2024 (10) TMI 570 - HC - Money Laundering

Petitioner fails to prove innocence under Section 24 PMLA, discharge petition rejected for money laundering charges

The HC dismissed a criminal revision case challenging rejection of discharge petition under PMLA. The petitioner faced charges under IPC Sections 120B, ... Prima facie case - discharge petition - proceeds of crime - offence of money laundering under Section 3 of PMLA - presumption under Section 24 of PMLA - trust as a juristic person liable under PMLA - definition of person under PMLA - scope of Section 3 - knowingly assists/party/possession and projectionPrima facie case - discharge petition - offence of money laundering under Section 3 of PMLA - presumption under Section 24 of PMLA - trust as a juristic person liable under PMLA - Whether the Special Court rightly refused to discharge the petitioner (Accused No.2) in the prosecution under PMLA on the basis of the complaint and materials produced - HELD THAT: - The High Court examined the complaint and annexures to ascertain whether prima facie materials existed against the petitioner. The complaint alleged that the petitioner was a trustee of the AIOBEU Trust, participated in decisions to transfer and administer Union property to the Trust, and that Trust funds were used to create fixed deposits and acquire movable and immovable assets allegedly derived from scheduled offences (see extracted paragraphs of the complaint). The Court noted the petitioner's asserted resignation after FIR registration but observed absence of documentary proof of acceptance and reliance on trust law principles (Sections 46 and 72, Indian Trusts Act) that a trustee who has accepted trust cannot unilaterally renounce office. The Court treated the Trust as an artificial/juristic person within the definition of 'person' under PMLA and the IPC, rendering the Trust and its trustees amenable to PMLA provisions. On legal construction, the Court held that Section 3 of PMLA covers a wide range of activities (possession, acquisition, use, projection of proceeds of crime) and that mere possession or use of proceeds of crime is sufficient to attract the offence. In view of Section 24, the Court emphasised the statutory presumption in proceedings relating to proceeds of crime, placing onus on the accused to displace the presumption. Applying these principles to the complaint material - allegations of control over Trust affairs, transactions, acquisition of property and deposits, and the role of trustees - the Court found no perversity in the Special Court's conclusion that prima facie case existed against the petitioner and that the discharge petition was rightly rejected. The Court further observed that detailed adjudication of evidentiary materials is unnecessary at the discharge stage and is for trial. [Paras 30, 31, 33, 34, 35]The refusal to discharge the petitioner is confirmed and the Criminal Revision is dismissedFinal Conclusion: The High Court confirmed the Special Court's order refusing discharge of the petitioner, holding that prima facie material existed to proceed under PMLA against the petitioner and dismissing the criminal revision. Issues Involved:1. Whether the petitioner, as a trustee, is implicated correctly under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA).2. Whether there is a prima facie case against the petitioner for the offence of money laundering.3. Whether the petitioner's involvement in the alleged activities constitutes an offence under PMLA.4. The applicability of the burden of proof under Section 24 of PMLA.Issue-wise Detailed Analysis:1. Implication under PMLA:The petitioner, identified as Accused No.2, was a trustee of the All India Indian Overseas Bank Employees Union Welfare Charitable and Endowment Trust. The complaint against the petitioner was filed under Section 45(1) read with Sections 3 and 4 and 8(5) of PMLA. The prosecution alleged that the petitioner, in his capacity as a trustee, was involved in a criminal conspiracy with Accused No.1 to manage the affairs of the Trust, which was used to project proceeds of crime as untainted. The petitioner contended that he was not involved in the administration of the Association and had no connection with the money collected by Accused No.1. However, the court found that the petitioner, as a trustee, had entered into various agreements and had not provided any document to support his claim of resignation from the Trust. Under Section 46 of the Indian Trusts Act, 1882, a trustee cannot renounce the trust without fulfilling specific conditions, none of which were demonstrated by the petitioner.2. Prima Facie Case:The court examined whether there were prima facie materials available against the petitioner. The prosecution complaint highlighted the role of the petitioner in the formation and management of the Trust, which was allegedly used for money laundering activities. Statements from other trustees and bank account analyses indicated that the Trust earned significant amounts from commercial activities, which were not benefiting the Union or its members. The court found that the complaint sufficiently outlined the petitioner's involvement, thereby establishing a prima facie case.3. Offence under PMLA:The court analyzed the definition of 'proceeds of crime' under Section 2(1)(u) of PMLA and the offence of money laundering under Section 3. The complaint alleged that the petitioner was involved in the acquisition, possession, and use of proceeds of crime, projecting them as untainted property. The court noted that the scope of Section 3 is broad and includes various activities connected with proceeds of crime. The petitioner's alleged actions fell within this scope, and thus, the provisions of PMLA were applicable.4. Burden of Proof:Section 24 of PMLA places the burden of proof on the person charged with the offence of money laundering. The court emphasized that the authorities are presumed to have sufficient grounds to proceed against a person unless proven otherwise. The petitioner was required to prove his innocence during the trial. The court found that the trial court had correctly applied this principle, and the petitioner failed to demonstrate any contrary evidence.Conclusion:The court concluded that the trial court had rightly rejected the discharge petition, as there was no infirmity or perversity in its findings. The petitioner's arguments were insufficient to establish a lack of prima facie case. Consequently, the impugned order dated 02.06.2023 by the Principal Sessions Court, Chennai, was confirmed, and the Criminal Revision Case was dismissed.