Gauhati High Court upholds ED probe in the Nagaland-linked HPZ Token scam, dismissing a firm's plea to quash proceedings.
DIMAPUR — In a significant ruling in the multi-crore HPZ Token cryptocurrency fraud case that originated in Nagaland, the Kohima Bench of Gauhati High Court has dismissed a petition filed by Mumbai-based M/s Jyotisha Technology Private Limited, refusing to quash Enforcement Directorate (ED) proceedings initiated under the Prevention of Money Laundering Act (PMLA).
Delivering the judgement on Friday, Justice Yarenjungla Longkumer held that the materials placed before the court disclosed a prima facie case warranting investigation and prosecution, and ruled that the ED has the jurisdiction to proceed against any person or entity allegedly involved in handling the proceeds of crime, even if they were not named in the original police FIR.
The petition challenged the ED's Enforcement Case Information Report (ECIR), prosecution complaint, provisional attachment orders and the summoning order issued by the Special Judge (PMLA), Dimapur.
Rejecting the plea, the High Court observed that offences under the PMLA are distinct from the scheduled or predicate offence and that once proceeds of crime are generated, any person or entity alleged to have knowingly assisted in concealing, transferring or projecting those funds as untainted property may be proceeded against under the Act.
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The court further held that the absence of the petitioner's name in the original FIR did not bar the ED from initiating proceedings if the investigation revealed its alleged involvement in the laundering of proceeds of crime.
The case traces its origin to an FIR registered at Cyber Crime Police Station, Kohima, in October 2021 following complaints that the HPZ Token mobile application lured investors by promising high returns through cryptocurrency and Bitcoin mining investments before allegedly defaulting on payments and rendering the platform inaccessible.
According to the ED, its subsequent investigation uncovered an extensive financial network involving hundreds of entities and individuals through which investor funds were allegedly routed via payment gateways, shell companies and cryptocurrency exchanges before being transferred to foreign digital wallets.
During the proceedings, the ED alleged that Jyotisha Technology Private Limited functioned as a shell company and was used to facilitate financial transactions connected with the alleged laundering of funds generated through the investment scheme.
The court referred to materials collected during the investigation, including statements of the company's director, while observing that the issues raised by the petitioner required appreciation of evidence during trial and could not be examined in proceedings seeking quashing of criminal action.
Justice Longkumer also held that the inherent powers of the High Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) and its supervisory jurisdiction under Article 227 of the Constitution could not be invoked to bypass the statutory remedies available under the PMLA.
Finding no illegality or jurisdictional error in the proceedings before the Special Judge (PMLA), Dimapur, the court dismissed the petition and allowed the ED investigation and prosecution to continue in accordance with law.