Bombay High Court quashes ECIR against the Goyals

Bombay High Court quashes ECIR against the Goyals

A division Bench of Bombay High Court headed by Justices Revati Mohite Dere and Prithviraj K Chavan following the law laid down by the Supreme Court in landmark judgment of Vijay Madanlal Chaudhary, on Thursday, 23 February 2023 was pleased to quash the Enforcement Case Information Report (ECIR) filed by Enforcement Directorate (ED) in an alleged money laundering case against Jet Airways founder Mr. Naresh Goyal and his wife.

The matter was argued by Senior Counsel, Mr. Ravi Kadam and Mr. Aabad Ponda instructed by Naik Naik & Co. before the Bombay High Court with briefing Attorneys Mr. Ameet Naik, Managing Partner and Mr. Abhishek Kale, Deputy Managing Partner

ED's counsel argued that the ECIR cannot be quashed since it is an internal document unlike a FIR. To the said submission, Mr. Ponda specifically brought to the attention of the Court that in the matter of Directorate of Enforcement vs Obalpuram Mining Company Pvt. Ltd. the Learned Solicitor General of India appearing for the Adjudicating Authority/ED had made a statement which was recorded by the Hon'ble Supreme Court in its Order that "Learned Solicitor General fairly states that since there is a closure report in respect of the predicate offence which has been accepted, the present proceeding will not survive and consequently the ECIR No.CEZO/01/2017 stands quashed."

The Bench after hearing, delivered this verdict in the petitions filed by the Goyals challenging the ECIR filed against them by ED allowing the Petitioner in terms of prayer clause (a) thereby quashing the ECIR. The prayer (a) is reproduced below-

a)issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India, 1950, calling the records of the Respondent No.1 pertaining to the ECIR/MBZO-II/01/2020 dated 20.02.2020 ("Impugned ECIR") (Exhibit A) and quash and / or set aside the ECIR/MBZO-II/01/2020 dated 20.02.2020 ("Impugned ECIR") (Exhibit A), the investigation carried thereunder and all proceedings and actions emanating therefrom against the Petitioner, as being illegal and contrary to law;:

The order follows the various decisions of the Apex Court and Delhi High Court in similar matters where the position of law has been declared by the Courts and have held that when a person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering (scheduled offence) against him that survives.

In the present case a closure report ('C summary report') was filed by the investigation agency before the Trial court in March 2020 which recorded that the offences alleged against the Goyals are purely of civil nature. These conclusions were accepted by the Ld. Trial Court in December 2020 and have attained finality. The First Information Report (F.I.R.) stood closed. Since the ECIR is based on the FIR and since the FIR stood closed, the ECIR could not survive.

The Division Bench has observed that since the scheduled offence goes, the very basis for ECIR goes, and nothing survives in the matter. As ED has seized the original passports of the Goyals pursuant to the ECIR, ED will now be required to return the seized items along with the original passports of the Goyals as the ECIR now stands quashed. This order is in line with the law laid down by the Supreme Court in the matter of Vijay Madanlal Chaudhary and follows several other judgements. It is a settled law that offences under the Prevention of Money Laundering Act is dependent on illegal gain of property as a result of criminal activity relating to the scheduled offence. This is because money laundering is a secondary offence it must necessarily involve a predicate offence. Given that the F.I.R against the Goyals did not refer to any illegal gain and the F.I.R. stood closed, question of illegal gain of property does not arise.

Since the prayer (a) reproduced above is granted, all consequential actions and proceedings stemming from the ECIR are also set aside which means that the passports seized by the ED pursuant to the ECIR shall also be returned by the ED.