Kerala High Court
Ismail Chakkarath vs Union Of India on 9 May, 2025
Author: Kauser Edappagath
Bench: Kauser Edappagath
BA No.1442/2025
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH
FRIDAY, THE 9TH DAY OF MAY 2025 / 19TH VAISAKHA, 1947
BAIL APPL. NO. 1442 OF 2025
CRIME NO.2/2023 OF ENFORCEMENT DIRECTORATE, KOZHIKODE
AGAINST THE ORDER IN Bail Appl. NO.1036 OF 2025 OF
HIGH COURT OF KERALA
PETITIONER/ACCUSED:
ISMAIL CHAKKARATH
AGED 54 YEARS
S/O. PACKRAN HAJI, CHAKKARATH HOUSE,
THRIPPANGOTTUR, THUVAKKUNNU. P.O., KATHIKANDY,
KANNUR DISTRICT, PIN - 670693
BY ADVS.
C.P.UDAYABHANU
NAVANEETH.N.NATH
RASSAL JANARDHANAN A.
ABHISHEK M. KUNNATHU
BOBAN PALAT
P.U.PRATHEESH KUMAR
P.R.AJAY
K.U.SWAPNIL
PRANAV USHAKAR
SWETHA BIJUMON
BA No.1442/2025
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RESPONDENTS/COMPLAINANT:
1 UNION OF INDIA
REPRESENTED BY THE SPECIAL PUBLIC PROSECUTOR, HIGH
COURT OF KERALA, ERNAKULAM, PIN - 682031
2 ASSISTANT DIRECTOR
DIRECTORATE OF ENFORCEMENT, SUB ZONAL OFFICE,
KOZHIKODE, PIN - 673003
*3 JOLLY MALAYIL
M/S NEIL DEBT COLLECTIONS, 55/520-C, NANDANAM, 2ND
FLOOR, THOUNDAYIL ROAD, PANAMPILLY NAGAR, COCHIN-
682036 (*IS IMPLEADED AS ADDL.3RD RESPONDENT VIDE
ORDER IN CRL.M.A.NO.1/2025 DATED 11/4/25)
BY ADVS.
JAISHANKAR V. NAIR
K. R. SUNIL
OTHERS PRESENT
SRI.P.N.PRAKASH
THIS BAIL APPLICATION HAVING COME UP FOR ADMISSION ON
11.04.2025, THE COURT ON 09.05.2025 DELIVERED THE
FOLLOWING:
BA No.1442/2025
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ORDER
This is an application for regular bail filed by the petitioner/accused No.1 in ECIR No.KZSZO/02/2023 registered by the Enforcement Directorate, Kozhikode Sub Zone.
2. The petitioner is alleged to have committed the offences punishable under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (for short, 'PMLA').
3. The petitioner is an NRI conducting business in Qatar in the name and style of M/s Grand Mart Trading. The Kulavallur Police registered a crime against the petitioner on 12/1/2023 as Crime No.25/2023 under Sections 406 and 420 of the Indian Penal Code (for short, IPC). It was registered pursuant to a complaint filed by M/s United Bank Ltd., Qatar, through its power of attorney holder, Mr. Jolly Malayil, CEO of M/s Neil Debt Collections. The Crime was subsequently transferred to the Crime Branch, Economic Offences Wing (EOW), Kannur and Kasaragod Units, Kerala, which re-registered it as Crime No.976/2023 on BA No.1442/2025 -:4:- 11/4/2023. The allegation in the FIR is that the petitioner obtained a loan from United Bank Ltd., Qatar of QAR 30,643,204 (equivalent to INR 61,28,64,080/-) on 14/3/2017 ostensibly for the expansion of his business operation in Qatar, wilfully defaulted on its repayment, misused and diverted the funds to India through illicit channels and thus cheated the bank. The alleged diversion of funds and the failure to fulfil the obligations of repayment were stated to constitute a deliberate and wilful act of deception and fraudulent intent on the part of the petitioner. The conduct of the petitioner was alleged to have resulted in a wrongful loss to the Bank and an unlawful gain to him. The petitioner was granted pre-arrest bail in the said crime by this Court. The investigation into the said crime is still going on, and the final report is yet to be filed.
