SFIO Probe No Bar To PMLA Proceedings: Delhi High Court Upholds ED's Provisional Attachment In ₹6000 Cr Forex Scam
The Delhi High Court has made it clear that probe by Serious Fraud Investigation Office into the affairs of a company does not bar parallel proceedings under Prevention of Money Laundering Act.A division bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar thus dismissed the plea moved by certain accused, challenging provisional attachment of their movable and immovable...
The Delhi High Court has made it clear that probe by Serious Fraud Investigation Office into the affairs of a company does not bar parallel proceedings under Prevention of Money Laundering Act.
A division bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar thus dismissed the plea moved by certain accused, challenging provisional attachment of their movable and immovable properties during pendency of SFIO probe into their (shell) companies under Section 447 of the Companies Act, 2013.
The judges observed,
“contention of the Petitioner, that the transfer of investigation to the SFIO would bar parallel proceedings under the PMLA, is legally untenable. This Court is afraid that the said argument holds no ground since the express language, “in respect of any offence under this Act”, used in Section 212(2) the Act of 2013, reveals that the said provision applies only to offences covered under that Act.”
Further, the Court continued, a purposive and harmonious construction of the statutory regime confirms that the Act of 2013 is merely applicable to the offences relating to companies and does not extend to offences under other laws, including the PMLA.
For context, a bank official had alleged serious irregularities pertaining to foreign exchange transactions amounting to approximately Rs. 6000 Crores, involving accounts of various shell companies.
During investigation, it was revealed that the Petitioners, in active collusion with importers and exporters, had orchestrated the creation of shell companies in India.
ED then provisionally attached Petitioners' properties as being proceeds of crime arising out of illegal acts connected to the foreign exchange laundering scheme using shell companies.
Petitioners argued that the right of CBI and ED to investigate the present case stood interdicted by virtue of Section 212(2) of the Act of 2013, as the matter was handed over to the SFIO.
It was submitted that the said provision creates a statutory bar, preventing any other agency from investigating offences arising under matters related to the Act of 2013.
ED on the other hand argued that the said provision merely deals with investigation into the affairs of the company, whereas in the present case, the scheduled offence comprising of Section 420 and 120-B of IPC and Section 13 of Prevention of Corruption Act, do not fall within the purview of SFIO under the Act of 2013.
It was further argued that Section 212(2) of the Act of 2013 bars other agencies only from investigating offences under the Act of 2013 and not under any other law.
Agreeing with ED, the High Court held, “While Section 212 is a self-contained code governing SFIO investigations into company affairs, its scheme does not preclude other agencies, in their own domain, from probing offences under separate laws.”
The Court emphasized that Act of 2013 only deals with violations of corporate governance, norms, fraudulent conduct by the officers of the company and irregularities in the administration of the said company.
“However, the PMLA, penalises the process or activity connected with the proceeds of crime derived from scheduled offences, and under which, such tainted property would be classified as proceeds of crime. The offences defined under both the aforementioned statues are distinct and involve separate elements of proof while serving distinct legislative purposes.”
The Court further clarified that under Section 5 of the PMLA, the Designated/ Authorised Officer is not required to provide a separate pre-attachment hearing or notice of belief before passing a Provisional Attachment Order.
“The Act contains comprehensive safeguards, including mandatory recording of reasons in writing and forwarding the same to AA in a sealed envelope, and subsequently, to the affected person through the issuance of show cause notice,” the Court said and dismissed the petition.
Appearance: Mr. Naveen Malhotra, Mr. Ritvik Malhotra and Mr. Nilansh Malhotra, Advocates for Petitioner; Mr. Anupam S. Sharrma, Special Counsel with Mr. Vivek Gurnani, Ms. Harpreet Kalsi, Mr. Abhishek Batra, Mr. Ripudaman Sharma, Mr. Vashisht Rao, Ms. Riya Sachdeva, Mr. Vishesh Jain and Mr. Anant Mishra, Advocates for ED (and connected matters)
Case title: Sanjay Aggarwal v. Union Of India & Ors (and connected matters)
Citation: 2025 LiveLaw (Del) 1628
Case no.: W.P.(C) 2819/2016 (and connected matters)