Money laundering is a menace not only to the economy but also to the integrity and sovereignty of a nation. To combat with tenacity and obviate the foe, the Indian Parliament enacted the ‘Prevention of Money Laundering Act, 2002’ [henceforth ‘the Act’]. One of the essential features of ‘the Act’, which sets it apart from the general scheme of the Criminal Procedure Code, 1973 and the Indian Penal Code, 1860 is the provision of presumption and the burden of proof. As per Section 24 of ‘the Act’ when a person is accused of having committed the offence of money laundering under Section 3, the burden to prove that the alleged ‘proceeds of crime’ are untainted property shall be on the accused. In a general criminal law the burden is on the prosecution to prove the felony, however, not so under this “Act”
Under Section 24 of ‘the Act’ in any proceeding relating to the proceeds of crime, a presumption is raised by the Authority or the Court against any person indicted with the offence of money laundering that the money/property in question is ‘tainted’, unless the contrary is proved by the felon. Even in the case of Records, and Properties, which are found in the possession or control of any person in the course of a survey or search under this Act, it shall be presumed that such record or property belongs to such person.
Therefore, it is unequivocally clear that, it is the person indicted with an offence under Section 3 of ‘the Act’, whose property is attached and proceeded against for Confiscation, who has to discharge the onus of proof by disclosing the sources of his Income, Earnings or Assets, out of which or means whereby he has acquired the property attached. It is “he” who has to discharge the burden that the property does not constitute proceeds of crime and is legit.
Further it is necessary to mention that where a transaction of acquisition of property is part of inter-connected transactions, the onus of establishing that the property acquired is not connected to the activity of Money-Laundering is on the person in ownership, control or possession of the property, even though not accused under Section 3 offence under ’the Act’, provided one or more of the interconnected transactions is/are proved to be involved in Money-Laundering.
The “discharge of burden” under section 24 of ‘the Act’ has persistently been convoluted contention before the Court and the Authority, particularly at what stage “onus” shifts on the accused during the proceeding as there are various stages of proceeding under ‘the Act’. So, let’s examine the issue:
The Section 24 of ‘the Act’ has undergone paradigm shift under the prevention of the Money Laundering (Amendment) Bill 2012 whereby the amendment in the parent “Act of 2002” was carried out and the “accused” word in original parent section 24 was substituted with word “charged”. The position of Section 24 of the “Act”( Burden of Proof) pre and post amendment of 2013 has been like this:
(Prior to 2013 amendment): “Burden of proof” When a person is “accused” of having committed the offence under section 3, the burden of proving that proceeds of crime are untainted property shall be on the accused.”
(Post 2013 amendment):“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.
On scrutiny of the original section 24 in Parent Act of 2002 suggests that when person is “accused” of having committed the offence of money laundering the burden of proving the proceeds of crime are untainted property shall be on the accused. It appeared to be a drastic provision as simply by an accusation that a person had committed an offence of money laundering the burden shifts on the accused whereas he may not even be charged at that time. Thereafter, ‘the Prevention of Money Laundering (Amendment) Bill 2012’ was introduced in the Parliament and Section 24 of the parent Act was amended, whereby, the word “accused” in parent Act was replaced with word “charged”.
It is appropriate to mention here that the Hon’ble Finance minister, while answering the Question in Rajay Sabha about the Amendment of Section 24 of ‘the Act’ under ‘the Prevention of Money Laundering (Amendment) Bill 2012’ clarified that the word “accused” is onerous and unfair provision in the parent Act of 2002 in view of the above mentioned reasons hence, it is substituted with word “charge”. Now as per the amended provision a person is “charged” with an offence of money laundering under the “the Act” means when the Court frames a charge against him in accordance with Section 211 of CrPC and only at that stage the burden shifts on the accused. The word “charge” appears first time in the CrPC under section 211 and by borrowing the language of section 211 CrPC the word “accused” is substituted with word “charge” in ‘the Act’. Therefore, it is noticeable that the burden of proof shifts on accused once charge of offence is framed, which means ‘at the stage of trial’ and not ‘at the stage of enquiry’.