4. Section 420 of IPC being a scheduled offence in the PMLA, the Directorate of Enforcement, Kozhikode Sub Zone registered an ECIR bearing No.KZSZO/02/2023 dated 30/5/2023 under the PMLA, thereby initiating an investigation into the generation, acquisition and laundering of the proceeds of crime BA No.1442/2025 -:5:- by the petitioner. The petitioner was arrested in the said crime on 26/11/2024. Since then, he has been in judicial custody.
5. After investigation, the Enforcement Director filed a complaint under Section 44 of the PMLA against the petitioner and one Siddiq Puthan Purayil for the offence punishable under Sections 3 and 4 of the PMLA before the Special Court on 24/1/2025. The gist of the allegation in the complaint is that the proceeds of the crime arising out of the scheduled offence have been laundered by the petitioner and the 2nd accused by acquiring immovable properties in the name of the benami individuals.
6. I have heard Sri.P.N.Prakash, the learned Senior Counsel and also Sri.C.P.Udayabhanu, the learned counsel appearing for the petitioner, Sri.Jaishankar V.Nair, the learned standing counsel for the Enforcement Directorate and Sri.K.R.Sunil, the learned counsel for the additional 3 rd respondent.
7. The learned Senior Counsel for the petitioner submitted that the petitioner is absolutely innocent of the BA No.1442/2025 -:6:- offences alleged against him and he has been falsely implicated in the case. The learned Senior Counsel further submitted that there is no evidence on record to show that the alleged proceeds of crime were received and used by the petitioner for purchasing immovable properties in his or his nominees' name as alleged by the prosecution. The learned Senior Counsel further submitted that even if the entire prosecution case is believed in toto, no offence under the PMLA is made out against the petitioner. The Counsel also submitted that the investigation is over, a complaint has already been filed, and hence, the further detention of the petitioner is not necessary. As far as the rigour of Section 45(1) of the PMLA is concerned, the learned Counsel submitted that the twin conditions are not attracted on the facts of the case. The learned standing counsel for the Enforcement Directorate, Sri.Jaishankar V. Nair, on the other hand, submitted that there are sufficient materials on record to show the involvement of the petitioner in the crime. The learned counsel further submitted that the magnitude of the offence is so high and in the case of an economic offence, the court must account for several factors BA No.1442/2025 -:7:- while granting bail, especially the gravity of the offence involved. The standing counsel also submitted that going by Section 45(1) of the PMLA, bail can only be granted in a case where there are reasonable grounds for believing that the accused is not guilty of such an offence and that he is not likely to commit any offence while on bail and the petitioner failed to satisfy the said mandatory conditions.
8. The jurisdiction of this court to grant bail to a person accused of an offence under the PMLA is circumscribed by the provisions of Section 45 as amended in 2018. Going by the said provision, if the Public Prosecutor opposes the application, bail can be granted only in a case where there are reasonable grounds for believing that the accused is not guilty of an offence under the Act and that he is not likely to commit any offence while on bail. However, the first proviso to the Section says that a person, who is under the age of 16 years, or is a woman or is sick or infirm or is accused either on his own or along with other co- accused of money-laundering, a sum of less than one crore rupees, may be released on bail, if the Special Court so directs. BA No.1442/2025 -:8:- The conditions specified under Section 45 of the PMLA are mandatory and need to be complied with, which is further strengthened by the provisions of Sections 65 and 71 of the PMLA. Section 65 of the PMLA requires that the provisions of the Code of Criminal Procedure shall apply, insofar as they are not inconsistent with the provisions of this Act and Section 71 of the PMLA provides that the provisions of the PMLA shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The PMLA has an overriding effect, and the provisions of the Cr. P.C. would apply only if they are not inconsistent with the provisions of the said Act. Therefore, the conditions enumerated in Section 45 of the PMLA will have to be complied with even in respect of an application for bail made under Section 439 of Cr.P.C. Sub-section (2) of Section 45 says that the limitation on granting of bail specified in sub-section (1) is in addition to the limitations under the Code of Criminal Procedure or any other law for the time being in force on granting of bail. Thus, the power to grant bail to a person accused of having committed an offence under the BA No.1442/2025 -:9:- PMLA is not only subject to the limitations imposed under Section 439 of Cr. P.C., but also subject to the restrictions imposed by the twin conditions of sub-section (1) of Section 45 of the PMLA.
