Madhya Pradesh High Court
Asif Hanif Thara vs The State Of Madhya Pradesh on 28 January, 2026
Author: Milind Ramesh Phadke
Bench: Milind Ramesh Phadke
NEUTRAL CITATION NO. 2026:MPHC-GWL:2035
1 MCRC-43784-2025
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE
MISC. CRIMINAL CASE No. 43784 of 2025
ASIF HANIF THARA
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Siddharth Agarwal - Senior Advocate alongwith Shri Ankur
Maheshwari -Advocate and Ms. Smiriti Sinha - Advocate, Shri Karan
Dhalla- Advocate for petitioner.
Shri Sunil Kumar Jain - Additional Solicitor General through VC and
Shri Praveen Kumar Newaskar- Deputy Solicitor General for respondent
No.2.
Shri Samar Ghuraiya - Public Prosecutor for respondent No.1/State.
Reserved on : 16.01.2025
Pronounced on : 28.01.2026
ORDER
This petition under Section 528 of BNSS/482 of Cr.P.C. has been filed by the petitioner seeking quashment of FIR bearing crime No. 421/2023 dated 16.06.2023 registered at Police Station Morar District Gwalior for offence punishable under Sections 120B, 417, 420 of IPC against the petitioner and the proceedings emanating therefrom.
2. As per prosecution case, the complainant, Kuldeep Bhamu, son of Premsingh Bhamu, Assistant Enforcement Officer, Enforcement Directorate, S.T.F. Branch, Government of India, New Delhi, appeared in person at Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 2 MCRC-43784-2025 Police Station Murar, District Gwalior and submitted an application seeking registration of a criminal case against Mr. Asif Hanif Thara, Hanif Qadir Thara, and the proprietors of the benami firms allegedly of Asif Hanif Thara, namely Putta Swamy, S. Murthy, Noor Ahmad, Shankar Rao, Lokesh, Irfan Pasha, Aleem Ulla Sharif, Kiran Kumar, Amjad Pasha, and others under Sections 120-B, 417, and 420 of the Indian Penal Code, 1860, and other relevant laws. In this connection, it was submitted that during an investigation conducted by the Special Task Force (STF) of the Enforcement Directorate (ED), Government of India, under the Foreign Exchange Management Act (FEMA), it was revealed that Asif Hanif Thara, a resident of Bengaluru, operating through M/s Unique Traders, was importing seeds from China and Turkey at undervalued prices. He was obtaining import authorizations (import licenses) from the Central Bureau of Narcotics (CBN), Gwalior, for the import of poppy seeds, in gross violation of the licensing provisions prescribed by the Revenue Department, Ministry of Finance, Government of India, by establishing multiple proprietorship firms in the names of his employees. The proprietor of M/s Unique Traders is Hanif Qadir Thara, the father of Asif Hanif Thara, and Asif Hanif Thara is authorized to sign and act on behalf of the said firm in the course of business and is responsible for managing and controlling all commercial and financial operations of the firm. During the investigation, it was further revealed that Asif Hanif Thara had established the following proprietorship firms in the names of his employees, all of which were being operated from the same address, the ownership of which vests with Asif Hanif Thara himself.
Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 3 MCRC-43784-2025 Sr. Name of Date Relationship Beneficial Proprietor Address No. entity of Creation Owner Putta Swamy is the Shop No. S-1, 2nd Floor, No. 49, Om Putta employee of M/s Unik 1. 16/07/2014 Old No. 298, Old Tharagupet, Traders Swamy Traders. Asif Hanif Bangalore-560053714011843 Thara Murthy is also an Thunga Shop No. S-5, No. 49, Old No. employee of M/s Unik 2. Trading 16/07/2014 S. Murthy 298, 2nd Floor, Old Tharagupet, Traders.Asif Hanif Company Bangalore-560053714011851S Thara Shop No. S-7, 2nd Floor, No. 49, Noor Ahmad is the KGN Noor 3. 16/07/2014 Old No. 298, Old Tharagupet, domestic helper at Asifs Traders Ahmad Bangalore-56005371401183 residence. Sankar Rao is also an Shop No. S-10, 2nd Floor, No. Shree Sankar employee of M/s Unik 4. 16/07/2014 49, Old No. 298, Old Tharagupet, Associates Rao Traders. Asif Hanif Bangalore-560053714011827 Thara Shop No. F-2, 1st Floor, No 49, Lokesh looks after the Royal 5. 21/09/2020 Lokesh Old No. 298, Old Tharagupet, maintenance work at Traders Bangalore-560053AJSPL6898 Asifs residence Shop No. S-2, 2nd Floor, No. 49, Star Irfan Irfan Pasha is also Asifs 6. 21/09/2020 Old No. 298, Old Tharagupet, Traders Pasha family driver Bangalore-560053ACEPI9425P Aleem Shop No. S-8 2nd Floor, No. 49, JBS Aleem Ulla Shareef is 7. 24/09/2020 Ulla Old No. 298, Old Tharagupet, Traders Asifs family driver. Shareef Bangalore-560053BTRPA4957M Shop No. S-9, 2nd Floor, No. 49, Kiran Kumar is also a AK Kiran 8. 28/08/2021 Old No. 298, Old Tharagupet, domestic helper at Asifs Traders Kumar Bangalore-560053CNSPM1173M residence. Shop No. S-4, 2nd Floor, No. 49, Sunlight Amjad Amjad Pasha is also 9. 22/11/2021 Old No. 298, Old Tharagupet, Traders Pasha Asifs family driver. Bangalore- 560053BBXPP8318M
