Introduction
In the matter of Rakesh Brijlal Jain v. State of Maharashtra[i], the Hon’ble Bombay High Court adjudicated upon a* *Criminal Revision Petition filed by Rakesh Brijlal Jain (‘Applicant’), who was aggrieved by the wrongful and illegal initiation of criminal proceedings by Gul Achhra, representing GK Solutions (‘Complainant/Respondent No.2’). On the basis of such ill-founded criminal proceedings, the Enforcement Directorate (‘ED’) initiated proceedings qua the Applicant, leading to the issuance of process by the Court, even though the alleged offence had not been established. In the present ruling, the High Court has strictly enunciated that disputes, which are civil in nature, should not be given a criminal colour, thereby avoiding the misuse of criminal law as a tool for settling civil disputes.
Brief Facts
The Applicant was a partner of M/s Kamala Developers (‘Company’). On behalf of the company, he entered into a registered sale deed with the Complainant/Respondent No.2 to purchase an immovable property. Additionally, a separate renovation agreement was signed between the Applicant and the Complainant, in which the premises were to be converted into a residential hotel/guest house.
In favour of the aforementioned renovation agreement, the Applicant received a certain amount from the Complainant. However, the Complaint alleged that the Applicant had not only failed to provide the promised amenities but had also failed to return the money. Such act of the Applicant allegedly amounted to him having committed the offence of cheating and breach of trust.
Aggrieved by the alleged commission of the aforementioned offence, the Complainant approached the Economic Offences Wing and the Malad Police Station. However, both places rejected to lodge his complaint, citing that the issue between the Applicant and the Complainant was purely contractual and, hence, the same did not warrant the initiation of criminal proceedings qua the Applicant. Accordingly, the Complainant was advised to pursue a civil remedy.
Despite the above, the Complainant proceeded to file a complaint with the Metropolitan Magistrate, Andheri, under s. 156(3) of the CrPC, which led to an FIR being filed against the Applicant for cheating, criminal breach of trust, and harassment at the Vile Parle Police Station.
ED, while acting upon the aforementioned complaint, alleged that the Applicant had committed money laundering under ss. 3 and 4 of the Prevention of Money Laundering Act, 2002 (‘PMLA’). Claiming that the amount received for renovation constituted proceeds of crime, the ED proceeded to register an ECIR qua the Applicant.
Based on the above, the Special Court under PMLA (‘Special Court’) initiated proceedings against the Applicant, compelling him to file the present criminal revision application.
Held
The High Court, while allowing the criminal revision application filed by the Applicant and consequently quashing the process initiated by the Special Court, made the following observations:
The High Court noted that the dispute arose from a contractual arrangement, and no element of cheating, criminal breach of trust, or fraud was involved. The Complainant had acknowledged that most of the work under the renovation agreement had been completed, excluding a small portion for which payment had already been withheld.
The ED’s claim that the amount received under the renovation agreement constituted ‘proceeds of crime’ under PMLA was found to be entirely baseless by the High Court, considering that the amount was paid under a mutual contractual arrangement that was duly acknowledged by both the Applicant and the Complainant. The ED failed to recognize that the Complainant had admitted to paying the installments based on the work that had already been completed.
The High Court further noted that since there was no criminal breach of trust or cheating, the allegation that proceeds of crime were involved did not stand, making the charges under ss. 3 and 4 of the PMLA are entirely unsustainable, especially considering that the entire transaction was contractual and lacked any element of misappropriation or fraudulent intent.
The High Court also imposed exemplary costs on the Complainant as well as the ED for the attempt made by them to firstly criminalize a civil dispute and, secondly,* *for misusing legal provisions. It observed that ED failed to conduct due diligence and wrongly proceeded to attach the Applicant’s properties based on an erroneous assumption of facts and law. The attachment made by ED was also set aside by the High Court to reiterate that it was unjustified and based on an incorrect interpretation of the PMLA.
Our Analysis
The present ruling serves as an important precedent in distinguishing between civil and criminal liability. It underscores the need for rigorous judicial scrutiny by courts, statutory bodies, and their officers, particularly in penal statutes such as PMLA, where immediate provisions exist to deprive an accused of their fundamental rights to life, liberty, and property.
This case illustrates how easily a complainant can circumvent statutory authorities, such as the EOW and the Police, to initiate false, frivolous, and malicious proceedings against an accused. The Magistrate’s Court failed to exercise due diligence, allowing the matter to proceed without a prima facie case. Worse still, the ED, despite being a specialized enforcement agency, failed to distinguish between a civil and a criminal offence and proceeded to attach the Applicant’s property without proper verification or legal basis, despite clear evidence that the dispute was contractual. This raises serious concerns about the abuse of criminal law for personal vendettas.
The case presents both negative and positive lessons. On the negative side, it reveals how easily the lower judiciary can be manipulated, compelling it to initiate action against an accused even when no criminal offence is made out. On the positive side, it affirms that judicial scrutiny, especially in financial crimes, eventually exposes malicious prosecutions, given the higher evidentiary threshold required in money laundering cases compared to civil disputes.
The presumption that every litigant acts in good faith must change. Judicial scrutiny in criminal matters must be strict and unwavering, ensuring that false complaints are met with exemplary costs and, in more serious cases, criminal penalties against the complainant for abusing the legal system.
End Note
[i] 2025 SCC OnLine Bom 118 dated 21.01.2025.
Authored by the Metalegal Editorial Board, the views expressed are personal and do not constitute legal advice or opinion.
More Insights
24-07-2026
10
min read
‘Shylockian’ Lending is ‘Squeezing of Blood’: NCLT Moves Beyond Debt & Default to Reject a Section 7 Application
In a rare departure from the conventional debt-and-default enquiry under section 7 of the IBC, the NCLT, Kochi Bench rejected the financial creditors' petition after characterizing the underlying arrangement as a ‘Shylockian system’ of lending. This court ruling discusses Shylockian lending and examines the strength of the Tribunal's focus on the economic substance of the transaction against established legal principles governing admission under section 7 of the IBC.
10-07-2026
7
min read
Faceless Reassessment after S. 147A: What the Supreme Court Did – and Did Not – Decide
The Supreme Court's decision in Tej Pratap Singh does not settle the JAO–FAO controversy. Following Parliament's retrospective insertion of s. 147A, it remands the issue to the High Courts for fresh consideration. Faceless reassessment was never merely about moving tax files from paper to portal; it fundamentally changed the statutory authority responsible for communicating with the taxpayer, examining the record, drafting the order and completing the assessment. The real question now is how far a retrospective legislative clarification can go.
22-06-2026
8
min read
Claim Admission is not Debt Acknowledgement: Supreme Court on RP’s Role & Limitation under the IBC
Can admission of a claim by a Resolution Professional extend limitation under section 18 of the Limitation Act? In Shankar Khandelwal v. Omkara Asset Reconstruction Pvt. Ltd., the Supreme Court answered this question in the negative, holding that claim admission during CIRP is merely a statutory claim-verification process and not an acknowledgement of debt. The ruling clarifies the RP’s non-adjudicatory role and reinforces important principles governing limitation under the IBC.