Fashion Gold money laundering case: Kerala High Court grants bail to former MLA MC Kamarudheen

The Kerala High Court on Tuesday granted bail to IUML leader and former Manjeshwar Member of the Legislative Assembly (MLA) MC Kamarudheen in the Fashion Gold money laundering case [MC Kamarudheen v State of Kerala & anr and connected case].

Justice Bechu Kurian Thomas also granted bail to Kamarudheen's business associate TK Pookoya Thangal, who is a co-accused in the case.

The Enforcement Directorate (ED) had accused Kamarudheen and Thangal (petitioners) of being involved in a scheme where crores of money and gold invested by various persons were siphoned off by them.

Notably, the ED's money laundering case was registered based on first information reports (FIR) that accused the petitioners of cheating investors.

The Court, however, took note of the accused's submission that there was no dishonest intention on their part, and that they could not return investor money due to business failures during the COVID-19 pandemic.

In view of this submission, the Court opined that there appeared to be no prima facie case of cheating made out against the two accused. A mere failure of business cannot translate into the offence of cheating, it said.

"The FIR's are all seen to have been registered after September, 2020 when the country had into a state of lockdown due to Covid-19 pandemic. A business failure cannot lead to an assumption of commission of the offence of cheating, as the primary ingredient for such an offence is a dishonest or fraudulent intention from the very beginning," the Court observed.

It proceeded to grant the two accused petitioners bail after noting that they had already spent over 265 days in jail. The Court added that they cannot be kept in jail indefinitely without a timely trial.

"Detaining the accused for a long time, especially when the period of punishment prescribed is limited, is an intrusion into the liberty of an individual. In the above circumstances, continuing the incarceration will amount to be an instrument in the hands of ED to confine the petitioners in jail for a long time without any possibility of a trial. Having regard to the above circumstances, this Court is of the view that the continued custody of the petitioners is not warranted," the Court said.

The accused petitioners were accused of collecting deposits and investments from the public under various schemes, through four companies, namely, Fashion Gold International Pvt Ltd, Fashion Ornaments Pvt Ltd, Nujoom Gold Pvt Ltd, and Qamar Fashion Gold Pvt Ltd.

Promising high returns, they allegedly lured investors and diverted invested funds to acquire immovable properties in the their names, which were later transferred to their relatives' names and other such persons to avoid detection by authorities.

The investigation revealed that around ₹20 crores collected from investors were siphoned off in this manner.

The ED registered a case under Sections 3 (money laundering) and 4 (punishment for money laundering) of the Prevention of Money Laundering Act, 2022 (PMLA), based on the predicate offence of cheating under Section 420 of the Indian Penal Code (IPC).

The Court, however, found that the allegations did not establish a dishonest or fraudulent intention on the part of the petitioners, which is a key ingredient to prove the offence under Section 420, IPC.

It noted that many investors had already received portions of their investments as dividends. A mere failure to fulfil contractual obligations would not amount to cheating unless fraudulent intent existed at the time of making promises, the Court opined.

The Court further observed that even if offences under the Banning of Unregulated Deposit Schemes Act (BUDS Act) were made out against the accused, the PMLA would not apply because the BUDS Act is not a scheduled offence under the PMLA.

It concluded that prima facie, there was no material against the petitioners for a money laundering case, before granting them bail on various conditions.

MC Kamarudheen was represented by advocate Anoop V Nair while TK Pookoya Thangal was represented by advocate Rahul Sasi.

Public prosecutor Noushad KA appeared for the State.

Additional Solicitor General of India AR L Sundaresan appeared for Enforcement Directorate.

[Read Order]