When Professional Assistance Does Not Amount to Money-Laundering: Telangana High Court’s PCH Group Ruling
The Telangana High Court’s common order in Om Prakash Sharma v. Directorate of Enforcement and Manoj Baser v. Directorate of Enforcement examines an important boundary under the Prevention of Money-Laundering Act, 2002: when does professional or intermediary assistance become knowing participation in money-laundering?
The decision does not create a general exemption for chartered accountants, consultants or intermediaries. Its significance lies in the Court’s insistence that a prosecution under Sections 3 and 4 must be supported by material connecting the particular accused to the proceeds of crime and to a legally recognised laundering activity.
The prosecution and the alleged transaction
The case arose from alleged bank fraud involving companies in the PCH Group. According to the prosecution, loans were obtained using false or fabricated material, diverted through shell entities and rotated through several accounts. ED alleged proceeds of crime of approximately ₹747.59 crore and filed a prosecution complaint before the PMLA Special Court at Hyderabad.
Manoj Baser, a chartered accountant arrayed as accused no. 9, and Om Prakash Sharma, a businessman arrayed as accused no. 16, were alleged to have acted as intermediaries in arranging accounts and facilitating fund rotation. The allegation included receipt of commission. They sought quashing under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, corresponding to the High Court’s inherent power previously contained in Section 482 CrPC.
What the High Court found
The Court examined the prosecution material person by person. At paragraphs 8(a) and 8(b), it identified the Section 50 statements on which the allegations rested. At paragraphs 8(c) to 8(h), it found no material showing that either petitioner executed the questioned transactions, controlled the relevant bank accounts, received share certificates, enjoyed the alleged proceeds, falsified records or obtained a financial benefit from the proceeds of crime.
The Court treated the alleged commission as evidence requiring context, not as an automatic substitute for proceeds of crime or mens rea. It considered the petitioners’ roles peripheral and facilitative and found no independent documentary or electronic corroboration showing a prior meeting of minds, control over funds or enjoyment of tainted property.
The statutory test under Section 3
Section 3 covers a person who directly or indirectly attempts to indulge, knowingly assists, knowingly becomes a party to, or is actually involved in a process or activity connected with proceeds of crime. The provision includes concealment, possession, acquisition, use, and projecting or claiming the property as untainted.
The expression “knowingly” matters. Professional association, preparation of a document or introduction of parties can be innocent, negligent or criminal depending on the evidence. The prosecution must show facts from which the required knowledge and involvement can legally be inferred. A designation such as accountant or intermediary cannot itself prove the ingredients.
Section 50 statements and corroboration
At paragraphs 8(h), 8(k), 8(l) and 8(m), the High Court held that the proceedings against these petitioners rested on statements by co-accused and their statements recorded under Section 50, without an independent money trail, recovery, attachment, account control or proof of mens rea.
This aspect must be read carefully. Vijay Madanlal Choudhary v. Union of India upheld the Section 50 framework and held that the authorised PMLA officers are not police officers for that purpose. The Telangana decision does not declare every Section 50 statement inadmissible. It holds that, on the particular record before it, mutually implicating statements without corroborative material were insufficient to subject these two persons to trial.
The precedents considered
In Satish Mehra v. State (NCT of Delhi), the Supreme Court held that a criminal trial cannot be continued merely in the hope that incriminating material might later emerge. The Telangana High Court applied that principle because it found no definite prima facie material connecting the petitioners to the laundering activity.
Murali Krishna Chakrala v. Deputy Director concerned Form 15CB certificates issued by a chartered accountant. The Madras High Court examined the limited professional function involved and found no basis for criminal liability merely because the professional acted on documents supplied by a client. The Supreme Court declined to interfere in Deputy Director v. Murali Krishna Chakrala, reported as 2024 SCC OnLine SC 873. The Telangana High Court used this authority to distinguish professional performance from knowing participation in crime.
ED relied on Anil Bhutani Jain v. State of Maharashtra and Pradeep Nirankarnath Sharma v. Directorate of Enforcement to argue against premature quashing. In Pradeep Sharma, 2025 INSC 349, the Supreme Court emphasised that serious economic-offence proceedings should not be terminated at the preliminary stage where the record discloses material requiring trial. That principle remains important: discharge depends on an evidentiary deficiency, not merely on the accused describing the activity as professional work.
The order also considered Vijay Madanlal Choudhary, P. Chidambaram v. Directorate of Enforcement and Sushila Aggarwal v. State (NCT of Delhi), cited by ED concerning the gravity of economic offences and judicial restraint during investigation. Finally, it applied the third illustrative category in State of Haryana v. Bhajan Lal: intervention may be justified where the uncontroverted allegations and supporting material do not disclose an offence against the accused.
Why the proceedings were quashed
The operative conclusion appears at paragraphs 8(k) to 9. The Court found no specific, credible and corroborated material linking the two petitioners with possession, concealment, projection or use of proceeds of crime. Continuing the prosecution solely on the identified statements was held oppressive and an abuse of process. Criminal Petition Nos. 2605 and 2607 of 2025 were therefore allowed, and the proceedings against accused nos. 9 and 16 in PMLA-SC No. 264 of 2022 were quashed.
Practical significance
The decision supports a role-specific approach. For the prosecution, the complaint should identify the professional’s instructions, knowledge, account access, communications, transaction control and benefit. For the defence, engagement records, source documents, contemporaneous advice, limitations on the assignment and the absence of control over funds may be decisive.
The ruling should not be read to mean that receiving a small commission or acting through a professional firm can never attract PMLA. If evidence shows knowing assistance in layering, concealment of beneficial ownership, fabrication or deliberate projection of tainted property as legitimate, Section 3 can apply. The dividing line is proved knowledge and conduct connected with proceeds of crime.
Sources
High Court for the State of Telangana, Om Prakash Sharma v. Directorate of Enforcement and Manoj Baser v. Directorate of Enforcement, Criminal Petition Nos. 2605 and 2607 of 2025, common order dated 9 January 2026, especially paragraphs 8(a)–8(n) and 9.
Supreme Court of India, Satish Mehra v. State (NCT of Delhi), (2012) 13 SCC 614, especially paragraph 21: https://api.sci.gov.in/jonew/judis/39740.pdf
Madras High Court, Murali Krishna Chakrala v. Deputy Director, Directorate of Enforcement, judgment concerning Form 15CB certification and alleged professional assistance under the PMLA.
Supreme Court of India, Deputy Director v. Murali Krishna Chakrala, 2024 SCC OnLine SC 873.
Supreme Court of India, Pradeep Nirankarnath Sharma v. Directorate of Enforcement, 2025 INSC 349, especially paragraphs 31–34: https://api.sci.gov.in/supremecourt/2023/17381/17381_2023_5_1501_60147_Judgement_17-Mar-2025.pdf
Supreme Court of India, Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929.
Supreme Court of India, P. Chidambaram v. Directorate of Enforcement, (2019) 9 SCC 24.
Supreme Court of India, Sushila Aggarwal v. State (NCT of Delhi), (2020) 5 SCC 1.
Supreme Court of India, State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335.
Prevention of Money-Laundering Act, 2002, Sections 2(1)(u), 3, 4, 24 and 50: https://www.indiacode.nic.in/handle/123456789/15402
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