Jammu & Kashmir High Court – Srinagar Bench
Hilal Ahmad Mir vs Directorate Of Enforcement Dy on 3 January, 2025
Author: Javed Iqbal Wani
Bench: Javed Iqbal Wani
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
Reserved on: 27.11.2024
Pronounced on: 03.01.2025
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024
CRM(M) No. 484/2024
1. Hilal Ahmad Mir .....Appellant(s)/Petitioner(s)
Aged 53 years
S/O Sona Ul Lah Mir R/O House
No. 5, Lane 5, Pathan Colony,
Zakura, Srinagar, Jammu and
Kashmir, PIN Code 190006.
2. Abdul Hamid Hajam
Aged 64 years
S/O Late Gh. Nabi Hajam R/O
House No. 339, Mohalla Hurra,
Zakura, Hazratbal, Srinagar,
Jammu and Kashmir, PIN Code
190006
Through: Mr. Tasaduq H. Khawaja, Advocate with
Mr. Ab. Muizz, Advocate
vs
1. Directorate of Enforcement Dy. ..... Respondent(s)
Director
Th. Srinagar Zonal Office, Shah
Building, Gogjibagh, Srinagar, Jammu
and Kashmir, PIN Code 190008.
Through: Mr. Zuhaib Hussain, Advocate
(Virtual Mode) with
Mr. Faizan Ah. Ganie, Advocate.
CRM(M) No. 418/2024
1. Mohammad Shafi Dar .....Appellant(s)/Petitioner(s)
Aged 64 years
S/O Abdul Ghani Dar R/O
Majeed Bagh, Barzulla, Srinagar.
Through: Mr. M. Y. Bhat, Sr. Advocate with
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 2
Mr. Sajid Ahmad Bhat, Advocate.
vs
1. Directorate of Enforcement ..... Respondent(s)
Srinagar Zonal Office, Shah Building,
Gogji Bagh Srinagar, J&K
Through: Mr. Zuhaib Hussain, Advocate (Virtual
Mode) with
Mr. Faizan Ah. Ganie, Advocate.
Coram: HON'BLE MR. JUSTICE JAVED IQBAL WANI, JUDGE
JUDGMENT
1. The issues involved in the instant petitions are akin and analogous to
each other and are taken up hereunder for final disposal at this stage
with the consent of learned counsel for the parties.
2. Before proceeding to advert to the issues involved in the petition, the
brief facts in context of issues involved are briefly detailed hereunder:
A. CRM(M) No. 484/2024.
(i) The petitioners herein are stated to have been working as Chairman
and Secretary of a registered Co-operative Society, namely, River
Jehlum Co-operative House Building Society (for short „the Society‟),
which Society had proposed to develop a satellite township at
Shivpora, Srinagar on a big plot of land that was identified by the
Society for the said purpose and the said land was proposed to be
purchased by the Society from its land owners for the development of
the said township.
(ii) In furtherance of the aforesaid proposal, petitioner 1 herein claims
to have approached the Jammu and Kashmir State Co-operative Bank
(for short „the Bank‟) for grant of financial assistance by way of loan
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 3of Rs. 300 crores in favour of the Society for enabling it to acquire the
identified land from its owners and its subsequent development for
establishment of the satellite township. A detailed project report is
claimed to have been prepared and submitted to the Bank for
consideration of the case of the Society for grant of loan. It is stated
that the petitioner also filed an application to the Government of
Jammu and Kashmir for facilitating early consideration of the said
loan case. The Bank after considering the financial viability of the
project and financial interests of the Bank, is stated to have agreed to
finance the project to the extent of Rs. 250 crores and subsequently in
the first instance, the Bank released an amount of Rs. 223 crores as
loan and directly transferred the same in the accounts of 18 land
owners against the land in question measuring 257 Kanal and 18
Marlas covered under Khewat No. 53 in estate Shivpora and the land
owners consequently are stated to have executed an irrevocable power
of attorney in favour of the petitioner 1 herein, in order to facilitate the
transfer of the land in the name of the Society or else the ultimate
purchasers of the plots of land therein the said township and the
petitioner 1 herein, in turn is stated to have executed a perpetual lease
deed qua the said land in favour of the Society through petitioner 2
herein, whereafter the leasehold rights are stated to have got
mortgaged with the Bank and the land in question properly laid and
marked in the relevant revenue records in favour of the Bank.
