A) ABSTRACT / HEADNOTE

The appeal challenges the High Court’s dismissal of a criminal revision seeking discharge of Pradeep Nirankarnath Sharma in a prosecution under the Prevention of Money Laundering Act, 2002 (PMLA). The prosecution alleges that the appellant, while serving as a Collector, misused his official position to effect land allotments and related transactions that produced illicit gains which were thereafter concealed, layered and integrated through banking and hawala channels.

The appellant’s core contention is twofold:

(i) many of the predicate acts pre-dated the PMLA or the inclusion of the alleged predicate offences in the PMLA Schedule, rendering PMLA inapplicable;

(ii) the material fails to make out a prima facie case warranting continuation of proceedings at the Section 227 CrPC stage.

The respondent (Enforcement Directorate) relies on the well-settled doctrine that money-laundering is a continuing offence and that the relevant date for PMLA liability is when the accused deals with proceeds of crime, not when the predicate offence occurred. On the record, courts below found prima facie material showing concealment, utilisation and fresh transactions linked to proceeds, and concluded that aggregate proceeds exceed applicable monetary thresholds.

The Supreme Court, relying on prior precedent including Vijay Madanlal Chaudhary v. Union of India and on the statutory scheme (notably Section 3 PMLA and Section 24 PMLA), upheld the trial court’s refusal to discharge and dismissed the appeal, holding that

(i) money-laundering may extend beyond the date of the predicate offence as a continuing crime;

(ii) the monetary threshold was prima facie met;

(iii) interference at the preliminary stage was not warranted given the gravity and economic magnitude of allegations.

Keywords: proceeds of crime; continuing offence; Section 3 PMLA; Section 24 PMLA; discharge under Section 227 CrPC.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appeal arises from an enforcement action initiated by the Enforcement Directorate (ED) following ECIR/01/AZO/2012, which itself built upon FIRs registered in 2010. The allegation is systematic: while holding public office (Collector at Bhuj and later Rajkot), the appellant approved large land allotments and conversions that produced alleged pecuniary benefits to private parties and indirectly to persons connected to the appellant. The ED contends those pecuniary benefits were laundered via banking and hawala channels, including transfers to an NRO account held by the appellant’s wife, payments of mobile bills by corporate entities, and other layering transactions.

The appellant sought discharge under Section 227 CrPC arguing absence of a prima facie case and pressing the constitutional-legality dimension that many of the predicate acts predated PMLA or predated the inclusion of particular offences in the PMLA Schedule; accordingly, he argued absence of retrospective application and that PMLA could not be invoked. The trial court refused discharge after identifying prima facie material of large-value hawala transactions and possession/usage of proceeds, placing burden under Section 24 PMLA on the accused to show that property was not proceeds of crime.

The High Court dismissed the revision petition, emphasizing that economic offences of this magnitude require cautious judicial truncation and that the trial stage must examine the entire financial trail. The Supreme Court granted leave and considered primarily whether the continuing-offence doctrine and the threshold calculations justified rejecting discharge at the nascent stage, while keeping open full trial scrutiny.

D) FACTS OF THE CASE

The ED registered ECIR/01/AZO/2012 following FIRs No. 03/2010 and No. 09/2010 alleging corruption and fraud in land allotments and related transactions. The appellant served as Collector (Bhuj and Rajkot) during the critical period (2003–2008) and is alleged to have approved allotments beyond statutory caps, permitted conversions of land-use favoring entities linked to him or his family, and issued administrative orders facilitating transfers at undervalued rates causing substantial loss to the State.

Corporate entities (e.g., M/s Wellspun, M/s Value Packaging, M/s Ratan Enterprises) are alleged to have paid substantial mobile phone bills and other sums for SIM cards used by the appellant; the wife of the appellant allegedly received ₹22 lakhs in an NRO account on exit from a partnership, claimed by ED as disguised illicit gratification. Investigations revealed hawala transactions and alleged layering/placement of funds into domestic and foreign bank accounts (including US accounts opened during the appellant’s earlier period abroad). Charge-sheets under IPC and PC Act were filed; ED filed complaint under Sections 3 and 4 PMLA (complaint dated 27.09.2016).

