Whether Enforcement Case Information Report can proceed while proceedings pursuant to FIR stayed by Court? Madras High Court refrains ED to proceed against Senthil Balaji

Madras High Court

Madras High Court: In a case relating to a writ petition filed by Tamil Nadu electricity minister V. Senthil Balaji for issuance of a writ of certiorari, to call for the entire records in connection with the Enforcement Case Information Report (ECIR) issued by the Enforcement Directorate (ED), and to quash the same as illegal and unconstitutional, the division bench of T.Raja and K. Kumaresh Babu, JJ. observed that the quashing of the proceedings in Complaint case of 2021 and staying of the proceedings in Complaint Case of 2020 and of 2021, the scheduled offence for the present case is eclipsed, suspended or stop operating during the period of stay, and the ED should have awaited the finality of the said proceedings, thus, refrained ED from proceeding any further pursuant to the impugned proceedings.

The Court took note of the ruling in Vijay Madanlal Choudhary v. Union of India, 2021 SCC OnLine SC 3286, wherein the Court dealt with the powers of the authority to proceed against a person under the Prevention of Money laundering Act, 2002(‘PMLA’), and held that when a person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by a Court of competent jurisdiction, then, there can be no offence of money-laundering against that person and viewed that the proceedings in complaint case of 2021 have been quashed, the ED would not proceed against Senthil Balaji. However, the respondent submitted that the benefit of the order of quash cannot be extended to the orders of stay granted in two other cases, as they should come for inquiry responding to the summons issued under Section 50 of PMLA.

The Court observed that the effect of an order of stay means that the operation of the impugned order is stayed or stands stalled as if the impugned order does not exist. Moreover, as the ECIR itself was only on the basis of the said three First Information Reports,thus the Court viewed that “when the proceedings pursuant to the FIR have been stayed by the High Court, whether the ECIR,which is also pursuant to the FIR, can be proceeded with, is a question that stares at open, and our considered answer is in the negative”.

The Court further observed that apart from the said FIR’s there were no other materials based upon which the proceedings under PMLA have been initiated, thus,when the cases which culminated from the said FIR’s have been stayed, the authority must have refrained itself from proceeding any further, as the summon issued to Senthil Balaji was pursuant to the initiation of ECIR based upon the FIR’s, and there was no scheduled offence as per Section 2(y) of the PMLA for the  ED to proceed under the said Act.

The Court took note of the ruling in Arun Kumar v. Union of India, (2007) 1 SCC 732,wherein the Court held that an authority by erroneously assuming existence of a jurisdictional fact, cannot confer upon itself jurisdiction which it otherwise does not possess.

Thus, the Court held that the impugned proceedings/summons do not have any legal sanctity and the interim order of stay will be subject to the final orders in the main proceedings, after which the eclipse would also wane away. Hence, it left open all the questions that are raised on the merits and de-merits of the proceedings initiated by the respondent, to be dealt with in appropriate proceedings.

[V.Senthil Balaji v. Karthik Dasari, 2022 SCC OnLine Mad 4417, decided on 01.09.2022]


Advocates who appeared in this case :

For Petitioners: Senior Advocate Sidharth Luthra

Senior Advocate S.Prabhakaran

For Respondent: Additional Solicitor General R.Sankaranarayanan

Special Public Prosecutor S.Sasikumar

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