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 4
(iii) A frivolous investigation is stated to have been initiated in the
matter by the Anti Corruption Bureau (for short „ACB‟) after
registering FIR No. 4/2020 for commission of offences punishable
under Sections 120-B, 420, 467, 471 RPC read with Section 5(2) of
J&K Prevention of Corruption Act, wherein the crux of the allegations
against the petitioners and other co-accused therein the said FIR was
that the petitioners herein had falsely claimed that the Society was a
registered Society and succeeded in obtaining a loan of Rs. 250 crores
from the Bank on false premise while alleging further that the loan had
been sanctioned by the Bank illegally and fraudulently without
following the Standard Operating Procedure, proper documentation,
KYC norms and also without obtaining tangible security with further
allegation that the whole exercise had been undertaken by the
petitioners herein at the behest and instance of the then Chairman of
the Bank, namely, Mohammad Shafi Dar (petitioner in connected
CRM(M) No. 418/2024), who came to be the alleged kingpin in the
whole affair, having compromised the interest of the Bank while
sanctioning loan in favour of the Society.
(iv) The petitioners herein along with other accused persons therein
the FIR (Supra) are stated to have been arrested in connection with the
investigation therein the said FIR, however, subsequently released on
bail by the orders of the competent court of law and during the course
of said investigation, the land in question is stated to have been
attached and the bank accounts of 18 land owners frozen, so as to stop
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 5
them from withdrawing the amount credited into their accounts against
the land in question.
(v) After completion of the investigation in the FIR supra, charge-
sheet is stated to have been filed before the competent court against
the petitioners herein along with the other accused persons, which
charge-sheet is stated to be pending trial before the competent court.
(vi) It is further stated that the attached Bank accounts of the land
owners became subject matter of litigation before the Hon‟ble Apex
Court, wherein during the course of proceedings, Society volunteered
to abide by its arrangement with the Bank and return the loan amount
availed by it with interest, subject to the condition that the attachment
order qua the land was lifted, whereupon the Apex Court is stated to
have lifted the attachment order, however, in respect of the accounts of
the land owners in order to facilitate them to withdraw the money that
had been credited into their accounts in consideration of their land in
question having been leased out perpetually in favour of the Society.
(vii) It is being further stated that the manner and the course, in which
the money that was directly transferred in the accounts of the land
owners by the Bank out of the loan amount sanctioned in favour of the
Society in lieu of the land and was allowed to be withdrawn by the
said land owners by the Apex Court, no money was ever transferred in
the accounts of the petitioners or the Society or else used by the
petitioners or the Society at any point of time.
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 6
(viii) It is further stated that in the meanwhile, it got transpired that the
above named Mohammad Shafi Dar, the then Chairman of the Bank,
who was alleged to be the kingpin in the whole affair and had been
shown as the main accused in the charge-sheet, had instituted series of
proceedings against the Government of J&K so that the Board of
Directors of the Bank appointed by the Government are removed and
fresh elections for electing new Board of Directors are conducted at
the earliest, wherein the said Mohammad Shafi Dar could seek re-
election and in the said litigations, various orders have had been
passed and having not gone down well and that the then Government
of J&K feeling irked by the said court orders, the interested officers in
the then Government of J&K appear to have approached the
respondent-Directorate for conducting further proceedings in
furtherance of Enforcement Case Information Report (ECIR)
registered in 2021 under No. ECIR/04/SRZO/2021 dated 31.03.2021
having been registered for investigating money-laundering aspect of
the case, although there had been no element or feature of money-
laundering, as sale consideration of the land in question had been
credited in the accounts of the land owners by the Bank out of the
sanctioned amount of loan directly and the petitioners have had never
been in possession of the money in question that is alleged to have
been laundered, as sine qua non for the offence of money-laundering
that one should be in possession of “proceeds of crime” and engaged
in an activity to project it as an untainted property.
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 7
(ix) It is further stated that the respondent-Directorate after remaining
dormant for about three years reactivated itself most probably at the
instance of the then Govt. of J&K for the aforesaid reasons of
litigation instituted by the above named Mohammad Shafi Dar and in
furtherance of the said ECIR registered in 2021 started further
proceedings in the month of November 2023 and in the course of said
proceedings, on 14.12.2023, attached the land in question being 257
Kanal and 18 Marlas having been acquired in the name of the Society
in lieu of the sanctioned amount of loan and subsequent thereto, the
petitioners herein as also the above named Mohammad Shafi Dar were
again arrested by the respondent-Directorate in connection with the
investigation in the ECIR (Supra), but were subsequently released on
bail pursuant to the orders passed by the competent court of law/High
Court.
