Ingenuine Documents Submitted By Clients for Form 15CB, CA Cannot Be Prosecuted Under PMLA: Madras High Court

CASE TITLE:
Murali Krishna Chakrala v. The Deputy Director.

DATE OF ORDER:
23rd November 2022.

JUDGE(S):
Justice Mr. P.N. Prakash and Mr. G. Chandrasekharan.

PARTIES:
Petitioner: Murali Krishna Chakrala.
Respondent: The Deputy Director.

SUBJECT

The present petition has been filed to validate that in any kind of case, a Chartered Accountant cannot be charged to check the genuineness of a document submitted to him. It is the duty of the panel of lawyers hired by the Bank to check the authenticity of any such document.

IMPORTANT PROVISIONS:

• Code of Criminal Procedure, 1973.

1. Section 397-Calling for records to exercise powers of revision.
2. Section 401-High Court's Powers of revisions.

• Indian Penal Code, 1860.

1. Section 420-Cheating and dishonestly inducing delivery of property.
2. Section 465-Punishment for forgery.
3. Section 467-Forgery of valuable security, will, etc.
4. Section 468-Forgery for purpose of cheating.
5. Section 471-Using as genuine a forged document.

BRIEF FACTS

• Mani Anbazhagan opened a bank account in the Thousand Lights Chennai Branch of Indian Bank in the name of some persons. He requested the Branch Manager to transfer foreign exchange to certain entities in abroad and presented some import documents for the same.
• The Branch Manager suspected something mischievous in those documents and thereby sent those imported documents to the Principal Commissioner of Customs for verification. Upon verifying, the department came to know that most of them were forged. This was immediately informed to the Enforcement Directorate (hereinafter to be referred as “ED”) about the transaction and even the Branch Manager was alerted with the same. Thereby, the Branch Manager reported this to his higher ups.
• The CCB-I registered a case for the offences under Sections 420, 465, 467, 468 and 471 IPC against Kannan, Rasool Khan, Eliyaspeer Mohamed, Syed Haroon, H. Basha, R. Imanuvel on receiving a complaint given by the Deputy Manager of Indian Bank, Thousand Lights Branch.
• The ED registered and took up the investigation of the case as the FIR mentioned the commission of a scheduled offence under the Prevention of Money Laundering Act, 2002.
• Kannan was arrested by the CCB-I, Chennai and remanded in judicial custody. As the ED started interrogating Kannan, more and more information came out about the transactions.
• The present case focusses only on the monies by B.K. Electro Tool Products to abroad. The EDrevealed that this entity was started in the name of Kannan who was just a name lender and did not had any means to do any business.
• Another important point came up that current accounts were opened in the name of B.K. Electro Tool Products in seven banks. But instead of Kannan, the photograph of one S.R. Kavin Sidhaarth @ R. Senthil’s was fixed in all the applications which was submitted to the bank. On confronting this to Kannan, he said that he has no knowledge about that person.
• The ED thereafter started tracing that person and discovered another identity, Kavin Sidhaarth @ Senthil Kumar. It came out that this person was masquerading as Kannan and hence, he was arrested by the Enforcement Directorate. This arrest further led to other accused people i.e, Kannan, Mani Anbazhagan, Thamim Ansari and Murali Krishna.
• Therefore on completion of the entire investigation, the ED filed a complaint for Prevention of Money Laundering (hereinafter referred as “PML”) cases in the Special Court, Chennai against the above mentioned five persons. They were allalleged to have opened fictitious bank accounts, submitted forged Bills of Entry, deposited huge amounts of money in those bank accounts and transferred them to various parties in the abroad through the bank.
• During the initial investigation, a total sum of 8 crores was revealed to have been sent out of India to fictitious entities through seven bank accounts.
• The ED continued their investigation and came across some Form 15CB that was issued by an Auditor, one Murali Krishna Chakrala. The ED interrogated him and came to know that one of his clients Kiyam Mohammed approached him for insurance of Form 15CB under Rule 37-BB of the Income Tax Rules, 1962. He submitted various documents in support of his request and accordingly, the auditor verified those documents and issued certificates. The auditor here mentioned that issuing Form 15CB was not necessary for overseas payment of imports.
• The ED noticed that the five numbers of Form 15 CB in relation to B.K. Electro Tool Products were also uploaded in the website portal of Income Tax Department on 22 August 2016. It was noticed that the five numbers Form 15CB which was issued by the auditor were presented to the Branch Manager of the State Bank of Travancore, Mount Road Branch to transfer a sum of Rs. 3.45 crores to various entities in Hong Kong.
• Based on the information provided by Murali Krishna Chakrala (the Auditor), the ED focussed on his client Kiyam Mohammed and arrested him. After this he revealed the involvement of Abdul Haleem in all of these activities. Later, Abdul Haleem was caught.
• A supplementary complaint was filed by the ED in the Special Court against Murali Krishna Chakrala (the auditor), Kiyam Mohammed (the client) and Abdul Haleem after the investigation was completed.
• The Auditor thereby approached the Court for quashing the above complaint made against him but it was dismissed and he was given the liberty to approach the Trial Court for the same.
• Thereafter, Murali Krishna Chakrala filed a discharge petition which was dismissed by the Trial Court.

QUESTIONS RAISED

• Whether a Chartered Account can be held liable for forged documents approved by him?

ARGUMENTS ADVANCED BY THE APPELLANT

• The petitioner’s counsel submitted the statement of Murali Krishna Chakrala which was given by him under Section 50 of the PML Act and stated that the involvement of Kiyam Mohammed and Abdul Haleem would have never came infront of this Court in the absence of Murali Krishna Chakrala.
• Thereby, the learned counsel also stated that the petitioner did not had any reason to suspect the genuineness of the documents presented to him by his client Kiyam Mohammed.
• Hence, it is clearly seen that he has neither directly nor indirectly involved in the proceeds of the crime in any manner whatsoever.
• The petitioner’s counsel further submitted that the Form 15CB was not even required for making any overseas payment towards import under the law. This is the reason why, all the other nationalised banks had transferred the funds without filling up the 15 CB Form from a Chartered Accountant (hereinafter referred to as “CA”) except the State Bank of Travancore.
• Therefore, it is very clear that if the petitioner would have been a part of this crime conspiracy then he would not have uploaded the certificates into the Income Tax Department portal on the same day.
• Proceeding the arguments, the counsel referred to the statement given by Murali Krishna Chakrala in a question and answer form.
• The counsel stated that just by giving five numbers to the client, the Auditor does not become liable of a whole crime conspiracy indulging money laundering.

ARGUMENTS ADVANCED BY THE RESPONDENT

• The respondent counsel has filed a detailed counter affidavit justifying the prosecution of Murali Krishna Chakrala on 9 November 2022. The document stated that there are prima facie materials against him which are sufficient enough to proceed the trial further.

ANALYSIS OF THE COURT

• The Court observed from the records that it was only the State Bank of Travancore who had insisted upon the said certificates.
• It was very clear from the complaint and the accompanying background show that Abdul Haleem had operated those bank accounts. Kiyam Mohammed has helped to open those account and preparation of various documents by availing the services of various persons including the petitioner. He did this to obtain Form 15CB for transferring monies from State Bank of Travancore.
• The Court thereby claimed that a CA is required to only examine the nature of the remittance and not genuineness of the documents submitted by his clients.
• The Court allowed the Criminal Revision and discharged the petitioner from the prosecution.

CONCLUSION

This case showcased the power and authority of a CA and thereby validated his position by certifying that he is not liable to check the genuineness of a document. He is only entitled to see the nature of the document and thereby, follow the rules and regulations established in the Companies Act.

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