Laxmi Narain S/O Ghandrup Singh Kaushik and 3 Others vs Directive of Enforcement Thr. The Assistant Director, Sub-Zonal Office, Nagpur and Another

493 apl1488.24

1

IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH, NAGPUR

CRIMINAL APPLICATION (APL) NO.1488 OF 2024

1. Laxmi Narain s/o Chandrup Singh Kaushik, aged abut 57 years, occupation: business, r/o flat No.402, plot No.123, Gauri Vandan Apartment, Shivaji Nagar, Nagpur - 440010.

2. Shachi Kaushik w/o Laxmi Narain Kaushik, aged about 55 years, occupation: business, r/o flat No.402, plot No.123, Gauri Vandan Apartment, Shivaji Nagar, Nagpur - 440010.

3. Shachi Imports and Exports Pvt.Ltd. 10D Tapowan Complex, Somalwada, Nagpur-440025.

4. Textile Professional LLP, plot No.4, Trishan Housing Society, Takli Seem, Near Dubey Layout, Nagpur - 440036. ..... Applicants.

:: V E R S U S ::

1. Directorate of Enforcement, through the Assistant Director, Sub-Zonal Office, Nagpur.

2. Chairperson,

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Adjudicating Authority, Directorate of Enforcement Room no 26, 4th floor Jeevan Deep Building Parliament Street, New Delhi-1100. ..... Non-applicants.

Shri D.V.Chauhan, Senior Counsel assisted by Shri Chaitanya Barve, Advocate for the Applicants. Shri Anil Singh, Additional Solicitor General (Senior Counsel) assisted by Shri Kartik Shukul, Shri Aditya Thakkar, Shri Raghav Tiwari, and Shri S.S.Bhist, Advocates for the Non-applicants..

CORAM : URMILA JOSHI-PHALKE & NANDESH S.DESHPANDE, JJ.

CLOSED ON : 15/10/2025 PRONOUNCED ON : 11/11/2025

JUDGMENT ( Per : Urmila Joshi-Phalke)

1. By this application, the applicants seeks

following reliefs:

(i) Quash and set side the chargesheet filed in

Enforcement Case Information Report ECIR

bearing No.ECIR/NGSZO/01/2024 registered

by Directorate of Enforcement, Sub-Zonal

.....3/-

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Office, Nagpur for the offence punishable

under Sections 3 and 4 of the Prevention of

Money Laundering Act, 2002 relied upon

Documents (RUD) before the Sp.Court (PMLA)

Nagpur in Criminal Case No.1/2024.

(ii) grant stay to the proceedings arising out of

ECIR bearing No.ECIR/NGSZO/01/2024

registered by Directorate of Enforcement, Sub-

Zonal Office, Nagpur for the offence

punishable under Sections 3 and 4 of the

Prevention of Money Laundering Act, 2002

pending before the SPL Court PMLA Nagpur in

Criminal Case No.1/2024.

(iii) Grant stay to the order dated 30.9.2024

passed by Chairperson Adjudicating Authority

Delhi Enforcement Directorate in PAO

.....4/-

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No.02/2024 and Original Complaint

No.2317/2024.

(iv) Quash the proceedings pending before the

Chairperson Adjudicating Authority Delhi

Enforcement Directorate in PAO NO.02/2024

and Original Complaint No.2317/2024.

(v) The Hon'ble Court may kindly release all

the bank accounts which are seized by the ED

in the present proceedings or specifically one

savings bank account NO.80410082137 of

standard chartered bank at Civil Lines having

an amount of Rs.6 lakhs 45 thousand balance

remaining.

(vi) Quash the order of court of SPL PMLA

Court Nagpur taking cognizance of the case

.....5/-

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vide order dated 23.7.2024 in Criminal Case

No.1/2024.

(vii) Allow the application.

(viii) Grant any other relief which this Hon'ble

Court deems fit and proper in the facts and

circumstances of the case in the interest of

justice.

2. The ECIR was registered on the basis of

predicate offences registered against the applicants vide

FIR No.11200048233307 dated 20.9.2023 under

Sections 195, 323, 341, 342, 506(2), 389, 120-B of the

IPC and schedule offence vide FIR No.11191067240040

dated 4.3.2024 under Sections 406, 419 and 420 of the

IPC and under Section 66-B of the Information

Technology Act, 2000 at Valsad and Ahmedabad Police

Stations respectively.

.....6/-

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3. As per the investigating agency, the schedule

offence was investigated by the competent police

authorities and it revealed that the applicants are

involved in money laundering of the proceeds of crime

and, therefore, investigation was carried out by the

Enforcement Directorate (the ED). It revealed during the

investigation that the applicant No.1 - Laxmi Narain s/o

Chandrup Singh Kaushik played vital role who while

discharging duty as employee in the Welspun India

Limited, a textile section exercised de facto control over

two entities namely (1) Shachi Imports and Exports

Pvt.Ltd. and (2) Textile Professional LLP and laundered

the financial benefits received by him by defrauding

M/s.Welspun India Limited. The documents seized and

statements of witnesses including statement of applicant

No.1 under Section 50 of the Prevention of Money

Laundering Act, 2002 (PMLA) and statements of his

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associates, co-partners and business counterparts

substantiated the facts.

4. From the evidence gathered, it revealed that

applicant No.1 hatched the conspiracy and defrauded M/

s.Welspun India Limited through various means and

utilized companies viz. M/s.Shachi Imports and Exports

Pvt.Ltd. and M/s.Textile Professional LLP for layering

proceeds of crime. It further revealed that invoices were

raised in the name of Textile Professional LLP thereby

layering transactions, siphoned the amounts routing the

same to M/s.Shachi Imports and Exports Pvt.Ltd. and

parts of the funds were transferred abroad. Thus, prima

facie material revealed shows that involvement of the

applicants in offence under Sections 3 and 4 read

with Section 70 of the PMLA. Hence,

ECIR/NGSZO/01/2024 was registered against the

applicants.

.....8/-

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5. The present application is preferred by the

applicants under Section 482 of the Code of Criminal

Procedure/Section 528 of the BNSS on the ground that

the applicants cannot be prosecuted under two predicate

offences by using the provisions of the PMLA. First

Offence bearing Crime No.239/2013 cannot be

considered for invocation of the provisions of the PMLA

because Section 120-B of the IPC stands alone and cannot

be resorted by the ED for registration of ECIR. The

applicants have not earned anything or generated any

proceeds of crime out of the second predicate offence.

Perusal of the FIR would reveal that all the allegations

levelled in the report are baseless and engineered with an

intention to implicate the applicants by the ED in

connivance with M/s.Welspun India Limited. The ECIR

was registered on the basis of first two predicate offences.

In the entire scheme of PMLA, there is no enabling

.....9/-

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provisions which permits the ED to amend the ECIR.

There is no prima facie material to make out the offence

to initiate the proceeding under the provisions of PMLA

and, therefore, the ECIR deserves to be quashed and set

aside.

6. Heard learned Senior Counsel Shri

D.V.Chauhan for the applicants. He submitted that

applicant No.1 has impeachable professional track record

and has worked in several countries with utmost honesty

and integrity. There has never been any complaints

against the applicants in his entire career. The applicant

No.1 was working in the field of textile industry since

more than three decades and also worked in several

countries on different posts. In the year 2005, he

returned to India and worked initially with Abhishek

Industrial Limited as Vice President. In the month of May

2006, he joined Spentex Industries Limited on the post of

.....10/-

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President (Textile Operations). The main crux which led

to the registration of the crime and scheduled offences is

as joining of applicant No.1 as Director and Business

Head with M/s.Welspun India Limited in the month of

July 2018. During employment with M/s.Welspun India

Limited, he came across the computer system for tracing

fibers in textile processes from cotton till final product.

