No Evidence of Intent: Supreme Court Dismisses ED’s Appeal Against Razorpay

The Supreme Court of India has upheld a decision of the Karnataka High Court that cancelled money laundering proceedings against payment company Razorpay, saying there was no evidence that the company was involved in the money laundering case.

The Enforcement Directorate (ED) had filed a case against Razorpay under the Prevention of Money Laundering Act (PMLA). The ED claimed that Razorpay helped transfer money connected to an illegal loan app.

The case originally involved a company called Jamnadas Morarji Finance Pvt. Ltd. This company was accused of running illegal loan apps that charged very high interest rates. Borrowers were allegedly harassed and threatened if they failed to repay on time. It was also claimed that personal data from borrowers mobile phones was misused.

The ED alleged that Razorpay allowed transactions for this company without properly verifying it and therefore helped move “proceeds of crime”.

Razorpay challenged the case in the Karnataka High Court. The High Court said that for someone to be guilty under Section 3 of the PMLA, there must be proof that they knowingly handled or helped hide illegal money.

The High Court found that there was no proof that Razorpay knew the money came from illegal activities. At most, the court said, there may have been negligence in setting up the merchant account, but negligence alone is not enough to prove money laundering.

The High Court also said that intent is necessary under the law. Since there was no proof of such intent, the commission earned by Razorpay could not be treated as illegal money.

The ED appealed this decision in the Supreme Court. However, the Supreme Court dismissed the appeal under sections 3, 4, and 70 of the PMLA and upheld the High Court order.