MAPPING THE MAZE: TERRITORIAL JURISDICTION IN MONEY LAUNDERING PROSECUTIONS UNDER THE PMLA

The Supreme Court of India in Rana Ayyub v. Directorate of Enforcement[1] clarified the principles governing territorial jurisdiction in money laundering prosecutions under the Prevention of Money Laundering Act, 2002 (“PMLA”). The Court held that the trial of scheduled offences should follow the trial of money laundering offences, not vice versa, and that jurisdiction extends to all places where any process of money laundering occurs.

This article seeks to examine the Supreme Court’s reasoning in Rana Ayyub, analyze the statutory framework under Section 44 of the PMLA, and explore the decision’s practical impact on money laundering trials.

Background: The Jurisdictional Conundrum

Unlike conventional crimes with clearly defined loci, money laundering is inherently multi-jurisdictional. Proceeds of crime may be acquired in one location, concealed in another, and utilized in a third. This geographic dispersal raises a fundamental question: where should money laundering cases be tried?

The question assumes significance because the answer determines not just the convenience of trial, but also strategic considerations for both prosecution and defense. A case tried in Delhi may have different evidentiary challenges than one tried in Mumbai or Bangalore.

Factual Matrix of Rana Ayyub

Journalist Rana Ayyub initiated three crowdfunding campaigns during the COVID-19 pandemic through the online platform “Ketto” between April 2020 and September 2021. The Mumbai Zonal Office of the Enforcement Directorate (“ED”) initiated an inquiry under FEMA on 3 August 2021. Simultaneously, a private complaint was filed in Ghaziabad alleging offences under various provisions of the IPC, IT Act, and the Black Money Act.

Based on the Ghaziabad FIR, the Delhi Zonal Office of ED filed a PMLA complaint before the Special Court, Ghaziabad, which took cognizance and issued summons to Ayyub.

Ayyub challenged the summons on grounds of lack of territorial jurisdiction. Her contention was straightforward: since her bank account (where alleged proceeds of crime were deposited) was in Navi Mumbai, and no part of the alleged money laundering occurred in Ghaziabad, only the Maharashtra Special Court had jurisdiction.

This raises the essential question: does the location of the bank account determine jurisdiction in money laundering cases, or is there a broader principle at play?

The Statutory Framework: Section 44 of the PMLA

To answer this question, it is necessary to understand the statutory framework governing territorial jurisdiction under the PMLA.

The PMLA adopts a two-pronged approach: dealing with proceeds of crime through attachment and confiscation (Chapters III and VI), and prosecuting money launderers through Special Courts (Chapter VII).

Section 43 establishes Special Courts primarily for trying offences under Section 4 (money laundering). However, Section 43(2) confers additional jurisdiction to try any other offence—including scheduled offences—with which the accused may be charged at the same trial.

Section 44(1)(a) lays down the fundamental rule: an offence punishable under Section 4 and any scheduled offence connected thereto shall be triable by the Special Court constituted for the area in which the offence has been committed.

The Court in Rana Ayyub emphasized that Section 44(1)(a) uses “offence” (referring to money laundering) three times, and “scheduled offence” (the predicate offence) only once. This linguistic distinction is not without significance. According to the Court, “[i]n all three places where the word “offence” alone is used, it connotes the offence of money laundering. The place where the expression “scheduled offence” is used, it connotes the predicate offence. By  prescribing that an offence punishable under Section 4 of the PMLA and any scheduled offence connected to the same shall be triable by the Special Court constituted for the area in which “the offence” has been committed, Section 44(1)(a) makes it crystal clear that it is the Special court constituted under Section 43(1), which will be empowered to try even the scheduled offence connected to the same.”

The Court then considered Section 44(1)(c) which addresses situations where the court that has taken cognizance of the scheduled offence differs from the Special Court that has taken cognizance of money laundering. In such cases, the former shall commit the case to the latter upon application by the authorized authority.

Findings in Rana Ayyub and Their Analysis

The Supreme Court’s reasoning in Rana Ayyub rests on three fundamental propositions:

First, the trial of the scheduled offence should follow the trial of the money laundering offence, not vice versa. The Special Court constituted under PMLA has jurisdiction to try even the scheduled offence. The Court observed: “Even if the scheduled offence is taken cognizance of by any other Court, that Court shall commit the same, on an application by the concerned authority, to the Special Court which has taken cognizance of the offence of money-laundering.”