9. In Vijay Madanlal Choudhary and Others v. Union of India and Others (2022 SCC OnLine SC 929), the Supreme Court categorically held that while Section 45 of the PMLA restrict the right of the accused to grant of bail, it could not be said that the conditions provided under Section 45 impose absolute restraint on the grant of bail. In Manish Sisodia v. Directorate of Enforcement (AIR 2024 SC 4053), the Supreme Court took the view that even under the PMLA, the governing principle is that "bail is rule and jail is exception". The dictum laid down in Vijay Madanlal Choudhary (supra) and Manish Sisodia (supra) had been reiterated by the Supreme Court in Prem Prakash v. Union of India [(2024) 9 SCC 787]. Bearing in mind the above principles, let me consider the merits of the bail application
10. Money laundering has two phases or components: (1) the predicate offence and (2) the surface offence. The predicate offence is the underlying criminal activity that generates BA No.1442/2025 -:10:- proceeds, which, when laundered, results in the offence of money laundering. The predicate offence in this case is the crime (Crime No.976/2023) registered by the Crime Branch, and money laundering involved in the above crime is the surface or the larger offence. The allegation against the accused/petitioner in Crime No.976/2023 is that after availing a loan from United Bank Ltd., Qatar amounting to INR 61,28,64,080/- on 14/3/2017 ostensibly for the expansion of his business operation in Qatar, the petitioner willfully failed to repay the loan amount, instead diverted the funds to India through illicit channels and thus cheated the bank. The definite case of the prosecution herein is that these funds identified as proceeds of crime were utilised by the petitioner for acquiring immovable assets in his name and in the name of benami individuals. This is the surface offence allegedly committed by him under Section 3 of the PMLA.
11. Chapter II of the PMLA contains provisions relating to the offence of money laundering. Section 2(1)(p) defines "money- laundering" as having the same meaning as assigned in Section
3. Section 3 stipulates "money-laundering" to be an offence. BA No.1442/2025 -:11:- Section 3 states that whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting or claiming it as untainted property shall be guilty of the offence of money-laundering. The word "proceeds of crime" is defined under Section 2(1)(u) as "proceeds of crime"
means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.
12. The provisions of the PMLA, including Section 3, have undergone various amendments. The words in Section 3 "proceeds of crime and projecting" have been amended as "proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming" by the Amendment Act of 2013. By inserting an Explanation to Section 3 by the amendment of 2019, now it is made clear that a process or activity connected with the proceeds of crime would include concealing, possessing, acquiring, using or projecting or claiming as untainted property. From the aforesaid definition, the term BA No.1442/2025 -:12:- "money-laundering" can be said to be any process or activity connected with the proceeds of crime, namely concealment, possession, acquisition, use, projecting or claiming as untainted property. In Vijay Madanlal Choudhary (supra), it was held that the Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word "and" preceding the expression projecting or claiming as "or". Also, the meaning of the term "proceeds of crime" has been widened by inserting an Explanation to Section 2(1)(u) in the year 2019. By the said Explanation, it has been clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. In Vijay Madanlal Choudhary (supra), it was held that the Explanation inserted to Clause (u) of Section 2(1) of the PMLA does not travel beyond the main provision predicating tracking and reaching up to the property derived or obtained directly or indirectly as a result of criminal activity relating to a BA No.1442/2025 -:13:- scheduled offence. A person may have indulged, attempted to indulge, or knowingly assisted another person in any process or activity connected with the "proceeds of crime". That involvement may be direct or indirect, by way of concealing, possessing, or using the tainted money or assets. The involvement, further, may be acquiring, projecting or claiming the tainted money or property as untainted. Any of the above multitude of activities constitutes a crime under Section 3 of the PMLA. Thus, involvement in any one of such processes or activities connected with the proceeds of crime would constitute an offence of money laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence, except the proceeds of crime derived or obtained as a result of that crime.
