No Prosecution of Chartered Accountant for Issuing Form 15CB Certificates Without Knowledge of Forgery

The Hon'ble Supreme Court in the case of The Deputy Director V. Murali Krishna Chakrala [Special Leave Petition (Criminal) Diary No(S). 8123/2024] upheld the judgment by the Hon'ble Madras High Court in the case of Murali Krishna Chakrala v. The Deputy Director, Directorate of Enforcement [(Crl.R.C.No.1354 of 2022), order dated November 23, 2022] held that the Petitioner, a Chartered Accountant, who issued Form 15CB certificates to client entities without knowledge of forged documents or fraudulent intent, is not a conspirator and is discharged from prosecution under the Prevention of Money Laundering Act, 2002 ("PMLA"). The Court allowed his discharge while giving liberty to the prosecution to examine him as a witness.

Facts:

Murali Krishna Chakrala("the Petitioner") before the Hon'ble Madras High Court, is a Chartered Accountant who issued five Form 15CB certificates under Income Tax Rules, 1962, at the request of his client, which were used for foreign remittances.

The Directorate of Enforcement ("the Respondent") alleged involvement of the Petitioner in a money laundering scheme involving forged import documents and fictitious bank accounts aiding illicit foreign exchange transfer of Rs. 8 crores.

The Petitioner contended that he performed his professional duty by issuing certificates without examining the genuineness of import documents or knowing about forged papers; the accounts and documents falsified by others without his knowledge.

The Respondent contended the Petitioner crossed professional boundaries and was instrumental in facilitating money laundering through certifications aiding illegal remittance.

The Petitioner approached the Madras High Court by Criminal Revision challenging the denial of his discharge petition filed before the trial court, praying to set aside proceedings and discharge him.

Issue:

Whether the Petitioner, as a Chartered Accountant, can be held liable for money laundering under the PMLA by issuing Form 15CB certificates to clients without actual knowledge of forged documents or fraudulent transactions?

Held:

The Hon'ble Supreme Court dismissed the Special Leave Petition, finding no reason to interfere with the judgment of the Hon'ble Madras High Court.

The Hon'ble Madras High Court had held as under:

· Observed that, issuing Form 15CB per Income Tax Rules involves certifying nature of remittance and does not require delving into genuineness of underlying documents.

· Noted that, the Petitioner neither directly nor indirectly participated in generation of proceeds of crime or had culpable knowledge.

· Found that, the Petitioner helped prosecution by identifying key accused and offering cooperation, making him a potential witness rather than an accused.

· Held that prosecution for conspiracy under PMLA against the petitioner cannot be sustained based on available materials at this stage.

· Allowed the revision petition, set aside trial court's order, and discharged the Petitioner from prosecution with liberty to be examined as prosecution witness.

Our Comments:

The judgment distinguishes the professional role of a Chartered Accountant who issues certificates in compliance with law without knowledge of underlying fraud, from active conspirators in money laundering. It affirms settled principles that professional opinions or certifications, given without knowledge or intent, do not attract criminal liability for offences under PMLA. The Court highlights the Petitioner's cooperation with enforcement authorities and his role in identifying principal accused as mitigating factors negating conspiracy allegations. This ruling aligns with principles of mens rea in criminal liability and fair trial rights, preventing misuse of the prosecution process against professionals acting bona fide. The decision reinforces the importance of not conflating professional compliance with complicity in fraud or money laundering.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED