PMLA | Money Laundering Case Cannot Survive After Acceptance of Closure Report in Predicate Offence: Calcutta High Court

“In cases where the schedule offence is negated with the acceptance of final report... the fundamental principle of continuing any proceeding under the PMLA also vanishes”— In a seminal ruling Calcutta High Court, comprising Dr. Justice Ajoy Kumar Mukherjee, quashed an Enforcement Case Information Report (ECIR) and subsequent prosecution against M/s. Future Gaming and Hotels Services Pvt. Ltd., holding that the Enforcement Directorate cannot continue money laundering proceedings once the predicate FIRs have culminated in a closure report accepted by the jurisdictional Magistrate.

The controversy originated from two First Information Reports (FIRs) registered by the Kolkata Police at Bhawanipur and Beleghata Police Stations in 2019. The allegations pertained to offences under the Indian Penal Code and the Lotteries Regulation Act, accusing the petitioners of unlawfully participating in lottery games and claiming prizes. Based on these "scheduled offences," the Enforcement Directorate (ED), Kolkata, registered an ECIR in 2021 and subsequently froze assets worth crores. However, the investigation by the local police in both predicate FIRs concluded with the filing of Final Reports (Closure Reports) on the ground of "mistake of fact." Crucially, the jurisdictional Magistrates accepted these closure reports in early 2022. Despite the collapse of the foundational offences, the ED continued its proceedings, filing a prosecution complaint in 2023 and attempting to link the case to a separate CBI charge sheet filed in Kochi.

“The offence of money laundering relates to the proceeds of crime, the genesis of which is a scheduled offence.”

The ED’s Attempt to Sustain the ECIR

The Enforcement Directorate vehemently opposed the quashing petitions, arguing that the offence of money laundering is a continuing one. The ED contended that they had filed applications for further investigation under Section 173(8) of the Code of Criminal Procedure (CrPC), which were pending adjudication; thus, the accused had not been "finally absolved." Furthermore, the ED attempted to pivot the basis of the Kolkata ECIR by incorporating a CBI charge sheet from Kochi (Kerala) involving a lottery scam of approximately Rs. 10,000 crores. The agency argued that under Section 66(2) of the PMLA, they were obligated to share information and proceed against the "proceeds of crime" regardless of the jurisdiction, asserting that the ECIR is an internal document capable of encompassing multiple predicate offences.

Judicial Analysis: The Dependency Principle

Dr. Justice Ajoy Kumar Mukherjee rejected the ED's contentions, placing heavy reliance on the Supreme Court’s landmark judgment in Vijay Madanlal Choudhary v. Union of India. The High Court reiterated that the PMLA is not a standalone regime; it is inextricably linked to the existence of a scheduled offence. The Court held that the acceptance of a closure report by a Magistrate stands on the same footing as an acquittal, discharge, or quashing. Once the scheduled offence is negated, the very definition of "proceeds of crime" under Section 2(1)(u) of the PMLA fails, as there is no longer any criminal activity to which the property can be related. The Court observed that continuing PMLA proceedings in the absence of a subsisting scheduled offence would be paradoxical.

“It is not possible to conceive of a situation where the accused are absolved in the predicate case, the PMLA proceedings still can be continued believing that the properties attached are proceeds of crime.”

The ‘Imported’ Predicate Offence and Double Jeopardy

The Court took a stern view of the ED's attempt to import the Kochi CBI charge sheet into the Kolkata ECIR to keep the latter alive. The Bench noted that the Kochi charge sheet was already the subject matter of a separate ECIR and a pending trial before the Special PMLA Court in Kerala. The Court termed the ED's attempt to rely on the same Kochi charge sheet for a second prosecution in Kolkata as an impermissible "second cognizance" on the same cause of action. The judgment highlighted that the ED only referenced the Kochi case after the Kolkata FIRs faced closure, characterizing this as an attempt to rely on extraneous material to save a collapsing case.

Section 66(2) and ‘Reason to Believe’

Addressing the ED's reliance on Section 66(2) of the PMLA regarding the sharing of information, the Court clarified that mere disclosure of information does not crystallize a scheduled offence. The "reason to believe" required for provisional attachment under Section 5 of the PMLA must be founded on tangible material, not suspicion. The Court held that after the acceptance of a closure report, any belief regarding the existence of proceeds of crime becomes untenable. The Bench ruled that Section 66(2) cannot be used to resurrect a non-existent predicate offence or to sustain an attachment when the foundational crime has been closed by a competent court.

Consequently, the High Court allowed the revision petitions and quashed both the ECIR and the subsequent ML Case No. 15 of 2023 pending before the Special CBI Court. However, safeguarding the interests of the prosecution, the Court granted liberty to the ED to seek revival of the proceedings only if the closure reports in the predicate FIRs are set aside or if fresh legitimate grounds arise in accordance with the law.

Date of Decision: 23/12/2025