Supreme Court Dismisses ED Appeal Against Quashing Of Money Laundering Case Against Razorpay Over Illegal Loan App

The Supreme Court today upheld a Karnataka High Court order quashing money laundering proceedings initiated against payment gateway company Razorpay in connection with an money transfer related to an alleged illegal loan app.A bench of Justice MM Sundresh and Justice N Kotiswar Singh dismissed ED's SLP against the HC order that had held that there was no material to show that Razorpay knowingly facilitated transfer of proceeds of crime.The High Court had set aside the proceedings initiated by the Enforcement Directorate under Sections 3, 4 and 70 of the PMLA and had also quashed the summons issued to the company, holding that there was no material to show that the company had the intention to commit an offence under Section 3 of the PMLA.The case arose from allegations against M/s Jamnadas Morarji Finance Pvt. Ltd., which was booked under various provisions of the IPC and the Information Technology Act for allegedly running an illegal money lending business through mobile applications at exorbitant rates of interest. It was alleged that when borrowers failed to repay loans in time, and in some cases even after repayment, they were harassed and extorted. It was also alleged that the co-accused stole data from victims' mobile phones and misused it.The allegation against Razorpay was that it allowed transactions in the name of the prime accused without verifying its credibility. Thus, it approached the HC for quashing of the case.The High Court noted that the scheduled offences were under investigation by the police and observed that Razorpay could be prosecuted under the PMLA only if it was established that it had prima facie committed an offence under Section 3.The Court reiterated the essential elements of Section 3 of the PMLA, and highlighted that there must be involvement with proceeds of crime, participation in concealing, transferring or removing such proceeds, knowledge or reason to believe that the property is derived from criminal activity related to a scheduled offence, a link with the scheduled offences listed in the Act, and intention to project the proceeds of crime as untainted money.The High Court found that there was no prima facie material to show that Razorpay had knowledge that the funds transferred to the merchant IDs of accused M/s. Jamnadas Morarji were derived from criminal activity or that it knowingly assisted in projecting illicit proceeds as clean money. At most, the material indicated negligence in setting up the merchant IDs, the Court held.The High Court observed that intent is essential to constitute an offence under Section 3 of the PMLA and held that the commission earned by Razorpay could not be treated as proceeds of crime in the absence of material showing such intent. The High Court also held that in the absence of prima facie material to show that Razorpay knowingly facilitated transfer of proceeds of crime, no presumption could be drawn under Section 24 of the PMLA and the burden remained on the prosecution to prove otherwise.This HC order was upheld by the Supreme Court today.Advocate-on-Record Anupam Kishore Sinha represented Razorpay.Case no. – SLP(Crl) No. 5511/2025Case Title – Union of India v. Razorpay Software Private Limited

Supreme Court Dismisses ED Appeal Against Quashing Of Money Laundering Case Against Razorpay Over Illegal Loan App

Amisha Shrivastava

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