Guest Post: The Boundary between Trafficking and Possession in Counterfeit Cases

(This is a guest post by Jishnudeep Kolay) 

Imagine a person walking down a city street, with a bundle of 500 counterfeit notes of INR 500 in a bag. He has neither sold them nor attempted to tender them as legal. He is simply walking. Under the IPC, he could have been charged with an offence under Section 489C, for possession of Fake Indian Currency Notes (‘FICN’), with an intention to use as genuine — an offence that is punishable with a maximum sentence of seven years. 

However, the Calcutta High Court’s judgment in the reference case of Anikul v State (2025), somehow turns this into an offence under Section 489B, for trafficking in FICN, which carries a maximum sentence of life imprisonment. For doing so, it converts static possession into “active transportation.” 

The core issue in the reference was this: can recovery of a substantial amount of FICN raise a presumption of active transportation of FICN, thus make it trafficking, which is punishable under Section 489B. The High Court answered in the affirmative, holding that the presence of a substantial amount of FICN shall be deemed to be active transportation, punishable under Section 489B.

This post dissects the judicial doctrine and argues that the answer to the reference misconstrued the textual framework of Sections 489B and 489C. The two relevant Supreme Court judgements in Mammutti (AIR 1979 SC 1705) and Umashankar (AIR 2001 SC 3074) do not tackle the specific issue in raised in Anikul, but simply affirm that the requisite mens rea must be proved. Existing High Court judgements, mostly by the Calcutta High Court, conflict with each other, as this post shall show. Therefore, Anikul presented a great opportunity for a full bench to clarify the issue — which it missed.

The Textual Framework

Section 489B reads as follows:

“489B. Using as genuine, forged or counterfeit currency-notes or bank-notes.—Whoever sells to, or buys or receives from, any other person, or otherwise traffics in or uses as genuine, any forged or counterfeit currency-note or bank-note, knowing or having reason to believe the same to be forged or counterfeit, shall be punished with 4 [imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.”

While the maximum punishment for Section 489B is life imprisonment, it is 7 years for Section 489C, which reads as follows:

“Possession of forged or counterfeit currency-notes or bank-notes.—Whoever has in his possession any forged or counterfeit currency-note or bank-note, knowing or having reason to believe the same to be forged or counterfeit and intending to use the same as genuine or that it may be used as genuine, shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both.”

Clearly, mere possession is intended to be punished under Section 489C and not 489B. While the mens rea element is same for both, the actus reus separates the two. The words preceding phrase “or otherwise traffics in” in 489B evince the need to prove a transaction. One might argue that the phrase “or uses as genuine” does not require the presence of another person. However, the same phrase is also used under 489C, with the same mens rea requirement. Thus, if a person is proved to knowingly use FICN as genuine then he can be convicted for an offence under Section 489C. However, the words preceding the phrase in Section 489B shows that to elevate the offence to Section 489B it, some kind of trafficking or transaction in FICN must be shown.

Conflicting Doctrine

The Supreme Court judgements on these issues are limited and have not addressed the issues that High Courts have struggled to answer. In Mammutti, the Court confirmed the requirement of knowledge that was already present in the provision. Umashankar also followed suit. 

The Calcutta High Court has had several chances to examine the provision. In Jiban Sasmal, the accused was found with 5 FICN of ten-rupee denomination. The High Court held that mere possession does not capture the actus requirement of section 489B, which requires some kind of transaction. 

While Jiban Sasmal had to deal with possession of a small quantity of FICN, in Jubeda Chitrakar, the accused was found with more than 500 pieces of FICN. There was no evidence of any kind of transaction. On the conduct aspect, the appellant argued that “otherwise traffics in” must be read ejusdem generis with the preceding words, thus requiring proof of a transaction with the presence of another person. However, the High Court held that “traffics” refers to dealing in illegal substances. Therefore, possession of a large quantity of FICN is not dormant, but active possession, which amounts to trafficking. Any other interpretation, as per the Court, would “dilute the rigour of law”. In reaching its conclusion, it relied on Section 106 of the Evidence Act, presuming that possession of such quantity of FICN is transportation with knowledge, unless rebutted. In essence, any person found with a large quantity of FICN can be made liable under both Sections 489B and 489C, even without a direct proof of any of the acts specifically mentioned in Section 489B. While the holding is in stark contrast with Jiban Sasmal, the only differentiating factor is the quantity of FICN recovered. 

