional basis" or "assumption that
scheduled offence has been committed". Therefore, submission by the respondents that there could be
an offence still subsisting would not be correct or acceptable.

xii) Reference was also drawn to the reply filed by the respondent No. 1 in W.P. (CRL.) No. 440/2022
from para 6 to 9 where the respondent No. 1 has categorically stated that it was on the basis of the said
FIR that the ECIR had been premised. Para 9 of the said reply states that "the sections under which the
FIR was registered are Scheduled Offence under the PMLA and thus the Subject ECIR was recorded."

xiii) It was vehemently contended that the PMLA authority cannot file a predicate offence and at best
it could only disclose any circumstances which came to their knowledge to the appropriate authority
which in its own wisdom and as per applicable law may proceed to file against the potential accused
alleging a scheduled offence.

xiv) Reliance was placed on State of Punjab Vs. Davinder Pal Singh Bhullar & Ors.,
MANU/SC/1476/2011 : (2011) 14 SCC 770 to contend that once the preceding proceeding stands
quashed all consequential steps emanating out of the same stand quashed as well.

Analysis

It is now therefore imperative to examine the factual matrix and contentions of the parties in relation to the
relief sought by the petitioners.

8. Consequent to directions in a petition filed under section 156 (3) Cr. PC by the complainant before the
Judicial Magistrate First Class, Wada, FIR No. 129/2021 was registered in P.S. Wada (Thane) in District
Palghar, Mumbai on 13th April, 2021 against following accused:

1. Indiabulls Housing Finance Ltd. (Petitioner before this Court)

2. Mr. Mukesh Talreja Companies LLPs

3. Harish Motiram Fabiani (Petitioner before this Court)

4. Jasol Investment and Trading

5. Americorp Capital

6. Nimir Kishore Mehta

7. Rana Kapoor and Bindu Kapoor

8. Atul Chordia of Chordia Group (Petitioner before this Court)

9. Writ Petition Nos. 1805/2021 and 6812/2021 were filed in High Court of Bombay by various petitioners
seeking quashment of the order of 7th April, 2021 passed by the Judicial Magistrate First Class, Wada and FIR
No. 129/2021 of P.S. Wada.

10. Para 'a' of the prayer in Writ Petition No. 1805/2021 filed by Indiabulls Housing Finance Ltd. & Ors. reads
as under:

"a. Quash order dated 07.04.2021 passed by judicial magistrate in O.M.A. No. 105 of 2021 and FIR
No. 0129 of 2021 dated 13.04.2021 in P.S. Wada under Sections 420, 465, 467, 468, 469, 470, 471
read with 120(B) of the Indian Penal Code, 1860 against the Petitioner and set aside all proceedings
arising therefrom; and"

(emphasis supplied)
11. Para 'a' of the prayer in the Writ Petition No. 6812/2021 filed by Shri Atul Chordia reads as under:

"a. This Hon 'ble Court be pleased to issue a Writ of Certiorari or any other Writ, order or direction
calling for the records and proceedings of the said FIR bearing No. 129 of 2021 dated 13.04.2021
(Exhibit A' hereto) and upon examining the legality, correctness and propriety of the proceedings
conducted so far, be pleased to quash and set aside the said FIR;"

12. The High Court of Bombay by the judgment and order dated 4th May, 2022 recorded in para 38 as under:

"38. We are of the opinion that the lodgment of the complaint against the Petitioners and continuity of
the proceedings, is an abuse of process of law. Thus, these are the fit cases for exercising inherent
powers of this Court under Section 482 of Code of Criminal Procedure, 1973 to secure the ends of
justice. Accordingly, both Writ Petitions are allowed in terms of prayer clause 'a'. Rule made
absolute."

