Should money laundering trials pause till predicate offence trial?

Enforcement Directorate seeks Additional Solicitor General view

With an important legal question on the sequencing of trials in money laundering cases currently under consideration before the Supreme Court, the Enforcement Directorate (ED) has sought clarity on whether proceedings under the Prevention of Money Laundering Act (PMLA) should continue independently or await the outcome of the predicate offence. 

 

A predicate offence is the initial or underlying criminal act that generates illicit proceeds (money or assets), forming the foundation for a more complex crime, most commonly money laundering or racketeering. The issue, which goes to the heart of India’s anti-money laundering framework and its alignment with global standards, remains sub judice even as the agency looks to firm up its prosecutorial approach.

 

Additional Solicitor General (ASG) S V Raju is expected to weigh in on the issue, ED director Rahul Navin signalled on Friday.

 

“The ED has a conviction rate of 94 per cent and we are confident that out of more than 2,400 cases now pending before trial courts, most will result in the conviction of the accused and the confiscation of proceeds of crime. Of course, there are legal challenges before the courts, the most important being whether the trial in money laundering cases should take a pause till the trial in predicate offence gets concluded or continue on a stand alone basis in consonance with international standards and FATF (Financial Action Task Force) guidelines,” the director said, adding that ASG Raju  has agreed to share his views on this topic with the ED even as the matter is under the Supreme Court’s consideration.

 

Money laundering investigations are among the most complex in the realm of law enforcement as the frequently span multiple jurisdictions, involve intricate cross-border transactions and layered financial structures, Navin said.

 

Experts said the legal framework governing money laundering cases under the Prevention of Money Laundering Act (PMLA) does not require proceedings to be put on hold pending the outcome of the predicate offence.

 

Harsh K Sharma, Founder & Head of Prosoll Law, said there is no statutory mandate under the PMLA to stay proceedings until the predicate offence is concluded. “The statutory scheme permits registration of an ECIR, attachment proceedings and prosecution before the Special Court independent of the stage of the predicate case,” he said. 

 

Citing the Supreme Court’s ruling in Vijay Madanlal Choudhary v. Union of India, Sharma noted that money laundering has been recognised as a stand-alone offence, allowing trials to proceed without waiting for the conclusion of the underlying criminal case. This ensures that enforcement actions such as attachment and prosecution are not delayed by the pace of the predicate offence.

 

Nikhil Varshney, partner at Cyril Amarchand Mangaldas, said the structure of the PMLA reflects this duality. “Without a scheduled offence, there can be no proceeds of crime, and without proceeds of crime, there can be no offence of money laundering,” he said, adding that if the predicate offence ultimately fails, the interim PMLA proceedings could be seen as a waste of judicial resources.

 

India’s anti-money laundering regime is aligned with global standards set by the FATF that encourage autonomous prosecution of money laundering cases, timely asset recovery and avoidance of delays caused by predicate offence trials. Staying PMLA proceedings, Sharma said, would undermine enforcement efficiency and run contrary to international practices.

 

Sharma also underscored that the law retains a substantive link with the predicate offence since the existence of “proceeds of crime” forms the basis of a PMLA case. While proceedings may run in parallel, adjudication of the money laundering offence ultimately depends on the outcome of the predicate offence. “If the scheduled offence is not proved beyond reasonable doubt, the money laundering proceedings cannot stand,” he said.

 

Varshney pointed out that Parliament has, over time, moved towards delinking PMLA proceedings from the outcome of the predicate offence. He referred to the 2019 amendment inserting Explanation (i) to Section 44, which clarifies that the jurisdiction of the Special Court dealing with money laundering is not dependent on orders passed in respect of the scheduled offence. He also noted that provisions such as Sections 8(5) and 8(6), as amended in 2013, refer only to the conclusion of the money laundering trial and not the predicate offence trial, reinforcing the position that both proceedings can run simultaneously and independently.

 

On the current legal position, Varshney said that trials in both the predicate offence and the money laundering case proceed in parallel. However, the issue remains far from settled.

 

He pointed to the pending matter in Directorate of Enforcement v. Gagandeep Singh & Ors where the Supreme Court has framed key questions. These include whether invoking jurisdiction under the PMLA requires merely the existence of a “crime” irrespective of court orders in the predicate offence, the effect of quashing, discharge, acquittal or compromise in the predicate case during the pendency of PMLA proceedings, and the impact of the Vijay Madanlal Choudhary judgment on these issues. The outcome, he said, will have far-reaching implications for anti-money laundering jurisprudence in India.

 

Tushar Agarwal, Founder and Managing Partner at C.L.A.P. Juris, said the PMLA occupies a “carefully balanced, hybrid position.” He noted that while the Supreme Court has clarified that money laundering is a distinct and stand-alone offence for the purposes of investigation and trial, there is no legal requirement for PMLA proceedings to await the outcome of the predicate offence. This is also consistent with FATF standards, under which parallel proceedings are permissible and even individuals not accused in the scheduled offence can face prosecution under the PMLA.

 

However, Agarwal emphasised that this autonomy has limits. Since “proceeds of crime” are intrinsically linked to the predicate offence, a complete collapse of the scheduled offence, through quashing, discharge or acquittal, may render the PMLA case unsustainable.

 

He highlighted that this creates a nuanced legal tension. While the independence of PMLA proceedings is largely settled, courts across the country have taken divergent views on whether the termination of the predicate offence should automatically bring an end to money laundering proceedings or whether such cases can survive in limited circumstances.

 

“The issue is presently under consideration before the Supreme Court, and the law remains in a state of evolution,” Agarwal said, adding that the eventual ruling will be crucial in shaping the contours of India’s anti-money laundering regime by balancing effective enforcement with fundamental principles of criminal law.