[PMLA] Courts cannot proceed on preponderance of probabilities; allegations must be proved beyond reasonable doubt: Supreme Court

The Supreme Court on Thursday held that in cases under the Prevention of Money Laundering Act, 2002 (PMLA), courts cannot proceed based on preponderance of probabilities but will require evidence beyond reasonable doubt [J Sekar @Sekar Reddy v. Director of Enforcement]..A bench of Justices Vineet Saran and JK Maheshwari held that in PMLA cases, the courts must look into the material collected by the enforcement authorities to show whether a prima facie case is made out or not. The allegations levied by the authorities must be substantiated and proved against the accused in the court of law, the bench emphasised."In our opinion, even in cases of PMLA, the Court cannot proceed on the basis of preponderance of probabilities. On perusal of the statement of objects and reasons specified in PMLA, it is the stringent law brought by parliament to check money laundering. Thus, the allegation must be proved beyond reasonable doubt in the court," the judgment said. .In this case, the appellant had approached the apex court against the judgment of the Madras High Court which had dismissed his petition under Section 482 of the Criminal Procedure Code for quashing of PMLA proceedings. The appellant, a managing partner in a sand mining partnership firm since 2013, had deposited around ₹300 crores in three bank accounts of the firm. In 2016, Income Tax Department raided the premises of the appellant and seized currency amounting to ₹106.9 crores and 128.495 kg of gold (valued at ₹36.7 crore).Subsequently, a case was registered by the Central Bureau of Investigation (CBI) against the appellant under Sections 120B (Punishment for Criminal Conspiracy), 409 (Criminal breach of trust by public, servant. or by banker, merchant or agent) and 420 (Cheating and dishonestly inducing delivery of property) of the Indian Penal Code, 1860 and Prevention of Corruption Act, 1988. .Later, the Respondent-Enforcement Directorate (ED) also registered a case against the appellant under the PMLA. The investigation was conducted by the ED and statement of the appellant was recorded. Subsequently, further searches and seizures were conducted and around ₹33 crores in cash was recovered. The Deputy Director of ED ordered attachment of property of the appellant which was rejected by the adjudicating authority under the PMLA.The CBI after the investigation submitted a closure report before the Sessions Judge (CBI) and the report was accepted "with an observation that for lack of sufficient evidence, nothing incriminating is found which may surface on the part of accused persons". The other two offences for which the CBI filed a case were also quashed by the High Court. Therefore, the investigations made by the Income Tax Department were closed. It was also found that the cash which was recovered was from a sand mining deal and that tax was paid for the same. .The Supreme Court noted that the first information report (FIR) with respect to the scheduled offence was closed by the CBI with respect to proceeds of the crime including the attached property. Due to the lack of evidence the CBI closed the case, the apex court observed. "For lack of identity of the source of collected money, it could not be reasonably believed by the Deputy Director (ED) that the unaccounted money is connected with the commission of offence under PMLA," the top court held.Furthermore, the Court rejected the contention of the ED that the money was used for laundering as the tax was already paid on seized currency."The Department itself is unable to collect any incriminating material and also not produced before this Court even after a lapse of 5 ½ years to prove its case beyond reasonable doubt. From the material collected by the Agency, they themselves are prima facie not satisfied that the offence under PMLA can be proved beyond reasonable doubt", the apex court held. .Therefore, the apex court allowed the appeal as allegations against the appellant were "bleak" and "till the allegations are proved, the appellant would be innocent." The judgment of the High Court was, therefore, set aside and the ED case was quashed. .Senior Advocate Vikram Chaudhari appeared for the appellant, while Additional Solicitor General SV Raju appeared for the respondent..[Read Judgment]