Supreme Court: PMLA Is a Continuing Offence, Retrospectivity and Threshold Challenges Held Legally Unsustainable

Introduction

In yet another significant decision in the expanding jurisprudence under the Prevention of Money Laundering Act, 2002 (‘PMLA’), the Supreme Court in Pradeep Nirankarnath Sharma v. Enforcement Directorate[i]* *has authoritatively ruled on the continuing nature of the offence of money laundering and the statutory scope of the PMLA. Reaffirming the principles laid down in the landmark decision of Vijay Madan Lal Chaudhary’s[ii], the Hon’ble Supreme Court reiterated that the offence of money laundering is not confined to the initial act of acquiring illicit funds but persists across various stages from concealment to projection as untainted and eventual integration into the financial system.

The present judgment is a solid reinforcement of the legislative intent with which the PMLA was enacted, i.e., combating financial crimes. The judgment adopts a strict interpretative stance, clarifying that liability under the PMLA cannot be negated merely on procedural or technical grounds such as retrospective applicability or failure to meet a monetary threshold.

Facts

• The present case arose from the two FIRs registered in 2010 for alleged commission of offences under ss. 7, 11, 13(1)(B), 13(2) of the Prevention of Corruption Act, 1988 (‘PC Act’) and ss. 217, 409, 465, 467, 468, 471, 476, 120-B of the Indian Penal Code (‘IPC’).

• Pradeep Sharma (‘Appellant’) was the former Collector of Bhuj and Rajkot. Allegedly, the Appellant was involved in fraudulent activities and financial transactions wherein he had undervalued land grants to private firms, expedited approvals for a company linked to his wife, misused earthquake rehabilitation schemes and accepted pecuniary advantages, including mobile expenses borne by private firms, which amounted to bribery under the PC Act.

• Based on the predicate offences, the Enforcement Directorate (‘ED’) registered an ECIR under the PMLA in 2012, leading to the Appellant’s arrest in 2016, followed by the filing of the prosecution complaint, alleging the commission of an offence under ss. 3 and 4 of the PMLA.

• Subsequently, the Appellant filed for discharge under s. 227 of CrPC before the Special Court, PMLA; however, the same was rejected by the Special Court, citing the existence of prima facie material against the Appellant and his failure to rebut the presumption under s. 24 of the PMLA. Aggrieved by such dismissal, the Appellant filed a criminal revision application before the Gujarat High Court, which was also subsequently dismissed while upholding the observations made by the Special Court, PMLA. Resultantly, the Appellant filed the present appeal.

• Arguments made by the Appellant:

i. The PMLA, being a penal statute, cannot be retrospectively applied to the present case, considering that the alleged predicate offence occurred prior to the enactment of the PMLA in 2005 and before the alleged offence was added as a scheduled offence under the PMLA. The Appellant furthered the argument regarding the retrospective applicability of the PMLA on the grounds that the law in this regard was still unsettled and under deliberation by the Supreme Court itself in ED v. M/s Obulapuram Mining Company Pvt. Ltd. Thus, it could not be said that such an issue was conclusively settled through *Vijay Madanlal Chaudhary’s *judgment.

ii. Furthermore, the Appellant also contended that certain transactions, including payments received by his wife’s business and private companies, which covered his mobile bills, did not constitute proceeds of crime under the PMLA since they were unrelated to any of the alleged acts of corruption.  

iii. The present case was also not amenable to the Appellant, considering that at the time the alleged offence was committed, such offences were either unscheduled under the PMLA or subject to a monetary threshold of Rs. 30 lakhs, which was not met in the present case, making the PMLA inapplicable.

• Arguments made by the Respondent

i. While vehemently opposing the submissions put forth by the Appellant, the Respondent contended that, since money laundering is a continuing offence, the PMLA would be applicable to the present case, as the accused continued to enjoy and use the alleged proceeds of crime beyond 2005.

ii. The respondent contended that the scheduled offences under IPC and the PC Act were already included in PMLA at the time of commission of the offence, while the monetary threshold of Rs. 30 lakh was exceeded, making the case fall within the PMLA framework.

iii. Furthermore, considering that the Appellant had failed to discharge the burden of proof cast upon him under s. 24 of the PMLA, a clear case of money laundering was made out against him in light of his involvement in hawala transactions and certain financial exchanges. Thus, considering that a prima facie case was established against the Appellant, the discharge application deserved to be set aside by the Supreme Court.

Held

The Supreme Court, while dismissing  the discharge application filed by the Appellant, made the following observations :

• The Supreme Court unequivocally reaffirmed that money laundering is a continuing offence, extending beyond the initial act wherein the scheduled offence was first committed. Thus, as long as the proceeds of crime are concealed, projected as untainted, or utilised in financial transactions, the continuing nature of the offence negates any challenge based on retrospective application.  The Supreme Court relied on judicial precedents to establish that offences under PMLA persist over time, making them subject to legal scrutiny even if the original acts occurred before certain amendments.

• The Appellant’s arguments regarding the proceeds of crime not meeting the statutory threshold for initiating proceedings under PMLA were also rejected in light of the financial records and other material evidence submitted by the Respondent, which demonstrated that the proceeds of crime far exceeded the threshold, even under the unamended provisions of the PMLA. The Supreme Court emphasised that the threshold must be assessed holistically, considering the aggregate financial trail, rather than dissected through isolated transactions.

• Additionally, the Supreme Court also recognised the broader economic implications of money laundering, highlighting how illicit financial transactions deprive the state of revenue, distort market integrity, and contribute to systemic financial instability. Given the gravity of the allegations, the Supreme Court held that a thorough trial was necessary to ascertain the full extent of wrongdoing.

• In view of the above discussion, the Supreme Court ultimately concluded that the Appellant had failed to establish any legally sustainable ground to interfere at a pre-trial stage. The proceedings under PMLA were found to be justified, and the findings of the Special Court, PMLA, were upheld.

Our Analysis

Can procedural labels diminish the core legislative mandate of the PMLA? The Supreme Court answers emphatically in the negative.

Through this landmark decision, the Supreme Court has reaffirmed that the core objective of the PMLA to combat the laundering of illicit proceeds must not be diluted by procedural technicalities often invoked by accused persons to evade prosecution. The Court underscored that the offence of money laundering is of a continuing character, which does not conclude with the initial acquisition of tainted assets but endures so long as the proceeds of crime are concealed, projected as legitimate, or assimilated into the financial system. Significantly, this finding aligns with the well-reasoned ratio of the High Court, which now stands affirmed by the Supreme Court, whose dismissal of the SLP, though on grounds of delay, was accompanied by a clear finding of lack of merit. This ruling effectively precludes accused persons from circumventing the PMLA’s rigour by citing the pre-enactment timing of predicate offences or the timeline of statutory amendments.

By recognising the continuing nature of money laundering, the Supreme Court has ensured that individuals who continue to hold, use, or transfer proceeds of crime after the enforcement of the PMLA remain within its purview. The judgment also underscores the broader economic and systemic risks posed by money laundering, such as revenue loss, market distortion, and financial instability. By upholding the lower Courts’ findings, the decision affirms that economic offences require strict judicial scrutiny and that offenders cannot exploit legal technicalities to evade prosecution. This reinforces the deterrent objective of the PMLA and strengthens the legal framework against financial crimes.

End Notes

[i] 2025 SCC OnLine SC 560 dated 17.03.2025.

[ii] (2023) 12 SCC 1.

Authored by Shivam Mishra, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.