2024 (8) TMI 1647 - HC - Money Laundering

Section 3 PMLA offence for indirect involvement upheld; discharge under s.227 Cr.P.C. refused, trial to decide guilt

HC dismissed the criminal revision and confirmed the trial court's refusal to discharge the petitioner from prosecution under s.227 Cr.P.C. The court held ... Money Laundering - proceeds of crime - Rejection of discharge petition filed by the petitioner under section 227 of Cr.P.C - scope and interpretation of Section 3 of the Prevention of Money-Laundering Act, 2002 - HELD THAT:- Section 3 of PMLA 2002 enumerates offence of money laundering. Accordingly, whosoever, directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity, connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property, shall be guilty of offence of money laundering. The wider scope provided under Section 3 would amplify that persons indirectly attempted can be brought under the provisions of PMLA. Beyond that, a person actually involved in any process is amenable to prosecution under PMLA. The phrases used under Section 3 are unambiguous. In between each phrase, word employed is “or”. The statement in the complaint would reveal that the petitioner/A5 indirectly assisted A1 in the matter of filling up the account form and check leafs and knowingly a party in the activity connected with the proceeds of crime. The said allegations are subject matter of trial, which cannot be gone into by this Court at the initial stage. In a discharge petition, the Courts are not expected to go into the truthfulness of the allegations and such an endeavour must be undertaken during the course of trial. The allegations prima facie make out to proceed against the petitioner/A5. The Trial Court, while dealing with the discharge petition, made a categorical finding that the petitioner/A5 had indirectly assisted A1 and A7 in the matter of filling up the account opening form and cheque leafs. Thus, he has knowingly indulged in the activity connected with the proceeds of trial. Further findings are made that the documents as well as the evidence produced by the complaint reveals that the petitioner/A5 had indirectly assisted A1 and A7 in the matter of filing up the account opening form and cheque leafs. The findings in the order impugned would be sufficient to form an opinion that the case on hand is not a fit case to discharge. Therefore, the petitioner is at liberty to defend his case during the course of trial. The order impugned stands confirmed and consequently, Criminal Revision Case is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Trial Court erred in rejecting a discharge application under Section 227 Cr.P.C. in respect of an accused alleged to have participated in money-laundering by indirectly assisting in account opening and filling cheque/Account Opening Form (AOF) particulars. 2. The proper scope and interpretation of Section 3 of the Prevention of Money-Laundering Act, 2002 (PMLA) - specifically whether persons who 'indirectly attempts,' 'knowingly assists,' 'knowingly is a party' or are 'actually involved in any process' connected with proceeds of crime fall within the offence. 3. The effect of Section 24 PMLA (reverse legal burden/presumption in proceedings relating to proceeds of crime) on the assessment at the discharge stage. 4. Whether, on the material alleged in the complaint (filling AOFs, pay-in slip and multiple cheque leaves at request of another), the allegations prima facie make out a case requiring trial or whether the truthfulness of such allegations should be gone into at the discharge stage. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of rejecting discharge under Section 227 Cr.P.C. Legal framework: Section 227 Cr.P.C. empowers the Trial Court to discharge an accused where the Judge, upon perusal of the record and the allegations, finds that no case is made out against the accused requiring trial. At the discharge stage Courts are not to probe the truthfulness of allegations but to see if prima facie a case is made out. Precedent Treatment: No specific authorities were relied upon by the Court in the judgment; the Court applied established principles governing discharge applications (limited enquiry; no weighing of evidence beyond prima facie material). Interpretation and reasoning: The Court observed that the complaint and supporting material contained allegations that the accused filled AOFs, pay-in slip and multiple cheque leaves in his own handwriting at the request of another accused and that the accused 'indirectly assisted' in activity connected with proceeds of crime. The Trial Court had made categorical findings on these prima facie facts. Given the limited scope of inquiry at the discharge stage, those allegations sufficed to permit continuation to trial. Ratio vs. Obiter: Ratio - where complaint material alleges that an accused indirectly assisted in filling account opening forms and cheque leaves in furtherance of transactions connected with proceeds of crime, such allegations, if prima facie established on the record, preclude discharge under Section 227 Cr.P.C. Obiter - observations on the broader investigation or policy consequences of granting discharge (e.g., hampering trial) are