The Madras High Court has clarified that a Fixed Deposit Receipt furnished by an accused to secure permission to travel abroad, contingent upon the existence of a lookout circular, must be returned immediately upon quashing of both the predicate offence and the subsequent PMLA proceedings. This ruling reinforces the principle that security deposits tied to provisional restrictions cannot be retained once the legal basis for those restrictions ceases to exist.
Background & Facts
The Dispute
The petitioner, Ahmed A.R. Buhari, was subject to a lookout circular issued by the Directorate of Enforcement on 31.01.2018, arising from a criminal case registered by the Central Bureau of Investigation (CBI) on 22.01.2018. The CBI case formed the predicate offence for proceedings under the Prevention of Money Laundering Act, 2002 (PMLA), which culminated in Special C.C. No.1 of 2022 before the XII Additional Court for CBI Cases, Chennai.
Key Facts
- The petitioner was restricted from traveling abroad due to the lookout circular issued on 31.01.2018.
- On 10.03.2020, the Madras High Court, in WP No.3949 of 2020, permitted the petitioner to travel abroad subject to furnishing a Fixed Deposit Receipt (FDR) of Rs.50,00,000/- issued by Karur Vysya Bank, Anna Nagar Branch, Chennai, bearing No.1154501000187911/1 dated 11.03.2020.
- The petitioner complied with the condition and deposited the FDR with the Directorate of Enforcement.
- The CBI’s predicate offence was quashed by the Delhi High Court on 16.09.2025 in Crl.M.C.No.2639 of 2021, Crl.M.A.No.4776 of 2023 and Crl.M.A.No.15461 of 2025.
- On 07.10.2025, the Madras High Court, in Crl.O.P.No.12147 of 2025, quashed the PMLA proceedings in Special C.C.No.1 of 2022.
- On the same date, 07.10.2025, the Madras High Court, in W.P. Crl.No.663 of 2025, directed the Directorate of Enforcement to lift the lookout circular.
Procedural History
- 31.01.2018: Lookout circular issued by Directorate of Enforcement.
- 22.01.2018: CBI registered predicate offence.
- 11.03.2020: Petitioner furnished FDR of Rs.50,00,000/- to the respondent as condition for travel permission.
- 10.03.2020: Madras HC granted conditional travel permission in WP No.3949 of 2020.
- 16.09.2025: Delhi High Court quashed the CBI predicate offence.
- 07.10.2025: Madras HC quashed PMLA proceedings in Crl.O.P.No.12147 of 2025.
- 07.10.2025: Madras HC directed lifting of lookout circular in W.P. Crl.No.663 of 2025.
- 30.04.2026: Present writ petition filed under Article 226 of the Constitution.
Relief Sought
The petitioner sought a writ of mandamus directing the respondent to return the FDR bearing No.1154501000187911/1 dated 11.03.2020 for Rs.50,00,000/-, along with all accrued interest, since the legal basis for its retention had been extinguished.
The Legal Issue
The central question was whether the Directorate of Enforcement is legally entitled to retain a Fixed Deposit Receipt furnished as a condition for suspending a lookout circular, after both the predicate offence and the PMLA proceedings have been quashed by competent courts.
Arguments Presented
For the Petitioner
Learned counsel argued that the FDR was provided solely as a condition to suspend the lookout circular, which was itself a provisional measure. With the predicate offence quashed and the PMLA proceedings set aside, the entire legal foundation for the restriction and the associated security vanished. Retention of the FDR amounted to unjust enrichment and violated the principle of proportionality. Reliance was placed on State of Haryana v. Bhajan Lal to argue that continued retention without legal basis is arbitrary.
For the Respondent
The respondent did not contest the quashing of the proceedings but argued that the FDR was deposited as a financial guarantee and its return was subject to administrative discretion. No specific statutory provision was cited to justify retention after the termination of proceedings.
The Court's Analysis
The Court observed that the FDR was not a penalty, fine, or confiscation, but a conditional security measure tied exclusively to the existence of the lookout circular. The circular was imposed to ensure the petitioner’s availability for investigation and trial. Once the predicate offence was quashed and the PMLA proceedings were set aside, the necessity for the lookout circular ceased entirely.
"The FDR was furnished as a condition to permit travel abroad, contingent upon the subsistence of the lookout circular. With the circular lifted and the underlying proceedings quashed, the basis for retention of the FDR no longer exists."
The Court emphasized that the respondent had no statutory authority to retain the FDR after the conditions for its imposition were extinguished. The retention of the deposit in the absence of any pending proceeding or threat to the investigation was arbitrary and violative of Article 14 of the Constitution. The Court rejected the notion that administrative discretion could override the clear termination of legal proceedings.
The Verdict
The writ petition was allowed. The Court directed the Directorate of Enforcement to return the Fixed Deposit Receipt bearing No.1154501000187911/1 dated 11.03.2020 for Rs.50,00,000/-, along with all accrued interest, within two weeks from the date of receipt of a certified copy of the order. There shall be no order as to costs.
What This Means For Similar Cases
Security Deposits Cannot Be Retained After Proceedings Terminate
- Practitioners must now argue that any deposit, bond, or FDR furnished as a condition for interim relief (e.g., travel permission, bail) must be returned immediately upon quashing of the underlying proceedings.
- The doctrine of proportionality requires that security measures be co-extensive with the threat they are designed to mitigate.
No Administrative Discretion to Withhold After Legal Basis Vanishes
- Authorities cannot invoke "administrative discretion" to retain financial security once the legal basis for its imposition is nullified by a court order.
- This applies equally to bail bonds, surety deposits, and other provisional financial guarantees in criminal and quasi-criminal proceedings.
Precedent for PMLA and Predicate Offence Linkage
- This judgment reinforces that PMLA proceedings are derivative. If the predicate offence is quashed, the PMLA case collapses, and all ancillary measures - including financial deposits - must be reversed.
- This provides a clear roadmap for defense counsel in PMLA matters where the underlying offence is challenged successfully.
