The Delhi High Court quashed ED money-laundering proceedings against the Aristo Group, holding a PMLA case cannot survive once the predicate offence is closed, and calling the ED’s revival attempt a colourable exercise of power.
New Delhi: The Delhi High Court has quashed the Enforcement Directorate’s money-laundering proceedings against the family and management of the Aristo Group of Companies, holding that a PMLA case cannot survive once the sole predicate offence on which it was founded has collapsed and that the ED’s attempt to revive the case by belatedly bolting on an older FIR, after the original scheduled offence was closed, was a “colourable exercise of power” [Kanchana Rai v. Directorate of Enforcement and Others].
Justice Anish Dayal, in a detailed 115-page judgment, allowed a batch of writ petitions challenging ECIR No. DLZO-II/72/2021 and quashed all proceedings emanating from it, directing that the status quo ante be restored in favour of the petitioners.
The central principle: no live predicate offence, no PMLA case
The decisive holding rests on the foundational architecture of the Prevention of Money Laundering Act that the offence of money laundering is parasitic on a “scheduled” or predicate offence, and cannot stand on its own once that predicate offence falls away.
Here, the ECIR had been registered in December 2021 exclusively on the basis of one FIR the “second FIR” registered by the Economic Offences Wing in February 2021, alleging that share transfers and bank transactions had been effected by forging the signatures of the late matriarch of the family. That FIR was the sole scheduled offence underpinning the ED’s case. But in December 2022 the EOW filed a cancellation report concluding that no offence was made out the Forensic Science Laboratory having confirmed that the disputed signatures were in fact genuine and in June 2025 a magistrate accepted that cancellation report, bringing the predicate case to a close.
Applying the Supreme Court’s authority in Vijay Madanlal Choudhary v. Union of India and a consistent line of subsequent rulings — including Obulapuram Mining and Naresh Kumar Kejriwal the High Court held that once the predicate offence is disposed of by discharge, acquittal, quashing, or the acceptance of a closure report, the PMLA proceedings founded on it cannot continue. There being no order of any superior court reviving the predicate offence, the ECIR could not legally subsist.
The ‘addendum’ held to be a colourable exercise of power
The more striking part of the judgment concerns the ED’s attempt to keep the case alive. Roughly two months after the magistrate accepted the closure report in June 2025, the ED in August 2025 issued an “addendum” to the same ECIR, seeking to incorporate a much older 2019 FIR (the “first FIR,” relating to alleged wrongful confinement of the matriarch and removal of jewellery) as a fresh predicate offence, and then conducted searches and issued summons on that basis.
The Court found the addendum legally unsustainable on two grounds. First, it could not breathe life into an ECIR whose “original substratum had already ceased to subsist” a dead ECIR could not be revived by adding a new predicate to it. Second, and more pointedly, the Court held that the issuance of the addendum was “vitiated by illegality and procedural impropriety” and bore “the imprint of a colourable exercise of power.” It noted that the first FIR had been registered in 2019 and chargesheeted, yet the ED had not treated it as a basis for a money-laundering investigation for nearly six years, despite the family disputes being repeatedly litigated — a delay that, the Court held, undercut the claim that the FIR independently disclosed proceeds of crime, and exposed the addendum’s true purpose as an attempt to resuscitate a collapsed case.
The Court observed that if the ED genuinely believed the 2019 FIR disclosed proceeds of crime, “nothing prevented it from proceeding in accordance with law at the appropriate stage” by registering a fresh ECIR rather than grafting it onto a defunct one.
A significant finding on writ jurisdiction over an ECIR
Before reaching the merits, the Court made a jurisdictional ruling of wider importance to PMLA litigation. The ED and the complainant had argued that the petitioners ought to be relegated to the statutory remedy before the Adjudicating Authority, and that a civil writ petition challenging an ECIR was not maintainable.
Rejecting that objection, the Court held that it has jurisdiction, in a civil writ petition, to entertain a challenge to an ECIR instituted by the ED and to the proceedings flowing from it, including steps taken under Section 17 of the PMLA, and that the petitioners need not be relegated to the alternative remedy. That the High Court entertained a writ challenge to the ECIR itself rather than confining the petitioners to the PMLA’s internal appellate machinery is a notable affirmation of the writ court’s supervisory reach over money-laundering proceedings.
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The operative directions
Concluding, the Court held that the ED cannot initiate or continue any proceedings under the ECIR including in connection with the second FIR — unless a superior court revives the investigation into the predicate offence, and quashed all consequential proceedings and coercive action emanating from it. It separately struck down the August 2025 addendum seeking to add the 2019 FIR, quashing all consequential action taken pursuant to it, and directed that the status quo ante be restored in favour of the petitioners. The writ petitions were disposed of accordingly.
Background
The Aristo Group comprising Aristo Pharmaceuticals, Aristo Laboratories and Mapra Laboratories was built by the late Dr. Mahendra Prasad, a seven-time Member of Parliament, who died in November 2021. The petitioners are members of his family and the senior management of the group, and the proceedings arise against the backdrop of a bitterly contested dispute among different factions of the family over a substantial estate. The competing FIRs and complaints, the Court noted, were a product of that intra-family litigation observing that where rival factions contest rights over a large estate, “successive allegations and proceedings may inevitably proliferate,” but that this could not furnish a legal basis for indefinitely expanding the scope of an ECIR by adding previously registered predicate offences merely because some factual strand connected them.
Case Title: Kanchana Rai v. Directorate of Enforcement, New Delhi and Others [W.P.(C) 9799/2023 and connected petitions]
Bench: Justice Anish Dayal
Date of Judgment: August 18, 2026
