Indira Sahakari Sootgirni Maryadit Vs Deputy Director (Appellate Tribunal under SAFEMA, New Delhi)
PMLA: Tribunal Upholds ₹74.81 Lakh Attachment, Rejects Claim of Genuine Business Dues
The Appellate Tribunal under SAFEMA, New Delhi, has upheld the attachment of ₹74,81,114 in the bank account of Indira Sahakari Sootgirni Maryadit, rejecting its contention that the amount represented genuine business dues payable to another entity.
In Indira Sahakari Sootgirni Maryadit v. Deputy Director, Directorate of Enforcement, Nagpur, Appeal No. FPA-PMLA-2152/NGP/2024, decided on 4 November 2026, the Tribunal held that the attachment rested on material gathered during investigation rather than mere suspicion.
The Tribunal dismissed the appeal against the Adjudicating Authority’s order dated 30 September 2024, confirming the provisional attachment dated 27 April 2024.
Background: Alleged Fraud Against Welspun India
The proceedings arose from allegations that Laxmi Narain Kaushik, while associated with Welspun India Limited, conspired with others to procure low-quality cotton and receive financial benefits from suppliers.
The allegations included purchasing approximately 1,200 bales of low-quality MECH-1 cotton, introducing new suppliers despite quality concerns and obtaining kickbacks.
Separate complaints concerned alleged intimidation of witnesses, disclosure of confidential business information to competitors and diversion of business.
According to the investigation, vendors were misled into believing that Textile Professional LLP (TPLLP) and Shachi Imports and Exports Pvt. Ltd. were subsidiaries of Welspun India. Business was allegedly diverted through these entities for the benefit of the main accused.
The ED alleged that Kaushik received ₹45.4 crore, routed through entities beneficially owned or controlled by him and other accounts.
Dispute Concerned Amount Payable to TPLLP
The appellant’s attachment concerned ₹74,81,114 identified as payable to TPLLP.
The appellant maintained that it had conducted genuine business with TPLLP since 16 October 2019. The outstanding amount, according to it, arose from those commercial dealings and was payable to the LLP, rather than personally to Kaushik.
It argued that transactions with an entity associated with an accused person could not, without supporting evidence, establish possession of proceeds of crime.
The appellant also maintained that the attached State Bank of India account was used for working capital and that the restriction had brought its business to a grinding halt.
Appellant Alleged Attachment Based on Suspicion
The appellant submitted that the ED had failed to establish a money trail connecting the attached balance with criminal activity.
It argued that the finding of suspicious transactions arose from assumptions about other entities, overlooking its own genuine business operations.
The appellant further disputed the interpretation of its Managing Director’s statement recorded under Section 50(2) of PMLA. According to it, the statement acknowledged an amount payable to TPLLP, not an amount payable to Kaushik personally.
Relying on Directorate of Enforcement v. Poonam Malik, it contended that “reason to believe” must rest on cogent material, rather than suspicion.
It also argued that the ED had to establish foundational facts before invoking the reverse burden under Section 24.
Tribunal Examined Outstanding Dues and Appellant’s Conduct
The Tribunal considered the appellant’s admission that the attached amount was payable to TPLLP.
It noted that TPLLP had not instituted recovery proceedings or otherwise pursued recovery of the amount. In that background, it questioned the appellant’s effort to obtain release of funds which, on its own case, were payable to another entity.
The Tribunal treated this conduct as supporting the inference that the appellant sought to benefit TPLLP, managed by the main accused.
It also viewed the appellant’s simultaneous description of the amount as its working capital and as money payable to TPLLP as contradictory.
These observations formed part of the Tribunal’s assessment of the surrounding transactions and the purpose of seeking release.
Managing Director’s Statement Supported Attachment
The Tribunal referred to the statement of Atul Patil, the appellant’s Managing Director, recorded on 16 April 2024.
The statement confirmed the commencement of dealings with TPLLP and the outstanding amount of ₹74,81,114 for financial year 2023-24.
The Tribunal noted that the prosecution complaint referred to the amount as payable to Kaushik and his business entities.