The Trial Court (Special Judge PMLA) refused discharge on 08.01.2018; the High Court dismissed Criminal Revision on 14.03.2023. The Supreme Court record notes aggregate alleged proceeds exceeding statutory thresholds (figures alleged: loss ≈ ₹1.20 crores; proceeds identified ≈ ₹1.32 crores; hawala dealings in crores), and records that certain sanctioning orders and transactions post-date PMLA coming into force (1 July 2005), thus anchoring ED’s claim of continuing laundering activity.

E) LEGAL ISSUES RAISED

i. Whether the acts alleged, many of which pre-dated the PMLA or the inclusion of specific offences in the PMLA Schedule, can attract prosecution under the PMLA by virtue of the doctrine of continuing offence?
ii. Whether the material placed by the ED at the charge-framing/discharge stage discloses a prima facie case of money-laundering such that discharge under Section 227 CrPC is not warranted?
iii. Whether the monetary threshold applicable to Part-B scheduled offences (₹30 lakhs) is satisfied on the prima facie material placed on record?
iv. Whether judicial interference at the preliminary stage to quash PMLA proceedings is warranted in the absence of manifest illegality or miscarriage of justice?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Petitioner / Appellant submitted that the alleged predicate offences and many contributory acts occurred before 1 July 2005 or before the relevant offences were added to the PMLA Schedule, thus PMLA could not be applied retrospectively. The counsels for Petitioner / Appellant submitted that the appellant was falsely implicated, that alleged corporate payments (mobile bills, goodwill) were not proceeds of crime attributable to him, and that certain bank accounts were used legitimately during foreign study, not for laundering.

The counsels for Petitioner / Appellant submitted that the Special Judge failed to appreciate absence of cogent material and relied on conjecture; therefore Section 227 CrPC discharge should have been granted at the nascent stage. The counsels for Petitioner / Appellant submitted that the appellant had attained superannuation, making certain administrative allegations irrelevant, and that aggregate valuation arguments were mischaracterised by ED without documentary proof sufficient for prima facie attribution.

G) RESPONDENT’S ARGUMENTS

The counsels for Respondent submitted that money-laundering is a continuing offence and liability attaches when the accused indulges in processes connected with proceeds, irrespective of when predicate offence occurred. The counsels for Respondent submitted that the charge-sheet, ECIR and corroborative financial material disclose grave suspicion and prima facie indicia of layering, concealment and projection of proceeds as untainted property. The counsels for Respondent submitted that the total proceeds exceed ₹30 lakhs and, in fact, aggregate to crores, satisfying pre-amendment thresholds; the reverse burden under Section 24 PMLA shifts the onus on the accused to prove the legitimacy of assets. The counsels for Respondent submitted that courts should be cautious about quashing serious economic offence prosecutions at a preliminary stage and that the factual matrix necessitates full trial.

H) JUDGEMENT

The Supreme Court considered statutory text, precedent and the material on record. The Court reiterated that Section 3 PMLA criminalises any process or activity connected with proceeds of crime concealment, possession, acquisition, use or projection as untainted property and emphasised that those acts may extend over time. Reliance was placed on the analysis in Vijay Madanlal Chaudhary v. Union of India (2023) which recognises the continuing nature of money-laundering and that the relevant time for PMLA liability is when the offender deals with proceeds, not exclusively the date of predicate commission.

Applying that principle, the Court found the record contains prima facie material of onward transactions, hawala entries, receipts in family accounts and later utilisation that continued after PMLA’s enforcement date and after predicate FIRs were lodged, thereby extending the offence into the PMLA era. On the monetary threshold point the Court accepted ED’s aggregated computation the alleged government loss and proceeds exceed ₹30 lakhs and amount to over a crore and noted that threshold inquiry at discharge stage is rightly based on the totality of the financial trail as opposed to isolated instances.