(x) It is further stated that upon completing the investigation in the
ECIR supra, the respondent-Directorate filed a complaint before the
court of Special Judge, Anti Corruption Bureau (CBI) being
Designated Court for the purposes of Prevention of Money-laundering
Act, 2002 (for short PMLA), wherein the petitioners came to be
arrayed as accused Nos. 2 and 3 and the above named Mohammad
Shafi Dar as accused No. 1 and alleged to have committed offence
under Section 44 and 45 read with Section 70 of the PMLA.
3. The petitioners herein have maintained the instant petition on the
following grounds:
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 8
a) Because the registration of impugned report and
consequential complaint has resulted in miscarriage of
justice in that accused have been subjected to process
under PMLA even though elements that are sine quo non
for commission of offence under said Act are absent.
b) Because from the bare perusal of complaint it transpires
that there is no ingredient or element of offence of money-
laundering in that the amount that has been released out
of the sanctioned loan, which is described as “proceeds of
crime”, has been, admittedly, directly transferred in the
account of landowners. Petitioners have never been in
possession of money which is alleged to have been
laundered. The sine quo non for the offence of money-
laundering is that one should be first in possession of
“proceeds of crime” and then engage in an activity to
project it as untainted property. That element is totally
missing. The complaint is, therefore, liable to be quashed.
c) Because the complaint is violative of Article 21 and 22
which besides ensuring fair process also guarantee
protection against double jeopardy.
d) Because admittedly the amounts that were transferred in
the account of landowners and which were attached on
the false premise that same were “proceeds of crime”
were ordered to be released in favour of landowners by
the orders of the Hon’ble Supreme Court. If the amounts
in the account of landowners were “proceeds of crime”,
the Hon’ble Supreme Court would not have ordered or
allowed their release as “proceeds of crime” could not be
so released. Treating the amount in the account of
landowners for the purposes of making out case of money-
laundering against the petitioners under such
circumstances is not only abuse of process of law but
amounts to overreaching orders of Hon’ble Supreme
Court.
e) Because the transaction between landowners and Society
have been treated as genuine by the Hon’ble Supreme
Court and allegation of the Society being non-existent has
not been approved by the Hon’ble Supreme Court so much
so calling landowners has been termed as harassment. No
case can be thus made against petitioners.
f) Because the existence of “proceeds of crime” and its
possession by a person is quintessential ingredient of
offence of money-laundering and a person can be accused
of offence of money-laundering only if he projects or uses
such property by projecting it as untainted property. None
of the conditions exist in the present case. The complaint
is, thus, liable to be quashed.
g) That the Hon’ble High Court has already taken
cognizance of the matter and stayed the proceedings in
the complaint at the behest of so-called main accused, Mr.
Mohammed Shafi Dar. Under the circumstances,
proceedings cannot be continued against petitioners,
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 9which is neither practicable nor feasible. Copy of the
order passed by the Hon’ble High Court at the first
instance as well as order whereby said order has been
extended till further orders are annexed herewith and
collectively marked as Annexure III.
4. Reply to the petition has been filed by the respondent-Directorate,
wherein the petition is being opposed, inter alia, on the premise that
the petitioners herein entered into a conspiracy with the then Chairman
of the Bank besides others while creating a non-existent fictitious
Society in the year 2018-19 for obtaining a loan of Rs. 300 crores from
the Bank on a false pretext of developing and establishing a satellite
township at Shivpora, Srinagar and that an amount of Rs. 250 crores
was sanctioned as loan by the then Chairman of the Bank on
25.04.2019, which loan was arranged by the Bank against its FD‟s
maintained with the J&K Bank and upon receipt of a loan amount of
Rs. 223 crores, 18 land owners executed irrevocable power of attorney
in favour of the petitioner 1 herein being the Chairman of the Society
who in turn executed a perpetual lease deed in favour of the petitioner
2 herein being Secretary of the Society and the said land was shown as
a security pledged by the Society with the Bank for obtaining the loan
and that in furtherance of the conspiracy hatched by the petitioners
with other accused persons, the loan in question was sanctioned
without any proper documentation and following KYC norms,
inasmuch as in violation of the credit policy of the Bank as also
without obtaining any field report, balance sheet, profit and loss
statement, income tax reports, byelaws of the Society as also without
securing the loan amount by way of taking sufficient collateral
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 10
security, stating further that even the sanctioning of the loan by the
Bank in favour of the Society was not reported by the Bank to its
controlling Bank being NABARD (National Bank for Agriculture and
Rural Development) and instead concealed the same.
