Isabella Mariam

The High Court of Judicature at Bombay, Division Bench of Justices A.S. Gadkari and Rajesh S. Patil quashed the Enforcement Directorate’s proceedings under the Prevention of Money Laundering Act, 2002, against Krishna and Prasanna Chamankar of KS Chamankar Enterprises. The case stemmed from allegations in the Maharashtra Sadan scam, in which the contractor was accused of irregularly securing contracts linked to former State Cabinet Minister Chhagan Bhujbal. The Bench ruled that once the petitioners were discharged from the predicate Anti-Corruption Bureau offence, and that discharge attained finality, the money laundering prosecution could not continue.

The proceedings arose from a writ petition filed before the High Court of Judicature at Bombay by Krishna Shantaram Chamankar, Prasanna Shantaram Chamankar, and their partnership firm, K.S. Chamankar Enterprises. The petitioners sought quashing of a charge-sheet and all consequential proceedings initiated by the Directorate of Enforcement under the Prevention of Money Laundering Act, 2002 (PMLA).

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The Enforcement Directorate had registered an Enforcement Case Information Report (ECIR) on the basis of a First Information Report lodged by the Anti-Corruption Bureau, Mumbai. The predicate offence concerned alleged irregularities in the award of contracts for construction of Maharashtra Sadan in Delhi, the High Mount Rest House, and certain Regional Transport Office buildings. The petitioners’ firm was among the contractors implicated, and the Enforcement Directorate initiated money laundering proceedings on that foundation.

The petitioners argued that they had already been discharged from the predicate offence by the competent trial court in July 2021. That discharge order, they pointed out, had not been challenged by the prosecuting agency in the intervening years and therefore attained finality. Relying on the decision of the Supreme Court in Vijay Madanlal Choudhary v. Union of India, they submitted that once a person is finally discharged or acquitted of the scheduled offence, no prosecution for money laundering can continue in respect of the same alleged proceeds of crime.

On the other hand, the Enforcement Directorate opposed the plea. In an affidavit filed through its Assistant Director, the agency acknowledged that the ECIR was based on the Anti-Corruption Bureau’s case but maintained that proceedings under PMLA do not necessarily end with a discharge in the predicate offence. The Directorate relied on decisions including a ruling of the Jammu and Kashmir High Court in Niket Kansal v. Union of India, which suggested that PMLA prosecution could proceed independently, and on the Supreme Court’s judgment in Pavana Dibbur v. Directorate of Enforcement, which addressed whether persons not directly arraigned in the scheduled offence could still be liable under PMLA.

After considering the rival submissions, the High Court examined Section 3 of the PMLA and the relevant judicial precedents. It observed that the petitioners’ discharge from the scheduled offence had attained finality, and that the binding conclusions of the Supreme Court in Vijay Madanlal Choudhary applied squarely to their case. The Court held that, in the absence of a subsisting scheduled offence, proceedings for money laundering could not continue. Consequently, the ECIR and the charge-sheet were quashed, and the petition was allowed

The Court noted: “It is an admitted fact on record that, the Order dated 31st July 2021, has attained finality, as it has not been challenged by the ACB, Mumbai, being the prosecuting Agency.” The Court further observed: “The Petitioners in para No. 2 of the Petition have specifically pleaded that, they have been discharged from the said case filed by the ACB, Mumbai.”

Regarding the Jammu and Kashmir High Court decision, the Bench stated: “It may be noted that, the decision in the case of Niket Kansal (supra), has been rendered by the learned single Judge of the Jammu and Kashmir High Court and under the law, it has no binding effect on this Court.” The Court also observed that the decision itself recognized the binding nature of the Supreme Court judgment in Vijay Madanlal Choudhary.

The Court cited paragraph 31.2 of the Pavana Dibbur judgment, which states: “Even if an accused shown in the complaint under PMLA is not an accused in the scheduled offence, he will benefit from the acquittal of all the accused in the scheduled offence or discharge of all the accused in the scheduled offence. Similarly, he will get the benefit of the order of quashing the proceedings of the scheduled offence.”

The Bench stated that the Supreme Court in Vijay Madanlal Choudhary, decided by a three-Judge Bench, had conclusively held in paragraph 382.8: “The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money laundering. The authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the court of competent jurisdiction, there can be no offence of money laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.”

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Applying this to the facts, the Court recorded: “It is an admitted fact on record that, the Petitioners have been discharged by the trial Court from the predicate offence registered by the ACB, Mumbai Division, by its Order dated 31st July 2021 and the said Order has attained finality.”

The Bench concluded: “In view thereof, according to us, the conclusion enumerated by the Hon’ble Supreme Court in para No.382.8 in the case of Vijay Madanlal Choudhary (supra), squarely applies to the Petitioners and therefore the ECIR and the charge-sheet filed thereof, registered by Respondent No.2 qua the Petitioners, deserves to be quashed and set aside.”

 “In view of the above discussion, Petition is allowed in terms of prayer clause (a).”

Advocates Representing the Parties

For the Petitioners: Mr. Shreeyash Lalit (Through V.C.) a/w Ms. Shweta R. Rathod i/b Elixir Legal Services.

For the Respondents: Ms. Manisha Jagtap; Smt. M.M. Deshmukh, APP

Case Title: Krishna Shantaram Chamankar & Ors. v. Union of India & Ors.

Neutral Citation: 2025: BHC-AS:38407-DB

Case Number: Writ Petition No. 3400 of 2025

Bench: Justice A. S. Gadkari and Justice Rajesh S. Patil