The said process and its trademark were pretended as

"Weltrak". The said patent track was invented by its CEO

and Joint Managing Director Mrs.Deepali Goenka and

partly implemented by M/s.Welspun India Limited as the

said company was caught by its customer i.e. for

defrauding its customers in India and on international

platform. In order to cover up the same, M/s.Welspun

India Limited developed a computer system for tracing

fiber in textile processes from cotton till the final product,

the said process monitoring system was submitted as a

.....11/-

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patent to the US Patent and Trademark Department and

the said was approved on 7.11.2017 and same was

trademarked as "Weltrak". On the basis of the said

"Weltrak", M/s.Welspun India Limited and Welspun USA

entered into a settlement agreement with the Class

Counsels and the Court at US Illinois approved the said

settlement agreement on 28.10.2019 with an injunctive

relief and safe harbor mandating the company to ensure

that its "Weltrak" is fully implemented and products

which are labelled as Egyptian or PIMA are fully

traceable till the fiber stage is up to fields in Egypt and

America. The applicant were unaware of the said

implementation from the date of his joining till

30.10.2019 i.e. the date on which the settlement

agreement was shared with him along with a mandate

that a monthly/quarterly audit would be carried out for

ensuring the implementation of "Weltrak". Getting aware

.....12/-

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of the same, the applicant formed a team and studied the

contents of the said patent and verified the details to the

utter shock of the applicant, the said patent was neither

correctly drafted nor the same was implemented in the

company. Being a responsible employee, he intimated

the said fact to the superior i.e. CEO, Managing Director

and Director (Finance). The copy of the said

communication is also filed on record. He immediately

received a call from the Director (Finance) followed by a

call from CEO seeking explanations as to why the

applicant put these facts in black and white. The said

fact revealed that the patent was only a camouflage to

continue to cheat and deceit and not a real attempt to

correct things at the company. Thereafter, he was pushed

to pass on price benefits to Welspun Flooring Limited

which was not within law. Being a law abiding citizen,

he has not kept mum and again sought his intervention to

.....13/-

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correct the content of the patent and its implementation.

However, higher officials of the company were not in

favour of the applicant and, therefore, he resigned from

the said company vide communication dated 22.11.2019.

Thus, the applicant has blown the whistle. Though he

intimated, there was no response from the investigation

committee. The applicant was taking due follow up from

the committee in order to report its findings, but there

was absolutely no response and, therefore, he reported

the matter to the Ministry of Corporate Sectors. As the

applicant has not kept mum and was following the above

said issue, he received a legal notice dated 8.12.2020

from the company thereby threatening him of filing a

defamation suit against him in order to silence him.

7. In order to put him under pressure and to

insist him to withdraw from his stand, Welspun India

Limited after more than two years of his resignation with

.....14/-

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the help of its ex-employees registered the offences

against the applicant under Sections 342, 348, 406, 504,

506(2) and 120-B of the IPC at Vapi Police Station,

Gujarat alleging that the applicant was involved in illegal

activities during his employment in the company. The

said offence is treated as first predicate offence by the ED

for impleading the accused in the instant crime. After

registration of the offence against the applicant, the

management of the company left no stone unturned to

defame the applicant. The applicant filed a suit seeking

damages for defamation against the company before

learned CJSD, Nagpur. The said suit is still pending.

Another crime was registered against the applicant at

Vapi Police Station, Gujarat for the offences punishable

under Sections 195, 120-B, 323, 341, 342, 389, and 506

(2) of the IPC on the basis of report lodged by one Samir

Desai, an employee of Welspun Company who claimed to

.....15/-

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be one of the witnesses in first predicate offence inter alia

alleging that on 12.9.2023 the applicant has sent some

unknown persons to him not to adduce evidence against

the applicant. The said crime to the extent of Section

389 of the IPC is treated as second scheduled offence for

the purpose of ECIR. The applicant was arrested in the

said offence. Subsequent to that, IT raid was conducted

on 30.9.2023 and the applicant's residence and some

documents are seized from his house.

8. Learned Senior Counsel for the applicants

further submitted that an attempt was made to portray

that the applicant is involved in the process of money

laundering by opening several bank accounts, but from

the bare perusal of the documents on record it would

reveal that the accusations against the applicants are

false and baseless. The base of the said allegations is

only on the basis that he maintained several bank

.....16/-

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accounts and fixed deposits which are not disclosed in

his ITR and thus notice under Section 51 of the Black

Money Act was issued against him. He has already

explained by his notice reply to the ED. The applicant

had also disclosed the foreign accounts and fixed deposits

in his ITR for Assessment Year 2023-2024. The genesis of

the present crime and two predicate crime are registered

against him wherein he has already been released on

bail. In fact, essential ingredients of Section 389 of the

IPC on the basis of which further proceeding under the

PMLA is initiated itself are not made out as there was no

actual delivery of the property. Therefore, prima facie

case is not made out against the applicant. The offence

under Section 120-B of the IPC cannot be treated as

stand alone offence in the absence of any other

scheduled offence being committed for the purpose of

prosecution under the PMLA. Thus, there is no predicate

.....17/-

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crime. He further submitted that every monetary

transaction between the two business entities does not

necessarily amount to money laundering unless money

involved is proceeds of crime. The transactions took

place between M/s.Textile Professional LLP and various

firms are genuine transactions. The ED has made false

allegations in the complaint. The applicant has never

received any amount in cash. All the entries which the

ED has claimed cash transaction are actually RTGS/NEFT

transactions which are received for valid accountable

source. The applicant has also raised his grievance before

the Standard Chartered Bank on 11.9.2024.

9. Thus, the entire charges are levelled against

the applicant without any material on record on the basis

of false and baseless allegations. The very genesis of the

nature of prosecution lies on foreign bank accounts and

fixed deposits held by the applicant and not disclosed in

.....18/-

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his ITR. However, the said account was opened by the

applicant in the year 1999 during his employment in the

said countries and undisputably, the scheduled/predicate

offences came to be registered in the year 2022-2023.

Thus, there is no nexus between the opening of the said

accounts and the predicate offences and, therefore, the

said foreign account cannot be termed as "proceeds of

crime" under the PMLA.

10. Learned Senior Counsel for the applicants also

invited our attention to definition of "proceeds of crime"

and submitted that proceeds of crime is a basic

requirement for exercising powers under the PMLA which

is absent here. Thus, there being no predicate crime and

accordingly proceeds of crime on this ground alone only

the criminal complaint and RUD need to be quashed and

set aside. He further submitted that it is well settled

provision of law that every irregular transaction, if any,

.....19/-

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would not necessarily come under the ambit of PMLA, for

such transactions, there are other enactments like Income

Tax Act and Black Money Act etc.. The main ingredient

to invoke, stringent provisions of the PMLA is existence of

the predicate offence and proceeds of crime accumulated

from the said offence. However, in the present case,

perusal of the chargesheet would reveal that the

investigation agency has miserably failed to bring on

record a single material suggesting the same and,

therefore, in absence of the said necessary ingredient, no

offence as alleged can be made out against the applicant.

He submitted that considering the entire material, no

prima facie case is made out and, therefore, the

application deserves to be allowed.

11. In support of his contentions, learned Senior

Counsel for the applicants placed reliance on following

decisions:

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(1) Anand Kumar Mohatta and anr vs. State (NCT of Delhi), Department of Home and anr, reported in (2019)11 SCC 706;

(2) South Indian Bank Ltd., rep. by its Chief Manager Jily Hanah Eapen vs. Directorate of Enforcement, rep. by Deputy Director of Enforcement and others, reported in 2024 SCC OnLine Ker 3936;

(3) Writ Petition No.612/2023 (Amar S.Mulchandani vs. Directorate of Enforcement, thr.its Deputy Director and ors) and other connected matter decided by this court on 29.8.2024;

(4) State of Haryana and ors vs. Bhajan Lal and ors, reported in 1992 Supp (1) SCC 335;

(5) Pavana Dibbur vs. Directorate of Enforcement, reported in 2023 SCC OnLine SC 1586;

(6) Vijay Madanlal Choudhary and ors vs. Union of India and ors, reported in 2022 SCC OnLine Sc 929;

(7) Isaac Isanga Musumba and ors vs. State of Maharashtra and ors, reported in (2014)15 SCC 357, and

(8) V.Senthi Balaji vs. Deputy Director, Directorate of Enforcement, reported in 2024 SCC OnLine SC 2626.

