16 Sep 2023 9:30 AM GMT
The Kerala High Court on Thursday made a seminal observation that the Prevention of Money Laundering Act (PML Act, 1992) does not stipulate presumption of guilt of accused for the predicate offences alleged against him. The Court made the afore observation while granting bail to the Managing Director of Popular Finance, Thomas Daniel, who is accused of committing various offences under...
The Kerala High Court on Thursday made a seminal observation that the Prevention of Money Laundering Act (PML Act, 1992) does not stipulate presumption of guilt of accused for the predicate offences alleged against him.
The Court made the afore observation while granting bail to the Managing Director of Popular Finance, Thomas Daniel, who is accused of committing various offences under the PMLA.
Daniel is accused of cheating several depositors by collecting fixed deposits without authority, and failing to repay the amounts so collected or the interest thereon, The monies were alleged to have been utilized for acquiring property. He was thus alleged to have committed the offence of money laundering under Section 3 of PMLA.
The main predicate offences alleged against Daniel are under Sections 420 ('Cheating and dishonestly inducing delivery of property') and 421 ('Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors') of IPC.
The Single Judge Bench of Justice Bechu Kurian Thomas noted that while registration of an FIR for predicate offences by itself would be sufficient to attract the offence of money laundering under the PMLA, in Vijay Madanlal Choudhary vs Union of India [2022 LiveLaw (SC) 633], the Apex Court had laid down that if the predicate offences are quashed, or the accused is discharged, or the predicate offence is not made out, the offence under the PMLA would not lie.
In this regard, the Court was faced with the question as to whether the petitioner could be presumed as guilty of the predicate offence under sections 420 and 421 IPC so as to attract the offence of money laundering.
The Court explained that while Section 24 of PMLA relates to 'burden of proof' and directs that the court shall presume that the proceeds of crime are involved in money laundering, it does not however, create a presumption of guilt of the predicate offences on the accused.
Relying upon the Apex Court decision in Vijay Madanlal Choudhary (Supra), the Court reiterated that the legal presumption regarding the proceeds of crime in money laundering would become relevant only after establishing following three basic or foundational facts:
i. That criminal activity relating to a scheduled offence has been committed;
ii. That the property in question has been derived or obtained directly or indirectly, by any person as a result of that criminal activity; and
iii. That the person concerned is directly or indirectly involved in any process or activity connected with the said property being proceeds of crime.
Accordingly, the Court held that Section 24 of PMLA cannot be utilized to presume the guilt of the accused for the predicate offences alleged.
In this light, the Court had to analyze whether there were reasonable grounds to believe that Daneil is not guilty of the offence of money laundering.
The Court observed that in order for the predicate offence under Section 420 IPC to arise, there ought to be dishonest or fraudulent intention from the beginning, which could not be discerned from the present case. It stated that the petitioner's act of collecting deposits by individuals or firms or by unincorporated associations from the public without permission from the RBI, would not by itself amount to an offence under Section 420 of the IPC in the absence of an element of dishonesty or fraud existing from the inception.
As regards the predicate offence under Section 421 IPC, the Court observed that the said offence had not been charge-sheeted yet, and that there was nothing to indicate any dishonest or fraudulent removal, concealment or delivery of any property without adequate consideration to prevent the distribution of property to creditors.
Daniel was thus enlarged on bail, on these grounds.
Counsel for the Petitioner: Advocates C.S. Manu, C.A. Anupaman, T.B. Sivaprasad, C.Y. Vijay Kumar, Manju E.R., Dilu Joseph, Anandhu Satheesh, and Alint Joseph
Counsel for the Respondents: Deputy Solicitor General of India S. Manu, Standing Counsel for the ED Jaishankar V. Nair, and Advocates T.K. Rajeshkumar, G. Harikumar, Akhil Suresh, Au Balakrishnan Nambiar, Athul M.V., Manoj V. George, Aswin K.R., Mathews Benny, Keerthana V., Thushara Paily, Aparna Somarajan, and Archana Krishnan K.R.
Citation: 2023 LiveLaw (Ker) 480
Case Title: Thomas Daniel v. Enforcement Directorate & Ors.
Case Number: BAIL APPL. NO. 5921 OF 2022
Click Here To Read/Download The Order