When Compromise Ends the Predicate Case, Can PMLA Still Survive? A Critical Analysis of Rohit Vij v Directorate of Enforcement
The Delhi High Court’s decision in Rohit Vij v Directorate of Enforcement, BAIL APPLN. 4461/2025, dated 10 August 2026, raises a question of exceptional importance under the Prevention of Money-Laundering Act, 2002: if the predicate criminal case has been finally quashed because the parties compromised, can the Enforcement Directorate continue treating the alleged activity as the source of “proceeds of crime”?
The Court answered that question provisionally in favour of continuation. It distinguished an acquittal or merits-based quashing from quashing founded on compromise. According to the judgment, the former may establish that the scheduled offence never occurred, whereas the latter terminates the prosecution before a judicial determination of criminality and therefore does not necessarily negate the generation of proceeds of crime.
That concern is understandable. Money-laundering is a public wrong and cannot ordinarily be converted into a privately compoundable dispute. Yet the reasoning in Rohit Vij is open to substantial legal criticism. It appears to add a qualification to the Supreme Court’s rule in Vijay Madanlal Choudhary v Union of India that is not found in its text; it does not consider directly relevant coordinate-bench decisions of the Delhi High Court; and it risks replacing the legally operative status of the predicate case with an independent ED assessment of whether the scheduled offence “really” occurred.
The result may ultimately be supportable because 24 additional predicate FIRs allegedly survived. The broader proposition concerning compromise, however, required a more complete precedent analysis and may be difficult to sustain as an unqualified rule.
The facts and the limited procedural setting
Rohit Vij was a regular-bail application under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 read with Section 45 PMLA. It was not a final petition deciding the validity of the ECIR or an appeal after trial.
The ECIR arose from allegations concerning the “Xindai” and “Betench” investment applications, movement of allegedly defrauded funds through bank accounts and forex entities, and conversion of electronic transfers into cash or foreign currency. These remained prosecution allegations; the bail judgment did not determine guilt.
The applicant relied on the quashing of FIR No. 1352/2022 dated 26 July 2022 following a compromise. ED responded that the compromise could not erase money-laundering and that 24 other FIRs had been added to the ECIR through an addendum.
In paragraphs 17 and 18, the Court drew its central distinction. If acquittal or quashing occurs on merits with a judicial finding that the predicate offence never happened, no proceeds of crime could have been generated. But when a case is quashed on compromise, the Court reasoned, there is no finding on the existence of proceeds of crime. Otherwise, alleged launderers could frustrate PMLA proceedings by settling with complainants.
The Court also referred to a later statement attributed to the original complainant alleging coercion in the compromise. It expressly declined to reach a final conclusion on that allegation but regarded the circumstances as prima facie questionable. In addition, it found that the 24 added FIRs prima facie preserved the PMLA foundation, while leaving the legality of their inclusion open for trial.
The first difficulty: Vijay Madanlal does not create a compromise exception
Section 2(1)(u) PMLA defines proceeds of crime by reference to property derived or obtained from criminal activity relating to a scheduled offence. Section 3 criminalises specified involvement with such property. The offence of money-laundering is distinct from the scheduled offence, but the existence of proceeds of crime remains its statutory foundation.
In Vijay Madanlal Choudhary v Union of India, (2023) 12 SCC 1, the Supreme Court held in paragraph 109 that where a person is finally absolved of the scheduled offence through discharge, acquittal or quashing of the criminal case, there can be no money-laundering action against that person or a person claiming through that person in relation to property linked to the stated offence.
The language is outcome-based. It identifies discharge, acquittal and quashing without expressly subdividing quashing into “on merits” and “by compromise”. The word “finally” directs attention to the operative legal status of the scheduled proceeding. Rohit Vij instead directs attention to whether the predicate court made an affirmative factual finding that the crime never occurred.
That is not an inevitable reading of Vijay Madanlal. A quashing order based on compromise may not declare factual innocence, but it legally terminates the criminal case. Unless that order is stayed, recalled or reversed, the scheduled offence is no longer registered or pending in the legally cognisable form that Vijay Madanlal regarded as necessary for punitive PMLA action.
