J&K High Court Quashes FIR Against Former J&K State Cooperative Bank Chairman Mohammad Shafi Dar, Finds No Money Laundering

In a landmark decision , the Jammu and Kashmir, Ladakh high court has acquitted former Chairman Jammu and Kashmir State Cooperative Bank Mohammad Shafi Dar. In this regard, in a big decision High Court has quashed the complaints made by the Enforcement Department (ED) before the Special Judge Anti-Corruption (CBI) under Prevention of Money Laundering Act (PMLA) against the former Chairman J&K State Cooperative Bank (JKSCB) Ltd and the Chairman of River Jhelum Co-operative House Building Society in Rs 250 crore loan scam. Justice Javed Iqbal Wani while dealing with petitions moved by the former Chairman JKSCB, Mohammad Shafi Dar and the Chairman of River Jhelum Co-operative House Building Society, Hilal Ahmad Mir, against the complaints made by the ED against them under Money Laundering case concluded that the instant petitions succeed, as a consequence whereof, the impugned complaints qua the petitioners in both the petitions are quashed. The ED after completion of the investigation in the ECIR, filed a complaint before the court of Special Judge, Anti-Corruption Bureau being Designated Court for the purposes of Prevention of Money-Laundering Act, 2002 wherein the petitioners came to be arrayed as accused alleged to have committed offence under Section 44 and 45 read with Section 70 of the PMLA. Quashing complaints filed under the PMLA in an alleged 250 crore scam Justice Javed Iqbal Wani observed, “Having regard to the aforesaid position obtaining in the matter, inasmuch as the admitted facts noticed in the preceding paras, the alleged offence manifestly has not resulted in any “proceed of crime” in favour of the petitioners herein. A-fortiori, it cannot be said that the petitioners have indulged in any activity connected with the “proceeds of crime” for unless there are “proceeds of crime”, there cannot be any activity about the “proceeds of crime”. The dispute arose from a ₹250 crore loan sanctioned by the J&K State Co-operative Bank to the River Jehlum Co-operative House Building Society for developing a satellite township in Shivpora, Srinagar. Allegations were made that the society was fictitious and that the loan was obtained fraudulently, bypassing standard procedures such as proper documentation, KYC norms, and tangible security. The Anti-Corruption Bureau (ACB) registered an FIR in 2020, alleging offences under the J&K Prevention of Corruption Act and the Indian Penal Code. Subsequently, the Enforcement Directorate (ED) initiated proceedings under the PMLA, attaching properties and accusing the petitioners of money laundering. The petitioners, who served as Chairman and Secretary, respectively, of the River Jehlum Co-operative House Building Society alongside the Chairman of the Jammu and Kashmir State Co-operative Bank, which sanctioned a loan of ₹250 crores to the society for the project challenged the proceedings, contending that no “proceeds of crime” were involved as the loan amount was directly credited to landowners’ accounts as payment for the land. They argued that the funds never came under their possession, negating any scope for money laundering under the PMLA. In yet another landmark observation, Analysing the record, the court found no evidence that the petitioners possessed or controlled the funds in question as the loan amount of ₹250 crores, sanctioned by the J&K State Co-operative Bank, was directly transferred to the accounts of 18 landowners as payment for their property. “…there was no occasion for the petitioners herein to indulge in any activity associated with the so called “proceeds of crime” as the money that has been released out of the sanctioned loan, which is described as the “proceeds of crime” in the complaint, had admittedly been transferred/credited directly into the accounts of the land owners and the petitioners herein had never been in possession or control of the said money, which is alleged to have been laundered”, the court remarked. Furthermore, the Court referred to the Supreme Court’s order, which allowed the landowners to withdraw the attached funds, affirming that the transaction between the society and the landowners was legitimate. The Court highlighted that if the funds in the landowners’ accounts had been proceeds of crime, the Supreme Court would not have permitted their release.