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The Supreme Court has said the offences under the Prevention of Money Laundering Act 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. 

A bench of Justices Vikram Nath and Prasanna B Varale pointed out that the legislative intent behind the PMLA is to combat the menace of money laundering, which by its very nature involves transactions spanning over time.  

"The PMLA was enacted to combat the menace of money laundering and to curb the use of proceeds of crime in the formal economy. Given the evolving complexity of financial crimes, courts must adopt a strict approach in matters concerning economic offences to ensure that perpetrators do not exploit procedural loopholes to evade justice," the bench said.  

The court pointed out that the concept of a continuing offence under PMLA has been well-settled by judicial precedents. 

"An offence is deemed continuing when the illicit act or its consequences persist over time, thereby extending the liability of the offender. Section 3 of the PMLA defines the offence of money laundering to include direct or indirect attempts to indulge in, knowingly assist, or knowingly be a party to, or actually be involved in any process or activity connected with the proceeds of crime. Such involvement, if prolonged, constitutes a continuing offence," the bench said.  

Court dismissed an appeal filed by former Gujarat cadre IAS officer Pradeep Nirankarnath Sharma against the high court's judgment of March 14, 2023, which rejected his criminal revision petition and refused to quash the order of the trial court declining his plea for discharge in a case for offences under the Prevention of Money Laundering Act, 2002. It held that the findings of the courts below were well-reasoned and did not call for interference.

"The present case involves grave and serious allegations of financial misconduct, misuse of position, and involvement in transactions constituting money laundering. The appellant seeks an end to the proceedings at a preliminary stage, effectively preventing the full adjudication of facts and evidence before the competent forum. However, as established in multiple judicial pronouncements, cases involving economic offences necessitate a thorough trial to unearth the complete chain of events, financial transactions, and culpability of the accused," the bench said.  

It was alleged that the accused during his tenure as the collector at Bhuj and Rajkot approved large-scale land allotments in 2004 and 2005 to private companies and individuals, exceeding his authorised power. He was accused of approving the conversion of land use from agricultural to industrial to unduly benefit certain persons, and facilitated land allotments at below-market rates, causing notional losses to the government in 2004. Certain private companies allegedly paid his mobile phone bills, characterised as bribery under the Prevention of Corruption Act, 1988.       

The appellant contended that the alleged acts dic not constitute an offence under the PMLA as the same was not in force during the relevant period, or the predicate offences as alleged were not included in the schedule to the PMLA at the relevant time and, therefore, could not be subject to proceedings under the PMLA. It was also argued that these instances did not constitute continuing offences.

"This contention, however, is untenable," the bench said.

The bench said even though the issue of retrospective application of the PMLA was pending adjudication before the apex court, the reliance by the respondent on the observation made in Vijay Madanlal Chaudhary and others Vs Union of India (2023) could not be said to be misplaced. 

"In the present case, the material on record establishes that the misuse of power and position by the appellant, coupled with the alleged utilization and concealment of proceeds of crime, has had an enduring impact. The act of laundering money is not a one-time occurrence but rather a process that continues so long as the benefits derived from criminal activity remain in circulation within the financial system or are being actively utilized by the accused," the bench said. 

The respondents-State and the Enforcement Directorate contended fresh instances of the utilization of the proceeds of crime had surfaced even in recent times, thereby extending the offence into the present and negating the appellant’s contention that the act was confined to a particular point in the past.

"The alleged offences in the present case have a direct bearing on the economy, as illicit financial transactions deprive the state of legitimate revenue, distort market integrity, and contribute to economic instability. Such acts, when committed by persons in positions of power, erode public confidence in governance and lead to systemic vulnerabilities within financial institutions," the bench said. 

The court also emphasised the illegal diversion and layering of funds have a cascading effect, leading to revenue losses for the state and depriving legitimate sectors of investment and financial resources. 

It is settled law that in cases involving serious economic offences, judicial intervention at a preliminary stage must be exercised with caution, and proceedings should not be quashed in the absence of compelling legal grounds, the bench said.

The court opined that the respondent had rightly argued that in cases involving allegations of such magnitude, a trial was imperative to establish the full extent of wrongdoing and to ensure accountability.  

"The law recognizes that money laundering is not a static event but an ongoing activity, as long as illicit gains are possessed, projected as legitimate, or reintroduced into the economy. Thus, the argument that the offence is not continuing does not hold good in law or on facts, and therefore, the judgment of the High Court cannot be set aside on this ground," the bench said.

The court further noted the material on record indicated the continued and repeated misuse of power and position by the appellant, resulting in the generation and utilization of proceeds of crime over an extended period. 

The respondent has successfully demonstrated prima facie that the appellant remained involved in financial transactions linked to proceeds of crime beyond the initial point of commission. The utilization of such proceeds, the alleged layering and integration, and the efforts to project such funds as untainted all constitute elements of a continuing offence under the PMLA. Thus, the proceedings initiated against the appellant are well within the legal framework and cannot be assailed on this ground, the bench said.

The court also noted in the case, the financial trail indicated that the aggregated value of assets derived from the alleged criminal activity was well beyond the prescribed limit of Rs 30 lakh.     

It is settled law that the determination of the threshold value must be based on the entirety of the transaction and not an isolated instance or a narrow interpretation of specific amounts at any given time, the bench said.   

The court also underscored that the totality of the evidence must be assessed, which is a matter of trial.

"The PMLA was enacted with the primary objective of preventing money laundering and confiscating the proceeds of crime, thereby ensuring that such illicit funds do not undermine the financial system. Money laundering has far-reaching consequences, not only in terms of individual acts of corruption but also in causing significant loss to the public exchequer. The laundering of proceeds of crime results in a significant loss to the economy, disrupts lawful financial transactions, and erodes public trust in the system," the bench said.

The court held that discharging the appellant at this stage would be premature and contrary to the principles governing the prosecution in money laundering cases.

It said the argument that the proceedings were unwarranted was devoid of substance in light of the statutory objectives, the continuing nature of the offence, and the significant financial implications arising from the alleged acts.

"Given the severe and grave nature of the allegations against the appellant, it is imperative that he must undergo thorough judicial scrutiny during trial. A proper trial is necessary to unearth the full extent of the offence, to evaluate the evidence produced by the appellant, to analyze the complete chain of final transactions, and find out the veracity of the severe allegations and the amount of proceeds of crime. The legal framework under the PMLA serves as a crucial mechanism to ensure that individuals involved in laundering proceeds of crime are brought to justice and that economic offences do not go unpunished," the bench said.     

The court thus held the appellant had failed to establish any legally sustainable ground warranting interference at a pre-trial stage. The submissions made in support of the appeal are neither legally untenable nor in the best interest of justice, it said. 

The offence alleged against the appellant was clearly a continuing offence under the PMLA, and the quantum of proceeds of crime involved far exceeded the statutory threshold and required proper investigation and judicial scrutiny, it said.   

Case Title: Pradeep Nirankarnath Sharma Vs Directorate of Enforcement & Anr