JUDGMENT :

SUVRA GHOSH, J.

1) In the present application, the petitioner seeks quashing of M.L. Case no.7 of 2018 under Section 45 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the PMLA). The genesis of the case is the FIR registered by the Central Bureau of Investigation (for short the CBI) on 31st March, 2014 against one Manoj Kumar Jain, Director of M/s of Prakash Vanijya Private Limited (PVPL) and others on the basis of a complaint received from the Central Bank of India, Corporate Finance Branch, Kolkata alleging loss of Rs. 234.57 crores. CBI filed charge sheet and supplementary charge sheet under Sections 420/467/468/471/120B of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act which includes scheduled offences under the PMLA. In view thereof, the Enforcement Directorate (hereinafter referred to as the E.D.) registered ECIR no. KLZO/9/2016 dated 5^th September, 2016 which culminated in filing of a prosecution complaint against the petitioner and others.

2) Seeking quashing of the said complaint, learned counsel for the petitioner has submitted as hereunder:-

The allegation against the petitioner is that the petitioner company resorted to circular trading in connivance and conspiracy with the other accused persons and the three LCs opened in favour of the company amounting to Rs. 25 crores were routed back after discounting to M/s. PVPL and its sister concerns through the purported debtor company of PVPL, namely M/s. Quality Vintrade Private Limited (QVPL). The petitioner sold commodities to PVPL by way of sale contracts after purchasing the same from QVPL through warehouse trust receipt which is conclusive proof of sale of goods lying in a warehouse under the Sale of Goods Act. There is no requirement of physical movement of the goods for completion of the transaction which is done through warehouse receipt. The petitioner company stored the goods purchased from QVPL in the warehouses and sold them as part of normal trade transaction to PVPL and others.

3) The petitioner has not been arraigned as an accused in the predicate offence wherein charge sheet and supplementary charge sheet have been filed. The three LCs in question were investigated by the CBI which revealed the criminality of Manoj Kumar Jain and other accused persons. However, the petitioner was not implicated. Further, one of the authorized representatives of the petitioner company Mr. Narendra Malik has been cited as a prosecution witness in the charge sheet of the predicate offence. The E.D. has transgressed into the arena of the predicate offence in holding investigation with regard to the predicate offence even after the petitioner was exonerated therefrom by the CBI. Investigation of the predicate offence is solely within the domain of the CBI and the E.D. had no authority to investigate the same. The CBI has in fact held that investigation could not establish any diversion of fund in respect of the petitioner company.

4) It is a fact that a person may be implicated in money laundering even if he is not arraigned as an accused in the predicate offence if he is involved in the subsequent generation of proceeds of crime and directly or indirectly deals with the same. In the present case, the CBI has looked into the criminality, if any, attached to the three transactions among the petitioner, PVPL and QVPL pertaining to the three LCs in question and has not attributed any criminality to the petitioner. QVPL has not been made an accused. Therefore purchase of goods by the petitioner from QVPL is not tainted and the chain of alleged circular trading breaks. Also, the LC has a credit period of 150 days which has not been considered by the E.D. PVPL has honoured 12 out of 15 LCS and the petitioner has no responsibility with regard to failure of PVPL to honour the remaining three LCS, moreso, since the petitioner had no knowledge that the PVPL would not honour the LCs in future. The am