Karnataka HC Puts a Brake on ED: Money Laundering, Death of Accused and the Rights of Relatives

**Introduction**

A recent order of the Karnataka High Court, directing the Enforcement Directorate (ED) not to take coercive action against a man being investigated in a money laundering case linked to his deceased grandmother, raises an important structural question under the Prevention of Money Laundering Act 2002 (PMLA): what happens to PMLA proceedings when the sole accused in the predicate offence has died and the criminal case has abated? The Court has indicated that it will examine whether money laundering proceedings can validly continue against relatives when the underlying criminal case has effectively come to an end. This development touches core issues of the relationship between scheduled offences and the PMLA, the presumption that attaches to property in the hands of family members, and the limits of coercive investigation powers in economic crime.

**Legal Background**

PMLA is built around the concept of a “scheduled offence” and the “proceeds of crime”. Section 3 defines the offence of money laundering as any process or activity connected with the proceeds of crime, including concealment, possession, acquisition, use, projecting or claiming such property as untainted. Section 2(1)(u) defines “proceeds of crime” as property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, or the value thereof.

Crucially, the existence of a scheduled offence is a jurisdictional foundation. In Vijay Madanlal Choudhary v Union of India (2022) 10 SCC 201, the Supreme Court held that PMLA is a distinct offence but “dependent on” the commission of a scheduled offence; where the person concerned is acquitted or the scheduled offence itself is quashed, continuation of PMLA proceedings normally becomes impermissible, absent some distinct scheduled crime.

Section 8 PMLA governs adjudication and confiscation. Section 8(5)–(7) specifically empowers the Special Court to order confiscation or release of attached property even where the trial cannot be concluded due to the death of the accused or similar contingencies. In B.K. Singh, Enforcement Directorate v Surajpal @ Chacha & Others (Special Court, PMLA, Delhi, 2019), the Court held that, after the death of the main accused in a wildlife poaching case, it could still decide whether cash seized from his premises constituted “proceeds of crime” and order confiscation under Section 8(7).

At the evidential level, Section 24 PMLA reverses the burden: once the prosecution shows a nexus between property and a scheduled offence, the onus lies on the person in possession to prove that it is not the proceeds of crime. This presumption, however, does not dissolve constitutional protections under Articles 20 and 21, nor does it authorise proceedings completely unmoored from any demonstrable scheduled crime.

**Critical Analysis**

On the publicly reported facts, the Karnataka case involves a deceased grandmother who was the sole accused in the predicate offence. Following her death, the underlying criminal case has abated. The ED, however, appears to have continued investigation into alleged money laundering involving property now in the hands of her grandson, prompting him to approach the High Court for protection. The High Court’s interim direction against “coercive action” is a familiar constitutional technique used to preserve the status quo while a substantial legal question is examined.

Do PMLA proceedings automatically fall with the abatement of the predicate case? The answer is more nuanced than a simple yes or no. Two distinct issues arise:

1. **Existence of the scheduled offence in rem** – As explained in Vijay Madanlal Choudhary, PMLA presupposes that there has been criminal activity constituting a scheduled offence which generated proceeds of crime. Abatement due to death does not ipso facto mean the offence never occurred; it means criminal liability of that individual cannot be pursued to conviction. In B.K. Singh v Surajpal, the Special Court treated wildlife trafficking as established (two co-accused had been convicted under the Wild Life (Protection) Act) and, despite the death of the alleged kingpin, proceeded to decide whether cash recovered from his home and associated sums were “proceeds of crime” and liable to confiscation.

2. **Personal criminal liability for laundering** – Money laundering under Section 3 is a separate, continuing offence. If a relative has independently engaged in concealment, possession, projection or use of tainted property, he or she may be liable as a principal money launderer even though they were not part of the original scheduled crime. Thus, a grandson can, in principle, be prosecuted if the prosecution can show knowing involvement with proceeds of crime, irrespective of whether the grandmother’s trial concluded.