It further reasoned that, even accepting the appellant’s contention that the payment was due only to TPLLP, the recipient would remain an entity managed by the main accused for his benefit.
The distinction advanced by the appellant therefore did not persuade the Tribunal to release the attached funds.
Appeal Dismissed
The Tribunal acknowledged that the action may initially have originated from suspicious transactions. However, it held that subsequent material and the appellant’s conduct supported the attachment.
It therefore declined to interfere with the confirmation order and dismissed the appeal.
The decision illustrates the Tribunal’s assessment of a claimed commercial payable in the context of alleged diversion of business and connected entities. It does not establish that every outstanding trade liability involving an accused person’s entity is automatically proceeds of crime. The outcome rested on the particular record and inferences drawn in these attachment proceedings.
Cases Discussed:
- Directorate of Enforcement Vs Poonam Malik (Delhi High Court) — (2025) 180 taxmann.com 625 (Delhi); referred to by the appellant regarding reasons to believe and suspicion.
FULL TEXT OF THE JUDGMENT/ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA, NEW DELHI
By this appeal under Section 26 of the Prevention of Money Laundering Act, 2002, a challenge has been made to the order dated 30.09.2024 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 27.04.2024.
2. It is a case where a complaint was filed by Shri Anand Dattatreya Kulkarni, DGM and former employee of M/s Welspun India Ltd. (M/s WIL) against Laxmi Narain Kaushik and others. It was alleged that the main accused Laxmi Narain Kaushik, in collusion with Shri Mahendra Rathi, defrauded M/s WIL by purchasing low-quality cotton. The complainant was part of the cotton purchasing team of the company and responsible for evaluating the quality of cotton through laboratory tests. The team was tasked for quality assurance of the cotton procured for the Vapi Plant, Gujarat.
3. In August, 2018, Laxmi Narain Kaushik joined the company as a business head and took charge of cotton purchases in November, 2018. He engaged himself to buy low-quality MECH-1 cotton from Shri Mahendra Rathi’s connections despite previous poor experience. Ignoring the complainant’s warning about the quality, Laxmi Narain Kaushik purchased approximately 1,200 bales of MECH-1 cotton. He introduced about 15 new suppliers of low-quality cotton to the company. In return, Laxmi Narain Kaushik and Mahendra Rathi received financial benefits from these vendors. Laxmi Narain Kaushik even threatened Shri Anand Dattatreya Kulkarni for making complaint. It was in the presence of Quality Testing team.
4. The police filed charge sheet on 25.11.2022 for the commission of offence under Section 342,348,406,408,504,506(2),120-B and 114 of IPC against Laxmi Narain Kaushik and Mahendra Rathi. Laxmi Narain Kaushik even offered financial benefits to the complainant Shri Anand Dattatreya Kulkarni.
5. Another FIR was registered with Vapi Town Police Station on 20.09.2023 for an offence under Section 389 read with Section 120- B IPC on the complainant of Shri Samir Jashvantrai Desai. It was alleged that Laxmi Narain Kaushik used threats and extortion to force him to withdraw as a witness from the case and demanded Rs.10 lakhs from him. The PS Cybercrime, Ahmedabad City, Gujarat had registered yet another FIR against Laxmi Narain Kaushik on 04.03.2024 based on a complaint by Shri Bhumik Dave, Assistant Vice President of M/s WIL. It was for the offence under Sections 406,419,420 IPC and Section 66B of the Information Technology Act. It was alleged that the main accused Laxmi Narain Kaushik while working as a Director of M/s WIL illegally obtained and leaked sensitive proprietary information to the competitors causing financial loss to the company.
6. The main accused was found involved in diverting business from M/s WIL by misleading the vendors into believing that M/s Textile Professional LLP (M/s TPLLP) and M/s Shachi Imports and Exports Pvt. Ltd. (M/s SIEPL) are subsidiaries of M/s WIL. He persuaded the vendors to transact through M/s TPLLP and M/s SIEPL which resulted in loss to M/s WIL.