3. In this regard, as per Notification No. 17/2015-20 dated 29.07.2016 issued by the Ministry of Commerce and Industry, the import of poppy seeds was permitted subject to the following conditions: (a) Import of poppy seeds Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 4 MCRC-43784-2025 shall be permitted only from Australia, Austria, France, China, Hungary, the Netherlands, Poland, Slovakia, Spain, Turkey, the Czech Republic, the UK, the Democratic People's Republic of Korea, Macedonia, Germany, and Ukraine; (b) The importer shall submit a suitable certificate from the competent authority of the exporting country certifying that the opium poppy has been legally cultivated in that country; and (c) All import contracts for this item shall be mandatorily registered with the Narcotics Commissioner, Gwalior, prior to import, in accordance with the guidelines issued by the Department of Revenue. In pursuance of condition (c) of the above notification, the Department of Revenue, Ministry of Finance, formulated guidelines for registration of sale contracts for the import of poppy seeds. The Central Bureau of Narcotics (CBN), Gwalior implements the guidelines and directions issued by the Ministry from time to time for registration of sale contracts for the import of poppy seeds. As per paragraph 1 of the guidelines issued by the Department of Revenue, Ministry of Finance vide F.No. N-22012/2/2018-NC-1 dated 25.10.2021 for registration of sale contracts for import of poppy seeds from China, the Narcotics Commissioner, Gwalior has been authorized to fix the country cap for import of poppy seeds. Further, as per sub-paragraph (iv) of paragraph (II) of the said guidelines, each importer could submit only one application during a financial year for obtaining import authorization. Similarly, paragraph 1 of the guidelines issued vide F.No. N-12019/06/2017-NC-1 dated 25.06.2019 for import of poppy seeds from Turkey stipulates that, for the purpose of import of poppy seeds from Turkey, the country cap shall be approved by the Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 5 MCRC-43784-2025 Department of Revenue on the recommendation of a committee consisting of the Narcotics Commissioner, a representative of the DGFT, and a representative of the Department of Revenue, Ministry of Finance. Paragraph (II)(b) of the said guidelines further provides that the genuineness of the existence of the importer shall be verified and such verification may be carried out by the Narcotics Commissioner on the basis of documents submitted along with the application, however, if the importer has not registered any sales contract for import of poppy seeds during the preceding three financial years, the genuineness of the importer's existence shall be verified through physical verification. In the complaint, it is alleged that Mr. Asif Hanif Thara had established multiple proprietorship firms in the names of his employees and had imported poppy seeds in the names of such entities operating from the same address in Bengaluru (as listed in Table No. 1). The imported poppy seeds were either purchased by M/s Unique Traders or, on certain occasions, were sold directly to domestic buyers. Thus, Mr. Asif Hanif Thara, in violation of the above-mentioned guidelines issued by the Department of Revenue, Government of India, created benami entities in the names of his employees in order to obtain the maximum possible share of the country quota for import of poppy seeds.
4. Further, it has been observed that one such benami entity, namely M/s Thunga Trading Company, obtained registration of its sale contract with CBN, Gwalior for import of poppy seeds from Turkey during the financial year 2015-16. Thereafter, it did not register any sales contract during the financial years 2016-17, 2017-18, and 2018-19. After a gap of three financial Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 6 MCRC-43784-2025 years, it again obtained registration of a sale contract for import of poppy seeds from Turkey with CBN, Gwalior during the financial year 2019-20. As per the prevailing guidelines, it was mandatory for CBN, Gwalior to verify the genuineness of the importer's existence through physical verification, however, despite being a benami entity, CBN, Gwalior registered the sale contract of M/s Thunga Trading Company and, in gross violation of the existing guidelines, permitted imports of 450 metric tonnes and 324 metric tonnes during the years 2019 and 2022 respectively. A study of the imports of poppy seeds made during the years 2018, 2019, and 2022 reveals that during this period, M/s Unique Traders could import only 1,267.9 metric tonnes of poppy seeds valued at Rs. 23.26 crore, however, through his benami entities, Mr. Asif Hanif Thara imported an additional quantity of 6,541.4 metric tonnes of poppy seeds valued at Rs. 136.22 crore during the same period. Mr. Asif Hanif Thara, with malafide intent, created multiple entities in the names of his employees and fraudulently obtained multiple licenses, resulting in an increase in his share of poppy seed imports every year and wrongful gain for himself by circumventing the guidelines issued by the Government of India. By establishing multiple benami entities, Mr. Asif Hanif Thara fraudulently evaded taxes, duties, and other statutory requirements. A proprietorship firm is treated as the same legal entity as its proprietor, and the proprietor is responsible for all acts of the firm. If a person opens a proprietorship firm in the name of another person, it may be viewed as an attempt to conceal the identity of the true controller of the proprietorship firm and to carry out fraudulent activities, including Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 7 MCRC-43784-2025 fraudulently obtaining import licenses. During preliminary investigation, examination of the prior financial status, business history, and modus operandi of the proprietors listed in the said table revealed from their Income Tax Returns (ITRs) that all such individuals were filing NIL ITRs or were not filing ITRs prior to registration of the proprietorship firms, and their personal status was found to be that of employees of Asif Hanif Thara rather than independent proprietors. After registration of the firms, their bank accounts suddenly reflected transactions involving crores of rupees, and corresponding income was shown in their ITRs, clearly indicating that these firms were benami entities of Asif Hanif Thara and that he was the sole beneficiary of all such firms.
