The Bombay High Court at Goa has quashed money laundering proceedings holding that the Enforcement Directorate (ED) cannot continue proceedings when the underlying scheduled offence no longer survives against them.
The bench of Justice Amit S. Jamsandekar has observed that the earlier quashing of the underlying FIR against the petitioners removed the legal foundation for continuing the proceedings under the Prevention of Money Laundering Act, 2002 (PMLA).
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The dispute arose from an investigation into alleged illegal mining in Goa following the report of Justice M. B. Shah Commission. The Commission had been constituted to examine allegations of illegal mining of iron ore and manganese, including violations of mining, forest and environmental laws.
A Division Bench of the High Court directed the State of Goa to register an FIR against persons identified as responsible for illegal mining in the Commission’s report.
The Crime Branch subsequently registered FIR No. 15/2013 on August 12, 2013, invoking provisions of the Indian Penal Code, the Prevention of Corruption Act, mining legislation and associated rules.
Based on this FIR, the ED recorded ECIR No. PJZO/2/2014 on June 9, 2014. Over the years, summonses were issued to the petitioners and their directors, shareholders and employees.
Accused Discharged; Underlying FIR Subsequently Quashed
The judgment records that the petitioning entities and their associated individuals were not named as accused in the FIR. A chargesheet filed by the Special Investigation Team in February 2018 against 17 persons also did not name the petitioners or their directors.
On February 10, 2025, the Special Judge, North Goa, discharged the persons named in that chargesheet. The State did not challenge the discharge order. According to the State’s reply, the Directorate of Prosecution had advised that the case was not fit for an appeal.
Meanwhile, on January 17, 2023, the Supreme Court had set aside the High Court’s earlier omnibus direction to register an FIR based on the Shah Commission report. As reproduced in the present judgment, the Supreme Court found that such a direction against numerous persons, without giving them an opportunity of being heard, was unsustainable.
After the ED initially opposed the writ petitions on the ground that FIR No. 15/2013 continued to subsist, the petitioners separately challenged that FIR.
On July 16, 2026, the High Court quashed the FIR insofar as it concerned the applicants and their directors, partners, shareholders or employees.
The Court referred to the prolonged delay, the absence of a chargesheet against the petitioners and the unchallenged discharge of the accused in the connected prosecution.
The petitioners argued that the ECIR and proceedings arising from it could not survive once the underlying FIR had been quashed.
He submitted that the ED’s original opposition rested on the continued existence of the FIR. After the July 16 order, there was no surviving scheduled offence against the petitioners to support the money laundering investigation.
The petitioners also relied on the ED’s earlier affidavit, which acknowledged that PMLA action would fail when the scheduled offence ceased to exist in law or the criminal activity giving rise to the alleged proceeds of crime was judicially extinguished.
They cited Supreme Court and High Court decisions, including Vijay Madanlal Choudhary v. Union of India, Pavana Dibbur v. Directorate of Enforcement and Naresh Goyal v. Directorate of Enforcement.
The ED opposed the relief through an additional affidavit filed after the FIR was quashed.
Its counsel, Siddharth Samant, argued that the ECIR covered several other individuals and entities besides the petitioners and that this wider coverage justified refusing their request for quashing.
The ED also advanced submissions supporting the continuation of investigative proceedings despite the quashing of the FIR, relying on decisions of other High Courts.
The Court rejected the argument that the presence of other persons within the ECIR could prevent relief to these petitioners. It explained that the petitioners sought quashing only insofar as the ECIR concerned them.
The High Court relied on the Supreme Court’s ruling in Vijay Madanlal Choudhary to explain the connection between a scheduled offence and money laundering.
Under that ruling, property qualifies as “proceeds of crime” when it is derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence. Authorities cannot proceed merely on an assumption that property represents proceeds of crime or that a scheduled offence has occurred.
The Court further noted that where a competent court finally discharges or acquits a person, or quashes the criminal case concerning the scheduled offence, money laundering action linked to that offence cannot continue against that person or someone claiming the connected property through them.
It also relied on Pavana Dibbur, which recognised the existence of a scheduled offence as a condition precedent for proceeds of crime, and noted that the Supreme Court reiterated the principle in Yash Tuteja v. Union of India.
Applying these authorities, the High Court held that the ED could not exercise jurisdiction in the absence of a subsisting predicate offence.
“Once the predicate offence ceases to exist,” the Court observed, the ED “cannot proceed further.”
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