Money Laundering And Economic Offences Under Bns
🔍 I. Introduction to Money Laundering and Economic Offences under BNS (Bharatiya Nyaya Sanhita)
The Bharatiya Nyaya Sanhita (BNS), 2023, replaces the Indian Penal Code (IPC), 1860, as part of a larger reform of India's criminal laws. Economic offences and money laundering are serious crimes that involve concealment of proceeds of crime, manipulation of financial systems, and defrauding individuals, institutions, or the government.
While the BNS 2023 introduces various offences and retains the essential framework of the IPC, the primary legislation to combat money laundering in India remains the Prevention of Money Laundering Act, 2002 (PMLA). However, the offences listed in BNS (formerly IPC) form the predicate offences (scheduled offences) for PMLA prosecution.
🧾 II. Key Provisions Relevant to Economic Offences under BNS
Here are some major provisions in BNS 2023 related to economic offences:
| Section (BNS) | Offence | Equivalent IPC Section |
|---|---|---|
| Section 176 | Cheating | IPC 420 |
| Section 179 | Criminal breach of trust | IPC 406 |
| Section 187 | Forgery | IPC 463-471 |
| Section 141 | Criminal misappropriation of property | IPC 403 |
| Section 316 | Organized Crime | New in BNS |
| Section 113 | Abetment | IPC 107 |
All these are scheduled offences under PMLA, and their proceeds may be laundered through various means.
🧼 III. What is Money Laundering?
Defined under Section 3 of the PMLA, money laundering is the process of converting illegally obtained money (called proceeds of crime) into legitimate assets or income.
Three Stages:
Placement – introducing illegal funds into the financial system.
Layering – disguising the source of funds via complex transactions.
Integration – reintegrating laundered money into the economy as legitimate assets.
⚖️ IV. Major Case Laws on Money Laundering and Economic Offences in India
Here are six major cases with detailed explanations:
✅ 1. Enforcement Directorate v. P. Chidambaram (INX Media Case)
Facts:
P. Chidambaram, former Finance Minister, was accused of misusing his position in granting FIPB (Foreign Investment Promotion Board) approvals to INX Media. Allegedly, bribes were paid to companies linked to his son, Karti Chidambaram.
Legal Issues:
Was the FIPB approval manipulated?
Were proceeds of crime routed through shell companies?
Outcome:
PMLA was invoked due to alleged laundering of bribe money.
The court observed that public officials laundering bribe money via shell companies falls squarely under money laundering.
Chidambaram was arrested by the ED but later granted bail by the Supreme Court, while investigations continued.
Significance:
This case reinforced that politically exposed persons can be prosecuted under PMLA, and abuse of official power leading to illegal gains is prosecutable under economic offences and money laundering laws.
✅ 2. Vijay Madanlal Choudhary v. Union of India (2022)
Facts:
Multiple petitions were filed challenging constitutional validity of PMLA provisions (like burden of proof, power of arrest, etc.)
Key Issues:
Whether PMLA provisions violate fundamental rights?
Is reversing the burden of proof (Section 24 PMLA) constitutional?
Supreme Court Ruling:
Upheld the validity of PMLA provisions.
Ruled that money laundering is a standalone offence, not merely derivative of the predicate offence.
ED is not required to wait for the outcome of the scheduled offence trial.
Significance:
This landmark judgment strengthened ED’s powers and made prosecution for money laundering more robust under PMLA, including for offences under BNS.
✅ 3. State of Maharashtra v. Tapas D. Neogy (1999)
Facts:
A bank manager was involved in misappropriating funds from depositors’ accounts.
Issue:
Whether the offence of criminal breach of trust (now Section 179 BNS) can be a predicate offence under PMLA?
Ruling:
The Supreme Court held that misappropriation by a banker amounts to criminal breach of trust and can be a scheduled offence, making it liable under money laundering laws.
Significance:
It clarified that economic frauds within institutions like banks can lead to PMLA charges.
✅ *4. Hasan Ali Khan Case (2011)
Facts:
Hasan Ali Khan, a Pune-based businessman, was accused of laundering thousands of crores of rupees through foreign accounts, including tax evasion and hawala dealings.
Legal Action:
ED attached properties under PMLA.
The case involved cross-border money laundering and use of fictitious companies.
Significance:
One of the earliest high-profile cases where PMLA was used extensively. It showed how foreign assets and hawala channels are used for layering and integration stages of laundering.
✅ **5. Rose Valley Chit Fund Scam – ED v. Gautam Kundu
Facts:
Rose Valley Group ran unauthorized chit funds and collected thousands of crores from the public. The money was diverted to personal assets and fake companies.
Legal Action:
The Supreme Court and ED cracked down under PMLA.
Gautam Kundu, the chairman, was arrested and assets seized.
Significance:
A leading case demonstrating large-scale public fraud (Section 176 BNS – cheating) being treated as a predicate offence for money laundering. This case reinforced the link between Ponzi schemes and laundering.
✅ 6. M/s Mahanivesh Oils & Foods Pvt. Ltd. v. Director, Enforcement Directorate (2016)
Facts:
The petitioner’s properties were provisionally attached by ED under PMLA. The company challenged the seizure, claiming it was unjustified.
Legal Issue:
Whether attachment of property under PMLA before completion of investigation is valid?
Ruling:
The Delhi High Court upheld the ED’s powers, noting that provisional attachment under Section 5 of PMLA is valid if there's "reason to believe" the property is linked to proceeds of crime.
Significance:
Clarified the ED’s preventive powers even before charges are filed, especially in high-stakes financial frauds.
🧠 V. Conclusion
Economic offences and money laundering are serious crimes, and the BNS provisions form the basis for determining criminal liability, while PMLA handles the laundering aspect. Indian courts have shown increasing readiness to interpret these laws broadly to combat financial crimes, especially those involving public corruption, fraud, and shell companies.
The cases above demonstrate:
The expanding role of ED.
The growing scope of what counts as proceeds of crime.
The seriousness with which courts are now treating economic offences.
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