Introduction:

In a significant judgment emphasizing the fundamental principles of criminal law and evidentiary standards, the Kerala High Court in Abdul Hakkim v. State of Kerala (Crl.A. No. 318 of 2009; 2025 LiveLaw (Ker) 719) acquitted a man who had been convicted under Section 489C of the Indian Penal Code for allegedly possessing a counterfeit 100-dollar note. The single-judge bench of Justice Johnson John held that the prosecution failed to establish the essential ingredients of the offence — namely, conscious possession of the counterfeit note and the intention to use it as genuine. The Court observed that mere possession of a forged or counterfeit note does not automatically attract criminal liability unless the prosecution proves beyond reasonable doubt that the accused knew of its falsity and intended to use it deceitfully. The judgment, while reaffirming the wide applicability of Section 489C even to foreign currency as held in K. Hasim v. State of T.N. (2005), also underscored that conviction cannot be based on suspicion, conjecture, or procedural irregularities. The case serves as a reminder that the cornerstone of criminal justice lies in the principle that guilt must be proven, not presumed, and that any reasonable doubt must operate in favour of the accused.

Arguments of the Appellant (Accused):

The appellant, represented by Advocate Thareeq Anver as State Brief, contended that the trial court erred in convicting him without any cogent or admissible evidence. He argued that the essential ingredients of Section 489C IPC — possession of counterfeit currency with knowledge of its falsity and intention to use it as genuine — were not established by the prosecution. The defence maintained that there was no evidence whatsoever to prove that the accused was aware that the 100-dollar bill in his possession was counterfeit, nor that he had made any attempt to pass it off as genuine. The appellant explained that he, along with four other headload workers employed at Thiruvananthapuram airport, had received the 100-dollar note as a tip from a group of foreign tourists for helping them load their luggage onto a bus. It was only after the foreigners left that the group noticed that the note was torn and pasted together, which led to an argument among them. The Sub-Inspector (PW3), upon witnessing the altercation, intervened and took them to the police station. However, inexplicably, only the appellant was implicated while the others were released.

The defence emphasized that during the trial, both PW1 and PW2 — the other workers present during the incident — turned hostile and denied having any knowledge of the alleged offence. Furthermore, neither the investigating officer nor the bank manager, who had purportedly confirmed the note’s counterfeit nature, were examined by the prosecution. The absence of these key witnesses, the defence argued, fatally weakened the prosecution’s case. The appellant further contended that the trial court had improperly relied upon the portions of the witnesses’ statements recorded under Section 161 CrPC, treating them as substantive evidence, which is expressly prohibited under Section 162 CrPC. The defence submitted that such reliance was in gross violation of procedural fairness and evidentiary rules, rendering the conviction unsustainable. It was also argued that no question was put to the accused under Section 313 CrPC to ascertain his knowledge or intention to use the note as genuine, thereby denying him the opportunity to explain his stance fully. On these grounds, the appellant urged the High Court to set aside his conviction and sentence, and to restore his honour by recognizing the failure of the prosecution to establish guilt beyond reasonable doubt.

Arguments of the Respondent (State of Kerala):

On the other hand, the State, represented by Public Prosecutor Hasnamol N.S., defended the trial court’s conviction, contending that the recovery of the counterfeit note from the possession of the accused was duly proved through the testimony of PW3, the Sub-Inspector. The prosecution argued that Section 489C IPC is not restricted to Indian currency alone but also applies to foreign currencies, including the American dollar, as clarified by the Supreme Court in K. Hasim v. State of T.N. (2005). Thus, possession of a counterfeit 100-dollar note falls squarely within the ambit of the provision. The State further contended that the evidence on record, including the recovery mahazar and the statement of PW3, established that the accused was found quarrelling with PW1 regarding the exchange of the counterfeit note, which indicated his knowledge of its existence and possible intention to use it as genuine. The prosecution maintained that even though PW1 and PW2 turned hostile, the corroborative testimony of PW3 and the material evidence sufficed to sustain the conviction.

