Money Laundering Is a Continuing Offense—PMLA Applies Even If Predicate Crime Occurred Earlier: Supreme Court Refuses to Quash Case Against Former IAS Officer

Proceeds of Crime Remain Tainted—An Accused Cannot Claim Immunity Just Because the Predicate Offense Took Place Before PMLA’s Enactment - In a significant ruling the Supreme Court of India dismissed the appeal of retired IAS officer Pradeep Nirankarnath Sharma, rejecting his plea for discharge from a money laundering case under the Prevention of Money Laundering Act, 2002 (PMLA). The Court ruled that money laundering is a continuing offense and remains punishable as long as the proceeds of crime are used, possessed, or concealed, irrespective of when the predicate offense took place.

Sharma had argued that the offenses alleged against him predated the enforcement of PMLA and that its application in his case amounted to retrospective criminalization. The Supreme Court, however, held that this argument was legally untenable, declaring: "The offense of money laundering does not conclude with a single act but extends so long as the proceeds of crime remain in circulation or are being actively utilized. An offender cannot claim immunity merely because the predicate offense occurred before PMLA’s enactment."

The judgment upheld the Gujarat High Court’s decision dated March 14, 2024, which had affirmed the Trial Court’s refusal to discharge Sharma. It concluded that prima facie material exists to show his involvement in financial misconduct and money laundering activities, justifying the continuation of trial proceedings.

"A Senior Bureaucrat Accused of Laundering Crores—ED Traces Illegal Land Deals and Hawala Transactions"

The case against Pradeep Nirankarnath Sharma originated from allegations of corrupt land allotments during his tenure as Collector of Kachchh and Rajkot districts in Gujarat between 2003 and 2009. The Enforcement Directorate (ED) accused Sharma of facilitating land allotments at below-market prices to private companies in violation of rules, causing massive financial losses to the Gujarat government.

According to the prosecution, the ill-gotten money from these transactions was funneled through various financial channels, including bank accounts linked to Sharma’s wife, and was also transferred through Hawala networks to conceal its illicit origins.

The CID Crime, Gujarat, registered two FIRs in 2010, listing offenses under the Prevention of Corruption Act, 1988, and the Indian Penal Code (IPC), including Sections 217, 409, 465, 467, 468, 471, and 120-B. These FIRs were treated as scheduled offenses under the PMLA, leading to the registration of a case by the ED in 2012.

The Special Judge (PMLA), Ahmedabad, refused to discharge Sharma in 2018, observing that: "The accused appears to be involved in illegal financial transactions amounting to crores of rupees through Hawala channels, concealing the proceeds of crime, and using tainted money to his advantage. Given the gravity of the allegations, discharge cannot be granted at this stage."

Aggrieved, Sharma moved the Gujarat High Court, arguing that: "The alleged predicate offenses took place before the PMLA came into force on July 1, 2005, and thus, its application to him is legally impermissible. The financial transactions attributed to him cannot be linked to money laundering, and no direct evidence has been presented to establish his guilt."

The High Court dismissed his plea on March 14, 2024, ruling that: "The offense of money laundering is a continuing offense, and as long as the proceeds of crime remain in circulation or are being used, the PMLA is applicable."

Sharma then approached the Supreme Court, arguing that the law was being misapplied retrospectively.

"Proceeds of Crime Do Not Become Clean with Time—The Offense Persists As Long As the Money Remains in Use"

Before the Supreme Court, Senior Advocate Kapil Sibal, appearing for Sharma, contended that: "The PMLA cannot be applied retrospectively to transactions that occurred before its enactment. The offenses under the Prevention of Corruption Act and IPC were included in the PMLA schedule only in 2009 and 2013. Applying PMLA to alleged actions before that period is legally impermissible."

Opposing the appeal, Solicitor General Tushar Mehta, appearing for the Enforcement Directorate (ED), countered: "Money laundering is not a one-time event but a continuing offense. The accused continued to use and benefit from the proceeds of crime well after PMLA was enacted. The law applies as long as the illicit funds are possessed, transferred, or projected as untainted property."

The Solicitor General further emphasized that the FIRs were registered in 2010 when PMLA was already in force, and the illegal land allotments continued to generate unlawful profits even after the 2009 and 2013 PMLA amendments, making it a live offense. He also pointed out that Sharma had failed to discharge the burden under Section 24 of PMLA, which requires an accused to prove that the money in question is not tainted.

"No Escape from Law—Supreme Court Rejects Retrospective Argument, Cites PMLA’s Broad Scope"

The Supreme Court, after examining the legal and factual aspects, ruled against Sharma, holding that: "Even if the scheduled offense occurred before PMLA’s enactment, the law applies as long as the proceeds of crime are being used, transferred, or projected as untainted property after PMLA’s enforcement."

Relying on its 2022 ruling in Vijay Madanlal Choudhary v. Union of India, the Court reiterated that: "The relevant date for determining the offense of money laundering is not the date of the scheduled offense but the date on which the accused engages in activities connected with the proceeds of crime."

Rejecting the argument that PMLA was being applied retrospectively, the Court declared: "The laundering of illicit funds is a continuous process. The accused continued to possess and project illicit gains as legitimate even after PMLA’s enactment, making the law applicable."

Dismissing Sharma’s claim that the quantum of proceeds of crime did not meet the ₹30 lakh threshold under the pre-2013 PMLA framework, the Court ruled:

"The total proceeds of crime in this case exceed ₹1.32 crores, justifying the invocation of PMLA even under the pre-2013 framework."

"Trial Must Proceed—Judiciary Will Not Shield Economic Offenders"

Concluding its judgment, the Supreme Court dismissed Sharma’s appeal, ruling that: "Given the severe nature of allegations, the continuing impact of the alleged offenses, and the necessity of a thorough judicial examination, the appellant’s trial must proceed. The request for discharge is devoid of merit."

The Court directed the Special Judge (PMLA) to expedite the trial, ensuring that the full extent of the money laundering charges is examined in accordance with law.

With this ruling, the Supreme Court has strengthened the legal framework against financial crimes, making it clear that economic offenders cannot evade prosecution by claiming that the predicate offense predates PMLA’s enactment. The judgment sets a precedent for holding corrupt officials accountable, ensuring that proceeds of crime remain within the purview of law until fully recovered or penalized.

Date of decision: 17/03/2025