JURISDICTION AND SURVIVAL: EXAMINING THE LIMITS OF ED'S POWERS AFTER CLOSURE OF THE PREDICATE OFFENCE

Recently, the Hon’ble High Court of Delhi (“Hon’ble Court”), in Kanchana Rai v. Enforcement Directorate, 2026 SCC OnLine Del 6395, examined the scope of the powers of the Directorate of Enforcement (“ED”) under the Prevention of Money Laundering Act, 2002 (“PMLA”), and held that once the predicate offence underlying an Enforcement Case Information Report (“ECIR”) is judicially closed, the ED can neither continue action under the same ECIR nor substitute a different offence in its place.

The dispute arose from a family and corporate estate dispute following the death of Dr. Mahendra Prasad, founder of the Aristo Group of Companies. An FIR was registered on 21.09.2019 alleging wrongful confinement of Smt. Satula Devi, theft of jewelry and offences under the Passports Act, 1967 (“First FIR”). Thereafter, on 10.02.2021, the Economic Offences Wing (“EOW”) registered a separate FIR bearing No. 27/2021, alleging that the signatures of Smt. Satula Devi were forged for share transfers and bank transactions (“Second FIR”).

The ED registered ECIR No. DLZO-II/72/2021 on 28.12.2021 on the basis of the Second FIR. However, forensic evidence confirmed that the signatures were genuine, and the EOW filed a cancellation report dated 08.12.2022. Despite this, the ED issued a freezing order under Section 17(1-A) of the PMLA on 28.06.2023. On 12.06.2025, the Magistrate accepted the cancellation report and dismissed the protest petition. Thereafter, on 20.08.2025, the ED issued an addendum to the same ECIR dated 28.12.2021, incorporating the First FIR as a fresh scheduled offence, and conducted fresh search and seizure proceedings under Section 17 of the PMLA on that basis.

The Petitioners approached this Hon’ble Court seeking quashing of the ECIR and all consequential action, including the freezing order and the search and seizure proceedings conducted by ED in furtherance of the addendum issued to the ECIR on 20.08.2025. Importantly, the Petitioners raised two grounds: firstly, against the continuation of the original ECIR, and secondly, against the addendum of the First FIR to the ECIR.

Key Findings

The Hon’ble Court held that the existence of an ECIR is dependent upon the existence of a predicate offence, relying of the judgment of Hon’ble Supreme Court in Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929. The Hon’ble Court further clarified that in the present case, the predicate offence underlying the ECIR ceased to subsist once the EOW filed the cancellation report, the Magistrate accepted it and the protest petition was dismissed. The Hon’ble Court observed that permitting PMLA proceedings to continue after the predicate offence ceases to subsist would allow the ED to chase a fictional concept of proceeds of crime, when in law no crime survives. Accordingly, once the scheduled offence stands extinguished by a competent court, the ED cannot continue to exercise its civil or coercive powers under the PMLA.

The Hon’ble Court rejected the contention that an addendum to an ECIR is inherently permissible, on two grounds: first, the ECIR sought to be revived by the addendum had already ceased to exist when its original predicate offence was closed; and second, the addendum was vitiated by illegality and procedural impropriety and was a colourable exercise of power by the ED. The writ petitions were accordingly allowed, and the ECIR and all consequential actions of the ED were quashed.

Significance

The decision is significant as it draws clear limits on the exercise of powers by the ED under the PMLA. First, notwithstanding the special adjudicatory mechanism under the PMLA, proceedings under its provisions remain amenable to writ jurisdiction, particularly where jurisdictional validity or abuse of power is in question.

Second, the judgment underscores that an ECIR is not an evergreen instrument. Its existence depends upon, and is co-extensive with, the existence of a scheduled offence. Once the predicate offence is closed by a competent court, the ECIR cannot be kept alive by an addendum that imports a different scheduled offence, as that would amount to reviving a proceeding that no longer exists.

The judgment consequently reinforces the principle that PMLA proceedings are derivative of the scheduled offence, and that the ED’s civil and coercive powers, including freezing, search and seizure, cannot survive the extinguishment of the offence from which they spring.”

The article is authored by Ms. Nandini Gupta and Mr. Karanveer Singh.