ED Can Lodge Cases Under PMLA While Relying On Predicate Offences Under BNS, As It Replaced IPC: Bombay High Court

In a significant ruling, the Bombay High Court on Tuesday (July 8) held that 'predicate offences' lodged under the newly introduced Bharatiya Nyaya Sanhita (BNS) can be treated as 'scheduled offences' under the stringent Prevention of Money Laundering Act (PMLA), even if its schedule only refers to the repealed Indian Penal Code (IPC).

Single-judge Justice Amit Borkar while rejecting a bail plea, held that the Enforcement Directorate (ED) can register cases under the PMLA while relying on the predicate offences lodged under the BNS and the said prosecution can be termed a valid one.

The judge held that if it is argued that the repeal of the IPC has made the references in the Schedule to the PMLA ineffective or invalid, then such a view would result in a serious legal absurdity.

"Such an interpretation would mean that, although the substance of the offences remains the same under the new law, namely the BNS, the PMLA cannot be enforced merely because the section numbers or names of offences have changed. This would effectively mean that serious offences like cheating, forgery, criminal conspiracy, murder, extortion, and dacoity, which were earlier listed as scheduled offences under the IPC, can no longer be used as the basis for prosecuting money laundering offences under the PMLA. This result would be contrary to common sense, public interest, and the purpose for which both statutes were enacted," the judge said. 

The judge further opined that if the applicant's argument were accepted, it would lead to an anomalous and absurd situation: from July 1, 2024 onwards, the PMLA would be practically inapplicable to any money laundering arising from offences under the new penal code until Parliament convened to amend the Schedule.

"As the Prosecutor rightly noted, this would open a dangerous lacuna where potentially all criminals could launder money with impunity during the interregnum, defeating the very object of the PMLA. Courts generally eschew interpretations that produce absurd or stultifying consequences which could never have been intended by the law-makers," the judge said. 

The PMLA law, the judge explained, is intended to be strict and continuous in its operation, targeting those who use money generated from criminal activity for legitimate-looking business or investments.

"If the enforcement of the PMLA is disrupted just because the IPC has been replaced with a new code, the entire mechanism would come to a halt, and offenders would escape liability due to a technicality. That is clearly not what Parliament intended. In the present case, if the court were to hold that the PMLA Schedule became ineffective merely because the IPC has been repealed and re-enacted, it would produce an unreasonable and illogical outcome, namely, that a central penal statute like PMLA would become partly inoperative even though the same offences still exist under the new law. This would defeat the very object and spirit of the PMLA, which is to fight the menace of money laundering by linking it with specified predicate offences," the judge underscored. 

Such an interpretation must be avoided, the court said, adding, "Instead, the references to IPC offences in the Schedule to PMLA must be read as dynamically updating to their corresponding provisions in the BNS, in light of Section 8(1) of the General Clauses Act, 1897, and the settled judicial principle of purposive construction. This ensures that the law remains functional, effective, and in tune with its intended purpose, even after legislative changes."

The nature of reference in the PMLA is such that the repeal and substitution of IPC by BNS does not disrupt or invalidate the operation of the Schedule. The offences that were earlier specified by their IPC section numbers must now be read as referring to their corresponding provisions in the BNS, by applying Section 8 of the General Clauses Act, 1897, the court said.

"Thus, the PMLA Schedule continues to remain operational and meaningful, even after the IPC has been repealed, because the legal mechanism of legislation by reference ensures continuity by treating references as living and dynamic, not static or frozen in time. Now that the IPC has been repealed and replaced by the BNS, the references in the PMLA must be read dynamically, that is, as referring to the corresponding new sections in BNS. To interpret otherwise would create an unintended legal vacuum, rendering the PMLA toothless with respect to those scheduled offences. That would be against public interest and legislative intent," the court held. 

Nagani Akram Mohammad ShafiIn his 37-page judgment, Justice Borkar observed that even if the new enactment has a different structure or numbering, what matters is the substance and continuity of the offence as if the same offence is now found under a different section number in the re-enacted law, then that new section is to be read in place of the old one in all laws which referred to it, including special Acts like PMLA.

"This ensures that the operation of laws like PMLA does not get disrupted just because of changes in numbering or restructuring of the penal code. It also prevents legal uncertainty or technical loopholes, which could otherwise be misused to defeat the objectives of special laws dealing with serious offences like money laundering. Therefore, applying Section 8(1) of the General Clauses Act, it is held that the references to IPC offences in the Schedule to PMLA must now be read as references to the corresponding offences under the Bharatiya Nyaya Sanhita, 2023, including Section 318(4) of BNS in place of Section 420 of IPC, since both provisions deal with the same offence of cheating in substance. This approach preserves the legislative intent, upholds the rule of law, and ensures that the enforcement of the PMLA continues without interruption or ambiguity," Justice Borkar held. 

The judge was hearing a bail application filed by one Nagani Akram Mohammad Shafi, who was arrested in November 2024 in connection with a money laundering investigation involving Rs 100 crore allegedly routed through 14 newly opened bank accounts at Nashik Merchant Co-operative Bank at Malegaon district. The ED lodged a case under the PMLA premising its ECIR on the predicate offences lodged against Shafi under sections 318(4) (cheating), 338 (forgery of valuable security) and 340(2) (using a forged document as genuine) of the BNS.

Taking an exception to this, Shafi argued that the PMLA Schedule refers the 'scheduled offences' as under the IPC and not under the BNS and now that the IPC has been replaced by the BNS, the ED has no powers or jurisdiction to lodge a case under PMLA by relying on the offences lodged under the BNS. 

However, the court turned down the argument and rejected the bail plea. 

Appearance:

Advocates Ajay Bhise, Deepali Kedar, Sandeep Salonkhe and Mr. Tejas Dhotre appeared for the Applicant.

Special Public Prosecutor Hiten Venegavkar along with Advocates Aayush Kedia and Leepika Basant represented the ED.

Additional Public Prosecutor Supriya Kak represented the State.

Case Title: Nagani Akram Mohammad Shafi vs Union of India (Bail Application 728 of 2025)

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