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When Quashing a Second FIR Does Not End PMLA Proceedings: Madhya Pradesh High Court Explains the Surviving Predicate-Offence Test

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When Quashing a Second FIR Does Not End PMLA Proceedings: Madhya Pradesh High Court Explains the Surviving Predicate-Offence Test

A quashed FIR does not invariably extinguish a money-laundering investigation. The decisive question is whether the judicial order has eliminated the criminal activity said to constitute the scheduled-offence foundation, or has merely removed a duplicative proceeding while leaving another FIR concerning the same transaction alive.

The Madhya Pradesh High Court drew this distinction in M/s Jayshri Gaytri Food Products Pvt Ltd v Directorate of Enforcement and Amit Kumar Kuklod v Directorate of Enforcement, W.P. Nos. 9694 and 11472 of 2025, neutral citation 2026:MPHC-JBP:23463, decided on 18 March 2026. B.P. Sharma J dismissed challenges to ECIR/BHZO/13/2024 because an earlier FIR continued to subsist despite the quashing of a later FIR.

The decision is important because the familiar statement that PMLA cannot survive the disappearance of the predicate offence must be applied to the actual operative order. A court must ask what was quashed, why it was quashed, and what criminal proceeding remained.

The two FIRs

FIR No. 0492/2023 was registered at Police Station Habibganj, Bhopal. It alleged offences under sections 420, 406 and 120B IPC concerning fraudulent conduct connected with the company’s dairy-products business. A later FIR, Crime No. 27/2024, was registered by the Economic Offences Wing under sections 420, 467, 468, 471 and 120B IPC. The later allegations included fabricated laboratory reports and export of allegedly substandard products.

ED recorded ECIR/BHZO/13/2024 and commenced its investigation. The petitioners argued that the ECIR lost its legal foundation when the Madhya Pradesh High Court quashed FIR No. 27/2024 on 13 February 2025 in Amit Kumar Kuklod v State of Madhya Pradesh, W.P. No. 22979 of 2024, neutral citation 2025:MPHC-JBP:8338.

That argument depended on treating the 13 February 2025 order as a determination that no scheduled criminal activity existed. The operative order said something narrower.

What the earlier quashing order actually decided

The coordinate Bench found that the two FIRs overlapped in relation to the same transaction. Paragraphs 13 to 16 applied the rule against successive FIRs arising from the same occurrence. The Court also considered the absence of specific allegations supporting vicarious liability of company directors and the principles governing forgery allegations.

Paragraph 17 quashed FIR No. 27/2024 but expressly left Police Station Habibganj at liberty to conduct further investigation in FIR No. 492/2023 and file a supplementary charge-sheet if required. The order therefore prevented a separate, overlapping investigation; it did not quash the first FIR and did not hold that the underlying alleged criminal activity was legally nonexistent.

This operative distinction drove the result in the PMLA challenge. At paragraphs 10 to 12 of the 18 March 2026 judgment, the High Court held that the earlier FIR and allegations survived. Paragraphs 13 and 14 distinguished cases in which the predicate offence had been conclusively eliminated. Paragraph 15 noted that an ECIR is an internal ED document rather than an FIR in the strict sense. Paragraphs 16 to 19 dismissed the petitions, vacated interim protection and permitted ED to proceed according to law.

The governing PMLA connection

Section 2(1)(u) PMLA defines proceeds of crime by reference to property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, or its statutory value equivalent. Section 3 criminalises specified processes or activities connected with those proceeds.

The statutory foundation is therefore criminal activity relating to a scheduled offence, not the mere number or label of FIRs. If one of two duplicative FIRs is quashed but the first continues to carry the same alleged transaction and scheduled offences, the proceeds-of-crime inquiry does not necessarily collapse. Conversely, if the only scheduled-offence case is finally quashed, or the accused is finally discharged or acquitted in a manner eliminating the relevant criminal activity, the consequence may be fundamentally different.