13. As stated already, property derived or obtained, directly or indirectly, by a person as a result of criminal activity relating to a scheduled offence constitutes proceeds of crime. The loan amount of `61,28,64,080/- obtained by the petitioner from M/s United Bank Ltd., Qatar has been projected as proceeds BA No.1442/2025 -:14:- of crime by the prosecution since, according to them, it has been derived/obtained directly by the petitioner as a result of the commission of the predicate offence. According to the prosecution, a substantial portion of the said amount has been utilised by the petitioner to purchase immovable properties in his name as well as in the name of his relatives, friends, associates and nominees. The purchase of properties utilising the proceeds of crime by the petitioner has been projected by the prosecution as a process or activity connected with the proceeds of crime. In order to prove the same, the prosecution mainly relied on the bank transaction details and the statement of the petitioner and the 2nd accused, recorded under Section 50 of the PMLA.
14. In page 8 of the complaint, it is averred that investigation under the PMLA revealed that a part of the proceeds of crime amounting to `12.49 crores approximately were credited to the Axis Bank account of the petitioner having Account No.909010039442218. It is further averred that additional proceeds of crime amounting to `5 crores approximately were credited to the petitioner's Federal Bank Account bearing A/c BA No.1442/2025 -:15:- No.20262100007626, and these funds were used for property purchases. The details of the above-mentioned `12.49 crores credited to the Axis Bank account of the petitioner have been shown in Table No.15 and the details of `5 crores credited to the Federal Bank account have been shown in Table No.16 in the complaint. The prosecution relied on the statement given by the petitioner on 26/11/2024 under Section 50 of the PMLA that he received approximately `8 crores from M/s Grand Mart Trading LLP which was credited to his Federal Bank account and Axis Bank account mentioned above.
15. The "proceeds of crime" being the core of the ingredients constituting the offence of money laundering, that expression needs to be construed strictly. All properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as BA No.1442/2025 -:16:- proceeds of crime within the meaning of Section 2(1)(u) of the PMLA -- so long as the whole or some portion of the property has been derived or obtained by any person "as a result of" criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a result of" criminal activity relating to a scheduled offence. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the scheduled offence concerned. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the PMLA [Vijay Madanlal Choudhary, (supra)]. Needless to say, such a process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence).