7. It was alleged that Laxmi Narain Kaushik orchestrated a systematic conspiracy to defraud M/s Welspun India Limited for his own financial gain and that of his accomplices. He received financial kickbacks from M/s WIL’s competitors for leaking company’s confidential proprietary information, causing financial loss to M/s WIL. Additionally, he exploited his position within the company to procure low-quality MECH-1 cotton and received financial kickbacks from new vendors. He also diverted company’s business by misleading vendors into believing it to be his personal entities i.e. M/s TPLLP and M/s SIEPL.
8. As per the information given by the Income Tax Department, Laxmi Narain Kaushik was found to be in possession of two foreign bank accounts and shareholdings in a company in Indonesia. He was also having unreported bank accounts in Singapore, Turkey and Sri Lanka. His HSBC account in Sri Lanka contained undisclosed fixed deposits maturing at USD 127,939 on 22.11.2023.
9. M/s TPLLP was engaged in transactions with M/s Matoshree Magasvargiya Shetkari Sehkari Sootgimi Maryadit. However, Shri Wasudev Varade, in a statement recorded under Section 132(4) of the Income Tax Act 1961 and reconfirmed under Section 50 (2) of PMLA 2002, admitted that “Yashwant Sahakari Soot Giri Maryadit and Matosliree Magasvargiya Shetkari Sehkari Sootgirni Maryadit are not conducting genuine business activities. All operations at the mill are controlled and managed by TPL only.”
10. During the Income Tax Department search, blank cheques from Nagpur Nagarik Sahakari Bank Ltd (A/c No. 022011100000798) belonging to M/s Matoshree Magasvargiya Shetkari Sehkari Sootgirni Maryadit were found at the premises of M/s TPLLP. These cheques were signed by Narayan Khapse (Manager of Matoshree mill) and Bandu Thukaram Tagde (Chairman of Matoshree mill), indicating that the purchase transactions of Matoshree Magasvargiya were fictitious.
11. The facts given above show the deeds of main accused Laxmi Narain Kaushik and other accused. However, provisional attachment of the properties belonging to the appellant was also caused and has been challenged as the appellant is not alleged to be involved in commission of crime though it was found that the main accused remained recipient of Rs.45.4 Crores and it was diverted through the entities beneficially owned and controlled by him i.e. M/s TPLLP and M/s SIEPL. It was also in the bank accounts of his spouse Smt. Shachi Kaushik.
12. So far as the appellant is concerned, it was found working in association with the main accused Laxmi Narain Kaushik and found in possession of the proceeds of crime. So far as M/s Indira Sahakari Sootgirni and M/s Shri Gajajan Sahkari Sootgirni are concerned, they were found to be in possession of the proceeds of crime of Rs.80,23,071/- and, in fact, the attached properties comprised in four categories. The first category consisted of an immovable property standing in the name of Shri Laxmi Narain Kaushik valued at Rs.41,00,000/-. The second category comprised movable properties, including bank balances of Shri Laxmi Narain Kaushik, his wife, M/s TPLLP and M/s SIEPL aggregating Rs.96,34,709.87. The third category consisted of movable properties, namely bank balances of M/s Indira Sahakari Sootgirni Maryadit and M/s Shree Gajanan Sahakari Sootgirni, valued at Rs.80,23,071/-, which, according to the Enforcement Directorate, represents proceeds of crime routed through outstanding receivables of M/s TPLLP. The fourth category comprised bank balances of M/s Fame Lifestyle Pvt. Ltd., M/s Alliance Fibres Ltd., R. Yarns Pvt. Ltd., M/s Katbro Corporation Pvt. Ltd., Rangoli Yarns and Shree Ganesh Enterprises, aggregating Rs.43,15,481/-. The provisional attachment of the properties has been confirmed by the Adjudicating Authority. Aggrieved by the order, this appeal has been filed.
Arguments of counsel for the appellant:
13. The learned counsel for the appellant submitted that without involvement of the appellant in commission of crime and even possession of the proceeds of crime, the properties have been attached. The respondent failed to connect the property under provisional attachment with the crime. It could not have been on account of the transaction of the appellant with a company beneficially owned by the main accused Laxmi Narain Kaushik i.e. M/s TPLLP and M/s SIEPL. So far as M/s Indira Sahakari Sootgirni Maryadit is concerned, the provisional attachment has been caused finding outstanding receivables by M/s TPLLP in the financial year 2022-23. The appellant was one of the party to transact with M/s TPLLP and despite existence of large receivables, considerable payments and debit entries continued to be made by M/s TPLLP in favour of the appellant yet the sum under attachment was shown payable to M/s TPLLP. It was taken to be unusual pattern and thus suspicious transactions.
