Possession of Fake Currency Must Be Backed by Intent to Use as Genuine: Calcutta High Court Answers Reference on What Constitutes 'Trafficking' Under Fake Currency Law

"Large Quantity of FICNs Not Dormant Possession But Active Transportation", Full Bench of the Calcutta High Court comprising Justices Tirthankar Ghosh, Debangsu Basak, and Jay Sengupta delivered a comprehensive ruling that sets out the legal contours of Sections 489B and 489C of the Indian Penal Code, providing much-needed clarity on what constitutes an offence relating to counterfeit currency.

The Court observed that "mere possession of counterfeit currency notes, irrespective of quantity, is not sufficient to attract the rigours of Section 489B IPC unless the prosecution proves the requisite mens rea." In doing so, it harmonised conflicting decisions and laid down the foundational legal propositions applicable to counterfeit currency cases across jurisdictions.

The reference was necessitated by divergent interpretations of what constitutes ‘trafficking’, ‘use’, and ‘possession’ of counterfeit currency, and whether mere seizure of such notes could lead to conviction without any evidence of the accused’s knowledge or intent.

"Mens Rea is the Core Ingredient of Section 489B IPC": Court Lays Down Legal Standards for Fake Currency Convictions

The Court's primary focus was on clarifying the threshold of culpability under Section 489B, which criminalises the use or trafficking of counterfeit currency "knowing or having reason to believe the same to be forged or counterfeit." The Court held, “In order to secure conviction under Section 489B IPC, it is not enough to prove that counterfeit notes were found in possession of the accused; the prosecution must further demonstrate that the accused either used or attempted to use them as genuine with knowledge or reason to believe them to be fake.”

The ruling drew strength from settled Supreme Court precedents such as Uma Shankar v. State of Chhattisgarh and M. Mammutti v. State of Karnataka, reiterating that the mental state of the accused must be established through either direct or circumstantial evidence. The Court clarified, “Mens rea must be inferred from the conduct of the accused, the circumstances of recovery, and whether the accused offered a plausible explanation during examination under Section 313 CrPC.”

The Court rejected blanket presumptions of guilt based on possession alone, noting that “a person may come into possession of counterfeit currency in the course of ordinary business without any knowledge of its falsity,” and stressed that “each case must be judged on its own factual matrix.”

"Concealed Possession of FICNs in Substantial Quantity Amounts to Trafficking": Court Reads Down the Phrase 'Otherwise Traffics In'

A pivotal legal question addressed by the Full Bench was the interpretation of the term “otherwise traffics in” under Section 489B IPC. Citing the decision in Jubeda Chitrakar v. State of West Bengal, the Court clarified that trafficking is not limited to sale, purchase, or receipt of FICNs but includes the act of carrying or transporting them with intent to circulate.

The Court explained, “The phrase ‘or otherwise traffics in’ is not to be read ejusdem generis with ‘sells to’, ‘buys’ or ‘receives from’ — it must be interpreted broadly to include active transportation and dealing of counterfeit notes even without direct exchange.”

The Bench held, “Possession of a sizeable quantity of fake notes, concealed and carried through public spaces, cannot be treated as dormant possession. It amounts to active transportation and falls squarely within the mischief of trafficking as contemplated under Section 489B IPC.”

The judgment drew reference from the Gujarat High Court’s ruling in Rayab Jusab Sama v. State of Gujarat and the Madhya Pradesh High Court’s decision in Shabbir Sheikh & Ors. v. State of MP, both of which endorsed the principle that large-scale possession of FICNs implies intention to traffic.

"Silence of Accused During Section 313 Examination Is a Telling Circumstance": Calcutta High Court Emphasises Burden Under Section 106 Evidence Act

Reinforcing the statutory burden cast upon the accused under Section 106 of the Indian Evidence Act, the Court underlined that “when facts regarding the source or purpose of possession are within the special knowledge of the accused, failure to disclose them during Section 313 CrPC examination can lead to adverse inference.”

The Full Bench cited Ponnusamy v. State where the Supreme Court upheld conviction on the ground that the accused, found with forged notes, had offered no explanation as to their origin. The Calcutta High Court concurred: “Silence in the face of incriminating circumstances cannot be treated as neutral when the law mandates an explanation.”

The Court clarified, “It is incumbent on the accused to explain the nature of possession during trial, and failure to do so may support a finding of knowledge and intent.”

"Quantity and Quality of Fake Currency Irrelevant for Section 489B": Court Clarifies Focus is on Conscious Possession and Intent

In a categorical statement, the Court held that “for the purpose of attracting Section 489B of the IPC, neither the quality nor the quantity of the counterfeit notes is a determinative factor.”

Rejecting the notion that high-quality forgery alone escalates liability, the Court remarked, “Whether the notes are crudely made or sophisticatedly forged, the offence hinges not on their quality but on the accused’s knowledge and intention to circulate them as genuine.”

This approach was consistent with earlier precedents such as Chhotelal Thakur v. Union of India and Md. Tousif @ Gara v. State of West Bengal, where courts held that even possession of notes not resembling genuine currency could not sustain conviction unless intention to use was proven.

Court Summarises Six Key Legal Conclusions in Reference Judgment

In conclusion to the reference, the Full Bench crystallised six core propositions of law:

“(i) For attracting Section 489B IPC, the quantity of counterfeit notes is immaterial.”

“(ii) Possession of a substantial amount of counterfeit currency is indicative of active transportation and not mere dormant possession.”

“(iii) Specific and distinct charges must be framed by trial courts for offences under Section 489B to ensure a fair trial.”

“(iv) The prosecution must establish foundational facts showing the necessary ingredients of the offence under Section 489B.”

“(v) The accused must discharge the burden under Section 106 of the Evidence Act and explain the possession of FICNs during Section 313 CrPC examination.”

“(vi) These principles apply universally, irrespective of whether the accused is a private citizen or a public servant.”

The Full Bench directed that the pending criminal appeals, revisions, and related proceedings be disposed of by the appropriate benches in light of the legal findings declared through this judgment.

"Possession Is Not Guilt — It Is Intention That Converts It Into Crime": Judgment Reinforces the Spirit of Criminal Jurisprudence

With this judgment, the Calcutta High Court not only resolves a long-standing ambiguity in counterfeit currency jurisprudence but also upholds fundamental principles of criminal law — that guilt must be founded on intent, and every accused has a right to a fair and specific charge.

The verdict is a significant contribution to Indian criminal law, serving as a guiding precedent for courts across the country dealing with cases involving fake currency and upholding the constitutional protections guaranteed to the accused.

Date of Decision: November 10, 2022