TaxTMI 
TaxTMI 
2026 (7) TMI 1548
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....ging that office bearers, members and cadres of an unlawful association (hereinafter "association") conspired to raise and collect funds, domestically and from abroad, for financing terrorist activities, promoting communal disharmony and radicalising vulnerable youth. 3. Neither of the two applicants finds mention in the main prosecution complaint dated 19.11.2022. Both applicants were arrayed as an accused for the first time only in the V supplementary prosecution complaint dated 24.05.2024. The applicant Anshad Badruddin as Accused No. 24, and the applicant Abdul Khader Puttur as Accused No. 26, on the allegation that they had served as Physical Education ("PE") trainers of the association and had received monies from the association in that capacity. 4. The applicant Anshad Badruddin was arrested on 18.03.2024 from District Jail, Lucknow, where he was already lodged in judicial custody in a separate matter. The applicant Abdul Khader Puttur was arrested on 19.03.2024 from Central Prison, Bengaluru, where he too was already in judicial custody in a separate matter. Both applicants thereafter preferred regular bail applications before the Additional Sessions Judge, Special C....
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....a want of due care in appreciation of the individual role of each accused separately. 10. The submissions made on behalf of the applicants are strongly opposed by Mr. Vivek Gurnani, learned counsel for the respondent-Enforcement Directorate ("ED"). He submits that the allegations against the present applicants are serious in nature and that the roles assigned to the applicants are graver than the accused persons who have already been enlarged on bail. It is submitted that, unlike Parvez Ahmed, Mohd. Ilyas and Abdul Muqeet, who merely collected donations and deposited the same in association's own accounts, the present applicants were themselves direct and personal beneficiaries of monies credited to their individual bank accounts, and accordingly stood in dominion and control of the alleged proceeds of crime. 11. Learned counsel further submits that the applicants were engaged not in innocuous fund-collection but in personally conducting physical education training that was, in truth, a facade for imparting weapons training, in the use of sickles, swords, knives and other implements, to association's cadres, as evidenced by documents seized during investigation, and that the ....
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.... "(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." 18. Section 45 of the PMLA, in turn, prescribes the following twin conditions which must be satisfied before an accused can be released on bail: "45. Offences to be cognizable and non-bailable.- (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail." 19. Equally settled is the proposition that, absent a scheduled offence, there can be no "proceeds of crime", and absent proceeds of crime, the offence under Section 3 of the....
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....l link has also been emphasised in R.K.M Powergen Private Limited v. Enforcement Directorate (W.P.Nos.4297 & 4300/2025 (Madras HC), decided on 15.07.2025), in the following terms: "The PMLA demands the existence of a predicate offence. When there is no predicate offence, initiation of proceedings under PMLA is a non starter... The essential ingredient for the ED to seize jurisdiction is the presence of a predicate offence. It is like a limpet mine attached to a ship. If there is no ship, the limpet cannot work. The ship is the predicate offence and 'proceeds of crime'. The ED is not a loitering munition or drone to attack at will on any criminal activity." 22. Vide order dated 04.12.2024 in the case of Parvez Ahmed (Supra), the role assigned to the applicants therein i.e. Parvez Ahmed, Mohd. Ilyas and Abdul Muqeet, is extracted in paragraph no. 4, and the same is reproduced as under: "4. As per the Complaint filed by the ED, the specific role of the petitioners are described as under:- Role of Parvez Ahmed • It is stated that he was the president of Delhi state unit of Popular Front of India ("PFI") for the term 2018-2020 and was actively involved ....
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....l Muqeet • • It is stated that he was the office secretary of Delhi State Unit of the organization since 2017. During the investigation, it was revealed that bogus donation slips were issued in the name of residents of Mullah Colony, Gharoli for PFI by Abdul Muqeet along with his associates. It was also revealed that donations made for a sum of Rs. 50-100 were incorrectly reflected as donations to the tune of Rs. 2000 - Rs. 4000. Further, Abdul Muqeet was actively involved in the collection of donations in his locality, i.e. Mullah Colony, Gharoli, Delhi-96. • His statement under section 50 of PMLA was recorded wherein he inter alia, stated that he joined PFI after meeting Parvez Ahmed and was made office secretary of PFI Delhi. Further as office secretary, his responsibility was to open and close PFI's office and to attend any PFI related person who came to the office. He used to attend office every day for 3-4 hours and it was his responsibility to collect Zakat in Mulla Colony and nearby areas and after collecting Zakat if anybody used to ask him for donation receipts, he would talk to Mohd Ilyas and arranged for receipts." 23. The Court....