It is further stated that upon undertaking investigation by the ACB in
the matter, the Board of Directors of the Bank including the Chairman
came to be removed in terms of order dated 15.05.2020 and the land in
question attached vide order dated 15.02.2020 besides freezing the
accounts of land owners.
It is next stated that subsequently proceedings came to be initiated in
the matter under ECIR dated 31.03.2021 and consequently upon
undertaking investigation thereof and concluding the same,
prosecution/complaint against six accused persons/entities including
the petitioners herein came to be instituted on 29.01.2024 for offence
of money-laundering under Section 3 punishable under Section 4 of
the PMLA.
It is being lastly stated in the reply, before referring to the various
judgments delivered by the Apex Court qua the ambit and scope of
exercise of inherent power of this Court saved under Section 482 Cr.
P.C., that the petitioners have committed the offence of money-
laundering rendering them liable for prosecution under PMLA and
that, as such, interference by this Court in the instant petition at this
Stage will amount to abuse of process of law and will prove to be
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 11
detrimental to the interest of the Bank and defeat the purpose of
PMLA.
B. CRM(M) No. 418/2024
(i) In the instant petition, the petitioner herein claims to have been
elected as Chairman of the Bank in the month of December 2018 for a
period of three years to expire in December 2021, however, alleges to
have been dislodged on 15.05.2020 at the instance of a powerful team
of bureaucrats working in the Government of J&K purportedly in
exercise of its power under the J&K Co-operative Act, 1989 and got
the FIR supra registered against the petitioner herein, in the capacity as
Chairman of the Bank along with other accused persons for having
sanctioned a loan allegedly in favour of a non-existent Society and that
the removal of the petitioner and the elected board of Bank came to be
questioned before the High Court in WP(C) No. 2775/2021, which
came to be decided on 15.07.2022 holding that the nominated Board
of Directors of the Bank is entitled to remain in position and
legitimately run the affairs and management of the Bank till
04.10.2022 and that the nominated Board of Directors shall cease to be
in existence after 04.10.2022 and that it is incumbent upon the
Government or the Registrar to reconstitute the Board of Directors on
or before 04.10.2022 by holding elections in accordance with the Act
of 1989, rules and byelaws of the Bank and that such Board of
Directors was never constituted and the order of the Court was not
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 12
complied with for which a contempt petition came to be filed and that
one more petition being WP(C) No. 174/2023 came to be filed by one
Kashmir Valley Co-operative Society and another which too was
decided on 07.04.2023 by this Court by observing that it is clear that
the respondent did not have power and competence to reconstitute the
nominated Board which had already outlived its life and that it was not
open to the Government to give a fresh lease of life to the said Board
simply by replacing one of its members and that action of the
respondent cannot be countenanced by law while quashing order
dated 21.01.2023 in terms whereof an arrangement had been made by
the Government for running the affairs of the Bank.
(ii) It is further stated that the petitioner yet again filed another petition
before this Court titled as Ex-Board of Directors of the J&K State Co-
operative Bank through its then Chairman, namely, Mohammad Shafi
Dar against UT of J&K and the nominated Board of Directors
nominated by the Government for running the affairs of the Bank.
5. Insofar as the issues involved in the instant petition are concerned, the
petitioner herein, has reiterated the factual aspects referred in the
aforesaid petition being CRM(M) No. 484/2024, as such, in order to
avoid repetition, the said facts are not reiterated. However risking the
repetition, it is pertinent to mention here that the petitioner herein is
the alleged main accused implicated in the complaint having arisen out
of the ECIR (Supra) and in the complaint is alleged to have committed
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 13
the offences as are alleged committed by the petitioners of CRM(M)
No. 484/2024 supra.
6. The petitioner herein, as well, has maintained the instant petition
fundamentally on the premise on which the petitioners of CRM(M)
No. 484/2024 supra have maintained the said petition, as such, for the
sake of brevity, the same is not reiterated hereunder.
7. Objections to the petition have been filed by the respondent-
Directorate, wherein the petition is being opposed on almost same and
similar premise and grounds on which the petition bearing CRM(M)
No. 484/2024 supra has been opposed, as such, the same as well is not
being reiterated for the sake of brevity.
Heard learned counsel for the parties and perused the record.
8. Before proceeding further in the matter, it would be advantageous and
appropriate to refer to the ambit and scope of inherent power vested in
this Court saved under Section 482 Cr.P.C, qua the quashing of a
complaint/FIR.
