The Enforcement Directorate has the right to challenge the closure report of the underlying offence: High Court of Madras

“In a complaint under the PMLA, if the underlying offense is dismissed, in this case it has resulted in a miscarriage of justice, the Enforcement Directorate is fully entitled to refer the facts to the High Court by raising a petition under Section 482 of the Convention. Criminal Procedure Code to achieve the goals of justice,“, the court noted.

The bench of Justice SM Subramaniam and Justice V Sivagnanam reiterated that PMLA is a separate offense and that when the closure report of the underlying offense is filed, it will not automatically close the PMLA proceedings.

“Once “proceeds of crime” are identified by the Enforcement Directorate and a complaint under the PMLA is filed in a court of competent jurisdiction, the offense under the PMLA becomes a separate offense and an independent process to be pursued in accordance with the procedures as provided in the PMLA“, the court said.

Thus, the court overturned the closure report filed by the state police and taken up by a magistrate in connection with the cases involving lottery baron Santiago Martin and his wife.

An FIR has been registered against Martin, his wife and one Nagarajar for offenses punishable under Section 294N, Section 420 and 120B of the Indian Penal Code for possession of unaccounted money. In this regard, since the offense under Section 420 was a planned one, proceedings under PMLA were also initiated.

In seeking a preliminary lien, Martin provided a sales agreement in which he claimed the refund was a sales charge. It was later discovered that the stamp paper on which the sale deed was printed was dated earlier. After that, the investigator drew up a protocol on making changes. However, the state police later submitted a closure report, which was accepted by the magistrate. This was challenged by the ED.

Additional Solicitor General ARL Sundaresan, appearing for the ED, argued that the magistrate’s cryptic order accepting the closure report was against all canons of justice. He submitted that the closure report itself states that the genuineness of the sale certificate cannot be established. He claimed that the magistrate did not take into account the available materials and the preliminary investigation.

On the contrary, Advocate General PS Raman, appearing for the State, and Senior Advocate NR Elango, appearing for the respondents, questioned the propriety of the present writ petition and submitted that when the predicate offense itself has been disposed of, the PMLA cannot be seasoned It was also submitted that the ED was not an aggrieved person and therefore had no locus standi to file this petition.

The court noted that since the ED had already frozen the proceeds of crime, it was necessary for the ED to challenge the propriety of the order granting final confiscation of the proceeds of crime. The court also noted that since the action of the ED was dependent on the predicate offence, the closure of the predicate offense had to be challenged to continue the proceedings under the PMLA.

“if the investigating authority dealing with the underlying offense fails to take appropriate action in accordance with law and in view thereof the accused is allowed to go free with the proceeds of crime, the administration of law enforcement measures to achieve the objectives under the PMLA and to deal with proceeds of crime under the PMLA is entitled to the remedies provided by law“, the court said.

The court also noted that under Section 482 of the CrPC, any person who was involved in the issues or concerned about the outcome of the case could approach the High Court stating that an illegal offense had taken place which needed to be rectified in the interest of justice.

Thus, the court declined to accept the defendants’ contention that ED is not an aggrieved party for the purposes of this petition. The court observed that the ED was not a party to the issues pending in the case and, therefore, the petition was maintainable.

The court also opined that the closure report was found to be incorrect as the dated fake document was created on stamp paper which itself proved the existence of the main crime and the planned crime.

Thus, the court held that the order passed by the Magistrate was a mechanical order passed without considering all the relevant facts and materials available on record. The court also observed that the State Agency tried to expose the underlying crime in a suspicious manner and on extraneous considerations, which was evident from their action in submitting the final closure report.

Thus, the court obliged the State Investigation and the Criminal Investigation Department to start the investigation of the case jointly and to ensure the investigation of the criminal case in accordance with the law.

The plaintiff’s lawyer: Mr. ARL Sundaresan Additional Solicitor General of India Assisted by Mr. S. Sasikumar Special Public Prosecutor

Defendants’ lawyer: Mr. PS Raman, Advocate General. Assisted by Mr. R. Muniyapparaj, Additional Public Prosecutor (for R1) Mr. NR Lango, Senior Counsel Mr. T. Vijay (for R2) and Mr. AS Aswin Prasanna (for R3) and Ms. Aruna Elango (for R4 ) and Mr.Agilesh Kumar (for R5)

Citation: 2024 LiveLaw (Mad) 409

Case title: Assistant Director v. State et al

Case No: CRL.OPNo.28289 of 2023