The distinction between factual occurrence and legal existence is crucial. PMLA does not authorise ED to prosecute the scheduled offence. If the competent court has finally terminated that case, ED cannot ordinarily recreate its legal existence merely by asserting that the underlying conduct may nevertheless have occurred.
The second difficulty: a substantial line of contrary authority was not considered
Rohit Vij does not discuss Nayati Healthcare and Research NCR Pvt Ltd v Union of India, 2023:DHC:7542, decided on 11 October 2023, or Rajinder Singh Chadha v Union of India, W.P.(CRL.) 562/2023, decided on 24 November 2023. It also does not consider the authorities examined in those judgments—particularly Nik Nish Retail Ltd v Assistant Director, Enforcement Directorate, 2022 SCC OnLine Cal 4044, and Manturi Shashi Kumar v Director, Directorate of Enforcement, 2023 SCC OnLine TS 1098.
Nik Nish Retail: settlement-based quashing eliminated the scheduled offence
Nik Nish Retail directly involved a predicate FIR quashed on settlement. The Calcutta High Court applied Vijay Madanlal and quashed the ED complaint. Paragraph 34 treated quashing as legally eliminating the offences alleged in the FIR; once the scheduled offence ceased to exist, the PMLA proceeding could not stand by itself.
ED challenged Nik Nish Retail before the Supreme Court in SLP (Crl.) Diary No. 24321/2023. On 14 July 2023, the Supreme Court declined to interfere, while preserving the possibility of lawful revival if the predicate-offence quashing were successfully challenged. The order is important confirmation of the practical consequence applied in that case. It should not, however, be overstated: dismissal of a special-leave petition does not, without more, convert every proposition in the High Court judgment into a declaration of law under Article 141.
Manturi Shashi Kumar: merits and composition treated alike for PMLA dependency
In Manturi Shashi Kumar, the Telangana High Court quashed the Section 3 PMLA complaint after the accused had been discharged or acquitted in the scheduled-offence case. Paragraph 28 stated that, for the PMLA dependency analysis, it was immaterial whether the acquittal was on merits or composition. The controlling idea was that Section 3 requires illegal gain derived from criminal activity relating to a legally surviving scheduled offence.
Manturi Shashi Kumar did not involve precisely the same procedural facts as Rohit Vij: it arose from discharge/acquittal, whereas Rohit Vij concerned an FIR quashed through compromise. Its express treatment of composition nevertheless contradicts the categorical distinction subsequently adopted in Rohit Vij and therefore required engagement before a contrary general rule was formulated.
Nayati Healthcare: Delhi High Court applied both authorities to a settlement
Nayati Healthcare is the most direct coordinate-bench difficulty. The predicate FIR had been quashed following settlement and the order had not been challenged. Justice Amit Bansal reproduced and applied Nik Nish Retail and Manturi Shashi Kumar, held that the ED complaint could not survive, and quashed ECIR/51/DLZO-II/2021 together with the related look-out circular.
The exact ratio should be stated carefully. Nayati did not hold that an ECIR must disappear whenever any one of several predicates is compromised. It proceeded on the footing that the operative predicate foundation for that ED complaint had been finally quashed and no legally surviving scheduled offence was shown to sustain it.
Rajinder Singh Chadha: extinguished predicates were severed while a surviving FIR preserved the ECIR
Rajinder Singh Chadha supplies an even closer analytical answer to the multiple-FIR situation in Rohit Vij. ECIR/09/HIU/2019 was associated with FIR No. 16/2018 and FIR No. 49/2021, both involving alleged offences under Sections 420, 406 and 120B IPC. The former had been compounded and the latter quashed. A third case, FIR No. 55/2023, was subsequently registered for alleged offences under Sections 409, 420 and 120B IPC.
In paragraph 36, Justice Amit Sharma refused to quash the ECIR in its entirety because FIR No. 55/2023 supplied a surviving scheduled-offence foundation. At the same time, the Court held that ED could not initiate or continue any proceeding—including investigation—in connection with FIR Nos. 16/2018 and 49/2021. The PMLA proceedings attributable to those extinguished FIRs were specifically quashed qua the petitioner.
This was not a finding that the compromise erased every part of a multi-predicate ECIR. It was a calibrated severance ruling:
1. the compounded and quashed FIRs could no longer independently support PMLA action;
2. the later scheduled FIR could preserve the ECIR and the investigation linked to that surviving predicate; and
3. the legal effect of each predicate had to be assessed separately.
