Court’s Decision
The Supreme Court refused to quash the criminal proceedings initiated by the Enforcement Directorate (ED) against JSW Steel Limited and its official, holding that the Prevention of Money Laundering Act (PMLA) provides a complete and self-contained mechanism, and the appellants must exhaust their statutory remedies before the Appellate Tribunal.
The Bench comprising Justices Dipankar Datta and Augustine George Masih ruled that the Court would not exercise extraordinary jurisdiction under Article 136 when the appellants had already invoked an effective alternative remedy under Section 26 of the PMLA. Emphasizing judicial restraint, the Court observed:
“Interference at this stage would prejudge issues that are squarely within the domain of the Appellate Tribunal.”
JSW
Accordingly, the Court dismissed the appeals, allowing JSW Steel to pursue its pending statutory appeal before the PMLA Appellate Tribunal.
Facts
The dispute originated from JSW Steel’s agreement with Obulapuram Mining Company (OMC) in November 2009 for the supply of 1.5 million metric tonnes of iron ore. After partial supplies were made, OMC failed to deliver further consignments, prompting JSW to seek adjustment of its ₹130 crore advance.
Following a 2011 Supreme Court order directing the CBI to investigate illegal mining, the CBI registered a case against OMC and its affiliates, including Ananthpur Mining Corporation (AMC), owned by G. Janardhan Reddy. Initially, JSW was named as an accused, but the supplementary chargesheet in 2013 dropped JSW, exonerating it.
Despite this, the ED registered ECIR/09/BZ/2012 under PMLA against Reddy and his associates, alleging that ₹33.80 crore remained payable by JSW to AMC and represented “proceeds of crime.” The ED issued Provisional Attachment Orders (PAOs) in 2015 and 2016, attaching JSW’s bank accounts totaling ₹33.80 crore.
JSW challenged these attachments through writ petitions, which were dismissed by the Karnataka High Court, directing the company to pursue remedies before the Appellate Tribunal. While appeals were pending, the ED transferred ₹17.25 crore from JSW’s accounts and initiated prosecution by filing a complaint under Sections 44 and 45(1) of the PMLA.
The Special Court took cognizance and issued summons. The High Court dismissed JSW’s challenge to this cognizance, leading to the present appeals before the Supreme Court.
Issues
- Whether JSW Steel’s prosecution under PMLA could continue when it had been exonerated in the CBI’s predicate offence.
- Whether the alleged withdrawal of funds after provisional attachment constituted a PMLA offence under Section 3.
- Whether the High Court erred in refusing to quash proceedings despite pending appeals before the PMLA Appellate Tribunal.
- Whether cash-credit accounts could be attached under Section 5 of PMLA.
Petitioner’s Arguments
JSW Steel contended that the entire prosecution was founded on conjecture since the CBI had already exonerated the company in the predicate offence. Without a subsisting scheduled offence, there could be no “proceeds of crime” under Section 2(1)(u) of PMLA. Relying on Vijay Madanlal Choudhary v. Union of India [(2023) 12 SCC 1], the company argued that once the predicate offence is closed, PMLA proceedings cannot survive.
The petitioner further submitted that the alleged withdrawals of ₹21.45 crore were made before the communication of PAO 08/2015 and, therefore, could not be treated as violation. Moreover, withdrawals made during a stay order of the Karnataka High Court were lawful transactions, lacking any criminal intent.
JSW also argued that cash-credit accounts cannot be attached since they represent overdraft facilities and not actual property, relying on the Bombay High Court’s decision in Skytech Rolling Mill Pvt. Ltd. v. Joint Commissioner of State Tax (2025).
Further, it was argued that the continuation of prosecution while appeals against the attachment orders were pending before the Appellate Tribunal amounted to a parallel adjudication in contravention of the statutory process.
To support quashing under Article 136, the petitioners cited R.P. Kapur v. State of Punjab (AIR 1960 SC 866) and State of Haryana v. Bhajan Lal (1992 Supp (1) SCC 335), arguing that the allegations, even if taken at face value, did not constitute an offence under PMLA.
Respondent’s Arguments
The Enforcement Directorate opposed the appeal, asserting that the case revealed a continuing offence of money laundering under Section 3 PMLA. It was submitted that the CBI investigation had uncovered illegal extraction and sale of 24 lakh metric tonnes of iron ore worth ₹480 crore, including ₹118.13 crore supplied to JSW, making JSW’s payments part of the tainted chain.
The ED contended that ₹33.80 crore payable by JSW to AMC constituted “proceeds of crime,” as the amount originated from illegal mining activity. Provisional Attachment Orders in 2015 and 2016 were duly issued and confirmed by the Adjudicating Authority in April 2021.
The ED accused JSW of colluding with bank officials to frustrate the attachments by prematurely withdrawing funds from accounts under lien. Documentary evidence—including emails from Vijaya Bank and Bank of Baroda—allegedly proved that liens were removed despite explicit directions from the ED.
