Money Laundering as a Continuing Offence: Clarifying the Scope of PMLA in Sharma v. Directorate of Enforcement

I. Introduction

The Supreme Court of India’s Judgment in Pradeep Nirankarnath Sharma v. Directorate of Enforcement & Anr. (2025 INSC 349) addresses critical questions about the scope and applicability of the Prevention of Money Laundering Act, 2002 (“PMLA”). The case delves into whether the offence of money laundering can be treated as a continuing offence and whether the PMLA can apply to alleged predicate offences predating the Act or preceding relevant amendments.

The appellant, a former government official, challenged the prosecution under PMLA, arguing that the underlying offences occurred before certain provisions of PMLA came into force or before relevant IPC and corruption offences got listed as scheduled offences. The Enforcement Directorate (“ED”) and the State, however, countered by emphasizing that money laundering, by its nature, endures so long as the proceeds of crime remain in circulation or are further used, hidden, or disguised.

This commentary provides an in-depth analysis of the Judgment, the precedents cited, the legal reasoning adopted by the Court, and the potential impact on future cases. It also clarifies the complex legal concepts embedded in the decision, including the notion of a “continuing offence” under the PMLA.

II. Summary of the Judgment

In this Judgment, the Supreme Court of India considered an appeal arising from the High Court of Gujarat’s dismissal of the appellant’s criminal revision application. The High Court had upheld the Special Judge’s order refusing to discharge the appellant in a prosecution under the PMLA.

Key takeaways of the Supreme Court’s decision include:

The Court reaffirmed that the offence of money laundering is a continuing offence. Merely because the underlying “predicate” or “scheduled” offences took place prior to the Act or to amendments in the Act does not necessarily defeat prosecution under PMLA.
The Court rejected the appellant’s arguments on threshold value, confirming that the alleged laundered amount exceeded the then prevailing monetary requirements for establishing an offence under PMLA.
The Court supported the view that economic offences have wide implications for society and the financial system, and should be viewed strictly at the stage of discharge.
The appeal was dismissed, confirming that the matter should proceed to trial on the merits.

III. Analysis

A. Precedents Cited

The Judgment refers to Vijay Madanlal Chaudhary & Ors. v. Union of India & Ors. ((2023) 12 SCC 1), a landmark decision that reinforced the notion of money laundering as a continuing offence. In that case, the Supreme Court acknowledged that an individual can be prosecuted for money laundering activities that continue even if the predicate offence predated the date on which it became a scheduled offence.

The Court also referred to earlier decisions under PMLA jurisprudence which have consistently emphasized that considerations of “continuity”, “layering”, and “projection” of illicit funds are key to differentiating the offence of money laundering from the mere commission of the underlying crime. The instant Judgment builds upon these precedents, applying them in a context where the scheduled offences partly pre-dated their inclusion under the PMLA schedule.

B. Legal Reasoning

The Court’s rationale rests on the legal concept that money laundering is not a one-time act. Instead, it spans the entire duration during which illegally obtained funds are handled, disguised, or projected as lawful. Therefore, even if a bribe or fraud occurred prior to PMLA coming into force—or before a specific offence was added to the PMLA’s schedule—the subsequent layering, possession, or use of the proceeds could still be prosecuted under PMLA.

The major legal points derived from the Judgment are:

Continuing Offence Principle: The Court stressed that as long as proceeds of crime are being used or concealed, the offence continues. This aligns with Section 3 of PMLA, which states that the offence of money laundering includes any process or activity connected with proceeds of crime, making it a distinct and ongoing wrong.
Relevance of Scheduling and Thresholds: Although the appellant argued that certain offences were included in the PMLA schedule only after the alleged events, the Court observed that the fraudulent financial activities continued well after the PMLA came into effect and exceeded the monetary thresholds then in place.
Pre-Trial Discharge Standard: Because economic offences require rigorous scrutiny, courts must be slow to quash proceedings or discharge accused persons before trial if prima facie evidence suggests laundering activities. In the Court’s view, the High Court acted correctly by ensuring that the matter proceeds to a full investigation and trial.
Economic Offences as a Serious Category: The Judgment reiterated that money laundering and corruption, when committed by public officials, undermine the economy and public trust, justifying a strict approach.

C. Impact

The impact of this decision is multifold:

Clarification on Retrospectivity: Courts and prosecutors now have clear guidance that, even if the “predicate offence” began before certain amendments, liability for money laundering can still arise if proceeds of crime were subsequently laundered or used after the relevant provisions came into force. This ensures that backdated financial crimes do not escape scrutiny under the PMLA.
Heightened Scrutiny of Economic Offences: The Judgment reinforces that at the discharge stage, courts should lean towards permitting further inquiry in cases involving high-value economic crimes. It indicates that judicial reluctance to quash economic offence cases early will likely increase.
Guidance for Investigative Agencies: Agencies like the Enforcement Directorate may rely on this Judgment to pursue money laundering charges in complex, continuing-financial-transactions scenarios. The Court’s discussion of threshold values and continuing offence elements provides an even stronger basis for investigating older crimes whose financial aftermath persists.
Enhanced Deterrence: By deeming money laundering to be continuing, potential offenders cannot rely on the gap between the underlying offence and the time the PMLA or relevant amendments took effect. This stands to strengthen deterrence.

IV. Complex Concepts Simplified

Although the PMLA can appear intricate, two main concepts from the Judgment are worth simplifying:

Continuing Offence: In criminal law, a continuing offence is one that does not occur just at a single, fixed point in time but persists over a duration. Money laundering often involves multiple steps—placement, layering, and integration of illicit proceeds—necessitating ongoing conduct. As long as someone conceals, transfers, or projects tainted property as clean, the offence continues.
Scheduled Offences and Threshold: PMLA’s “scheduled offences” are crimes listed in the Act’s schedule. When funds derived from these crimes are laundered, PMLA provisions can be triggered. Earlier versions of the schedule had a monetary floor (often Rs. 30 lakhs) for certain offences. Regardless of when the scheduled offence was committed, if the laundered proceeds remain in use or circulation after the Act or the relevant schedule list is in force, PMLA can apply—provided that threshold values and other conditions are met.

V. Conclusion

The Supreme Court’s decision in Sharma v. Directorate of Enforcement reaffirms the principle that money laundering is a continuing offence. Through extensive legal reasoning, the Court held that the relevant date for prosecuting laundering activities is not limited to when the predicate offence took place but continues as long as an accused person retains, disguises, or transfers the proceeds of crime.

Beyond interpreting the PMLA’s scope, the Judgment underscores the importance of allowing cases involving high-value economic offences to proceed to trial. By declining to set aside the High Court’s refusal to discharge the appellant, the Supreme Court has mirrored legislative intent to combat financial crimes aggressively. The message to both potential offenders and enforcement agencies is unmistakable: the use or possession of illicit funds will not be shielded by technical arguments of timing or newly amended schedules.

In a broader context, the Judgment bolsters the fight against corruption and fraud by ensuring that the PMLA remains robust, even when dealing with older underlying offences. Going forward, investigative and judicial bodies are likely to follow this precedent to maintain strict vigilance over monetary transactions spanning periods before and after PMLA amendments, thereby buttressing the financial integrity of the nation.