LI Network
Published on: 18 September 2023 at 10:57 IST
The Kerala High Court has clarified that the Prevention of Money Laundering Act (PMLA, 1992) does not establish a presumption of guilt for accused individuals concerning the predicate offenses alleged against them.
This clarification came as the court granted bail to Thomas Daniel, the Managing Director of Popular Finance, who stands accused of various PMLA violations. These offenses include cheating depositors by collecting fixed deposits without proper authorization and failing to repay the amounts, ultimately using the funds to acquire property. Daniel was specifically charged with money laundering under Section 3 of the PMLA.
The primary predicate offenses against Daniel involve 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 the Indian Penal Code (IPC).
Also Read: Cheating under Indian Penal Code, 1860 – Law Insider India
The Kerala High Court pointed out that although the mere registration of an FIR for predicate offenses would be sufficient to invoke the money laundering offense under the PMLA, in a recent Supreme Court judgment, Vijay Madanlal Choudhary vs. Union of India emphasized that if the predicate offenses are dismissed, or the accused is discharged, or the predicate offense is not established, the PMLA offense cannot stand.
Therefore, the court faced the question of whether the petitioner could be presumed guilty of the predicate offenses under Sections 420 and 421 IPC to justify a money laundering charge.
The court explained that Section 24 of the PMLA, which deals with the “burden of proof,” only presumes that the proceeds of crime are involved in money laundering. It does not, however, create a presumption of guilt for the accused regarding the predicate offenses.
The Supreme Court’s decision in Vijay Madanlal Choudhary, the Kerala High Court emphasized that the legal presumption concerning the proceeds of crime in money laundering becomes relevant only after establishing three foundational facts:
1. That criminal activity related to a scheduled offense has occurred.
2. That the property in question has been directly or indirectly derived or obtained as a result of that criminal activity.
3. That the person in question is directly or indirectly involved in any process or activity related to the property as proceeds of crime.
Consequently, the court concluded that Section 24 of the PMLA cannot be utilized to presume the accused’s guilt for the alleged predicate offenses.
In light of this, the court assessed whether there were reasonable grounds to believe that Thomas Daniel was not guilty of money laundering. It noted that, for the predicate offense under Section 420 IPC to apply, there must be evidence of dishonest or fraudulent intent from the outset, which was not apparent in this case.
Additionally, the court found no indication of any dishonest or fraudulent removal, concealment, or delivery of property without adequate consideration under Section 421 IPC. Considering these factors, Thomas Daniel was granted bail.
Case Title: Thomas Daniel v. Enforcement Directorate & Ors.