New Guidelines After Supreme Court Rulings on Money Laundering Cases
In the wake of recent setbacks in high-profile money laundering cases, the Enforcement Directorate (ED) has issued fresh instructions to its officers, clarifying that the agency will no longer pursue cases under the Prevention of Money Laundering Act (PMLA) based solely on criminal conspiracy charges. The directive, reportedly communicated by ED Director Rahul Navin, reflects the agency’s response to recent legal challenges that resulted in key cases being dismissed in court.
ED’s Revised Approach After Court Rulings
Sources indicate that the new instructions come after several high-profile cases involving the ED were thrown out by the judiciary. Notably, the Supreme Court dismissed cases against prominent political figures, such as Congress leader D K Shivakumar and retired IAS officer Anil Tuteja, due to issues surrounding the legal basis for invoking PMLA.
Under PMLA, the ED is allowed to investigate and prosecute individuals involved in money laundering, but only if there is a “predicate offence” — a primary crime that forms the basis of the investigation. According to the law, the ED can pursue money laundering cases only after another agency, like the Central Bureau of Investigation (CBI) or state police, registers an FIR for a criminal activity specified in the PMLA schedule. This schedule includes over 150 offences, ranging from corruption to tax evasion, as well as violations of environmental laws like the Wildlife Protection Act.
Court’s Stand on Criminal Conspiracy as a Predicate Offence
The recent directive from the ED comes on the heels of significant Supreme Court rulings that clarified the limits of using “criminal conspiracy” under Section 120B of the Indian Penal Code (IPC) as the basis for invoking PMLA. The court has consistently ruled that a criminal conspiracy cannot serve as the sole predicate offence for money laundering cases unless it is tied to a scheduled offence under PMLA.
In November 2023, the Supreme Court made it clear that criminal conspiracy alone, as per Section 120B, cannot form the basis for money laundering investigations under PMLA. This was in response to an ED case against Pavana Dibbur, the acting head of a private university in Karnataka, regarding a 2020 land deal. The court emphasized that only conspiracies linked to specific offences outlined in the PMLA schedule can qualify.
Key Supreme Court Rulings Impacting ED’s Strategy
The Supreme Court’s decision in March 2024 further reinforced this stance, dismissing an ED case against Shivakumar related to alleged tax evasion. The apex court ruled that criminal conspiracy under Section 120B cannot be used as the sole foundation for invoking PMLA unless it is linked to a specific scheduled offence. A similar ruling in the case involving Anil Tuteja, a retired IAS officer, led the Supreme Court to quash the ED’s case, stating that the absence of a scheduled offence meant there were no “proceeds of crime” to investigate under PMLA.
Another significant case involves an investigation into a liquor scam in Chhattisgarh, which was also dismissed by the Supreme Court on similar grounds. In these cases, the ED had initially invoked PMLA based on conspiracy charges alone, but the court found that such charges did not meet the legal requirements for money laundering under the Act.
ED Adjusts Strategy Post-Ruling
In light of these rulings, the ED has now been instructed to ensure that PMLA cases are based not only on conspiracy charges but also on other offences that fall under the PMLA’s schedule. According to senior ED officials, the agency has faced repeated setbacks in cases where the sole charge was conspiracy, and the courts have consistently ruled that such charges cannot be independently invoked under PMLA.
The ED has also taken action to address these concerns. In the case of Tuteja, the agency re-registered the case based on a fresh FIR filed by Chhattisgarh police, which included provisions of the Prevention of Corruption Act. Similarly, the ED has been forced to reevaluate other cases, such as its investigation into Amnesty International, which was initially based on a CBI FIR for violations of the Foreign Contribution Regulation Act (FCRA), a non-scheduled offence.
Implications of the Directive
This shift in approach represents a significant change for the ED, which has faced challenges in advancing cases under PMLA that are not adequately backed by scheduled offences. The ruling may have broader implications for the future of money laundering investigations in India, particularly as the ED seeks to navigate the complexities of legal requirements while pursuing high-profile cases.
With the Bharatiya Nyaya Sanhita (BNS) replacing the IPC this year, legal frameworks around criminal conspiracy and money laundering may undergo further scrutiny in the courts. The ED’s new directive reflects an attempt to align its cases with the evolving legal landscape, ensuring that future money laundering investigations are based on more robust legal grounds.