5. It is further alleged that CBN, Gwalior has been entrusted with the responsibility of ensuring compliance with the guidelines issued by the Ministry of Finance, Government of India, relating to the import of poppy seeds, and for this purpose, it has been vested with the powers to issue import authorizations (import licenses). The Department of Revenue, Ministry of Finance, vide F. No. 22012/2/2018-NC-1 dated 25.10.2021 clearly stipulated in paragraph (iv) of paragraph (II) of the guidelines issued for the import of poppy seeds from China that only one authorization (license) is to be issued in favour of any importer. Thus, the intent behind the import authorization (import license) system is to ensure that no single importer is granted more than one authorization by CBN, Gwalior. Further, the guidelines issued by the Department of Revenue, Ministry of Finance, on 25.06.2019 for the import of poppy seeds from Turkey, under paragraph (II) Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 8 MCRC-43784-2025
(b) of F.N., clearly mandate that the existence and genuineness of the importer must be verified. Such verification may be carried out by the Narcotics Commissioner on the basis of the documents submitted along with the application. However, if the importer has not registered any sale contract for the import of poppy seeds during the preceding three financial years, the verification of the importer's existence is required to be conducted through physical verification. Therefore, after the issuance of the said guidelines, it was mandatory for CBN, Gwalior to carry out physical verification of M/s Thunga Trading Company before registering its sale contract. Needless to say, CBN, Gwalior was required to conduct due diligence with respect to applicants seeking import authorization (import license). However, the inquiry conducted by this office reveals that CBN, Gwalior failed to exercise proper due diligence and, in collusion with Shri Asif Hanif Thara, granted import authorizations (import licenses) to all nine benami entities beneficially owned by Shri Asif Hanif Thara, despite the fact that all nine benami entities were operating from the same address in Bengaluru. By granting authorizations to nine benami entities controlled by Shri Asif Hanif Thara, CBN, Gwalior, in complete disregard of the responsibility entrusted to it and in gross violation of the guidelines issued by the Department of Revenue, Ministry of Finance, Government of India, conferred undue benefit upon Shri Asif Hanif Thara.
6. It was also averred in the complaint that an officer of Tamilnad Mercantile Bank was continuously providing information to Mr. Asif Hanif Thara whenever details of the bank accounts of the entities involved in the Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 9 MCRC-43784-2025 ongoing investigation were sought from its Bengaluru branch. This clearly establishes that Asif Hanif Thara was executing this racket with the active assistance of bank employees and officials of CBN, Gwalior. Opening proprietorship firms in the names of drivers, servants, or other individuals and obtaining import licenses in the names of such firms in order to circumvent the prescribed quota for import of goods constitutes a serious offence involving misrepresentation, cheating, circumvention of the prescribed quota, and money laundering. In view of the above, Mr. Asif Hanif Thara, along with officials of CBN, Gwalior, Tamilnad Mercantile Bank, and others, have prima facie committed cognizable offences under Sections 120B, 417, and 420 of the Indian Penal Code, 1860, by fraudulently obtaining import authorizations (import licenses) in the names of benami entities through deception of government authorities, misleading officials, concealing material facts from them, and thereby causing wrongful loss to the government exchequer and securing the maximum share of the country quota. Thus, Asif Hanif Thara, Hanif Qadir Thara, and the proprietors of the benami firms of Asif Hanif Thara as mentioned in the above table--namely Putta Swamy, S. Murthy, Noor Ahmad, Shankar Rao, Lokesh, Irfan Pasha, Aleem Ulla Sharif, Kiran Kumar, Amjad Pasha, and others have, in conspiracy and with dishonest intention, violated the aforesaid guidelines of the Ministry of Finance, Government of India, obtained undue advantage, and committed criminal acts. With the aforesaid allegations contained in the complaint, present FIR for offences under Sections 120B, 417, and 420 of the Indian Penal Code, 1860, was registered against Mr. Asif Hanif Thara, Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 10 MCRC-43784-2025 Hanif Qadir Thara, and the proprietors of the benami firms of Asif Hanif Thara-Putta Swamy, S. Murthy, Noor Ahmad, Shankar Rao, Lokesh, Irfan Pasha, Aleem Ulla Sharif, Kiran Kumar, Amjad Pasha, and others.
ARGUMENTS
7. Learned Senior Counsel for the petitioner submits that the petitioner is a businessman aged about 50 years and a permanent resident of Bengaluru and is an authorised signatory of M/s Unik Traders, a properietorship firm under the sole properietorship of petitioner's father engaged inter alia in the import and export of spices and import and domestic trade of poppy seeds having a substantial business turnover and is regularly discharging its tax and statutory obligations to the Government. Under the directions and guidelines issued by various Government departments, poppy seeds can be imported only from specified countries after registration of sales contracts with the Narcotics Commissioner, Gwalior. Master Directions were issued by the Ministry of Commerce and Industry vide Notification No. 17/2015-20 dated 29.07.2016, permitting the import of poppy seeds from specified countries, including Turkey and China. As per condition No. 3(c) of the said notification, all import contracts were required to be compulsorily registered with the Narcotics Commissioner, Gwalior prior to import, in accordance with the guidelines issued by the Department of Revenue and all import contracts of M/s Unik Traders were duly registered in compliance with the said requirement.
8. It is further submitted that as per the guidelines for registration of sales contracts for import of poppy seeds from China dated 25.10.2021, each Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 11 MCRC-43784-2025 importer having a specific Importer-Exporter Code was permitted to submit only one application during a financial year, clearly indicating the total quantity sought to be registered. In the event of submission of more than one application by an importer with the same IEC, all such applications were liable to be rejected. Thus, each importer could submit only a single application in a financial year for obtaining import authorisation.
