Sanchayita Lahkar

The Supreme Court has declined to interfere with the orders passed by the Special Judge and the High Court rejecting the discharge application of the appellant, accused of offences under the Prevention of Money Laundering Act, 2002 (PMLA). The Division Bench of Justice Vikram Nath and Justice Prasanna B. Varale recorded that the offence of money laundering is a continuing offence and observed that “involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money laundering.” The Court also dismissed the appellant’s contention that the alleged offences predate the enactment of the PMLA or its amendments, stating that “such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence.”

The Court further declined to quash the charge framing stage proceedings, affirming the decisions of the lower courts. It recorded that “discharging the appellant at this stage would be premature and contrary to the principles governing the prosecution in money laundering cases.”

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The appeal arose from a challenge to the High Court of Gujarat’s refusal to interfere with the Trial Court’s decision, which had dismissed the appellant’s discharge plea in a prosecution under Sections 3 and 4 of the PMLA. The Special Judge (PMLA), Ahmedabad, had refused to discharge the appellant from proceedings arising from alleged acts of money laundering linked to financial losses caused to the State of Gujarat through offences under the Prevention of Corruption Act, 1988, and the Indian Penal Code, 1860.

The case originates from allegations of economic offences committed during the appellant’s tenure as a senior public servant. The Directorate of Enforcement initiated an Enforcement Case Information Report in 2012 following two First Information Reports (FIRs) registered by the Rajkot Zone, CID Crime. The first FIR alleged offences under Sections 7, 11, 13(1)(B), 13(2) of the Prevention of Corruption Act, 1988, and the second FIR alleged offences under Sections 217, 409, 465, 467, 468, 471, 476, and 120-B of the IPC. The appellant was arrested on 31 July 2016, following which the Directorate of Enforcement filed a complaint under Sections 3 and 4 of the PMLA.

The appellant approached the Special Court seeking discharge under Section 227 of the Code of Criminal Procedure, 1973 (CrPC), arguing that the scheduled offences and alleged acts occurred prior to the enactment or amendment of the PMLA. It was contended that the financial transactions attributed to him were either linked to a company in which his wife was a partner or related to personal accounts maintained during his studies abroad. The Special Judge, in its order dated 8 January 2018, recorded that “from the material on record and on the basis of the investigation by respondent no.1, it prima facie appears that the appellant is involved in Hawala, that is, illegal transfer of money to foreign countries.” The Trial Court also recorded that “it appears from the material on record that the appellant is prima facie involved in Hawala transaction of crores of rupees as well,” and rejected the discharge plea.

The appellant, in challenging the Trial Court’s decision before the High Court, submitted that the PMLA provisions could not be applied retrospectively and that there was no prima facie evidence of his involvement in the alleged offence. The Enforcement Directorate and the State opposed this, contending that the offence of money laundering is a continuing offence and that the investigation had revealed the appellant’s active role in the alleged scheme to conceal and project the proceeds of crime as untainted.

The High Court, in its order dated 14 March 2024, recorded that “the material placed on record by the Enforcement Directorate indicated prima facie involvement of the appellant in the alleged offence” and dismissed the revision application, noting that “the order of the Trial Court does not suffer from any illegality, irregularity or impropriety.”

Before the Supreme Court, the appellant, represented by Mr. Kapil Sibal, submitted that the alleged predicate offences occurred prior to the PMLA or before its amendments brought the relevant offences within its ambit. It was argued that “the alleged predicate offences, which supposedly generated proceeds of crime, took place before the PMLA came into force.” The appellant further submitted that “the Enforcement Directorate has relied on the judgment in Vijay Madanlal Chaudhary… to argue that the issue of PMLA’s retrospective application is settled,” but argued that this matter is still pending adjudication before a larger Bench in another case.

The appellant contended that the allegations pertained to actions during his tenure as Collector, Bhuj and Rajkot, involving the allotment of lands, issuance of certificates, and acceptance of bribes through indirect channels, all occurring either before the PMLA came into force or before the relevant offences were included in its schedule. The appellant relied on a chronological matrix, submitting that during key periods, the Prevention of Corruption Act and IPC offences were not scheduled offences under the PMLA.

Mr. Tushar Mehta, Solicitor General, representing the respondents, submitted that the PMLA’s provisions are attracted because money laundering is a continuing offence. The respondents argued that the threshold requirement of Rs. 30 lakhs under Part B of the PMLA schedule was met, as the alleged transactions resulted in losses exceeding Rs. 1 crore. It was submitted that “the amount allegedly laundered by the appellant is far in excess of the Rs. 30 lakhs threshold” and that “the total proceeds of crime laundered amount to Rs. 1.32 crores, as identified through investigation.”

The respondents also contended that “the reverse burden of proof under Section 24 of PMLA places the onus on the appellant to prove that the attached properties were not proceeds of crime.”

The Supreme Court observed that “offences under the PMLA are of a continuing nature, and the act of money laundering does not conclude with a single instance but extends so long as the proceeds of crime are concealed, used, or projected as untainted property.” Referring to its earlier judgment, the Court stated, “the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money laundering under the 2002 Act.”

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The Court rejected the appellant’s argument that the monetary threshold of Rs. 30 lakhs under the pre-amendment PMLA had not been met, recording that “the quantum of proceeds of crime significantly exceeds the statutory threshold” and that “the totality of the evidence must be assessed, which is a matter of trial; but even on a prima facie assessment, it is clear that the proceeds of crime in the present case are significantly higher than the statutory threshold.”

It was concluded that “the present case involves grave and serious allegations of financial misconduct, misuse of position, and involvement in transactions constituting money laundering” and that “a trial is imperative to establish the full extent of wrongdoing and to ensure accountability.”

The appeal was accordingly dismissed.

Advocates Representing the Parties:

For the Appellant: Kapil Sibal, Senior Advocate

For the Respondents: Tushar Mehta, Solicitor General

Case Title: Pradeep Nirankarnath Sharma v. Directorate of Enforcement & Anr.

Neutral Citation: 2025 INSC 349

Case Number: SLP(CRL). No. 6185 of 2023

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