Section 24 PMLA: Why Reverse Burden of Proof Cannot Replace Foundational Evidence

Summary: Section 24 of the Prevention of Money Laundering Act, 2002 (PMLA) establishes a statutory framework governing the burden of proof in proceedings relating to proceeds of crime. The provision distinguishes between persons charged with money laundering under Section 3 and other persons connected with such proceedings. Under Section 24(a), the authority or court shall presume that proceeds of crime are involved in money laundering unless the contrary is proved. Section 24(b), however, provides a discretionary presumption in relation to any other person. The article examines the legislative history of this reverse-onus provision, particularly the amendment introduced through the Prevention of Money-Laundering (Amendment) Act, 2012, which replaced the expression ‘accused’ with ‘charged’. It analyses the significance of this change in determining when statutory presumptions may operate and how they interact with the fundamental principle of presumption of innocence. The analysis principally relies on the Supreme Court’s decision in Vijay Madanlal Choudhary v. Union of India (2022 SCC OnLine SC 929), which examined the constitutional validity and operation of several PMLA provisions, including Section 24. The article discusses the importance of establishing foundational facts before invoking statutory presumptions. It also examines Mr. Dennis Sagaya Jude v. Directorate of Enforcement (Karnataka High Court), concerning allegations of knowing assistance in money laundering; Kavitha G. Pillai v. Joint Director, Enforcement Directorate (Kerala High Court), concerning the distinction between proving that property constitutes proceeds of crime and presuming its involvement in money laundering; and Ajay Kumar Chandraparkash Baheti v. Directorate of Enforcement (Bombay High Court), concerning the limits of statutory presumptions and the prosecution’s responsibility to establish the ingredients of the offence.

I. The Bare Provision: Section 24, PMLA 2002

In any proceeding relating to proceeds of crime under this Act- (a) In the case of a person charged with an 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.

II. Legislative History and Parliamentary Intent

Under the original statutory scheme of Section 24 of the Prevention of Money Laundering Act, 2002 (PMLA), the court was required to presume a culpable mental state on the part of the ‘accused’, placing the primary burden of rebuttal entirely upon the defense from the inception of proceedings.

This draconian architecture raised widespread systemic concerns. Parliamentary Committees-including the Standing Committee Reports on the PMLA Bill 1998 and Amendment Bill 2011, as well as the Select Committee Report on the PMLA Bill 1999-consistently highlighted the extreme stringency of shifting the burden of proof at the threshold investigative stage. The Committees flagged a fundamental procedural conflict: while scheduled (predicate) offences under traditional penal statutes place the legal burden strictly on the prosecution to prove guilt beyond reasonable doubt, the PMLA uniquely reversed this presumption. In joint trials conducted by Special Courts holding jurisdiction over both the predicate offence and the PMLA offence, applying opposing standards of proof within a single proceeding created profound ambiguity and practical friction.

To resolve this constitutional and procedural conflict, Parliament enacted the 2013 Legislative Shift via the Prevention of Money-Laundering (Amendment) Act, 2012. The amendment substituted the term ‘accused’ with a person ‘charged’ with an offence of money laundering under Section 3. This statutory amendment explicitly aligned the provision with legislative intent: the mandatory statutory presumption against an individual does not trigger at the initial investigative or complaint stage, but solely after formal charges are framed by the court upon judicial evaluation.

III. Jurisprudence of Burden of Proof: Classical Principles vs. Reverse Onus

Under cardinal principles of criminal jurisprudence, an accused is presumed innocent until proven guilty beyond a reasonable doubt, casting the primary legal burden perpetually upon the prosecution. In evidence law, a vital distinction exists between the legal burden of proof on pleadings (under Section 101 of the Indian Evidence Act, 1872 / Bharatiya Sakshya Adhiniyam, 2023), which remains static on the prosecution throughout the trial, and the evidentiary burden of adducing evidence (under Section 102 of the Indian Evidence Act), which shifts dynamically between parties as facts or statutory presumptions are introduced.

Section 24 of the PMLA operates strictly on the evidentiary burden under Section 102. It does not discharge the prosecution from proving core foundational facts, nor does it serve as a statutory shortcut to bypass initial evidentiary requirements.

IV. Operationalizing Statutory Presumptions: Section 24(a) vs. Section 24(b)

Section 24 of the PMLA creates a sharp, deliberate distinction between a person formally charged with money laundering under clause (a) and ‘any other person’ under clause (b):

1. Scope and Mechanics of Clause (a): Mandatory Presumption for Charged Persons

Applicability Stage: Applies exclusively after formal charges are framed by the Special Court.

Mandatory Nature (‘Shall Presume’): Once triggered, Section 24(a) creates a mandatory statutory presumption where the court or authority is statutorily bound to presume that proceeds of crime are involved in money laundering unless the contrary is proved.

Threshold Burden on the Prosecution: This legal presumption does not apply automatically upon registration of an ECIR or filing of a prosecution complaint. The prosecution must first establish two foundational facts beyond reasonable doubt: (i) the existence of ‘proceeds of crime’, and (ii) the direct or indirect involvement of the accused in any process or activity connected to those proceeds.

Shifting Onus and Rebuttable Character: Only after the prosecution proves these foundational facts does the evidentiary onus shift to the accused. The charged individual must then rebut the presumption by producing evidence within their personal knowledge. Because ‘shall presume’ establishes a rebuttable inference rather than conclusive proof, it constitutionally obliges the court to provide a fair opportunity to introduce rebuttal evidence prior to reaching a final verdict.

