JSW Steel PMLA Appeals Closed by Supreme Court: Karnataka High Court’s Approach Explained

The material supplied contains only a brief operative order of the Supreme Court in JSW Steel Limited Etc. Vs Deputy Director, stating that the appeals have been disposed of in terms of a signed non-reportable judgment. As that detailed judgment is not reproduced, the Supreme Court’s reasoning and final directions cannot be inferred from the text available.

This write-up therefore focuses on the underlying Karnataka High Court judgment that formed the basis of the appeals. It explains how the High Court dealt with the challenge brought by JSW Steel Limited under the Prevention of Money Laundering Act, 2002 (PMLA), the role of earlier inter-parties decisions, and the treatment of cognizance by the Special Court under the CrPC.

Supreme Court Order: Only Operative Directions Available

Scope of the Supreme Court Text Provided

The supplied Supreme Court order records the following:

  • The judgment of the Bench comprising Hon’ble Mr. Justice Dipankar Datta and Hon’ble Mr. Justice Augustine George Masih was pronounced by Hon’ble Mr. Justice Augustine George Masih.
  • The appeals have been disposed of in terms of a signed non-reportable judgment.
  • All pending applications, if any, have also been disposed of.

Since the signed non-reportable judgment is not part of the material, there is no reliable basis to state how the Supreme Court evaluated the Karnataka High Court’s reasoning, nor the precise relief or directions ultimately granted or refused.

Accordingly, what follows is a structured explanation of the Karnataka High Court’s common judgment that had dismissed JSW Steel’s writ petitions and led to the appeals before the Supreme Court.

Background Before the Karnataka High Court

Two Writ Petitions Filed by JSW Steel

JSW Steel Limited and connected petitioners had approached the Karnataka High Court through two writ petitions:

  • W.P. No. 7499 of 2022
    Sought quashing of all steps, including investigation and other proceedings, arising from ECIR/09/BZ/2012 registered by the Directorate of Enforcement.

  • W.P. No. 11399 of 2022
    In addition to the above reliefs, challenged the Special Court’s order dated 11 April 2022, by which cognizance was taken of the alleged offence under the PMLA and summons were issued.

Because both petitions emerged from a common factual matrix and overlapped significantly in their legal contentions, the High Court addressed them together in a consolidated judgment.

Contract for Iron Ore Supply and Advance Payment of ₹130 Crore

JSW Steel’s factual narrative was centred on a commercial arrangement:

  • A contract dated 16 November 2009 was executed with Obulapuram Mining Company Private Limited (OMC), allegedly linked to G. Janardhan Reddy, for supply of 1.5 million tonnes of iron ore (fines and lumps) to JSW’s Vijayanagar facility.
  • As per JSW Steel, an advance of ₹130 crore was remitted by bank transfer towards the agreed supplies.
  • JSW contended that from around March 2010, OMC did not deliver the contracted quantities.
  • Some supplies were thereafter made through related entities of OMC, yet iron ore equivalent to about ₹35.45 crore remained outstanding.

On this basis, JSW asserted that it was essentially a creditor of OMC and associated entities, and not a beneficiary or possessor of any “proceeds of crime” within the meaning of the PMLA.

Investigation History: CBI FIR, Charge Sheet and ECIR

Events on the enforcement side unfolded as follows:

  • On 23 September 2011, the Supreme Court ordered a CBI investigation into alleged illegal mining and export of iron ore by Associated Mining Company.
  • The CBI registered an FIR against several persons, including G. Janardhan Reddy and Lakshmi Aruna.
  • A charge sheet dated 30 May 2012 was filed for offences under the IPC and the Prevention of Corruption Act, 1988. JSW Steel did not feature as an accused in that initial filing.
  • Meanwhile, JSW initiated arbitration proceedings against OMC for recovery of about ₹35.44 crore and damages for non-supply.
  • On 25 September 2012, the Enforcement Directorate (ED) registered ECIR/09/BZ/2012 against G. Janardhan Reddy and Lakshmi Aruna.
  • A supplementary report dated 6 September 2013 by the CBI thereafter mentioned JSW Steel’s name.

JSW sought to use these facts to argue that the PMLA proceedings had an erroneous jurisdictional foundation so far as it was concerned.

Arbitral Award and JSW’s “Creditor” Position

In support of its stand that its dealings were bona fide commercial transactions, JSW relied heavily on the arbitral process:

  • The Arbitral Tribunal granted JSW the reliefs sought in its claim against OMC.
  • JSW moved an execution application before the Bombay High Court to enforce the arbitral award.
  • OMC’s challenge through Commercial Arbitration Petition No. 454 of 2019 was dismissed for non-prosecution.

From this, JSW argued that it had been judicially recognised as a creditor in respect of the unpaid amount and could not legally be described as holding or enjoying “proceeds of crime”.