Understanding the Burden of Proof in PMLA Cases: Exploring the Flawed Concept

“The scales of justice should always tip in favor of preserving individual liberty, even when weighed against the distant possibility of conviction.”

One of the most important legislations, The Prevention of Money Laundering Act, 2002 (PML Act), in my opinion, suffers from vagueness and lacks logical coherence. In the present article, I will try to highlight the (i) ‘flawed concept of burden of proof under PML Act’, and (ii) ‘hasty arrest made by ED and misapplication of twin conditions upon such arrests.'

What is the 'burden of proof'? 

Simply, the 'Burden of Proof' is the obligation to prove a disputed assertion or a fact in a legal proceeding. Generally, in criminal cases, the said burden lies heavily upon the prosecution. It is based on the principle that one is presumed innocent until proven guilty. The prosecution is burdened with proving the guilt of an accused 'beyond reasonable doubt' to secure a conviction. In civil cases, however, the party making a claim must prove it on the 'balance of probabilities.' 

Concept of Burden of proof under the PML Act. 

Section 24 of the PML Act lays down the concept of reverse burden under PMLA prosecutions and adjudications. The said section is read as under:

"Section 24: Burden of proof: In any proceeding relating to proceeds of crime under this Act,-

(a) in the case of a person charged with the offence of money-laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and

(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering."

It is evident from Section 24(a) that wherein formal charges for the offence of money laundering as defined under Section 3 of the PML Act have been framed against the Accused, the Authority or Court is obligated to presume that proceeds of crime are used in money laundering. In other words, under the PML Act a reverse burden is cast upon the Accused to prove his innocence which the accused has to rebut during the course of the trial. Whereas section 24(b) accounts for a situation wherein formal charges are yet not framed against the Accused, under such a situation, the Authority or Court, may presume that proceeds of crime are used in money laundering. 

It is evident that for triggering the presumption under Section 24, the existence of proceeds of crime is a sine qua non. The said section does not in the first place enable the Authority or Court to presume that any proceeds of crime have been generated at all. Therefore, step 1 for initiating any action be that be arrest or attachment, what is to be established is first, a scheduled offence has been committed and secondly, from the commission of scheduled offence, proceeds of crime have been generated and only thereafter, presumption under Section 24 PML Act can trigger. 

Now the question arises, how can a Special Court or Authority under the PML Act come to the satisfaction that a scheduled offence has been committed and has led to the generation of proceeds of crime? 

The correct answer to the said question, in my opinion, can only be, when a person accused of a scheduled offence has been convicted by the concerned court and has rather returned a finding of involvement of proceeds of crime. 

However, for a moment's sake, let's adopt a lesser argument, that for a Special Court or Authority, to even reach prima facie finding that a scheduled offence has been committed which led to the generation of proceeds of crime, at least what is required is for the court dealing with the scheduled offence to take cognizance of the final report. In my opinion, any arrest made before the taking of cognizance by the Court dealing with the schedule should be considered as premature. 

My experience and conclusion:

What astonishes me the most is the fact that mere registration of an FIR is considered to be sufficient for enabling the ED to make an arrest. An FIR is merely an information report, in most cases, the police authorities are bound to register an FIR when the complaint discloses information about the commission of a cognizable offence. An FIR alone cannot lead to a presumption of the existence of a scheduled offence and the generation of proceeds of crime thereof. 

However, in many cases, an accused is arrested under PMLA within a very short period post the registration of an FIR under the scheduled offence. Further, there are several cases wherein the accused persons are suffering years of custody under PMLA wherein no chargesheets whatsoever have been filed under the scheduled offence. So as to say in cases wherein the investigating agencies investigating the scheduled offence do not even have sufficient material/evidence to file a final report, ED has assumed that a scheduled offence has been committed and has also led to the generation of proceeds of crime. 

In one of the PMLA prosecutions against Shakti Bhog Foods Ltd wherein I appeared for the promoters of the company, an FIR was registered by CBI in the month of December 2020. After the registration of FIR, an ECIR was registered by ED and consequently several arrests were made. However, to date no chargesheet whatsoever has been filed by the CBI. More than 3 years of investigation conducted by CBI has not enabled it to even file a single chargesheet casting a shadow of doubt on the very commission of scheduled offence. However, despite the aforesaid, the director of the company has been under incarceration for the alleged offence of Money Laundering for more than 2.5 years. 

The said self-presumption of scheduled offence and existence of proceeds of crime by ED and putting the burden of proof upon the Accused to show that proceeds of crime are not used in money laundering when the investigating agencies has itself failed to conclude even the commission of scheduled offence is bizarre and devoid of logic. 

In conclusion, unless a 'scheduled offence' and generation of 'proceeds of crime' from the said commission is proved at least at a 'prima facie' level by the Court dealing with the Scheduled offence i.e. by taking cognizance under Section 190 CrPC, any arrest or attachment made under PMLA especially putting reverse burden upon the Accused in terms of Section 24 or twin condition of bail should be considered to be premature and illegal.