HC quashes ED chargesheets in JKCA case against Farooq Abdullah, others

Srinagar, Aug 14: The High Court of J&K and Ladakh Wednesday quashed chargesheets filed by the Enforcement Directorate (ED) against National Conference patron former Chief Minister Farooq Abdullah and five other persons regarding a money laundering probe linked to an alleged multi-crore J&K Cricket Association fund misappropriation case.

On the allegations of misappropriation of funds by JKCA, the Police Station Ram Munshi Bagh, Srinagar had registered an FIR No.27/2012 dated 10.03.2012 under Section 120- B, 406 and 409 of the Ranbir Penal Code(RPC). The FIR was registered against Ahsan Ahmad Mirza and one Muhammad Saleem Khan, the then office bearers of the JKCA. During the investigation by the police and on the intervention made by the High Court, the investigation in the FIR was transferred to the Central Bureau of Investigation (CBI).

In July 2017, the CBI filed charge-sheet before the CJM Srinagar in the case for charges of criminal conspiracy and criminal breach of trust under the RPC against  Farooq Abdullah, the then president of JKCA, Muhammad Saleem Khan, the then general secretary, Ahsan Ahmad Mirza, the then treasurer and Bashir Ahmad Misgar, an executive in the J&K Bank. The ED had later named the same persons in the money-laundering case.

“The complaint, the charge-sheet and the charges framed by the designated Special Court (Principal Sessions Court, Srinagar) vide order dated 18.03.2020 are quashed,” a bench of Justice Sanjeev Kumar said while deciding pleas filed separately by Ahsan Mirza and Mir Manzoor Gazanffer.

“It is, however, made clear that notwithstanding quashing of the charges, it shall remain open to the Enforcement Director to register ECIR (Enforcement Case Information Report) afresh and launch prosecution against the petitioners under Section 3 of the PMLA if ultimately the Court of Chief Judicial Magistrate, Srinagar frames charges for offence/offences, which are specifically mentioned in the schedule of PMLA,” the court said.

In their plea, Mirza and Gazanffer had sought to quash a complaint filed by the ED against them alleging the commission of the offence of money laundering under Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) as also the prosecution launched under the order of cognisance dated  December 2, 2019.

They had also sought quashing of an order dated March 18, 2020, passed by the Designated Special Court (the Court of Principal Sessions Judge, Srinagar), whereby the charges had been framed against them.

The controversy raised by the duo was that the complaint was eventually instituted by the ED for their prosecution under Sections 3 and 4 of PMLA and what was alleged against them was misappropriation of funds of JKCA with criminal conspiracy with other accused persons and that the funds so misappropriated had been laundered by layering them into other bank accounts thereby generating proceeds of crime within the meaning of Section 2(1)(u) of PMLA.

“About the allegation of misappropriation of JKCA funds, the CBI has already registered an FIR for the commission of offences under Sections 120-B, 406 and 409 RPC. Both the offences i.e. S.406 and S.409 RPC are not the scheduled offences as defined under Section 2(y) of PMLA,” they said.

S V Raju, Additional Solicitor General of India, argued that since as per the CBI charge-sheet, the scheduled offences under Sections 411 and 424 RPC were also made out, therefore, there was no escape for the petitioners from facing prosecution under PMLA when they had been found to have indulged in activities connected with the proceeds of crime, an offence under Section 3 of PMLA and punishable under Section 4 of PMLA.

“Upon completion of the investigation, the CBI has filed a charge-sheet against six accused persons including the petitioner for commission of offences under Sections 120-B, 406 and 409 RPC, which is pending consideration before Chief Judicial Magistrate, Srinagar,” the court said. “It is not in dispute that Sections 406 and 409 RPC/IPC are not the scheduled offences”.

The Court observed that in keeping with the legal position amply clarified by the Supreme Court in Pavana Dibbur’s case, “offence punishable under Section 120-B RPC or IPC shall not be a scheduled offence unless conspiracy alleged is of committing an offence specifically included in the schedule”.

“Viewed thus, the charge-sheet, which is pending trial before the Chief Judicial Magistrate, Srinagar is not in respect of any offence, which is specifically included in the schedule of PMLA”, it said.

