Bombay High Court to ED: Stop Harassing Citizens, Follow Law; ₹1 Lakh Costs Imposed
Safiya Malik
The Bombay High Court, in a significant judgment, quashed criminal proceedings initiated under the Prevention of Money Laundering Act, 2002 (PMLA), against a city-based developer. The court also imposed exemplary costs of ₹1 lakh each on the Enforcement Directorate (ED) and the complainant, citing procedural improprieties and suppression of material facts.
The case originated from a dispute involving a real estate transaction for commercial premises in Malad, Mumbai. The complainant, Respondent No. 2, entered into a sale deed with M/s Kamala Developers for two floors of a building, intended for use as a residential hotel or guest house. The agreement included provisions for parking and separate access. A second agreement was executed with M/s Sadguru Enterprises for renovation and additional amenities, with a total consideration of ₹4.27 crore.
The complainant alleged that the developer failed to hand over possession of the premises by the stipulated date, July 30, 2007, and did not procure the required Occupation Certificate (OC). The developer cited delays caused by modifications requested by the complainant and unauthorized alterations by other residents.
The complainant filed complaints with the Malad Police Station, which were dismissed as civil disputes. Subsequently, a private complaint was filed before the Andheri Magistrate Court, resulting in an investigation by the Vile Parle Police Station and the filing of a chargesheet. The Enforcement Directorate (ED) later initiated proceedings under the PMLA, alleging that ₹4.27 crore paid under the renovation agreement constituted "proceeds of crime." The ED claimed these funds were used by the developer to purchase properties in Andheri.
The Special PMLA Court accepted the ED’s arguments and issued a process while allowing the attachment of the developer’s properties. The developer challenged this order before the Bombay High Court.
The High Court examined the allegations and found no basis for the initiation of criminal proceedings under the PMLA or the Indian Penal Code (IPC).
- Nature of the Dispute:
The court noted that the case primarily involved a breach of contract regarding the sale and renovation agreements. It observed: “In the facts of this case, none of the ingredients of cheating are present. There is nothing which prohibits a developer from entering into a Sale Agreement and allowing execution of a simultaneous Agreement for providing additional amenities/renovation in the same premises through another entity.”
- Conduct of the Complainant:
Justice Jadhav stated that the complainant suppressed prior findings of the Malad Police Station and the Economic Offences Wing (EOW), which had concluded that the matter was civil in nature. The court observed: “The Complainant had a clear sinister motive in his mind which becomes clearly evident.”
- Role of the ED:
The court criticized the ED for acting without due diligence and remarked: “I am compelled to levy exemplary costs because a strong message needs to be sent to the Law Enforcement Agencies like ED that they should conduct themselves within the parameters of law and that they cannot take law into their own hands without application of mind and harass citizens.”
- Definition of Money Laundering:
The judgment observed that money laundering involves deliberate criminal intent and the concealment or projection of tainted property as untainted. The court found no evidence to support the ED’s claims that the funds constituted proceeds of crime.
The High Court quashed the proceedings initiated by the ED and the order issued by the Special PMLA Court on August 8, 2014. It imposed exemplary costs of ₹1 lakh each on the ED and the complainant, payable to the court within eight weeks.
The court further observed that the simultaneous agreements between the complainant and the developer were standard business practices in Mumbai’s real estate sector and did not constitute criminal activities.
Appearance:
- Applicants: Senior Advocate Kevic Setalvad, Advocates Jehan Lalkaka and Bhavesh Thakur
- State: Additional Public Prosecutor Dr. DS Krishnaiyer
- Enforcement Directorate: Special Prosecutor Shriram Shirsat, Advocates Karishma Raje and Shekhar Mane
- Complainant: Gul Achhra (Party-in-person)
Case Title: Rakesh Brijlal Jain & Ors. v. State of Maharashtra & Ors.
Case Number: Criminal Revision Application No. 379 of 2016
Bench: Justice Milind N. Jadhav
[Read/Download order]