That method maps directly onto Rohit Vij. If the 24 additional FIRs were lawfully incorporated and genuinely connected with the alleged proceeds, they could preserve the relevant PMLA investigation. But Rajinder Singh Chadha indicates that their survival does not resurrect FIR No. 1352/2022 or permit continued PMLA action to the extent founded exclusively on that compromised and quashed FIR.
The later single-judge ruling in Rohit Vij could distinguish these cases on facts. It could emphasise the 24 additional FIRs, the alleged multi-victim scheme, the questioned bona fides of the compromise, or the bail posture. But a coordinate bench cannot silently create a conflicting general rule without engaging with earlier coordinate authority. Ordinarily, if the earlier rule cannot be distinguished and the later bench disagrees, judicial discipline requires reference to a larger bench rather than an implied departure.
This does not automatically render the entire decision void or conclusively “per incuriam”. That label requires care, particularly because the outcome had an independent factual basis. But the omission materially reduces the precedential force of the broad compromise proposition.
The third difficulty: a bail court need not decide an unsettled jurisdictional issue broadly
The compromise question was considered while deciding bail under Section 45. At that stage, the Court was required to assess whether reasonable grounds existed for believing that the applicant was not guilty and was unlikely to commit an offence while on bail. It was not conducting a final trial or conclusively adjudicating the validity of the ECIR addendum.
The judgment itself acknowledges in paragraph 22 that the legality of incorporating the 24 FIRs could not be conclusively decided at the bail stage and could be raised later at trial. The same caution should arguably have governed the broader compromise proposition.
If 24 legally surviving and transactionally connected scheduled FIRs existed, the Court could have held that quashing of the original FIR did not eliminate the entire foundation because other predicates remained. That narrow conclusion would have been consistent with Rajinder Singh Chadha and Yash Tuteja. It was unnecessary to formulate the wider proposition that compromise-based quashing is categorically different from merits-based quashing for PMLA survival.
The strongest defence of Rohit Vij
A fair critique must acknowledge the powerful arguments supporting the judgment.
Money-laundering affects the financial system and society, not merely the complainant. A settlement may compensate one victim without accounting for other victims, public revenue, layered transactions or property already integrated into the economy. Permitting a principal offender to purchase the disappearance of PMLA consequences would frustrate the statute.
Further, the original FIR in Rohit Vij was not the only alleged predicate. The Court recorded 24 additional FIRs connected prima facie with the applications and the wider conspiracy. The applicant’s absence from those FIRs was not determinative because a laundering accused need not be a predicate accused. The ultimate refusal of bail may therefore be defensible without accepting the broad compromise exception.
The allegation that the original complainant was coerced also justified judicial caution. But caution at bail is different from a final rule that an operative compromise-based quashing order carries no terminating effect under PMLA.
The Supreme Court has recognised that the question remains open
On 3 February 2026, the Supreme Court in Directorate of Enforcement v Gagandeep Singh, SLP (Crl.) No. 2234 of 2023 with connected matters, expressly identified the larger issue concerning the meaning of “crime” in Section 2(1)(u), the impact of Explanation (i) to Section 44, and the effect of quashing, discharge, acquittal, absence of sanction or compromise in the predicate case.
That reference is incompatible with presenting the compromise question as conclusively settled. Until the Supreme Court answers it, courts should acknowledge the competing lines of authority and avoid categorical formulations unnecessary to decide the case.
A more coherent legal approach
The better interim framework would be:
1. A final order quashing the only predicate case must be given legal effect unless stayed, recalled or reversed.
2. If the quashing order was allegedly procured through coercion or fraud, the competent forum should be moved to set it aside; ED should not collaterally disregard it.
3. Every additional FIR must be tested separately for a qualifying scheduled offence, legal survival and a real nexus with the alleged proceeds.
4. PMLA action may continue to the extent it rests on a distinct surviving predicate and connected property, even though another FIR was quashed through compromise.
5. The PMLA accused’s absence from the predicate FIR is not decisive, but ED must still establish the scheduled criminal activity and proceeds nexus.
6. Bail-stage observations should remain provisional and should not foreclose a later jurisdictional challenge to the prosecution complaint or addendum.
