Supreme Court on Retrospective Application of PMLA Offences and Scope of Discharge: Pradeep Nirankarnath Sharma v. Directorate of Enforcement & Anr. (2025 INSC 349)

1. Introduction

The Prevention of Money Laundering Act, 2002 (“PMLA”) has generated significant litigation, particularly concerning its retrospective applicability, definition of continuing offence, and standards for discharge under criminal procedure. In Pradeep Nirankarnath Sharma v. Directorate of Enforcement (2025 INSC 349), the Supreme Court addressed these critical questions in the context of a discharge application rejected by the Special Court and later upheld by the Delhi High Court.

This judgment is significant as it clarifies (i) the treatment of proceeds of crime generated before and after the enactment of PMLA, (ii) whether the offence of money-laundering is continuing in nature, and (iii) the limited scope of judicial review at the discharge stage.

2. Factual Background

• The appellant, Pradeep Nirankarnath Sharma, was alleged to have amassed disproportionate assets during his tenure as a public servant.

• The predicate offence was registered under the Prevention of Corruption Act, 1988 (“PC Act”) in 2006.

• During investigation, it was found that the appellant allegedly concealed, possessed, and used assetsdisproportionate to his known sources of income.

• On this basis, the Enforcement Directorate (ED) initiated proceedings under the PMLA, 2002 and filed a complaint before the Special Court.

The appellant filed a discharge application, arguing that:

1. The alleged offences/transactions took place before 1 July 2005, the date when Section 3 of PMLA came into effect.

2. The PMLA could not be applied retrospectively to acts done prior to its enforcement.

The Special Court dismissed the discharge application. The Delhi High Court affirmed this view. The matter was carried in appeal to the Supreme Court.

3. Issues Before the Court

The Supreme Court framed the following key issues:

1. Retrospective Application of PMLA – Whether a person can be prosecuted for money-laundering if the predicate offence (PC Act offence) was committed prior to the enforcement of Section 3 of the PMLA (01.07.2005).

2. Nature of the Offence – Whether money-laundering is a one-time offence (completed with the commission of the predicate offence) or a continuing offence (as long as the proceeds of crime are enjoyed, projected, or concealed).

3. Scope of Discharge under Section 227 CrPC – At what stage and on what grounds can an accused be discharged from PMLA proceedings?

4. Arguments

Appellant’s Submissions

• The predicate offence was registered in 2006 but the assets were acquired much earlier.

• PMLA cannot operate retrospectively to penalize acts that occurred before its enforcement.

• Reliance placed on T. Barai v. Henry Ah Hoe (1983) and Jayantilal Ratanchand Shah v. State of Maharashtra(1968), where retrospective criminal liability was prohibited under Article 20(1) of the Constitution.

Enforcement Directorate’s Submissions

• Money-laundering is a continuing offence – as long as the proceeds of crime are possessed, concealed, or projected as untainted, the offence continues.

• Even if assets were acquired before 2005, their continued possession and enjoyment post-2005 brings the offence within the ambit of PMLA.

• The Special Court was right in rejecting discharge, as the materials collected during investigation prima facieestablish the offence.

5. Supreme Court’s Reasoning

(a) On Retrospective Application of PMLA

• The Court distinguished between commission of predicate offence and the subsequent laundering activity.

• Acquisition of property may have occurred prior to 2005, but if such property was concealed, used, or projected as untainted after 2005, it constitutes money-laundering.

• Hence, no violation of Article 20(1) arises, since the offence of money-laundering is not retrospective but continuing in nature.

(b) On the Nature of Offence – Continuing Offence Doctrine

• Relying on Vijay Madanlal Choudhary v. Union of India (2022) 10 SCC 94, the Court reaffirmed that money-laundering is a continuing offence.

• The relevant date is not when the property was acquired, but whether the tainted property was being projected, concealed, or enjoyed after PMLA came into force.

(c) On Discharge Under Section 227 CrPC

• At the discharge stage, the Court cannot conduct a mini-trial or weigh evidence meticulously.

• If the material on record discloses a prima facie case, the accused cannot be discharged.

• The threshold is low: the Court only has to see whether there is sufficient ground to proceed.

6. Decision

• The Supreme Court dismissed the appeal and upheld the orders of the Special Court and High Court.

• Held that:

  1. Money-laundering is a continuing offence.

  2. PMLA can be applied even if the predicate offence or acquisition of assets predates 01.07.2005, provided laundering activities continued thereafter.

  3. The appellant was not entitled to discharge, since a prima facie case existed.

7. Critical Analysis

This judgment cements the doctrine of continuing offence under PMLA. Its implications are significant:

1. Wider Net of Prosecution – Even if disproportionate assets or illegal proceeds were acquired decades ago, if they are still held or enjoyed post-2005, prosecution under PMLA is maintainable.

2. Reinforcement of ED’s Powers – The ED can initiate action without being hindered by arguments of retrospectivity, expanding its jurisdiction.

3. Higher Burden on Accused at Discharge Stage – Accused cannot escape at the preliminary stage by merely citing the timing of acquisition; they must face trial unless no prima facie case exists.

4. Possible Constitutional Concerns – Critics argue this interpretation indirectly expands retrospective liability, as individuals are punished for acts rooted in the past. However, the Court distinguishes between acquisition (past act) and possession/projection (continuing act).

8. Conclusion

The Supreme Court in Pradeep Nirankarnath Sharma v. Directorate of Enforcement has reaffirmed the continuing nature of money-laundering and curtailed the possibility of discharge on grounds of retrospectivity. This ruling strengthens the enforcement of PMLA, but simultaneously raises questions about fairness to individuals whose assets pre-date the statute.

In effect, the judgment underscores that the crime of laundering persists as long as “dirty money” is kept in circulation, and therefore, offenders cannot take shelter under the plea of past acquisition.

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