ancillary. Conclusion: The rejection of the discharge petition was proper; the matter must proceed to trial where veracity of the allegations can be tested. Issue 2 - Scope and interpretation of Section 3 PMLA Legal framework: Section 3 PMLA criminalises money-laundering, and uses disjunctive phrases covering persons who 'directly or indirectly attempts to indulge,' who 'knowingly assists,' who 'knowingly is a party,' or who are 'actually involved in any process or activity' connected with proceeds of crime including concealment, possession, acquisition, use, projecting or claiming as untainted property. Precedent Treatment: The Court did not distinguish or overrule prior authorities; it emphasized the statutory text and its plain meaning. Interpretation and reasoning: The Court held that the statutory language is unambiguous and deliberately wide in scope. The use of the word 'or' between phrases demonstrates that persons falling within any of the enumerated categories can be prosecuted. The scope therefore includes indirect participation and assistance; the Court refused to narrowly construe Section 3 to displace statutory breadth when considering discharge. Ratio vs. Obiter: Ratio - Section 3 PMLA encompasses persons who indirectly assist or are otherwise involved in processes connected to proceeds of crime and therefore such persons are amenable to prosecution under PMLA. Obiter - policy remarks about the larger scale of money-laundering investigations and identification of multiple persons involved. Conclusion: Section 3 must be given its wide scope; allegations that an accused indirectly assisted in account opening and related transactions can attract prosecution under Section 3. Issue 3 - Effect of Section 24 PMLA (burden of proof/presumption) at the discharge stage Legal framework: Section 24 PMLA provides that in proceedings relating to proceeds of crime, when a person is charged under Section 3 the authority or Court shall, unless contrary is proved, presume that such proceeds are involved in money-laundering; for any other person the authority or Court may presume involvement. Precedent Treatment: The Court relied on the statutory provision; no specific case law was invoked to modify its application at the threshold stage. Interpretation and reasoning: The Court noted that Section 24 shifts the evidentiary burden to the accused once charges are framed (or in proceedings relating to proceeds of crime), creating a presumption of involvement in money-laundering for persons charged under Section 3. While recognizing the presumption, the Court applied settled discharge law: at the prima facie stage the existence of Section 24 and its presumption reinforces that material alleging involvement cannot be lightly rejected; the onus may crystallize at trial. Ratio vs. Obiter: Ratio - the statutory presumption under Section 24 supports proceeding to trial where prima facie material exists; Obiter - no detailed delineation of how Section 24 operates vis-à-vis specific types of evidence at discharge. Conclusion: Section 24's presumption is relevant and weighs against discharge where the complaint and material prima facie indicate involvement; ultimate satisfaction of the presumption is for trial. Issue 4 - Sufficiency of complaint material (filling AOFs, cheques, pay-in slip) to require trial Legal framework: At the discharge stage the Court examines whether the allegations, if accepted at face value, constitute an offence and whether there is prima facie evidence linking the accused to the offence; the Court must not decide contested questions of fact or truthfulness. Precedent Treatment: The Court adhered to conventional threshold principles for discharge petitions without reference to contrary authorities. Interpretation and reasoning: The complaint set out specific acts by the accused - handwriting on AOFs and cheque leaves, filling of pay-in slip, all at the request of another - and concluded the accused 'indirectly assisted' and was 'knowingly a party' to activities connected with proceeds of crime. The Court observed these allegations, taken at face value for the limited purpose of a discharge application, are sufficient to form an opinion that the case should proceed to trial. The Trial Court's categorical findings on these allegations were held to be adequate for continuing the proceedings. Ratio vs. Obiter: Ratio - specific factual allegations of assisting in account opening and cheque filling, when prima facie established on the record, constitute sufficient material to refuse discharge in a PMLA prosecution; Obiter - comments regarding the possibility of impersonation or identity confusion were noted but treated as matters for trial. Conclusion: The material in the complaint prima facie connects the accused to the charged activity; therefore the accused should not be discharged and must be afforded the opportunity to defend the allegations at trial. Cross-reference Issues 2 and 3 are interrelated: the wide scope of Section 3 (Issue 2) together with the presumption under Section 24 (Issue 3) support the proposition that allegations of indirect assistance (Issue 4) should ordinarily be tested at trial rather than being disposed of at the discharge stage (Issue 1).