The Threshold for Taking Cognizance under the PMLA, 2002

When does the law formally step in to prosecute a money laundering case in India? The answer lies in a concept called taking cognizance – the point at which a court formally acknowledges and decides to proceed on a criminal complaint. Under the Prevention of Money Laundering Act, 2002 (PMLA), this threshold is not automatic. The law sets specific monetary and procedural conditions that must be met before a Special Court can take cognizance of a money laundering offence. Understanding this limit is essential for anyone studying how anti-money laundering enforcement actually works in India.

What does “taking cognizance” mean under the PMLA? 🔗

In criminal law, cognizance refers to the formal act of a court taking notice of an offence and deciding to proceed with a complaint. It is the starting point of the judicial process – before this stage, there is investigation; after it, there is a trial. Under the PMLA, cognizance is not taken by an ordinary magistrate’s court. Instead, Section 44(1)(b) of the PMLA provides that a designated Special Court may, upon a complaint filed by an authorised authority (the Directorate of Enforcement), take cognizance of an offence under Section 3 of the Act – the core money laundering offence – without the accused being first committed to it for trial.

This is a significant departure from the ordinary criminal procedure, where a Sessions Court typically requires a committal from a Magistrate. The Special Court under the PMLA is empowered to directly receive and act upon complaints from the Enforcement Directorate (ED), reflecting the serious and specialised nature of money laundering prosecutions.

The monetary threshold: the Rs. 30 lakh limit explained 🔗

Not every act that looks like money laundering will automatically attract the full force of the PMLA. The Act draws a distinction between offences through its Schedule, which is divided into three parts – Part A, Part B, and Part C. This classification directly affects cognizance.

How the schedule determines the threshold 🔗

Section 2(1)(y) of the PMLA defines a scheduled offence as one specified under Part A, Part B (subject to a monetary limit), or Part C of the Schedule. This definition is the key to understanding the cognizance threshold:

• Part A offences – These are serious crimes such as offences under the Indian Penal Code (kidnapping, dacoity, murder), the NDPS Act, the Prevention of Corruption Act, and several other statutes. There is no minimum monetary limit for these. The PMLA applies to them regardless of the value involved.
• Part B offences – Currently limited to offences under Section 132 of the Customs Act (false declarations and use of false documents), these qualify as scheduled offences only if the total value involved is Rs. 30 lakh or more. Below this threshold, they do not constitute a scheduled offence under the PMLA, and therefore, no cognizance can be taken under the Act.
• Part C offences – These cover offences with cross-border implications, including Part A offences or property-related offences under Chapter XVII of the IPC where the proceeds are transferred or attempted to be transferred outside India.

The Rs. 30 lakh minimum value for Part B offences serves as a jurisdictional filter. It ensures that only cases involving a sufficiently significant financial harm fall within the PMLA’s ambit when the predicate offence itself is relatively narrow in scope.

Why this threshold matters: the predicate offence requirement 🔗

The PMLA does not operate in isolation. It is triggered only when a predicate offence (a scheduled offence) has first been committed and proceeds of crime have been generated. The Supreme Court in Vijay Madanlal Choudhary v. Union of India (2022) made it clear that no action under the PMLA can be initiated unless there is a valid scheduled offence as the foundation. If a person is acquitted of the scheduled offence, the money laundering case loses its very basis.

This means that for a Special Court to take cognizance of a PMLA complaint, two conditions must independently be satisfied: first, a registered FIR or charge sheet must exist in relation to a scheduled offence, and second, the proceeds connected to that offence must exist. For Part B offences specifically, there is an additional third requirement – the value involved must meet or exceed Rs. 30 lakhs. If this monetary floor is not crossed, the Special Court simply has no jurisdiction to take cognizance of a money laundering complaint arising from that predicate offence.

The procedural path to cognizance 🔗

Once the monetary and substantive conditions are met, the process of taking cognizance follows a defined sequence. When a scheduled offence FIR is registered, the concerned agency (police, CBI, etc.) informs the Enforcement Directorate. The ED then registers an Enforcement Case Information Report (ECIR) and conducts its investigation into whether the proceeds of that offence have been laundered. Upon completing investigation, the ED files a Prosecution Complaint (the PMLA equivalent of a charge sheet) before the Special Court.

It is at this point that the Special Court decides whether to take cognizance. The court examines the complaint to determine whether, on its face, an offence under Section 3 of the PMLA is made out. If it is satisfied, it takes cognizance and proceeds to issue process against the accused.