(emphasis supplied)

13. It is therefore incontrovertibly clear from a bare perusal of the judgment/order of the High Court of
Bombay read in conjunction with prayer clause 'a' extracted above from both the Writ Petitions before the
Court, that both the order dated 7th April, 2021 passed by Judicial Magistrate in O.M.A. No. 105 of 2021 and
FIR No. 129/2021 dated 13th April, 2021 in P.S. Wada stood quashed in toto. This Court finds no merit in the
argument by the Respondents that the quashing was qua the petitioners before the High Court of Bombay and
not the other accused in the said FIR. The quashing of the FIR and order of the Judicial Magistrate preceding
its registration was complete and not conditional, partial or truncated in any manner. Nothing in the said
judgment/order of the High Court of Bombay suggests otherwise. Once the predicate order under section
156(3) Cr.P.C. and the FIR stood quashed there would be no residue left in the matter against the accused as
regards the allegations made in the said complaint and crystallized in the FIR.

14. Reference in this regard may be made to the judgment of the Hon'ble Supreme Court in State of Punjab v.
Davinder Pal Singh Bhullar & Ors., MANU/SC/1476/2011 : (2011) 14 SCC 770, brought to this Court's
attention by Senior Counsel for one of the petitioners, where the Hon'ble Supreme Court in paras 105, 107 and
111 has stated as under:

"105. The FIR unquestionably is an inseparable corollary to the impugned orders which are a nullity.
Therefore, the very birth of the FIR, which is a direct consequence of the impugned orders cannot have
any lawful existence. The FIR itself is based on a preliminary enquiry which in turn is based on the
affidavits submitted by the applicants who had filed the petitions under Section 482 CrPC.

"107. It is a settled legal proposition that if initial action is not in consonance with law, all subsequent
and consequential proceedings would fall through for the reason that illegality strikes at the root of
the order. In such a fact situation, the legal maxim sublato fundamento cadit opus meaning thereby
that foundation being removed, structure/work falls, comes into play and applies on all scores in the
present case.

"111. Thus, in view of the above, we are of the considered opinion that the orders impugned being a
nullity, cannot be sustained. As a consequence, subsequent proceedings/orders/FIR/investigation stand
automatically vitiated and are liable to be declared non est".

(emphasis supplied)

15. It is further the case of the petitioners before this Court that various petitioners in the respective writ
petitions are not even accused in the said FIR No. 129/2021 and therefore there is no predicate offence and
therefore the question of the said ECIR being sustained in isolation against them does not arise. For ease of
reference, the list of petitioners before this Court who are not an accused in the said FIR are tabulated below:
It is noted that this Court vide order dated 14th March, 2022 had allowed CRL. M.A. 4803/2022 filed by
Sameer Gehlaut, petitioner No. 3 in W.P. (CRL.) 443/2022, deleting his name from the array of parties, on the
ground that he was not an accused in the FIR.

16. As per the petitioners, the above named persons are various employees of Indiabulls Housing Finance
Limited and related companies and have been roped in by the respondents in the said ECIR without there
being any underlying predicate offence registered against them. In light of the conclusion and finding of the
Hon'ble Supreme Court in Vijay Madanlal Choudhary (supra) this Court finds no reason for the said ECIR to
be sustained against them, without there being any evidence of a predicate offence or an FIR against them
which is in existence or is legally alive.

17. In all these cases therefore, both of the employees against whom no complaint was ever filed for the
scheduled offences and those against whom it was filed and has been quashed subsequently by a Court of
competent jurisdiction, it would only be appropriate that the said ECIR against them under PMLA be quashed
and all proceedings consequent thereto undertaken or directed by the Respondents or any authority are set
aside.

