FEMA Doesn’t Grant A Person Immunity For IPC Offences Since It Doesn’t Repeal It Either Expressly Or By Implication: Delhi High Court

The Delhi High Court held that the Foreign Exchange Management Act, 1999 (FEMA) does not grant a person immunity for the offences under the Indian Penal Code, 1860 (IPC) since FEMA does not repeal IPC, expressly or by implication.

The Court held thus in a batch of Writ Petitions preferred by the accused persons against their arrests in an FIR registered under Sections 120-B, 420, 468, 467, 471, and 201 of the IPC and under the Prevention of Money Laundering Act, 2002 (PMLA).

A Single Bench of Justice Anup Jairam Bhambhani observed, “In view of the foregoing position of law as applied to the provisions of FEMA vis-à-vis the provisions of IPC, this court is of the view there is no basis to hold that the enactment of FEMA grants to a person immunity for offences under the IPC, since FEMA does not repeal the IPC, either expressly or by implication. Moreover, FEMA and IPC address different and distinct infractions of the law : with FEMA addressing infractions relating to foreign exchange transactions and the IPC dealing with conventional crimes.”

The Bench added that the offences of criminal conspiracy, cheating, forgery and related offences of which the Petitioners are accused under the IPC, do not get obliterated or subsumed or cease to be penal offences, merely because they were the underlying actions for the infractions of foreign exchange regulations.

Senior Advocate Vikram Chaudhri and Advocate Raktim Gogoi appeared for the Petitioners while ASC Amol Sinha, Special Counsel Zoheb Hossain and Panel Counsel Vivek Gurnani appeared for the Respondents.

Facts of the Case

A search and seizure operation was carried out by the Enforcement Directorate (ED) under Section 37 of FEMA at the premises of the Petitioners-accused during which the ED also recorded their statements. As per the ED, the accused persons admitted that they had indulged in international hawala transactions of Rs. 3,500 crores by fabricating documents to send outward remittances to their companies in Hong Kong and Canada. It was alleged that the accused admitted that cash was handed-over to them which they deposited in certain bank accounts and thereafter made onward remittances to foreign entities engaged in the trade of textile, electronics, and opticals through the accused’s company.

Resultantly, the ED filed a Police Complaint which led to the registration of FIR against the accused persons. They were produced before the Magistrate who remanded them to police custody. Treating the offences alleged in the FIR as predicate or scheduled offences, the ED then proceeded to register an Economic Crime Information Report (ECIR), alleging commission of offences under the PMLA. Since the accused were lodged in jail upon their arrest, the ED filed an Application before the Sessions Court, seeking permission to examine them in relation to ECIR. The said Application was allowed and thereupon, the ED arrested the Petitioners. Being aggrieved, they were before the High Court.

Reasoning

The High Court in view of the facts and circumstances of the case, said, “In the present case, neither do the two statutes viz., FEMA and IPC, occupy or operate in the same field; nor do they contain any inconsistent or repugnant or irreconcilable provisions. FEMA replaced FERA with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of the foreign exchange market in India;57 while IPC is the codified substantive penal law of the country, which deals with punishing conventional crimes.”

The Court was of the opinion that the civil wrongs alleged to have been committed by the Petitioners relating to foreign exchange transactions under FEMA cannot be viewed as having been committed in one fell swoop with all preceding actions and omissions that the Petitioners committed in preparation of the civil wrongs.

“As per the allegations, the foreign exchange transactions that are subject matter of investigation by the ED under the provisions of the FEMA were preceded by several actions and omissions, such as forging of notarial stamps and fabrication of fake invoices, which amount to criminal offences under the IPC; and these offences were committed even before the petitioners committed the civil wrongs under FEMA that they have been accused of”, it added.

The Court further remarked that the penal offences were complete in themselves before the infraction of the provisions of FEMA took place and that the Petitioners’ submission that they cannot be prosecuted for offences under the IPC cannot be accepted.

“In the present case, there can be no cavil that the complaint received by the police from the ED did disclose the commission of cognizable offences; and therefore the law mandated that the police must register an FIR; and they cannot be faulted for having done so”, it noted.

The Court also observed that what the Supreme Court has said in Pankaj Bansal v. Union of India & Ors. (2024) is that mere non-cooperation or failure to respond to a question put by the ED is not in itself sufficient to arrest a person; but that cannot be construed to mean that if there are other grounds to arrest a person, those should be ignored.

“In view thereof, the argument that the petitioners were arrested merely for non-cooperation in investigation, is misconceived and must be rejected. … What has been recorded in the arrest memos are not grounds of arrest since these do not spell-out the specific roles alleged against the petitioners; nor do they refer to the specific incriminating circumstances that can be attributed to a particular petitioner in relation to the offences alleged”, it said.

The Court, therefore, held that the Petitioners’ arrest by the Delhi Police is not in compliance with the mandate of the Supreme Court in the case of Prabir Purkayastha v. State (NCT of Delhi) [2024].

Conclusion

The Court summarised the following important points –

• The enactment of FEMA does not grant to a person immunity from prosecution for offences under the IPC even if the offences alleged arise from the same underlying actions or omissions that led to infractions of FEMA;

• The registration of the subject FIR by the Delhi Police, based on the complaint filed by the ED, arising from the search and seizure operation conducted by the (latter) agency, is not invalid or illegal merely because the FIR is based on the ED’s complaint;

• The Petitioners’ arrest by the ED in the subject ECIR for violations of the provisions of PMLA is valid and legal and in compliance of the requirements of the law, including the requirements of the Supreme Court verdict in Prabir Purkayastha case and Section 19 of the PMLA;

• The Petitioners’ arrest by the Delhi Police in the subject FIR is not valid, since those are in violation of the mandate of the Supreme Court in Prabir Purkayastha case.

Accordingly, the High Court disposed of the Petitions and directed the release of the accused persons on custody upon furnishing a personal bond of Rs. 5 lakhs each with two sureties in the like amount from family members to the satisfaction of the Trial Court.

Cause Title- Manideep Mago v. Union of India & Ors. (Neutral Citation: 2025:DHC:3739)

Appearance:

Petitioners: Senior Advocate Vikram Chaudhri, Advocates Raktim Gogoi, Arveen Sekhon, Rishi Sehgal, Shivam Pal Sharma, Anuj Kr., and Ishaan Sahai.

Respondents: ASC Amol Sinha, CGSC B. Ramaswamy, Special Counsel Zoheb Hossain, Panel Counsel Vivek Gurnani, Advocates Kshitiz Garg, Ashvini Kumar, Nitish Dhawan, Pranjal Tripathi, and Kartik Sabharwal.

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