Regarding procedural review, the Court held that early judicial termination of economic offender trials requires compelling legal grounds; absent manifest illegality, the Trial Court and High Court were justified in proceeding to trial. The Court therefore dismissed the appeal and upheld the refusal of discharge, leaving open full adjudication on merits at trial.

a. RATIO DECIDENDI

The controlling ratio is that money-laundering under Section 3 PMLA may be a continuing offence and is attracted when a person engages in acts connected to proceeds of crime even after the date of the predicate offence; consequently, retrospective objection fails where the accused continued to possess, use, conceal, or project proceeds after PMLA came into force. At a preliminary stage (discharge), courts must determine whether prima facie material raises grave suspicion and not assess the probative value of evidence exhaustively; where ED places on record prima facie financial trails showing ongoing utilisation and layering of proceeds exceeding statutory thresholds, discharge is not warranted. The reversal burden under Section 24 PMLA shifts on such prima facie showing. The ratio thus harmonises statutory purpose (combating laundering) with procedural thresholds for discharge.

b. OBITER DICTA

The Court reiterated cautions about judicial intervention at early stages in complex economic offences, suggesting meticulous trial scrutiny is required to unravel transactional chains. It observed that legislative amendments (2009, 2013, and 2019 explanations) clarified scope but did not fundamentally change the continuing-offence concept; the Court noted ongoing three-judge consideration in ED v. M/s Obulapuram Mining Co. Pvt. Ltd. but treated Vijay Madanlal Chaudhary observations as sufficiently persuasive for the facts here. The Court further commented that the question of provenance and attribution of specific sums to the appellant’s acts requires evidentiary trial and is unsuitable for resolution at the discharge stage.

c. GUIDELINES

i. Where ED shows prima facie financial trail indicating concealment, layering or integration of proceeds beyond the predicate date, courts should decline discharge and permit trial.
ii. Determination of statutory monetary thresholds must be by aggregate assessment of the entire financial trail rather than narrow segmentation of transactions.
iii. Reverse burden under Section 24 PMLA operates once prima facie nexus between property and proceeds of crime is made out; courts must ensure accused is informed of shift and allowed fair opportunity at trial.
iv. Judicial quashing at preliminary stage in economic offence matters must be exercised sparingly; exceptional circumstances or manifest illegality are required to truncate trial.
v. Allegations of retrospective misuse should be examined primarily in light of whether the offender continued dealings with alleged proceeds after relevant PMLA dates.

I) CONCLUSION & COMMENTS

The Supreme Court’s decision reaffirms judicial deference to trial processes in complex financial prosecutions and underscores the doctrinal position that money-laundering is not temporally confined to the date of the predicate wrong. For practitioners, the judgment underscores careful pleadings and robust documentary financial mapping at the ED stage to survive discharge challenges, and conversely requires defence strategy to meet the reverse burden with early documentary exculpation where possible.

The Court’s approach balances statutory object (safeguarding financial system from illicit funds) with procedural fairness by preserving trial adjudication on contested nexus and valuation points. Academic and practitioner debates will persist around retrospective reach and prosecutorial thresholds; however, the judgment solidifies that when prima facie material shows continued utilisation or fresh laundering acts post-PMLA, prosecution must be allowed to run its course. The decision also signals courts’ reluctance to allow procedural technicalities to prematurely abort inquiries into large-scale economic corruption that allegedly damaged public finances.

J) REFERENCES

a. Important Cases Referred
i. Vijay Madanlal Chaudhary and Others v. Union of India and Others, (2023) 12 SCC 1.
ii. ED v. M/s Obulapuram Mining Company Pvt. Ltd., Criminal Appeal No. 1269/2017 (listed as pending reference in the record).

b. Important Statutes Referred
i. The Prevention of Money Laundering Act, 2002 (Sections 3, 5, 24).
ii. The Code of Criminal Procedure, 1973 (Section 227).
iii. The Prevention of Corruption Act, 1988; relevant IPC provisions (Sections 217, 409, 465, 467, 468, 471, 476, 120B, 420).