Court holds ECIR ceases to subsist upon acceptance of Closure Report in predicate offence; addition of unrelated prior FIR as addendum to revive ECIR is mala fide and arbitrary exercise of power.
In a landmark judgment dated August 18, 2026, the Delhi High Court, presided over by Justice Anish Dayal, quashed the Enforcement Directorate’s (ED) ongoing proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) in a batch of writ petitions filed by members and associates of the Aristo Group of Companies. The Court held that once the Closure Report in the predicate offence FIR was accepted by the competent court, the corresponding Enforcement Case Information Report (ECIR) and all proceedings under the PMLA based on that FIR cease to subsist. Any attempt by the ED to revive such proceedings by adding an unrelated prior FIR as an addendum to the ECIR was declared illegal, mala fide, and a colourable exercise of power.
The dispute arose from two FIRs: FIR No. 27/2021 ("second FIR") relating to allegations of forgery and fraudulent share transfers against members of the Aristo family, and FIR No. 279/2019 ("first FIR") concerning alleged wrongful confinement and theft of jewellery involving different persons. The ED had registered ECIR No. DLZO-II/72/2021 exclusively on the basis of the second FIR.
Following the investigation, the Economic Offences Wing filed a Cancellation Report for the second FIR concluding no offence was made out, which was accepted by the Additional Chief Judicial Magistrate on June 12, 2025. Subsequently, the ED issued an addendum in August 2025 to the ECIR incorporating the first FIR as an additional predicate offence, despite the first FIR being unrelated and predating the ECIR by several years.
The petitioners challenged the continuation of the ECIR proceedings and the addendum, contending that the ED had knowledge of the first FIR for years but deliberately excluded it until after the second FIR was closed, indicating mala fide intent. They argued that no "proceeds of crime" emanated from the first FIR and that the two FIRs did not constitute the "same transaction" necessary to club them under PMLA proceedings.
The ED and complainants contended that both FIRs were interconnected, forming part of a continuous conspiracy to misappropriate the assets of the late Dr. Mahendra Prasad, and that addition of the first FIR was permissible.
After extensive analysis, the Court observed that the ECIR is an internal administrative document and its continuation depends on the existence of a subsisting scheduled offence (predicate offence). Once the Closure Report in the predicate FIR was accepted, the scheduled offence ceased to subsist, rendering the ECIR and related proceedings void. The Court held that no investigation or coercive action can continue in absence of a subsisting predicate offence.
Regarding the addendum, the Court held that adding an unrelated prior FIR as a scheduled offence after the predicate offence was extinguished is arbitrary, mala fide, and a colourable exercise of power. The addendum could not revive extinguished ECIR proceedings. The Court emphasized the principle that multiple FIRs may be clubbed only if they relate to the "same transaction" involving proximity in time, place, or unity of purpose. Here, the first and second FIRs related to distinct transactions with different accused and properties involved.
The Court also held that judicial review is available to challenge the validity of an addendum and ECIR on grounds of illegality, unreasonableness, procedural impropriety, and mala fides. It rejected the ED’s contention that alternative remedies before the Adjudicating Authority ousted writ jurisdiction, noting that challenges to foundational jurisdictional facts are maintainable in writ petitions.
Consequently, the Court quashed the ECIR No. DLZO-II/72/2021 and all proceedings emanating therefrom, including orders passed under Section 17(1A) of PMLA, the addendum dated August 20, 2025, and all coercive actions such as search, seizure, and freezing of bank accounts. The ED was directed to restore the status quo ante in favour of the petitioners. The Court granted liberty to the ED to revive proceedings if the predicate offence is revived by a competent court.
This judgment reinforces the legal position that PMLA proceedings are contingent upon a subsisting predicate offence and protects individuals from prolonged investigations and coercive actions based on extinguished or unrelated FIRs. It also clarifies the scope and limits of the ED’s powers in amending ECIRs.
Bottom Line:
Money Laundering - Proceedings under an ECIR registered by the Enforcement Directorate (ED) under PMLA cease to subsist upon acceptance of the Closure Report in the predicate FIR, and addition of an unrelated prior FIR as an addendum to revive ECIR is impermissible and constitutes mala fide exercise of power.
Statutory provision(s):
Prevention of Money Laundering Act, 2002 Sections 2(1)(u), 3, 5, 8, 17, 17(1A), 44, 50
Kanchana Rai v. Directorate of Enforcement New Delhi, (Delhi) : Law Finder Doc id # 2963664