A reference in this regard to the judgment of Apex Court passed in
case titled State of Haryana and others vs. Bhajan Lal and others
reported in 1992 Supp (1) SCC 335 would be relevant, wherein in
para 102, following has laid down:
“102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of the
principles of law enunciated by this Court in a series of
decisions relating to the exercise of the extraordinary power
under Article 226 or the inherent powers under Section 482 of
the Code which we have extracted and reproduced above, we
give the following categories of cases by way of illustration
wherein such power could be exercised either to prevent
abuse of the process of any court or otherwise to secure the
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 14ends of justice, though it may not be possible to lay down any
precise, clearly defined and sufficiently channelised and
inflexible guidelines or rigid formulae and to give an
exhaustive list of myriad kinds of cases wherein such power
should be exercised.
1) Where the allegations made in the first information
report or the complaint, even if they are taken at
their face value and accepted in their entirety do
not prima facie constitute any offence or make out
a case against the accused.
2) Where the allegations in the first information
report and other materials, if any, accompanying
the FIR do not disclose a cognizable offence,
justifying an investigation by police officers under
156 (1) of the Code except under an order of a
Magistrate within the purview of Section 155 (2) of
the Code.
3) Where the uncontroverted allegations made in the
FIR or complaint and the evidence collected in
support of the same do not disclose the commission
of any offence and make out a case against the
accused.
4) Where, the allegations in the FIR do not constitute
a cognizable offence but constitute only a non-
cognizable offence, no investigation is permitted by
a police officer without an order of a Magistrate as
contemplated under Section 155 (2) of the Code.
5) Where the allegations made in the FIR or
complaint are so absurd and inherently improbable
on the basis of which no prudent person can ever
reach a just conclusion that there is sufficient
ground for proceeding against the accused.
6) Where there is an express legal bar engrafted in
any of the provisions of the Code or the concerned
Act (under which a criminal proceeding is
instituted) to the institution and continuance of the
proceedings and/or where there is a specific
provision in the Code or the concerned Act,
providing efficacious redress for the grievance of
the aggrieved party.
7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the
proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the
accused and with a view to spite him due to private
and personal grudge.”
The Apex Court further in this regard has also in case titled as State of
Karnataka vs. M. Devenderappa and another reported in 2002 (3)
SCC 89, at para 6 held as under:
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 15“6….All courts, whether civil or criminal possess, in the
absence of any express provision, as inherent in their
constitution, all such powers as are necessary to do the right
and to undo a wrong in course of administration of justice on
the principle quando lex aliquid alicui concedit, concedere
videtur et id sine quo res ipsae esse non potest (when the law
gives a person anything it gives him that without which it
cannot exist). While exercising powers under the section, the
court does not function as a court of appeal or revision.
Inherent jurisdiction under the section though wide has to be
exercised sparingly, carefully and with caution and only when
such exercise is justified by the tests specifically laid down in
the section itself. It is to be exercised ex debito justitiae to do
real and substantial justice for the administration of which
alone courts exist. Authority of the court exists for
advancement of justice and if any attempt is made to abuse
that authority so as to produce injustice, the court has power
to prevent abuse. It would be an abuse of process of the court
to allow any action which would result in injustice and
prevent promotion of justice. In exercise of the powers court
would be justified to quash any proceeding if it finds that
initiation/continuance of it amounts to abuse of the process of
court or quashing of these proceedings would otherwise serve
the ends of justice. When no offence is disclosed by the
complaint, the court may examine the question of fact. When a
complaint is sought to be quashed, it is permissible to look
into the materials to assess what the complainant has alleged
and whether any offence is made out even if the allegations
are accepted in toto.”
The Apex Court also in case titled as Mohammad Wajid and another vs
State of UP and others reported in 2023 SCC Online SC 951 has at para
34 has observed as under:
“34. At this stage, we would like to observe something
important. Whenever an accused comes before the Court
invoking either the inherent powers under Section 482 of the
Code of Criminal Procedure (Cr.P.C.) or extraordinary
jurisdiction under Article 226 of the Constitution to get the
FIR or the criminal proceedings quashed essentially on the
ground that such proceedings are manifestly frivolous or
vexatious or instituted with the ulterior motive for wreaking
vengeance, then in such circumstances the Court owes a duty
to look into the FIR with care and a little more closely. We
say so because once the complainant decides to proceed
against the accused with an ulterior motive for wreaking
personal vengeance, etc., then he would ensure that the
FIR/complaint is very well drafted with all the necessary
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 16pleadings. The complainant would ensure that the averments
made in the FIR/complaint are such that they disclose the
necessary ingredients to constitute the alleged offence.
