Even In Cases Of PMLA, Court Cannot Proceed On Basis Of Preponderance Of Probabilities – Supreme Court

The Bench in this context, observed –

"In our opinion, even in cases of PMLA, the Court cannot proceed on the basis of preponderance of probabilities. On perusal of the statement of Objects and Reasons specified in PMLA, it is the stringent law brought by Parliament to check money laundering. Thus, the allegation must be proved beyond reasonable doubt in the Court."

Senior Counsel Mr Vikram Chaudhari appeared for the Appellant while ASG Mr SV Raju appeared for the Respondent before the Apex Court.

An appeal was preferred before the Supreme Court assailing the judgment of the Division Bench of the Madras High Court which dismissed the petition of the Appellant under Section 482 CrPC. The High Court had rejected the argument of the Appellant that the FIR with respect to the schedule offence, the prosecution for offences under Sections 3 and 4 of the PMLA was unsustainable.

In this case, the Appellant was the Managing Partner of M/s SRS Mining a partnership firm engaged in sand mining. The Appellant had deposited crores of rupees in three different bank accounts of the firm. Thereafter, the Income Tax Department, Chennai, conducted a search in the official/commercial premises of the Appellant and others seized crores of rupees and gold valued in crores.

This was followed by CBI registering a case against the Appellant and other co-accused under Sections 120-B read with 409, 420 IPC and Sections 13(2) and 13(1)(c) of the Prevention of Corruption Act. CBI went on to register three cases against the Appellant and the other co-accused out of which the High Court had quashed two FIRs with respect to schedule offence.

Regarding the PMLA case, the Appellant approached the High Court for quashing of proceedings under Section 482 CrPC, however, the Court dismissed the petition.

Aggrieved, the Appellant filed an appeal before the Supreme Court.

The Apex Court noted that after the registration of the FIR for the offences under Sections 3, 4, 8(5) of PMLA, the Deputy Director (ED) passed an order under Section 5(1) of PMLA attaching the Appellant's property, which the Adjudicating Authority rejected under Section 5(5) of PMLA for confirmation of attachment.

The Bench further placed reliance on Radheshyam Kejriwal Vs. State of West Bengal (2011)3SCC 581 and on analysing the report of the IT Department and the reasoning given by CBI while submitting the final closure report in the Regular case instituted by it, held –

…it is clear that for proceeds of crime, as defined under Section 2(1)(u) of PMLA, the property seized would be relevant and its possession with recovery and claim thereto must be innocent."

The Bench held that in this case, the schedule offence was not made because of a lack of evidence.

"The Adjudicating Authority, at the time of refusing to continue the order of attachment under PMLA, was of the opinion that the record regarding banks and its officials who may be involved, is not on record. Therefore, for lack of identity of the source of collected money, it could not be reasonably believed by the Deputy Director (ED) that the unaccounted money is connected with the commission of offence under PMLA," the Court added.

Further, the Bench observed that it is incumbent upon the Court to look into the allegation and the material collected support thereto and to find out whether a prima facie offence is made out. Unless the allegations are substantiated by the authorities and proved against a person in a court of law, the person is innocent.

Additionally, the Court also noted that the Department is unable to collect any incriminating material which is not produced before the Court even after five and a half years to prove its case beyond reasonable doubt. Even the agency is not prima facie satisfied that the offence under PMLA can be proved beyond reasonable doubt.

Thus, the Court held that the chances to prove the allegations are very bleak and till the allegations are proved, the Appellant would be innocent. Therefore, the findings of the High Court cannot be sustained.

Accordingly, the Court allowed the appeal and set aside the impugned order of the High Court and quashed the complaint.

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