PMLA Proceedings Must Not Be Short-Circuited When Statutory Remedies Exist — Supreme Court Refuses To Quash Cognizance Against JSW Steel

“Allegations at this stage are confined to the recovery of ₹33.80 crore and do not extend to fastening criminal liability” – On October 7, 2025, the Supreme Court  declined to interfere with ongoing proceedings under the Prevention of Money Laundering Act, 2002 (PMLA), refusing to quash a cognizance order issued by the Special Court despite the appellants not being named in the predicate offence. The Court underscored the critical principle that “constitutional or appellate jurisdiction should not be exercised where efficacious alternate remedies exist and are actively being pursued.”

The Court refused to entertain JSW Steel’s plea that its prosecution under PMLA was legally untenable in the absence of a live scheduled offence. It stressed that such core issues – including whether the attached property represented “proceeds of crime” – should be determined by the PMLA Appellate Tribunal, where statutory appeals were already pending.

“Even If Charges Were Dropped In Predicate Offence, The Tribunal Must First Decide If PMLA Still Applies” – Supreme Court Declines To Short-Circuit Process

The genesis of the case lay in a 2009 agreement between JSW Steel and Obulapuram Mining Company (OMC) for supply of iron ore. After partial fulfillment, supplies stopped, and JSW initiated arbitration seeking refund of ₹130 crore. An arbitral award in 2014, upheld by the Bombay High Court in 2019, directed refund by OMC.

However, investigations into illegal mining by OMC’s group concern AMC – led by G. Janardhan Reddy – led to CBI registering RC 18(A)/2011, and later ED filing ECIR/09/BZ/2012 under the PMLA. While the CBI exonerated JSW Steel in a supplementary report filed on 06.09.2013, ED proceeded with attachment of JSW’s bank accounts, claiming ₹33.80 crore remained unpaid to AMC and constituted “proceeds of crime.”

ED issued Provisional Attachment Orders (PAO Nos. 08 of 2015 and 11 of 2016), which were later confirmed. Alleging JSW had “wilfully frustrated” the attachment orders by withdrawing money from the accounts – some even during a court-granted stay – ED proceeded with a prosecution complaint and obtained cognizance from the Special Court on 11.04.2022.

JSW filed writ petitions challenging the entire proceedings, which were dismissed by the Karnataka High Court. The present appeal arose from that order.

“In Absence of a Live Predicate Offence, There Can Be No Proceeds of Crime” – JSW Argues for Quashing Under Section 3 PMLA

JSW’s senior counsel argued that prosecution under Section 3 of PMLA was legally flawed as “JSW is neither named in the ECIR nor charge-sheeted in the CBI case”, and there was no live scheduled offence. The Supreme Court’s landmark judgment in Vijay Madanlal Choudhary v. Union of India was relied upon to argue that quashing of the predicate offence nullifies PMLA proceedings.

Further, it was contended that amounts were withdrawn before or during the period of a valid stay, and that cash credit accounts are not specific “property” under Section 2(1)(v) of PMLA. JSW insisted there was no mens rea, as the amounts were accounted through regular banking channels and fully disclosed.

The ED was accused of initiating a parallel prosecution despite pending statutory appeals under Section 26 of PMLA, which JSW argued should bar the current proceedings.

“Possession of Confirmed Attached Property After PAO Falls Within Section 3 PMLA” – ED Defends Prosecution

The Directorate of Enforcement countered that ₹33.80 crore remained unpaid by JSW to AMC, which constituted “proceeds of crime” as defined under Section 2(1)(u) PMLA. This amount was linked to iron ore illegally mined and sold by AMC to JSW during 2010–11, part of the massive Bellary mining scam.

ED alleged that after PAOs were issued and confirmed, JSW – in collusion with bank officials – deliberately withdrew attached amounts. The balance in one account fell short by ₹16.55 crore due to these withdrawals, and ED accused JSW of “concealment, possession, and use of proceeds of crime” under Section 3 PMLA.

The ED relied on communications from banks and claimed non-cooperation by JSW’s officials, further evidencing criminal intent. It also argued that bank accounts were “property” as held in State of Maharashtra v. Tapas D. Neogy, and attachment was legally sustainable.

“The Complaint Is Based Not on Laundering Per Se But Withdrawal of Attached Amounts” – Supreme Court Limits Scope of Allegation

The Supreme Court acknowledged that JSW had already approached the Appellate Tribunal, and that the matter was still pending. It reaffirmed that PMLA contains a “comprehensive and self-contained adjudicatory mechanism”, and courts must not intervene unless there is jurisdictional error or patent illegality.

The Court observed: “It is undisputed that the ECIR registered by the ED does not name the appellants as accused persons. The charge-sheet filed by the CBI also does not array them as accused.”

However, the Court declined to quash the cognizance, noting:

“The allegations, at this stage, are confined to the recovery of the quantified amount of ₹33.80 crore and do not extend to fastening criminal liability beyond that process.”

The key issue – whether this ₹33.80 crore qualifies as “proceeds of crime” – was held to be a matter of adjudication before the Tribunal. The Court held:

“The appropriate course would be to permit the statutory process to run its route to reach its logical conclusion. Interference at this stage would prejudge issues that are squarely within the domain of the Appellate Tribunal.”

“Apprehension of Arbitrary Prosecution Is Misplaced” – Supreme Court Disposes Appeals, Leaves All Questions Open

In conclusion, the Supreme Court held that the facts of the case did not warrant judicial interference at this stage, and all contentions should be raised before the Appellate Tribunal. It said:

“We decline to interfere with the proceedings at this stage. The appellants shall be at liberty to pursue their statutory appeals… uninfluenced by any observations contained herein above.”

With that, the criminal appeals were disposed of, and the challenge to the cognizance order dismissed. No costs were imposed.

Date of Decision: October 7, 2025