The Supreme Court on Tuesday refused to quash the money laundering proceedings against JSW Steel and its officers in connection with an illegal mining scam involving Obulapuram Mining Company (OMC), which is owned by mining baron and BJP leader G. Janardhana Reddy.
Noting that JSW has already moved the appellate tribunal against attachment of its bank accounts under Section 26 of the PMLA, a Bench comprising justices Dipankar Datta and Augustine George Masih said that 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, including whether the attached property represents “proceeds of crime” within the meaning of Section 2(1)(u) PMLA and whether the withdrawals were in violation of law,” it said.
“We are unable to hold that the case for quashing the cognizance order or interdicting proceedings is made out. The allegations, at this stage, are confined to the recovery of the quantified amount of Rs 33.80 crore and do not extend to fastening criminal liability upon the appellants (JSW) beyond that process. The apprehension of arbitrary prosecution is, therefore, misplaced,” the bench said.
However, the court noted that it is undisputed that the ECIR registered by the Enforcement Directorate does not name JSW as accused persons. Even the charge-sheet filed by the CBI had dropped it as an accused in the supplementary report after finding no material to proceed, it said.
The apex court said that the complaint by the ED is predicated not on any independent act of laundering but on the allegation that JSW withdrew certain sums from the attached bank accounts in violation of its orders, thus frustrating the recovery of Rs 33.80 crore, alleged to be “proceeds of crime.”
It noted that the core issue before the court is not whether the JSW’s entire banking operations were tainted, but whether the specific amount of Rs 33.80 crore, representing unpaid consideration for iron ore supplied by Associate Mining Company (AMC), a Reddy firm, can be treated as “proceeds of crime” and whether its withdrawal post provisional attachment order constitutes an offence under Section 3 PMLA.
“The apprehension that the entire account balance constitutes proceeds of crime is misplaced, particularly when the admitted position is that payments were made and received through regular banking channels and are duly reflected in the books of account,” the judgment stated.
In 2009, JSW had entered into an agreement with OMC for supply of 1.5 MT of iron ore, fines, and lumps to its plant at Vijayanagar. JSW had made advance payments of about Rs 130 crore to OMC.
From November 2009 to December 2009, partial supplies were made by OMC from its mines and thereafter till March 2010 from its group companies, including Ananthpur Mining Corporation and Associate Mining Company (AMC). As OMC thereafter failed to supply iron ore despite assurances that supply would recommence upon reopening of the mines, JSW sought adjustment of the remaining amount from the advance paid.
Meanwhile, the SC had directed an investigation into the matter of illegal mining and export of iron ore by AMC, a partnership firm of Reddy. Pursuant to this direction, the Central Bureau of Investigation (CBI) had registered a case against AMC, its partners Reddy and G Lakshmi Aruna along with others and filed a chargesheet in May 2012.
Though JSW was named as an accused but subsequently, in September 2013, a supplementary final report was filed dropping charges, thereby exonerating it in the CBI case.
Because of the non-supply of the iron ore and there being an outstanding amount against OMC, arbitration proceedings were initiated by JSW. The sole arbitrator in May 2014 directed refund of the principal outstanding balance of Rs 35.44 crore to JSW after adjusting the sums payable to AMC along with interest and damages.
The Enforcement Directorate later attached the company's bank accounts in 2015 pursuant to registering a money laundering case against Reddy and Aruna in 2012.
In 2022, the Directorate filed a prosecution complaint against JSW for having operated its bank accounts, while they were attached by the agency. Further, the probe agency registered a case against JSW alleging that it had received supplies of illegally mined ore from AMC and had not paid for it, therefore, the money owed by JSW to the Reddy firm qualified as proceeds of crime.
Noting that JSW has already moved the appellate tribunal against attachment of its bank accounts under Section 26 of the PMLA, a Bench comprising justices Dipankar Datta and Augustine George Masih said that 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, including whether the attached property represents “proceeds of crime” within the meaning of Section 2(1)(u) PMLA and whether the withdrawals were in violation of law,” it said.
“We are unable to hold that the case for quashing the cognizance order or interdicting proceedings is made out. The allegations, at this stage, are confined to the recovery of the quantified amount of Rs 33.80 crore and do not extend to fastening criminal liability upon the appellants (JSW) beyond that process. The apprehension of arbitrary prosecution is, therefore, misplaced,” the bench said.
However, the court noted that it is undisputed that the ECIR registered by the Enforcement Directorate does not name JSW as accused persons. Even the charge-sheet filed by the CBI had dropped it as an accused in the supplementary report after finding no material to proceed, it said.
The apex court said that the complaint by the ED is predicated not on any independent act of laundering but on the allegation that JSW withdrew certain sums from the attached bank accounts in violation of its orders, thus frustrating the recovery of Rs 33.80 crore, alleged to be “proceeds of crime.”
It noted that the core issue before the court is not whether the JSW’s entire banking operations were tainted, but whether the specific amount of Rs 33.80 crore, representing unpaid consideration for iron ore supplied by Associate Mining Company (AMC), a Reddy firm, can be treated as “proceeds of crime” and whether its withdrawal post provisional attachment order constitutes an offence under Section 3 PMLA.
“The apprehension that the entire account balance constitutes proceeds of crime is misplaced, particularly when the admitted position is that payments were made and received through regular banking channels and are duly reflected in the books of account,” the judgment stated.
In 2009, JSW had entered into an agreement with OMC for supply of 1.5 MT of iron ore, fines, and lumps to its plant at Vijayanagar. JSW had made advance payments of about Rs 130 crore to OMC.
From November 2009 to December 2009, partial supplies were made by OMC from its mines and thereafter till March 2010 from its group companies, including Ananthpur Mining Corporation and Associate Mining Company (AMC). As OMC thereafter failed to supply iron ore despite assurances that supply would recommence upon reopening of the mines, JSW sought adjustment of the remaining amount from the advance paid.
Meanwhile, the SC had directed an investigation into the matter of illegal mining and export of iron ore by AMC, a partnership firm of Reddy. Pursuant to this direction, the Central Bureau of Investigation (CBI) had registered a case against AMC, its partners Reddy and G Lakshmi Aruna along with others and filed a chargesheet in May 2012.
Though JSW was named as an accused but subsequently, in September 2013, a supplementary final report was filed dropping charges, thereby exonerating it in the CBI case.
Because of the non-supply of the iron ore and there being an outstanding amount against OMC, arbitration proceedings were initiated by JSW. The sole arbitrator in May 2014 directed refund of the principal outstanding balance of Rs 35.44 crore to JSW after adjusting the sums payable to AMC along with interest and damages.
The Enforcement Directorate later attached the company's bank accounts in 2015 pursuant to registering a money laundering case against Reddy and Aruna in 2012.
In 2022, the Directorate filed a prosecution complaint against JSW for having operated its bank accounts, while they were attached by the agency. Further, the probe agency registered a case against JSW alleging that it had received supplies of illegally mined ore from AMC and had not paid for it, therefore, the money owed by JSW to the Reddy firm qualified as proceeds of crime.
You may also like
Joe Sugg says 'oh dear' as he shares Dianne Buswell pregnancy update
I made the famous three-ingredient pasta sauce recipe — it's better after 1 change
BBC Celebrity Traitors full TV schedule: when does it start and what time?
Maha Cabinet clears Slum Cluster Redevelopment Scheme for Mumbai ahead of BMC elections
Travis Kelce facing second NFL fine after Kansas City Chiefs defeat
