The Supreme Court on Tuesday agreed to examine a crucial legal question under the Prevention of Money Laundering Act (PMLA): whether acquittal or discharge in a predicate offence precludes prosecution for money laundering. The Court flagged serious implications of such interpretation and said it may refer the matter to a larger bench.
A bench of Justices M.M. Sundresh and N. Kotiswar Singh is hearing several petitions where accused persons have argued that since they were acquitted or discharged in the scheduled offence, the Enforcement Directorate (ED) cannot proceed against them under the PMLA, due to the absence of “proceeds of crime.”
Under PMLA, a “predicate offence” is the underlying crime that allegedly generates the proceeds of crime. Investigation by the ED is premised on the existence of such an offence.
Appearing for the ED, Additional Solicitor General S.V. Raju submitted that the agency faces serious difficulties in prosecuting money laundering cases where state police give a “free pass” in predicate offences, particularly involving powerful individuals. He said the 2022 Vijay Madanlal Choudhary verdict—although largely in ED’s favour—has been interpreted by many courts in a way that hampers the agency’s ability to prosecute when the predicate offence ends in acquittal.
The bench questioned the legal logic that ED’s case should fall automatically if the predicate offence is quashed or ends in acquittal. “Why does the ED case depend on the predicate offence?” the court asked, pointing out that ED does not appear before courts to defend the predicate crime, and each offence has its own facts.
The court expressed concern that such an interpretation could cripple ED’s ability to prosecute complex economic crimes. “It appears that ED has been completely shut out,” the bench remarked. “If the hands of ED are tied up… then how will they prosecute? It will defeat the very object of the enactment.”
The bench also cited examples where a crime may have occurred, even if the accused is acquitted in the predicate offence. “The acquittal or discharge of an accused in a predicate offence does not mean the crime has not happened,” the court observed.
The court cast doubt on two earlier decisions:
- The Vijay Madanlal Choudhary judgment (2022), which upheld the ED’s powers but also held that without a scheduled offence, PMLA proceedings cannot continue.
- The Pavana Dibbur v. Directorate of Enforcement ruling (2023), which held that an accused need not be named in the scheduled offence to be prosecuted under PMLA.
Justice Sundresh said that several “knots need to be untied” and the court would examine whether these findings hold in law.
The Supreme Court will take up the matter for detailed hearing in April. “If required, we will refer it to a larger three-judge bench,” the court said, since the Vijay Madanlal ruling was by a bench of equal strength.
It also asked why the ED had not sought a review of the 2022 verdict if it was facing consistent prosecutorial hurdles. ASG Raju replied that although the verdict was largely in ED’s favour, several review petitions by different parties are already pending.
