PMLA summons need not disclose grounds if the ED can justify them in court, Karnataka High Court rules

The petitioners challenged two summons issued under Section 50(2) and (3) of the Prevention of Money Laundering Act, 2002 (PMLA), requiring them to appear and produce personal, financial and project-related documents in connection with ECIR No. BGZO/34/2023.

They argued that the summons lacked particulars, that the relevant predicate-offence proceedings had been quashed or stayed, and that the ECIR could not be sustained.

The Enforcement Directorate (ED) opposed the petition, contending that a summons was not ordinarily amenable to challenge and that the FIR relied upon had been stayed only in part, not quashed; it also referred to other predicate-offence FIRs.

1. Whether the summons could be challenged as vague or lacking particulars, and whether that deficiency invalidated them.

2. Whether the stay of proceedings in the predicate-offence case, or the asserted absence of a continuing predicate offence, invalidated the ECIR and summons.

Sections 50(2) and (3) of the PMLA empower the ED to summon persons to give evidence or produce records; a person summoned is ordinarily required to appear and comply.

Under P. Chidambaram v. Directorate of Enforcement and Directorate of Enforcement v. V.C. Mohan, PMLA proceedings are linked to offences specified in the PMLA Schedule.

A stay of proceedings suspends or “eclipses” them but does not erase them, and is not equivalent to quashing (Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association).

Although a notice should ordinarily convey the case to be met and the consequences of non-compliance (Gorkha Security Services v. Govt. of NCT of Delhi; UMC Technologies Pvt. Ltd. v. Food Corporation of India), the court held that, in PMLA investigations, absence of those particulars does not by itself invalidate a summons.

A summons does not ordinarily constitute an adverse order giving rise to a cause of action, absent an allegation of lack of jurisdiction.

The FIR in Crime No. 209/2023 had not been quashed; proceedings were only stayed insofar as petitioner no. 1 was concerned. Applying Shree Chamundi Mopeds, the court held that the stay did not remove the FIR as the predicate basis for the ECIR, and the summons therefore did not fall within the rule in Gameskraft Technologies Pvt. Ltd. v. Enforcement Directorate concerning summons founded on predicate FIRs registered after an ECIR.

As to the summons’ particulars, the court accepted that the petitioners could have a grievance about the documents sought, but held that the omission did not, without more, warrant quashing. The petitioners could approach the ED, provide what was available and seek time to furnish further material; the ED was required to consider that request before proceeding.

It disposed of the writ petition with directions that the petitioners appear before the respondents within two weeks, if they had not already done so, offer the available information and documents, and seek time for any further material; the respondents were directed to consider their request before proceeding further.