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
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
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
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
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.
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
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
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.
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
"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
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
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
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
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
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.
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
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
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
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
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
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
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
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
