2025 (3) TMI 850 - SC - Money Laundering

Money laundering offences are continuing crimes extending while proceeds remain concealed or projected as untainted property

The SC dismissed an appeal challenging PMLA proceedings, rejecting the appellant's contention that alleged acts did not constitute offences under PMLA as ... Money Laundering - proceeds of crime - scheduled offences - primary allegation was that the appellant was involved in financial transactions related to proceeds of crime, generated through fraudulent activities causing significant financial losses to the State of Gujarat - HELD THAT:- A significant ground raised by the appellant pertains to the nature of the alleged offence under the PMLA. The appellant has contended that the alleged acts do 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, cannot be subject to proceedings under the PMLA. It has also been argued that these instances do not constitute continuing offences. This contention, however, is untenable. It is well established that offences under the PMLA 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. 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 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 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 - The material on record indicates 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. Furthermore, it is settled law that the determination of the amount involved in a money laundering offence is not to be viewed in isolation but in the context of the overall financial trail and associated transactions - The appellant has failed to substantiate his claim with any material that contradicts the respondent’s submissions in this regard. Therefore, this ground also does not aid the appellant in any manner. 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 respondent has rightly argued that in cases involving allegations of such magnitude, a trial is imperative to establish the full extent of wrongdoing and to ensure accountability - 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. Conclusion - It is evident that the appellant has failed to establish any legally sustainable ground warranting interference by this Court at a pre-trial stage. The submissions made in support of the appeal are neither legally untenable nor in the best interest of justice. The offence alleged against the appellant is clearly a continuing offence under the PMLA, and the quantum of proceeds of crime involved far exceeds the statutory threshold and requires proper investigation and judicial scrutiny. The findings of the Courts below are wellreasoned and do not call for interference. Appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the alleged acts constitute an offence under the Prevention of Money Laundering Act, 2002 (PMLA), given that the predicate offences predate the PMLA or were not scheduled offences at the relevant time.Whether the offence of money laundering is a continuing offence, allowing for the application of the PMLA to acts committed before its enactment or the inclusion of the predicate offences in its schedule.Whether the monetary threshold required for initiating proceedings under the PMLA was met in this case.Whether the High Court and Special Judge erred in rejecting the appellant's discharge application under Section 227 of the Code of Criminal Procedure, 1973 (CrPC).Whether the retrospective application of the PMLA is permissible under the circumstances of this case.2. ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The PMLA was enacted to prevent money laundering and to provide for the confiscation of property derived from, or involved in, money laundering. Section 3 of the PMLA defines the offence of money laundering as involving any process or activity connected with the proceeds of crime. The PMLA was amended in 2009 and 2013 to include various offences in its schedule, affecting the applicability of the Act to certain predicate offences.Precedents such as Vijay Madanlal Chaudhary v. Union of India have clarified that money laundering is a continuing offence, and the relevant date for determining the offence is when the accused engages in activities connected to the proceeds of crime.Court's interpretation and reasoning:The Court held that the offence of money laundering is a continuing offence, and the act of laundering money does not conclude with a single instance. The Court emphasized that the relevant date is when the accused engages in activities connected to the proceeds of crime, not the date of the predicate offence. The Court found that the misuse of power and position by the appellant, coupled with the alleged utilization and concealment of proceeds of crime, had an enduring impact, thereby constituting a continuing offence.Key evidence and findings:The material on record established the appellant's involvement in financial transactions linked to proceeds of crime. The allegations involved land allotment transactions facilitated through forgery, cheating, and fraud, resulting in a significant financial loss to the government. The respondent submitted evidence of hawala transactions and illegal gratification, reinforcing the magnitude of the financial crime.Application of law to facts:The Court applied the legal framework of the PMLA to the facts of the case, concluding that the appellant's actions constituted a continuing offence. The Court found that the quantum of proceeds of crime significantly exceeded the statutory threshold, justifying the invocation of the PMLA. The Court held that the proceedings initiated against the appellant were well within the legal framework and could not be assailed on the grounds of retrospective application or failure to meet the monetary threshold.Treatment of competing arguments:The appellant argued that the alleged acts did not constitute an offence under the PMLA as the predicate offences predated the Act or were not scheduled offences at the relevant time. The appellant also contended that the offence was not continuing and that the monetary threshold was not met. The respondent countered that money laundering is a continuing offence and that the total amount involved far exceeded the statutory threshold. The Court sided with the respondent, finding the appellant's arguments legally untenable.Conclusions:The Court concluded that the appellant's actions constituted a continuing offence under the PMLA, and the quantum of proceeds of crime involved far exceeded the statutory threshold. The Court found no merit in the appellant's arguments regarding the retrospective application of the PMLA or the failure to meet the monetary threshold. The Court upheld the decisions of the High Court and Special Judge, rejecting the appellant's discharge application.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:The Court quoted the judgment in Vijay Madanlal Chaudhary, emphasizing that 'the offence of money laundering is an independent offence regarding the process or activity connected with the proceeds of crime,' and that 'such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence.'Core principles established:The offence of money laundering is a continuing offence, and the relevant date for determining the offence is when the accused engages in activities connected to the proceeds of crime.The PMLA applies to acts committed before its enactment or the inclusion of predicate offences in its schedule if the acts constitute a continuing offence.The determination of the monetary threshold must consider the entirety of the transaction, not isolated instances.Judicial intervention at a preliminary stage in cases involving serious economic offences must be exercised with caution.Final determinations on each issue:The Court dismissed the appeal, finding no merit in the appellant's arguments. The Court upheld the decisions of the High Court and Special Judge, concluding that the appellant's actions constituted a continuing offence under the PMLA and that the quantum of proceeds of crime involved far exceeded the statutory threshold.