14. The learned counsel for the appellant submitted that the impugned order in the case of M/s Indira Sahakari Sootgirni Maryadit has been caused based on suspicion while the mandate of the Act requires a money trail and a case of money laundering without doubt. In the case of M/s Indira Sahakari Sootgirni Maryadit, the element of money laundering and the proceeds of crime is missing. The order is based on suspicion.
15. The learned counsel for the appellant further submitted that the suspicion was drawn on the presumption that certain companies transacted with M/s TPLLP were not having business activities, which was verified during the course of investigation overlooking the fact that the appellant M/s Indira Sahakari Sootgirni Maryadit was involved in genuine business.
16. The respondent has relied on the statement of Shri Atul Patil, Managing Director of the appellant, recorded under Section 50(2) of the Act of 2002. The said witness confirmed over commencement of business dealings of the appellant company with TPLLP since 16.10.2019. It was, however, with an admission that at the close of the financial year 2023-24, an amount of Rs.74,81,114/- remained payable by the appellant to M/s TPLLP. It has been taken for the main accused Laxmi Narain Kaushik. According to the respondent, the said amount was nothing but to benefit Laxmi Narain Kaushik, thus proceeds of crime under Section 2(1)(u) of the Act of 2002. The presumption aforesaid is not based on cogent evidence and reasons. The impugned order thus deserves to be set aside.
17. The learned counsel for the appellant further submitted that the SBI account under provisional attachment was operated for working capital. The settlement of the amount was out of the transaction between the appellant and M/s TPLLP. It had no connection with Laxmi Narain Kaushik. By twisting the statement of the Managing Director of the appellant, it was taken to indicate due amount to Laxmi Narain Kaushik while no such statement was made. The finding recorded by the Adjudicating Authority goes beyond the record and thus deserves to be interfered.
18. The learned counsel for the appellant further submitted that the appellant company was involved in business and had been carrying the transactions with M/s TPLLP since the year 2019 and, therefore, no sham transaction was existing between the parties. The amount of Rs.74,81,114/- was payable to M/s TPLLP out of the sale of the products and, therefore, there was no reason to provisionally attach the said amount and otherwise it is solely based on suspicion. The reasons to believe should be based on cogent material and not on suspicion, as exist in this case.
19. The learned counsel gave reference to the judgment of the Hon’ble High Court of Delhi in the case of Directorate of Enforcement Vs. Poonam Malik reported in (2025) 180 taxmann.com 625 (Delhi), affirmed by the Hon’ble Supreme Court in SLP (Cr.) Diary No.25221/2026 vide order dated 31.07.2026. The judgment in the case (supra) has been upheld by the Apex Court while dismissing the appeal in limine. In view of the above, the impugned order deserves to be set aside having been caused solely based on suspicion. It is with further submission that on account of provisional attachment of the SBI account for a sum of Rs.74,81,114/-, the business of the appellant has come to a grinding halt.
20. In view of the above also, the impugned order deserves to be set aside.
21. The learned counsel for the appellant further submitted that the burden of proof initially lies on the respondent ED and it is only after laying foundation of facts that Section 24 of the Act of 2002 can be invoked. The aforesaid aspect was also ignored by the respondent for causing Provisional Attachment Order and even by the Adjudicating Authority while passing the impugned order. The learned counsel for the appellant accordingly prayed for quashing of the order and for acceptance of the appeal.
21. With the aforesaid, the learned counsel for the appellant concluded his arguments though he was invited to raise any other legal or factual issue other than what has been referred to above. The learned counsel for the appellant shown his satisfaction to the arguments raised by him for pressing the appeal and closed his arguments.