.....21/-

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12. The said application is resisted by the non-

applicants on the ground that the ECIR was registered on

the basis of the scheduled offences relating to a well

planned conspiracy hatched by applicant No.1 by

defrauding M/s.Welspun India Limited through various

means for his own benefits. The scheduled offence was

investigated by the competent police authorities and

subsequently, the non-applicants took up the

investigation under PMLA into the laundering of the

proceeds of the crime generated from the said offence.

By exercising the powers conferred under Sections 17

and 50 of the PMLA, search and seizure proceedings,

statements of relevant witnesses were recorded by which

prominent role of the applicant No.1 was revealed. The

material gathered against the applicant No.1 is not

confined to documentary seizures alone, but is fortified

.....22/-

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by his own statements recorded under Section 50 of the

PMLA as well as statements of his associates, co-partners

and third party business counterparts. The collective

reading of these statements and documents established

that the applicant No.1 was controlling mind directing

divergent of funds through layer transactions involving

the aforesaid entities. The modus operandi which stands

revealed is that invoices were raised in the name of

Textile Professional LLP while the actual material

originated from Matoshri Magasvargiya Shetkari Sutgirni

Maryadit thereby layering transaction to distance the

flow of funds from their true sources. The proceeds of

such transactions were then routed to Shachi Imports and

Exports Pvt.Ltd. and part of the funds was transferred

abroad as reflected in the correspondence and written

replies of the accused applicant himself.

.....23/-

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13. Heard learned Additional Solicitor General

Shri Anil Singh for the non-applicants. He has submitted

his notes of submissions. He orally submitted that there

were two FIRs which are already registered prior to the

recording of the ECIR. The Vapi Police Station had

registered two FIRs vide No.1200048220239 dated

8.1.2022 under Sections 342, 348, 406, 408, 504, 506,

and 120-B of the IPC. A chargesheet bearing

No.391/2022 was filed in connection with the said

offence 22.11.2022 against the applicant No.1 and one

Mr.Mahendra Rathi, the Vide President (Cotton

Procurement). It revealed during the investigation of the

said crime that the applicant No.1 along with

Mr.Mahendra Rathi committed offence against the

company by procuring low quality MECH-1 Cotton for

their economic and financial benefits. The another crime

bearing No.11200048233307 dated 20.9.2023 under

.....24/-

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24 Sections 120-B and 389 of the IPC was registered against

the applicant No.1. As per the said FIR registered at Vapi

Police Station, one Mr.Sameer Desai alleged that the

applicant No.1 is engaged in threats and extortion and by

engaging some persons threatened him to withdraw

himself as a witness from the case against the applicant

No.1 and demanded Rs.10.00 lacs from him. The

another FIR bearing registration No.11191067240040

dated 4.3.2024 against applicant No.1 under Sections

406, 419 and 420 of the IPC and under Section 66-B of

the Information Technology Act by Cyber Crime Police,

Ahmedabad. The complaint was filed by one Bhumik

Dave and employees of M/s.Welspun Limited against the

applicant No.1 for illegally obtaining highly confidential

company data. As per the said FIR, it is alleged by the

complainant that the applicant No.1 had illegally and

dishonestly for his own personal benefits directly or

.....25/-

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through his personal entities being applicant Nos.3 and 4

lured the employees of M/s.Welspun Company by means

to gain their trust and get sensitive documents containing

M/s.Welspun Company proprietary information from

them. The applicant No.1 subsequently leaked this

confidential information to the rival companies of

M/s.Welspun with an intention to cause loss to the

company. Thus, the applicant No.1 was in criminal

activities in relation to M/s.Welspun Company and,

therefore, the ECIR was amended to add third FIR. From

the FIRs it shows that the main allegations that the well

planned systematic conspiracy was hatched by the

applicant No.1 by defrauding M/s.Welspun India Limited

through various means for his own financial benefits and

his accomplices. He got benefited through leaking of

company's confidential proprietary information causing

financial loss to the M/s.Welspun Company, causing

.....26/-

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financial loss through misuse of his position within the

company through the procurement of low quality MECH-

1 Cotton, diverting the business of M/s.Welspun

Company by misrepresenting and misleading its various

vendors by claiming that companies are his personal

entity in which he was partner were subsidiaries of the

M/s.Welspun Company Limited. Thus, the financial

kickbacks and other benefits are availed by him from the

proceeds of the crime. During the investigation, a raid

was conducted at the applicant's residence and some

documents are seized. Thus, considering prima facie

material, the application deserves to be rejected.

14. Learned Additional Solicitor General for the

non-applicants further submitted that seven grounds are

raised in the application. However, the said grounds are

not made out by the applicants. The reliefs sought by the

applicants are not maintainable. The reliefs regarding

.....27/-

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quashing of the ECIR and the complaint are also not

maintainable as cognizance has already been taken by

the court by order dated 23.7.2004. He further

submitted that during the course of the investigation,

statement of Shri Anand Kulkarni, former employee of

M/s.Welspun India Limited; statement of Shri Bhumik

Dave, employee of M/s.Welspun India Limited; and

statement of Shri Lalit Mahajan, authorized

representative of M/s.Welspun India Limited, were

recorded which disclose that the applicant No.1 took

charge of raw cotton procurement, he introduced new

vendors from the Maharashtra, Telangana, Andhra

Pradesh, and Karnataka and replaced the superior cotton

with lower grade cotton falsely presenting prices and

represented that there is only difference of Rs.5/- to

Rs.10/- per kilogram. Whereas, price gap was about

Rs.44/- per kilogram. He purchased cotton at large scale

.....28/-

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and diverted the unsuitable cotton from Ring Spinning to

lower value Open-end Spinning and forced the firm to

repurchase Shankar Cotton to meet commitments of the

supplier and thereby caused loss to M/s.Welspun

Company. The statements of Shri Samir Desai, Shri

Mahendra Rathi, and Shri Prakash Patnayak were also

recorded and it revealed that multiple employee of

M/s.Welspun India Limited along with persons who were

employed by the applicant No.1 were involved in the

conspiracy which was hatched for his own financial

benefits. The statements of applicant No.1, Shri Akash

Agrawal, Auditor of M/s.Shachi Imports and Exports

Pvt.Ltd., applicant No.2 who is wife of the applicant No.1

also disclose the manner in which the activities are

carried out by the applicant No.1. Neither the applicant

No.1 nor his Auditor Akash Agrawal could produce the

documents to show that the financial transactions which

.....29/-

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he entered into was shown in the record maintained by

the entities of which he is a partner. The statements

show that the financial control of M/s.Shachi Imports and

Exports Pvt.Ltd.; M/s.Textile Professional LLP, and

M/s.Matoshri Magasvargiya Shetkari Sutgirni Maryadit

was under the control of applicant No.1 who has utilized

these firms for layering the proceeds of crime. Thus,

during the investigation, the entire correspondence which

was obtained from the applicant No.1 prima facie shows

his involvement and modus operandi shows that invoices

were raised in the name of M/s.Textile Professional LLP

while actual material regenerated from M/s.Matoshri

Magasvargiya Shetkari Sutgirni Maryadit thereby layering

the transaction to distance the flow of funds from their

true sources. The proceeds of such transactions were

then routed to M/s.Shachi Imports and Exports Pvt.Ltd.

and part of the funds was transferred abroad.

.....30/-

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15. In support of his contentions, learned

Additional Solicitor General for the non-applicants placed

reliance on the following decisions:

(1) Sheonandan Paswan vs. State of Bihar and ors, reported in (1987)1 SCC 288;

(2) Directorate of Enforcement vs. Niraj Tyagi and ors, reported in (2024)5 SCC 419;

(3) Pradeep Nirankarnath Sharma vs. Directorate of Enforcement and anr, 2026 SCC OnLine SC 560;

(4) Anil Vasantrao Deshmukh vs. Directorate of Enforcement, thr.its Director and ors, reported in 2021 SCC OnLine Bom 3641;

(5) Vijay Madanlal Choudhary vs. Union of India, reported in 2022 SCC OnLine SC 929;

(6) Vijayraj Surana vs Assistant Director, Enforcement Directorate, Writ Petition No.14782/2024 along with other petitions decided by the Madras High Court on 28.8.2024

(7) Sh.Anup Kumar Singh vs. The Deputy Director Directorate of Enforcement, Hyderabad, reported in 2019 SC (Raj) 1385;

.....31/-

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(8) Pawan Insaa vs. Directorate of Enforcement decided by the Punjab and Haryana High; and

(9) Abhishek Singh vs. Ajay Kumar and ors, SLP (Cri.) No.480/2025 decided by the Supreme Court on 5.6.2025.