Therefore, it will not be just enough for the Court to look into
the averments made in the FIR/complaint alone for the
purpose of ascertaining whether the necessary ingredients to
constitute the alleged offence are disclosed or not. In frivolous
or vexatious proceedings, the Court owes a duty to look into
many other attending circumstances emerging from the
record of the case over and above the averments and, if need
be, with due care and circumspection try to read in between
the lines. The Court while exercising its jurisdiction under
Section 482 of the Cr.P.C. or Article 226 of the Constitution
need not restrict itself only to the stage of a case but is
empowered to take into account the overall circumstances
leading to the initiation/registration of the case as well as the
materials collected in the course of investigation.”
Thus, what emanates from the above principles of law is that the
inherent power of this court saved under Section 482 Cr. P.C. does not
confer any new power on the High Court, in that, it only saves the
inherent power of this Court, which the court possessed before
enactment of the Code of Criminal Procedure and it envisages three
circumstances under which the inherent jurisdiction may be exercised,
namely-
a) To give effect to an order under the Code,
b) To prevent abuse of process of court, and
c) To otherwise secure the ends of justice.
9. It is also significant to mention here that the consistent view of the
Constitutional Courts that it is neither possible not desirable to lay
down any inflexible rule which would govern the exercise of inherent
jurisdiction and no legislative enactment dealing with procedure can
provide for all cases that may possibly arise, thus suggesting that the
the courts have inherent powers apart from provisions of law which
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 17
are necessary for proper discharge of functions and duties imposed
upon them by law. That is the doctrine which finds expression in
Section 482 Cr. P.C. which merely recognises and preserves the
inherent power of the High Court to do the right and to undo the
wrong in the course of administration of justice on the principle “that
when the law gives a person anything, it gives him that without
which it cannot exist” and that the inherent power is exercised ex
debito justitiae to do real and substantial justice for the administration
of which alone the courts exist and that the authority of court exists for
advancement of justice and if any attempt is made to abuse the
authority so as to produce injustice, the court has power to prevent
abuse and that it would be an abuse of process of court to allow any
action which would result in injustice and prevent promotion of justice
and that in exercise of powers, the court would be justified to quash
any proceeding if it finds that the initiation/continuance of it amounts
to abuse of process of court or quashing of these proceedings would
otherwise serve the ends of justice.
10. Before proceeding further in the matter, a reference to Section 2(1) (p),
2(1)(u), Section 3 and Section 4 of the Prevention of Money-
Laundering Act, 2002 would be also relevant, which are reproduced
hereunder:
“Section 2(1)(p)
“Money-laundering” has the meaning assigned to it in
Section 3.
Section 2(1) (u)
“Proceeds of crime” means any property derived or
obtained, directly or indirectly, by any person as a result
CRM(M) No. 484/2024
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CRM(M) No. 418/2024 18of 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;
Explanation–For the removal of doubts, it is hereby
clarified that “proceeds of crime” include property not
only derived or obtained from the scheduled offence but
also any property which may directly or indirectly be
derived or obtained as a result of any criminal activity
relatable to the scheduled offence;]
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 2 [“proceeds of
crime” including its concealment, possession,
acquisition or use and projecting or claiming] it as
untainted property shall be guilty of offence of money-
laundering.”
Explanation.-For the removal of doubts, it is hereby
clarified that,– (i) a person shall be guilty of offence of
money-laundering if such person is found to have
directly or indirectly attempted to indulge or knowingly
assisted or knowingly is a party or is actually involved in
one or more of the following processes or activities
connected with “proceeds of crime”, namely– (a)
concealment; or (b) possession; or (c) acquisition; or (a)
use; or (e) projecting as untainted property; or (f)
claiming as untainted property, in any manner
whatsoever; (ii) the process or activity connected with
“proceeds of crime” is a continuing activity and
continues till such time a person is directly or indirectly
enjoying the “proceeds of crime” by its concealment or
possession or acquisition or use or projecting it as
untainted property or claiming it as untainted property
in any manner whatsoever.]
Section 4.
“Punishment for money-laundering.–Whoever
commits the offence of money-laundering shall be
punishable with rigorous imprisonment for a term which
shall not be less than three years but which may extend
to seven years and shall also be liable to fine 28[* * *]:
Provided that where the “proceeds of crime” involved in
money-laundering relates to any offence specified under
paragraph 2 of Part A of the Schedule, the provisions of
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 19this section shall have effect as if for the words “which
may extend to seven years”, the words “which may
extend to ten years” had been substituted.”