The Hon’ble high court of Delhi, in the case Upender Rai vs Enforcement Directorate reported as (2019) 262 DLT 382 held that in case a person is charged with the offence of money laundering, the Authority or the Court shall presume that such proceeds of crime are involved in money laundering unless the contrary is proved. The stage of raising the presumption or for the accused to rebut the said presumption would be during the course of trial. Even if assuming that at the stage of bail the Court is to consider that the accused is prima facie required to rebut the presumption, the same would not have to be beyond reasonable doubt but on the basis of broad probabilities.
Now, the significant question arises that what is position of “burden of proof” at the stage of attachment of proceeds of crime under ‘the Act’. The legislators have predicted two parallel proceedings under the Act; One with regard to the attachment of the properties derived and obtained from the proceeds of crime and its confiscation and; Second, action contemplated is prosecution and punishment for commission of offence covered under section 3 of the Act. In the case of Radha Mohan Lakhotia Vs Enforcement Directorate reported as (2010) 5 BOM CR 625 the Hon’ble High Court of Bombay held that by virtue of Section 24 of the Act, the burden of proving that the property possessed by the accused was not proceeds of crime and is untainted would be on the accused and he is bound to discharge the burden of proof at the stage of attachment proceeding as well with support of the Income, Earnings, Assets.
Further in the case of B. Rama Raju Vs. Union of India reported as 164CompCas149(AP) it was held by Hon’ble Andhra Pradesh High Court that Section 24 of the Act shifts the burden of proving that the proceeds of crime are untainted property onto person(s) accused of having committed the offence under section 3. In response to the notice issued under section 8(1) and qua the legislative prescription in section 24 of the Act the person accused of having committed the offence under section 3 must show with supporting evidence and material that the person has requisite means by way of income, earning or assets, out of which or by means of which the person has acquired the property alleged to be proceeds of crime. Only on such showing would the accused be able to rebut the statutorily enjoined presumption that the alleged proceeds of crime are untainted property.
Moreover, it was argued that Section 24 of Act offends the Article 14 of the Constitution on the ground that burden of proving that proceeds of crime are untainted property is applicable only to the prosecution and trial of a person indicted of committing an offence under Section 3 of the Prevention of Money Laundering Act 2002 and do not operates to the attachment and confiscation under Chapter III of the “Act”. However, the Hon’ble High Court upheld the provision in Section 24 valid by observing that in the cases of money laundering the various strategies are involved by the accused and the proceeds of crime undergo various transactions and are layered into the economic system in order to show that money is untainted. Therefore, it is right to cast the burden of proof on the accused. The burden of proof under Section 24 applies to trial proceedings and continues to attachment and confiscation proceedings.
In case of Sarosh Munir Khan Vs Enforcement directorate (534 /Mumbai /2013) the Hon’ble High court of Bombay held that an order confirming the attachment and/or the provisional attachment can be passed only on the Adjudicating Authority being satisfied, on considering the material on record including the material or evidence furnished in response to the notice issued under section 8(1), the reply furnished in response thereto, and taking all and other relevant material in to consideration, to record a finding that the property or so much of it, is involved in money laundering.
In case of Rohit Tandon Vs Enforcement Directorate reported as AIR 2017 SC 5309 , The Hon’ble Supreme court held that the decisions in the cases of Subrata Chattoraj vs Union of India 2014(6) SCALE 593, Y. S. Jagan Mohan Reddy vs CBI AIR 2013 SC 1933, Union of India Vs Hassan Ali Khan, 2011 (11) SCALE 302 is that economic offences having deep-rooted conspiracies and involved huge loss of the public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. Further, when attempt is made to project the proceeds of crime as untainted money and also that the allegations may not ultimately be established, but having been made, the burden of Proof that the monies were not proceeds of crime and were not, therefore, tainted shifts on the accused person under section 24 of the Act.
Therefore, under the general law the burden of proof lies on the person/agency making any claim or asserting any fact under the Indian Evidence Act 1872, whereas, the ‘Prevention Of Money Laundering Act 2002’ is a Special Law enacted by the Parliament with the exceptional provision of presumption and reverse burden of proof in the prosecution as well as the attachment proceedings under the Act.
Nitesh Rana, Advocate, is Special Prosecutor and Counsel for the Enforcement Directorate.Disclaimer: The views or opinions expressed are solely of the author.