Vihaan Direct Selling INDIA Private Limited vs. The Assistant Director

Facts

The petitioner, Vihaan Direct Selling India Private Limited, filed a writ petition seeking to quash an ECIR (Enforcement Case Information Report) registered by the Directorate of Enforcement (ED) in Mumbai. The ECIR was based on an FIR registered by Oshiwara Police Station, Mumbai, for offences including Sections 120B and 420 of the IPC, which are scheduled offences under the Prevention of Money Laundering Act (PML Act). The ED had conducted searches, frozen the petitioner's bank accounts, and forwarded seized materials to the Adjudicating Authority. The petitioner argued that the predicate offence had been stayed by the Supreme Court, rendering the ED's investigation illegal. The petitioner also highlighted the hardship caused by the frozen accounts, impacting salary payments and tax obligations, and contended that the search and seizure were illegal due to the stay.

Held

The High Court held that it lacks territorial jurisdiction to entertain the writ petition. Citing constitutional provisions and judgments from the Supreme Court (Election Commission, India v. Saka Venkata Subba Rao and Dashrath Rupsingh Rathod v. State of Maharashtra) and the Delhi High Court (Sayed Mohd. Masood vs. Union of India), the Court concluded that for quashing an FIR or criminal proceedings under Article 226 of the Constitution or Section 482 of the CrPC, the primary criterion is the situs of the authority that registered the case, not the location of the cause of action or the petitioner. The Court found that since the ECIR was registered in Mumbai and the Adjudicating Authority is in Delhi, this High Court, whose jurisdiction is limited to Karnataka, cannot pass orders against the ED. The Court agreed with the Madras and Delhi High Courts that merely because the petitioner resides in Karnataka or has bank accounts there, it does not confer territorial jurisdiction on this High Court to quash proceedings registered elsewhere. Therefore, the petitioner's only recourse is to approach the Bombay High Court or the Adjudicating Authority in Delhi. The issue regarding the stay of the predicate offence was not decided on merits due to the jurisdictional bar.

Key Issues

1. Whether the High Court has territorial jurisdiction to quash an ECIR and related proceedings registered by the Directorate of Enforcement in Mumbai, when the petitioner's bank accounts are located in Karnataka and Chennai, and the company operates from Bengaluru. 2. Whether the ED can proceed with its investigation and seize documents in a PMLA case when the predicate offence has been stayed by the Supreme Court. Petitioner's arguments: The petitioner contended that the ED's investigation and seizure are illegal because the predicate offence has been stayed by the Supreme Court. They cited judgments from the High Court and Madras High Court supporting the view that PMLA proceedings should be stayed when the predicate offence is stayed. The petitioner also argued that the search and seizure were illegal due to the stay and that the ED's inaction for ten years, followed by a raid after the Supreme Court's stay, was unjustified. They highlighted the financial hardship caused by the frozen accounts, impacting essential payments like salaries and GST. Respondents' arguments: The respondents (ED) argued that the writ petition is not maintainable before this High Court due to lack of territorial jurisdiction, as the FIR and ECIR were registered in Mumbai, and the Adjudicating Authority is in Delhi. They contended that the petitioner should approach the Bombay High Court or the Adjudicating Authority in Delhi. They also argued that the Adjudicating Authority having seized the matter, it cannot be questioned here. The respondents further argued that when an alternative and efficacious remedy is available, the petitioner cannot approach this Court.