What emanates from the aforesaid provisions is that in order to
constitute an offence of money-laundering as defined under Section 3
(Supra) , the most important thing is that there must be an activity
connected with the “proceeds of crime”, which proceeds of crime in
terms of the aforesaid definition would mean 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.
Thus, in order to constitute an offence under Section 3 of PMLA,
Section 2(1)(u) is to be read together with Section 3 of PMLA to find
out whether the ingredients of the offence of money-laundering are
made out or not. When read so, the offence of money-laundering can
said to have been committed by fulfilment of following conditions:-
i. Scheduled offence must have been committed;
ii. Commission of scheduled offence must have resulted in some
“proceeds of crime”;
iii. Person accused of money-laundering must have indulged in an
activity connected with such “proceeds of crime”.
It needs to be mentioned here that the activity connected with the
“proceeds of crime” attributed to an accused must be the voluntary act
of the accused.
11. Keeping in mind the aforesaid provisions of the PMLA and reverting
back to the case in hand, inasmuch as the settled position of law
noticed and referred in the preceding paras laid down by the Apex
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 20
Court qua exercise of inherent power saved under Section 482 Cr. P.C.
that the Court at this stage has to proceed on the premise of the facts as
are stated in the complaint are true.
12. As is noticed in the preceding para, the case set up by the respondent-
Directorate against the petitioners herein in the complaints put briefly
is that petitioners in CRM(M) No. 484/2024, claiming to be the
Chairman and Secretary of the Society had approached the Bank
headed by the petitioner in CRM(M) No. 418/2024 for grant of a loan
to enable the Society to develop a satellite township on an identified
piece of land situated at Shivpora, Srinagar, in order to enable the
Society to purchase land from the land owners, in response whereof,
the Bank though its Chairman agreed and provided loan to the Society
to the tune of Rs. 250 crores and the land owners in furtherance
thereof executed an irrevocable power of attorney in favour of the
Chairman of the Society i.e. petitioner 1 in CRM(M) No. 484/2024 to
facilitate the transfer of land in favour of the Society, who in turn
executed a perpetual lease in favour of the Society represented by the
petitioner 2 in CRM(M) No. 484/2024, whereafter, the said lease hold
rights had been mortgage by the Society with the Bank in lieu of the
loan of Rs. 223 crores sanctioned by the Bank through its Chairman
being petitioner in CRM(M) No. 418/2024, which loan amount had
been transferred/credited in the Bank accounts of 18 land owners
whose land was proposed to be utilised by the Society for developing
the satellite township by the Society.
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 21
13. Perusal of the record tends to show that initially the investigation in
the matter was initiated by the ACB upon registration of FIR 4/2020
(Supra) under the J&K Prevention of Corruption Act, wherein crux of
the composite allegations against the petitioners in both the petitions
was that the Society was falsely created which succeeded in obtaining
the loan from the Bank on a false premise, which loan had been
sanctioned by the Bank illegally and fraudulently without following
Standard Operative Procedure, proper documentation, KYC norms,
inasmuch as without obtaining tangible security and that the whole
exercise had been undertaken by the accused persons including the
petitioners herein at the behest and instance of Chairman of the Bank
being petitioner in CRM(M) No. 418/2024, who was alleged to be the
kingpin in the whole affair and upon completion of the investigation in
the said FIR, charge-sheet came to be laid before the competent court
against the petitioners, which is pending trial and whether the accused
persons including the petitioners herein committed a scheduled
offence is for the court of competent jurisdiction to decide.
14. This Court, however, at this stage as has been stated in the preceding
paras would proceed on the premise that the accused including the
petitioners herein are involved in a scheduled offence and, as such, the
question that arises for consideration of this Court is as to whether the
alleged offence has resulted in “proceeds of crime” for the accused
persons including the petitioners herein and whether the accused
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 22
persons/petitioners herein have indulged into an activity related to
such “proceeds of crime”.
15. It is pertinent to mention here and as has been noticed in the preceding
paras as well, that during the course of investigation, land in question
as also the Bank accounts of 18 land owners, in whose accounts the
loan amount had been directly transferred/credited by the Bank were
attached to prevent the land owners from withdrawing the money so
transferred/credited and that the said attachment of the Bank accounts
of the land owners became subject matter of the litigation before the
Apex Court, wherein the Apex Court passed orders to facilitate the
land owners the withdrawal of the said money, having been
deposited/credited in their accounts in lieu of the land having been
perpetually leased out in favour of the Society.
