Auditors Face PMLA Heat As Himachal Pradesh HC Refuses To Quash Money Laundering Case

Chartered Accountants cannot escape the rigors of the Prevention of Money Laundering Act, 2002 by claiming a mere professional role if they facilitate layering of proceeds of crime or serve as 'entry operators' for shell companies. The Himachal Pradesh High Court has reinforced that even if an individual is not arrayed as an accused in the predicate scheduled offence, they remain liable for prosecution under Section 3 of the Prevention of Money Laundering Act, 2002 for assisting in the concealment or acquisition of tainted funds.

Justice Chirag Bhanu Singh delivered the judgment, dismissing a petition seeking to quash a Prevention of Money Laundering Act, 2002 complaint against a Chartered Accountant allegedly involved in a massive bank fraud case. The Court scrutinized the dual role of the petitioner, who functioned as an auditor for his family-owned companies while allegedly acting as a beneficial owner and entry operator to facilitate the diversion of over Rs. 300 crores for the main accused entity.

Court Rationale on Auditor Responsibility

The Court rejected the petitioner's argument that he was merely a professional auditor with no involvement in day-to-day operations. Examining Section 143 of the Companies Act, 2013, the Court noted that an auditor is mandated to report frauds and ensure financial statements represent a true picture. The Court, in its reasoning, observed: "Even assuming that the petitioner was an auditor of the company, which he has himself admitted while recording his statement under Section 50, it is amply clear that he would at least come within the domain of 'other officer' of the company... The appointment of the petitioner as an auditor itself smacks of fraud, as the petitioner was otherwise disqualified to act as an auditor as per the requirements of Section 141 of the Companies Act, 2013, since admittedly, his family and relatives were the owners of the company."

Addressing the legal requirement of being named in a scheduled offence, the Court relied on Pavana Dibbur v. Directorate of Enforcement ( "(2023 SCC OnLine SC 1586)": 2023 CaseBase(SC) 990) and Pradeep Nirankarnath Sharma v. Directorate of Enforcement & Anr. ( "(2025 SCC OnLine SC 560)": 2025 CaseBase(SC) 303). It clarified that Section 3 of the Prevention of Money Laundering Act, 2002 targets anyone who knowingly assists in any process connected with the proceeds of crime. The Court noted: "Such an accused can still be prosecuted under the PMLA so long as the scheduled offence exists. It was thus held that Section 3 can be invoked even after a scheduled offence, for instance, where the accused comes into the picture after the scheduled offence has been committed by assisting in the concealment or use of the proceeds of crime, though he may not be an accused in the scheduled offence."

Directions Issued

The Court has the following directions:

"Consequently, the present petition is dismissed in the aforesaid terms. Pending application(s), if any, also stand disposed off."

Background

The case originated from a massive fraud involving M/s Indian Technomac Company Limited (ITCOL), which allegedly siphoned off bank loans totaling Rs. 1622.75 crores. The Enforcement Directorate (ED) alleged that ITCOL, through its MD Rakesh Kumar Sharma, used 'round-tripping' and shell entities to project loan funds as untainted equity. The petitioner, a Chartered Accountant, was accused of acting as an entry operator, providing accommodation entries through nine shell companies owned by his family members, and charging a 0.25% commission for these services.

The petitioner moved the High Court under Section 482 of the Code of Criminal Procedure, 1973 to quash the complaint, arguing he was not named in the predicate FIRs and that the offences occurred before the 2013 amendments to the Prevention of Money Laundering Act, 2002. He contended his role was limited to being an auditor. The ED countered that his own statements under Section 50 admitted the money trail to his family business. The Court, citing Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra ( "(2021) 19 SCC 401": 2020 CaseBase(SC) 1378), emphasized that inherent powers to quash must be used sparingly and concluded that the allegations disclosed a cognizable offence requiring a full trial.

Case Details:
Case No.: Cr. MMO No. 1019 of 2023
Neutral Citation: 2026:HHC:44976
Case Title: Deepak Jain Versus Directorate of Enforcement
Appearances:
For the Petitioner(s): Mr. Deepak Kaushal, Senior Advocate, with Mr. Abhishek Verma, Advocate.
For the Respondent(s): Mr. Balram Sharma, Deputy Solicitor General of India, with Mr. Ajeet Singh Saklani & Mr. Abhinav Nainta, Legal Consultant.

Source: 2026 CaseBase(HP) 9464