The Bombay High Court has reaffirmed that ‘proceeds of crime’ under Section 2(u) PMLA must derive from criminal activity relating to a scheduled offence, a bare commercial banking transaction cannot by itself constitute proceeds of crime. The Court found no established link between the disputed contractual receipts and YES Bank’s 2018 disbursements to DHFL, and no basis to continue attaching the properties.
The Court noted that Rs. 67.85 crores received under Debenture Subscription Agreements executed in 2014–15 could not be treated as proceeds of crime merely because repayment fell after YES Bank’s loan disbursement to DHFL on 12 April 2018. The Court found ED’s calculation ‘entirely baseless’ and the temporal link absent. Further, consultancy payments of Rs. 47.52 crore disbursed by DHFL before 12 April 2018 could not be linked to proceeds of crime originating from that date’s disbursement.
The High Court also said that balance payment for a dairy-business sale (agreement dated 2016, first instalment paid January 2016) could not become proceeds of crime simply because the final 50% was received in February 2019, as each transaction was independent with no nexus. The Court rejected ED’s characterisation of DHFL’s Rs. 600 crore loan to DOIT Urban Ventures as a ‘kickback’, holding that a loan transaction cannot prima facie be termed a kickback without cogent material, and commercial wisdom of the lender cannot be questioned on bald pleadings.
Briefly, Bombay High Court heard cross-appeals against the Appellate Tribunal’s order, which continued attachment of two properties belonging to Samit Realty and Gauri Bhosale to the extent of Rs. 25 crores. Avinash Bhosale and others challenged the continued attachment, while the Directorate of Enforcement (ED) challenged the release of other attached properties. The proceedings arose from ED’s investigation into alleged money laundering involving YES Bank and DHFL. ED alleged that Rs. 164.64 crore received by Bhosale or his entities through debenture-related payments, consultancy arrangements and an ABIL Dairy transaction constituted proceeds of crime.
The Division Bench comprising Justice A. S. Gadkari and Justice Kamal Khata found that ED had not established a link between the disputed receipts and the monies disbursed by YES Bank in 2018. The Court rejected ED’s basis for treating Rs. 67.85 crores received under the Debenture Subscription Agreements as proceeds of crime, noting that the repayments arose from agreements executed in 2014.
The Court held that consultancy payments received before the loan disbursement on 12 April 2018 could not be linked to those alleged proceeds of crime. The Court also rejected linking the balance payment for the dairy-business sale to proceeds of crime merely because it was paid after that date. It found the transactions independent and no nexus between them.
The Court further observed that the banking transactions and subsequent payments to legal entities could not, on the material before it, be treated as illegal. It rejected ED’s allegation that DHFL’s Rs. 600 crore loan to DOIT Urban Ventures was a kickback, finding no cogent material to substantiate that allegation even prima facie.
