Allahabad HC Grants Bail in PMLA Case After Six Predicate FIRs End in Closure Reports

Justice Vikram D. Chauhan found that all six scheduled-offence FIRs from Himachal Pradesh had resulted in closure reports, fatally undermining the Enforcement Directorate’s proceeds-of-crime claim against the applicant.

The Allahabad High Court on 1 July 2026 granted bail to Sanjay Kumar @ Sanjay Dhiman, an accused in a Prevention of Money Laundering Act, 2002 case initiated by the Directorate of Enforcement. Justice Vikram D. Chauhan, sitting singly in Court No. 55, allowed Criminal Misc. Bail Application No. 38900 of 2025, finding that the six First Information Reports registered in Himachal Pradesh—which formed the entire scheduled-offence foundation of ECIR/HQ/01/2024—had each ended in closure reports accepted by competent courts. With no independently established scheduled offence remaining, the court held that the income said to have been generated at Himachal Pradesh could not be treated as proceeds of crime under PMLA, and that continuing the applicant’s detention beyond 18 months in these circumstances would amount to punishment before conviction.

The Enforcement Case and the Applicant’s Alleged Role

The Enforcement Directorate registered ECIR/HQ/01/2024 on the basis of six FIRs lodged at police stations in Districts Kangra and Una in Himachal Pradesh. Those FIRs alleged that tippers, JCBs and tractors were engaged in illegal mining on government land in the two districts, with illegally extracted minerals transported by overloaded vehicles to stone crushers.

The central entity in the prosecution case was M/s Jai Maa Jwala Stone Crusher, a proprietorship concern of co-accused Gian Chand, located in Adhwani Village, Jwalamukhi Tehsil, Kangra District. The Enforcement Directorate alleged that this stone crusher mined beyond its permitted lease area, conducted night-time mining, and sold crushed stone for cash. The National Green Tribunal had separately ordered the closure of M/s Ambay Stone Crusher-Cum-Mixer Plant, a partnership entity in which Gian Chand was one of three equal partners, because the plant stood within 100 metres of water bodies.

The applicant, Sanjay Kumar @ Sanjay Dhiman, was not named in any of the six Himachal Pradesh FIRs. The prosecution case was that he was a person who handled the day-to-day affairs of Jai Maa Jwala Stone Crusher and held a 9 per cent share in Garhwal Stone Crusher at Tehsil Behat, District Saharanpur, Uttar Pradesh—a stone crusher the Enforcement Directorate claimed was purchased with proceeds of the illegal mining in Himachal Pradesh.

According to the prosecution, Garhwal Stone Crusher was purchased in 2023–24 for Rs. 4.70 crore. Of that amount, Rs. 2.9 crore was paid through banking channels. The remaining Rs. 1.80 crore was paid in cash: Rs. 1.60 crore by Gian Chand from receipts of Jai Maa Jwala Stone Crusher and Rs. 20 lakh by the applicant, whose source of funds the Enforcement Directorate said was undisclosed.

A search at the premises of Garhwal Stone Crusher on 26 September 2024 found excess stored riverbed material of 1,182 cubic metres against a portal-recorded figure of 776 cubic metres. The State GST Department had earlier, on 20 June 2024, seized minerals worth Rs. 62.14 lakh at the same premises. Those seized minerals were subsequently sold without GST department permission. The Enforcement Directorate further alleged that Star Mines, a partnership firm, had sold 1,43,552 quintals of illegally mined minerals valued at Rs. 21,53,280 to Garhwal Stone Crusher.

On 7 November 2024, a fresh FIR bearing No. 0360 was registered at Police Station Behat, Saharanpur, against the applicant and others following a complaint by the Mining Inspector, District Magistrate Office, Saharanpur. The Enforcement Directorate subsequently made an addendum to ECIR/HQ/01/2024 including the new scheduled offences under Sections 413, 417, 418, 424, 471 and 120-B of the IPC. The applicant was arrested on 18 November 2024.

Why the Scheduled-Offence Foundation Collapsed

The court examined the status of each of the six Himachal Pradesh FIRs that the Enforcement Directorate relied upon as scheduled offences:

FIR No. 229/2018 (Sections 420, 120-B IPC and Section 21 of the Mines and Minerals (Development and Regulation) Act, 1957): closure report accepted by the Chief Judicial Magistrate, Una on 22 June 2019.

FIR No. 12/2018 (Sections 420, 120-B IPC, Section 21 MMDR Act and Section 194 of the Motor Vehicles Act, 1988): cancellation accepted by the JMFC, Una on 17 January 2023.

FIR No. 114/2019 (Section 411 IPC and Section 21 MMDR Act): cancellation accepted by the JMFC, Indora, District Kangra on 16 November 2022.

FIR No. 5/2018 (Sections 420, 406, 34 IPC and Section 22 MMDR Act): cancellation accepted by the court concerned on 25 June 2019.

FIR No. 7/2023 and FIR No. 120/2023: closure reports filed before the court concerned on 12 November 2024 and 30 November 2024 respectively, with acceptance proceedings pending.

