A short briefing for businesses and individuals facing, or concerned about, action under the Prevention of Money Laundering Act.
The Prevention of Money Laundering Act, 2002 (“PMLA”) has become one of the most consequential enforcement tools in India — capable of freezing assets, compelling testimony, and detaining individuals well before a trial concludes. Because the law develops rapidly through court rulings, a case that would have gone one way two years ago can go quite differently today. Below are five current threads worth understanding, whether you are advising a business or are personally facing an Enforcement Directorate (“ED”) matter.
1. Not every rupee in a frozen account is “proceeds of crime”
Courts have been increasingly willing to scrutinise the ED’s attachment orders where the amount attached is disproportionate to the scale of the underlying predicate offence. The principle, drawn from the Supreme Court’s 2023 ruling in Vijay Madanlal Choudhary v. Union of India, is that “proceeds of crime” must be traceable to the scheduled offence itself — an entire account cannot be presumed tainted merely because a much smaller sum connected to the alleged offence passed through it. Recent High Court decisions have applied this to reject blanket freezes and to hold that the Adjudicating Authority, not the ED unilaterally, decides whether partial relief — such as releasing funds for salaries or operating expenses — is warranted.
2. The scheduled offence still has to be a real, registered offence
PMLA proceedings cannot exist in a vacuum. The Act requires a “scheduled offence” — a predicate crime under another statute — to be formally registered before money laundering allegations can follow from it. Courts have reiterated that the ED cannot proceed on the assumption that an offence exists; the underlying case must actually be on the record. This has become a live issue in disputes over which court should try the scheduled offence when it falls under a different special statute than the one the PMLA case is proceeding in — a jurisdictional question the Supreme Court has left open for a future, more squarely-presented case.
3. Bail remains hard, but not impossible
Section 45 of the PMLA imposes “twin conditions” for bail: the court must be satisfied there are reasonable grounds to believe the accused is not guilty, and that they are unlikely to offend again while released. This is a materially higher bar than ordinary criminal bail. That said, courts — including the Supreme Court — have continued to grant bail where investigation and trial have dragged on for years without meaningful progress, on the reasoning that prolonged incarceration without trial itself amounts to a form of punishment inconsistent with the presumption of innocence.
4. Electronic service of notices is generally valid — but sufficiency of disclosure is not automatic
As PMLA proceedings increasingly move online, courts have confirmed that service of show-cause notices and relied-upon documents by email satisfies the applicable procedural regulations. But this is not a blank cheque for the ED: where an accused disputes whether they have received the complete set of documents relied upon, courts have directed the Adjudicating Authority to independently verify what qualifies as a “relied upon document” and ensure it is actually supplied — with a fair opportunity to respond once it is.
5. The shift to the Bharatiya Nagarik Suraksha Sanhita affects bail timelines too
With the Bharatiya Nagarik Suraksha Sanhita (“BNSS”) now governing criminal procedure, its default bail provisions — including the statutory detention period after which an undertrial becomes eligible for bail consideration — interact with parallel drug, economic offence, and PMLA-adjacent cases in ways still being worked out by the courts. Recent rulings have clarified that crossing the statutory period creates only an eligibility for bail consideration, not an automatic entitlement, and that courts retain discretion to order continued detention with reasons recorded, particularly where a longer period of custody has already passed.
What this means in practice
For businesses and individuals navigating a PMLA or ED matter, three practical takeaways follow from the above:
- Disproportionate attachment can be challenged — don’t assume an entire account or asset is beyond reach simply because it is linked, however loosely, to an alleged offence.
- The predicate offence matters as much as the PMLA case itself — weaknesses in the underlying scheduled offence can undercut the money laundering proceeding built on top of it.
- Delay can work in your favour on bail — a case that stalls in investigation or trial is not simply lost time; it can become an independent ground for relief.
This article is intended for general informational purposes and does not constitute legal advice. If you are facing a PMLA, ED, or white-collar crime matter, we recommend discussing the specific facts of your case with a lawyer before taking any action.