The Karnataka High Court has decided to rehear the Directorate of Enforcement’s case against Sammaan Capital after stating it was not made aware of orders passed by the Supreme Court in a related matter while quashing the enforcement proceedings last week.
Justice M Nagaprasanna, who had quashed the Directorate of Enforcement proceedings on the ground that the five predicate offences forming the basis of the Enforcement Case Information Report had been dropped, said he was reviewing the papers and had not yet signed the judgment when he discovered the discrepancy. He expressed concern that counsel for the Enforcement Directorate had not brought the Supreme Court’s directions to his notice during the hearing.
Addressing Advocate Anuparna Bordoloi, appearing for the Enforcement Directorate, Justice Nagaprasanna said, “You did not bring it to my notice in the Indiabulls matter Supreme Court has issued certain directions. Delhi High Court's judgment is sent back permitting review to be filed. All that why you did not tell?” He added that the matter involved allegations of multi-layered fraud which the Apex Court had highlighted and that the Securities and Exchange Board of India was monitoring.
The Court stated that it would not have quashed the proceedings had it been informed of the Supreme Court’s directions. Justice Nagaprasanna emphasised the seriousness of the issue, saying, “It's a very serious matter, I have quashed it,” and questioned what he should do if such information was not brought to the Court’s attention.
The Court has directed Additional Solicitor General of India Aravind Kamath to argue for the Enforcement Directorate when the matter is reheard on August 18 at 10:30 AM.
In quashing the proceedings earlier, the Court had relied on the position that the five predicate offences, on the basis of which the Enforcement Case Information Report was filed under the Prevention of Money Laundering Act 2002, had been dropped. It noted that in two of the five First Information Reports registered between 2017 and 2021 against Sammaan Capital, closure reports (B-reports) were accepted by the lower courts and proceedings against the company were closed. In two other FIRs, chargesheets filed by the police did not name Sammaan Capital as an accused due to lack of evidence. In the fifth FIR, a B-report was filed by the police in 2022, but the concerned court had not accepted it since then because the complainant had not appeared despite ten notices being sent.
Justice Nagaprasanna observed that the lower court could wait for the complainant but could not allow the delay to become a reason for the Enforcement Directorate to proceed with the case. He underscored that without the FIRs standing as valid predicate offences, the Enforcement Directorate would have no legal basis to continue with the case under the Prevention of Money Laundering Act.
The matter before the Supreme Court involves a petition filed by the NGO Citizens Whistleblower Forum seeking an investigation into alleged financial irregularities and fund diversion by Sammaan Capital, then known as Indiabulls Housing Finance Limited. The plea had sought a court-monitored probe into alleged round-tripping of funds and money laundering by the company and its promoters.
In a previous hearing, it was submitted that the Securities and Exchange Board of India had filed a report on irregularities by Indiabulls Housing Finance Limited concerning quid-pro-quo arrangements in loans given to six corporate groups. The Supreme Court had noted that the report constituted sufficient material for the purpose of registering a First Information Report by the Central Bureau of Investigation for a comprehensive investigation into the multi-layered financial transactions.
The Enforcement Directorate had informed the Supreme Court that a complaint filed by it in this regard was rejected by a magistrate, and that no cognizance was taken by the Economic Offences Wing on complaints submitted by the agency. The Court had been assured that a joint meeting of senior officers from the Central Bureau of Investigation, the Enforcement Directorate, the Serious Fraud Investigation Office, and the Securities and Exchange Board of India would be convened to address the matter.
Senior Advocates Prabhuling Navadgi and Dhyan Chinnappa, along with Advocates Chintan Chinnappa, Laksh Khanna and Venkatesh Kamath, appeared for Sammaan Capital during the earlier hearing. The Karnataka High Court will now reconsider the Enforcement Directorate’s case in light of the Supreme Court’s pending directions.