Telangana High Court Discharges CA, Businessman In PMLA Case; Finds No Direct Role In Money Laundering

Quashing a money laundering case against a chartered accountant and a businessman accused of assisting in layering of funds in an alleged bank fraud case, the Telangana High Court observed that prosecution under PMLA cannot be sustained based on uncorroborated statements of co-accused.A Single Judge Bench of Justice E.V. Venugopal while referring to Supreme Court judgments observed:"When the facts and circumstances of the case on hand are tested on the touchstone of the above proposition of law raid down by the Hon'ble supreme court, the same squarely applies to the case of the petitioners entitling them for discharge from the present criminal prosecution as basing on the uncorroborated statements of co-accused recorded under Section 50 of the PMLA, without any independent documentary or electronic evidence establishing a prior meeting of minds, control over funds, ownership or operation of accounts, or enjoyment of proceeds of crime the petitioners are arrayed as accused"It further said, “In the absence of any specific, credible or corroborative material linking accused Nos.9 and 16 to the proceeds of crime or the commission of the offence under the PMLA, continuation of proceedings against them would be legally unsustainable, oppressive and an abuse of the process of law. Accordingly, the charge-sheet insofar as it relates to accused Nos.9 and 16 deserves to be quashed and they are entitled to be discharged of all allegations under the Prevention of Money Laundering Act, 2002.”Allowing two criminal petitions, the Court quashed the proceedings against the petitioners in the PMLA case pending before the Metropolitan Sessions Judge-cum-Special Court in Hyderabad. The prosecution case stemmed from multiple complaints lodged by State Bank of India and Corporation Bank alleging that companies belonging to the PCH Group, through their directors Balvinder Singh and Baljit Kaur, fraudulently obtained bank loans and siphoned off funds through fictitious entities.According to the Enforcement Directorate (ED), the accused inflated stock values and diverted credit facilities to shell companies, rotating the funds through multiple bank accounts and using them for personal enrichment, causing wrongful loss to banks. The investigation revealed outstanding dues of approximately ₹747.59 crore, which the ED alleged constituted “proceeds of crime” under the PMLA. Based on the predicate offences registered by the CBI, the ED initiated investigation by recording an ECIR and subsequently filed a charge-sheet before the Special Court under the PMLA.Predicate offences are the underlying crimes (like fraud, corruption, or drug trafficking) that generate illegal money, which then becomes the “proceeds of crime” involved in money laundering cases covered by the PMLA. The petitioners, Manoj Baser (Accused No.9), a chartered accountant, and Om Prakash Sharma (Accused No.16), a businessman, were accused of assisting the main accused in rotating funds through shell companies and facilitating the layering of the alleged proceeds of crime. The petitioners contended that they had been falsely implicated and that the allegations against them were based purely on conjectures and statements of co-accused without any independent material. It was argued that there was no evidence of direct involvement, financial gain, or participation in money-laundering transactions, and that the prosecution had failed to demonstrate their active role in the alleged scheme. Relying on precedents including Satish Mehra v. State (NCT of Delhi) and Murali Krishna Chakrala v. Deputy Director, Directorate of Enforcement, the petitioners submitted that criminal proceedings cannot continue where the allegations are speculative and unsupported by material evidence.Opposing the petitions, the ED argued that investigation had revealed that the petitioners knowingly assisted the principal accused in the rotation and layering of funds through shell entities. The agency contended that the petitioners had facilitated the diversion of bank loans and had received commission for their participation, which was corroborated by statements as well as supporting documentary material such as bank records and communications.After examining the material on record, the High Court noted that the allegations against the petitioners were primarily based on statements made by co-accused during investigation. The Court observed that neither petitioner had directly executed the alleged transactions, controlled bank accounts, derived financial benefit from the alleged proceeds of crime, or participated in the predicate offence. At best, the material suggested that they had acted as intermediaries or agents who allegedly received a nominal commission.The Court emphasised that under Sections 3 and 4 of the PMLA, criminal liability arises only where there is proof of knowing participation, control, possession, projection or enjoyment of proceeds of crime, and that mere professional association...

Telangana High Court Discharges CA, Businessman In PMLA Case; Finds No Direct Role In Money Laundering

Ananya Tangri

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Ananya Tangri

Telangana High Court Discharges CA, Businessman In PMLA Case; Finds No Direct Role In Money Laundering

Ananya Tangri

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Ananya Tangri

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