Predicate offence extinction under PMLA bars laundering proceedings, but a later subsisting FIR can sustain the ECIR.

Proceedings under the Prevention of Money Laundering Act, 2002 cannot survive where the underlying scheduled offence has been finally extinguished by compounding or quashing, because the predicate offence is the jurisdictional foundation for action under Section 3. The Court therefore quashed the money-laundering proceedings linked to the first two FIRs. However, an ECIR is an internal record and is not equated with an FIR; the later FIR, involving the same project and disclosing a fresh subsisting scheduled offence, could validly be taken on record in the existing ECIR. Investigation was therefore permitted to continue only in relation to that later offence.

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Issues: (i) whether proceedings under the Prevention of Money Laundering Act, 2002 could continue in respect of predicate offences in the first two FIRs after one was compounded and the other quashed; (ii) whether the later FIR could validly be taken on record in the existing ECIR so as to sustain the investigation.

Issue (i): Whether proceedings under the Prevention of Money Laundering Act, 2002 could continue in respect of predicate offences in the first two FIRs after one was compounded and the other quashed.

Analysis: The existence of a scheduled offence is the jurisdictional foundation for action under the Prevention of Money Laundering Act, 2002. Where the predicate offence is finally extinguished by compounding or quashing, the proceedings for money laundering in relation to that offence cannot survive. The Court applied the settled principle that the offence under Section 3 of the Prevention of Money Laundering Act, 2002 is dependent on criminal activity relating to a scheduled offence and cannot continue on a notional basis once the underlying scheduled offence no longer exists.

Conclusion: The proceedings under the Prevention of Money Laundering Act, 2002 relating to the first two FIRs were quashed and cannot continue against the petitioner.

Issue (ii): Whether the later FIR could validly be taken on record in the existing ECIR so as to sustain the investigation.

Analysis: An ECIR is not equated with an FIR and is treated as an internal departmental record. On that basis, the later FIR, which concerned the same project and disclosed a fresh scheduled offence, could be taken on record in the existing ECIR. The Court held that the later FIR constituted a subsisting scheduled offence and therefore preserved the ECIR for purposes of inquiry and investigation under the Act, though not in relation to the earlier extinguished predicate offences.

Conclusion: The later FIR could sustain the ECIR and the investigation was permitted to continue on that basis.

Final Conclusion: The petition succeeded only to the extent of the earlier predicate offences, while the investigation was allowed to continue in relation to the later scheduled offence.

Ratio Decidendi: Proceedings under the Prevention of Money Laundering Act, 2002 cannot survive in relation to a scheduled offence that has been finally compounded or quashed, but an existing ECIR may continue where a subsequent scheduled offence arising from the same transaction remains subsisting.

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