SC to examine if acquittal in criminal case bars ED trial under PMLA

The Supreme Court of India on Tuesday agreed to examine a significant legal question impacting hundreds of cases across the country — whether the acquittal of an accused in a predicate criminal offence automatically bars prosecution for money laundering under the PMLA (Prevention of Money Laundering Act).

A bench of Justices M. M. Sundresh and N. Kotiswar Singh observed that the Enforcement Directorate appeared to have been “completely shut out” from prosecuting money-laundering cases in situations where accused persons were acquitted in predicate or scheduled offences.

A predicate offence under the PMLA is the scheduled offence that allegedly generates the “proceeds of crime”, which is a prerequisite for initiating an ED investigation.

The bench noted that the ED had complained that police authorities in several states often adopted a lax approach when the predicate offence involved “high and mighty” individuals, and that subsequent acquittals in such cases were being used to derail money-laundering prosecutions.

“A lot of knots need to be untied,” the bench said, expressing doubt over the interpretation of the 2022 verdict in Vijay Madanlal Choudhary, which upheld wide-ranging powers of the ED, including arrest, search and seizure.

The court said it was difficult to reconcile the finding that quashing of the predicate offence would automatically cause the money-laundering case to collapse.

“Why does the ED case depend on the predicate offence? Every case has its own facts. ED is not before the court to defend the predicate offence,” the bench observed, adding that money laundering involved serious economic offences.

Additional Solicitor General S. V. Raju, appearing for the ED, said the 2022 judgment had been interpreted differently by various courts, creating serious hardship for the agency in pursuing prosecutions.

Justice Sundresh also referred to the 2023 ruling in Pavana Dibbur versus Directorate of Enforcement, noting that the finding — that an accused need not be named in the scheduled offence to be prosecuted for money laundering — also required examination.

The bench emphasised that acquittal or discharge in a predicate offence does not necessarily mean that no crime occurred.

“If the hands of the ED are tied as held in the 2022 verdict, it will defeat the very object of the PMLA,” the court said, noting that accused persons were increasingly seeking discharge in money-laundering cases solely on the basis of acquittal in the predicate offence.

The court said it would hear the matter in April to examine the broader legal issue and may refer it to a larger bench if necessary, noting that the Vijay Madanlal Choudhary judgment was delivered by a three-judge bench.

The bench also questioned why the ED had not sought a review of the 2022 verdict, to which Raju responded that the ruling was largely in the agency’s favour and that multiple review petitions filed by other parties were already pending.