The Hon’ble High Court of Delhi (Court) in its judgment in the matter of Mr. Talib Hassan Darvesh v. The Directorate of Enforcement, held that the summons issued by the Directorate of Enforcement (ED) cannot be quashed merely because the relevant documents required for purposes of investigation or confrontation to the petitioner, have not been specified in the summons.
Reiterating the scheme of the Prevention of Money Laundering Act, 2002 (PMLA), the Court clarified that upon identification of existence of property being ‘proceeds of crime’, the competent authority is to inquire into relevant aspects in relation to such property and take necessary measures in this regard as per provisions of the PMLA.
It was the petitioner’s case that that the summons issued for investigation was vague as the same did not convey if the petitioner was being summoned as a witness or a suspect and the details of the documents and records, which were required to be investigated by ED. It was also attempted to take refuge under the fact that since the corporate debtor was undergoing the Corporate Insolvency Resolution Process (CIRP), such investigation could not have been undertaken. Hence, the entire exercise of the ED was nothing but an arbitrary exercise of power.
Per contra, the ED argued that by virtue of the statute, the concerned officers had power to summon any person, whose attendance is considered necessary for the purpose of evidence or produce any record during the course of investigation or proceedings under the PMLA and the same is not impacted by non-mentioning of the documents required for investigation / enquiry in the summons impugned by the petitioner.
Further, relying on section 32A of the Insolvency and Bankruptcy Code, 2016 (Code), it was contended that only the liability of the corporate debtor for prior offences ceased under the said section, and other persons (like the petitioner) responsible for the conduct of the business of the corporate debtor continued to be liable for such offences.
Concurring with the submissions made by the ED, the Court observed that it was not necessary for the ED to reveal the evidence collected by it at the stage of issuance of summons to the petitioner. On the point of initiation of CIRP against the Corporate Debtor and the liability of the petitioner, the Court held that the same cannot lead to a conclusion that the petitioner was not associated with the ‘proceeds of crime’. As such, the jurisdiction of the investigating authorities under the PMLA stood unaffected by the CIRP initiation order of the National Company Law Tribunal.
Even though the present judgment is of much more relevance for adjudication of offences incurred under the PMLA, however, by virtue of the present judgment it has been clarified that mere initiation of insolvency process under the Insolvency and Bankrupctcy Code, 2016 would not create an embargo upon institution of proceedings against the promoter of the corporate debtor, which in any case remains a well settled law.