Having regard to the aforesaid position obtaining in the matter,
inasmuch as the admitted facts noticed in the preceding paras, the
alleged offence manifestly has not resulted in any “proceed of crime”
in favour of the petitioners herein. A-fortiori, it cannot be said that the
petitioners have indulged in any activity connected with the “proceeds
of crime” for unless there are “proceeds of crime”, there cannot be any
activity about the “proceeds of crime”, in that, existence of “proceeds
of crime” pursuant to the predicate offence is sine qua non for
commission of offence of money-laundering, to be precise that if
there is no money or property, a question of money-laundering would
not arise.
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 23A reference in this regard to the judgment of the Apex Court passed in
case titled as Vijay Mananlal Choudhary and others vs. Union of
India and others reported in 2022 SCC Online SC 929 would be
relevant, wherein at para 283 and 284 following has been held:-
“283. Even though, the 2002 Act is a complete Code in
itself, it is only in respect of matters connected with
offence of money-laundering, and for that, existence of
“proceeds of crime” within the meaning of Section
2(1)(u) of the Act is quintessential. Absent existence of
“proceeds of crime”, as aforesaid, the authorities under
the 2002 Act cannot step in or initiate any prosecution.
284. In other words, the Authority under the 2002 Act, is
to prosecute a person for offence of money-laundering
only if it has reason to believe, which is required to be
recorded in writing that the person is in possession of
“”proceeds of crime””. Only if that belief is further
supported by tangible and credible evidence indicative
of involvement of the person concerned in any process
or activity connected with the “proceeds of crime”,
action under the Act can be taken forward for
attachment and confiscation of “proceeds of crime” and
until vesting thereof in the Central Government, such
process initiated would be a standalone process.”
What emanates from the above position of law is that the Apex Court,
inter alia, has held that in absence of “proceeds of crime”, the
Authority under PMLA have no jurisdiction to proceed.
16. Further perusal of the record tends to show and as has been noticed in
the preceding paras, admittedly no money was transferred to the
accounts of the petitioners herein, therefore, there was no occasion for
the petitioners herein to indulge in any activity associated with the so
called “proceeds of crime” as the money that has been released out of
the sanctioned loan, which is described as the “proceeds of crime” in
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 24
the complaint, had admittedly been transferred/credited directly into
the accounts of the land owners and the petitioners herein had never
been in possession or control of the said money, which is alleged to
have been laundered. As has been pointed out earlier, in order to
constitute the offence of money-laundering, it is imperative that one
should be first in possession of the “proceeds of crime” and then
engage in an activity to project it as untainted property, which
however, is missing in the instant case. In the instant case, “proceeds
of crime” in favour of the petitioners would have arisen only had the
petitioners developed the plots in the colony and sold them to earn
profit in the process, in that, the said profits would have been the
“proceeds of crime” and any activity related to such profits may have
resulted in money-laundering, which stage in the instant case has not
reached.
The fact that the money that was transferred in the accounts of the land
owners which had been attached on the premise that the same is
“proceeds of crime” and was released in favour of the said land
owners by the orders of the Apex Court cannot be overlooked, in that,
if the said money in the accounts of the land owners was “proceeds of
crime”, the same would not have been ordered to be released in favour
of the land owners and treating the said money in the accounts of the
land owners for the purpose of making out a case of money-laundering
against the petitioners herein under said circumstances cannot but said
to be not only abuse of process of law, but as well an attempt to
CRM(M) No. 484/2024
c/w
CRM(M) No. 418/2024 25
overreach the orders of the Apex Court, in that, the transaction
between the land owners and the Society essentially has been treated
as a genuine transaction by the Apex Court while ordering release of
money in question in favour of the land owners.
17. Thus, what emanates from the above is that none of the ingredients of
the offence of money-laundering against the petitioners herein is found
to be existing in the present case, more so in view of the fact that an
act of mortgaging the property with the Bank for securing the loan that
is said to have been obtained fraudulently without following Banking
rules and regulations cannot by any stretch of imagination be termed
as money-laundering and that the act of the petitioners herein of
having fraudulently secured loan for development and establishment
of satellite township by submitting false documents, at the most makes
out a case for forgery or Bank fraud.
18. For what has been observed, considered and analysed hereinabove, the
instant petitions succeed, as a consequence whereof, the impugned
complaints qua the petitioners in both the petitions are quashed.
19. Disposed of.
(JAVED IQBAL WANI)
JUDGE
Jammu
03.01.2025
Sahil Padha
Whether the order is speaking: Yes.
Whether the order is reportable: Yes. Sahil Padha 2025.01.07 16:15 I attest to the accuracy and integrity of this document