Money Laundering Is Not Wiped Out by Settlements in Predicate Offences: Punjab & Haryana High Court Upholds Arrests by ED in PMLA Case

“Judicial Review of Arrest Under Section 19 PMLA Is Limited—Courts Cannot Conduct a Merits Review of Material in Possession,” In a significant judgment dated January 29, 2026, the Punjab and Haryana High Court, while adjudicating the petitions filed by Arvind Walia and Sandeep Yadav, upheld the arrest and custodial remand orders passed against the promoters of Ramprastha Promoters & Developers Pvt. Ltd. under the Prevention of Money Laundering Act, 2002 (PMLA), ruling that the enforcement proceedings under PMLA do not become non-est merely because predicate offences are stayed, settled or cancelled.

Rejecting the petitioners’ challenge to the legality of their arrest and subsequent remand orders, Justice Tribhuvan Dahiya held:

“Merely because FIRs relating to predicate offences were stayed or settled does not mean that the scheduled offence stands extinguished for the purposes of the PMLA… Offence of money laundering is a distinct and independent offence.”

“ECIR Is Not a Statutory Document—Its Amendment Post-Arrest Does Not Vitiate the Jurisdiction of ED”

The petitioners had contended that at the time of their arrest on July 21, 2025, there were only three FIRs against them—two of which had already been settled and the third stayed by an order of the High Court—and thus, there was no “live scheduled offence”, a condition precedent for invoking the PMLA.

This argument was flatly rejected by the Court, which held that:

“The ECIR is an internal, non-statutory document created by the ED before initiating penal action… Non-inclusion of certain FIRs in the ECIR prior to arrest does not create any jurisdictional bar.”

In this context, the Court relied heavily on the Supreme Court’s ruling in Vijay Madanlal Choudhary v. Union of India, which confirmed that an ECIR is not akin to an FIR under the CrPC and that there is no statutory requirement that all FIRs must be included in the ECIR before any action is taken.

The Enforcement Directorate had filed an addendum to the ECIR on September 11, 2025, including eight additional FIRs, including those based in Delhi and Haryana. The Court found that material from several of these FIRs had already been relied upon by the ED prior to the arrest, even though they were formally added to the ECIR only later.

“There is no fetter on the ED to investigate other FIRs noticed after registration of ECIR… The absence of formal addition of such FIRs prior to arrest does not invalidate the action taken,” the Court ruled.

“Similarity in Grounds of Arrest and Reasons to Believe Does Not Invalidate Arrest”—Court Dismisses Allegation of Mechanical Exercise by ED

The petitioners argued that the ‘grounds of arrest’ and ‘reasons to believe’ issued to them by the ED were copy-pasted, suggesting a mechanical exercise without application of mind.

Justice Dahiya rejected this argument as misconceived:

“Similarity of documents in itself cannot be a ground to conclude non-application of mind… If the authorised officer has deemed it appropriate to record the material facts in both documents, no exception can be taken to it.”

Referring to the Supreme Court’s judgment in Arvind Kejriwal v. Directorate of Enforcement, the Court emphasized that judicial review of arrests under Section 19 of the PMLA is limited to examining whether the ‘reasons to believe’ are based on relevant material and whether there is a rational nexus between the facts and the conclusion.

“Courts are not to undertake a merit review of the material in possession of ED. Doubts may arise only when the reasons are not clear or reflect arbitrariness.”

“Cancellation of FIRs Does Not Automatically Erase PMLA Proceedings”—Settlements Not a Ground to Quash Money Laundering Case

One of the central planks of the petitioners’ argument was that two of the FIRs relied upon by the ED were settled between the parties, and cancellation reports were filed and accepted by the Magistrate. They also claimed that the third FIR was stayed and, thus, there was no existing scheduled offence on the date of arrest.

The Court firmly held:

“Settlement between parties and acceptance of cancellation reports in predicate offences does not automatically invalidate the ECIR or proceedings under the PMLA.”

In support of this view, the Court cited the Madras High Court’s decision in Vijayraj Surana v. Enforcement Directorate, which held that PMLA investigations can proceed even if the scheduled offence is quashed or settled on technicalities.

“Compliance with Section 19(2) PMLA Established—Documents Were Forwarded to Adjudicating Authority on Same Day”

The petitioners alleged non-compliance with Section 19(2) of the PMLA, which mandates that the arrest order, grounds of arrest, and the material in possession of the arresting officer must be forwarded to the Adjudicating Authority.

This allegation was also found to be without substance.

The Court recorded:

“On the day the petitioners were arrested, all relevant documents—running into over 300 pages—were forwarded to the Adjudicating Authority both by email and in hard copy. Acknowledgement from the Authority was placed on record.”

The Special Judge had also noted this compliance in his remand order, and the High Court refused to re-open this factual finding in a writ petition under Article 226/227, reiterating that judicial review cannot resolve disputed facts or substitute a full-fledged trial.

“Remand Orders Passed After Application of Mind—Arrest Was Not a Roving Enquiry but to Trace Money Trail”

The Court upheld the custodial remand orders dated July 21, 25, and 28, 2025, noting that each of these orders was passed after due application of mind by the Special Court, and the custody sought was not for mere investigation but for ascertaining the money trail and identifying proceeds of crime.

“There was a valid justification to arrest the petitioners, that is, to ascertain complete money trail of funds collected from genuine home buyers,” the Court observed.

It further clarified that once arrest is held lawful, remand orders based on the same stand validated.

No Illegality in Arrest or Custodial Remand—Petitions Dismissed

After analyzing the statutory framework, the nature of the ECIR, the extent of judicial review under Section 19, and the procedural safeguards under Section 19(2) of the PMLA, the High Court found no merit in the petitioners’ challenge.

“There is no reason to believe that the mandatory procedure laid down under Section 19(2) PMLA has not been complied with… The arrest cannot be termed illegal on the basis of the contentions raised.”

Accordingly, both petitions were dismissed, with the Court reiterating that its observations were confined to the context of bail and arrest, and would not affect the merits of the ongoing trial or adjudication.

Date of Decision: 29 January 2026