MP High Court Rejects Ex-Chairman's Plea Against ED Search In ₹1400-Crore SKNL Fraud Case, Directs Him To PMLA Authority

The Madhya Pradesh High Court, on Wednesday (January 28), dismissed the plea of Nitin Shambhukumar Kasliwal, the former Chairman and Managing Director of M/s S Kumar's Nationwide Limited, challenging the search and seizure operations carried out by the ED under the PMLA, in connection with an alleged Rs 1,400 crore bank fraud case.

The division bench of Justice Vijay Kumar Shukla and Justice Alok Awasthi observed that ED had moved an application under Section 17(4) of the PMLA, 2002, and Kasliwal could raise his contentions regarding the legality and validity of the search and seizure before the competent authority.

The bench directed;

"the respondents have already filed application under Section 17(4) of the PMLA, 2002 and the petitioner can raise all his objections including the legality and validity of the search and seizure proceedings before the competent authority, we are not inclined to entertain this petition".

SKNL was engaged in the manufacture and sale of textile products across several categories. In 2010, the company raised substantial funds in the form of debt from various financial institutions to expand its business operations.

However, the projects failed to generate the expected returns, resulting in defaults on loan repayments.

To address its financial distress, SKNL availed the Corporate Debt Restructuring Scheme, which was approved by the lenders. It later secured additional loans under the Technology Up-gradation Fund Scheme to modernise the HVFC and home textile manufacturing facilities.

Despite these measures, the SKNL faced several commercial challenges in 2011-12, leading to mounting losses. The company's loan accounts were eventually declared a Non-Performing Asset (NPA) by the lending banks,

Following the defaults, the IDBI Bank initiated insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, before NCLT Mumbai.

The petition was admitted on April 24, 2018, a moratorium was declared, and an Interim Resolution Professional was appointed. The company subsequently went into liquidation under Section 33(2) of IBC, with most assets sold and proceeds distributed among lenders.

After classifying the loan account as NPA, the IDBI Bank and Union Bank also declared the account as fraudulent under the Reserve Bank of India Fraud Classification and Reporting Directions of 2016. Under the RBI guidelines, such classification has serious consequences not only for the borrower but also for its promoters and directors, including 5 year debarment from accessing institutional finance. The petitioner contended that the declaration was made without issuing prior notice or granting an opportunity of hearing.

Based on complaints filed by the lending banks, the CBI registered multiple FIRs against SKNL and its former directors, including Kasliwal, alleging offences under the IPC and the Prevention of Corruption Act.

In earlier writ petitions, the High Court had granted interim protection to the petitioner, staying coercive action arising out of those FIRs. Those matters are presently pending before the Principal Bench of Jabalpur.

The petition challenged the search authorization dated December 22, 2025 and the subsequent search and seizure conducted on December 23, 2025, by ED under Section 17 PMLA.

The petitioner alleged that the search was conducted without recording a valid 'reasons to believe' and in the absence of any material establishing proceeds of crime or money laundering. It was also alleged that the action was malafide and retaliatory, as it followed shortly after the High Court quashed the travel restrictions imposed on him in another case.

The ED contended that the petition was premature. It was further argued that the reasons to believe had been duly recorded and forwarded to the adjudicating authority, and that applications under Section 17(4) and 5(5) of PMLA have already been filed. The ED argued that the petitioner had a full opportunity to challenge the legality of the search and seizure before the statutory forum.

The Court noted that proceedings under PMLA are distinct from scheduled offences as held by the Supreme Court in Vijay Madanlal Choudhary & Ors. V/s Union of India.

The court found that no specific allegations of malafide against any ED official and observed that the petitioner had adeuqate alternative remedy under the Act. The court, thus, refused to entertain the petition and dismissed it.

Case Title: Nitin Shambhukumar Kasliwal v Union of India [WP-1527-2026]

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