9. It is further submitted that vide Public Notice No. PS-1/2022 dated 07.01.2022, issued by the Central Bureau of Narcotics, guidelines were framed for the import of poppy seeds into India from China. Under the said guidelines, the country cap was fixed by the Chinese Government and the names of approved sellers were also specified. Allocation was to be made among applicants in the prescribed manner. In the case of China, only a country cap was prescribed and not a per-importer quantity cap, meaning thereby that even a single applicant could have imported the entire quantity of 7,700 MTs. If the country cap was not exhausted, applicants were permitted to import the quantity sought by them. Only if the country cap was met and full allocation was not possible would each importer be restricted to a maximum of 180 MTs or a lesser quantity. In the relevant year, the country cap for China was 7,700 MTs, out of which only 7,694 MTs were allotted, leaving 6 MTs unutilised. During the said period, M/s Unik Traders, apart from importing directly, also purchased poppy seeds from nine domestic entities who had imported the same from Yumurtacilar Tarim Ltd., Turkey, and Gansu Puankang Pharmaceutical Co. Ltd., China. On 01.10.2022, the Enforcement Directorate, STF Branch, conducted searches at the office and Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 12 MCRC-43784-2025 residence of the Petitioner alleging violations of the provisions of FEMA. Thereafter, the Petitioner was served with a summons dated 11.10.2022 and was asked to join the investigation. His statement was recorded under Section 37 of FEMA. It was during the course of the inquiry, the ED formed an opinion that the Petitioner was associated with the functioning of M/s Unik Traders and had allegedly set up nine entities in the names of employees and associates for the import of poppy seeds, treating them as benamidars of the Petitioner and/or M/s Unik Traders. On the basis of statements recorded under Section 37 of FEMA, the ED submitted a complaint dated 16.05.2023 to Police Station Murar, Gwalior, which resulted in the registration of FIR No. 421/2023 dated 16.06.2023 under Sections 120-B, 417 and 420 IPC against the Petitioner, his father and the said nine individuals. No preliminary enquiry whatsoever was conducted by the police prior to registration of the FIR.
10. It is submitted that a perusal of the list of permitted imports from China clearly demonstrates that against the prescribed country cap of 7,700 MTs for FY 2021-22, only 7,694 MTs were imported. Consequently, it cannot be allegedly said that imports through the alleged "benami" entities deprived any third party of its legitimate share or resulted in any prejudice.
11. It is further submitted that statements recorded under Section 37 of FEMA can be utilised only for the purposes of that Act and cannot be relied upon for proceedings under any other statute. The use of such statements for registration of the impugned FIR is impermissible, particularly in view of the absence of safeguards akin to those under Section 164 CrPC. Before any Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 13 MCRC-43784-2025 such statement is relied upon, it must be scrutinised to ensure that it was not obtained by inducement, coercion, threat or promise and was voluntarily made, thus the registration of the FIR suffers from a fundamental jurisdictional defect as it rests entirely on material and statements collected under Section 37 of FEMA as FEMA does not contain any provision authorising inter-agency sharing of such material for initiating criminal proceedings. The FIR is therefore liable to be quashed, as it emanates solely from a complaint dated 16.05.2023 based on the Petitioner's FEMA statement, which cannot be used under any other law. Reliance is placed on the judgment of the Hon'ble Supreme Court in K.T.M.S. Mohd. v. Union of India (1992) 3 SCC 178.
12. It is further submitted that M/s Thunga Trading had duly executed and registered a Sales Agreement with a Turkish entity during the financial year 2014-2015. The allegations contained in the FIR, however, pertain to the financial year 2022-2023 and do not relate to the said transaction of 2014-2015. It is further submitted that M/s Thunga Trading has duly discharged all applicable tax liabilities, and therefore no loss whatsoever has been caused to the public exchequer. It is settled law that, for an offence under Sections 417 and 420 of the IPC to be attracted, the intention to cheat must exist from the very inception of the transaction and not be formed subsequently. In the absence of any such dishonest intention at the inception, the essential ingredients of Sections 417 and 420 IPC are not made out, and consequently, the said provisions are not attracted in the present case.
13. It is an admitted position, even as per the ED, that the police were Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 14 MCRC-43784-2025 required to independently examine the matter and exercise their statutory discretion and it could not have mechanically acted upon the complaint of the ED. Also there is no material on record indicating any independent application of mind by the police prior to registration of the FIR. It is further submitted that the reliance placed by the ED on the decision of the Hon'ble Delhi High Court in Manideep Mago v. Union of India & Ors. W.P.(CRL) 2241/2024 vide decision dated 15.05.2025 is wholly misplaced as in that case, the Court distinguished K.T.M.S. Mohd. on the ground that the offences alleged were based not merely on statements under Section 37 of FEMA but also on independent material recovered during search and seizure and in the present case, the counter-affidavit is conspicuously silent on any seized material, as admittedly no seizure has taken place and the sole basis of the FIR is the statement recorded under Section 37(3) of FEMA. Moreover, the said judgment is presently under challenge before the Hon'ble Supreme Court in SLP (Cri.) No. 8472 of 2025 and SLP (Cri.) No. 11946 of 2025, in which notice has been issued.
14. It is settled law that it is not the sections invoked in an FIR but the essence of the allegations which are relevant. Where the allegations in truth and substance disclose another offence but the offence is mis-described to get over a judicial hurdle, Courts have intervened and categorically held that the jurisdictional defect cannot be cured merely by putting a wrong label on the allegations. Reliance is placed on the judgment of Hon'ble Apex Court rendered in the case of Basir-ul-Huq Vs. State of West Bengal (1953)1 SCC 637. Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 15 MCRC-43784-2025
15. It is further submitted that the gravamen of the impugned FIR is that the petitioner has used 9 entities as his benamidars in order to get over restrictions regarding quantity allowed to be imported. At the outset, it is imperative to note that there is no cogent basis for this allegation as it is the admitted case of the prosecution that all the 9 entities are run by district proprietors, have separate IEC codes, separate import contracts.
