Allegations must be proved beyond a reasonable doubt - Courts cannot proceed on the Preponderance of Probabilities: SC

Case: J Sekar @Sekar Reddy v. Director of Enforcement

Bench: Vineet Saran and JK Maheshwari

Prevention of Money Laundering Act, 2002 (PMLA)

On Thursday, the Supreme Court held that courts cannot proceed based on Preponderance of Probabilities under the Prevention of Money Laundering Act, 2002 (PMLA). The courts will require evidence beyond a rational doubt.

The bench of Justices, Vineet Saran and JK Maheshwari held that the courts must inspect the material collected by the enforcement authorities, to show whether a prima facie case is made out or not in PMLA cases.

The bench emphasised that the allegations imposed by the authorities must be proven and justified against the accused in the court of law.

"In our opinion, even in cases of PMLA, the Court cannot proceed based on preponderance of probabilities. The allegation must be proved beyond a reasonable doubt in the court," the judgment said.

Background: In this case, the Madras High Court had dismissed the appellant’s petition under Section 482 of the Criminal Procedure Code for quashing PMLA proceedings, after which the appellant approached the apex court.

A managing partner in a sand mining partnership firm since 2013, the appellant had deposited around ₹300 crores in three bank accounts of the firm. The Income Tax Department raided the premises of the appellant in 2016 and seized the currency amounting to ₹106.9 crores and 128.495 kg of gold (valued at ₹36.7 crores).

The Central Bureau of Investigation (CBI) issued a case against the appellant under Sections 120B (Punishment for Criminal Conspiracy), 409 (Criminal breach of trust by the 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.

The CBI closed the case due to a lack of evidence, the apex court noted.

“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.

The Court rejected the dispute of the ED that the money was used for laundering since the tax was already paid on the seized currency.