The Calcutta High Court has quashed money laundering proceedings against Louis Dreyfus Company India Private Limited under the Prevention of Money Laundering Act, 2002 (PMLA).
The Court held that the Enforcement Directorate (ED) could not continue prosecution after the Central Bureau of Investigation (CBI) had exonerated the company in the predicate offence.
Justice Suvra Ghosh allowed CRR 1145 of 2024, titled Louis Dreyfus Company India Private Limited v. Enforcement Directorate, Government of India. The Court also quashed M.L. Case No. 7 of 2018 pending before the Chief Judge, City Sessions Court, Calcutta, insofar as the petitioner company was concerned.
Background of the Case
The dispute originated from an FIR registered by the CBI on March 31, 2014.
The FIR named Manoj Kumar Jain, Director of Prakash Vanijya Private Limited (PVPL), and others. The case arose from a complaint filed by the Central Bank of India, Corporate Finance Branch, Kolkata.
The bank alleged a loss of Rs. 234.57 crore.
The CBI later filed charge sheets under various provisions of the Indian Penal Code and the Prevention of Corruption Act.
Since the offences qualified as scheduled offences under the PMLA, the ED registered ECIR No. KLZO/9/2016 on September 5, 2016. The agency later filed a prosecution complaint against the petitioner and other accused persons.
ED’s Allegations
The ED alleged that Louis Dreyfus Company participated in circular trading with the accused persons.
According to the agency, three Letters of Credit worth Rs. 25 crore moved through Quality Vintrade Private Limited (QVPL). The ED claimed that the funds eventually returned to PVPL and its sister concerns.
The petitioner denied these allegations.
It argued that the transactions involved genuine warehouse sales. The company stated that warehouse receipts supported the transactions even though the goods did not physically move.
The petitioner also pointed out that the law permits such transactions under the Sale of Goods Act and the Warehousing (Development and Regulation) Act, 2007.
Petitioner Challenges ED Case
Senior Advocate Sandipan Ganguly appeared for the petitioner.
He argued that the CBI had already investigated the disputed Letters of Credit. According to him, the agency found no diversion of funds involving Louis Dreyfus Company.
The petitioner also highlighted that QVPL was not an accused in either the predicate offence or the money laundering case.
The company further argued that the ED relied mainly on a statement made by co-accused Manoj Kumar Jain under Section 50 of the PMLA.
According to the petitioner, a co-accused’s statement alone cannot justify prosecution.
The company relied on several Supreme Court decisions, including Prem Prakash v. Union of India, Kashmira Singh v. State of Madhya Pradesh, Surinder Kumar Khanna v. DRI, Deepak Bhai Patel v. State, and Asif Hanif Thara v. Enforcement Directorate.
ED Defends Proceedings
The ED opposed the plea and maintained that the petitioner actively participated in laundering proceeds of crime.
The agency alleged that the petitioner purchased consignments from QVPL and sold them to PVPL on the same day.
According to the ED, the company received payments from PVPL before transferring money to QVPL.
The ED claimed that these transactions involved discounted Letters of Credit issued by the Central Bank of India.
The agency further alleged that the petitioner received Rs. 22.40 lakh as proceeds of crime and projected the amount as untainted money.
The ED also argued that a person need not be an accused in the predicate offence to face prosecution under the PMLA.
High Court Examines the Evidence
Justice Suvra Ghosh noted that a person can face prosecution under Section 3 of the PMLA even if authorities do not name them in the scheduled offence.
However, the Court stressed that the ED must produce sufficient material linking the person to the proceeds of crime.
The Court found that the petitioner conducted transactions through warehouse receipts in accordance with statutory requirements.
It held that authorities could not automatically label such transactions as paper transactions.
The Court also considered it significant that QVPL was not an accused in either case despite the ED describing it as a key link in the alleged circular trading route.
Court Says ED Cannot Ignore CBI Findings
The High Court emphasised that the CBI had thoroughly investigated the disputed Letters of Credit and the petitioner’s role.
The CBI concluded that Louis Dreyfus Company was not a beneficiary of the alleged transactions.
Referring to Vijay Madanlal Choudhary v. Union of India, the Court reiterated that money laundering depends on the existence of proceeds of crime derived from a scheduled offence.
The Court observed:
“Since the CBI has exonerated the petitioner from the allegations of his involvement in any criminal activity relating to the scheduled offence, he cannot be accused of indulging in any activity connected to such proceeds of crime.”
Co-Accused’s Statement Not Enough
The Court found that the ED relied primarily on the statement of co-accused Manoj Kumar Jain.
The agency failed to produce independent evidence linking the petitioner to money laundering.
Relying on Supreme Court precedents, including Kashmira Singh and Prem Prakash, the Court held that the prosecution cannot rely solely on a co-accused’s confession.
Proceedings Quashed
The High Court concluded that continuing the proceedings against the petitioner would amount to an abuse of the judicial process.
Justice Suvra Ghosh therefore quashed M.L. Case No. 7 of 2018 against Louis Dreyfus Company India Private Limited.
However, the Court allowed the proceedings to continue against the remaining accused persons.
The Court also directed the release of the petitioner’s bail bonds.
