Isabella Mariam

The High Court of Bombay Division Bench of Justice A.S. Gadkari and Justice Ranjitsinha Raja Bhonsale dismissed the Enforcement Directorate’s appeals, confirming a PMLA Appellate Tribunal order releasing attached properties, and upheld directions arising from transactions involving Shapoorji Pallonji and Co. Pvt. Ltd. The dispute concerned ED attachments in a money-laundering inquiry over payments totalling Rs 141.50 crore made under a 2007 arrangement to acquire about 900 acres at up to Rs 30 lakh per acre, which the agency alleged were proceeds of crime. On interest, the court directed that accrued interest on fixed deposits of Rs 45 crore and Rs 1.15 crore be shared equally between the company and the Armed Forces Battle Casualties Welfare Fund, noting an urgent need to support widows and children of armed forces personnel who died in service.

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The appeals arose from proceedings initiated by the Union of India through the Directorate of Enforcement challenging a common order passed by the PMLA Appellate Tribunal, New Delhi, which had set aside multiple provisional attachment orders issued under the Prevention of Money Laundering Act, 2002. The attachments related to amounts aggregating ₹141.50 crore advanced by a private company to certain individuals and group entities pursuant to a land acquisition agreement executed during 2007–2009.

The Enforcement Directorate alleged that the funds constituted “proceeds of crime” linked to a scheduled offence under the Prevention of Corruption Act, in connection with alleged disproportionate assets of a public servant. The respondents contended that the transactions were disclosed, routed through banking channels, reflected in audited accounts, and arose from a commercial agreement predating the inclusion of corruption offences as scheduled offences under PMLA. They further relied on income tax appellate findings and a consent decree passed by the High Court recognising the legitimacy of the transactions.

The Appellate Tribunal accepted the respondents’ case, set aside the attachments, and directed refund of the amounts with accrued interest. Aggrieved, the Enforcement Directorate preferred multiple criminal appeals before the High Court.

The Division Bench examined, at the threshold, the challenge raised by the Enforcement Directorate to statements and concessions recorded before the Appellate Tribunal. The Court recorded that “statements of fact as to what transpired at the hearing, recorded in the judgment of the court, are conclusive of the facts so stated” and cannot be contradicted in appeal without first seeking correction before the same forum. It noted that “if a party thinks that the happenings in court have been wrongly recorded, it is incumbent upon the party… to call the attention of the very judges who have made the record.”

On the merits, the Court analysed the statutory definition of “proceeds of crime” under Section 2(1)(u) of the PMLA and observed that “there should be a property, it should have been derived from criminal activity, and the criminal activity should relate to a scheduled offence.” It recorded that all three elements must coexist, failing which the property cannot be treated as proceeds of crime.

The Bench noted that the amounts were advanced pursuant to a written agreement, through banking channels, and duly reflected in the books of accounts. It observed that “the transaction between the parties is a normal business transaction” and that income tax proceedings had concluded in favour of the respondents, thereby displacing the foundation relied upon by the Enforcement Directorate.

The Court further observed that “before 1st June 2009, the offence under Section 13 of the Prevention of Corruption Act was not a scheduled offence under the PMLA” and held that criminal liability could not be applied retrospectively. It also recorded that “there is absolutely no material to connect or relate the monies paid… to the discharge of public duties by the public servant.”

In conclusion, the Bench stated that “none of the ingredients of the definition of ‘proceeds of crime’ are attracted” and that the attachments were made “without any legal evidence or basis.”

The Court ordered that “all the Appeals i.e. Criminal Appeal No. 1309 of 2024, Criminal Appeal No. 79 of 2020 and Criminal Appeal No. 1051 of 2019 are dismissed” and further directed that “the Order dated 17th January, 2019 passed by the Appellate Tribunal, PMLA, New Delhi is confirmed. Interim Application No. 2694 of 2025 in Criminal Appeal No. 1309 of 2024, Interim Application No. 3083 of 2025 in Criminal Appeal No. 79 of 2020 and Interim Application No. 3140 of 2025 in Criminal Appeal No. 1051 of 2019 do not survive and are accordingly disposed of.”

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In respect of Interim Application No. 724 of 2021 in Criminal Appeal No. 1051 of 2019, the Court directed that “the amount of Rs. 45 Crores as deposited by the Appellants with the Registry of this Court pursuant to Order dated 18th December, 2019 is hereby directed to be returned” and “the amount of Rs. 1.15 Crores as deposited by the Appellants with the Registry of this Court pursuant to Order dated 18th December, 2019 is hereby directed to be returned” to Shapoorji Pallonji and Co. Pvt. Ltd.

“50% of the interest which has accrued on the said deposits of (i) Rs. 45 Crores and (ii) Rs. 1.15 Crores be refunded to Shapoorji Pallonji and Co. Pvt. Ltd.” and that “the balance 50% of the accrued interest is directed to be transferred/paid to the ‘Armed Forces Battle Casualties Welfare Fund’ (AFBCWF). The said amount of interest be transferred in the said account within a period of two weeks from the date of uploading of this Order on the official website of High Court of Bombay”.

“Registrar Judicial-II is directed to verify the said amount transferred and submit a compliance report to this Court” and the matter be “listed under the caption ‘For Reporting Compliance’ on the date specified.”

Advocates Representing the Parties

For the Appellants: Ms. Manisha Jagtap, Advocate, along with Ms. Mansi Joshi

For the Respondents: Mr. Gaurang Mehta, Advocate, along with Mr. Shahzad A.K. Najam-Es-Sani and Ms. Rhea Mehta, instructed by Maneksha & Sethna

Case Title: Union of India v. Nilesh J. Thakur & Ors.
Neutral Citation: 2025: BHC-AS:58090-DB
Case Numbers: Criminal Appeal Nos. 1309 of 2024, 79 of 2020, and 1051 of 2019
Bench: Justice A.S. Gadkari and Justice Ranjitsinha Raja Bhonsale