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2025 (1) TMI 1042 - HC - Money LaunderingMoney Laundering - seeking to set aside the order principally on the ground that prima facie no offence whatsoever is made out under Sections 406 418 420 read with 120B Indian Penal Code 1860 - HELD THAT - In the present case it is seen that case of the Enforcement Directorate (ED) is that Applicant No. 1 on behalf of M/s. Kamala Developers received an amount of Rs. 4, 27, 16, 900/- as proceeds of crime from M/s. Sadguru Enterprises. The second charge of ED to attribute this amount to proceeds of crime is that M/s. Sadguru Enterprises has not delivered any of its services / obligations to the Complainant (Respondent No. 2) under the Renovation Agreement and therefore the amount received from him and routed to M/s. Kamala Developers is alleged as proceeds of crime . Apart from the above two charges there is no other case made out by ED. To understand levy of this charge one needs to understand what proceeds of crime means under the PMLA. As delineated herein above Section 2 (1)(u) of PMLA refers to proceeds of crime as any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence . The explanation to this definition provides that such property would include any property relatable to the scheduled offence mentioned in the PMLA. The fallacy in ED s charge / claim is that after receiving the above amount M/s. Sadguru Enterprises has not provided any services to Respondent No. 2. This charge of ED clearly falls flat because Respondent No. 2 has himself clearly acknowledged that M/s. Sadguru Enterprises having delivered its obligations under the said Agreement dated 16.04.2007 for which Respondent No. 2 agreed to pay the amount of Rs. 4, 57, 84, 400/- in three installments on fulfillment of the additional amenities to be specifically provided under its various conditions as agreed between them. Evidence on record acknowledged by Respondent No. 2 clearly shows that save and except an amount of Rs. 30, 67, 500/- Respondent No. 2 has paid the entire above amount to M/s. Sadguru Enterprises intermittently in three installments for having delivered under the very Agreement as per the schedule of installments when the works under the Renovation Agreement were accomplished and completed by M/s. Sadguru Enterprises. Works to the extent of Rs. 30, 67, 500/- having remained incomplete Respondent No. 2 has specifically acknowledged it in his own correspondence and he has withheld this amount under the original Agreement to be given to M/s. Sadguru Enterprises after which a No-claim Certificate is issued to him. In the present case it is clearly seen that there is no case made out by Respondent No. 2 against M/s. Sadguru Enterprises for non-compliance and breach of the Renovation Agreement except for some works for which he did not pay the balance amount which was accepted by M/s. Sadguru Enterprises and a No-claim Certificate was issued. It is not his case that there was never any intention since inception not to carry out the Renovation / additional amenities works agreed under the various conditions of the Agreement. Once that is the case ingredients of cheating are completely non-existent - Rather this is a case of the Complainant himself acknowledging the works done by M/s. Sadguru Enterprises under the said Agreement and only on being satisfied he paid the second and the third truncated installments to complete the payment schedule. According to Complainant s own letter dated 09.07.2007 appended at page No. 407 he has himself admitted that the subject premises were almost ready. This is a fit case for imposition of exemplary costs on the Complainant and ED for invoking criminal action in the present facts and harassing the Developer with criminal action. Conclusion - The civil disputes should not be converted into criminal cases and emphasized the need for clear evidence of criminal intent for IPC and PMLA charges. The criminal proceedings are quashed. Application dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment involve the legality and validity of the order dated 08.08.2014 issued by the Special Judge, Mumbai under the Prevention of Money Laundering Act, 2002 (PMLA). The primary questions include whether the amounts received by M/s. Sadguru Enterprises and subsequently transferred to M/s. Kamala Developers constitute "proceeds of crime" under the PMLA, and whether the alleged activities fall under the scheduled offences of cheating and criminal breach of trust under the Indian Penal Code (IPC). 2. ISSUE-WISE DETAILED ANALYSIS 2.1. Relevant Legal Framework and Precedents The judgment analyzes the definitions and provisions under the PMLA, particularly Section 2(1)(u) defining "proceeds of crime" and Sections 3 and 4 dealing with the offence of money laundering and its punishment. The legal framework under the IPC for offences of cheating (Section 420) and criminal breach of trust (Section 406) is also considered. 2.2. Court's Interpretation and Reasoning The Court scrutinizes the transactions between M/s. Sadguru Enterprises and Respondent No. 2, highlighting that the payments made were under a legitimate contract for renovation and additional amenities. The Court emphasizes that the Enforcement Directorate (ED) failed to acknowledge the contractual obligations and the evidence of compliance by M/s. Sadguru Enterprises. The judgment underscores that the allegations of non-delivery of services are unfounded as per the complainant's own admissions and correspondence. 2.3. Key Evidence and Findings The Court notes the existence of a Renovation Agreement dated 16.04.2007 between M/s. Sadguru Enterprises and Respondent No. 2, which was acknowledged and acted upon by both parties. The payments were made in installments as per the agreement, with a deduction for incomplete work acknowledged by Respondent No. 2. The Court finds no evidence of deception or criminal intent at the inception of the agreement. 2.4. Application of Law to Facts The judgment applies the legal definitions of "proceeds of crime" and "money laundering" to the facts, concluding that the transactions in question do not constitute criminal activity. The Court finds that the payments were part of a civil contractual obligation, not a result of any criminal offence, thereby negating the applicability of the PMLA. 2.5. Treatment of Competing Arguments The Court addresses the arguments presented by the ED and Respondent No. 2, dismissing the claims of money laundering due to lack of evidence and misinterpretation of the contractual relationship. The judgment also considers the procedural improprieties in the investigation and filing of charges by the Vile Parle Police Station, highlighting jurisdictional issues and the lack of substantive evidence to support the allegations. 2.6. Conclusions The Court concludes that the allegations of cheating and money laundering are baseless and that the dispute is purely civil in nature. The judgment emphasizes that the ED's actions were oppressive and lacked a proper legal basis, resulting in an abuse of the legal process. 3. SIGNIFICANT HOLDINGS 3.1. Core Principles Established The judgment reinforces the principle that civil disputes arising from contractual obligations should not be converted into criminal cases unless there is clear evidence of criminal intent or activity. It also highlights the importance of adhering to jurisdictional and procedural requirements in criminal investigations. 3.2. Final Determinations on Each Issue The Court quashes the proceedings under the PMLA and IPC against the applicants, finding no prima facie case of money laundering or cheating. It orders the cancellation of the attachment of properties by the ED and imposes exemplary costs on both the complainant and the ED for their conduct in the case. 3.3. Verbatim Quotes of Crucial Legal Reasoning The judgment states, "There is no misappropriation of money or property by any of the parties to the transactions. There is no proceeds of crime as can be seen from herein above. The subject property stands delivered to the Complainant before OC. Hence the case of ED based on the alleged crime recorded by Vile Parle Police Station is completely misconceived."
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