SC upholds order faulting ED for mala-fide probe, waives fine

MUMBAI: The Supreme Court has dismissed a special leave petition filed by the Enforcement Directorate (ED), challenging a Bombay high court order from January this year that faulted the agency for launching a probe into a contractual dispute with “mala-fide intentions”. The court has, however, waived off the ₹1 lakh fine imposed on the agency.

The ED’s plea was heard by the Supreme Court on Tuesday and the order was passed on the same day. “We find no reason to interfere with the impugned order passed by the high court...However, the cost imposed by the high court on the petitioner before us is made easy. The special leave petitions are accordingly dismissed,” the court said.

The high court had passed the order while hearing a plea filed by developers Rakesh Jain and his son Akshay Jain. The Jains had challenged the special PMLA court’s order dated August 8, 2014, which took cognisance of the charge-sheet filed by ED against them and issued processes against them.

The Jains argued that no offence was made out against them under sections 406 (criminal breach of trust), 418 (cheating with knowledge that wrongful loss would be caused), 420 (cheating) and 120B (criminal conspiracy) of the Indian Penal Code, 1860 and therefore the ED could not have initiated the money laundering probe.

Responding to the plea filed by the Jains, the high court had held that there was no element of cheating or criminal breach of trust in the entire episode. “The ED, for reasons best known to it, has supported the complainant’s false case without application of mind or without going through the record,” the court had said while striking down the criminal proceedings and imposing a fine of ₹1 lakh each on the ED and the complainant.

The operationalisation of the order, however, was stayed for four weeks, following a request made on behalf of the ED, so that the decision could be challenged in the apex court.

The money laundering case stems from a first information report (FIR) registered at the Vile Parle police station based on a complaint by Gul Achhra, a representative of GK Solutions Private Limited.

In 2007, GK Solutions had purchased two floors in Ashok Enclave in Malad West from Kamla Developers, which is owned by the Jains, and engaged Sadguru Enterprises for renovating the space into a hotel/ guest house for a consideration of ₹4.57 crore, payable in three instalments subject to completion of work.

Accordingly, Sadguru started the work and GK Solutions paid the first two instalments, but deducted ₹30.67 lakh from the third instalment, purportedly on account of some incomplete work.

As disputes started between the parties, Achhra from GK Solutions approached the Malad police station and the Economic Offences Wing (EOW) of Mumbai police with a complaint against the Jains, but was told the matter was civil in nature and no criminal conspiracy was involved in it. Achhra then approached the Vile Parle magistrate’s court and obtained an order directing the police to register an FIR and investigate the allegations.

A year later, the Vile Parle police filed a charge-sheet against the Jains after which ED launched a money laundering probe, showing the entire contractual amount of ₹4.57 crore as proceeds of crime.