Kerala High Court: The present set of bail applications were filed by former MLA, M.C. Kamarudheen, and his business associate T K Pookoya Thangal in a complaint filed by the Enforcement Directorate (‘ED’) for offences punishable the Prevention of Money Laundering Act, 2002 (‘PMLA’), in relation to a fraud of over Rs 20 crore. A Single Judge Bench of Bechu Kurian Thomas, J., keeping in mind the long period of custody already underwent by them, granted bail to M.C. Kamarudheen and his business asssociate, and observed that detaining them for a long time, especially when the period of punishment provided was limited, was an unwarranted interference with personal liberty.
Background:
T K Pookoya Thangal was the Chairman of Fashion Gold International Private Ltd., incorporated in 2006 and M.C. Kamarudheen was also instrumental in its incorporation. Subsequently, three other sister companies were formed for carrying on a jewellery business and T K Pookoya Thangal was the Managing Director. The prosecution alleged that the deposits were collected by the accused who were active politicians and social workers, promising huge amounts of dividends or profits. Many complaints were registered and the investigations revealed that the deposits were collected from the public without any authority and the same were utilised by the accused for acquiring immovable properties in the personal names, which were then disposed of or transferred into the name of family members and other persons to avoid detection by authorities, thereby indulging in money-laundering.
A complaint was filed by the ED under Section 43(1) of the PMLA for offences punishable under Sections 3 and 4 of the PMLA against M.C. Kamarudheen and T K Pookoya Thangal . They were arrested on 07-04-2025 and were remanded the next day and have been in custody since then. The counsels for both the accused argued that the allegations were baseless and the accused, being respectable individuals, had already spent 155 days in custody. They also pointed out that 265 cases registered against them, under Sections 406, 409 and 420 read with Section 34 of the Penal Code, 1860 (‘IPC’), apart from Section 5 of the Kerala Protection of Interest of Depositors in Financial Establishments Act, 2013 and Section 5 read with Section 23 of the Banning of Unregulated Deposit Schemes Act, 2019 (‘BUDS Act’), were under Crime Branch investigation, with the accused having served 110 days in custody for those. Therefore, they were in custody for over 265 days in total. It was also highlighted that their immovable properties worth Rs 19.60 crore were already attached and the continuance of the accused in jail were not conducive to the notions of right to life and liberty as contemplated under Article 21 of the Constitution.
The counsel for M.C. Kamarudheen also submitted that he was a former Member of Legislative Assembly of Kerala and that there could be no flight risk and considering their old age and the period of custody already undergone by them, they ought to be released on bail. It was also submitted that the failure to return the funds was unintentional as several financial establishments, including the accused’s companies, went into difficulty because of the lockdown imposed during the Covid-19 pandemic. Another ground was raised that the accused were senior citizens suffering from health issues and they were being targeted due to political rivalry.
Analysis and Decision:
The Court noted that the investigation revealed that around Rs 26 crore were collected by the accused from the various de facto complainants, and the proceeding under the PMLA was initiated since the offence under Section 420 IPC was alleged. The investigation conducted under the PMLA revealed that four companies, i.e., Fashion Gold International Pvt. Ltd., Fashion Ornaments Pvt. Ltd., Nujoom Gold Pvt. Ltd. and Qamar Fashion Gold Pvt. Ltd., were arrayed as Accused 1 to 4, along with the accused who were arrayed as Accused 5 and 6. The companies were not authorised to accept deposits from the public and around Rs 20 crores were siphoned off by the accused, which allegedly constituted the proceeds of crime.
The Court opined that primarily, the allegation was in relation to the investments made in companies and prima facie, there was nothing to indicate any dishonest intention. Thus, considering the nature of allegations in the various cases registered, it was doubtful as to whether the accused, being the Chairman and Managing Director, could be guilty under Section 420 IPC.
The Court further noted that the allegation was with respect to the four companies which were entitled to have 200 shareholders per company. However, the total number of depositors in all the four companies put together was about 464, which was less than the total number of permitted investors. Since the allegations revolved around the deposits collected from persons beyond the permissible limits permissible, it might have amounted to violation of Sections 2(68) and 73 of the Companies Act, 2013 (‘Companies Act’), but could not necessarily fall within the purview of Section 420 IPC unless there was any dishonest intention from the very inception.
The Court also pointed out that many of the de facto complainants had accepted that a portion of the amount collected from them, had already been disbursed to them either as profits or as dividends, which was contrary to the allegation that there was a dishonest intention from the inception to cheat them.
The Court, while relying on Inder Mohan Goswami v. State of Uttaranchal, (2007) 12 SCC 1, and Ashok Kumar Jain v. State of Gujarat, 2025 SCC OnLine SC 998, opined that the FIRs were registered after September 2020, when the country was in lockdown due to Covid-19 pandemic. A business failure could not lead to an assumption of an offence of cheating, as the primary ingredient for that offence was a dishonest or fraudulent intention from the very beginning. The Court further opined that even if the intention to cheat was developed later, it could not amount to cheating unless there was a fraudulent or dishonest intention at the time of making the promise or representation.
Therefore, the Court held that prima facie, there were no reasons to assume that the accused were guilty of the offence under Section 420 IPC and consequently, for the offence alleged under the PMLA. The Court explained that the failure to return the money collected or the deposit taken might have amounted to an offence under the BUDS Act, but since it was not a scheduled offence, the PMLA would not apply.
The Court relied on P. Chidambaram v. Directorate of Enforcement, (2020) 13 SCC 791 wherein it was held that “the basic jurisprudence relating to bail remained the same inasmuch as the grant of bail was the rule and refusal was the exception so as to ensure that the accused had the opportunity of securing fair trial.” The Court also referred to Manish Sisodia v. Enforcement Directorate, 2024 SCC OnLine SC 1920, wherein it was observed that the while considering the question of bail in PMLA proceedings, the Court must take note of the dimension regarding long periods of incarceration and delay in trial since the constitutional mandate was the higher law. Thus, noting the period of custody already undergone by the accused in the present case, the Court observed that no purpose would be served by continuing the custody any further.
The Court opined that detaining the accused for a long time was an intrusion into the liberty of an individual and in the present circumstances, continuing the incarceration would amount to an instrument in the hands of ED to confine the accused in jail for a long time without any possibility of a trial.
Thus, the Court, while allowing the applications, enlarged the accused on bail upon them executing a bond of Rs 50,000 each with two solvent sureties each for the like sum.
[M.C. Kamarudheen v. State of Kerala, Bail Appl. No. 6063 of 2025, decided on 09-09-2025]
Advocates who appeared in this case :
For the Accused: K. Anand, Gowri Menon, Nandhana T.B., Archana N., Anoop V. Nair, Rahul Sasi, Neethu Prem, Radhika V.R., Christo Simon, Advocates.
For the Respondents: Prasanth M.P., Public Prosecutor, Noushad K.A., Public Prosecutor, A.R.L. Sundaresan, ASGI, K. Anand, CGC, Jaishankar V. Nair, SC, Enforcement Directorate.
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