2. Scope and Mechanics of Clause (b): Discretionary Presumption for Uncharged Persons

Targeted Application: Applies strictly to ‘any other person’-individuals who have not been formally charged with the offence of money laundering under Section 3.

Discretionary Nature (‘May Presume’): Unlike mandatory clause (a), clause (b) employs the expression ‘may presume’, granting the court or adjudicating authority permissive discretion rather than an obligatory mandate to draw an adverse inference.

Prerequisite Foundational Link: The presumption cannot be arbitrarily invoked. The prosecution or authority must first establish the essential foundational facts: (i) the actual existence of proceeds of crime, and (ii) a demonstrable link connecting the uncharged person to processes or activities involving those proceeds.

Procedural Forum Flexibility & Evidentiary Parity: This discretionary presumption can be leveraged across multiple forums, including proceedings before the Adjudicating Authority (such as attachment proceedings under Section 5 or Section 8) or during trial. Once the foundational link is established and invoked, the underlying logic mirrors Section 24(a): it remains a rebuttable inference, leaving the individual full liberty to discharge the evidentiary onus on a preponderance of probabilities.

V. Judicial Deconstruction: Landmark Precedents

1. Vijay Madanlal Choudhary v. Union of India (2022 SCC OnLine SC 929)

The Supreme Court definitively held that the legal presumption in Section 24 pertains to the involvement of proceeds of crime in money laundering. This presumption becomes relevant only if the prosecution or authorities successfully establish three basic foundational facts:

First: That criminal activity relating to a scheduled offence has been committed.

Second: That the property in question has been derived or obtained, directly or indirectly, by any person as a result of that criminal activity.

Third: That the person concerned is directly or indirectly involved in any process or activity connected with the said property being proceeds of crime.

The Apex Court clarified that establishing these foundational facts constitutes the offence of money laundering (with the nature of process/activity elaborate in the Explanation to Section 3 inserted via Finance (No. 2) Act, 2019). Upon establishing these foundational facts, the legal presumption arises. If the person concerned produces evidence demonstrating no causal connection or disproving involvement, the legal presumption stands fully rebutted.

2. Mr. Dennis Sagaya Jude v. Directorate of Enforcement (Karnataka High Court)

The High Court of Karnataka held that PMLA prosecution against a petitioner who was not an accused in the scheduled offence was untenable absent evidence showing knowledge that funds transferred to his account were proceeds of crime. The Court emphasized:

“The petitioner is required to rebut the presumption under Section 24 of the Act, 2002, only if there is sufficient evidence or any specific allegation to establish that the petitioner knowingly assisted in concealing the proceeds of the crime or facilitated the use of such proceeds to project illicit proceeds as untainted property.”

Relying on the Supreme Court ruling in Sh. Satish Mehra v. Delhi Administration & Anr., the Court observed that where a judge is fairly certain that there is no prospect of conviction due to lack of prima facie evidence of knowing assistance, continuing proceedings constitutes an abuse of process of law, warranting truncation at the stage of discharge.

3. Kavitha G. Pillai v. Joint Director, Enforcement Directorate (Kerala High Court)

The Kerala High Court held that the burden cast under Section 24 is a mere evidentiary burden shifting based on the quality of evidence, as property source and acquisition facts reside within the holder’s personal knowledge. Crucially, the Court held:

No Presumption as to Ill-Gotten Nature: Section 24 presumes that proceeds of crime are ‘involved in money laundering’. There is NO presumption that the very proceeds are ill-gotten. The ill-gotten nature relates to the predicate offence, and only proof of the predicate offence determines that character.

Means vs. End Paradigm: In money laundering, proceeds of crime are the ‘means’; their laundering is the ‘end’ (legitimation of ill-gotten money). If the first exists, the second must be presumed; however, the converse does not apply.

(Tech Mahindra Limited v. Joint Director, ED, Andhra Pradesh High Court, W.P. No. 17525/2014, affirming that statutory presumptions cannot substitute missing proof of guilty knowledge).

4. Ajay Kumar Chandraparkash Baheti v. Directorate of Enforcement (Bombay High Court)

The Bombay High Court held that there is NO legal presumption under Section 24 that: (a) the concerned property is ‘proceeds of crime’, (b) the person accused has knowledge that the property is ‘proceeds of crime’, or (c) the person is involved in or guilty of money laundering merely for possessing or having concern with the proceeds of crime.

The High Court observed that offence ingredients under Section 3 require proof beyond reasonable doubt, and courts cannot proceed on mere preponderance of probabilities. Unless allegations are substantiated by authorities establishing predicate offence links, an individual is presumed innocent. A presumption cannot supply what initial evidence has failed to establish.

VI. Conclusion & Strategic Litigation Takeaways

Section 24 of the PMLA is an evidentiary tool, not a substitute for missing proof. In defense litigation before Special Courts and Adjudicating Authorities, senior practitioners must rigorously insist upon the strict discharge of threshold burdens by the Enforcement Directorate. Presumptions under Section 24-whether mandatory under clause (a) or discretionary under clause (b)-remain strictly dormant until the prosecution proves the existence of proceeds of crime and a direct causal link beyond reasonable doubt. When foundational facts are unproven, Section 24 cannot bridge the evidentiary gap.

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By: CA Shivam Nitesh Gandhi

CA, Lawyer | B.Com. (A&F) | ICAI Certified Anti Money Laundering Specialist | NISM Certified Anti-Money Laundering Manager (CALM) | ICAI Forensic Accounting And Fraud Detection, Arbitration, Artificial Intelligence (L1) & Ind AS Certificates