This approach protects the public interest without permitting PMLA authorities to assume jurisdiction on a scheduled offence that no longer exists in law.
Conclusion
Rohit Vij confronts a genuine enforcement problem: a private settlement should not become a device for laundering criminal liability, particularly in a multi-victim financial scheme. But a hard case cannot supply authority to rewrite the statutory dependency between the scheduled offence and proceeds of crime.
The judgment’s broad distinction between merits-based and compromise-based quashing is not expressed in Vijay Madanlal. It was formulated without considering Nik Nish Retail, Manturi Shashi Kumar, Nayati Healthcare and Rajinder Singh Chadha. Those decisions do not all arise from identical facts, but together they establish a substantial contrary line: an extinguished predicate cannot independently sustain PMLA action, while a separate surviving predicate may preserve the ECIR only to the extent of its own proceeds-of-crime nexus. That distinction was especially important because the 24 additional FIRs already offered a narrower basis for holding that the entire PMLA foundation had not disappeared.
The sound criticism is therefore not that PMLA necessarily had to end in Rohit Vij. It is that the Court should have rested its conclusion on the surviving predicate FIRs and left the larger compromise question open. Whether a finally quashed compromise case can independently continue supplying “criminal activity relating to a scheduled offence” now requires authoritative resolution by the Supreme Court.
General information disclaimer
This article is a legal analysis of reported judicial decisions and does not constitute legal advice. Bail findings are prima facie and do not determine guilt. The governing position may change when the Supreme Court decides the pending connected matters.
Sources
Delhi High Court, Rohit Vij v Directorate of Enforcement, BAIL APPLN. 4461/2025, judgment dated 10 August 2026, especially paragraphs 15–22 and 56–57: https://delhihighcourt.nic.in/web/judgement/fetch-data
Supreme Court of India, Vijay Madanlal Choudhary v Union of India, (2023) 12 SCC 1, judgment dated 27 July 2022, especially paragraph 109: https://api.sci.gov.in/supremecourt/2018/20982/20982_2018_1_1501_37292_Judgement_27-Jul-2022.pdf
Supreme Court of India, Yash Tuteja v Union of India, 2024 INSC 301, judgment dated 8 April 2024, especially paragraphs 2–10: https://api.sci.gov.in/supremecourt/2023/14771/14771_2023_8_68_52049_Judgement_08-Apr-2024.pdf
Supreme Court of India, Directorate of Enforcement v Gagandeep Singh, SLP (Crl.) No. 2234 of 2023 with connected matters, order dated 3 February 2026: https://api.sci.gov.in/supremecourt/2022/42315/42315_2022_5_10_67907_Order_03-Feb-2026.pdf
Delhi High Court, Nayati Healthcare and Research NCR Pvt Ltd v Union of India, W.P.(CRL.) 2871/2022, 2023:DHC:7542, judgment dated 11 October 2023, especially paragraphs 12–15; available through the official judgment portal: https://delhihighcourt.nic.in/web/judgement/fetch-data
Calcutta High Court, Nik Nish Retail Ltd v Assistant Director, Enforcement Directorate, 2022 SCC OnLine Cal 4044, especially paragraph 34; the material holding and the Supreme Court’s order dated 14 July 2023 in SLP (Crl.) Diary No. 24321/2023 are reproduced in paragraphs 12–13 of Nayati Healthcare above.
Telangana High Court, Manturi Shashi Kumar v Director, Directorate of Enforcement, 2023 SCC OnLine TS 1098, especially paragraph 28; the material holding is reproduced in paragraph 14 of Nayati Healthcare above.
Delhi High Court, Rajinder Singh Chadha v Union of India, W.P.(CRL.) 562/2023, judgment dated 24 November 2023, especially paragraphs 28 and 36: https://dhccaseinfo.nic.in/jupload/dhc/598/judgement/24-11-2023/59824112023CRLW5622023_174901.pdf
India Code, Prevention of Money-Laundering Act, 2002, especially Sections 2(1)(u), 3, 44 and 45: https://www.indiacode.nic.in/handle/123456789/2036
India Code, Bharatiya Nagarik Suraksha Sanhita, 2023, especially Sections 483 and 531: https://www.indiacode.nic.in/handle/123456789/20099
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