Arguments of counsel for the respondent:
22. The learned counsel for the respondent contested the appeal. Elaborate arguments were made on each issue raised by the counsel for the appellant and would be referred while recording the finding. It is to avoid repetition of facts and otherwise for the sake of brevity.
Finding of the Tribunal:
23. I have considered the rival submissions of the parties and scanned the record carefully.
24. The opening paras of this order refer to a complaint by Shri Anand Dattatreya Kulkarni, DGM and former employee of M/s WIL against Laxmi Narain Kaushik and others. It was alleged that the accused Laxmi Narain Kaushik, in collusion with Shri Mahendra Rathi, defrauded M/s WIL by purchasing low-quality cotton. The complainant was part of the cotton purchasing team of the company and responsible for evaluating the quality of cotton. The team was specifically tasked for quality assurance of the cotton procured for the Vapi Plant, Gujarat.
25. It was found that in August, 2018 Laxmi Narain Kaushik joined the company as a business head and took charge of cotton purchases in November, 2018. He engaged himself to buy low-quality MECH-1 cotton from Shri Mahendra Rathi’s connections despite previous poor experience. The complainant gave warning to the main accused Laxmi Narain Kaushik for the purchase of low-quality cotton yet purchase of approximately 1,200 bales of MECH-1 cotton was made by introducing about 15 new suppliers of low-quality cotton to the company. Laxmi Narain Kaushik and Mahendra Rathi received financial benefits from the vendors. The charge sheet in reference to the first FIR was filed on 25.11.2022.
26. Another FIR was registered with Vapi Town Police Station on 20.09.2023 for the offence under Section 389 read with Section 120- B IPC. It was on the complaint of Shri Samir Jashvantrai Desai, who alleged threats and extortion by the main accused Laxmi Narain Kaushik. The complainant was asked to withdraw himself from the witness with demand of Rs.10 lakhs.
27. The third FIR was registered on 04.03.3034 based on the complaint of Shri Bhumik Dave, Assistant Vice President of M/s WIL. It was alleged that the main accused Laxmi Narain Kaushik while working as a Director of M/s WIL illegally obtained and leaked sensitive proprietary information to the competitors causing financial loss to the company. The main accused was found involved in diverting business from M/s WIL by misleading the vendors into believing that M/s TPLLP and M/s SIEPL are subsidiaries of M/s WIL. He persuaded the vendors to transact through M/s TPLLP and M/s SIEPL which resulted in loss to M/s WIL and gain to the main accused and he was monitoring the aforesaid through M/s TPLLP and M/s SIEPL.
28. The facts referred to above show that the main accused Laxmi Narain Kaushik orchestrated a systematic conspiracy to defraud M/s WIL for his own financial gain and that of his accomplices. The main accused received financial kickbacks from M/s WIL’s competitors for leaking company’s confidential proprietary information and diversion of the business. It was mainly to M/s TPLLP and M/s SIEPL.
29. During the course of investigation, it was also found that Laxmi Narain Kaushik is in possession of two foreign bank accounts and shareholdings in a company in Indonesia. He was also having unreported bank accounts in Singapore, Turkey and Sri Lanka. His HSBC account in Sri Lanka contained undisclosed fixed deposits maturing at USD 127,939 on 22.11.2023.
30. So far as the appellant is concerned, their transactions were found in accord with M/s TPLLP and M/s SIEPL without actual business. The counsel for the appellant, however, submitted that the appellant company was in business with M/s TPLLP since the year 2019 and was having due amount of Rs.74,81,114/- in the financial year 2023-24. It was payable to M/s TPLLP and not to the main accused Laxmi Narain Kaushik though, according to the respondent, the said amount was nothing but proceeds of crime to be extended to the main accused through M/s TPLLP and accordingly provisional attachment of the amount referred to above was caused.
31. The challenge to the Provisional Attachment Order for an amount of Rs.74,81,114/- has been made mainly on the ground that it is payable to M/s TPLLP with an admission that no recovery suit or any action has been taken by M/s TPLLP for its recovery. The fact aforesaid gets significant in the background of the case, rather it is quite surprising that while an entity M/s TPLLP is not pursuing recovery of Rs.74,81,114/-, showing it to be due on account of supply of material, the appellant has taken up the matter which remains on behalf of M/s TPLLP, otherwise even, according to the appellant, the amount aforesaid does not belong to the company but is payable to M/s TPLLP.
