In a significant pronouncement with far-reaching implications for criminal law and anti-money laundering enforcement, the Bombay High Court examined the continued applicability of the Prevention of Money Laundering Act, 2002 (PMLA) following the repeal of the Indian Penal Code, 1860 (IPC) and its substitution by the Bharatiya Nyaya Sanhita, 2023 (BNS). Central to the case was a critical legal issue: whether offences under the BNS, not expressly listed in the PMLA Schedule, could still serve as predicate offences for money laundering prosecutions. Read on to see how the Court interpreted statutory transitions and upheld the principle of legislative continuity.
Brief Facts:
The case stemmed from allegations of money laundering involving over ₹100 crore deposited in fourteen newly opened accounts at Nashik Merchant Cooperative Bank. The funds were allegedly layered to conceal their illicit origin. In 2024, an FIR was registered under Sections 318(4), 338, and 340(2) of the BNS, which replaced the IPC. Subsequently, the Enforcement Directorate registered an ECIR under the PMLA, treating the BNS offences as scheduled offences. The applicant, Nagani Akram Mohammad Shafi, was arrested. After his bail plea was rejected by the Special Court (PMLA), he moved the Bombay High Court under Section 483 of the BNSS and Section 45 of the PMLA, challenging the prosecution’s maintainability in light of the IPC’s repeal.
Contentions of the Appellant:
The applicant argued that the PMLA was inapplicable as the predicate offences were registered under the BNS, which is not listed in its Schedule. With the IPC repealed and replaced by the BNS, and no corresponding amendment made to the PMLA, BNS offences could not qualify as scheduled offences. Citing Mahindra & Mahindra Ltd. vs. Union of India & Anr., he asserted that the PMLA incorporated specific IPC offences at enactment, and their repeal rendered those references ineffective. He also challenged the government notification equating IPC with BNS, claiming it lacked legislative authority and could not amend the PMLA Schedule. Further, he contended that the definition of “proceeds of crime” under Section 2(1)(u) of the PMLA applied only to scheduled offences, and since BNS is not included, the prosecution was unsustainable.
Contentions of the Respondent:
The ED argued that under Section 8(1) of the General Clauses Act, 1897 references to repealed laws like the IPC must be read as referring to their re-enacted versions, such as the BNS, unless stated otherwise. Since BNS provisions mirror IPC offences, they remain valid as scheduled offences under the PMLA. Advocating a dynamic interpretation, the ED warned that treating the PMLA Schedule as fixed to IPC provisions would create a legal vacuum post-1st July 2024, defeating the law’s purpose. It defended the 16th July 2024 notification as a valid clarificatory measure under Section 8(1) of the General Clauses Act, 1897 and Article 73 of the Constitution to ensure legal continuity. On merits, the ED cited substantial evidence of the applicant’s role in laundering ₹100 crore but focused primarily on countering the legal challenge.
Observation of the Court:
Justice Amit Borkar observed, “Applying well-settled principles to the context of PMLA, it is clear that the references to IPC offences in its Schedule are dynamic and must be interpreted in light of the current law in force, which is now the Bharatiya Nyaya Sanhita, 2023, replacing the IPC. 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. 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”
The Court addressed a pivotal legal question concerning the applicability of the PMLA following the repeal of the IPC and its replacement by the BNS. The Court carefully analyzed whether references to IPC offences in the PMLA Schedule should be construed as references to corresponding BNS provisions, invoking principles of statutory interpretation and constitutional law.
The Court emphasized the distinction between ‘legislation by reference’ and ‘legislation by incorporation’. It held that the PMLA’s Schedule, which lists IPC offences by section numbers without reproducing their text, constitutes “legislation by reference” rather than incorporation. While referring to the case Mahindra & Mahindra Ltd. vs. Union of India & Anr., the Court noted, “Where there is mere reference to or citation of one enactment in another without incorporation, Section 8(1) applies and the repeal and re-enactment of the provision referred to or cited has the effect set out in that section and the reference to the provision repealed is required to be construed as reference to the provision as re-enacted.” This dynamic reference ensures that PMLA remains operative by aligning with the current penal law, the BNS, without requiring textual amendment.
Further, relying on Section 8(1) of the General Clauses Act, 1897, which provides that references in an enactment to a repealed provision shall be construed as references to the re-enacted provision unless a contrary intention appears, the Court found no such contrary intention in the PMLA or BNS, while observing, The PMLA refers to various offences listed under the Indian Penal Code, 1860 (IPC) by mentioning their section numbers in the Schedule appended to the Act. For example, it includes references such as Section 120B (criminal conspiracy), Section 420 (cheating), and so on. However, these sections are not reproduced word-for-word in the PMLA. Instead, the PMLA only makes a mention or citation of those IPC sections. This method of reference is what is legally known as “legislation by reference”.” It rejected the applicant’s argument that the PMLA’s Schedule was frozen to IPC offences, noting that such an interpretation would render the PMLA “toothless” and create an “unintended legal vacuum” post-1st July 2024.
While addressing the ‘legislative intent’, the Court emphasized that the PMLA targets categories of criminal activity, not specific IPC section numbers. It stated, “There is nothing in the PMLA that shows that Parliament’s focus was on the section numbers or code name (IPC) itself. What matters is the type of offences, such as cheating, criminal breach of trust, forgery, extortion, murder, dacoity, terrorism, etc.” Accepting the applicant’s contention would lead to an “absurd and unintended consequence” where serious offences under the BNS could not form the basis for PMLA prosecution, defeating the Act’s purpose of combating money laundering.
The Court held that government notication lacked the force of law under Article 13(3)(a) of the Constitution, as it was not issued under statutory authority or authenticated per Article 77. The Court clarified, “Section 8 does not give any power to the Executive or the Government. It is not a power-conferring provision… it cannot be used by the Executive as a tool to enact or modify law.” However, this finding did not affect the Court’s primary conclusion, as Section 8(1) operates automatically as an interpretative tool, not requiring executive action.
It held, “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.” Thus, BNS offences corresponding to erstwhile IPC provisions, such as Sections 318(4), 338, and 340(2), were deemed valid scheduled offences under the PMLA.
The decision of the Court:
In the light of the foregoing discussion, the Court rejected the bail application while upholding that offences under the Bharatiya Nyaya Sanhita, 2023, corresponding to those previously listed under the Indian Penal Code in the PMLA Schedule, are valid scheduled offences for the purposes of the PMLA, 2002.
Case Title: Nagani Akram Mohammad Shafi vs. The Union of India and Anr.
Case No.: Bail Application No.728 Of 2025
Coram: Justice Amit Borkar
Advocate for Appellant: Advs. Ajay Bhise, Deepali Kedar, Sandeep Salonkhe, and Tejas Dhotre
Advocate for Respondent: Adv. H. S. Venegavkar, Aayush Kedia, and Leepika Basant, APP Supriya I. Kak
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