The Hon’ble Supreme Court, in a recent matter¹ held that in case of offences under the Prevention of Money Laundering Act, 2002 (‘PMLA’, or ‘Act’) courts cannot proceed merely on the basis of the principle of ‘preponderance of probabilities’. An allegation under the said Act must be proved ‘beyond reasonable doubt’.

Preponderance of probabilities is an evidentiary standard under which, the party bearing the burden of proof must present evidence that is more credible and persuasive than that presented by the other party, therefore elucidating that the existence of a fact is more probable than its non-existence. This principle, used mostly to establish the burden of proof in civil matters, has a lower evidentiary threshold than the principle of ‘beyond reasonable doubt’. The Hon’ble Supreme Court, on reading the Statements of Objects and Reasons provided in the PMLA, opined that the intention of the legislature is to check and control the menace of money laundering, thus, intending it to be a stringent criminal law. Therefore, the standard of proof ought to be strict and beyond reasonable doubt. The Hon’ble Apex Court further stated that the court, in such matters, must look for prima facie evidence in the favour of case. Unless these allegations are substantiated by the authorities and proven, the person is believed to be innocent.

In the present case, the Appellant was a partner in a mining firm, and had deposited approximately Rs. 300 crores in the bank accounts of the firm in 2013, pursuant to which the Income Tax Department raided his premises, and seized almost 106 crores in cash and 128 Kgs of gold from his premises. The CBI lodged a FIR under Sections 120B, 409, 420 of Indian Penal Code, 1860 and Section 13(2) read with 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act, 1988. The Directorate of Enforcement (‘ED’), on the basis of the FIR lodged by the CBI, registered an Enforcement Case Information Report (‘ECIR’) under the PMLA. On subsequent raids, the authorities found Rs. 33 Crores in new currency notes.

However, it is interesting to note that the CBI, after its investigation, submitted a ‘closure report’ before the Special Judge. The Appellant, subsequently, appeared before the High Court of Madras seeking to quash the pending ECIR, however, the Hon’ble High Court dismissed the Appeal. The Counsel of the Appellant then argued before the Apex Court that the PMLA supposes a pre-existence of a scheduled offence, and that ‘proceeds of crime’ are to be derived from this ‘scheduled offence’. He further argued that the Adjudicating Authority never allowed for the attachment of the property/assets seized at first place, as the burden of proof was not fully discharged. Thus, mere belief by the director of the ED that money/property is unaccounted and are the proceeds of a crime is not enough. The Supreme Court, at this juncture opined that mere preponderance of probabilities is not enough to discharge the burden of proof. The evidentiary threshold must be extended to incorporate the principle of ‘Beyond Reasonable Doubt’. In all scenarios therefore, the only conclusion to be drawn must be determined beyond reasonable doubt, and not merely on the basis of probabilities.

By - Muskaan Ahuja and Devesh Bhatia