PMLA | For Acts Done Prior To Enactment Penalty Follows Only If Proceeds Of Crime Are Utilized, Article 20(1) Is Not Violated: Kerala HC
The Kerala High Court has held that Prevention of Money-Laundering Act, 2002 does not penalize a person for his past actions, but penal consequences only follow when the accused utilizes the proceeds of the crime from past actions for money laundering after the enactment of PMLA and the amendment to its schedule in 2009. The Court thus held that Section 3 of the PMLA criminalizes the act of...
The Kerala High Court has held that Prevention of Money-Laundering Act, 2002 does not penalize a person for his past actions, but penal consequences only follow when the accused utilizes the proceeds of the crime from past actions for money laundering after the enactment of PMLA and the amendment to its schedule in 2009.
The Court thus held that Section 3 of the PMLA criminalizes the act of money laundering and does not violate Article 20(1) of the Constitution.
The appellant/petitioners had assailed the act of the Enforcement Directorate on the ground that penalising a person for any act done in the past on the basis of subsequent legislation is prohibited by Article 20(1) of the Constitution of India.
A division bench of Justice A.Muhamed Mustaque and Justice P. Krishna Kumar thus ruled that there is no retrospective application of penal laws and hence there is no violation of Article 20 (1).
Perusing the pleadings and records the bench said that it appeared that the appellant/petitioners are not being proceeded against under the PMLA for any criminal act done by them before the commencement of the PMLA.
Court said, “In relation to an act done by a person before the commencement of the PMLA or the amendment to its schedule, the penal consequences will follow only if the accused uses/puts into circulation the tainted money obtained by the past act, or when he projects that it is untainted money or when he does any other acts as defined in Section 3, after the commencement of the PMLA and the amendment to its schedule in 2009. Article 20(1) of the Constitution declares that a person shall not be convicted for any offence except for violation of a law in force at the time of commission of the act. The expression 'law in force' refers to a law that is factually in operation at the time when the offence is committed, in contrast to a law 'deemed to be in force' due to the retrospective operation of a subsequently enacted law. This interdiction cannot be extended to a case of the above nature where a person is allegedly using the proceeds of crime or projecting or claiming it as untainted property, after the commencement of the relevant statutory provision. In that case, there is no question of retrospective operation of a penal law. There is only a reference in the statute to a past action, which is only for the identification of the subject - the proceeds of crime. There is no penal consequence for the past act done by him, under the PMLA.”
The Court was considering the constitutional validity of criminal proceedings initiated under the PMLA in cases where the alleged act of money laundering was committed before the enactment of PMLA or before the amendment to its schedule in 2009. It was argued that penalising an act based on the enactment of a subsequent legislation is violative of Article 20 (1) of the Constitution.
The Court referring to Apex Court decision in Vijay Mandalal Chaudharay and Others v. Union of India & Ors (2023) observed that offence of money laundering under Section 3 of the PMLA is a continuing offence.
The Court also referred to the Apex Court decision Pradeep Nirankarnath Sharma v. Directorate of Enforcement & Another (2023) which held that the Enforcement Directorate can initiate criminal proceedings even if the predicate offence occurred before the enactment of the PMLA, provided the accused utilizes the proceeds of the crime after the Act came into force. The Court noted that in Pradeep Nirankarnath Sharma, it was also held that money laundering is not a static event but an ongoing activity.
In the facts of the case, the Court observed that there was no prosecution for any past act before the commencement of the PMLA or the amendment to its schedule. It stated that penal consequences arises only when the accused uses the proceeds of the crime obtained by the past act for committing money laundering after the enactment of PMLA and amendment to its schedule.
The Court held that if a person uses, circulates tainted money obtained from past act for committing money laundering, only then penal consequences follow and hence there is no violation of Article 20 (3).
Accordingly, the Court dismissed the petitions.
Case Title: A.K Samsuddin & Connected Cases
Case No: WA NO. 2076 OF 2016 & Connected Cases
Citation: 2025 LiveLaw (Ker) 213
