Absence of due diligence not money laundering: Bombay High Court discharges CA of Chhagan Bhujbal

The Bombay High Court recently closed the money laundering case against Shyam Radhakrishna Malpani, the chartered accountant (CA) of Maharashtra Minister and Senior NCP leader Chhagan Bhujbal and his family [Shyam Radhakrishna Malpani v State of Maharashtra and Anr]. .In an order passed on June 16, Justice RN Laddha said that mere absence of due diligence will not amount to the offence of money laundering under Section 3 of the Prevention of Money Laundering Act (PMLA). "Mere absence of due diligence, even if assumed for arguments sake, does not amount to the commission or omission of an offence under Section 3 of the PMLA,” the Court said.Bhujbals themselves had already been discharged in the predicate offences that formed the basis of the money laundering case involving companies linked to the Bhujbals.A special court had earlier rejected Malpani’s discharge application in the money laundering case.The High Court on June 16 set aside the Special Court's 2021 order. .ED had registered the case under PMLA against Bhujbals in connection with the Maharashtra Sadan scam, alleging money laundering of approximately ₹1,000 crore. The ED probe was based on the Anti-Corruption Bureau (ACB) investigation..The ED had alleged that Malpani actively participated in the offence of money laundering through both acts of omission and commission, while serving as the Chartered Accountant for the entities controlled by the Bhujbals.It was further alleged that he was in knowledge of all the dubious transactions and sham deals and that he allowed the Bhujbals to indulge in acquisition of illicit funds and its laundering. .However, Malpani, through his counsel, argued that he was not named as an accused or charge-sheeted in any of the predicate FIRs and had audited the financial accounts only for the financial year ending March 2012 to 2015, whereas the alleged proceeds of crime originated around 2007–2008.In response, the ED submitted that Malpani, as the auditor of companies controlled by the Bhujbals, helped camouflage illicit transactions and conceal the flow of proceeds of crime. It was further argued that at the stage of deciding a discharge application, the Court must assume the truth of the prosecution’s material and examine whether on its face, it discloses the offence alleged..Considering the arguments and record, the Court found that there was no substantive material on record to demonstrate that Malpani had any knowledge of the sham transactions or that he was in any way negligent in the discharge of his duties. "The complaint lacks material to establish a nexus between the applicant and the alleged criminal conspiracy or money laundering activities. Moreover, the applicant has neither been named nor charge sheeted in the related crimes, which further reinforces the absence of any direct or indirect involvement in the purported criminal conduct,” it said. The Court also observed that Malpani was not a beneficiary of the proceeds of crime and that the amount attributed to him was “explicitly stated as ‘NIL’.” It thus quashed the trial court order rejecting Malpani's application for discharge."As a result, the applicant is discharged from PMLA Case No.2 of 2016, pending before the Court of Additional Sessions Judge (Special Judge), Mumbai," the Court ordered..Senior Advocate Pranav Badheka along with advocate Aishwarya Sharma instructed by Prashant Pawar appeared for the Malpani.Additional Public Prosecutor SS Pednekar appeared for the State.Public Prosecutor Hiten S Venegavkar with advocate Ayush Kedia appeared for the Enforcement Directorate. .[Read Judgment]