Facts very similar to Chitrakar appeared before a single judge bench of the same High Court in Sarvesh Pathak. There, the accused was found in possession of over 8 lakhs worth of FICN. The state argued that such a large amount by itself proves an offence under Section 489B. The judge disagreed, holding that all that it proves is the conduct under Section 489C — possession or that they may use it as genuine — but not 489B..

The Kerala High Court has largely agreed with Chitrakar. However, its doctrine shows the importance of conduct of the accused rather than merely the quantity of FICN. In Md Islam v. CBI, the accused were found with more than 200 FICN pieces. Citing Chitrakar, the Court held the guilty as no explanation was offered. Vijayan acquitted the accused, as less than 20 notes were recovered. In Masidur Rahman (2024 SCC OnLine Ker 4650), a conviction was sustained despite recovering less than 50 notes from the accused because the accused had attempted to transact with the notes. Facts that the accused was tensed when the fake notes were discovered and his hurried attempt to leave the place, were used to prove knowledge.

The Delhi High Court has read the provisions strictly, without presuming active transportation barring proof. In Akil v. State, a substantial amount of more than 200 fake notes were recovered. However, the Court, citing Umashankar, held that mere possession or even transacting with the same without proper proof of mens rea cannot sustain a conviction under either Section 489B or 489C. Further, for Section 489B, the High Court held that there must be a transaction and mere possession is not enough. While the Akil Court did not cited Chitrakar (in any case, it was not bound by it), the logic employed was exactly the opposite. The recovery of a substantial amount of FICN was not taken as active transportation, without any evidence of transaction.

The Anikul Reference

The reference in Anikul was the perfect opportunity to clarify the position. The question asked was whether a recovery of a large quantity of FICN can be deemed to be active transportation, thus falling under the ambit of Section 489B. While it cited several judgements, the High Court failed to offer any independent reason of its own to back up the conclusions. It held that while the amount of FICN recovered is immaterial for Section 489B, a substantial amount shall be deemed to be active transportation. Before triggering the presumption, the prosecution must prove the foundational facts of Section 489B. 

Basically, the Court repeated the ratio of Chitrakar, without any independent reasoning. This is striking, since several cases cited by the Court itself go against this holding. For example, in Abu Sajeed, the Calcutta High Court itself had held that lack of evidence of a transaction shall lead to acquittal on the charges of Section 489B. 

Anikul’s view that possession of substantial quantity of FICN is “active transportation,” and therefore trafficking, conflates the offence of trafficking with simple possession which has lesser punishment under section 489C. The flaw originated in Chitrakar, which Anikul repeated without assigning any independent reasons.

The first few words under Section 489B: “sells to, or buys or receives from, any other person” indicates the requirement of some transaction. On the other hand, Section 489C simply requires possession “and intending to use the same as genuine or that it may be used as genuine.” The mens requirement under both is the same. Therefore, if an accused is found to be merely in possession of FICN, he can be charged only with Section 489C regardless of the quantity. Chitrakar held that “or otherwise traffics in” can capture possession of substantial amount of FICN as well. However, the same shall also be punishable under Section 489C, which limits the sentence to a maximum of 7 years as opposed to life imprisonment under Section 489B. If such a reading is adopted, then the difference between the two sections and the legislative intention of treated transacting in FICN as a more severe offence shall be vitiated. The defence in Chitrakar did argue for reading “or otherwise traffics in” ejusdem generis with the preceding words. However, the Court held that such a reading shall dilute the rigour of the provisions.

High Courts have also marshalled section 106 IEA. The High Courts of Calcutta and Kerala have used section 106 in the following manner: Prosecution proves substantial possession of FICN — section 106 is invoked and the onus shifts to the accused to explain the source — accused fails provide a satisfactory explanation — court presumes knowledge and the act of trafficking as well. However, section 106 can never be used to compensate for the prosecution’s failure to prove the ingredients of an offence (here and here). Thus, the Court cannot make a jump from mere possession to trafficking, by using 106 IEA, without proving any transaction of FICN. While section 106 can be deployed, the manner is different. If an accused is caught possessing a substantial amount of FICN, then 106 can be marshalled to presume that he was “intending to use the same as genuine or that it may be used as genuine.” However, presumption cannot change the conduct altogether. Anikul, by uncritically following Chitrakar, continued the flawed reading and missed a crucial opportunity to change course.