16. The present application is preferred by the

applicants for quashing of the ECIR.

17. Before entering into the merits of the

application, it is necessary to see principles which

required to be taken into consideration for quashing of

the FIR/ECIR.

18. Perusal of Section 482 of the Code/Section

528 of the BNSS, there is nothing in the words of these

Sections which prohibit the exercise of powers of the

court to prevent the abuse of process of court or

miscarriage of justice. The scope of exercise to be carried

out by the court while adjudicating such an application

.....32/-

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for quashing is also well established. At this stage, the

court is only to look to the prima facie possibility of the

offence having been committed.

19. In the case of Central Bureau of Investigation

vs. Aryan Singh etc., reported in (2023)18 SCC 399, the

Hon'ble Apex Court laid down cardinal principle of law

that while exercising the powers under Section 482 of the

Code, the court is not required to conduct a mini trial.

What is required to be considered is whether any

sufficient material is available to proceed further against

the accused for which the accused is required to be tried

or not.

20. In the case of Rajeev Kourav v. Baisahab (Smt.)

and ors, reported in (2022)3 SCC 317, also the Hon'ble

Apex Court held that it is no more res integra that

exercise of power under Section 482 CrPC to quash a

.....33/-

Judgment

493 apl1488.24

33

criminal proceeding is only when an allegation made in

the FIR or the charge-sheet constitutes the ingredients of

the offence/offences alleged. Interference by the High

Court under Section 482 CrPC is to prevent the abuse of

process of any court or otherwise to secure the ends of

justice. It is settled law that the evidence produced by the

accused in his defence cannot be looked into by the court,

except in very exceptional circumstances, at the initial

stage of the criminal proceedings. It is trite law that the

High Court cannot embark upon the appreciation of

evidence while considering the petition filed under

Section 482 CrPC for quashing criminal proceedings. It is

clear from the law laid down by this Court that if a prima

facie case is made out disclosing the ingredients of the

offence alleged against the accused, the Court cannot

quash a criminal proceeding.

.....34/-

Judgment

493 apl1488.24

34

21. Section 482 of the Code saves inherent powers

of this court. The said provision with the power to make

such orders as may be necessary to give effect to any

order under the Code or to prevent the abuse of process

of any court or otherwise to secure the ends of justice. A

reading of the said Section itself is sufficient to

comprehend the extent and scope of powers vested in the

High Courts. Any orders passed under the provisions of

the Code be given its full effect by issuing appropriate

orders under Section 482 of the Code. The scope of

power under Section 482 is not limited or constricted by

the court or nature of the order under challenge. Even

an administrative order can be quashed in exercise of the

powers under Section 482 of the Code, if it is required to

give effect to an order issued under the Code, or if it is

necessary to secure the ends of justice.

.....35/-

Judgment

493 apl1488.24

35

22. The Hon'ble Apex in the case of Pepsi Foods

Ltd. vs. Judicial Magistrate, reported in (1998) 5 SCC

749 has observed that the powers conferred on the High

Courts under Articles 226 and 227 of the Constitution

and under Section 482 of the Code have no limits and

only restriction is that more the power more the due care

and caution is to be exercised while invoking such

powers.

23. The Hon'ble Apex Court in the case of State of

Haryana and ors vs. Bhajan Lal and ors supra laid down

the principles to exercise the inherent powers under

Section 482 of the code which can be exercised by this

Court either to prevent abuse of process of any court or

otherwise to secure the ends of justice which can be

summarized as follows:

.....36/-

Judgment

493 apl1488.24

36

(a) 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;

(b) 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 Section 156(1) of the

Code except under an order of a Magistrate

within the purview of Section 155(2) of the

Code;

(c) where the uncontroverted allegations made

in the FIR or complaint and the evidence

.....37/-

Judgment

493 apl1488.24

37

collected in support of the same do not

disclose the commission of any offence and

make out a case against the accused;

(d) 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;

(e) 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;

.....38/-

Judgment

493 apl1488.24

38

(f) 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;

(g) 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.

.....39/-

Judgment

493 apl1488.24

39

24. In the light of the above well settled legal

principles, the present application is required to be

decided.

25. Before entering into the merits of the case, a

reference of the relevant provisions is required to be

taken into consideration.

26. The definition of the scheduled offence given

under Section 2(y) of the PMLA which states that

"scheduled offence" means-- (i) the offences specified

under Part A of the Schedule; or (ii) the offences

specified under Part B of the Schedule if the total value

involved in such offences is (one crore rupees) or more;

or (iii) the offences specified under Part C of the

Schedule.

27. The predicate offence is the initial underlying

criminal act that generates illicit proceeds which are then

.....40/-

Judgment

493 apl1488.24

40

used in a subsequent crime morel suitably money

laundering.

28. The Act also defines proceeds of crime.

Section 2(u) which states that "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.

The Explanation given under the said Section

is that for 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

.....41/-

Judgment

493 apl1488.24

41

obtained as a result of any criminal activity relatable to

the scheduled offence.

29. Section 3 of the PMLA deals with offence of

money-laundering that 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 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

.....42/-

Judgment

493 apl1488.24

42

activities connected with proceeds of crime, namely (a)

concealment; or (b) possession; or (c) acquisition; or (d)

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.

30. Thus, the offence of money laundering, as per

definition in Black's Law Dictionary is, "the act of

transferring illegally obtained money through legitimate

people or accounts so that its original source cannot be

traced.

.....43/-

Judgment

493 apl1488.24

43

31. Another material provision is Section 50 of the

PMLA which deals with powers of authorities regarding

summons production of documents and to give evidence

etc.

32. Reverting back to the facts of this case, it is no

doubt true that the commission of scheduled offence is

prerequisite and sine-qua-non for initiating investigation

under the PMLA which is a special enactment to prevent

money laundering and to provide for confiscation of the

property derived or obtained directly or indirectly from or

involved in any process or activity connected to proceeds

of crime including its concealment, possession or

acquisition or use and projecting or claiming it as

untainted property.

33. The ED recorded ECIR based on crimes

registered vide Crime No.1200048220239 under Sections

.....44/-

Judgment

493 apl1488.24

44

342, 348, 406, 408, 504, 506, and 120-B of the IPC, a

chargesheet bearing No.391/2022 registered under

Sections 114, 120-B, 342, 348, 406, 408, 504, and 506 of

the IPC against applicant No.1 and one Mr.Mahendra

Rathi and another crime is registered vide Crime

No.11200048233307 dated 20.9.2023 under Sections

389 and 120-B of the IPC and FIR No.1119106740040

dated 4.3.2024 under Sections 406, 419, and 420 of the

IPC and under Section 66B of the Information Technology

Act by the Cyber Crime Police Station, Ahmedabad.

These crimes are registered at Vapi and Valsad Police

Stations and Cyber Crime Police Station, Ahmedabad

respectively.

34. As far as FIR No.11191067240040 dated

4.3.2024 is concerned, the same registered on the basis of

report filed one Bhumik Dave, an employee of

M/s.Welspun Company against the applicant No.1 for

.....45/-

Judgment

493 apl1488.24

45

illegal obtaining highly confidential company data. As

per the allegations in the FIR, the applicant No.1 had

illegally and dishonestly for his own personal benefits

directly or through his personal entities being applicant

Nos.3 and 4 lured the employees of M/s.Welspun

Company and by gaining their trust obtained sensitive

documents of the company and and leaked the said

confidential information to the competitors company for

the purposes of causing loss to the company. Considering

the allegations in the third FIR which was in relation to

the criminal activity conducted by the applicants more

particularly applicant No.1 in relation to M/s.Welspun

Company, the ECIR was amended to add third FIR.

