The Chhattisgarh High Court has clarified that mere possession of counterfeit currency notes, without proof of knowledge or intent to use them as genuine, cannot sustain a conviction under Sections 489-B and 489-C of the Indian Penal Code. This judgment reinforces the necessity of establishing mens rea in economic offences involving forged currency, protecting unwary individuals from unjust criminal liability.
Background & Facts
The Dispute
The appellant, Rohit Kumar Pandey, was charged under Sections 489-B and 489-C of the Indian Penal Code for allegedly depositing counterfeit currency notes at the State Bank of India, Akaltara branch on 22.12.2005. The prosecution alleged that he deposited Rs. 50,000 in the account of his father and Rs. 1,51,000 in the account of his uncle, Jata Shankar Pandey, using 161 counterfeit notes. The bank staff detected the notes as fake after dissolving them in water and using an ultraviolet machine. A case was registered, and the appellant was arrested.
Key Facts
- On 22.12.2005, the appellant deposited Rs. 2,01,000 in two accounts at SBI Akaltara branch.
- 161 currency notes were identified as counterfeit after testing.
- The notes were seized and sent to the Currency Note Press, Nasik, for verification (Ex-P/10).
- The appellant was not the account holder; Jata Shankar Pandey, who was absconding, was the beneficiary.
- Jata Shankar Pandey, in his statement under Section 313 CrPC, stated he had given the money to the appellant to deposit in his account and had no knowledge of the notes being counterfeit.
- The appellant was a 32-year-old individual with no prior criminal record.
- No evidence established that the appellant had handled the notes before or had any prior dealings with counterfeit currency.
- The prosecution did not prove that the appellant knew or had reason to believe the notes were counterfeit.
Procedural History
- 22.12.2005: Incident of deposit of counterfeit notes at SBI Akaltara branch.
- 23.12.2005: FIR registered at Police Station Akaltara (Ex-P/2).
- 24.12.2005: Seizure memo prepared (Ex-P/1).
- 04.07.2006: Charges framed by Judicial Magistrate, Class-I, Janjgir, under Sections 489-B and 489-C IPC.
- 24.07.2007: Trial Court convicted the appellant and sentenced him to 3 years RI with Rs. 5,000 fine under Section 489-B and 2 years RI under Section 489-C.
- 12.06.2007: Appeal filed before the Sessions Court, Janjgir-Champa.
- 24.07.2007: Conviction and sentence confirmed by Sessions Judge.
- 24.03.2026: Judgment reserved by the High Court.
- 24.03.2026: Judgment pronounced and uploaded.
The Parties' Positions
For the Appellant
The appellant’s counsel argued that the prosecution failed to establish the essential ingredient of mens rea under Sections 489-B and 489-C IPC. She contended that the appellant was merely acting as a deposit agent for his uncle, had no prior knowledge of the notes being counterfeit, and was not in a position to discern their authenticity. Reliance was placed on Dipakbhai Jagdishchandra Patel v. State of Gujarat and Umashanker v. State of Chhattisgarh to argue that possession alone is insufficient.
For the Respondent
The State counsel defended the conviction, asserting that the appellant’s presence at the bank during the deposit, the large quantity of counterfeit notes, and the fact that he filled the deposit slips were sufficient to infer knowledge. The prosecution argued that the appellant’s failure to explain how he came into possession of the notes raised a presumption of guilt.
Relief Sought
The appellant sought quashing of the conviction and sentence under Sections 489-B and 489-C IPC, and acquittal on the grounds that the prosecution failed to prove the essential elements of the offences.
The Legal Issue
The central question was whether Sections 489-B and 489-C of the Indian Penal Code can be invoked against a person who merely deposits counterfeit currency notes without proof that he knew or had reason to believe they were forged.
Arguments Presented
For the Appellant
The appellant’s counsel relied on M. Mammutti v. State of Karnataka and Dipakbhai Jagdishchandra Patel v. State of Gujarat to argue that mens rea is an indispensable element of both offences. She emphasized that the appellant was not the account holder, had no motive to defraud the bank, and was acting on behalf of his uncle who had provided the cash. The prosecution did not examine whether the appellant had previously dealt in counterfeit notes, nor did it prove that he had any opportunity to inspect the notes before deposit. The trial court’s reliance on possession alone was legally unsustainable.
For the Respondent
The State contended that the large number of counterfeit notes (161), the fact that the appellant filled the deposit slips, and his presence at the bank during the transaction collectively indicated knowledge. It argued that the appellant’s failure to raise any objection when the notes were detected, coupled with the absence of any credible explanation, justified the inference of guilt.
The Court's Analysis
The Court undertook a meticulous review of the evidence and the legal principles governing Sections 489-B and 489-C IPC. It noted that while the prosecution established that counterfeit notes were deposited, it entirely failed to prove that the appellant had knowledge or reason to believe they were forged.
"A perusal of the provisions... shows that mens rea of offences under Sections 489-B and 489-C is 'knowing or having reason to believe the currency notes or banknotes are forged or counterfeit'. Without the aforementioned mens rea... possessing or even intending to use any forged... currency notes... is not sufficient to make out a case under Section 489-C."
The Court emphasized that the Supreme Court in Umashanker v. State of Chhattisgarh had explicitly held that presumption of knowledge from possession alone is impermissible under Section 4 of the Evidence Act, particularly when the accused is an ordinary individual with no prior involvement in such offences. The appellant, a 32-year-old with no criminal antecedents, was merely acting as a deposit agent for his uncle, who was the actual beneficiary.
The Court further observed that the prosecution did not examine whether the appellant had been in possession of similar notes before, nor did it establish any pattern of conduct suggesting intent to defraud. The fact that the notes were deposited in the account of an absconding person did not, by itself, prove the appellant’s knowledge. The Court also noted contradictions in the testimonies of the bank staff and the Investigating Officer regarding the sequence of events.
The Court concluded that the trial court had erred in convicting the appellant based on circumstantial inferences that were neither clear, indubitable, nor irresistible. The burden of proving mens rea remained on the prosecution, and it had not discharged it.
The Verdict
The appeal is allowed. The conviction and sentence under Sections 489-B and 489-C of the Indian Penal Code are set aside. The appellant is acquitted of both charges. The appellant, who is on bail, is directed to furnish a personal bond of Rs. 25,000 each before the trial court within seven days, effective for six months, with an undertaking to appear before the Supreme Court if a Special Leave Petition is filed. The trial court record and a copy of this judgment are to be returned immediately for compliance.
What This Means For Similar Cases
Mens Rea Is Non-Negotiable in Counterfeit Currency Cases
- Practitioners must insist that the prosecution prove actual knowledge or reason to believe the notes were counterfeit - possession alone is legally insufficient.
- In cases where the accused is a deposit agent or intermediary, the burden shifts to the prosecution to establish a direct link between the accused and the origin of the counterfeit notes.
Courts Cannot Presume Guilt from Circumstantial Evidence Alone
- Trial courts must avoid drawing presumptions of knowledge under Section 4 of the Evidence Act without concrete evidence of prior conduct, large-scale possession, or prior attempts to pass off such notes.
- If the accused is a layperson with no financial expertise, courts must exercise heightened caution before inferring intent.
Importance of Section 313 CrPC Examination
- Failure to put specific questions about knowledge of counterfeit notes during Section 313 CrPC examination weakens the prosecution’s case significantly.
- Defence counsel should highlight this omission as a fatal flaw in the prosecution’s evidence.
