PMLA proceedings fail without a surviving scheduled offence; ECIR, summons and look out circulars cannot stand

The constitutional challenge to the Prevention of Money Laundering Act provisions was held infructuous because the Supreme Court had already conclusively decided the validity issue. On the PMLA proceedings, the ECIR could not survive once the scheduled offence and the FIR forming its foundation were quashed. Section 66(2) was treated only as an information-sharing provision, not an independent source of jurisdiction to continue money-laundering action. In the absence of any subsisting predicate offence against the petitioners, the ECIR, summons, coercive steps and look out circulars were quashed.

---

---

Issues: (i) Whether the challenge to the constitutionality and vires of the Prevention of Money Laundering Act provisions survived after the Supreme Court's ruling; (ii) Whether the ECIR and all consequential proceedings, including summons and look out circulars, could continue after the scheduled offence/FIR had been quashed and in respect of persons not shown as accused in that FIR.

Issue (i): Whether the challenge to the constitutionality and vires of the Prevention of Money Laundering Act provisions survived after the Supreme Court's ruling

Analysis: The constitutional challenge had already been conclusively determined by the Supreme Court. Once the controlling question on validity of the provisions stood answered, no separate declaration from the High Court could be granted. The challenge therefore did not survive for adjudication.

Conclusion: The constitutional challenge was infructuous.

Issue (ii): Whether the ECIR and all consequential proceedings, including summons and look out circulars, could continue after the scheduled offence/FIR had been quashed and in respect of persons not shown as accused in that FIR

Analysis: The ECIR was founded on the registered scheduled offence. The quashing of the FIR and the order that led to its registration removed the foundational substratum for PMLA action. The governing principle applied was that money-laundering proceedings cannot rest on a mere assumption of a scheduled offence, and once the scheduled offence is finally quashed there can be no action for money-laundering in relation to property linked to that offence. Section 66(2) of the Prevention of Money Laundering Act, 2002 was held to be only an information-sharing provision and not a source of independent jurisdiction to sustain the ECIR. As no subsisting predicate offence remained against the petitioners, the ECIR could not survive, and neither could the consequential summons, coercive steps or look out circulars.

Conclusion: The ECIR and all proceedings arising from it were quashed and the look out circulars were set aside.

Final Conclusion: The petitions succeeded in part by removing the PMLA proceedings founded on the quashed scheduled offence, while the separate constitutional challenge was rendered unnecessary because it had already been decided by the Supreme Court.

Ratio Decidendi: PMLA proceedings cannot continue in the absence of a legally subsisting scheduled offence, and the quashing of the predicate criminal case extinguishes the foundation for ECIR-based action and all consequential coercive measures.

---