This establishes the primacy of PMLA Special Courts over regular criminal courts—a significant departure from the general principle that the court first seised of a matter has jurisdiction.

Second, and more significantly, the Court held that all places where any process of money laundering occurs constitute places where the offence was committed. Section 3 of the PMLA defines money laundering as involvement in any process or activity connected with proceeds of crime, including concealment, possession, acquisition, use, projecting as untainted property, or claiming as untainted property.

The Court held that: (a) the area in which the place of acquisition of the proceeds of crime is located, or (b) the place of keeping it in possession is located, or (c) the place in which it is concealed is located, or (d) the place in which it is used is located, will all constitute areas where the offence has been committed. This creates multiple concurrent jurisdictions. If proceeds of crime are acquired in Mumbai, concealed in Delhi, and used in Bangalore, all three Special Courts have jurisdiction.

Third, the Court held that the issue of territorial jurisdiction cannot be decided in a writ petition, especially when serious factual disputes exist about the place(s) of commission. The Court observed: “This question should be raised by the petitioner before the Special Court, since an answer to the same would depend upon evidence as to the places where any one or more of the processes or activities mentioned in Section 3 were carried out.”

The Court dismissed Ayyub’s writ petition while granting her liberty to raise the jurisdictional issue before the trial court.

The Implications: A Double-Edged Sword

The decision in Rana Ayyub has far-reaching implications for PMLA prosecutions.

On one hand, it significantly expands the jurisdictional bases for trying money laundering cases. Unlike conventional crimes with limited jurisdiction, money laundering cases can now be tried in any jurisdiction where any process of money laundering occurred. This addresses the practical reality that money laundering is a multi-locational crime.

On the other hand, this creates concerns about forum shopping. ED has discretion to file complaints in any jurisdiction where any money laundering activity occurred—a discretion that could potentially be used to choose forums perceived as more prosecution-friendly.

For the accused, this imposes significant burdens. Defending a case in a distant jurisdiction creates financial and logistical challenges, potentially affecting the right to fair trial.

There is also the evidentiary challenge. Determining where money laundering occurred requires extensive factual inquiry. In the digital age with instantaneous electronic transactions across multiple locations, pinpointing the “place” of money laundering becomes increasingly complex.

A Contrast with ED’s Investigative Powers

It is important to distinguish prosecutorial jurisdiction (where the case is tried) from investigative jurisdiction (where ED can investigate).

In Abhishek Banerjee v. Directorate of Enforcement,[2] the Supreme Court held that ED’s powers to summon and investigate are not territorially limited under Section 50 of PMLA. ED can summon any person from anywhere in India during investigation.

However, Rana Ayyub addresses a different question: once investigation is complete, where should the trial occur? This is governed by Section 44 and the “place of commission” principles.

This distinction is crucial. While ED has pan-India investigative powers, the trial must still occur in a jurisdiction where money laundering activities actually took place—though “took place” is now broadly interpreted.

Conclusion

The decision in Rana Ayyub provides clarity on territorial jurisdiction in PMLA prosecutions. However, the decision also raises concerns about forum shopping, burden on accused persons, and evidentiary complexity. As money laundering increasingly occurs through digital transactions across multiple jurisdictions simultaneously, courts will face evolving challenges in applying Rana Ayyub’s principles.

For practitioners, Rana Ayyub underscores the importance of raising jurisdictional challenges early, with supporting evid

ence demonstrating where money laundering activities did or did not occur. The decision shifts jurisdictional analysis from a purely legal question to a fact-intensive inquiry—a shift that will shape PMLA litigation in the years to come.

Whether this approach strikes the right balance between prosecutorial efficiency and accused persons’ rights remains to be seen. The balance between effective prosecution of economic offences and protection of fair trial rights in convenient forums is delicate. As Indian courts continue applying Rana Ayyub, this balance will be tested and refined.

ENDNOTES

[1] Rana Ayyub v. Directorate of Enforcement, (2023) 4 SCC 457

[2] Abhishek Banerjee v. Directorate of Enforcement, 2024 SCC OnLine SC