It was also argued that the fact that the accused did not offer any immediate explanation regarding the possession of the counterfeit note during his arrest or interrogation was indicative of guilty knowledge. The State, therefore, asserted that the trial court was justified in relying on the available evidence to infer that the accused possessed the counterfeit note knowingly and with an intent to use it as genuine. The prosecution urged the High Court to affirm the conviction and sentence, arguing that the accused’s conduct and possession of the forged note were sufficient to draw an inference of culpability under Section 489C IPC.

Court’s Judgment and Observations:

After carefully evaluating the records, depositions, and legal contentions, the Kerala High Court allowed the appeal and set aside the conviction and sentence imposed by the trial court. Justice Johnson John commenced the judgment by reaffirming that Section 489C IPC is a broad penal provision that covers not only counterfeit Indian currency but also forged or counterfeit foreign currencies, relying on the precedent laid down in K. Hasim v. State of Tamil Nadu (2005). However, the Court emphasized that this legal position does not dilute the prosecution’s duty to establish two vital ingredients — (1) that the accused was in conscious possession of the counterfeit note, and (2) that he had the intention to use it as genuine.

The Court noted that in the present case, the prosecution had failed to discharge this burden. The trial court, it observed, had convicted the accused solely on the basis of PW3’s testimony and the portions of the hostile witnesses’ Section 161 CrPC statements, which is impermissible in law. The High Court held that the trial court’s reliance on Section 161 statements as substantive evidence was a direct violation of Section 162 CrPC, which clearly prohibits the use of such statements except for the purpose of contradiction during cross-examination. The Court observed that neither the investigating officer nor the bank manager — both crucial witnesses — were examined to establish the authenticity of the recovery or the genuineness of the counterfeit note. Without their evidence, the chain of proof was broken, making the prosecution case inherently weak.

Justice Johnson John further observed that the prosecution failed to prove that the accused had any intention to use the note as genuine. There was no evidence to suggest that he attempted to exchange or circulate the note. The mere possession of a counterfeit note, without proof of knowledge and intent, does not constitute an offence under Section 489C IPC. The Court took note of the accused’s explanation under Section 313 CrPC, wherein he stated that the dollar note had been received as a tip for loading luggage and that he was unaware of its counterfeit nature. The Court found this explanation plausible and consistent with the evidence on record. Importantly, the Court highlighted that during the Section 313 examination, no question was put to the accused indicating his conscious possession or intention to use the note deceitfully. This procedural lapse, it observed, further vitiated the fairness of the trial.

The judgment also noted that PW3, the Sub-Inspector, had himself admitted uncertainty regarding the genuineness of the note at the time of seizure. This, coupled with the absence of the bank manager’s testimony, created a substantial gap in the prosecution’s narrative. Moreover, there was no allegation or evidence that the accused attempted to flee, conceal evidence, or had any other contraband, indicating the absence of a guilty mind. The Court reiterated the settled principle that when two views are possible — one pointing to the guilt of the accused and the other to his innocence — the one favourable to the accused must be adopted.

In this light, the High Court concluded that the prosecution had not proved beyond reasonable doubt that the accused had the knowledge that the dollar note was counterfeit or that he had intended to use it as genuine. It stressed that the presumption of innocence is a fundamental right under criminal jurisprudence, and no person should be convicted based on suspicion, however strong it may appear. Consequently, the Court allowed the appeal, set aside the conviction and the three-year sentence imposed by the trial court, and acquitted the appellant of all charges, granting him the benefit of doubt.

The judgment stands as a reaffirmation of two critical principles — that the mental element (mens rea) is indispensable in offences relating to counterfeit currency, and that strict adherence to procedural and evidentiary safeguards is vital to preserve the fairness of the criminal process. The High Court’s reasoning demonstrates the judiciary’s unwavering commitment to ensuring that justice is not sacrificed at the altar of technical expediency.