Quashing Of Subsequent FIR Doesn't Extinguish PMLA Proceedings If Earlier FIR Subsists: MP High Court

The Madhya Pradesh High Court, while quashing a petition filed by a milk manufacturer and exporter, has held that proceedings under the Prevention of Money Laundering Act can continue even if a subsequent FIR is quashed, provided an earlier FIR forming the basis of the alleged offence is subsisting. The bench of Justice BP Sharma observed; "In view of the foregoing analysis, this Court holds that the quashing of FIR No.27/2024 does not extinguish the existence of the scheduled offence and that FIR No.0492/2023 registered at Police Station Habibganj continues to provide a valid source and jurisdictional foundation for the proceedings under the PMLA. The investigation initiated by the Enforcement Directorate is, therefore, legal and valid". A petition was filed by a company involved in the manufacture and export of milk products, challenging the validity and legality of ECIR registered under the Prevention of Money Laundering Act. Per the facts, an ECIR was registered on the allegations that the company and its functionaries were involved in manufacturing and exporting adulterated milk products using forged laboratory reports. Initially, an FIR was registered for cheating (Section 420), criminal breach of trust (Section 406) and criminal conspiracy (Section 120B) of the IPC. Subsequently, a FIR was registered by the Economic Offences Wing, Bhopal, for cheating (Section 420), forgery of valuable security (Section 467), forgery for cheating (Section 468) and using a forged document as genuine (Section 471) of IPC. Based on the said material, the ED registered an ECIR and initiated proceedings under PMLA. The second FIR, however, was quashed by the High Court through an order of February 13, 2025. The primary issue before the High Court was whether, after the quashing of the FIR registered by the EOW, the Enforcement Directorate is left without any valid source or material to continue its investigation under the PMLA, or whether the earlier FIR registered at Police Station Habibganj continues to provide the requisite jurisdictional foundation.The counsel for the petitioner contended that the proceedings under PMLA were entirely dependent on the FIR and cannot exist without the existence of a valid and subsisting scheduled offence. It was further contended that the ECIR would be obliterated as the very foundation of the proceedings, that is, the second FIR, was quashed. The counsel for the ED contended that the premise that the proceedings under PMLA are dependent upon FIR was erroneous. The counsel further argued that the High Court, while quashing the second FIR, did not hold that the offence did not exist, but merely held that the two FIRs cannot be registered for the same cause of action. The bench noted that the second FIR was quashed with the observation that it was filed in continuation of the same set of facts and transactions forming the subject matter of the first FIR. The second FIR was quashed to prevent double jeopardy. The bench further noted that the order of February 13, 2025, did not extinguish the allegations but merely consolidated the two FIRs. Thus, the earlier FIR continues to subsist and remains a valid source of investigation. The bench highlighted "In the context of the PMLA, what is required is the existence of a scheduled offence and the generation of proceeds of crime therefrom".Additionally, the court emphasized "the ECIR is not an FIR in the strict sense and is merely an internal document of the Enforcement Directorate for initiating investigation. The validity of the ECIR cannot be tested on the same parameters as an FIR. The Enforcement Directorate is entitled to act on the basis of material available to it, including information derived from multiple sources". Accordingly, the petitioner was dismissed. Case Title: M/s Jayshri Gaytri Food Products v Directorate of Enforcement [WP-9694-2025]Citation: 2026 LiveLaw (MP) 85Click here to read/download the Order

Quashing Of Subsequent FIR Doesn't Extinguish PMLA Proceedings If Earlier FIR Subsists: MP High Court

Jayanti Pahwa

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Jayanti Pahwa

Quashing Of Subsequent FIR Doesn't Extinguish PMLA Proceedings If Earlier FIR Subsists: MP High Court

Jayanti Pahwa

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Jayanti Pahwa

This is a premium content
Available exclusively to
Our subscribers