The Bombay High Court has set aside the continuation of attachment over properties linked to businessman in a money laundering case arising from transactions involving YES Bank and Dewan Housing Finance Corporation Ltd. (DHFL).
The bench of Justice A. S. Gadkari and Justice Kamal Khata held that the Enforcement Directorate (ED) had not established a link between the transactions under scrutiny and proceeds of crime. The court said it could not understand how official transactions between a bank and a corporate entity, carried out in the usual course of business, could be treated as proceeds of crime on the material presented.
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The court allowed the appeal filed by the petitioner and others and dismissed the ED’s cross-appeal against the release of attached properties.
The appeals arose from an order passed on April 1, 2026, by the Appellate Tribunal in New Delhi. The tribunal had continued the provisional attachment to the extent of ₹25 crore against two properties.
The first was a Pune land parcel measuring 6,143.71 square metres, held in the name of Samit Realty Pvt. Ltd. and valued at ₹14.65 crore. The second was land measuring 20,200 square metres in Nagpur, held in the name of Gauri Bhosale and valued at approximately ₹15.53 crore. The tribunal had continued attachment over the Nagpur property to the extent required to make up the ₹25 crore amount.
The petitioner and the other appellants challenged the continuation of the attachment. The ED, meanwhile, challenged the tribunal’s decision to release the remaining attached properties.
The High Court found no basis to continue the attachment over the two properties. Its judgment dealt with the attachment appeals; it did not record a separate order disposing of the underlying criminal proceedings.
According to the judgment, the ED’s original complaint, filed on October 21, 2022, alleged that proceeds of crime amounting to ₹3,983 crore originated from YES Bank and were disbursed to DHFL through investments and financing arrangements.
The amount comprised ₹1,000 crore under subordinated debt or private placement of bonds, ₹283 crore through masala bonds, and ₹2,700 crore through a public issue of non-convertible debentures.
The court said the ED had alleged that ₹164.64 crore was received by petitioner or his entities through transactions concerning Nibodh Realty, consultancy arrangements and ABIL Dairy.
The bench examined the definitions of “proceeds of crime” and money laundering under Sections 2(1)(u) and 3 of the Prevention of Money Laundering Act, 2002.
It observed that the definition of proceeds of crime covers property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. On the record before it, however, the bench found that the ED had not established the necessary connection between the alleged proceeds and the transactions involving petitioner’s entities.
The court questioned how official banking transactions between a bank and a corporate entity, conducted in the ordinary course of business, could be characterised as proceeds of crime in the circumstances of the case.
The court examined transactions involving Nibodh Realty, which had invested ₹237.50 crore in a company associated with Sanjay Chhabria between October 2014 and July 2015 under three debenture subscription agreements. The agreements carried interest at 18% per annum.
The parties gave differing calculations concerning repayments. According to the appellants’ calculations recorded in the judgment, ₹499.63 crore had been repaid, including ₹335.70 crore after April 12, 2018. The ED alleged that ₹67.85 crore from the amount received after that date constituted proceeds of crime.
The bench found no basis for that allegation. It noted that the repayments were made under agreements executed in 2014 and held that no link had been established between those payments and the money disbursed by YES Bank in 2018. The court also found the ED’s calculation insufficient to support the figure of ₹67.85 crore.
The ED alleged that proceeds of crime of ₹71.82 crore were involved in consultancy agreements between DHFL and entities linked to petitioner.
The court noted that ₹47.52 crore had been disbursed by DHFL before YES Bank granted the loan to DHFL on April 12, 2018. It held that amounts received before that disbursal could not be linked to the alleged proceeds from it.
The judgment further recorded that ₹55.62 crore had been disbursed under the consultancy agreements between July 4, 2017, and May 11, 2018. An invoice for ₹16.20 crore was raised on April 6, 2018, six days before the date identified by the court for the YES Bank loan disbursal.
The ED also alleged that ₹25 crore received by ABIL from Sanjay Chhabria in February 2019 constituted proceeds of crime.
The court observed that the payment related to an agreement for the sale of a dairy business executed in 2016, under which the first 50% had been paid in January 2016. It found no basis to link the balance payment to proceeds of crime merely because it was paid after April 12, 2018.
The bench held that the transactions examined were independent transactions involving separate corporate entities and that no nexus between them had been established.
The ED had also contended that DHFL lent ₹600 crore in July 2018 to DOIT Urban Ventures, described in the judgment as allegedly being an entity associated with Rana Kapoor’s family, by way of a kickback.
The High Court found the allegation unsupported by cogent material on the record before it. It observed that a lender may decide, in its commercial judgment, whether to extend a loan with or without appropriate security. The court said the pleadings contained no material sufficient even to prima facie substantiate the kickback allegation.
The bench observed that the Appellate Tribunal had considered the parties’ submissions and that its conclusions on the material placed before it were not perverse. However, the High Court disagreed with the tribunal’s decision to continue attachment over the two properties.
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