18. As regards the contention of the respondents that since an SLP has been preferred by the ED assailing the
judgment/order dated 4th May, 2022 of the High Court of Bombay this Court should stay its hands in the
interim, this Court finds that judgment/order of the High Court of Bombay quashing the FIR and the
preceding order of the Judicial Magistrate was complete in all respects and it was exactly this kind of situation
that the Hon'ble Supreme Court contemplated in para 467 (v) (d) of Vijay Madanlal Choudhary (supra) as a
final discharge/acquittal of the scheduled offence or the criminal case being quashed by a court of competent
jurisdiction. Therefore, finality has indeed been obtained as regards the extinguishment of the FIR. The fact
that a Special Leave Petition had been filed by the ED which was not the party in the Writ Petitions before the
High Court of Bombay against the said order of the High Court of Bombay does not dilute or erode the
finality of the order of the High Court of Bombay.

19. In this regard reference may also be placed on para 253 of Vijay Madanlal Choudhary (supra) which reads
as under:

"253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a
result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The
authorities under the 2002 Act cannot resort to action against any person for money-laundering on an
assumption that the property recovered by them must be proceeds of crime and that a scheduled
offence has been committed, unless the same is registered with the jurisdictional police or pending
inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is
indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the
event the person named in the criminal activity relating to a scheduled offence is finally absolved by a
Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of
the criminal case (scheduled offence) against him/her, there can be no action for money-laundering
against such a person or person claiming through him in relation to the property linked to the stated
scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the
2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting
of these provisions and disregarding the express language of definition clause "proceeds of crime", as
it obtains as of now."

(emphasis supplied)

20. The Hon'ble Supreme Court has been clear and categorical in its reasoning as evident from the para
extracted above. The undeniable sequitur of the above reasoning is that firstly, authorities under the PMLA
cannot resort to action against any person for money-laundering on an assumption that the property recovered
by them must be proceeds of crime and that a scheduled offence has been committed; secondly, the scheduled
offence must be registered with the jurisdictional police or pending inquiry by way of complaint before the
competent forum; thirdly, in the event there is already a registered scheduled offence but the person named in
the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction
owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can
be no action for money laundering against not only such a person but also any person claiming through him in
relation to the property linked to the stated scheduled offence. In other words no action under PMLA can be
resorted to unless there is a substratum of a scheduled offence for the same, which substratum should legally
exist in the form of a subsisting (not quashed) criminal complaint/inquiry or if it did exist the accused has
since been discharged or acquitted by a Court of competent jurisdiction.

21. As regards the contention of the learned ASG for the ED that Section 66 PMLA permits the Respondents
to activate any authority by disclosure of a scheduled offence, this Court is of the considered view that an
ECIR or a proceeding under the PMLA cannot be triggered merely on that assumption alone, as noticed by the
Hon'ble Supreme Court in the para 253 of Vijay Madanlal Choudhary (supra). Section 66(2) which was being
pressed by the Respondents for this purpose merely encapsulates the power of the Director or any other
authority to disclose/share any information it may have regarding contravention of any other law by a
person/entity "for necessary action". The provision itself enables disclosure and sharing of information inter se
authorities, however mere disclosure does not crystallize a scheduled offence. It is merely an "assumption" till
it precipitates as being "registered with the jurisdictional police or pending inquiry by way of complaint before
the competent forum" (per the Hon'ble Supreme Court).

22. Reliance of the learned ASG on State of Bihar & Anr. Vs. P.P. Sharma, IAS & Anr. (supra) and Municipal
Corporation of Delhi Vs. Ram Kishan Rohtagi & Ors., (supra) may not be relevant to the conspectus of the
issue before this Court. In these petitions, this Court is not required to go into the merits of the original
complainant or the consequent investigation or the potential cognizance of the complaint regarding those who
weren't arrayed as accused. The judgment/order of the Hon'ble High Court of Bombay in this regard is final at
this stage and any other allegation against the accused in the said FIR or any other persons not accused in the
said FIR is a matter which would be for the appropriate Court of competent jurisdiction to decide in an
appropriate proceeding before that Court. Suffice it to say, at this stage nothing has been brought to the
attention of this Court of any existing or surviving complaint/inquiry or an FIR against the petitioners before
this Court for any of the offences as provided in the Schedule of PMLA. In any event it is clarified that the
relief sought in this petition relating to the particular ECIR no. ECIR/07/HIU/2021 which was specifically
predicated upon FIR no. 129/2021, in light of the conclusions arrived at in Vijay Madanlal Choudhary (supra)
by the Hon'ble Supreme Court, cannot survive.

