Enactment of FEMA Does Not Grant Person Immunity for Offences under IPC: Delhi HC In Manideep Mago's Case

The Delhi High Court, on Thursday, granted partial relief to Manideep Mago for offences filed under the IPC and Foreign Exchange Management Act, 1999 (FEMA), highlighting that the enactment of FEMA does to grant a person immunity for offences under the IPC.

The bench of Justice Anup Jairam Bhambhani held, "this court is of the view there is no basis to hold that the enactment of FEMA grants to a person immunity for offences under the IPC, since FEMA does not repeal the IPC, either expressly or by implication".

The case was registered after the Directorate of Enforcement (ED) conducted a search and seizure at the premises of Birfa IT Services. During the operation, Mago's statement was recorded, in which he allegedly admitted to conducting international hawala transactions amounting to ₹3,500 crore. These transactions were reportedly carried out by fabricating documents to remit funds to their companies in Hong Kong and Canada.

The ED further alleged that Mago accepted cash deposits into certain bank accounts and transferred the funds abroad through his company using fake invoices for software imports from M/s Mozire Technologies Ltd. A simultaneous search was also conducted at Birfa IT’s office, resulting in the seizure of digital devices and documents.

On the same day, the ED lodged a complaint with the Crime Branch, Delhi, which led to the registration of an FIR. Mago was arrested on May 31, 2024 and remanded to police custody. Treating the FIR offences as predicate offences, the ED registered an ECIR under the Prevention of Money Laundering Act (PMLA).

Mago, represented by Senior Advocate Vikram Chaudhri, challenged his arrest by the ED and the Delhi Police, asserting that the actions of the accused amount, at most, to civil violations under the FEMA, which does not prescribe criminal punishment. Senior Advocate Chaudhri also argued that since FEMA replaced the Foreign Exchange Regulation Act (FERA) with the intent to decriminalise foreign exchange-related infractions, any criminal prosecution would effectively revive repealed FERA provisions.

Senior Advocate Chaudhri further contended that the FIR registered by the Delhi Police was legally flawed as no preliminary enquiry was conducted, and the FIR was based solely on ED’s search and seizure operations under FEMA. Senior Advocate Chaudhri also contended that the arrest by the ED failed to satisfy the statutory requirement under Section 19(1) and (2) of PMLA, and did not provide the mandatory “reasons to believe”.

Per ED's case, over ₹2,886 crores were deposited into accounts controlled by Mago, claiming this was part of international hawala operations facilitating payments for Indian importers to foreign exporters, especially in China and Hong Kong. Additionally, around ₹4,817 crores were allegedly remitted abroad using fake invoices by fictitious foreign companies, with payments shown as made in cash by Indian clients for sham IT services. The ED claimed crypto payouts were also falsely documented.

The court framed the following issues to be considered in this case:

Does the enactment of a FEMA grant to a person immunity from prosecution for offences which arise under the IPC from the underlying acts or omissions that led to infraction of the provisions of FEMA?

Was the registration of the subject FIR by the Delhi Police valid and legal?

Was the petitioners' arrest by the ED in the subject ECIR valid and legal?

Was the petitioners' arrest by the Delhi Police in the subject FIR valid and legal?

Relying on the Supreme Court case of Union of India v Venkateshan ((2002) 5 SCC 285), the court emphasized that though FEMA decriminalised foreign exchange violations, preventive detention under COFEPOSA could still be justified based on conduct relating to the same transactions. This clarified that decriminalisation under FEMA does not automatically extend to other statutes.

Further applying the principles laid down in the case of M. Karunanidhi v Union of India ((1979) 3 SCC 431), the court observed that "neither do the two statutes viz., FEMA and IPC, occupy or operate in the same field; nor do they contain any inconsistent or repugnant or irreconcilable provisions. FEMA replaced FERA with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of the foreign exchange market in India; while IPC is the codified substantive penal law of the country, which deals with punishing conventional crimes".

The court noted that the acts attributed to Mago, such as forging notarial stamps and fabricating fake invoices, were independently punishable under the IPC and occurred before the alleged FEMA violations. Hence, these criminal acts do not get subsumed or decriminalised merely because they are linked to a FEMA proceeding.

Therefore, in the first issue, the court held that the enactment of FEMA does not grant immunity from prosecution under the IPC. The offences under IPC, including criminal conspiracy, cheating, and forgery, remain intact and prosecutable, regardless of their association with FEMA violations. Therefore, the court rejected Mago's argument regarding non-prosecution under the IPC.

The second issue addressed the legality of the FIR registered by the Delhi Police. The court, examining the principles laid down in the Supreme Court case of Lalita Kumari v Government of UP ((2014) 2 SCC 1), noted that the FIR was not solely based on Mago’s statement but also on material evidence recovered during the ED’s search, such as invoices, notarial stamps, and other documents that supported allegations of forgery and fabrication.

Furthermore, the court noted that Mago’s statement under Section 37 FEMA did not amount to a confession of any offence; at most, it contained some admissions. Thus, even if parts of the FIR referred to that statement, it would not justify quashing the FIR. "Mago does not appear to have confessed to committing any offence, and therefore, it would appear that at worst, the statement merely contains some admissions on his part", the court stated.

The court also rejected the argument of Mago's argument regarding the legality of arrest under PMLA. Relying on the case of Arvind Kejriwal, Mago argued that ED failed to provide the “reasons to believe” as mandated under Section 19(1) of the Act. However, the court held that the judgment, being fairly recent, had a protective effect.

The court added, "since what the Supreme Court articulated in Arvind Kejriwal was an additional requirement, and the Supreme Court was not interpreting an existing statutory requirement, such additional requirement could only be prospective in its operation as of the date that requirement was laid down by the Supreme Court".

Accepting Mago's argument regarding Delhi Police's failure to provide grounds of arrest, the court emphasized that, "What has been recorded in the arrest memos are not grounds of arrest since these do not spell-out the specific roles alleged against the petitioners; nor do they refer to the specific incriminating circumstances that can be attributed to a particular petitioner in relation to the offences alleged. The petitioners' arrest by the Delhi Police is therefore clearly not in compliance with the mandate of the Supreme Court".

Accordingly, the court granted Mago partial relief by releasing him from 'custody in the subject FIR upon furnishing personal bond in the sum of Rs. 05 lacs each with 02 sureties'.

For Petitioner: Senior Advocate Vikram Chaudhri with Advocates Raktim Gogoi, Arveen Sekhon, Rishi Sehgal, Shivam Pal Sharma, Anuj Kr and Ishaan Saha

For Union: Standing Counsel Amol Sinha with Advocates Kshitiz Garg, Ashvini Kumar and Nitish Dhawan

For ED: Special Counsel Zoheb Hossain with Advocates Vivek Gurnani, Pranjal Tripathi and Kartik Sabharwal

Case Title: Manideep Mago v Union (2025:DHC:3739)