35. Thus, it can be seen that in the FIRs the main

allegations are that the well planned systematic

conspiracy was hatched by the applicant No.1 by

.....46/-

Judgment

493 apl1488.24

46

defrauding M/s.Welspun India Limited to various means

for his own financial benefits and his accomplices.

36. On going through the material collected

during the investigation, by recording the statements of

various witnesses, in exercise of powers conferred under

Sections 17 and 50 of the PMLA, it revealed that the

statement of one Anand Kulkarni, former employee of M/

s.Welspun India Limited states that new vendors are

known to the applicant No.1 for making one cotton

which was of low quality. Previously, the cotton was

purchased locally from Gujarat, but he hailing from

Maharashtra utilized his own connections to introduce

new vendors, in return, he received financial kickbacks

while M/s.Welspun India Limited suffered loss. The

statement of Bhumik Dave, employee of M/s.Welspun

India Limited, was recorded under Section 50 of the

PMLA, on the basis of whose statement Crime

.....47/-

Judgment

493 apl1488.24

47

No.11191067240040 was registered disclosing that

initially the applicant No.1 was head and later incharge

of cotton procurement repeatedly violated company

policies and ethics concealing his own competing

business M/s.Shachi Imports and Exports Pvt.Ltd. and M/

s.Textile Professional LLP, refusing to sign his employment

agreement and using his position to recruit associates and

introduced new cotton vendors from the Maharashtra

without justification. He shifted procurement from the

superior Shankar Cotton, Gujarat to inferior MECH-1

Cotton (Maharashtra/Andhra Pradesh) fixing prices

higher than market rates, causing quality problems and

losses and receiving kickbacks that led to an estimated

Rs.40.00 crores loss to M/s.Welspun Company. After

resigning abruptly in November 2019, he conspired with

competitor company and through his NGO (Textile

Consumer Foundation) spread the rumor that Welspun

.....48/-

Judgment

493 apl1488.24

48

patented hygro cotton process was fraud and also issued

threatening letters to the vendors, leaked the confidential

information and sought to damage Welspun Export

business for rivals benefits. Perusal of his statements

shows that while joining Welspun Company, the applicant

No.1 has not disclosed regarding on going personal

business despite it was mandatory to disclose the same.

He deliberately did not sign employment agreement with

the company. His statement further shows his actions

revealed that he was acting in a bad faith and motivated

to cause harm to the company. While joining the

company, he suppressed the facts and failed to disclose

anything about his business M/s.Shachi Imports and

Exports Pvt.Ltd. wherein he is Director, Promoter of

M/s.Textile Professional LLP wherein he is designated

partner. Both of his business are in business competing

with the business of company wherein he was serving.

.....49/-

Judgment

493 apl1488.24

49

There was a clear conflict which was not disclosed by the

applicant No.1. His statement further disclosed that by

using his position, the applicant No.1 pressurized the

other employees to urgently recruit Mahendra Rathi in

Cotton Procurement Department though there was no

vacancy at that time. It was later revealed that Mahendra

Rathi was colleague of the applicant No.1 in his previous

organization. The statement also shows that the

applicant No.1 introduced 24 new cotton vendors mostly

from Maharashtra Region without providing the test and

obtained inferior quality of cotton from them by ignoring

higher quality cotton of Shankar Cotton and caused loss

to the Welspun Company. This statement of said Bhumik

Dave alleges that the applicant No.1 has engaged services

of Mahendra Rathi by appointing him by using his

position in the company. The statement of Mahendra

Rathi is also recorded who substantiates the said

.....50/-

Judgment

493 apl1488.24

50

allegations and stated that after the applicant No.1 had

joined M/s.Welspun India Limited, he informed him as to

the job opportunities in M/s.Welspun India Limited. As

per his instructions, he has attended interview in

M/s.Welspun India Limited at corporate office, Mumbai

and was elected and posted at Vapi Plant as Vice

President (Cotton Purchase). In Vapi Plant of

M/s.Welspun India Limited, his role was only to purchase

the cotton. Upon instructions of the applicant No.1, new

vendors were introduced to supply MECH-1 Cotton to M/

s.Welspun India Limited. As a result, 1200 raw cotton of

MECH-1 was procured. Upon test being conducted by

total quality management team, it was revealed that the

quality of cotton procured was of low quality. It was also

informed that the applicant No.1 was tampering with the

test result to ensure that the low quality cotton gets

cleared for production. The MECH-1 cotton was

.....51/-

Judgment

493 apl1488.24

51

procured from the vendors as suggested by the applicant

No.1. He specifically stated that he was only following

instructions of applicant No.1. He was aware that the

quality of MECH-1 Cotton was inferior to that of Shankar

variant of raw cotton. The decision to shift from Shankar

variant cotton to MECH-1 variant of cotton was of the

applicant No.1. He was in the company for two months.

37. Besides the statements of these two witnesses,

statement of Lalit Mahajan, an authorized representative

of M/s.Welspun India Limited was recorded under

Section 50 of the PMLA who also stated that after the

applicant No.1 took charge of Raw Cotton Procurement,

he introduced new vendors from Maharashtra,

Telangana, Andhra Pradesh, and Karnataka and replaced

the superior cotton with Lower Grade MECH-1 falsely

presenting the price gap of Rs.5/- to Rs.10/- whereas real

gap was about Rs.44/- per kilogram. By purchasing 1200

.....52/-

Judgment

493 apl1488.24

52

raw cotton of MECH-1 of inflated prices, diverting this

unsuitable cotton from ring spinning to lower value open

end spinning and forcing the firm to repurchase from

Shankar Cotton to meet supply commitments. The

Welspun suffered loss about Rs.6.75 crores, Rs.6.95

crores and Rs.23.24 crores respectively. The negative

propaganda and representation were followed in link by

applicant No.1's NGO which caused loss to the Welspun

Company. The estimated value of the loss was Rs.121.77

crores revenue loss. His statement further revealed that

there was deliberate conspiracy on part of the applicant

No.1 for personal gain taking kickbacks from the

competitors, leaking confidential information and

diverting the business while falsely portraying his own

firms M/s.Textile Professional LLP and M/s.Shachi

Imports and Exports Pvt.Ltd. as Welspun subsidiaries and

.....53/-

Judgment

493 apl1488.24

53

channeling the illicit proceeds into them. These

statements reveal in RUD-3.

38. The statements of Samir Desai and Prakash

Patnayak disclose regarding illegal activities of the

applicant No.1 due to which Welspun Company suffered

loss and the applicant No.1 received kickbacks from the

competitors. Not only the statements of these witnesses

but also statements of the applicant No.1 himself and his

Auditor Shri Akash Agrawal disclose that M/s.Shachi

Imports and Exports Pvt.Ltd. deals with trading of cotton

yarns and fibers. The company did not have any

manufacturing unit except the registered address of the

company i.e. Flat No.10D, Tapovan Complex,

Somalwada, Nagpur, the company did not have any other

branches and only one employee Shri Dilip Vyas. The

applicant No.1 as well as his Auditor failed to produce

relevant documents to show the source of income

.....54/-

Judgment

493 apl1488.24

54

received by the applicant or the profits received by the

applicant by running the said companies. Even, the

Auditor was not aware of the logistics of M/s.Shachi

Imports and Exports Pvt.Ltd.. The statement of Shri

Akash Agrawal shows that Shri Dilip Vyas was the only

employee who used to supply the shares and the sale

containing the details of sales/purchases, credit note,

debit note, invoices of sale purchases and expenses and

bank account statements. His statement though shows

that he used to maintain accounts of both the entities, he

could not produce the data pertaining to M/s.Shachi

Imports and Exports Pvt.Ltd. before the investigating

agency. It further reveals from his statement that entries

made in the books of M/s.Shachi Imports and Exports

Pvt.Ltd. with respect to M/s.Matoshri Magasvargiya

Shetkari Sutgirni Maryadit, one Vijaykumar Kedia had

conducted the audit for the entries pertaining to

.....55/-

Judgment

493 apl1488.24

55

M/s.Matoshri Magasvargiya Shetkari Sutgirni Maryadit

based on the documents submitted by the applicant No.1

through Shri Dilip Vyas, but he could comment on the

genuineness of the said transactions.

