Money Laundering Distinct From Scheduled Offence; Continued Possession Of Tainted Property After PMLA Enforcement Is A Continuing Offence: Delhi High Court

The Court clarified that invoking PMLA in such cases would not violate Article 20(1) of the Constitution of India, which prohibits retrospective criminal punishment. The Bench held that even if the scheduled offence was committed before the Act came into force, proceedings under the PMLA would still be valid where the accused continues to possess or use property derived from criminal activity after the law became operational, as the offence of money laundering is a continuing one.

Justice C. Hari Shankar and Justice Om Prakash Shukla emphasising the conceptual distinction between the scheduled offence and the offence of money laundering, observed, “The PMLA does not intend to punish for the commission of scheduled offence. It punishes for commission of the offence of money laundering. Infliction, for committing the offence of money laundering, of a punishment which may be greater than the punishment which attaches the commission of the scheduled offence does not, therefore, in any manner violate Article 20(1) of the Constitution of India…It is clear that the scheduled offence and the offence of money laundering are distinct and different. There can be no comparison, therefore, of the punishments which may visit the commission of these two offences. Nor can Article 20(1) be said to be infracted if the punishment visiting the commission of offence of money laundering is greater than the punishment visiting the commission of scheduled offence”.

Rejecting the argument that proceedings under the PMLA would amount to retrospective punishment, the Court held, “…the offence of money laundering does not, as the impugned judgment, seeks to hold, stand committed and concluded on the date when the subject property was purchased by the respondent. Inasmuch as the respondent continued to remain in possession of, and continued to use, the subject property even after the PMLA came into force, the offence of money laundering also continued. It was not as though, therefore, any provision of the PMLA was being given retrospective effect”.

The Bench allowed an appeal filed by the Directorate of Enforcement (ED) against a 2016 judgment of a Single Judge Bench that had quashed a provisional attachment order under Section 5(1) of the PMLA.

Anupam Sharma, Special Counsel appeared for the appellant and Senior Advocate Parag Tripathi appeared for the respondent.

The case concerned a property located in Vasant Vihar, New Delhi, which was allegedly purchased in 2005 using funds generated through criminal activity linked to a corruption and cheating case involving officials of the National Agricultural Marketing Cooperative Federation (NAFED).

According to the prosecution, money arising from the alleged offence was routed through multiple companies before being used to purchase the property in the name of Mahanivesh Oils & Foods Pvt Ltd.

The Single Judge had reasoned that once the proceeds of crime were integrated into the economy, such as by purchasing property, the offence of money laundering stood completed. Since the property was bought in March 18, 2005, prior to the enforcement of the PMLA, the Court held that the Act could not be invoked retrospectively.

The Division Bench, disagreed with the interpretation and identified several errors in the impugned judgment. It held:

-that the definition of “proceeds of crime” under the PMLA includes not only the original tainted money but also property derived directly or indirectly from it;

-that possession and use of such property are themselves activities constituting money laundering under Section 3 of the Act;

-that the offence of money laundering continues as long as a person retains and enjoys property derived from criminal activity.

“…even if the property, which is included within the definition of proceeds of crime undergoes ‘significant changes’ or ‘is integrated in legitimate economic activity’ or ‘is in the hands of persons unconnected with the scheduled offence’, that would not militate against the applicability of Section 3 of the PMLA. All that has to be shown is that the alleged offender is in possession of, or is using, the property”, the Bench noted.

Accordingly, the Division Bench allowed the ED’s appeal and upheld the provisional attachment of the property, reaffirming that the PMLA can apply where possession and enjoyment of tainted assets continues after the law’s commencement.

Cause Title: Directorate Of Enforcement v. M/S Mahanivesh Oils & Foods Pvt Ltd [Neutral Citation: 2026:DHC:2147-DB]

Appearances:

Appellant: Zoheb Hossain, Anupam Sharma, Special Counsel, Vivek Gurnani, Panel Counsel, Satyam, Riya Sachdev and Pranjal Tripathi, Advocates.

Respondent: Parag Tripathi, Sr. Adv., D.S. Kohli, Rini Mehra, Yash Kadyan and Mannat Kohli, Advocates.

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