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....It is submitted that Vijay Madanlal Choudhry (supra) has held that PML Act is an independent and distinct Act which deals with offences relating to only proceeds of crime, and not with the crime itself which generates the proceeds of the crime. In particular, paragraph 406 in Vijay Madanlal Choudhary (supra) states: "406...The fact that the proceeds of crime have been generated as a result of criminal activity relating to a scheduled offence, which incidentally happens to be a non-cognisable offence, would make no difference. The person is not prosecuted for the scheduled offence by invoking provisions of the 2002 Act, but only when he has derived or obtained property as a result of criminal activity relating to or in relation to a scheduled offence and the indulges in process or activity connected with such proceeds of crime..." 15. Paragraph 407 similarly states: "407...the offence under this Act in terms of Section 3 is specific to involvement in any process or activity connected with the proceeds of crime which is generated as a result of criminal activity related to the scheduled offence..." 16. In Mohan Lal (supra), the expression 'possessi....
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.... the accused person has to cross the hurdle of twin conditions laid down in section 45 of PMLA which read as under:- "45. Offences to be cognizable and non-bailable.-- (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:" 45. For the reasons noted above, I am of the view that in the present case, the twin conditions of section 45 have been met. The Special Counsel for ED has been given an opportunity to oppose the bail applications. Prima facie, I am of the view that the offence of money laundering is not made out against the petitioners herein. Delay in trial and long incarceration. 46. T....
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.... 120. Thus, what emerges is that, the ED's entire case against the Applicant is founded on guilt by association. Mere occupancy of leadership positions in PFI, which was a lawful organization during the Applicant's association from 2009 to 2018. The Petitioner as Member of SDPI thus, separated much prior to PFI been declared as a banned Organization on 28.09.2022. SDPI which continues to be a lawful political party not declared unlawful by the Government, does not, without more, constitute the offence of money laundering. 121. The Applicant may have at one point of time be a founding Member of PFI since 2015 and remained a member till 2018, but that or that he may be a National President of SDPI, but these allegations in itself are not enough to prima facie make out a case of laundering the proceeds of crime. Mere association of the Applicant with an organization or holding a position in an organization, without specific and concrete evidence of personal involvement in money laundering activities, cannot constitute an offence under Section 3 of PMLA. 122. The only allegations are that the funds have been collected in the accounts of PFI/SDPI from unknown sou....
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....he additional twin conditions get watered-down. In the present case, the amount attributed to the petitioner, even on ED's own reckoning, is only Rs. 3.15 lacs, which falls far below that threshold. Without undertaking an elaborate exegesis of that provision at this stage, this court is of the view, that when the alleged involvement of an accused is confined to a quantum substantially below the statutory threshold, it would be incongruous to subject him to the same degree of rigour as may apply to persons alleged to have laundered, or to be in possession of, amounts equal to or exceeding that threshold; and that this factor militates in favour of a more liberal approach in the matter of bail. 21. The court is also conscious of the observations made by a Co-ordinate Bench while granting regular bail to co-accused Moideen Kutty K @ MK Faizy, particularly the observation that there was no material to show that the said co-accused had dealt with "proceeds of crime" within the meaning of section 3 of the PMLA. If the inflows into SDPI's accounts have, at least at this stage, not been demonstrated to constitute proceeds of crime, then ex-facie the sums allegedly transferred by the pet....
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....harmony and received substantial funds from the association, making him complicit in activities linked to the proceeds of crime. f. He knowingly concealed, possessed, and used illicit funds, projecting them as legitimate, thereby committing the offence of money laundering under Section 3 read with Section 70 of PMLA, 2002, punishable under Section 4. 29. Similarly, as per ED, the role assigned to Abdul Khader Puttur is as under: a. Investigation under PMLA, 2002 revealed that Abdul Khader Puttur was a State Executive Council member of Karnataka wing of the association (2011-2022), General Secretary (2013-2014), and Vice President (2015). b. As a Physical Trainer of the association, he instigated violent tendencies among vulnerable Muslims under the guise of yoga and fitness classes, providing training in the use of weapons like sickles and swords to promote unlawful activities. c. He received Rs. 2,16,000 from the association's Union Bank account for conducting PE training and had unexplained cash deposits of Rs. 23,35,724 in his own account. d. Despite declaring an annual income of Rs. 3 lakh, he failed to explain these deposits ....