16. A bare look at Table No.15 of the complaint would show that all the remittances made to the Axis Bank account of the petitioner, except the last six transactions, were made prior BA No.1442/2025 -:17:- to 14/3/2017. Similarly, Table No.16 would show that all the remittances made to the Federal Bank account of the petitioner were made prior to 14/3/2017. It is pertinent to note that the definite case of the prosecution in the predicate offence (Crime No.976/2023) is that the petitioner availed a loan from United Bank Limited, Qatar for `61,28,64,080/- on 14/3/2017 which was misused, diverted to India through illicit channels and thus cheated the Bank. The said loan amount has been identified as the proceeds of the crime. It is the prosecution version that the said proceeds of the crime were utilized for acquiring immovable assets in the name of the benami individuals by the petitioner. Thus, the proceeds of crime could have been obtained by the petitioner only on 14/3/2017 and not before. Therefore, any amount credited to the accounts of the petitioner as shown in Table Nos.15 and 16 prior to 14/3/2017 cannot be termed as proceeds of crime. The total amount credited to the petitioner's Axis Bank account after 14/3/2017 from the last six transactions shown in Table No.15 would only come to `41,74,526.5/-, which would fall under the first proviso to Section 45 of the PMLA. BA No.1442/2025 -:18:-
17. It is further averred in page 15 of the complaint that the petitioner, through his associate Siddiq Puthen Purayil (the 2 nd accused), acquired over 14 properties using proceeds transferred from M/s Grand Mart Trading Company, Qatar, through various financial channels, including the account of the 2 nd accused. The details of the immovable properties so acquired have been shown in Table No.7 of the complaint. The prosecution relied on the statements of the 2nd accused as well as the petitioner given under Section 50 of the PMLA in support of the said version. It is true that the 2nd accused has admitted in his statement dated 27/9/2024 under Section 50 of the PMLA that those properties were purchased from the funds received by him from M/s.Grand Mart Trading Company. However, admittedly, the 2 nd accused has been doing various kinds of business in Qatar for the last few years. He also has business tie-ups with M/s Grand Mart Trading at Grand Mart Hyper Market. In his statement, he has stated that he used to receive amount from M/s Grand Mart Trading in Qatar in connection with the business he had with it. To a specific question (Question No.13), in the statement dated 27/9/2024, the BA No.1442/2025 -:19:- 2nd accused has answered that he did not have any association with the petitioner or his business other than his involvement in the wholesale vegetable business at Grand Mart Hyper Market and his engagement was strictly limited to that venture and he did not have any business dealings or partnership with him outside of that context. Thus, the statement given by the 2 nd accused under Section 50 of the PMLA and relied on by the prosecution are not sufficient to conclude that the properties in the name of the 2nd accused shown in Table No.7 were purchased utilising the proceeds of crime. That apart, it is settled that the statement of a co-accused against another co-accused will not have a character of substantive evidence, and the prosecution cannot start with such a statement to establish its case.
18. In the complaint, it is also averred that the petitioner utilizing the proceeds of crime acquired properties in benami names such as Ronnie Cherian, Joby Antony, Ashraf Chakkarath, Shoukathali and Muhammedisha. It is specifically alleged that the petitioner, through his associates, concealed proceeds of crime amounting to `2.02 crores with Ronnie Cherian under the BA No.1442/2025 -:20:- guise of acquiring benami properties in Wayanad. But the funds allegedly transferred by the petitioner to Ronnie Cherian were in the year 2015, prior to 14/3/2017. It is also alleged that Ashraf Chakkarath, the brother of the petitioner, facilitated Joby Antony's entry as benami into business activity involving M/s Grand Mart Trading Company through an entity namely M/s AshJoe Cold Chain Establishment having Ashraf Chakkarath and Joby Antony as partners and that Joby Antony received substantial fund from M/s Arab Air-Conditioning and Refrigeration Company, branch of M/s Grand Mart Trading Company. However, the details of the funds received in the account of M/s.AshJoe Cold Chain Establishment would show that all those funds were transferred in the years 2015 and 2016, prior to the cut-off date of 14/3/2017. Similarly, the funds received by Shoukathali and Ashraf Chakkarath from the petitioner were also prior to 14/3/2017, as revealed from Table Nos. 18 and 19. Also, the funds allegedly received by Muhammedisha from the petitioner were in the years 2015 and 2016.
