High Court flags ‘mischief’ in treating ordinary cash as drug money

The Punjab and Haryana High Court has drawn a sharp line between lawful possession of currency and “financing illicit traffic” under the NDPS Act, before cautioning that investigators were stretching the law to invoke the bail-blocking mechanism by labelling even small cash recoveries as “drug money”.

The ruling came in a case where a person was arrested for possessing 5 grams of heroin and Rs 1000, which the police termed as drug money and invoked stringent provisions.

Holding that the police had “not uttered a single reason” to show how Rs 1,000 recovered with heroin could constitute illicit financing, the court asserted that “the mischief is being played taking advantage of the provisions of Section 27-A to unwarrantedly trigger Section 37 with an ulterior motive to make bail difficult.”

The Bench made it clear that the NDPS Act nowhere declared that any cash found with contraband automatically became drug proceed. “Section 27-A and 2(viiib) nowhere, directly or indirectly, mentions any cash found along with the contraband as ‘drug money’ or ‘proceeds of drug sale’.”

The Bench added the legislature did not use that expression and “this court cannot import such words because apparently the usage looks like a folly.”

The Bench made it further clear that the issue involved revolved around Section 27-A. When invoked, it carried a minimum punishment of 10 years and stringent bail restrictions, but only if the accused was actually involved in “financing illicit traffic or harboring any offender” under Section 2(viiib).

These terms, the court explained, denoted “relational roles—financing, which nourishes the economy and logistics of illicit trafficking” and harbouring, which means “to give shelter” to offenders. Therefore, “only when the proceeds are proved to finance the organised chain can the provision of 27-A be invoked.”

The judgment rejected the sweeping use of Section 27-A for petty recoveries and described its true purpose as "a scalpel for the financial sinews of organised traffic, not a net for every case with cash near contraband.” Parliament’s target was “the networked, profit-driven activity… not the edges of consumption or ad-hoc street peddling.”

Asserting that possession of currency was a lawful and constitutionally protected act, the Court held that “keeping money, issued by a Sovereign, can never be an offence unless a statute makes it so” and that India is “not yet a completely cashless economy, and almost everyone… would keep currency notes with them.” The mere proximity of cash to contraband cannot be converted into criminality: “To label any discovered value proximate to narcotics as ‘drug money’… would be contrary to its scope.”

The court rejected the investigative assumption that Rs 1,000 was drug finance, after noting that the State’s response “does not mention an iota of evidence, not even worth a pinch of salt… and the Investigator assumed the same to be drug money and further misinterpreted drug money as ‘financing illicit traffic’.” This, it said, had caused “serious prejudice” to the accused.

On statutory presumptions, the court clarified that Section 54 applies only to narcotics or related articles—“currency notes, being legal tender, do not fall within the ambit”—and that Section 35’s presumption of men’s requires an established actus reus. Without proof that money has “a plausible and proximate nexus” with illicit traffic, “the statutory presumption… cannot lawfully attach to the mere possession of currency.” Any contrary assumption would “offend Article 21”.

The burden, the court stated, would always lay on the prosecution: “Since coins and paper currency are issued and guaranteed by the sovereign… the burden of proving their illicit derivation… lies upon the investigating agency.” Without that nexus, “there is no statutory presumption that mere possession of cash indicates involvement in illicit traffic.”

Warning against routine misuse, the court observed that “whenever any investigating agency invokes the stringent provisions of Section 27-A, the possibility is writ large that mischief is being carried out to make the offence non-bailable.” Where Section 27-A is wrongly applied, the restrictions of Section 37 “shall neither apply nor frustrate the rule of bail”.

The court concluded that cash recovery “does not, per se, fall within the ambit of any prohibited act under the statute” and that another accused had been implicated only on the basis of a disclosure statement, which “does not prima facie make out an offence of ‘financing illicit traffic’.”

Allowing the petitions, the court made the interim orders absolute, reiterating that Section 27-A must be confined to proven financial or organisational links with illicit drug trafficking and cannot be invoked on assumptions drawn from the mere presence of small amounts of cash.