16. It is further submitted that the FIR alleges the aforesaid entities to be benami solely on the basis of their commercial reliance upon the petitioner and the purported fact that they operate from the same address. However, it is pointed out that all nine entities function from separate and distinct shops, albeit situated within the same commercial complex. Mere co- location within a common complex cannot, by itself, give rise to an inference of benami ownership. It is further imperative to note that even from the list of importers from China relied upon by the investigating agencies, several importers share common addresses, clearly indicating that they too are related or co-located entities. By way of illustration, entities listed at Serial Nos. 11-14, 16-17, 21, and 24 are all registered at the same address. Similarly, entities at Serial Nos. 15, 17, 30, 33, and 34 operate from another common address. Entities at Serial Nos. 31 and 32, as well as Serial Nos. 35 and 36, are likewise registered at their respective common addresses. Significantly, the aforesaid factual position has not been disputed or refuted either by the Police or by the Enforcement Directorate in their counter affidavits, therefore, the reliance placed solely on common address or commercial interdependence, without any material establishing ownership or Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 16 MCRC-43784-2025 control, is therefore wholly misconceived. In this regard, reliance is placed on the judgment of the Hon'ble Supreme Court in Rajiv Kapoor v. Madan Lal Kapoor, reported in (2013) 3 SCC 330 paragraph 30, wherein it has been held that criminal proceedings cannot be permitted to continue on the basis of conjectures or inferences unsupported by cogent material.
17. It is further submitted that, notwithstanding the bald and sweeping averments contained in the impugned FIR, there is not even a whisper of any specific imputation, much less any cogent material, either in the FIR or in the counter-affidavit filed by the Enforcement Directorate, to demonstrate any alleged short-payment of tax or duty or any wrongful loss whatsoever to the Government. Each and every import transaction was duly cleared by the Customs Department in accordance with law, and at no point any proceeding has been initiated against any entity on the ground of deficient payment of tax or customs duty. There is neither any allegation nor any material on record to suggest under-valuation or over-valuation of imports, any shortfall in the payment of statutory levies, or the causation of any loss whatsoever to the Government or to any public or private entity.
18. It is further submitted that it is a settled proposition of law that in the absence of any specific pleading or allegation of misrepresentation, and where no wrongful loss to the public exchequer is either alleged or made out, the continuation of criminal proceedings under Sections 417 and 420 of the Indian Penal Code is wholly unsustainable and liable to be quashed. The essential ingredients of the offences of cheating, namely dishonest intention at the inception and inducement resulting in wrongful gain or loss, are Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 17 MCRC-43784-2025 conspicuously absent in the present case. Reliance in this regard is placed on the judgments of the Hon'ble Supreme Court in Vijay Kumar Ghai & Ors. v. State of West Bengal & Ors., (2022) 7 SCC 124, and Prof. R.K. Vijayasarthy & Anr. v. Sudha Seetharam & Anr., (2019) 16 SCC 739.
19. It is further submitted that even if the allegations are accepted at face value, they at best disclose an offence under Section 53 of the Prohibition of Benami Property Transactions Act, 1988 and under Section 61 of the said Act, offences are expressly declared to be non-cognizable. Thus, where the substance of the allegations discloses only a non-cognizable offence, registration of an FIR and investigation without an order of the Magistrate under Section 155(2) CrPC is illegal and liable to be quashed. In support of aforesaid contention, reliance is placed on State of Haryana v. Bhajan Lal (1992 Supp (1) SCC 335) Para 102(4), Umashankar Yadav v. State of U.P. (Criminal Appeal No. 439 of 2018) Para 17, 25, 30, 31.
20. It is finally submitted that in the present case, the essential ingredients of Sections 417 and 420 IPC are entirely absent. There is no allegation of any false statement, deception or misrepresentation. Each entity possessed a valid Import-Exporter Code issued by the Directorate General of Foreign Trade (DGFT), which has been duly renewed and remains subsisting. Licences granted by the Central Bureau of Narcotics have not been cancelled. There is no allegation of incorrect documentation or false disclosure to any statutory authority and in the absence of any such material, continuation of the criminal proceedings amounts to abuse of process of law. . In view of the aforesaid submissions, it is prayed that the impugned FIR Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 18 MCRC-43784-2025 No. 421/2023 dated 16.06.2023 registered at Police Station Murar, Gwalior, be quashed.
21. On the other hand, learned Additional Solicitor General appearing for respondent No. 2, while placing reliance on the Guidelines for Registration of Sales Contracts for import of poppy seeds from China dated 25.10.2021, submitted that Clause II(iv) clearly mandates that each importer having a specific Importer-Exporter Code (IEC) shall submit only one application indicating the total quantity of poppy seeds sought to be registered, and submission of more than one application by an importer with the same IEC would result in rejection of all such applications. It is contended that the petitioner deliberately circumvented the said guideline by routing imports through nine separate entities in order to secure additional quantities of poppy seeds. As borne out from the FIR, the allegation against the present petitioner is that he in connivance with officials of the Central Bureau of Narcotics, Gwalior, officials of Tamil Nadu Mercantile Bank, and other co-accused, committed cognizable offences by deceiving government authorities and fraudulently obtained import authorisations in the names of benami entities. Such acts prima facie attract offences punishable under Sections 120-B, 417, and 420 of the Indian Penal Code, 1860.
22. It is further alleged that by misleading the authorities, suppressing material facts, and employing benami arrangements, the accused persons caused wrongful loss to the government exchequer and secured an unlawful gain by cornering the maximum permissible share of the national import quota. The FIR discloses that Asif Hanif Thara, Hanif Qadir Thara, the Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 19 MCRC-43784-2025 proprietors of the benami firms, and other co-accused acted in concert with dishonest intention and in furtherance of a criminal conspiracy to violate the guidelines issued by the Ministry of Finance, Government of India, thereby committed serious economic offences.
