In a landmark ruling reinforcing the restitution framework under Indian anti-money laundering law, a Special PMLA Court in Mumbai has ordered the release and restoration of attached immovable assets worth ₹393.79 crore to legitimate claimants in the financial fraud case involving textile firm Nakoda Ltd. The judicial order, issued on August 4, 2026, follows an explicit submission by the Enforcement Directorate stating it had no objection to transferring the seized properties to the court-appointed liquidator for equitable distribution to affected banking entities.
The money laundering probe stems from an extensive financial investigation initiated by the Enforcement Directorate’s Surat Sub-Zonal Office into an alleged ₹828 crore banking fraud. According to law enforcement agencies, Nakoda Ltd and its key promoters, including Babulal Gumanmal Jain and Devendra Babulal Jain, systematically orchestrated a multi-layered financial diversion scheme that defaulted on credit facilities extended by a 13-bank consortium led by Canara Bank.
Consortium Fraud and Devolved Letters of Credit
The core of the fraudulent operation centered on the systematic misuse of trade finance instruments. Investigators established that Nakoda Ltd obtained 1,212 Letters of Credit totaling ₹4,204.25 crore in favor of various vendor entities controlled by or associated with the company’s management. These instruments were subsequently discounted through financial institutions based on fabricated invoices and fake bills of exchange, without any physical movement or underlying supply of commercial goods.
The scheme unraveled when 202 inland Letters of Credit valued at ₹827.98 crore devolved after Nakoda Ltd failed to meet its payment obligations, inflicting severe financial losses on the lending institutions. Forensic analysis revealed that the generated funds were routinely layered and siphoned through a complex network of group companies to conceal the original source of the capital and mask the proceeds of crime.
Asset Attachment and Resolution Procedures
To secure the defrauded public capital, federal investigators provisionally attached immovable assets valued at ₹375.71 crore in 2018, followed by a secondary attachment of properties worth ₹18.08 crore in 2019. The combined attachment totaling ₹393.79 crore was later confirmed by the PMLA Adjudicating Authority, after which the agency filed primary and supplementary prosecution complaints seeking final confiscation of the assets.
Concurrently, Nakoda Ltd was subjected to the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code before the National Company Law Tribunal, Ahmedabad Bench. Following the failure of the resolution framework, the company entered formal liquidation proceedings, prompting the court-appointed liquidator to file an application before the Special PMLA Court seeking the release of the attached assets to satisfy legitimate institutional claims.
Restitution Mandate and Legal Impact
Aligning with statutory provisions under the Prevention of Money Laundering Act designed to restore crime proceeds to bona fide victims, the Enforcement Directorate formally conveyed its non-objection to the asset release. Accepting the agency’s position, the Special Court directed that the ₹393.79 crore in real estate holdings be handed over to the liquidator for distribution in accordance with statutory priority rules.
Legal commentators note that the judicial decision highlights a growing emphasis on asset recovery and victim restitution over prolonged state confiscation. By restoring seized assets to verified creditors during corporate insolvency, the ruling establishes a vital precedent for mitigating institutional banking losses caused by large-scale corporate fraud and money laundering schemes.
