2026 (2) TMI 1025 - HC - Money Laundering

Discharge under Section 227 CrPC: assume prosecution case true; prima facie PMLA allegations can sustain trial, sanction not automatic.

At the discharge stage in proceedings under the Prevention of Money Laundering Act, the court must assume prosecution material to be true and decide ... Discharge under Section 227 CrPC - scope of Section 197 CrPC - continuing nature of offence under PMLA - definition of 'proceeds of crime' - prima facie standard / grave suspicion test - Whether the impugned order rejecting the application preferred by the petitioners for their discharge from the offence alleged is legally sustainable. - HELD THAT:- Upon a cumulative reading of the record, it becomes abundantly clear that protection under Section 197 Cr.P.C. is neither automatic nor absolute. The decisive test is the “quality of the act” and its reasonable nexus with official duty. The Supreme Court in the case of Directorate of Enforcement vs. Bibhu Prasad Acharya, Etc. [2024 (11) TMI 296 - SUPREME COURT] has categorically clarified that the requirement of sanction is not to be mechanically invoked at the threshold, nor does its absence necessarily render proceedings void ab initio. The question may arise at any stage and is often dependent upon evidence. The contention of the Petitioners regarding non-compliance of Section 197 Cr.P.C. does not, at this stage, demolish the prosecution case. The issue, if pressed, can very well be examined during trial in light of the evidence that may emerge. The Court has further underscored the grave nature of economic offences, observing that such crimes undermine public confidence and disrupt financial integrity, and therefore discharge at a nascent stage should not be granted lightly in cases involving complex financial transactions. In view of these authoritative pronouncements, the Petitioners’ contention that the PMLA is inapplicable on temporal grounds cannot be accepted at the stage of discharge. In view of the above, the matter having been dealt with in a lucid manner as above, this Court finds that further reference to the decision in the matter of Niket Kansal vs. Union of India through Enforcement Directorate, Jammu [2025 (6) TMI 1183 - JAMMU AND KASHMIR AND LADAKH HIGH COURT] would only be an academical one. Definition of 'proceeds of crime' - HELD THAT:- The definition under Section 2(1)(u) is intentionally expansive. It includes not only direct tainted property but also transformed forms and equivalent value. The legislative design is to prevent laundering through layering, conversion, and camouflage. The existence of “proceeds of crime” is indeed a jurisdictional fact. However, its determination is evidentiary in character. Unless the materials on record clearly exclude any possible nexus between the property and the scheduled offence, the matter must proceed to trial. The presumption under the statute operates in favour of the prosecution at the threshold stage, subject to rebuttal by the accused during trial. Therefore, detailed evaluation of whether the properties are legitimately acquired or ancestral cannot be conclusively undertaken at the stage of Section 227 Cr.P.C. Prima facie standard / grave suspicion test - HELD THAT:- The test is of “grave suspicion,” not proof beyond reasonable doubt. In the present case, the charge-sheet reflects material alleging disproportionate assets and their alleged projection/possession within the meaning of Section 3 of the PMLA. Whether such material ultimately results in conviction is a matter for trial. At this stage, it suffices that the materials disclose ingredients of the alleged offence. There being material on record to constitute the offence alleged against the Petitioners, as reflected in the Charge Sheet, there is no necessity to further assess whether such material would be sufficient to sustain a conviction. The materials on record are sufficient to bring the matter to trial for adjudication as to whether the Petitioners have amassed property disproportionate to their known sources of income and whether the allegations and materials produced constitute proceeds of crime within the meaning and scope of the PMLA. These are matters to be determined during trial. Accordingly, this Court finds that the learned Addl. Sessions Judge-cum-Special Judge, C.B.I.-I, Bhubaneswar in Crl. Misc. (PMLA) Case No.06 of 2015 order dated 02.09.2023 did not travel beyond the scope of the provision enumerated under Section 227 Cr.P.C., and the materials before it being sufficient to frame charge, rightly declined to entertain the prayer of the Petitioners. This Court finds no illegality or impropriety in the impugned order warranting interference. As a result, the present CRLREV, being devoid of merit, stands dismissed. Issues: Whether the order dated 02.09.2023 rejecting the petitioners' application for discharge under Section 227 Cr.P.C. in proceedings under the Prevention of Money Laundering Act, 2002 is legally sustainable.Analysis: Applicable principles governing discharge applications require the court at the threshold to assume the prosecution material to be true and to determine whether the facts, taken at their face value, disclose the ingredients of the alleged offence so as to constitute a prima facie case or grave suspicion sufficient to proceed to trial. Protection under sanction provisions for public servants is not automatic and depends on the quality of the act and its reasonable nexus with official duty; the need for sanction may be examined at appropriate stages and does not necessarily constitute a jurisdictional bar at the discharge stage. The offence under the Prevention of Money Laundering Act, 2002 is treated as a continuing offence and liability is triggered when a person indulges in processes or activities connected with proceeds of crime, such as concealment, possession, acquisition, use, or projection as untainted property. Determination of whether assets constitute proceeds of crime is primarily evidentiary and cannot ordinarily be concluded at the Section 227 Cr.P.C. stage unless the record clearly shows absence of any nexus between the property and the scheduled offence.Conclusion: The impugned order declining discharge was legally sustainable; the materials on record disclose a prima facie case under the Prevention of Money Laundering Act, 2002 and warrant trial. The petitioners' revision is dismissed and the rejection of the discharge application is upheld in favour of the respondent.