23. It is well settled that an FIR is not expected to be an encyclopedia containing all minute details of the prosecution case, particularly at the threshold stage. At that stage, the allegations contained in the FIR, read as a whole, should clearly disclose commission of a cognizable offences which in the present case is disclosed, thus, it warrants a thorough investigation. The investigation is presently at a nascent stage, and upon its completion, a charge-sheet shall be filed before the competent trial court. In such circumstances, the present case does not fall within any of the categories carved out by the Hon'ble Supreme Court in State of Haryana v. Bhajan Lal reported in 1992 Supp (1) SCC 335 , as the allegations cannot be said to be absurd, inherently improbable, or purely of a civil nature, nor can it be contended that the FIR does not disclose the commission of any offence. Consequently, the extraordinary jurisdiction of this Court for quashing of the FIR ought not to be exercised.
24. While adverting to paragraphs 7, 8, 9, 10, 11 and 12 of the reply filed by the Enforcement Directorate, it is submitted that the investigation conducted under the provisions of the Prevention of Money Laundering Act (PMLA) has revealed that the funds required for importing poppy seeds in the names of the aforesaid nine firms were arranged by Mr. Asif Hanif Thara through M/s Unik Traders. It has further been established that the imported Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 20 MCRC-43784-2025 poppy seeds were subsequently shown as sales to M/s Unik Traders or, on certain occasions, as direct sales to his domestic buyers. The investigation has thus unearthed that Mr. Asif Hanif Thara deliberately circumvented the guidelines issued by the Department of Revenue, Government of India, by setting up benami entities in the names of his employees and fraudulently obtained import licences with the intent to corner the maximum permissible share of the country quota for the import of poppy seeds. Mr. Asif Hanif Thara emerges as the kingpin and mastermind behind the entire fraudulent scheme of obtaining import authorisations. He had played an active and decisive role in establishing multiple proprietorship firms in the names of his employees with the malafide intention of securing an undue advantage, as the import of poppy seeds is capped at a specified quantity per country. In view of the aforesaid facts and circumstances, there is sufficient material on record at this stage to implicate the present petitioner in the commission of the alleged offences. Consequently, no interference is warranted by this Hon'ble Court to stifle a legitimate prosecution.
25. It is further submitted that so far as the submission of learned counsel for the petitioner that on the basis of statement of petitioner recorded under Section 37 of FEMA, FIR cannot be registered, the Hon'ble Delhi High Court in Manideep Mago (supra) while nagating the said contention has held as under:-
To be absolutely clear, the offences of criminal conspiracy, cheating,forgery and related offences ofwhich the petitioners are accused under the IPC, do not get obliterated or subsumed or cease to be penaloffences, merely because they were the underlying actions for theinfractions of foreign exchange regulations. Pertinently, the penaloffences were complete in Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 21 MCRC-43784-2025 themselves before the infraction of the provisions of FEMA took place.
Upon considering the foregoing submission, this court is of the view,thatfor one, a reading of the subject FIR would show that it is not basedsolely on Manideep Mago's statement recorded under section37 FEMAbut is also founded on the recoveries made by the ED in the course ofits search and seizure operation, including the recovery of invoices,notarial stamps and other material, which was the basis of theallegations offorgery and fabrication under the provisions of the IPC In the present matter, information gathered during the course of investigation under the Foreign Exchange Management Act, 1999 revealed the commission of offences by the petitioner under the Indian Penal Code, 1860. Accordingly, the said information was shared with the Police, who, upon due examination, proceeded to register an FIR. It is not in dispute that the aforesaid judgment is presently under challenge before the Hon'ble Supreme Court in SLP (Cri.) No. 8472 of 2025 and SLP (Cri.) No. 11946 of 2025. However, although notice has been issued in the said proceedings, there is no stay operating against the impugned judgment but it has a pursuasive value.
26. Learned counsel for the State has adopted the submissions advanced by the learned Additional Solicitor General appearing for respondent No. 2. He has placed reliance upon the judgment of the Hon'ble Apex Court in Muskan v. Ishaan Khan (Sataniya), Criminal Appeal No. 4752 of 2025, wherein the Hon'ble Supreme Court of India has categorically held that, at the stage of quashing, the Court ought not to conduct a mini-trial and that the power of quashing an FIR must be exercised sparingly and only in the rarest of rare cases. The Hon'ble Supreme Court has further held that the Courts cannot embark upon an enquiry into the reliability or genuineness of Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 22 MCRC-43784-2025 the allegations made in the FIR or complaint at this preliminary stage. In view of the aforesaid settled legal position, it is prayed that the present petition be dismissed.
27. Confronted with the last submissions advanced by the learned Additional Solicitor General for respondent No. 2 regarding investigation conducted under PMLA, learned Senior Counsel for the petitioner submitted that the entire action proceeds on a hypothetical offence which has, in fact, never been committed. The complaint initially furnished to the police was founded solely on a statement recorded under Section 37 of the FEMA. However, in an attempt to retrospectively justify the registration of the FIR, the learned Additional Solicitor General has relied upon statements subsequently recorded under Section 50 of the PMLA, 2002 statements which came into existence much later in point of time. Such subsequent material cannot be pressed into service to validate an action that had already been taken, namely, the registration of the FIR. Learned Senior Counsel placed to sustantiate his arguments reliance on the judgment of the High Court of Judicature at Madras in R.K.M. Powergen Private Ltd. v. The Assistant Director / Officer on Special Duty & Anr. , W.P. No. 24700 of 2021, decided on 18.06.2022 wherein in Para 37, it was held as under:-