39. Thus, from the investigating papers, it reveals

that invoices were raised in the name of M/s.Textile

Professional LLP while actual material originated from

M/s.Matoshri Magasvargiya Shetkari Sutgirni Maryadit

and the amount was siphoned by showing it flows from

their true source. The proceeds of such transactions were

then routed to M/s.Shachi Imports and Exports Pvt.Ltd..

The statement of Shri Dilip Vyas also confirms the

applicants direction in issuing non-genuine invoices and

makes it clear abundantly clear that the applicant was

involved in the activities connected with the proceeds of

crime.

.....56/-

Judgment

493 apl1488.24

56

40. The documentary evidence and the statements

recorded by the authorities, at this stage, prima facie,

show involvement of the applicants.

41. Though learned Senior Counsel Shri

D.V.Chauhan for the applicants vehemently submitted

that the applicant No.1 is involved in the said business

since long prior to joining M/s.Welspun India Limited,

concealing his involvement in the business that he is

running M/s.Shachi Imports and Exports Pvt.Ltd. and M/

s.Textile Professional LLP and deals with similar business.

The inability of the applicant to submit relevant

documents and his admission that he has not shown huge

amounts in his Income Tax Returns is sufficient to draw

an inference, at this stage, regarding his involvement in

the illegal activities supported by various statements of

the witnesses.

.....57/-

Judgment

493 apl1488.24

57

42. The statements of the witnesses, even the

statement of the applicant No.1 recorded under Section

50 of the PMLA and various documents, show modus

operandi who was found responsible for various illegal

activities and causing loss to M/s.Welspun India Limited.

43. The PMLA was enacted to deal with issue of

money laundering and for its prevention, by providing for

attachment of the proceeds of crime, its adjudication and

its confiscation, by setting up the agencies and

mechanism for combating as it posed serious threat to

financial situation of the nation. The validity and

interpretation of certain provisions of PMLA and the

procedure followed by the ED while enquiring

into/investigating the offence under the PMLA, as being

violative of the Constitutional mandate was placed before

the Three-Judge Bench of the Hon'ble Apex Court in the

case of Vijay Madanlal Choudhary and ors vs. Union of

.....58/-

Judgment

493 apl1488.24

58 India and ors supra which relied by both the sides and

various concerns as regards provisions and its

implementation. Paragraph No.455 of the said decision is

reproduced as under:

"455. Needless to underscore that the 2002 Act is intended to initiate action in respect of money-laundering activity which necessarily is associated with the property derived or obtained by any person, directly or indirectly, as a result of specified criminal activity. The prosecution under this Act is not in relation to the criminal activity per se but limited to property derived or obtained from specified criminal activity. Resultantly, the inclusion of criminal activity which has been regarded as non-cognizable, compoundable or minor offence under the concerned legislation, should have no bearing to answer the matter in issue. In that, the offence of money-laundering is

.....59/-

Judgment

493 apl1488.24

59

an independent offence and the persons involved in the commission of such offence are grouped together as offenders under this Act. There is no reason to make distinction between them insofar as the offence of money-laundering is concerned. In our opinion, therefore, there is no merit in the argument under consideration."

The difference between the ECIR and FIR is

also dealt upon in this judgment and for perusal,

paragraph Nos.456 and 457, are reproduced as under:

"456. As per the procedure prescribed by the 1973 Code, the officer in-charge of a police station is under an obligation to record the information relating to the commission of a cognizable offence, in terms of Section 154 of the 1973 Code. There is no corresponding provision in the 2002 Act requiring registration of offence of money-laundering. As noticed earlier,

.....60/-

Judgment

493 apl1488.24

60

the mechanism for proceeding against the property being proceeds of crime predicated in the 2002 Act is a sui generis procedure. No comparison can be drawn between the mechanism regarding prevention, investigation or trial in connection with the scheduled offence governed by the provisions of the 1973 Code. In the scheme of 2002 Act upon identification of existence of property being proceeds of crime, the Authority under this Act is expected to inquire into relevant aspects in relation to such property and take measures as may be necessary and specified in the 2002 Act including to attach the property for being dealt with as per the provisions of the 2002 Act. We have elaborately adverted to the procedure to be followed by the authorities for such attachment of the property being proceeds of crime and the follow-up steps of confiscation upon confirmation of the provisional attachment .....61/-

Judgment

493 apl1488.24

61

order by the Adjudicating Authority. For facilitating the Adjudicating Authority to confirm the provisional attachment order and direct confiscation, the authorities under the 2002 Act (i.e., Section 48) are expected to make an inquiry and investigate. Incidentally, when sufficient credible information is gathered by the authorities during such inquiry/investigation indicative of involvement of any person in any process or activity connected with the proceeds of crime, it is open to such authorities to file a formal complaint before the Special Court naming the concerned person for offence of money-laundering under Section 3 of this Act. Considering the scheme of the 2002 Act, though the offence of money-laundering is otherwise regarded as cognizable offence (cognizance whereof can be taken only by the authorities referred to in Section 48 of this Act and not by jurisdictional police) .....62/-

Judgment

493 apl1488.24

62

and punishable under Section 4 of the 2002 Act, special complaint procedure is prescribed by law. This procedure overrides the procedure prescribed under 1973 Code to deal with other offences (other than money-laundering offences) in the matter of registration of offence and inquiry/investigation thereof. This special procedure must prevail in terms of Section 71 of the 2002 Act and also keeping in mind Section 65 of the same Act. In other words, the offence of money-laundering cannot be registered by the jurisdictional police who is governed by the regime under Chapter XII of the 1973 Code. The provisions of Chapter XII of the 1973 Code do not apply in all respects to deal with information derived relating to commission of money-laundering offence much less investigation thereof. The dispensation regarding prevention of money-laundering, attachment of proceeds of crime and .....63/-

Judgment

493 apl1488.24

63

inquiry/investigation of offence of money- laundering upto filing of the complaint in respect of offence under Section 3 of the 2002 Act is fully governed by the provisions of the 2002 Act itself. To wit, regarding survey, searches, seizures, issuing summons, recording of statements of concerned persons and calling upon production of documents, inquiry/investigation, arrest of persons involved in the offence of money- laundering including bail and attachment, confiscation and vesting of property being proceeds of crime. Indeed, after arrest, the manner of dealing with such offender involved in offence of money-laundering would then be governed by the provisions of the 1973 Code as there are no inconsistent provisions in the 2002 Act in regard to production of the arrested person before the jurisdictional Magistrate within twenty-four hours and also filing of the complaint before the Special Court .....64/-

Judgment

493 apl1488.24

64

within the statutory period prescribed in the 1973 Code for filing of police report, if not released on bail before expiry thereof.

457. Suffice it to observe that being a special legislation providing for special mechanism regarding inquiry/ investigation of offence of money- laundering, analogy cannot be drawn from the provisions of 1973 Code, in regard to registration of offence of money- laundering and more so being a complaint procedure prescribed under the 2002 Act. Further, the authorities referred to in Section 48 of the 2002 Act alone are competent to file such complaint. It is a different matter that the materials/evidence collected by the same authorities for the purpose of civil action of attachment of proceeds of crime and confiscation thereof may be used to prosecute the person involved in the process or activity connected with the

.....65/-

Judgment

493 apl1488.24

65

proceeds of crime for offence of money- laundering. Considering the mechanism of inquiry/investigation for proceeding against the property (being proceeds of crime) under this Act by way of civil action (attachment and confiscation), there is no need to formally register an ECIR, unlike registration of an FIR by the jurisdictional police in respect of cognizable offence under the ordinary law.