32. The fact aforesaid becomes relevant with an admission of the appellant that merely for the reason that no proceeding for recovery of the amount has been initiated by M/s TPLLP, the amount of Rs.74,81,114/- could not have been provisionally attached. This itself shows intention of the appellant to bestow favour to M/s TPLLP managed by the main accused Laxmi Narain Kaushik. In fact, the highest office in the management of the appellant would be expected to find out the reason for filing appeal incurring cause for a case which does not affect them directly.
33. At this stage, it would be relevant to refer to the argument of the appellant that provisional attachment of the amount is out of the working capital and otherwise it had no connection with Laxmi Narain Kaushik. The fact aforesaid remains in contradiction. At one place, the appellant had admitted that the amount under provisional attachment is payable to M/s TPLLP while it is referring to the working capital amount on the other side in contradiction. It may be true that the appellant company was having transaction with M/s TPLLP since the year 2019 but thereupon the company M/s TPLLP and other related companies managed by Laxmi Narain Kaushik were having no business with returns of income tax for assessment.
34. I will now address the legal issues raised by the appellant. It was submitted that the reasons to believe should be on cogent material and not based on suspicion. In the instant case, the impugned order has been passed based on suspicion and not with the finding that the appellant is involved in money laundering defined under Section 3 of the Act of 2002. The reference of the judgment of Hon’ble High Court of Delhi in the case of Poonam Malik (supra) has been given.
35. To analyze the issue, I have gone through the record and find that initiation of action was based on suspicion but during the course of investigation, it was revealed that the appellant has not only remained recipient of the proceeds of crime as it gets proved from the fact that despite no persuasion or any action on the amount payable to M/s TPLLP, the appeal has been preferred by the appellant to get the amount released for its transfer to M/s TPLLP managed by the main accused Laxmi Narain Kaushik. It, therefore, remains no case of suspicion, rather the conduct of the appellant is explicit and proves a case of money laundering. I have already observed that appeal in the hands of the appellant is to benefit M/s TPLLP otherwise, according to the appellant themselves, the amount of Rs.74,81,114/- is payable to M/s TPLLP.
36. At this stage, reference of the statement of Shri Atul Patil, Managing Director of the appellant company, would be relevant. It was recorded under Section 50(2) of the Act of 2002 on 16.04.2024. Shri Atul Patil confirmed that the appellant started working with M/s TPLLP from 16.10.2019 and in the financial year 2023-24, the payable amount by the appellant company to Laxmi Narain Kaushik and his business entities was shown to be of Rs.74,81,114/-. The counsel for the appellant submitted that the said witness Shri Atul Patil did not make admission for payment of the amount under attachment to Laxmi Narain Kaushik but to M/s TPLLP. I, however, find that prosecution complaint makes a specific reference about the admission to make the payment of Rs.74,81,114/- to Laxmi Narain Kaushik and obviously it would be through his entity M/s TPLLP said to have been managed by the main accused Laxmi Narain Kaushik for his benefit. The prosecution complaint shows that the witness has specifically named Laxmi Narain Kaushik to receive the amount under provisional attachment and assuming if the name of Laxmi Narain Kaushik was not given by the witness, the amount would be received by M/s TPLLP as per the admission of the appellant. The counsel for the appellant could not give justification to file the appeal to press the claim for M/s TPLLP, rather it shows motive of the appellant company to endorse the proceeds of crime for its transfer to the entity M/s TPLLP managed by the main accused who had diverted the work of his own company M/s TPLLP to different entities for which many FIRs were registered.
37. In the light of the discussion made above, I do not find that the case remains based on suspicion. In fact, the foundation of the case may be with an intention of the suspicious transaction but with production of the material collected during the investigation, it becomes a clear case of money laundering in the hands of the appellant company which is pursuing the claim of an amount payable to M/s TPLLP and in that case it would not belong to the appellant. Thus, I do not find a case to cause interference in the impugned order. Appeal accordingly fails and is dismissed.