23. Mr. Zoheb Hossain, advocate for the ED, towards the end of the hearing before this Court and just prior to
this Court reserving judgment, made a submission that one of the writ petitions before this Court, the one filed
by Shri Atul Chordia, was part of a Transfer Petition (Criminal) No. 245/2022 filed before the Hon'ble
Supreme Court and was tagged along with the batch of matters in which the leading matter was Vijay
Madanlal Choudhary & Ors. Vs. Union of India & Ors., SLP (CRL.) 4634 of 2014. According to the counsel
for ED, the transfer petition was disposed of by the Hon'ble Supreme Court on 9th September, 2022 in terms
of the judgment dated 27th July, 2022 in Vijay Madanlal Choudhary (supra) and therefore the lis in the issue
would not survive before this Court. Aside from the propriety of raising this contention during the last
moments of the hearing, contending that this Court may not have jurisdiction, the submission itself is
untenable since in the concluding paras of Vijay Madanlal Choudhary (supra), while dealing with the Transfer
Petitions, the Hon'ble Supreme Court has noted:

"468. These transfer petitions are disposed of with liberty to the private parties to pursue the
proceedings pending before the High Court. The contentions, other than dealt with in this judgment,
are kept open, to be decided in those proceedings on its own merits. It would be open to the parties to
pursue all (other) contentions in those proceedings, except the question of validity and interpretation
of the concerned provision(s) already dealt with in this judgment."

Conclusion

24. In light of the above analysis and discussion this Court concludes as under:

a) The relief sought regarding constitutionality or vires of various provisions of the Prevention of
Money Laundering Act, 2002 is infructuous having been decided by the Hon'ble Supreme Court in
Vijay Madanlal Choudhary & Ors. Vs. Union of India & Ors., MANU/SC/0924/2022.

b) The ECIR no. ECIR/07/HIU/2021 registered by the Directorate of Enforcement, Department of

c) All proceedings arising from the ECIR No. ECIR/07/HIU/2021 are set aside and there would be no
further coercive action or search and seizure or summons arising from the said ECIR.

d) The Look out Circulars issued by respondents pursuant to the ECIR No. ECIR/07/HIU/2021 are
also set aside.

CRL. M.A. 3495/2022, CRL. M.A. 5002/2022 CRL. M.A. 10739/2022, CRL. M.A. 14801/2022, CRL. M.A.
17030/2022 in W.P.(CRL.) 408/2022

And

CRL. M.A. 3811/2022, CRL. M.A. 14894/2022 in W.P. (CRL.) 440/2022

And

CRL. M.A. 3845/2022, CRL. M.A. 4639/2022, CRL. M.A. 9001/2022, CRL. M.A. 14896/2022, CRL. M.A.
14897/2022 in W.P.(CRL.) 443/2022
And

CRL. M.A. 7761/2022, CRL. M.A. 14900/2022 CRL. M.A. 14901/2022 in W.P.(CRL.) 919/2022

And

CRL. M.A. 11196/2022, CRL. M.A. 14898/2022, CRL. M.A. 14899/2022 in W.P. (CRL.) 1299/2022

And

CRL. M.A. 11317/2022, CRL. M.A. 15145/2022, In W.P.(CRL.) 1316/2022

And

CRL. M.A. 11534/2022, CRL. M.A. 14891/2022, CRL. M.A. 14892/2022 in W.P.(CRL.) 1350/2022

And

CRL. M.A. 14723/2022 in W.P.(CRL.) 1691/2022

All pending applications are disposed of as infructuous.

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