There is force in the stand taken by the ED that ECIR is an internal document created by the department before initiating penal action or prosecution against the person involved with process or activity connected with proceeds of crime. Thus, ECIR is not a statutory document, nor there is any provision in 2002 Act requiring Authority referred to in Section 48 to record ECIR or to furnish copy thereof to the accused unlike Section 154 of the 1973 Code. The fact that such ECIR has not been recorded, does not come in .....66/-

Judgment

493 apl1488.24

66

the way of the authorities referred to in Section 48 of the 2002 Act to commence inquiry/investigation for initiating civil action of attachment of property being proceeds of crime by following prescribed procedure in that regard."

44. As The Prevention of Money Laundering Act,

2002 being enacted to prevent money-laundering, has

provided for a wider scope as this offence takes place

when, any person directly or indirectly attempts to

indulge or knowingly assist 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 projects or claims it as

an untainted property. A person is guilty of the offence of

money laundering in all the above situations. A person is

also guilty of money-laundering if he is found to have

directly or indirectly attempted to indulge or knowingly

.....67/-

Judgment

493 apl1488.24

67

assisted a party or is actually involved in concealment or

possession, acquisition, use and projecting it as untainted

property or claiming it to be so.

45. The statement of the applicant No.1 and

documents on record itself show that the applicant No.1

was not only involved in causing loss to M/s.Welspun

India Limited but also he created false documents and the

amounts are not shown the ITR. It is further evident that

he is involved in manipulating financial/book of accounts

of his bogus entities M/s.Shachi Imports and Exports

Pvt.Ltd. and M/s.Textile Professional LLP thereby

laundering the proceeds of crime.

46. The applicant Nos.1 and 2 were Directors of

M/s.Shachi Imports and applicant No.1 was also partner

of M/s.Textile Professional LLP. Though he stated that

invoices and original records of the company were kept at

.....68/-

Judgment

493 apl1488.24

68

his residence, while tally data and accounts were

maintained externally through professionals and thereby

conceded the financial and operational control of the

entities rested with him. The statement of his Auditor

Shri Akash Agrawal shows that M/s.Shachi Imports and

Exports Pvt.Ltd. was involved in only trading initially

importing polyster staple fibers from China and later

from 2018 buying and selling cotton fibers and yarn

within India with no manufacturing units and branches

other than its Nagpur registered offence and just one

employee. He further stated that he is unable to explain

rise in turnover between 2018-19 and 2021-22 as to the

large operations functioned with a single swab employed

by the applicants and thereby merely spread sheets and

bank statements were forwarded to the Auditor and the

Auditor without verifying genuineness, maintained the

.....69/-

Judgment

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69

record. Therefore, there is a doubt regarding

genuineness of the said transaction itself.

47. The statement of Shri Narayan Kapse, Manager

of M/s.Matoshri Magasvargiya Shetkari Sutgirni Maryadit

also shows that his role was to oversee the workers. He

submitted that the Chairman of M/s.Matoshri

Magasvargiya Shetkari Sutgirni Maryadit had handed

over all the mills financial and production responsibilities

to M/s.Textile Professional LLP without any written

agreement and that the mill was actually run by Shri

Wasudev Warade and the applicant No.1 with all its

financial records kept at M/s.Textile Professional LLP

premises.

48. From the above statement, it reveals that the

financial control of M/s.Shachi Imports and Exports

Pvt.Ltd., M/s.Textile Professional LLP, and M/s.Matoshri

.....70/-

Judgment

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70

Magasvargiya Shetkari Sutgirni Maryadit was under

applicant No.1 who has utilized these firms for layering

proceeds of crime.

49. The statement of another employee,

Mrs.Archana Rothe of Shri Gajanan Sahakari Sutgirni

Limited, also discloses that the applicant No.1 through

M/s.Textile Professional LLP engaged in fraudulent

dealing that caused heavy financial losses and ultimately

closure of their mill. The applicant No.1 and his

associates alleged submitted inflated invoices, supplied

poor quality cotton and on demand to replace it, removed

the defective raw cotton without providing any

replacement due to which loss was caused to the mill and

resultantly it was closed down.

50. The statement of Maheshwari Gourao,

proprietor of Rangoli Yarns recorded during investigation

.....71/-

Judgment

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71

throws further light on the modus operandi of the

applicant No.1 who stated that Shri Wasudev Warade

represented both textile professionals M/s.Shachi Imports

and Exports Pvt.Ltd. and M/s.Textile Professional LLP.

However, the invoices were often raised in the name of

M/s.Textile Professional LLP while actual material was

supplied by M/s.Matoshri Magasvargiya Shetkari Sutgirni

Maryadit which shows that the applicant No.1 through

his associate Shri Wasudev Warade used M/s.Textile

Professional LLP as billing entity while supplies

originated from M/s.Matoshri Magasvargiya Shetkari

Sutgirni Maryadit bill thereby layering the transactions

and concealing true source of funds.

51. From the statements of Yogesh Nimbonia and

Ram Setex it shows that the applicant No.1 was involved

in manipulating financial and book of accounts of his

bogus entities. The applicant No.1 furnished details of

.....72/-

Judgment

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72

multiple bank accounts held by himself and his wife and

his control over entities and also placed on record his

written submissions from which it reveals that invoices

were raised in the name M/s.Textile Professional LLP

while the actual material originated from M/s.Matoshri

Magasvargiya Shetkari Sutgirni Maryadit and proceeds of

such transactions were then routed to M/s.Shachi

Imports and Exports Pvt.Ltd. and part of the funds were

transferred abroad.

52. Thus, the complexity of the issue involving

multiple issues and facts and the transactions entered

appear to be not genuine one and rigorous investigation

is carried out by the authorities.

53. At this stage, the material involves a serious

allegation, discovery of incriminating financial records at

his residence and on going tracing of funds through

.....73/-

Judgment

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73

various entities which show prima facie case against the

applicants.

54. Admittedly, the scheduled offences are

registered against the applicants vide FIR

No.11200048233307 under Sections 195, 323, 341, 342,

506(2), 389, 120-B of the IPC and vide FIR

No.11191067240040 under Sections 406, 419 and 420 of

the IPC and under Section 66-B of the Information

Technology Act, 2000 at Valsad and Ahmedabad Police

Stations respectively. The quashing proceeding in respect

of the scheduled offences is still pending in Gujarat High

Court.

55. Section 420 of the IPC being included as

scheduled offence in the Schedule to the PMLA. The

ECIR was registered by considering the said scheduled

offence.

.....74/-

Judgment

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74

56. The pronouncement of the Hon'ble Apex Court

in the case of Vijay Madanlal Choudhary and ors vs.

Union of India and ors supra has demonstrated and

purpose of object of the PMLA by stating that it is not

limited to punishment for offence of money laundering,

but it also provides measures for prevention of money

laundering and for attachment of proceeds of crime

which are likely to be concealed, transferred or dealt with

in any manner which may result in frustrating any

proceedings relating to confiscation of such proceeds

under the PMLA.

57. Admittedly, a link between the scheduled

offence defined under Section 2(1)(y) of the PMLA with

"proceeds of crime" is required to be established.

58. In the present case, sufficient material is on

record to show link between the scheduled offence and

.....75/-

Judgment

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75

the proceeds of crime. The property derived or obtained

as a result of criminal activity relating to an offence

termed as a "scheduled offence" is regarded as a tainted

and dealing or layering such property, in any manner,

attracts the offence of money laundering.

59. The offence under Section 3 of the PMLA

depends on illegal gain of property as a result of criminal

activity relating to scheduled offence and is concerning

the process of activity connected with such property

which constitutes the offence of money laundering.

60. Thus, the statements of various witnesses and

documents on record sufficiently show that there is live

link between the scheduled offence and the ECIR.

61. Learned Senior Counsel Shri D.V.Chauhan for

the applicants raised grounds that due to the dispute

between the applicants and the management of the

.....76/-

Judgment

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76

Welspun, the applicants are falsely implicated in the

alleged offence.

Whereas, learned ASG Shri Anil Singh for the

non-applicants submitted that by that reason, the

application for quashment of the FIR cannot be allowed.

