ED Can Report Cognizable Offence To Police During FEMA Search : P&H High Court In Minister Sanjeev Arora's Bail Denial

The Punjab and Haryana High Court has held that an Enforcement Directorate (ED) officer conducting a search under the Foreign Exchange Management Act, 1999 (FEMA) can inform the local police that a cognizable offence has been committed. The officer can do so even though FEMA has no provision like Section 66 of the Prevention of Money Laundering Act, 2002 (PMLA). The Court held that an FIR registered on such information can validly serve as the predicate offence for a money laundering case.

Justice Kuldeep Tiwari observed, “Although the FEMA, 1999, contains no enabling provision akin to Section 66 of the PMLA, 2002, it imposes no restriction to share information regarding the commission of a cognizable offence to the local police of competent jurisdiction, rather informing commission of a cognizable offence does not require any statutory backing.”

The Court made these observations while dismissing the regular bail plea of Sanjeev Arora, former Chairman and Managing Director of M/s Hampton Sky Realty Limited (HSRL). The ED arrested him on May 9, 2026 over alleged fictitious exports of iPhones worth ₹102.50 crore to two UAE entities.

The Challenge To The Predicate FIR

The ED searched the premises of HSRL and other entities on April 17, 2026 under Section 37 of FEMA, read with Section 132 of the Income Tax Act. During the search, an ED Assistant Director lodged a complaint with the Gurugram Police. FIR No. 137 was registered at Police Station Udyog Vihar at 2:22 am on April 18 under provisions of the BNS dealing with cheating, forgery and conspiracy. The ED then registered an ECIR on May 5, treating this FIR as the predicate offence.

Senior Advocate appearing for Arora submitted that No ECIR existed when the complaint was made, so Section 66 of the PMLA could not be invoked. FEMA has no equivalent provision, so the Assistant Director had “neither the power nor the obligation” to approach the police.

The FIR was registered within 82 minutes of the general diary entry, without any preliminary inquiry into a complex, multi-jurisdictional transaction. Counsel argued this showed the FIR was registered mechanically to create jurisdiction under the PMLA, and that the arrest was therefore vitiated by mala fides.

The ED replied that exchange of information between government agencies is “well recognised and established within the framework of law.” It relied on the Supreme Court's decision in Anil Tuteja v. Union of India (2025), the High Court's own decision in Pirtpal Singh v. ED, and Manideep Mago v. Union of India of the Delhi High Court.

The Court rejected the petitioner's argument as “legally untenable.” It held that Section 66 of the PMLA is a distinct provision that imposes a mandatory duty to share material with other agencies, and that its exercise “has nothing to do with the proceedings pending at the relevant time.”

Relying on Anil Tuteja, the Court noted the Supreme Court's observation that the investigations of different agencies “travel on separate channels.” It said the material may be common, but the conclusions drawn from it may differ.

Since the information shared by the ED disclosed a cognizable offence, the Court held that “the law mandated that the local police should register an FIR upon receipt of such information.”

On the allegation of mala fides, the Court held, “At this stage, it would be premature for this Court to record any finding that the FIR was registered solely for the purpose of creating a predicate offence or with any oblique motive, particularly when there is sufficient legally admissible and incriminating material which, prima facie, establishes the guilt of the petitioner.”

Cheating The Revenue Is Cheating

The Court also rejected the argument that the FIR named no person who had been cheated. It relied on Ishwarlal Girdharilal Parekh v. State of Maharashtra, where the Supreme Court held that dishonestly inducing a tax officer to make an order amounts to inducing the making of a “valuable security” under Section 420 of the IPC.

Applying that principle, the Court held that the IGST refund of about ₹15.63 crore, allegedly obtained by falsely representing that genuine exports had taken place, caused wrongful gain to the petitioner and wrongful loss to the GST Department. It concluded that a scheduled offence was prima facie made out.

Other Findings

The Court also held that, the twin conditions under Section 45 of the PMLA apply even when bail is sought before a constitutional court. The Court relied on Vijay Madanlal Choudhary and Union of India v. Kanhaiya Prasad, and rejected the argument based on Section 44(2) of the PMLA and a ruling of the Allahabad High Court.

A summons under Section 50 is not a precondition to arrest under Section 19, since they are “separate and distinct statutory powers.” The Court found that Arora's evasive answers during the search, together with the banking and GST evidence already collected, supplied the “reason to believe” required for arrest.

The GST Appellate Authority order relied on by Arora was not “an unqualified clean chit.” The Authority had reserved liberty to act if the records were later found defective, and had rejected the input tax credit claims relating to the two main suppliers.

IMEI Trail

On the merits, the Court relied on IMEI data from Apple. According to that data, 123 identical IMEI numbers were declared in two separate export consignments to the same UAE buyer.

58 handsets had been activated in India before their declared export and 97 handsets were activated by Indian consumers after they were supposedly exported.

A three-way reconciliation of the records of Apple, Amazon and HSRL traced 1,249 handsets to 862 retail buyers across 11 States and Union Territories who had no connection with HSRL.

The Court also noted that the Every Tier-2 supplier in the supply chain was linked to a single mobile number, and none of them had any inward supply of mobile phones.

Admissions by staff. HSRL's own staff admitted that no phones were ever physically received at its office.

It noted that, HSRL began trading in mobile phones 107 days before the amendment to its Memorandum of Association took legal effect.

The Court concluded that, “Something comes out of something, and nothing comes out of nothing... Once, prima facie, there was no inward supply of goods, the subsequent export of such goods cannot reasonably be expected to have taken place.”

Holding that the material prima facie established “a clear case of trade-based money laundering,” the Court found that Arora had failed to satisfy the twin conditions. It also refused bail on medical grounds. It noted that the Supreme Court had already dismissed his Special Leave Petition on July 28, 2026 after the ED assured proper medical care, and that his condition was stable. The petition was dismissed.