Calcutta High Court Quashes PMLA Case Against Louis Dreyfus India In ₹234 Crore Bank Fraud Case

The Calcutta High Court on Friday (May 22) quashed money laundering proceedings initiated by the Enforcement Directorate (ED) against Louis Dreyfus Company India Private Limited, the Indian subsidiary of Dutch-French commodities giant Louis Dreyfus Company. The case arose out of an alleged bank fraud of about ₹234.57 crore investigated by the CBI.

The ED had alleged that the company was involved in circular trading transactions linked to three Letters of Credit (LCs) and had unlawfully received about ₹22.40 lakh as proceeds of crime.

Holding that continuation of the trial would amount to abuse of process, Justice Suvra Ghosh quashed the proceedings pending before the Chief Judge, City Sessions Court, Calcutta, insofar as Louis Dreyfus Company was concerned, while directing that proceedings against the remaining accused persons would continue.

The Court said that Louis Dreyfus Company was not named as an accused in the CBI charge sheet and supplementary charge sheet filed under the Indian Penal Code and the Prevention of Corruption Act. It held that the CBI, after examining the disputed LC transactions and the petitioner's role in them, found that the company was not a beneficiary of the alleged transactions.

“The petitioner has not been arraigned as an accused in the charge sheet and supplementary charge sheet in respect of the predicate offence under Sections 120B/420/467//468/471 of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act. In course of investigation, the three disputed LCs vis-a-vis the role of the petitioner with regard to the offence has been dealt with. The CBI has arrived at a conclusion that the petitioner company is not a beneficiary to the alleged transactions.”

The case originated from an FIR registered by the CBI on March 31, 2014 against Manoj Kumar Jain, Director of Prakash Vanijya Private Limited (PVPL), and others on allegations of causing losses of ₹234.57 crore to the Central Bank of India.

The ED subsequently registered an ECIR on September 5, 2016 and filed a prosecution complaint alleging that Louis Dreyfus had engaged in circular trading through warehouse receipt transactions involving wheat and maize consignments, with three LCs worth about ₹25 crore allegedly being routed back after discounting.

Relying on the Supreme Court's ruling in Vijay Madanlal Choudhary v. Union of India, the Court held that PMLA proceedings cannot continue merely on assumptions regarding a scheduled offence, particularly when the CBI had already exonerated Louis Dreyfus after full investigation into the same LC transactions.

“The authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed, there can be no offence of money laundering against him or any one claiming such property being the property linked to the scheduled offence through him.”

The court further held that there is a distinction between a person not being named in the predicate offence and one being specifically exonerated after a full-fledged investigation.

It said that since the CBI had already investigated the disputed LCs, found no diversion of funds involving Louis Dreyfus, and concluded that it was not a beneficiary, the ED could not continue alleging involvement in proceeds of crime on the same factual foundation.

Accordingly, the Court quashed the trial court proceedings against LDC while directing that proceedings against the remaining accused persons would continue.