2026 (1) TMI 656 - HC - Money Laundering

Framing Section 3 PMLA money-laundering charges: prima facie case found, discharge refused and revision dismissed

Whether the accused deserved discharge or whether a prima facie case existed for framing charge under Section 3, PMLA: applying the settled legal test ... Money Laundering - rejection of petition filed by the petitioner seeking discharge - the orders by which the application for discharge filed by the petitioner has been dismissed and charges have been framed respectively, can be said to suffer from an error or not - prima facie case against the petitioner is made out or not, on the basis of the evidence which has been collected in course of investigation. HELD THAT:- The reason for giving explanation under Section 2(1)(u) is by way of clarification to the effect that whether as per the substantive provision of Section 2(1)(u), the property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country but by way of explanation the proceeds of crime has been given broader implication by including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence - It is evident that the “scheduled offence” means the offences specified under Part A of the Schedule; or the offences specified under Part B of the Schedule if the total value involved in such offences is [one crore rupees] or more; or the offences specified under Part C of the Schedule. In the judgment rendered by the Hon’ble Apex Court in Vijay Madanlal Choudhary and Ors. Vs. Union of India and Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)] it has been held that the Authority under the 2002 Act, is to prosecute a person for offence of money-laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of “proceeds of crime”. Only if that belief is further supported by tangible and credible evidence indicative of involvement of the person concerned in any process or activity connected with the proceeds of crime, action under the Act can be taken forward for attachment and confiscation of proceeds of crime and until vesting thereof in the Central Government, such process initiated would be a standalone process. The law regarding the approach to be adopted by the Court while considering an application for discharge of the accused person the Court has to form a definite opinion, upon consideration of the record of the case and the documents submitted therewith, that there is not sufficient ground for proceeding against the accused. If, upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and the prosecution in this behalf, the Judge considers that there is no sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for doing so and if, after such consideration and hearing as aforesaid, the Judge is of the opinion that there is ground for presuming that the accused has committed an offence, the trial Court shall frame the charge. However, the defence of the accused cannot be looked into at the stage of discharge. The accused has no right to produce any document at that stage. The application for discharge has to be considered on the premise that the materials brought on record by the prosecution are true - at the time of considering an application for discharge, the Court is required to consider the limited extent to find out whether there is prima facie evidence against the accused to believe that he has committed any offence as alleged by the prosecution; if prima facie evidence is available against the accused, then there cannot be an order of discharge. It is settled position of law that the accused is entitled in law to know with precision what is the law on which they are put to trial. Charges are framed against the accused only when the Court finds that the accused is not entitled to discharge under the relevant provision of CrPC/BNSS - In Sessions case the Court shall frame a charge in writing against the accused when the Court is of the opinion that there is ground for presuming that the accused has committed an offence as can be seen from Section 252 of the BNSS. In warrant cases, a charge shall be framed when a prima facie case has been made out against the accused as is evident from sections 263 and 269 of BNSS. Further, it is settled position of law that at the stage of framing the charge, the trial Court is not required to meticulously examine and marshal the material available on record as to whether there is sufficient material against the accused which would ultimately result in conviction. The Court is prima facie required to consider whether there is sufficient material against the accused to presume the commission of the offence. Even strong suspicion about commission of offence is sufficient for framing the charge, the guilt or innocence of the accused has to be determined at the time of conclusion of the trial after evidence is adduced and not at the stage of framing the charge and, therefore, at the stage of framing the charge, the Court is not required to undertake an elaborate inquiry for the purpose of sifting and weighing the material. The present petitioner had directly indulged and knowingly is a party and is actually involved in all the activities connected with the offence of money laundering. Consequently, based on the evidence gathered during the course of the investigation, prima facie, it appears that the petitioner has committed offence under Section 3 of the Prevention of Money Laundering Act, 2002 - prima-facie material is available against the present petitioner, as such, charges have rightly been framed under the Section 3 of the Act 2002 against the petitioner. From perusal of the impugned orders, it is evident that the learned Special Judge has duly considered the rival submissions, examined the documents and statements placed on record, and thereafter, passed a reasoned order. The discharge application filed by the Petitioner was rejected only after satisfaction that sufficient grounds exist to proceed against him and consequently, order for framing of charge has also been passed. This court is of the considered view that there is no illegality in the impugned orders - the instant criminal revision petitions are hereby, dismissed. Issues: (i) Whether the orders dated 17.02.2025 and 03.03.2025 refusing discharge and framing charge under Section 3 read with Section 70 and punishable under Section 4 of the Prevention of Money Laundering Act, 2002 against the petitioner suffer from any error; (ii) Whether on the basis of the evidence collected in the investigation a prima facie case against the petitioner for offence under Section 3 of the PMLA is made out.Issue (i): Whether the impugned orders dated 17.02.2025 and 03.03.2025 refusing discharge and framing charge suffer from any error.Analysis: The Court applied the settled law governing discharge and framing of charge (BNSS/CrPC analogues and Supreme Court authorities) which require the trial court to consider the record and documents produced by prosecution and to discharge only if there is no sufficient ground for proceeding; the court may sift but must not conduct a mini-trial. The revisional jurisdiction of the High Court is limited and interference is warranted only for patent error of law, jurisdictional defect or where facts taken at face value cannot constitute the offence. The trial court’s orders were reasoned, considered the ECIR and supporting material, and recorded satisfaction that sufficient grounds existed to proceed.Conclusion: The Court found no error in the impugned orders and declined to interfere. This conclusion is against the petitioner.Issue (ii): Whether the evidence collected in the investigation makes out a prima facie case against the petitioner under Section 3 of the PMLA.Analysis: The Court examined the ECIR, investigative material and authorities on definition of 'proceeds of crime', scope of Section 3 PMLA and principles for framing charge. It accepted that proceeds of crime of Rs.1,08,95,583/- were identified from 26 forged invoices and that documentary and witness material, inter alia banking records, statements under Section 50 and seized documents, supported a money trail and the petitioner’s role as director with control over the company and related entities. The Court applied the test that material produced by the prosecution, taken at face value, must prima facie disclose the ingredients of the offence and that strong suspicion founded on material suffices to frame charge; defence merits and detailed probative value are for trial.Conclusion: The Court concluded that prima facie material existed to frame charge against the petitioner under Section 3 read with Section 70 and punishable under Section 4 of the PMLA. This conclusion is against the petitioner.Final Conclusion: On the record and in view of settled principles on discharge, framing of charge and the limited scope of revisional interference, the High Court refused to disturb the trial court’s rejection of discharge and framing of charge, thereby allowing the criminal proceedings to continue to trial.Ratio Decidendi: At the discharge and charge-framing stage the court must accept prosecution materials as true for the limited purpose of determining whether a prima facie case or a ground for presuming that an offence has been committed exists; where documentary and testimonial material disclose a money trail and involvement sufficient to raise strong or grave suspicion, the trial court may refuse discharge and frame charges, and the High Court will not ordinarily interfere in revisional jurisdiction absent a patent legal error.