The IPC allegations were historical. Within the PMLA Schedule, sections 120B, 420, 467 and 471 IPC are material scheduled provisions. Sections 406 and 468 IPC are not separately listed there. That distinction matters because an FIR containing several offences does not make every allegation a scheduled offence; the PMLA connection must be traced to the scheduled component and the property allegedly produced from it.

Why Nik Nish Retail and Harish Fabiani were different

In Nik Nish Retail Ltd v Assistant Director, Enforcement Directorate, 2022 SCC OnLine Cal 4044, the predicate FIR itself had been quashed following settlement. Paragraph 34 held that the scheduled offence no longer existed and the PMLA proceeding could not stand alone. The Supreme Court subsequently dismissed ED’s special-leave challenge.

Similarly, Harish Fabiani v Enforcement Directorate, 2022 SCC OnLine Del 3121, concerned a scheduled-offence FIR quashed in its entirety. Paragraphs 16 to 20 held that no predicate FIR survived; paragraph 21 clarified that information shared under section 66(2) PMLA does not itself crystallise a scheduled offence without a registered or pending complaint.

Those cases concern extinction of the relevant scheduled-offence foundation. In the Madhya Pradesh matter, FIR No. 0492/2023 remained pending and the earlier quashing order expressly permitted further investigation within it.

Manturi Shashi Kumar and final acquittal by composition

Manturi Shashi Kumar v Directorate of Enforcement, 2023 SCC OnLine TS 1098, involved a scheduled-offence prosecution compounded through Lok Adalat. Paragraphs 17 and 18 applied section 320(8) CrPC and treated composition as an acquittal. Paragraph 28 held that, for the consequence under PMLA, it was immaterial whether the acquittal was on merits or composition. Paragraphs 30 to 32 directed release of the attached properties because no scheduled offence remained.

Again, the contrast is between final elimination of the scheduled case and procedural consolidation of overlapping FIRs. The legal effect depends on the operative outcome, not on the broad fact that a quashing order exists.

Jagati Publications and the sequencing of trials

Jagati Publications Ltd v Enforcement Directorate, 2022 SCC OnLine TS 1605, should not be read as declaring that every defect affecting one FIR automatically nullifies PMLA proceedings. Paragraph 36 addressed the sequencing of parallel trials: the PMLA trial could proceed independently, but judgment should await the result of the scheduled-offence trial to avoid inconsistent outcomes.

That reasoning reinforces the need to identify the live scheduled-offence proceeding. Where such a proceeding remains, the inquiry moves to its connection with the alleged proceeds and to the proper sequencing of adjudication rather than automatic termination.

The important Mahanivesh Oils development

The petitioners also relied on the 2016 Single Judge decision in Mahanivesh Oils & Foods Pvt Ltd v Directorate of Enforcement. That authority cannot now be presented as current law without a crucial qualification.

On 16 March 2026, two days before the Madhya Pradesh judgment, a Division Bench of the Delhi High Court in Directorate of Enforcement v M/s Mahanivesh Oils & Foods Pvt Ltd, LPA 144/2016, neutral citation 2026:DHC:2147-DB, quashed and set aside the 2016 judgment. Paragraphs 64 to 81 rejected the earlier continuing-offence analysis in light of Vijay Madanlal Choudhary. Paragraphs 84 and 85 restored the provisional attachment and dismissed the writ petition.

The reversed Single Judge propositions should therefore not be used as binding or persuasive statements of the present position. The appellate judgment is the operative authority.

ECIR is internal, but statutory power is not unlimited

The High Court’s observation that an ECIR is an internal ED document reflects the Supreme Court’s treatment of the ECIR as distinct from a police FIR. It does not mean that ED may proceed without a registered or pending scheduled-offence foundation or without satisfying the statutory conditions governing attachment, search, seizure and prosecution.

The practical point is narrower. Quashing a second FIR for duplication does not automatically quash an ECIR when the first FIR remains capable of supporting the same alleged criminal activity. The validity of each PMLA measure must still be tested against sections 2(1)(u), 3 and the specific coercive provision invoked.

