Prior registration of a scheduled offence is not a prerequisite for initiating inquiry or civil attachment under PMLA.

In brief

The question

1. Whether the registration of an ECIR is a statutory requirement that can be quashed by a court.

The court held

The Court held that (1) an ECIR is a non-statutory internal document and cannot be equated with an FIR, making the prayer to quash it misconceived; (2) registration of a scheduled offence is a prerequisite only for penal prosecution under Section 3, not for the exercise of inquiry powers under Section 50 or provisional attachment under Section 5; and (3) the person summoned under Section 50 is not an "accused" at that stage and is bound to comply with the summons.

It also directed

The Court dismissed the appeal and upheld the Single Judge’s judgment.

01Facts

The 1st Appellant (CMRL) is a public limited company. Following a search by the Income Tax Department in 2019, the Settlement Commission upheld findings that CMRL had inflated expenses by ₹134.27 crores to generate unaccounted cash for illegal payments to politicians and entities like M/s. Exalogic Solutions.

p. 5, 11

While the Commission granted immunity from prosecution under the IT Act, the Ministry of Corporate Affairs subsequently ordered an investigation by the Serious Fraud Investigation Office (SFIO) into alleged fraud under Section 447 of the Companies Act.

p. 6, 12

In March 2024, the Enforcement Directorate (ED) registered an Enforcement Case Information Report (ECIR) and issued summons under Section 50 of the PMLA to the Appellants.

p. 7

The Appellants challenged the ECIR and summons, arguing that in the absence of a pre-registered FIR for a scheduled offence, the ED lacked jurisdiction. The Single Judge dismissed the writ petition as premature.

p. 14, 16

02Issues

i.1. Whether the registration of an ECIR is a statutory requirement that can be quashed by a court.

p. 26 / para. 16

ii.2. Whether the ED can exercise powers of inquiry and issue summons under Section 50 of the PMLA without a prior FIR or complaint involving a scheduled offence.

p. 26 / para. 16

iii.3. Whether immunity granted by the Income Tax Settlement Commission bars proceedings under the PMLA.

p. 43 / para. 28

03Law Applied

The court primarily applied the PMLA, specifically Section 5 (provisional attachment), Section 50 (powers of authorities regarding summons/evidence), and Section 66(2) (disclosure of information to other agencies).

p. 37, 41, 42

It relied heavily on the Three-Judge Bench precedent in Vijay Madanlal Choudhary v. Union of India, which established that an ECIR is a non-statutory internal document and that 'civil action' (attachment/inquiry) does not require a pre-registered criminal case, unlike 'prosecution'.

¶ 162, 370, 382

The court also applied the second proviso to Section 245H of the Income Tax Act, which restricts the Settlement Commission’s power to grant immunity from prosecution to only the IT and Wealth Tax Acts.

p. 43

Provisions in the judgment · 26 · Linked ones open on LawLens

Code of Criminal Procedure, 1973 Section 2 Section 154

Companies Act, 2013 Section 210 Section 212 Section 447

Indian Penal Code, 1860 Section 411 Section 420 Section 421 Section 424

Prevention of Money-Laundering Act, 2002 17 provisions

Section 2 Section 3 Section 4 Section 5 Section 8 Section 17 Section 18 Section 19 Section 24 Section 44 Section 45 Section 48 Section 50 Section 63 Section 65 Section 66 Section 71

04Reasoning

The Court reasoned that the PMLA serves a dual role: a "civil limb" (prevention, attachment, and inquiry) and a "penal limb" (prosecution). While the penal limb requires a scheduled offence/FIR, the civil limb—including issuing summons under Section 50—is a foundational inquiry to identify "proceeds of crime" and can commence based on "credible information" alone.

¶ 21, 23

The Court noted that an ECIR is merely an internal record-keeping document, not equivalent to an FIR under Section 154 of the Cr.P.C.; thus, its non-registration or quashing has no legal consequence on the ED's power to inquire.

¶ 17, 18

The Court rejected the immunity argument, stating that PMLA is an independent statute and the IT Settlement Commission’s jurisdiction is expressly barred from granting immunity against Central Acts other than the IT and Wealth Tax Acts since 2007.

¶ 28

The court found that sharing information under Section 66(2) with the police acts as a statutory bridge to eventually register a predicate offence, but doesn't stall the ED's ongoing inquiry.

¶ 27