Coal Block Case: Delhi High Court Quashes PMLA Case Against EMTA Coal After CBI Files Closure Report In 2015 FIR

The Delhi High Court has quashed the ECIR and attachment orders passed by the Enforcement Directorate against EMTA Coal Limited and other individuals, observing that if there is an acquittal or discharge or a closure report has been filed in the predicate offence, the ECIR would not stand and the same would be liable to be quashed.

"In view of the settled legal position in Vijay Madanlal Choudhary and the subsequent decisions and orders thereafter, the impugned attachment orders dated 14th February, 2022 and 20th June, 2022 as also the ECIRs are quashed," Justice Prathiba M Singh said.

In September 2014, the Supreme Court had de-allocated and cancelled various captive coal blocks which were allocated to West Bengal State Electricity Board and West Bengal Power Development Corporation Ltd.

In 2015, an FIR was registered by Central Bureau of Investigation (CBI) under sections 120B and 420 of the Indian Penal Code, 1860 and sections 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988 against EMTA, its partners or directors and also the officials of the WBPDCL, WBSEB and other unknown persons. 

The ED also registered ECIRs in the case on the basis of the CBI FIR.

CBI in January 2021 filed a closure report in the matter. The trial court in July 2022 accepted the closure report and said that from the available record, it cannot be ascertained that there was any criminality in allocation of coal blocks and/or their mining. 

The attachments orders passed by ED last year were stayed by the court in March and August 2022 after taking note of the submission that CBI has filed a closure report in the predicate offence. 

Challenging the attachment orders, the counsel representing the petitioners told court that in view of the recent decisions of the Supreme Court and the high court, the provisional attachment orders in question would no longer survive as the petitioners have been discharged in the predicate offence.

Reliance was placed on Vijay Madanlal Choudhary v. Union of India & Ors and Prakash Industries v. Directorate of Enforcement to argue that once the scheduled offence itself has come to an end resulting in discharge or acquittal and no proceedings are pending against the petitioners, the attachment orders cannot continue in view of the fact that section 3 of the PMLA contemplates that a predicate offence is a necessary precondition for any assets to be considered as “proceeds of crime.”

The counsel representing the ED, while relying on Vijay Madanlal Choudhary, argued that irrespective of whether the predicate offence exists or not, unless and until the trial court comes to a conclusion that the assets are not proceeds of crime, the attachment orders can continue and the ED can file an independent complaint in such a case.

However, when the court questioned whether there is even a single case where a separate complaint has been registered under PMLA by ED without a predicate offence having existed, the counsel submitted that this could be the first case.

ED also argued that trial court while accepting the closure report in the CBI case has not arrived at a conclusion that there was no criminality involved in the conduct of the petitioners and hence the court ought not to quash the attachment orders.

Justice Singh said the Supreme Court in Vijay Madanlal Choudhary has categorically held that for the existence of “proceeds of crime” under section 2(1)(u) of the PMLA, the existence of a criminal complaint pending enquiry and/or trial would be necessary. 

"Further, if the person in question has been finally discharged or acquitted of the scheduled/predicate offence, there can be no offence of money laundering against the said person," the court added.

The court further said a co-ordinate bench in Prakash Industries took a similar view that offence of money laundering cannot be a standalone offence, prior to the judgment of the Supreme Court in Vijay Madanlal Chaudhary.

"Subsequent to the judgment of the Supreme Court in Vijay Madanlal Choudhary (supra), the ld. Division Bench of this Court, in Harish Fabiani and Ors. v. Enforcement of Directorate and Ors., 2022 SCC OnLine Del 3121 has also taken a similar view," said the bench. 

The court further said that Supreme Court in Parvathi Kollur v. Enforcement Directorate has reiterated that closure of the proceedings under the PMLA is the natural consequence of the acquittal/discharge in the predicate offence.

"A perusal of the orders passed in Parvathi Kollur (supra) as also in the other three judgments referred above leaves no matter of doubt in the mind of the Court that if there is an acquittal/ discharge or a closure report has been filed in the predicate offence, the ECIR would not stand and the same would be liable to be quashed," it added.

Quashing the attachment orders and also the ECIRs, the court said, "In the facts of the present case, the Trial Court, in the complaint case which was pending before it, has clearly come to a conclusion that the closure report deserves to be accepted and no criminality is ascertainable as the documents in respect thereof were not available."

Counsel for petitioners: Senior Advocate Siddharth Aggarwal and Advocates Krishna Datta Multani, Parangat Pandey, Arshiya Ghosh, Shaunak Dutta,   Abhimanyu Bhandari, Kartika Sharma and Vanshita Gupta.

Counsel for respondents: Anupam S Sharma, Special Counsel ED along with Advocates Harpreet Kalsi, Prakarsh Airan, Abhishek Batra and Ripudaman Sharma.

Title: EMTA COAL LIMITED & ORS. v. DEPUTY DIRECTOR DIRECTORATE OF ENFORCEMENT

Citation: 2023 LiveLaw (Del) 49

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