India: Money Laundering

The Calcutta High Court, in Louis Dreyfus Company India Private Limited v. Enforcement Directorate, Government of India, CRR 1145 of 2024, examined the circumstances in which a person against whom no case was made out in the scheduled offence could nevertheless be proceeded against under the Prevention of Money Laundering Act, 2002 (“PMLA”). The Court quashed the PMLA proceedings against Louis Dreyfus Company India Private Limited (“LDC”), principally finding that the material collected by the Enforcement Directorate (“ED”) did not establish the requisite connection between LDC and the alleged proceeds of crime.

The Prevention of Money Laundering Act, 2002 grants the Enforcement Directorate sweeping powers under Section 50 to summon individuals, demand documents, and record statements under oath. Understanding the scope of these powers, the rights available to summoned persons, and the judicial safeguards established by landmark Supreme Court decisions is essential for anyone navigating ED investigations.

The exponential growth of India’s start-up ecosystem has coincided with the proliferation of offshore special purpose vehicles (“Offshore SPVs”) incorporated in jurisdictions such as the Cayman Islands, Mauritius, Delaware, and Singapore. These entities, often characterised by minimal regulatory oversight, flexible corporate governance norms, and tax-neutral regimes, are increasingly being deployed to channel foreign capital into high-growth Indian ventures.

The Enforcement Directorate's power to investigate money laundering cases hinges entirely on a fundamental legal concept: the predicate offence. Without a legitimately registered scheduled crime serving as the foundation, can the ED legally pursue a money laundering investigation? This analysis explores how the predicate offence acts as both an operational catalyst and a constitutional check on the ED's sweeping powers under the Prevention of Money Laundering Act, 2002.

The Allahabad High Court, in the case of Sanjay Kumar @ Sanjay Dhiman v. Directorate of Enforcement, Criminal Misc. Bail Application No. 38900 of 2025, delivered a significant ruling under the Prevention of Money Laundering Act, 2002 (“PMLA”), reiterating a legal principle which asserts that assets derived from unknown or unexplained sources cannot, merely on that basis, be presumed to constitute “proceeds of crime” arising from a scheduled offence under the PMLA.

The Court further held that a writ petition challenging the very jurisdictional foundation of the attachment is maintainable notwithstanding proceedings before the Adjudicating Authority under Section 8 of the PMLA or the availability of a statutory appellate remedy.

In April 2020, amid concerns regarding opportunistic acquisitions during the COVID-19 pandemic, the Department for Promotion of Industry and Internal Trade ("DPIIT"), Government of India, issued Press Note 3 (2020 Series) ("PN3 2020"). PN3 2020 fundamentally altered India's foreign direct investment ("FDI") framework by requiring government approval for investments originating from countries sharing land border with India.

We are delighted to share this month's AKP Dispute Resolution Monthly Digest.

On 10 March 2026, the Government of India issued a press release (Press Release) indicating that Union Cabinet (Cabinet) has approved amendments to the foreign direct investment (FDI) regime in India with respect to for investments into India with beneficial ownership originating from countries sharing land borders with India (LBCs) under a regulation known as "Press Note 3" (PN3).