Section 24 PMLA Burden of Proof: The Presumption Begins Only After Foundational Facts Are Established

Section 24 of the Prevention of Money-Laundering Act, 2002 creates a powerful evidentiary presumption, but it does not permit the prosecution to begin with an assumption that property is criminal. Its correct operation is sequential. The Enforcement Directorate must first establish the statutory foundation; only then can the burden shift to the person charged to prove the contrary.

The text and its two different standards

In a proceeding relating to proceeds of crime, Section 24(a) says that, for a person charged with the offence under Section 3, the Authority or Court shall presume—unless the contrary is proved—that the proceeds are involved in money-laundering. Section 24(b) deals with any other person and says the Authority or Court may draw that presumption.

The distinction is deliberate. The presumption is mandatory in the case of a person charged under Section 3, once its legal conditions arise; for another person it remains discretionary. Even a discretionary presumption must be supported by relevant material and reasons. Section 24 is therefore not a licence to collapse the difference between an accused, a third-party claimant and a person merely holding property.

The present formulation was substituted with effect from 15 February 2013. Its words must be read with Sections 2(1)(u) and 3. Section 2(1)(u) defines proceeds of crime by reference to property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence. Section 3 then addresses a person’s knowing involvement in a process or activity connected with those proceeds, including concealment, possession, acquisition, use, projecting as untainted property or claiming as untainted property.

Vijay Madanlal: three facts precede the presumption

In Vijay Madanlal Choudhary v Union of India, (2023) 12 SCC 1, decided on 27 July 2022, the Supreme Court upheld Section 24 and explained its limits. The Court’s Section 24 analysis identifies three foundational facts that the prosecution or PMLA authority must establish before the statutory presumption becomes relevant:

1. Criminal activity relating to a scheduled offence was committed. 2. The property in question was derived or obtained, directly or indirectly, as a result of that criminal activity. 3. The person concerned was directly or indirectly involved in a process or activity connected with that property as proceeds of crime.

This ordering is crucial. A scheduled offence alone does not prove that every asset held by an accused is proceeds of crime. Equally, unexplained wealth or a suspicious transaction does not, without the statutory link, prove derivation from scheduled criminal activity. The prosecution must identify the property, the alleged criminal activity, the path by which the property was generated and the conduct said to connect the person with it.

Only after that foundation is proved does Section 24 require the person charged to show why the presumed involvement in money-laundering should not follow. The Supreme Court treated this allocation as rational because the facts needed to explain the legitimate origin, ownership, consideration or use of property may be especially within that person’s knowledge. But facts within an accused’s knowledge do not relieve the State of proving the ingredients that activate the presumption.

What “unless the contrary is proved” means in practice

The provision places an evidentiary burden upon the accused, not an obligation to repair a missing prosecution case. The defence may answer the presumption through financial records, bank trails, tax material, audited accounts, loan documents, contemporaneous contracts, inheritance records, third-party evidence or weaknesses in the prosecution’s own material. Whether the contrary has been established is determined on the evidence as a whole and according to the standard applicable to the defence burden; the prosecution’s ultimate obligation to prove guilt in a criminal trial remains.

The questions should therefore be kept separate:

- Has the prosecution proved the scheduled criminal activity? - Has it shown that the identified property was derived or obtained from that activity? - Has it shown the accused’s connection with a process or activity concerning those proceeds? - If so, has the accused rebutted the resulting statutory presumption?

A court should not use a failure to explain property as a substitute for answering the first three questions.

Sarla Gupta: a heavy burden requires a real opportunity to defend

The Supreme Court revisited the practical consequences of Section 24 in Sarla Gupta v Directorate of Enforcement, 2025 INSC 645, decided on 7 May 2025. Paragraph 50 reproduces Section 24, and paragraph 51 describes the burden upon the accused as a serious negative burden. The Court held that the procedural right to summon witnesses and documents for the defence must consequently receive a liberal construction.

Sarla Gupta explains that Section 233(3) of the Code of Criminal Procedure, 1973 applies to a PMLA trial through Section 44(1)(d) PMLA. Under the present procedural code, the corresponding provision is Section 256(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023, subject to the commencement and savings provision in Section 531 BNSS. A Special Court should issue process for defence evidence unless the request is made for vexation, delay or defeating the ends of justice, and any refusal must be reasoned.

The judgment also recognises a route to seek production of non-relied-upon material. Paragraphs 52 to 54 hold that former Section 91 CrPC—now corresponding to Section 94 BNSS, subject to savings—may be invoked even at the bail stage where a document in ED’s custody is needed to meet the burden. If further investigation is continuing, disclosure may be refused where production would prejudice that investigation, but ED must place the material before the Court so that the judicial decision is informed rather than conclusory.