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....- "13. Fourthly, the contention of the DoE that generation of proceeds of crime is itself 'possession' or 'use' of the 'proceeds of crime', prima facie, appears to be unclear and not free from doubt in view of the ratio in Vijay Madanlal Choudhary (supra)... 16. In Mohan Lal (supra), the expression 'possession', it is held, consists of two elements. First, it refers to corpus of physical control and second it refers to the animus or intent which has reference to exercise of self-control... The stand of the DoE as to the constructive possession, will be satisfied only if the dominion and control criteria is satisfied. If the proceeds of crime are in dominion and control of a third person, and not in the dominion and control of the person charged under Section 3, the accused is not in possession of the proceeds of the crime. It would be a different matter, when an accused, though not in possession, is charged for use, concealment or acquisition of the proceeds of the crime, or projects or claims the proceeds of crime as untainted property. The involvement of an accused may be direct or indirect." 33. The submission advanced by Mr. Gurnani, that the present applic....
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....ce from which the payments received by the applicants can be said to be "derived", so as to clothe such payments with the character of proceeds of crime under Section 2(1)(u) of the PMLA. 37. This Court is not oblivious to the material relied upon by the ED regarding certain seized documents said to disclose that PE training conducted by association's trainers was, in substance, weapons training conducted under the guise of physical education and yoga instruction. However, even taking such material at its highest, it would, at best, go to establish that the applicants participated in an activity that may itself require to be tested as a scheduled offence at trial; it does not, without more, establish that the remuneration received by the applicants was generated as a result of a scheduled offence already committed and accomplished, as is required to attract Section 3 of the PMLA. 38. To hold otherwise would be to permit the ED to proceed on the same premise that was expressly disapproved of in Parvez Ahmed, namely, that funds said to have been utilised for, or connected with, the future or continuing commission of a scheduled offence can, without further foundation, be treate....
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....s of crime." 42. It is also relevant that the quantum of funds attributed to each of the present applicants, approximately Rs. 7,29,300/- in the case of Anshad Badruddin (Rs. 3,50,000/- through banking channels and Rs. 3,79,300/- in cash) and approximately Rs. 25,51,724/- in the case of Abdul Khader Puttur (Rs. 2,16,000/- through banking channels and Rs. 23,35,724/- in cash) is, on any view, well below the threshold of Rs. 1,00,00,000/- contemplated by the proviso to Section 45 of the PMLA and considered by this Court in Wahidur Rahman (Supra). 43. While this Court is not, at this stage, called upon to render a final view on the applicability of the said proviso to the facts of the present case, the relatively modest quantum involved is a factor that reinforces, rather than detracts from, a liberal approach to the question of bail, consistently with the approach adopted in the decisions discussed above. 44. It further deserves notice that neither applicant presently stands charge-sheeted in the predicate offence registered by the NIA. Abdul Khader Puttur, though named in FIR No. RC-14/2022/NIA/DLI, has admittedly not been charge-sheeted therein, and Anshad Badruddin does n....
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....to continue incarceration for a long time when there is no possibility of a trial of the scheduled offence and the PMLA offence concluding within a reasonable time. If the Constitutional Courts do not exercise their jurisdiction in such cases, the rights of the undertrials under Article 21 of the Constitution of India will be defeated." 47. The Supreme Court, in Prem Prakash v. Union of India (2024) 9 SCC 787, has, in the same vein, cautioned that "keeping persons behind the bars for unlimited periods of time in the hope of speedy completion of trial would deprive the fundamental right of persons under Article 21 of the Constitution of India and that prolonged incarceration before being pronounced guilty ought not to be permitted to become the punishment without trial." 48. In the present case, the applicant Anshad Badruddin has, as on date, remained in continuous custody for over two years and three months, and the applicant Abdul Khader Puttur for a like period, longer, in either case, than the two years and two months of incarceration that this Court found sufficient, in Parvez Ahmed, to tilt the balance in favour of bail. The Prosecution Complaint and Supplementary Compla....