It was further submitted that bank accounts qualify as “property” under Section 2(1)(v) of the PMLA, as affirmed in State of Maharashtra v. Tapas D. Neogy [(1999) 7 SCC 685]. Thus, the withdrawal of attached funds amounted to possession, concealment, and use of proceeds of crime.
The ED urged the Court not to exercise extraordinary jurisdiction to quash proceedings, given that the Appellate Tribunal was already seized of the matter, and the statutory process should be allowed to continue.
Analysis of the Law
The Court analyzed the scheme of the PMLA, emphasizing that it is a self-contained statute providing a complete adjudicatory framework. Section 5 authorizes provisional attachment, Section 8 mandates confirmation by the Adjudicating Authority, and Section 26 provides an appeal to the Appellate Tribunal.
Referring to Union of India v. Guwahati Carbon Ltd. [(2012) 11 SCC 651], the Court reiterated that constitutional jurisdiction should not be invoked when an efficacious statutory remedy exists, except in cases of patent illegality or jurisdictional error.
The Bench also considered the nature of the alleged offence under Section 3, clarifying that mere possession of attached property does not automatically constitute money laundering unless it is demonstrated that the accused projected the proceeds as untainted property.
Precedent Analysis
- Vijay Madanlal Choudhary v. Union of India (2023) 12 SCC 1 — Established that PMLA proceedings cannot continue in absence of a live predicate offence. However, the Court distinguished this case since the ED complaint here was based on independent acts of withdrawal from attached accounts.
- State of Maharashtra v. Tapas D. Neogy (1999) 7 SCC 685 — Recognized bank accounts as “property” capable of attachment under PMLA.
- Union of India v. Guwahati Carbon Ltd. (2012) 11 SCC 651 — Held that writ or appellate jurisdiction should not be exercised when statutory remedies are available.
- R.P. Kapur v. State of Punjab (1960 AIR SC 866) and Bhajan Lal (1992 Supp (1) SCC 335) — Relied upon for the limited principle that proceedings can be quashed only when allegations fail to disclose an offence. The Court found that allegations here did disclose one.
- Skytech Rolling Mill Pvt. Ltd. v. Joint Commissioner of State Tax (2025) — Cited to argue cash-credit accounts are not attachable, but the Court declined to apply this reasoning to PMLA context.
Court’s Reasoning
The Court found that JSW Steel’s appeals were premature, as the company had already availed its statutory appellate remedy under Section 26 PMLA. The Court emphasized that judicial interference at this stage would disrupt the statutory process:
“The appropriate course would be to permit the statutory process to run its route to reach its logical conclusion.”
It was observed that the ECIR did not name JSW or its officers as accused, and the CBI had dropped the company from its chargesheet. However, the ED’s complaint was confined to the specific withdrawal of attached funds, which required factual adjudication by the Tribunal rather than constitutional interference.
The Court further clarified that the ED’s apprehension that the entire account balance represented proceeds of crime was misplaced, as payments were made through regular banking channels and duly recorded in accounts. Determining whether the disputed ₹33.80 crore qualified as “proceeds of crime” required fact-based evaluation by the Tribunal, not by the Supreme Court in appellate jurisdiction.
Conclusion
The Supreme Court dismissed JSW Steel’s appeals, declining to quash the cognizance order or halt ED proceedings. It directed that the appellants may continue their pending appeal before the PMLA Appellate Tribunal, which should decide the matter uninfluenced by the Court’s observations.
The Court concluded that while the allegations were confined to ₹33.80 crore, no criminal liability was imposed beyond the statutory process. There was, therefore, no ground for extraordinary interference under Article 136.
“PMLA being a self-contained code, courts must allow its internal mechanisms to function without premature judicial interference.”
Implications
This judgment reaffirms the principle of judicial restraint in PMLA proceedings. It underscores that the Appellate Tribunal is the primary forum for resolving factual disputes relating to attachment and proceeds of crime. The ruling also delineates the scope of “proceeds of crime,” distinguishing between legitimate business transactions and illicit gains.
By emphasizing the limited scope of judicial intervention, the decision strengthens the procedural integrity of the PMLA framework and curbs multiplicity of parallel proceedings before constitutional courts.
FAQs
1. Can PMLA proceedings continue if the accused is exonerated in the predicate offence?
Generally, no. However, if independent acts of laundering or possession are alleged post-exoneration, proceedings may still continue subject to Tribunal adjudication.
2. Are bank accounts and cash-credit facilities attachable under PMLA?
Yes. Bank accounts qualify as “property” under Section 2(1)(v), as held in Tapas D. Neogy. However, each attachment must be justified by specific evidence.
3. Can High Courts or Supreme Court quash ED proceedings when a PMLA appeal is pending?
Ordinarily no. Courts avoid interference when an effective statutory remedy exists before the PMLA Appellate Tribunal.