Sanjay Kumar @ Sanjay Dhiman v. Directorate of Enforcement, 2026

Multiple FIRs were registered in Kangra and Una, Himachal Pradesh, alleging illegal mining on government land and unlawful transportation of minerals through overloaded vehicles.

The investigation alleged that M/s Jai Maa Jwala Stone Crusher, owned by a co-accused, was engaged in illegal extraction of minerals during night hours.

During investigation by the Directorate of Enforcement (ED), it was found that Garhwal Stone Crusher, situated in Saharanpur, Uttar Pradesh, had been purchased by the proprietor of M/s Jai Maa Jwala Stone Crusher.

The applicant was a partner in Garhwal Stone Crusher and was subsequently implicated in proceedings under the Prevention of Money Laundering Act, 2002 (PMLA).

FIRs invoking offences under the IPC, Prevention of Damage to Public Property Act, and the MMDR Act were registered against several persons, including the applicant.

The prosecution alleged that although the applicant was not the proprietor of M/s Jai Maa Jwala Stone Crusher, he actively participated in the day-to-day affairs of both business entities.

The applicant sought bail, contending that he was not named in the Himachal Pradesh FIRs, that no proceeds of crime had been linked to him, that the principal co-accused had already been granted bail, and that he had remained in custody for about 18 months.

During the proceedings, it was also brought to the Court's notice that closure reports had already been accepted in four out of six FIRs registered in Himachal Pradesh.

The High Court held that assets derived from unknown sources of income cannot automatically be presumed to be proceeds of crime arising from a scheduled offence under the PMLA.

The Court observed that Section 3 PMLA criminalizes only those activities connected with proceeds of crime, which must originate from a scheduled offence.

It emphasized that the expression "proceeds of crime" requires identification of property directly or indirectly derived from criminal activity relating to a scheduled offence.

The Court found that no evidence had been disclosed linking the applicant with the scheduled offences registered in Himachal Pradesh.

It noted that closure reports had been accepted in four out of six FIRs, thereby weakening the prosecution's case regarding the alleged scheduled offences.

The Court observed that since the applicant was not the proprietor of M/s Jai Maa Jwala Stone Crusher, income generated from that concern could not automatically be attributed to him.

It further held that once it was established that Garhwal Stone Crusher was not purchased from the proceeds of a scheduled offence, the income generated by it could not, without further proof, be treated as proceeds of crime.

The Court emphasized that although illegal mining or sale of illegally mined material may constitute an offence, the PMLA requires identification of specific property derived from a scheduled offence before prosecution can succeed.

It found that the Directorate of Enforcement had failed to identify any specific assets allegedly acquired from the scheduled offences or from the illegal sale and purchase of minerals.

Considering the absence of prima facie material, parity with the co-accused already granted bail, the applicant's prolonged incarceration, and the likelihood of delay in trial, the Court allowed the bail application.

The judgment reinforces the principle that the PMLA operates only where there is a demonstrable connection between the alleged property and a scheduled offence.

The Court correctly interpreted the statutory definition of "proceeds of crime" by insisting upon identification of property actually derived from criminal activity.

The decision emphasizes that mere suspicion, unexplained wealth, or assets from unknown sources cannot substitute the statutory requirement of proving proceeds of crime.

By distinguishing between illegal activity and proceeds of crime, the Court clarified that not every unlawful act automatically attracts liability under the PMLA.

The ruling strengthens the evidentiary burden upon the Directorate of Enforcement to specifically identify tainted assets before invoking money laundering provisions.

The Court also highlighted the significance of closure reports in weakening the prosecution's case where the alleged scheduled offences themselves remain unsubstantiated.

The judgment reinforces the settled principle that bail is the rule and jail is the exception, particularly where the trial is likely to take considerable time and no risk of absconding or tampering with evidence is demonstrated.

The decision is likely to influence future PMLA prosecutions by requiring stricter compliance with statutory definitions relating to proceeds of crime.

A notable strength of the judgment is its insistence that criminal liability under the PMLA must rest upon identifiable tainted property rather than assumptions regarding unexplained assets.

The ruling strengthens procedural safeguards against arbitrary invocation of money laundering proceedings while preserving the legislative intent of the PMLA.