Current BNS and BNSS orientation

The historical FIRs correctly cite the IPC because the alleged conduct predated 1 July 2024. For current orientation, the closest counterparts are section 61(2) BNS for section 120B IPC, section 316(2) BNS for section 406 IPC, section 318(4) BNS for section 420 IPC, section 338 BNS for section 467 IPC, section 336(3) BNS for section 468 IPC, and section 340(2) BNS for section 471 IPC.

These cross-references do not imply perfect textual identity or retroactive application. Likewise, section 482 CrPC, the historical inherent-power provision relevant to quashing jurisprudence, corresponds to section 528 BNSS, subject to the applicable commencement and savings rules.

Practical litigation framework

When a PMLA challenge rests on quashing of a predicate FIR, the following questions should be answered from certified court records:

1. Was the only predicate FIR quashed, or merely a second FIR concerning the same transaction? 2. Did the order decide that the alleged criminal activity did not occur, or did it address duplication, jurisdiction or procedure? 3. Does another FIR, complaint, inquiry or trial concerning the scheduled offence remain pending? 4. Does the surviving case cover the property alleged to be proceeds of crime? 5. Which specific offences in the surviving case are included in the PMLA Schedule? 6. Did the operative order preserve further investigation or a supplementary report?

These questions prevent the phrase no predicate offence, no PMLA from being applied as a slogan detached from the procedural record.

Conclusion

The Madhya Pradesh High Court’s ruling is best understood as a decision about legal substratum, not the numerical survival of FIRs. A duplicative FIR may be removed while the alleged transaction remains under investigation in the first FIR. In that situation, the PMLA foundation does not disappear merely because the second FIR was quashed.

The converse remains equally important: ED cannot substitute an internal ECIR or a bare assumption for an actually registered or pending scheduled offence and a demonstrated proceeds-of-crime nexus. The operative terms of the predicate-case order, the status of the surviving proceeding and the property connection must be examined together.

Sources

M/s Jayshri Gaytri Food Products Pvt Ltd v Directorate of Enforcement and connected matter, W.P. Nos. 9694 and 11472 of 2025, 2026:MPHC-JBP:23463, decided 18 March 2026: https://mphc.gov.in/upload/jabalpur/MPHCJB/2025/WP/9694/WP_9694_2025_FinalOrder_18-03-2026_digi.pdf

Amit Kumar Kuklod v State of Madhya Pradesh, W.P. No. 22979 of 2024, 2025:MPHC-JBP:8338, decided 13 February 2025: https://mphc.gov.in/upload/jabalpur/MPHCJB/2024/WP/22979/WP_22979_2024_FinalOrder_13-02-2025_digi.pdf

Directorate of Enforcement v M/s Mahanivesh Oils & Foods Pvt Ltd, LPA 144/2016, 2026:DHC:2147-DB, decided 16 March 2026: https://delhihighcourt.nic.in/app/showFileJudgment/CHS16032026LPA1442016_142957.pdf

Harish Fabiani v Enforcement Directorate, W.P.(CRL.) 408/2022 and connected matters, decided 26 September 2022, 2022 SCC OnLine Del 3121.

Jagati Publications Ltd v Enforcement Directorate, Criminal Petition No. 1217 of 2021, decided 8 September 2022, 2022 SCC OnLine TS 1605.

Manturi Shashi Kumar v Directorate of Enforcement, Writ Appeal No. 107 of 2023, decided 19 April 2023, 2023 SCC OnLine TS 1098.

Nik Nish Retail Ltd v Assistant Director, Enforcement Directorate, C.R.R. No. 2752 of 2018, decided 28 November 2022, 2022 SCC OnLine Cal 4044.

Prevention of Money-Laundering Act, 2002: https://upload.indiacode.nic.in/showfile?actid=AC_CEN_2_2_00035_200315_1517807326550&filename=a2003-15.pdf&type=actfile

Bharatiya Nyaya Sanhita, 2023: https://www.indiacode.nic.in/bitstream/123456789/20062/1/a2023-45.pdf

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