ED’s ECIR need not be quashed just because FIR has been set aside, rules Madras HC

The Enforcement Case Information Report (ECIR) registered by the Directorate of Enforcement (ED) under the Prevention of Money Laundering Act (PMLA) of 2002 cannot be quashed if the First Information Report (FIR) registered by another agency for the predicate offence had been set aside only on technical or procedural grounds and not on substantive grounds, the Madras High Court has ruled.

The Enforcement Case Information Report (ECIR) registered by the Directorate of Enforcement (ED) under the Prevention of Money Laundering Act (PMLA) of 2002 cannot be quashed if the First Information Report (FIR) registered by another agency for the predicate offence had been set aside only on technical or procedural grounds and not on substantive grounds, the Madras High Court has ruled.

A Division Bench of Justices S.M. Subramaniam and V. Sivagnanam held so while dismissing three writ petitions filed by Vijayaraj Surana to quash the ECIRs registered against him in 2019 and 2020. The petitioner had insisted on quashing the ECIRs since they had been registered on the basis of FIRs booked against him by the Central Bureau of Investigation (CBI) for predicate offences that find a place in the schedule to the PMLA.

The petitioner had contended that the CBI’s FIR – with respect to the seizure of 400.47 kg of gold and other alleged irregularities in borrowing loans to the tune of ₹1,301.76 crore and another ₹1,495.76 crore from IDBI Bank and ₹1,188.56 crore from State Bank of India (SBI) – had been quashed by the High Court of Karnataka on April 15, 2024, and therefore, the ED could not be allowed to continue the investigation under the PMLA.

Opposing the plea, Additional Solicitor General AR.L. Sundaresan, assisted by ED Special Public Prosecutor N. Ramesh, argued that certain observations made by the Supreme Court in the famous Vijay Madanlal Choudhary’s case could not be read in isolation in order to arrive at a conclusion that the ECIR should also get quashed after the setting aside of every FIR related to the predicate offence.

Accepting their submissions, the Division Bench said the High Court of Karnataka had quashed the CBI’s FIR with respect to the writ petitioner alone because the Serious Fraud Investigation Office (SFIO) was also seized of the issue. “Hence, it is amply clear that the High Court has quashed the FIR only on the ground that another Investigating Agency is seized of the matter,” the Bench said.

The judges went on to state: “The (Karnataka High) Court has not dealt with the allegations nor tested the merits of the offences charged in the FIR... Hence, the FIR was quashed purely on this technical or procedural issue and not on substantive grounds and has not made any findings as to the offences or the prima facie allegations in the FIR. Therefore, the quashing of the FIR shall not warrant an automatic quashing of ECIR.”