The PMLA Prosecution After Compromise ruling by the Delhi High Court clarifies an important legal distinction. A compromise in a scheduled offence does not automatically end money laundering proceedings.
Justice Purushaindra Kumar Kaurav delivered the ruling. The Court also rejected a bail plea in an investment app money laundering case.
The Court held that a settlement does not prove that no crime occurred. It also does not establish that no proceeds of crime existed.
Compromise Does Not End PMLA Proceedings
The High Court distinguished between two situations. The first involves an acquittal after a court examines the case on its merits.
The second involves quashing based on a compromise between the parties. These outcomes carry different legal consequences.
A merits-based finding that no crime occurred can affect a PMLA case. It can remove the basis for alleging proceeds of crime.
However, a compromise does not make the same finding. The court does not necessarily examine whether the accused generated illicit proceeds.
Therefore, quashing a scheduled offence through settlement does not automatically terminate PMLA proceedings.
Court Warns Against Misuse of Settlements
The Court rejected the argument that a compromise should end the money laundering case. Justice Kaurav warned that such an approach could create a serious loophole.
People accused of money laundering could otherwise negotiate settlements with complainants. They could then use those settlements to undermine separate PMLA proceedings.
The Court stressed that money laundering investigations serve a broader purpose. They target the proceeds of criminal activity and the networks involved in handling them.
ED Investigation Has a Wider Scope
The High Court also explained the difference between a police investigation and an Enforcement Directorate investigation.
A police FIR usually focuses on the specific grievance raised by the complainant. The ED’s investigation under the PMLA can examine a wider financial network.
It can also trace property allegedly derived from scheduled offences. Therefore, a compromise between a complainant and an accused does not automatically bind the ED.
The Court held that quashing a predicate FIR through compromise operates only between the parties involved. It cannot independently terminate the ED’s wider statutory investigation.
Case Involves Investment and Forex Fraud
The Court considered a bail application filed by Rohit Vij. The case arose from an Enforcement Case Information Report registered by the ED.
The investigation concerns an alleged money laundering network. Authorities linked the case to fraudulent investment applications and unauthorised foreign exchange transactions.
The ED later added 24 FIRs to the master ECIR. The additional cases allegedly involved several corporate entities.
These entities included Xindai Technologies and Betench Networks. The ED alleged that the cases formed part of a larger financial conspiracy.
Court Rejects Challenge to Additional FIRs
Vij argued that the ED could not rely on the additional FIRs. He pointed out that those complaints did not name him as an accused.
The High Court rejected this argument. The Court noted that the initial predicate FIR also did not name Vij.
The ED allegedly discovered his role during its financial investigation. Therefore, the absence of his name in individual FIRs did not automatically exclude him from the PMLA investigation.
Delhi High Court Rejects Bail Plea
The High Court found that the PMLA proceedings against Vij remained legally maintainable. The compromise in the primary FIR did not erase the alleged proceeds of crime.
The Court therefore rejected his bail application. It held that the ED could continue its investigation despite the settlement.
The PMLA Prosecution After Compromise ruling draws a clear line between compromise-based quashing and a merits-based acquittal.
The judgment also reinforces the wider scope of PMLA investigations. A private settlement cannot automatically prevent authorities from investigating suspected money laundering.