The pre-cognizance hearing: a recent development 🔗

An important procedural safeguard was introduced when the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) came into force on 1 July 2024. The proviso to Section 223(1) of the BNSS now mandates that a court cannot take cognizance of a complaint without first giving the accused an opportunity to be heard. The Supreme Court in Kushal Kumar Agarwal v. Directorate of Enforcement (2025) confirmed that this pre-cognizance hearing requirement applies to all PMLA complaints filed after 1 July 2024. Non-compliance with this requirement is sufficient ground to set aside the cognizance order. This was a significant departure from the earlier CrPC regime, which had no such provision.

What happens after cognizance is taken? 🔗

Once the Special Court takes cognizance of a PMLA complaint, the trial machinery is set in motion. As a general rule, the court issues summons to the accused (not a warrant, unless the accused has been uncooperative). A crucial consequence is that the ED loses the power to independently arrest the accused under Section 19 of the PMLA once cognizance is taken. The Supreme Court in Tarsem Lal v. Directorate of Enforcement (2024) held that after the Special Court assumes jurisdiction through cognizance, the accused is within the court’s domain. If the ED wants custody, it must apply to the Special Court under Section 309 of the CrPC – it cannot unilaterally arrest the accused.

Appearing before the Special Court in response to a summons does not amount to being in custody. The accused does not need to apply for bail simply because they have been summoned. The stringent twin conditions of bail under Section 45 of the PMLA – which are notoriously difficult to satisfy – apply only when actual custody is sought, not when the accused appears voluntarily pursuant to a summons.

Why this limit is significant for the financial system 🔗

The monetary threshold for cognizance under the PMLA serves a deliberate policy purpose. Money laundering, at its core, is a threat to the integrity of the financial system and, in serious cases, to national security. By concentrating enforcement resources on cases where the proceeds cross a meaningful value threshold (at least for Part B offences), the law ensures that investigative and prosecutorial bandwidth is directed at cases that genuinely threaten the economy.

India’s PMLA framework is built in alignment with global anti-money laundering standards set by the Financial Action Task Force (FATF), which periodically reviews India’s compliance. The scheduled offence structure, with its monetary filter for Part B, reflects a calibrated approach – serious offences under Part A attract PMLA regardless of amount, but narrower Customs Act violations only attract it when the financial stakes are substantial. This prevents the over-extension of a powerful law to trivial disputes while keeping the focus on significant financial crime.

The role of co-operatives 🔗

For cooperative societies and their members, the PMLA’s cognizance threshold has a direct relevance. Financial irregularities within cooperative banks or credit societies – such as fraudulent loan disbursements, diversion of public deposits, or manipulation of accounts – can potentially generate proceeds of crime that qualify as scheduled offences. Where the value of such transactions exceeds the applicable threshold, the ED is empowered to investigate and file a complaint before the Special Court. The Reserve Bank of India and the Financial Intelligence Unit India (FIU-IND) both play a role in flagging suspicious transactions from cooperative institutions, which can form the basis for ED action under the PMLA.

What do you think? Given that the Rs. 30 lakh threshold applies only to Part A offences under the Customs Act, should the monetary filter be extended to other categories of offences to better direct enforcement resources? And with the new pre-cognizance hearing requirement under the BNSS, do you think the balance between individual rights and effective anti-money laundering enforcement has improved in India?

References

1. https://indiankanoon.org/doc/1697463/
2. https://fiuindia.gov.in/files/AML_Legislation/pmla_2002.html
3. https://www.lexology.com/library/detail.aspx?g=b10405b8-0d8a-4f37-a520-07a5be001f2b
4. https://www.southindianbank.com/userfiles/aml-what_you_must_know.pdf
5. https://nmlaw.co.in/the-nexus-between-the-offence-of-money-laundering-the-scheduled-offence/
6. https://www.mshlegal.in/2020/05/section-44-of-pmla-offences-triable-by.html
7. https://disputeresolution.cyrilamarchandblogs.com/2026/02/bnss-and-the-pre-cognizance-imperative-procedural-safeguard-u-s-223-applies-even-to-pmla-complaints/
8. https://www.numenlaw.com/guidelines-for-special-courts-when-taking-cognizance-of-a-complaint-under-the-pmla.php
9. https://www.fatf-gafi.org/en/home.html