1. Petition to quash proceedings under PMLA for money laundering based on predicate bank fraud. (Para 1 , 3 )
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2026 Supreme(Telangana) 276
IN THE HIGH COURT FOR THE STATE OF TELANGANA HYDERABAD
E.V.Venugopal, J.
Om Prakash Sharma - Petitioner
Versus
The Directorate of Enforcement represented by its Deputy Director - Respondent
Criminal Petition No.2605 of 2025, Criminal Petition No.2607 of 2025
Decided On : 09-01-2026
Advocates Appeared:
For the Petitioner: Sri T.Srikanth Reddy for Sri V.Vijaya Rama Raj.
For the Respondent: Sri Anil Prasad Tiwari, Learned standing counsel
For the Petitioner: Sri T.Srikanth Reddy for Sri V.Vijaya Rama Raj.
For the Respondent: Sri Anil Prasad Tiwari, Learned standing counsel
Criminal liability under PMLA requires direct involvement in the possession, control, or projection of proceeds of crime; uncorroborated statements of co-accused under Section 50 PMLA, combined with a merely facilitative role without personal financial gain from the proceeds, are insufficient to sustain prosecution.
Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 3, 4, 24, and 50 - Criminal liability for money laundering requires proof of knowing participation, control, possession, projection, or actual enjoyment of proceeds of crime - Mere facilitation, professional association, or intermediary coordination, absent cogent material demonstrating culpable intent and direct involvement, does not satisfy statutory ingredients of the offence (Para 8(d)).
(B) Statements of co-accused recorded under Section 50 of the Act - Not substantive pieces of evidence without independent corroboration - Cannot form the sole basis to implicate others in a criminal prosecution (Para 8(m)).
(C) Quashing of proceedings - A criminal trial cannot be allowed to assume the character of a fishing and roving enquiry - Inherent powers can be exercised to prevent abuse of process where uncontroverted allegations and evidence do not disclose the commission of any offence (Paras 8(e) and 8(j)).
Facts of the case:
The petitioners, one a chartered accountant and the other a businessman, were arrayed as accused in a case involving the siphoning of bank loans through shell companies. It was alleged that they acted as intermediaries to facilitate the rotation of funds for the main accused and received a nominal commission for such services.
Findings of Court:
The record indicates that the petitioners did not execute the impugned transactions, control any bank accounts, or derive personal financial benefit from the proceeds of crime. The role attributed to them was peripheral and facilitative, and the charges were based exclusively on uncorroborated statements of co-accused recorded under Section 50 of the Act.
Issues: Whether the proceedings under the Prevention of Money Laundering Act can be sustained when the accused's role is merely that of a facilitating agent and the primary evidence consists of uncorroborated statements of co-accused.
Ratio Decidendi: Offences under the Act are parasitic and cannot stand without concrete involvement in financial transactions. Professional obligations of a chartered accountant or the act of facilitating bank account openings for a nominal commission does not constitute money laundering without evidence of control over funds or enjoyment of proceeds of crime.
Result: Criminal petitions allowed and proceedings against the petitioners quashed.
Legal Category Hierarchy
- crime and sentencing
- practice and procedure
Table of Contents
2. Petitioners argued no direct involvement or gain; respondent asserted knowing participation in layering proceeds of crime. (Para 6 , 7 )
3. Petitioners acted as mere agents for commission without control or benefit from proceeds of crime. (Para 8 )
4. Criminal petitions allowed; proceedings quashed against petitioners for all allegations under PMLA. (Para 9 )
ORDER :
E.V.Venugopal, J.
Criminal Petition No.2605 of 2025 is filed by the petitioner/accused No.16 and Criminal Petition No.2607 of 2025 is filed by the petitioner/accused No.9 seeking to quash the proceedings in PMLA SC No.264 of 2022 on the file of the learned Metropolitan Sessions Judge- cum-Special Court under the Prevention of Money Laundering Act (PMLA), 2002 (hereinafter referred to as “trial Court”) against them.
2. Heard Sri T.Srikanth Reddy, learned counsel representing Sri V.Vijaya Rama Raj, learned counsel for the petitioners in both the matters and Sri Anil Prasad Tiwari, learned Standing Counsel for the respondent/Enforcement Directorate.
3. The brief facts of the case of the prosecution are as follows :
(a) On the basis of 3 FIRs/complaints lodged by State Bank of India and erstwhile Corporation Bank (now Union Bank of India), it is alleged that PCH Group companies through their Directors Shri Balvinder Singh and Smt.Baljit Kaur, in criminal conspiracy with others obtained bank loans and cheated the bank by siphoning of the loan amounts. The accounts of the Directors were reported as fraud and they have inflated value of the stocks while submitting the stock statements. The Directors also availed various credit facilities by submitting false statements, they conspired with the other accused and diverted the credit to various fictitious companies which were floated by them and co-conspirators. Thus, there was alleged to be a loss of Rs.19.77 Crore to the bank. The Director Sri Balvinder Singh also tried to create a fabricated evidence that the name reflected in RBI defaulters’ list was not him, which was verified to be wrong. The accused diverted and siphoned off the loan funds through shell and fictitious companies, rotated the funds through multiple bank accounts and utilised the same for personal enrichment, thereby causing wrongful loss to banks.
(b) CBI has registered and investigated the scheduled offences and has filed charge-sheet on 03.05.2017 vide CC No.5231 of 2017 pertaining to FIR No.RC 10/E/2014-CBI-EOW dated 13.11.2014 registered by CBI, EOW, Chennai for the offences under Section 120-B read with Section 420 and 468 of IPC and Section 13 (2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 which are scheduled offences under the PMLA. Investigation pertaining to FIR No.RC 1/E/2019-CBI/BS&FC/BLR dated 11.03.2019 and FIR No.RC 10(E) 2017/CBI/EOW/Chennai dated 15.12.2017 are pending and the charge-sheets are yet to be filed. Complaint dated 24.07.2019 lodged by SBI, Stressed Assets Management with the CBI, BS and FC Bengaluru and another complaint dated 19.06.2020 lodged by Union Bank of India with CBI, EOW, New Delhi are pending investigation. On the basis of FIR No.RC 10/E/2014-CBI-EOW dated 13.11.2014 registered by CBI, EOW, Chennai, the Enforcement Directorate recorded ECIR No.ECIR/HYZO/08/2015 dated 13.08.2015 and initiated investigation under the PMLA.
(c) Various FIRs registered by predicate agencies after recording of the ECIR were merged in this file as most of the main accused and modus operandi of fraud and the ultimate beneficiaries of the proceeds of crime in these FIRs were same.
(d) The investigation revealed that PCH Group companies availed multiple loans from various banks on the basis of false and fabricated documents, which subsequently turned into NPAs. Enquiries with banks established total outstanding dues of Rs.747.59 crore, which was equal to the cumulative NPA resulting out of the fraud allegedly perpetrated by the accused persons. The said amount of Rs.747.59 Crore comprised of Rs.285.32 crore as principal amount and Rs.462.27 crore as interest outstanding, which constitute “proceeds of crime” under the PMLA.
(e) During investigation, substantial evidence including bank records, loan documents and statements recorded under Section 50 of the PMLA were collected, establishing diversion, layering and rotation of loan funds through shell companies having no genuine bu
