The Madras High Court has held that money laundering can arise from handling proceeds of crime even if predicate offence occurred earlier.

The Bench of Chief Justice Manindra Mohan Shrivastava and Justice G. Arul Murugan has quashed money-laundering proceedings initiated by the Enforcement Directorate (ED) holding that the prosecution complaint failed to disclose the essential ingredients of the offence under the Prevention of Money Laundering Act, 2002 (PMLA). 

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The bench ruled that merely alleging illegal mining without identifying the “proceeds of crime” attributable to the accused is insufficient to sustain a prosecution under the PMLA. 

RR Granites, a partnership firm engaged in granite quarrying in Madurai district, had purchased quarry land in January 2000 from Bannari Amman Sugars Limited and subsequently obtained government consent for transfer of the mining lease in 2001. The firm later renewed the lease in 2004 and continued mining operations until 2008. 

The controversy arose after allegations of large-scale illegal granite quarrying in the region surfaced. Based on complaints and official inspections, several FIRs were registered in Madurai between 2012 and 2015 against multiple firms and individuals, including RR Granites, alleging illegal mining activities and causing significant loss to the government exchequer. 

The ED subsequently registered an Enforcement Case Information Report (ECIR) and alleged that the accused entities had illegally mined granite between 2001 and 2012, earning substantial profits and converting the proceeds into assets and properties. Acting on these allegations, the agency provisionally attached certain properties of the firm in October 2017 and later filed a prosecution complaint under the PMLA before the Special Court in Madurai. 

RR Granites argued that the PMLA complaint was fundamentally defective and did not disclose any offence under the Act. The firm contended that the property cited by the ED as “proceeds of crime” had been purchased in 2000, prior to the alleged illegal mining period of 2001–2012. The complaint failed to identify any specific proceeds of crime derived by the petitioner from illegal quarrying. Merely alleging illegal mining does not constitute an offence under the PMLA unless the complaint demonstrates how the accused possessed, concealed, or used the proceeds of such crime. The prosecution had relied largely on inspection reports without linking them to specific financial gains or assets attributable to the firm. 

The petitioner therefore argued that continuing the proceedings would amount to an abuse of process of law.

The ED opposed the petition and argued that the quarry land and related properties were involved in money-laundering as they were used in illegal mining activities. According to the agency the illegal quarrying operations allegedly resulted in significant financial gains for the accused. The proceeds from these activities were used to acquire or maintain properties and business interests. Under the PMLA, any property derived from or connected to criminal activity related to a scheduled offence can be treated as proceeds of crime. 

The agency further argued that money laundering is a continuing offence, and therefore the earlier acquisition of property would not automatically exclude it from investigation under the Act.

After examining the complaint and statutory provisions of the PMLA, the High Court found that the ED had not adequately demonstrated the existence of “proceeds of crime” attributable to RR Granites.

The Bench emphasized that the offence of money laundering revolves around dealing with the proceeds of crime, not merely the commission of the underlying scheduled offence. The complaint must therefore clearly specify how the accused derived or possessed such proceeds.

The Court noted that the prosecution complaint contained only limited references to the role of RR Granites and largely relied on a report quantifying allegedly illegal granite extraction. However, it did not explain how the extracted granite translated into financial proceeds, whether those proceeds were retained or converted into identifiable assets, or how such assets were projected as untainted property.

The Bench held that without such particulars, the complaint lacked the material facts necessary to sustain prosecution under the PMLA. 

The Court referred to the Supreme Court’s decision in Vijay Madanlal Choudhary v. Union of India, which clarified that property can be treated as “proceeds of crime” only if it is derived or obtained as a result of criminal activity relating to a scheduled offence.

Applying this principle, the High Court observed that the complaint did not demonstrate how the petitioner had derived property from the alleged illegal mining activity.

Concluding that the complaint did not disclose the ingredients of money laundering, the Madras High Court held that continuing the prosecution against RR Granites would amount to an abuse of the judicial process.

Accordingly, the Court quashed the complaint in C.C. No. 9 of 2018 and the summons issued to the petitioner insofar as the firm was concerned.

Case Details

Case Title: M/s.R.R.Granites Versus ED

Citation: JURISHOUR-254-HC-2026(MAD) 

Case No.: Crl.O.P.(MD) No.8317 of 2019 and Crl.M.P.(MD)Nos.5200 and 6763 of 2019

Date: 05.03.2026

Counsel For  Petitioner: Richardson Wilson

Counsel For Respondent: AR.L.Sundaresan

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