He placed reliance on the decision in the case of

Sheonandan Paswan vs. State of Bihar and ors supra

wherein it is held that political motivation or vendetta

could not possibly a valid ground withdrawal of the

prosecution.

62. Even considering the entire material collected

during the investigation, it sufficiently shows involvement

of the applicants in the alleged crime and, therefore, the

contentions of learned Senior Counsel for the applicants

that the applicants are falsely implicated due to rift

.....77/-

Judgment

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77

between the management and the applicants are not

sustainable.

63. Learned Senior Counsel for the applicants also

submitted the offence under Section 120-B of the IPC

cannot be treated as stand alone offence in absence of

any other scheduled offence being committed for the

purposes of prosecution under the PMLA.

64. Now, Section 120-B of the IPC is included in

Part-A of the Schedule, even if allegation is of making

criminal conspiracy to commit an offence, which is not

part of the schedule, the offence becomes the scheduled

offence. Thus, the offence of dishonest misappropriation

of property or criminal breach of trust, the offence under

Section 120-B of the IPC of conspiracy to commit offences

under Section 420 of the IPC or any other offences will

become a scheduled offence. The legislative intent from

.....78/-

Judgment

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78

the definition of the scheduled offence under clause (y)

of sub-section (1) of Section 2 of the PMLA is that every

crime which may generate proceeds of crime need not be

a scheduled offence and, therefore, only certain specific

offences have been included in the schedule. Section 3

would be invoked by simply applying Section 120-B of

the IPC when there is material to show that there is

conspiracy to commit an offence. The object is to punish

those involved in conspiracy to commit a crime though

they may not have committed any overt act that

constitutes the offence. The conspiracy is an agreement

between the accused to commit an offence. The

punishment provided under Section 120-B of the IPC

becomes evidence that it is not aggravated offence. It

only fixes principle of vicarious liability. The said aspect

is also considered by the Hon'ble Apex court in the case

of Pavana Dibbur vs. Directorate of Enforcement,

.....79/-

Judgment

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79

reported in 2023 SCC OnLine SC 1586 wherein it is

observed that the offence punishable under Section 120-B

of the IPC will become a scheduled offence only if the

conspiracy alleged is of committing an offence which is

specifically included in the schedule.

65. The offences registered against the applicants

under Sections 389 read with 120-B of the IPC are

scheduled offences. The another crime registered against

the applicants under Sections 419 and 420 of the IPC is

also scheduled offence.

66. The condition precedent for existence of

"proceeds of crime" is the existence of "scheduled

offence. On this aspect, the Hon'ble Apex Court in the

case of Vijay Madanlal Choudhary supra held that,

"tersely put, it is only such property which is derived or

obtained, directly or indirectly, as a result of criminal

.....80/-

Judgment

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80

activity relating to a scheduled offence can be regarded

as proceeds of crime. The authorities under the 2002 Act

cannot resort to action against any person for money-

laundering on an assumption that the property recovered

by them must be proceeds of crime and that a scheduled

offence has been committed, unless the same is registered

with the jurisdictional police or pending inquiry by way

of complaint before the competent forum. For, the

expression "derived or obtained" is indicative of criminal

activity relating to a scheduled offence already

accomplished. Similarly, in the event the person named in

the criminal activity relating to a scheduled offence is

finally absolved by a Court of competent jurisdiction

owing to an order of discharge, acquittal or because of

quashing of the criminal case (scheduled offence) against

him/her, there can be no action for money-laundering

against such a person or person claiming through him in

.....81/-

Judgment

493 apl1488.24

81

relation to the property linked to the stated scheduled

offence. This interpretation alone can be countenanced

on the basis of the provisions of the 2002 Act, in

particular Section 2(1)(u) read with Section 3. Taking

any other view would be rewriting of these provisions

and disregarding the express language of definition

clause "proceeds of crime", as it obtains as of now".

It is further observed that, "from the bare

language of Section 3 of the 2002 Act, it is amply clear

that the offence of money-laundering is an independent

offence regarding the process or activity connected with

the proceeds of crime which had been derived or

obtained as a result of criminal activity relating to or in

relation to a scheduled offence. The process or activity

can be in any form - be it one of concealment, possession,

acquisition, use of proceeds of crime as much as

projecting it as untainted property or claiming it to be so.

.....82/-

Judgment

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82

Thus, involvement in any one of such process or activity

connected with the proceeds of crime would constitute

offence of money-laundering. This offence otherwise has

nothing to do with the criminal activity relating to a

scheduled offence - except the proceeds of crime derived

or obtained as a result of that crime.

67. Admittedly, the ECIR is based on the subject

FIR as it contained an accusation against the applicants

that the applicant No.1 has hatched conspiracy and

defrauded M/s.Welspun India Limited through various

means and utilized companies M/s.Shachi Imports and

Exports Pvt.Ltd. and M/s.Textile Professional LLP for

layering proceeds of crime. It further revealed that

invoices were raised in the name of M/s.Textile

Professional LLP thereby layering transactions, siphoned

the amounts, routing the same to M/s.Textile

.....83/-

Judgment

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83

Professional LLP and part of the funds was transferred

abroad.

68. Section 420 of the IPC being included as a

scheduled offence in the Schedule of PMLA, the subject

ECIR was registered by taking into consideration the

offence punishable under Section 420 of the IPC as well

as the offences under Sections 120-B, 195, 323, 341, 342,

389, and 506 of the IPC. The chargesheet bearing

No.391/2022 registered under Sections 114, 120-B, 342,

348, 406, 408, 504, and 506(2) of the IPC was also

considered while registering the ECIR. It was thus seen

from the FIR that the main allegations are that a well

planned systematic conspiracy was hatched by the

applicant No.1 and he got benefited through leaking of

confidential proprietary information, causing financial

loss to Welspun Company, causing financial loss to misuse

of his position within the company through procurement

.....84/-

Judgment

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84

of low quality raw material, diverting the business of

Welspun Company also by misrepresenting and

misleading its various vendors of the company. The stand

taken by the ED, supported by various statements of the

witnesses, is sufficient to conclude that the ECIR

registered against the applicants cannot be quashed and

the registration of the offences vide FIR

No.1200048220239 dated 8.1.2022 under Sections 342,

348, 406, 408, 504, 506(2), and 120-B of the IPC,

chargesheet bearing No.391/2022 registered under

Sections 114, 120-B, 342, 348, 406, 408, 504, and

506(2) of the IPC, and FIR No.11200048233307 under

Sections 195, 323, 341, 342, 506(2), 389, and 120-B of

the IPC and FIR No.11191067240040 under Sections

406, 419 and 420 of the IPC and under Section 66-B of

the Information Technology Act, 2000 would constitute

scheduled offences. The investigation carried out by the

.....85/-

Judgment

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85

ED on the basis of the scheduled offences sufficiently

shows involvement of the applicants in the alleged

offences and, therefore, a prima facie case is already

made out.

69. In view of the law laid down by the Hon'ble

Apex Court, while considering applications for quashing

of FIRs, powers under Section 482 of the Code cannot be

exercised when allegations made in the FIR or

chargesheet constitute ingredients of the offence/offences

alleged. Interference by this court under Section 482 of

the Code is to prevent the abuse of process of any court

or otherwise to secure ends of justice. The defence of the

accused cannot be looked into by the court except in very

exceptional circumstances at the initial stage of criminal

proceeding. Even, this court cannot conduct a mini trial

by appreciating the evidence while considering petition

filed under Section 482 of the Code and, therefore, at this

.....86/-

Judgment

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86

stage, what is to be looked into is, whether the evidence

collected by the investigating agency is sufficient to make

out a case against the accused triable.

70. By applying the said principle as above, there

is an ample material against the applicants and,

therefore, the application deserves to be rejected and the

same is rejected accordingly.

Application stands disposed of.

(NANDESH S.DESHPANDE, J.) (URMILA JOSHI-PHALKE, J.)

!! BrWankhede !!

Signed by: Mr. B. R. Wankhede Designation: PS To Honourable Judge ...../- Date: 13/11/2025 10:38:01