Transfer Of Investigation To SFIO Would Not Bar Parallel Proceedings Under PMLA: Delhi High Court

The High Court was considering the Petitions challenging the proceedings initiated by the Respondent Directorate of Enforcement. The Petitioners assailed the validity of the issuance of the Provisional Attachment Order (PAO) passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA) along with the Original Complaint filed under Section 5(5) of the PMLA and Show Cause Notice (SCN) issued under Section 8 of the PMLA.

The Division Bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar held, “This Court, having considered the submissions advanced by the learned counsel for the parties, is of the view that the contention of the Petitioner, that the transfer of investigation to the SFIO would bar parallel proceedings under the PMLA, is legally untenable. This Court is afraid that the said argument holds no ground since the express language, “in respect of any offence under this Act”, used in Section 212(2) the Act of 2013, reveals that the said provision applies only to offences covered under that Act. Moreover, a purposive and harmonious construction of the statutory regime confirms that the Act of 2013 is merely applicable to the offences relating to companies and does not extend to offences under other laws, including the PMLA.”

“While Section 212 is a self-contained code governing SFIO investigations into company affairs, its scheme does not preclude other agencies, in their own domain, from probing offences under separate laws”, it added.

Advocate Naveen Malhotra represented the Petitioner while Special Counsel Anupam S. Sharrma represented the Respondent.

Factual Background

A complaint was filed by the Deputy General Manager of Bank of Baroda alleging serious irregularities pertaining to foreign exchange transactions. The complaint delineated the involvement of accounts of various shell companies and overseas foreign exchange remittances, amounting to approximately Rs 6000 Crore. A similar complaint was also found to be sent to Central Bureau of Investigation (CBI), culminating into the registration of a First Information Report (FIR) against 59 companies and other unknown bank officials/private persons for the commission of offence under Section 420 read with Section 120B of Indian Penal Code, 1860 and under Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988. Consequently, on the basis of the aforesaid FIR registered by the CBI, the Directorate registered an ECIR under Section 3 of the PMLA to trace, and provisionally attach property that might constitute proceeds of crime.

It was further revealed that the Petitioner, in active collusion with importers and exporters, had orchestrated the creation of shell companies in India under the names of various individuals who lacked genuine financial substance. The Directorate filed an Original Complaint (OC) under Section 5(5) of the PMLA. Aggrieved by the aforesaid actions of the Directorate, the Petitioner approached the Single Bench of the Court seeking quashing of the PAO and SCN. The Single Judge referred the Petitions before the High Court for adjudication.

Reasoning

The Bench noted that the Companies Act, 2013 only deals with violations of corporate governance norms, fraudulent conduct by the officers of the company and irregularities in the administration of the said company. However, the PMLA, penalises the process or activity connected with the proceeds of crime derived from scheduled offences, and under which, such tainted property would be classified as proceeds of crime. It was noted that the offences defined under both the aforementioned statues are distinct and involve separate elements of proof while serving distinct legislative purposes.

On a perusal of Section 50 statements recorded from other accused persons, the Bench noted that the Petitioner, between January 2015 to July 2015, made advance remittances upto Rs 450 Crore. These remittances were not isolated and embedded within a broader network of transactions. The Petitioner was shown to have established a web of companies in the names of different individuals, ostensibly to channel forex abroad under the pretext of advance import payments. The shell companies alleged to have been set up by the Petitioner, having no genuine business substance, operated in collusion with both importers and exporters, whereafter, funds were disbursed overseas, routed through these facades, thereby camouflaging the true nature of the remittances.

“This corroborative testimony, coupled with documentary records and remittance trails, supports a prima facie link between the Petitioner‟s entities and the laundering of illicit funds under the guise of legitimate international trade”, the order read. The Bench was of the view that the D/AO had ample and cogent material to justify and form a ‘reason to believe’ under Section 5(1) of the PMLA for the purpose of attachment. In our view, the formation of belief was not perfunctory or based on mere suspicion, but was founded on a rational nexus between the material collected and the inference drawn regarding the involvement of the Petitioner in the process of money-laundering.

“The PMLA is a self-contained statutory regime, with its own adjudicatory and appellate structure, and the existence of a viable statutory remedy would militate against premature interference through writ jurisdiction. This Court, in analogous cases, has held that when a complete appeal mechanism is built into a special statute, Constitutional Courts should ordinarily restrain from exercising their powers under Article 226 of the Constitution of India, 1950, unless there is some extraordinary or exceptional circumstance. Therefore, this Court being conscious about its restricted jurisdiction, deems it appropriate to not delve deeply into the validity of the PAO and its consequential proceedings, leaving those matters to be ventilated before the Appellate Tribunal”, it held.

Thus, dismissing the Petitions, along with the pending applications, the Bench directed that the Petitioner may seek redressal before the Appellate Tribunal under the PMLA.

Cause Title: Sanjay Aggarwal v. Union of India (Neutral Citation: 2025:DHC:10498-DB)

Appearance

Appellant: Advocates Naveen Malhotra, Ritvik Malhotra, Nilansh Malhotra

Respondent: Special Counsel Anupam S. Sharrma, Advocates Vivek Gurnani, Harpreet Kalsi, Abhishek Batra, Ripudaman Sharma, Vashisht Rao, Riya Sachdeva, Vishesh Jain, Anant Mishra

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