Money Laundering Offences
Under the Prevention of Money Laundering Act, 2002 (PMLA), money laundering is defined under Section 3, which criminalises:
Directly or indirectly attempting to indulge, knowingly assisting, knowingly being a party, or being actually involved in any process or activity connected with the proceeds of crime, including concealment, possession, acquisition, use, projecting or claiming it as untainted property.
Essential ingredients of the offence:
Proceeds of Crime (PoC) must exist (arising from a scheduled offence).
The accused must be involved in any process or activity connected with PoC.
Intention to show the illegally obtained money as legitimate.
Important Case Laws (Explained in Detail)
1. Vijay Madanlal Choudhary v. Union of India (2022)
Significance: Landmark judgment interpreting Section 3, burden of proof, bail provisions, and wide powers of the ED.
Key principles laid down:
(a) Nature of Money-Laundering Offence
The Supreme Court held that money laundering is a “stand-alone offence”, independent from the scheduled offence, but cannot exist unless there are proceeds of crime arising from a scheduled offence.
(b) Continuing Offence
The Court declared money laundering a continuing offence, meaning:
The crime continues as long as the proceeds of crime are enjoyed, concealed, possessed, or used, even if the original scheduled offence happened years earlier.
(c) Twin Conditions for Bail (Sec. 45) Upheld
The Supreme Court upheld the constitutionality of the "twin conditions":
The court must be satisfied that the accused is not guilty.
The accused is not likely to commit any offence while on bail.
This made bail under PMLA significantly stricter.
2. Nikesh Tarachand Shah v. Union of India (2017)
Significance: Earlier judgment that had struck down the twin conditions for bail (later reversed by Parliament and upheld in Vijay Madanlal).
Key findings:
The Supreme Court held that the twin bail conditions under Section 45 were arbitrary and unconstitutional when applied to all offences.
The judgment emphasized Article 14 and 21 (equality and personal liberty).
It stated that stringent bail conditions cannot be applied when the accused has not even been convicted.
Even though Parliament later amended the law to overcome this judgment, it remains important historically.
3. P. Chidambaram v. Directorate of Enforcement (2019)
Significance: Clarifies the approach courts must take regarding PMLA bail and anticipatory bail.
Key points:
The Supreme Court held that anticipatory bail cannot be rejected solely because the offence is serious.
However, it recognized that economic offences require a more cautious approach.
The Court stressed that ED must show specific necessity for custodial interrogation.
Importantly, it stated that bail under PMLA is not automatic, but the prosecution must demonstrate why detention is necessary.
This case balanced individual liberty with the need to investigate financial crimes.
4. Gautam Kundu v. Directorate of Enforcement (2015)
Significance: Clarified evidentiary requirements and bail considerations under PMLA.
Major rulings:
The Supreme Court held that the prosecution must show:
There is proceeds of crime.
The accused was involved in activities connected to laundering.
Bail cannot be granted unless both twin conditions are satisfied.
The Court clarified that mere suspicion is not enough; the ED must show some prima facie evidence of the accused’s connection.
5. B. Rama Raju v. Union of India (2011, Andhra Pradesh High Court)
Significance: Early foundational case interpreting the purpose and scope of PMLA.
Key principles:
The Court held that attachment of property is not punishment; it is a preventive measure to stop dissipation of proceeds of crime.
It clarified that:
Properties derived from illegal activities can be attached even if they are transferred to family members.
The burden shifts to the accused to show that the property is untainted.
This case strengthened ED’s power to attach properties.
6. Hasan Ali Khan v. Union of India (2011)
Significance: One of the earliest cases upholding the stringent bail provisions under PMLA.
What the Supreme Court held:
Money laundering undermines the country’s financial integrity and national security.
Bail requires courts to apply a “higher threshold of satisfaction”.
The Court emphasized the transnational and organized nature of such crimes and the need for stricter investigation.
This case recognized money laundering as a serious threat to economic stability.
7. Rohit Tandon v. Directorate of Enforcement (2017)
Significance: Important case arising from demonetization–related laundering.
Court’s reasoning:
The Supreme Court held that conversion of unaccounted cash into legal tender, using shell accounts or layered transactions, constitutes money laundering.
It reiterated that economic offences are “grave offences”, justifying tougher bail standards.
It upheld the ED’s power to arrest and attach properties where "attempting to indulge" is evident.
Summary of Legal Principles Across These Cases
1. Money Laundering Is a Continuing Offence
As long as proceeds of crime are held or used, the offence continues.
2. ED Has Wide Investigative Powers
Search, seizure, attachment, arrest, and custodial interrogation.
3. Bail Under PMLA Is Exceptionally Difficult
Twin conditions apply.
Economic offences require stricter scrutiny.
4. Burden Shifts to the Accused
Once ED shows prima facie property is proceeds of crime, the accused must prove it is untainted.
5. Attachment of Property Is Preventive, Not Punitive
Courts consistently uphold broad powers of provisional attachment.
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