The Madras High Court, in C. Sivasankaran & Ors. v. Deputy Director, MBZO-I, Directorate of Enforcement & Ors. (W.P. No. 18308 of 2025), directed the refund of ?50 crore deposited before the PMLA Special Court, Mumbai, to IL&FS Financial Services Ltd. The Bench of Justices J. Nisha Banu and S. Sounthar held that the amount, initially paid by late industrialist Vallal RCK to secure release of attached properties, did not constitute “proceeds of crime.” The Court invoked its Article 226 powers to ensure completion of the IL&FS-approved One-Time Settlement, harmonizing PMLA enforcement with insolvency resolution objectives.

Legal Issue

Whether the Rs.50 crore deposited by the late Vallal RCK before the PMLA Special Court, Mumbai, as a condition for release of attached property, could lawfully be refunded to IL&FS Financial Services Ltd. (IFIN) to execute a One-Time Settlement (OTS) approved in principle on 03.10.2024, amidst pending PMLA proceedings.?

Brief Facts

Late Vallal RCK was accused in a money laundering case (ECIR/MBZO-I/2019) for financial transactions involving IL&FS Financial Services Ltd. He had purchased large tracts of land in Kanchipuram District (10.66 and 17.48 acres) and mortgaged these to secure corporate loans for group companies such as Siva Shelters & Constructions Pvt. Ltd. (SSCPL). The Enforcement Directorate (ED) attached these properties under PMLA, claiming proceeds of crime. By judicial orders from 2021–2022, RCK was directed to deposit Rs.8.08 crore and later Rs.50 crore before the PMLA Special Court, Mumbai, to secure release of attached properties.? Later, IL&FS approved OTSs for Rs.50 crore (for SSCPL) and Rs.60 crore (for Siva Green Power Projects India Pvt. Ltd.), subject to NCLT approval, to close debts aggregating Rs.190.50 crore.? After RCK’s death, his heirs (the petitioners) sought a refund of Rs . 50 crore lying with the Special Court for payment towards the approved settlement, claiming the amount did not constitute proceeds of crime.

Court’s Reasoning 

The Bench held:

• The Rs.50 crore was deposited per prior High Court direction to secure release of lawfully owned property; the funds were not proven to be tainted under Section 2(1)(u) PMLA.
• Once the financier (IFIN) acknowledged settlement through in-principle OTS, continuing possession of funds by the court served no judicial purpose.
• Article 226 jurisdiction could be invoked to do complete justice where statutory remedies were inadequate or delayed.
• Following State Trading Corporation of India Ltd. v. Global Steel Holding Ltd., repayment and economic restitution justified extinguishing further PMLA intervention.?

Judgment

The Court ordered the Special Court, PMLA, Mumbai to refund Rs.50 crore directly to IFIN within four weeks to facilitate OTS completion, clarifying the amount was not “proceeds of crime.” The writ petition was allowed with no costs.?

Subsequent Development

The judgment was pronounced on 16.10.2025; compliance was directed within four weeks. The order referenced ongoing NCLT approval of the OTS under supervision of Justice (Retd.) D.K. Jain. No appeal or modification was recorded as of October 2025. The decision marks a significant precedent reconciling PMLA enforcement and insolvency resolution frameworks.?

Case Title 

C. Sivasankaran, C. Santhabooshnam, P. Suthanthira, and C. Thenmozhi v. The Deputy Director, MBZO-I, Directorate of Enforcement, and others

Neutral Citation

W.P. No. 18308 of 2025 

Court

Madras High Court

Bench

Justice J. Nisha Banu and Justice S. Sounthar

To read the full judgment, click here