The court held that going by the charge sheet filed by the CBI, it was evident that offence of money laundering, as defined under Section 3 of PMLA, was not made out.

“For the commission of the offence of money laundering under Section 3 of PMLA, it is required to be demonstrated that the accused has directly or indirectly, knowingly or unknowingly involved in any process or activity connected with the proceeds of crime,” the court said. Such activity, it said, could be concealment possession, acquisition or use of the proceeds of crime and projecting it as untainted property. In the instant case, the court said, indisputably, the jurisdictional police, the CBI had not registered any case for the commission of any scheduled offence.

“Enquiry by way of complaint before the CJM, Srinagar is also not in respect of any scheduled offence. In the absence of there being any case registered for the commission of the scheduled offence or any case pending enquiry or trial in respect of the scheduled offence, authorities under PMLA have no jurisdiction to register ECIR and launch prosecution for the offence of money laundering under Sections 3/4 of PMLA,” the court said.

Relying on the judgment in the case of Vijay Madal Lal Choudhary v. Union of India, (2022) SCC Online SC 929, the court said: “The authorities under PMLA cannot resort to action against any person for money laundering only on the assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed unless the same is registered with jurisdictional police or pending enquiry by way of complaint before the competent forum”.

“In the instant case, indisputably, the jurisdictional police, the CBI has not registered any case for the commission of any scheduled offence,” it said. “Enquiry by way of complaint before the CJM, Srinagar is also not in respect of any scheduled offence. In the absence of there being any case registered for the commission of the scheduled offence or any case pending enquiry or trial in respect of the scheduled offence, authorities under PMLA have no jurisdiction to register ECIR and launch prosecution for the offence of money laundering under Sections 3/4 of PMLA.”

“The Enforcement Directorate is not an authority or investigating agency in any manner superior to CBI, nor is it vested with or conferred the power and jurisdiction to sit in appeal against the investigation made and the conclusion drawn by the later,” the court said.

The Enforcement Director being a parallel investigating agency in respect of crimes under PMLA must accept the investigation carried out by another investigating agency and the conclusion drawn by the said agency in respect of the commission of the offences other than the offences under PMLA. “

“The Enforcement Directorate cannot be permitted to preempt the outcome of an exercise, which is yet to be undertaken by a competent Court of law at the stage of charge or discharge. As of date, the charge-sheet presented by the CBI is only in respect of Section 120-B, 406 and 409 RPC, which are admittedly not the scheduled offences,” the court said.

“To maintain harmony and to avoid contradictory stand by the two investigating agencies operating in their independent fields, Enforcement Directorate must respect the decision of the CBI unless it is varied or modified by a competent Court of criminal jurisdiction”

The court said: “The Enforcement Directorate cannot be allowed to assume jurisdiction of the competent c court of criminal jurisdiction and arrived at conclusions different from those arrived at by CBI which has investigated the matter and presented the charge sheet before the learned CJM, Srinagar.

In response to an argument, the court said: “The Enforcement Directorate is not an authority or investigating agency in any manner superior to CBI, nor is it vested with or conferred the power and jurisdiction to sit in appeal against the investigation made and the conclusion drawn by the later”.

“The Enforcement Director being a parallel investigating agency in respect of crimes under PMLA must accept the investigation carried by another investigating agency and the conclusion drawn by the said agency in respect of commission of the offences other than the offences under PMLA”, it said.

The federal probe agency had attached assets belonging to Abdullah and others worth Rs 21.55 crore under three separate orders issued by it in the past.

The agency's case is based on a 2018 charge sheet filed by the CBI against the same accused.

The CBI charge sheet filed alleged "misappropriation” of JKCA funds to the tune of Rs 43.69 crores from grants given by the Board of Control for Cricket in India (BCCI) to promote the sport in the erstwhile state between 2002 and 2011.

The ED had earlier said its probe found that JKCA received Rs 94.06 crore from BCCI in three different bank accounts during the financial years 2005-2006 to 2011-2012 (up to December 2011).

It had alleged that several other bank accounts were opened in the name of the JKCA into which the funds were transferred. The bank accounts along with the existing bank accounts were later used for laundering JKCA funds.