19. Referring to Section 45 of the PMLA, in Vijay Madanlal BA No.1442/2025 -:21:- Choudhary (supra), the Supreme Court opined that the provision does not require that, to grant bail, the court must arrive at a positive finding that the applicant has not committed an offence under the PMLA. Section 45 must be construed reasonably as the intention of the legislature cannot be read as requiring the court to examine the issue threadbare and in detail to pronounce whether an accused is guilty or is entitled to acquittal. In Prem Prakash (supra), it was observed that liberty of the individual is always a rule and deprivation is the exception. Deprivation can only be by the procedure established by law, which has to be a valid and reasonable procedure. Section 45 of PMLA, by imposing twin conditions, does not re-write this principle to mean that deprivation is the norm and liberty is the exception. I have already found that the major part of the proceeds of crime relied on by the prosecution allegedly utilized for acquiring immovable assets in the name of the petitioner and benami individuals were received prior to 14/3/2017, the alleged date of commission of the predicate offence. At best, it can be said that `41,74,526.5/- was credited to the account of the petitioner from M/s Grand Mart BA No.1442/2025 -:22:- Trading Company after 14/3/2017. The first proviso to Section 45 clearly stipulates that if the amount of money laundering involved is less than one crore rupees, the accused can be released on bail notwithstanding the embargo under Section 45(1). Considering all these facts, I am of the view that the rigour of Section 45(1) of the PMLA is not attracted to the facts of the case. The investigation is over and complaint has already been filed. The petitioner is in custody for the last more than five months. His further detention is not necessary. Hence, I hold that the petitioner is entitled for regular bail .
In the result, the application is allowed on the following conditions:
(i) The petitioner shall be released on bail on executing a bond for `5,00,000/- (Rupees Five lakhs only) with two solvent sureties for the like sum each to the satisfaction of the trial court .
(ii) The petitioner shall not intimidate or influence the witnesses.
(iii) The petitioner shall not involve in any other crime of BA No.1442/2025 -:23:- like nature during the bail period.
(iv) The petitioner shall surrender his passport before the trial court if not already surrendered before the investigating agency or the court.
(v) The petitioner shall not leave the State of Kerala without getting prior permission of the trial court.
Sd/-
DR. KAUSER EDAPPAGATH JUDGE Rp BA No.1442/2025 -:24:- APPENDIX OF BAIL APPL. 1442/2025 PETITIONER ANNEXURES Annexure 1 ORDER DATED 27.01.2025 IN B.A. 1036/2025 PASSED BY THIS HON'BLE COURT RESPONDENT ANNEXURES Annexure R3(A) THE TRUE COPY OF THE FIR DATED 12/01/2023 NUMBERED AS CRIME NO. 25/2023 REGISTERED BY KULAVALLUR POLICE STATION, KANNU Annexure R3(B) THE TRUE COPY OF THE FIR DATED 11 / 04/2023 IN CRIME NO. 976/2023 PRESENTLY INVESTIGATED BY THE DYSP CRIME BRANCH EOW, KANNUR AND KASARGODE UNI Annexure R3(C) THE TRUE COPY OF ENGLISH TRANSLATED VERSION OF THE JUDGMENT OF THE SUPREME JUDICIARY COUNSEL OF THE STATE OF QATAR, CIVIL COURT, 6TH CIRCUIT AGAINST THE PETITIONER AND OTHER DIRECTORS Annexure R3(D) THE TRUE COPY OF THE ENGLISH TRANSLATED VERSION OF THE SUPREME JUDICIARY COUNSEL OF THE STATE OF QATAR, COMMERCIAL COURT , 9TH CIRCUIT AGAINST THE PETITION AND OTHER DIRECTORS PETITIONER ANNEXURES Annexure 2 COPY OF THE COMPLAINT FILED BY THE 2ND RESPONDENT IN S.C NO. 154 OF 2025 DATED 24/01/2025 BEFORE THE HON'BLE SPECIAL ADDITIONAL SESSION COURT (MARAD CASES) KOZHIKODE BA No.1442/2025 -:25:- Annexure 3 COPY OF THE COMPLAINT DATED 11.01.2023 FILED ON BEHALF OF UNITED BANK BEFORE THE HON'BLE CJM COURT, THALASSERY WHICH WAS NUMBERED AS C.M.P NO. 136 OF 2023 Annexure 4 COPY OF THE ORDER IN B.A. 510/2023 DATED 10.11.2023 PASSED BY THIS HON'BLE COURT