Justice Chauhan observed that the ECIR itself was registered on 2 July 2024—after four of those six closure reports had already been accepted by Himachal Pradesh courts. The scheduled-offence foundation was therefore not in existence on the date the ECIR was lodged. The Enforcement Directorate, the court noted, could not dispute the fact that closure reports had been submitted in all six cases.

The judgment then turned to the statutory definitions. Section 2(u) of PMLA defines “proceeds of crime” as any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. Section 2(y) defines a scheduled offence as one specified in Part A of the Schedule, or a Part B offence where the total value involved is Rs. 30 lakh or more. Since no scheduled offence had been established in the Himachal Pradesh FIRs after investigation, the court reasoned that income generated by Jai Maa Jwala Stone Crusher from its activities in Himachal Pradesh could not be characterised as proceeds of crime arising from a scheduled offence.

This reasoning had a cascading effect on the Garhwal Stone Crusher allegation. The prosecution case was that Garhwal Stone Crusher was itself a proceed of crime because it was purchased with money from the Himachal Pradesh illegal mining. The court held that once the scheduled-offence predicate at Himachal Pradesh failed, the purchase consideration for Garhwal Stone Crusher—however unaccounted—could not be presumed to be proceeds of crime. The court stated plainly that it is different to say income was generated by tax evasion or by illegal means than to say it constitutes proceeds of crime arising from a scheduled offence.

On the Uttar Pradesh limb of the case, the court found that although Garhwal Stone Crusher had exceeded its licensed storage limits and that excess material had been sold without GST permission, the Enforcement Directorate had not identified any specific assets of the applicant derived from those activities. No property belonging to the applicant appeared in Table No. 6 of the complaint—the table listing attached assets. All seizures and account freezes recorded there pertained to Gian Chand and Jai Maa Jwala Stone Crusher. The court observed that a person may hold assets of unknown origin without those assets being presumed derived from a scheduled offence.

The court also noted that the complaint alleged Garhwal Stone Crusher, once acquired, became “instrumental in generating further proceeds of crime.” However, this was insufficient without identification of the specific assets or property obtained from those activities. On the Star Mines transaction, the court observed that the complaint itself stated the Rs. 21,53,280 proceeds from illegal mineral sales were consumed in day-to-day affairs of Star Mines and were therefore not available for attachment—a further indication that no discrete proceeds of crime had been traced to the applicant.

Constitutional Liberty and the Weight of Prolonged Custody

Having found that the proceeds-of-crime case against the applicant lacked a stable foundation, the court addressed the prolonged incarceration. The applicant had been in custody since 18 November 2024—over 18 months at the time of the order. Trial had not concluded. The co-accused Gian Chand, who was the actual proprietor of Jai Maa Jwala Stone Crusher and held 75 per cent of Garhwal Stone Crusher, had already been enlarged on bail by the trial court.

Justice Chauhan drew on a line of Supreme Court decisions. In Ramkripal Meena v. Directorate of Enforcement, (2024) 12 SCC 682, the Supreme Court had granted bail after one year of custody where the only scheduled offence left against the accused was one in which he had already been enlarged on bail. In Union of India v. K.A. Najeeb, (2021) 3 SCC 713, the Supreme Court had held that once a timely trial is not possible and incarceration has been significant, courts are ordinarily obligated to enlarge the accused on bail, and that statutory restrictions such as Section 45 of PMLA do not oust the constitutional court’s power to grant bail for violation of Part III of the Constitution.

The court quoted from Manish Sisodia v. Directorate of Enforcement, (2024) 12 SCC 660: “bail is not to be withheld as a punishment.” It also referred to Javed Gulam Nabi Shaikh v. State of Maharashtra, (2024) 9 SCC 813, where the Supreme Court held that if the State cannot provide a speedy trial, it should not oppose bail merely because the alleged crime is serious, Article 21 applying irrespective of the nature of the offence. In Prem Prakash v. Union of India, (2024) 9 SCC 787, the Supreme Court had affirmed that Section 45 of PMLA restricts but does not absolutely bar bail, discretion remaining with the court.

The court held that given the state of the scheduled-offence predicates, the absence of any proceeds of crime identified against the applicant personally, the fact that his co-accused was already on bail, and the applicant’s detention exceeding 18 months without trial completion, continuing custody would amount to punishment pending trial.

Order

Justice Vikram D. Chauhan allowed Criminal Misc. Bail Application No. 38900 of 2025 and directed that Sanjay Kumar @ Sanjay Dhiman be released on bail in Special Case No. 01/2025 (ECIR/HQ/01/2024), pending before the Special Judge (Anti-Corruption), CBI-2, Ghaziabad, on furnishing a personal bond and two sureties each in the like amount to the satisfaction of the trial court.

The bail is subject to seven conditions: the applicant must not tamper with evidence; must not pressurise or intimidate prosecution witnesses; must appear before the trial court on each date fixed unless personal presence is exempted; must not commit a similar offence; must not make any inducement, threat or promise to any person acquainted with the facts of the case; must not leave India without the prior permission of the trial court; and must inform the trial court in writing of any change of residential address.

Liberty was reserved to the prosecution to move a bail cancellation application before the High Court in the event of any breach of these conditions. The court expressly clarified that its findings and observations in the bail order shall have no bearing on the merits of the case before the trial court, which is to proceed independently.