This does not create an unrestricted right to inspect the entire investigation file. It establishes a controlled judicial process. Relevance, necessity, investigative prejudice, confidentiality and the accused’s Article 21 right to a fair opportunity must be balanced by the Court.

Section 24 is not Section 45

Section 24 and the twin conditions for bail under Section 45 are often discussed together but perform different functions. Section 45 governs release on bail and asks whether there are reasonable grounds for believing that the accused is not guilty, along with the risk of offending while on bail. Section 24 is an evidentiary rule for proceedings relating to proceeds of crime. A court should not import the final operation of Section 24 mechanically into every bail determination or treat a bail refusal as proof at trial.

Likewise, findings in provisional attachment and adjudication proceedings do not automatically establish criminal guilt. Property proceedings and prosecution may overlap in evidence, but their purposes, stages and consequences differ. Every forum must apply the presumption only when the text and the proved foundation permit it.

Third-party claimants and Section 24(b)

A spouse, lender, purchaser, secured creditor, company or other claimant may possess an interest in attached property without being charged under Section 3. For such a person, Section 24(b) says the Authority or Court may presume; it does not command the presumption. The decision should account for the claimant’s knowledge, consideration, timing, title documents, source of funds and connection, if any, with the alleged criminal activity.

The mere fact that an asset stands in another name is not by itself a complete PMLA analysis. Conversely, formal title cannot defeat reliable tracing evidence. The statutory inquiry remains whether the property is proceeds of crime and whether the person’s claimed interest is genuine and legally protected.

The current evidence-law cross-reference

The familiar principle that a fact especially within a person’s knowledge may have to be proved by that person appeared in Section 106 of the Indian Evidence Act, 1872. Its current counterpart is Section 109 of the Bharatiya Sakshya Adhiniyam, 2023, subject to the BSA’s commencement and savings provisions. That general rule and Section 24 PMLA are not identical. Section 24 is the special statutory presumption and must be applied on its own terms; Section 109 BSA cannot be used to remove the prosecution’s foundational burden.

Practical checklist for court and counsel

Before invoking Section 24, the prosecution should present a property-specific case: the scheduled offence, the alleged generating transaction, the quantified or traceable proceeds, the route of acquisition or transformation, and the accused’s identified activity under Section 3. Broad assertions that the accused must explain everything reverse the statutory sequence.

The defence should identify precisely what is denied and preserve the contemporaneous record of legitimate source, payment, ownership and use. Where relevant material is in ED’s custody, an application should explain the document, its probable relevance and why production is necessary. Sarla Gupta requires the Special Court to make that process real, while protecting a genuinely continuing investigation.

Conclusion

Section 24 is stringent but conditional. Vijay Madanlal establishes that the State must first prove scheduled criminal activity, derivation of the identified property from that activity, and the person’s involvement with that property as proceeds of crime. Sarla Gupta ensures that the consequential burden is accompanied by an effective opportunity to obtain and lead defence material. The presumption strengthens a proved prosecution foundation; it cannot create one.

Sources

Prevention of Money-Laundering Act, 2002, Sections 2(1)(u), 3, 24, 44 and 45: https://www.indiacode.nic.in/bitstream/123456789/2036/1/A2003-15.pdf

Vijay Madanlal Choudhary v Union of India, SLP (Criminal) No. 4634 of 2014 and connected matters, decided 27 July 2022, (2023) 12 SCC 1, Section 24 discussion and conclusions: https://api.sci.gov.in/supremecourt/2018/20982/20982_2018_1_1501_37292_Judgement_27-Jul-2022.pdf

Sarla Gupta v Directorate of Enforcement, Criminal Appeal No. 1622 of 2022 with Criminal Appeal No. 730 of 2024, decided 7 May 2025, 2025 INSC 645, paragraphs 48–55: https://api.sci.gov.in/supremecourt/2019/31507/31507_2019_4_1501_61468_Judgement_07-May-2025.pdf

Bharatiya Nagarik Suraksha Sanhita, 2023, Sections 94, 256(3) and 531: https://www.indiacode.nic.in/bitstream/123456789/20099/1/a2023-46.pdf

Bharatiya Sakshya Adhiniyam, 2023, Sections 109 and 170: https://www.indiacode.nic.in/bitstream/123456789/20063/1/A2023-47.pdf

Disclaimer: This article is for general legal information and does not constitute legal advice. Statutory amendments, savings provisions and later judgments should be checked for the facts of a particular matter.

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