37. We may demonstrate the fallacy in the stand of the Enforcement Directorate with the following hypothetical example.
Let us assume for a moment that during investigation under the PML Act, the officers of the Enforcement Directorate search the house of an accused. During the search, they discover a dead body buried in the house and suspect the commission of an offence under Section 302 IPC. Can they be permitted to record the statement of the accused qua discovery of the body in the house? Such a statement, if it is confessional in nature, would become admissible and relevant in the murder trial as it has been given to a Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 23 MCRC-43784-2025 non-police officer. Hence, their duty is to inform the police about the discovery of the dead body and leave it at that. Applying the same analogy to the instant case, if the Enforcement Directorate are unable to find materials worth the salt to show that RKM Company had committed a criminal activity, generated proceeds of crime via the said criminal activity and had projected the same as untainted money, their role stops there. It does not lie with them to investigate to find out about other violations under the FEMA and Customs Act allegedly committed by RKM Company. They can very well hand over these aspects to the appropriate investigating agency and leave it at that.
28. Applying the aforesaid principle to the present case, once the Enforcement Directorate claims to have noticed possible violations under FEMA or other enactments, its statutory duty stands discharged upon forwarding such information to the appropriate authority. The Enforcement Directorate cannot, either directly or indirectly, dictate the registration of an FIR or supply post-facto material to legitimise an FIR that was registered without satisfying the mandatory requirements of Section 154 Cr.P.C. At best, the letter written by the Enforcement Directorate can only be treated as information forwarded to the State authorities. Upon receipt of such a letter, it is incumbent upon the State to independently examine whether the contents disclose the commission of a cognizable offence so as to attract Section 154 Cr.P.C. The decision to register an FIR must be taken dehors the dictate of Enforcement Directorate and should be strictly in accordance with law. Any FIR registered mechanically on the basis of such a communication, or subsequently justified by material gathered later in time, is vitiated and unsustainable in law.
29. Heard counsel for the parties and perused the record. DISCUSSION & CONCLUSION
30. It is well settled that the power under Section 482 of the Code of Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 24 MCRC-43784-2025 Criminal Procedure (now Section 528 of the BNSS) is to be exercised sparingly; however, where the allegations taken at their face value do not disclose the commission of any cognizable offence, or where the proceedings are manifestly attended with mala fides or founded on a fundamental jurisdictional defect, the High Court would be failing in its duty if it does not intervene. The principles enunciated by the Hon'ble Supreme Court in State of Haryana v. Bhajan Lal (supra), continue to hold the field and clearly recognise that criminal proceedings are liable to be quashed where the allegations do not prima facie constitute any offence or where the proceedings are initiated in violation of a statutory bar.
31. A plain reading of the impugned FIR shows that its gravamen is not the making of any false representation or deception practiced by the petitioner upon any authority, but the alleged circumvention of executive guidelines governing allocation of country-wise quotas for import of poppy seeds by operating multiple proprietorship concerns. Even if the allegations are accepted in their entirety, they essentially relate to the alleged use of benami arrangements to maximise commercial advantage. Such allegations, in substance, squarely fall within the domain of the Prohibition of Benami Property Transactions Act, 1988. Significantly, Section 61 of the said Act expressly declares the offences thereunder to be non-cognizable. In the absence of an order of the Magistrate under Section 155(2) CrPC, registration of an FIR and commencement of investigation on such allegations is ex facie without jurisdiction. The law in this regard has been reiterated by the Hon'ble Supreme Court in Umashankar Yadav Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 25 MCRC-43784-2025 (supra) where it has been held that investigation into a non-cognizable offence without following the mandate of Section 155(2) of CrPC vitiates the entire proceedings.
32. Equally significant is the fact that the allegations, even if taken at their face value and accepted in their entirety, do not prima facie disclose the essential ingredients of the offences punishable under Sections 417 and 420 of the Indian Penal Code. Cheating postulates deception and dishonest intention at the very inception of the transaction. The FIR does not allege any false representation, forged document, or misstatement made by the petitioner to the licensing authority. It is an admitted position that each of the entities referred to in the FIR possessed a valid Importer-Exporter Code issued by the Directorate General of Foreign Trade, that sales contracts were registered with the Central Bureau of Narcotics, and import authorisations were granted by the competent authority and continue to subsist. Mere alleged circumvention of executive guidelines, absent of demonstrable deception or inducement, cannot ipso facto give rise to a criminal offence under Sections 417 or 420 IPC. This principle has been reiterated in Vijay Kumar Ghai (supra) and Prof. R.K. Vijayasarthy (supra).
33. This Court also finds considerable merit in the submission that the impugned FIR suffers from a foundational illegality inasmuch as it is admittedly founded only on statements recorded under Section 37 of the Foreign Exchange Management Act, 1999. The Supreme Court in K.T.M.S. Mohd. (supra) has authoritatively held that statements recorded under special statutes, which do not provide safeguards akin to Section 164 CrPC, cannot Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 26 MCRC-43784-2025 be mechanically used for launching or sustaining prosecution under other penal laws without independent material. In the present case, the record does not disclose any seizure, recovery, or independent evidence collected by the police prior to registration of the FIR. The absence of any preliminary enquiry or independent application of mind by the police lends credence to the contention that the FIR is a mere reproduction of the Enforcement Directorate's complaint, thereby vitiating the statutory discretion required to be exercised under Section 154 CrPC.
