Case Note & Summary
The Bombay High Court considered multiple writ petitions filed by Amar S. Mulchandani and other petitioners, challenging the validity of investigations and actions initiated by the Directorate of Enforcement under the Prevention of Money Laundering Act, 2002 (PMLA). The petitions mainly revolved around accusations of money laundering following fraudulent loan disbursements in Seva Vikas Co-operative Bank. The judgment addresses the legality of subsuming multiple FIRs under a single ECIR (Enforcement Case Information Report) and whether investigations could proceed despite earlier closure reports and quashing of related audits. The court ultimately upheld the investigation, emphasizing the serious nature of the offenses and the ED's power under the PMLA.
1. Background and Initial FIR Registration Date and Details: An FIR (No. 163/2018) was registered on 17/05/2018 based on a complaint by Sagar Suryawanshi, an account holder at Seva Vikas Co-operative Bank, alleging fraudulent loan disbursements amounting to Rs. 11.5 crores to Rosary Education Group by the bank's officials and the Aranha family. 2. Audit Report Findings and Subsequent FIRs Audit and Investigation: An audit report conducted under the Maharashtra Co-operative Societies Act revealed irregularities in 124 loan accounts, amounting to Rs. 429.57 crores. Subsequent FIRs: FIRs 525/2021, 526/2021, and 527/2021 were registered based on the audit report, implicating Amar Mulchandani and others for financial misconduct and money laundering. 3. Quashing of Audit Report and Further Proceedings State Government’s Action: The audit report was quashed by the State Government following a revision application, leading to legal challenges about the validity of ongoing investigations by the ED. 4. Legal Arguments by the Petitioners Non-existence of ECIR: Petitioners argued that with the closure of the original FIR (163/2018) and the quashing of the audit report, the ECIR registered by the ED became non-existent and should be quashed. 5. Counter Arguments by the ED Subsuming Multiple FIRs: The ED defended its actions by stating that subsuming FIRs within the existing ECIR is a standard practice to ensure comprehensive investigation into the interconnected transactions and parties. 6. Court’s Observations and Decision Independence of Money Laundering Investigations: The court highlighted that money laundering investigations under PMLA are independent and can continue even if the predicate offense FIR is quashed or closed. Legality of Subsuming FIRs: The court upheld the ED’s approach, citing that it was necessary for a synchronized investigation given the large scale and interconnection of fraudulent transactions. Acts and Sections DiscussedIndian Penal Code (IPC) Sections:
Section 420: Cheating and dishonestly inducing delivery of property. Section 406, 409: Criminal breach of trust. Section 34: Acts done by several persons in furtherance of common intention.Prevention of Money Laundering Act, 2002 (PMLA):
Section 3: Offense of money laundering. Section 4: Punishment for money laundering. Section 50: Powers of authorities regarding summons, production of documents, and evidence.Maharashtra Co-operative Societies Act, 1960:
Section 81: Audit of societies. Legal RatioThe High Court ruled that investigations under the PMLA are not invalidated by the quashing of the predicate offense FIR or related audit reports. The judgment reinforces the independence and authority of the ED in investigating and prosecuting money laundering cases, even when linked to complex financial fraud involving multiple parties and transactions.
Subjects:Money Laundering, Bank Fraud, Criminal Law
PMLA, Seva Vikas Co-operative Bank, Directorate of Enforcement, Bombay High Court, Multi-Crore Fraud, Money Laundering Investigation
Issue of Consideration: Amar S. Mulchandani Versus Directorate of Enforcement through its Deputy Director and Ors.
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