The Karnataka matter is sharper: the grandmother was reportedly the *sole* accused in the predicate case and that case has abated. Unlike B.K. Singh v Surajpal, there may be no surviving co-accused or conviction in the scheduled offence from which “proceeds of crime” are demonstrably derived. In such a situation, continuing to invoke ED’s full coercive powers against a family member purely on the basis of inheritance or relationship, without articulating a separate scheduled offence or independent laundering conduct, risks converting PMLA into a property-grabbing mechanism rather than a criminal law focused on illicit proceeds.

Section 8(7) does allow a Special Court to pass confiscation or release orders where a trial cannot be conducted by reason of the death of the accused. But that jurisdiction presupposes that there was a pending trial under PMLA itself, or at least pending attachment proceedings properly linked to a scheduled offence. It does not create a free-standing power to pursue relatives in perpetuity merely because they hold property that was once suspected. The reasoning in B.K. Singh v Surajpal underscores this: the Court carefully analysed statements, corroborative material and the credibility of a purported sale transaction to decide whether Rs 50 lakh found in the deceased’s house was indeed proceeds of crime before ordering confiscation. The widow’s bare assertion of an advance for sale of property, unsupported by credible documentation or testimony, failed to rebut the statutory presumption.

By contrast, the Karnataka High Court appears concerned that, where the very predicate case has ended without adjudication, ED should not wield arrest and attachment powers against relatives unless it can anchor its case in a demonstrable scheduled offence and specific laundering conduct. The interim protection against coercive steps reflects a balance between the State’s interest in chasing complex economic crime and the individual’s right not to be subjected to punitive investigation merely because of kinship.

**Opinion & Outlook**

In my view, the High Court is right to treat this as a question deserving careful scrutiny rather than allowing business-as-usual under PMLA. Two propositions should guide the eventual ruling.

First, **death or abatement in the predicate case should not, by itself, extinguish the possibility of proving that an offence occurred and generated tainted property**, especially where there is independent material of criminal activity or conviction of others, as in the wildlife-trafficking factual matrix of B.K. Singh v Surajpal. Confiscation in rem remains a legitimate goal of anti–money laundering law. However, the prosecution must shoulder the initial burden of showing, on cogent material, that there was factual criminal activity amounting to a scheduled offence and that identified property is linked to it.

Secondly, **relatives should not be treated as automatic stand-ins for a deceased accused**. A grandson can be brought within Section 3 only if there is evidence that he has, with knowledge, possessed, used, concealed or projected the proceeds as untainted. Mere inheritance or nominal co-ownership, without proof of mens rea, should not suffice. To hold otherwise would stretch the reversed burden in Section 24 beyond its constitutional limits and effectively require every heir of a person once suspected under a scheduled law to prove innocence on pain of attachment.

Going forward, the Karnataka case provides an opportunity to clarify three practical safeguards:

* that ED must demonstrate at least a prima facie continued existence of a scheduled offence notwithstanding abatement; * that relatives can only be investigated under PMLA where there is some material indicating independent laundering conduct, not just familial proximity; and * that Section 8(7) confiscation in the wake of death is a tightly controlled, judicially scrutinised process, not an administrative default.

Such a calibrated approach would remain faithful to the Supreme Court’s emphasis in Vijay Madanlal Choudhary on the integral connection between scheduled offences and PMLA, while respecting the presumption of innocence and proportionality in investigation.

**Conclusion**

The Karnataka High Court’s intervention in restraining coercive action against a grandson in a money laundering probe linked to his deceased grandmother highlights a grey area at the intersection of PMLA, succession and due process. Comparative reasoning from decisions such as B.K. Singh v Surajpal shows that courts are willing to sustain confiscation against the estate of a deceased offender where there is solid evidence of criminal proceeds, but are equally alert to weak, relationship-based inferences. A principled ruling in this matter could draw that line more clearly: PMLA may justifiably follow the money beyond the grave, but only where the State can demonstrate both an underlying scheduled offence and genuine laundering conduct—rather than mere blood ties.