34. The reliance placed by the respondents on the decision of the Delhi High Court in Manideep Mago (supra) is clearly distinguishable on facts. In that case, the FIR was supported by independent material recovered during search and seizure operations. In the present matter, no such material has been pointed out. The FIR rests entirely on the information and statements collected during proceedings under FEMA. Moreover, the correctness of the said judgment is presently under consideration before the Hon'ble Supreme Court, and in any event, it cannot be read as laying down a blanket proposition that statements under Section 37 of FEMA, by themselves, can constitute the sole basis for registration of an FIR under the IPC.
35. This Court also finds merit in the contention that the police failed to undertake any independent application of mind prior to registration of the FIR. The record is conspicuously silent on any preliminary verification, discreet inquiry, or collection of material by the police dehors the communication received from the Enforcement Directorate. The statutory obligation cast upon the police under Section 154 Cr.P.C. to independently Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 27 MCRC-43784-2025 assess whether the information received discloses the commission of a cognizable offence cannot be diluted by mechanically acting upon a departmental complaint. The law is well settled that the discretion to register an FIR must be exercised independently and cannot be outsourced to another investigating agency, howsoever eminent. In the absence of such independent satisfaction, the very foundation of the impugned FIR stands vitiated.
36. The prosecution's contention that a wrongful loss has been caused to the public exchequer does not withstand scrutiny, even at this preliminary stage. There is neither any allegation nor any material on record suggesting under-valuation or over-valuation, any shortfall in the payment of statutory levies, or any loss whatsoever occasioned to the Government or to any public or private entity. Significantly, neither the FIR nor the counter-affidavit filed by the Enforcement Directorate alleges any deficient payment of tax or duty, nor do they disclose the existence of any wrongful loss to the Government. The mere circumstance that the proprietors of the firms were employees or associates of the petitioner, or the firms operated from the same commercial complex, cannot, by itself, give rise to a presumption of benami ownership or criminal conspiracy.
37. This Court also finds the foundational premise of the prosecution that the entities in question are benami merely because they operate from the same address or commercial complex--to be legally untenable and factually unsustainable. The impugned FIR proceeds on the assumption that commercial proximity or operational interdependence ipso facto establishes Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 28 MCRC-43784-2025 benami ownership. Such an assumption runs contrary to settled principles of law governing both criminal liability and benami transactions. It is not in dispute that each of the nine entities referred to in the FIR is a separately constituted proprietorship concern, each holding an independent Importer- Exporter Code issued by the Directorate General of Foreign Trade, maintaining distinct bank accounts, executing separate import contracts, and being recognised as independent importers by statutory authorities including the Central Bureau of Narcotics and Customs authorities. The mere fact that these entities operate from separate shops located within the same commercial complex does not, by any stretch of legal reasoning, establish that they are benami concerns of the petitioner. Significantly, the petitioner has specifically demonstrated by reference to the very data that several other importers, unconnected with the petitioner, share identical registered addresses. Entities listed at Serial Nos. 11-14, 16-17, 21, and 24 in the official list of importers from China are registered at the same address. Likewise, entities at Serial Nos. 15, 17, 30, 33, and 34 operate from another common address, while entities at Serial Nos. 31 and 32, as well as Serial Nos. 35 and 36, are also registered at shared addresses. This factual assertion has not been disputed or controverted by the respondents. If common address were to be treated as conclusive proof of benami ownership, the same logic would have to be uniformly applied to all such entities, which the prosecution conspicuously does not do. Criminal law cannot be set in motion on the basis of conjectures and surmises, as authoritatively held in Rajiv Kapoor (supra). To permit prosecution to proceed on the fragile footing of Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM NEUTRAL CITATION NO. 2026:MPHC-GWL:2035 29 MCRC-43784-2025 shared addresses and commercial proximity would amount to endorsing a standard of liability alien to criminal jurisprudence. Such an approach would not only be legally impermissible but would also have a chilling effect on legitimate business arrangements operating within shared commercial spaces. This Court is therefore of the considered view that the allegation of benami ownership, insofar as it is predicated merely on common address or commercial reliance, is wholly misconceived and does not disclose any cognizable offence. Even assuming the allegations of regulatory or policy violations to be correct, such allegations cannot be artificially elevated or dressed up as offences of cheating or criminal conspiracy merely to confer jurisdiction upon the police. As held by the Hon'ble Supreme Court in Basir- ul-Huq (supra), a jurisdictional defect cannot be cured by mischaracterising or misdescribing the true nature of the allegations. Where the foundational facts necessary to attract the penal provisions are absent, the continuation of criminal proceedings would amount to an abuse of the process of law.
38. This Court is conscious of the principle that, at the stage of quashing, a mini-trial is impermissible. At the same time, it is equally well settled that where the uncontroverted allegations do not disclose the basic ingredients of the offences alleged, continuation of criminal proceedings would amount to abuse of the process of law. The present case falls squarely within that category, thus allowing the investigation to proceed would result in converting a dispute essentially rooted in alleged regulatory non- compliance into a criminal prosecution, contrary to settled principles of criminal jurisprudence.
Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AMNEUTRAL CITATION NO. 2026:MPHC-GWL:2035 30 MCRC-43784-2025
39. In view of the foregoing discussion, this Court is satisfied that the impugned FIR does not disclose the commission of any cognizable offence under Sections 120-B, 417 or 420 of the Indian Penal Code and the continuation of the proceedings would amount to abuse of the process of law. Consequently, the petition deserves to be and is hereby allowed.
40. Accordingly, FIR bearing crime No. 421/2023 dated 16.06.2023 registered at Police Station Morar District Gwalior for offence punishable under Sections 120B, 417, 420 of IPC and the proceedings emanating therefrom against the petitioner are hereby quashed. Pending applications, if any, stand disposed of.
(MILIND RAMESH PHADKE) JUDGE ojha Signature Not Verified Signed by: YOGENDRA OJHA Signing time: 1/29/2026 10:55:18 AM