TaxTMI 
TaxTMI 
2026 (5) TMI 1379
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....Sections 420/467/468/471/120B of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act which includes scheduled offences under the PMLA. In view thereof, the Enforcement Directorate (hereinafter referred to as the E.D.) registered ECIR no. KLZO/9/2016 dated 5th September, 2016 which culminated in filing of a prosecution complaint against the petitioner and others. 2) Seeking quashing of the said complaint, learned counsel for the petitioner has submitted as hereunder:- The allegation against the petitioner is that the petitioner company resorted to circular trading in connivance and conspiracy with the other accused persons and the three LCs opened in favour of the company amounting to Rs. 25 crores were routed back after discounting to M/s. PVPL and its sister concerns through the purported debtor company of PVPL, namely M/s. Quality Vintrade Private Limited (QVPL). The petitioner sold commodities to PVPL by way of sale contracts after purchasing the same from QVPL through warehouse trust receipt which is conclusive proof of sale of goods lying in a warehouse under the Sale of Goods Act. There is no requirement of physic....
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....mar Jain and the foundational facts required for establishing an offence under the PMLA are absent. Statement of a co-accused is not sufficient for initiating proceedings against a person and can at best be used for the purpose of corroboration of other evidence. The allegations in the complaint do not make out a prima facie case against the petitioner. 6) Learned counsel has placed reliance on the following authorities in support of his contention. i. Prem Prakash v/s. Union of India reported in (2024) 9 Supreme Court Cases 784, ii. Kashmira Singh v/s. State of Madhya Pradesh reported in (1952) 1 Supreme Court Cases 275, iii. Surinder Kumar Khanna v/s. DRI reported in (2018) 8 Supreme Court Cases 271, iv. Deepak Bhai Patel v/s. State reported in (2019) 16 Supreme Court Cases 547 and v. Asif Hanif Thara v/s. Enforcement Directorate reported in 2024 Supreme Court Cases OnLine MP 7379 7) Vehemently opposing the submission made on behalf of the petitioner, learned counsel for the E.D. has canvassed his argument as follows:- The petitioner has acted as an accomplice of PVPL in siphoning the proceeds of crime generated from the....
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....ne All 9470, iii. Amit Banerjee v/s. Shri Manoj Kumar, Assistant Director, E.D. reported in 2016 Supreme Court Cases OnLine Cal 6708 & iv. Vijay Madanlal Choudhary & Ors. v/s. Union of India and Ors. reported in 2022 Supreme Court Cases OnLine SC 929. 11) I have considered the rival contention of the parties and material on record. 12) It shall be useful to reproduce Section 2(1)(u) of the PMLA which defines "proceeds of crime" and also, Section 3 of the Act. "Section 2(1)(u):- "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad; Section 3:- Offence of money-laundering.- Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall ....
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....nt and Regulation) Act, 2007. Such transaction cannot be termed as "paper transaction". Though a circular transaction between the petitioner, QVPL and PVPL has been alleged, surprisingly, QVPL has not been arraigned as an accused either in the predicate offence or in the M.L. case. In view of the fact that QVPL who is the alleged recipient of the money from the petitioner is not an accused in either of the cases, the transaction between them cannot be prima facie termed as illegal. Though the petitioner has been termed as a beneficiary by the E.D., no prima facie independent material is found in support thereof. 16) The petitioner has not been arraigned as an accused in the charge sheet and supplementary charge sheet in respect of the predicate offence under Sections 120B/420/467//468/471 of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act. In course of investigation, the three disputed LCs vis-a-vis the role of the petitioner with regard to the offence has been dealt with. The CBI has arrived at a conclusion that the petitioner company is not a beneficiary to the alleged transactions. In the tabulation recorded in the charge....
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....arrived at a conclusion that the petitioner was not a beneficiary in the alleged transaction and investigation could not establish any diversion of fund in respect of the petitioner company. The investigations held by the CBI and the E.D. are on the same premise and since the CBI has exonerated the petitioner from the allegations of his involvement in any criminal activity relating to the scheduled offence, he cannot be accused of indulging in any activity connected to such proceeds of crime. 19) It is trite law that the 2002 Act steps in only if there exists proceeds of crime within the meaning of Section 2(1)(u) of the Act and it is involved in any process or activity. The definition does not get attracted even in a case of existence of undisclosed income irrespective of its volume unless the property has been received or obtained as a result of criminal activity relating to a scheduled offence. 20) The Hon'ble Supreme Court, in the authority in Deepak Bhai Jagdish Chandra Patel (supra) has observed as hereunder:- "At the stage of framing the charge in accordance with the principles which have been laid down by this Court, what the court is expected to do is, it do....