PMLA proceedings fail where accepted closure reports erase the predicate offence and the alleged proceeds of crime foundation.

PMLA proceedings could not continue where the predicate Kolkata FIRs had ended in closure reports accepted by the Magistrate, because the foundation of the alleged proceeds of crime had disappeared. The Court also held that the Kolkata ECIR could not be preserved by later reliance on a Kochi charge sheet when that material was already the subject of a separate PMLA proceeding at Kochi, and using it in Kolkata would amount to impermissible second cognizance on the same predicate material. Section 66(2) of the PMLA was held to be only an information-sharing provision and not a source of substantive jurisdiction to revive or sustain proceedings after the predicate offences had been negated.

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Issues: (i) Whether the ECIR and the connected PMLA proceedings could survive after the predicate Kolkata FIRs had ended in closure reports accepted by the Magistrate. (ii) Whether the Enforcement Directorate could sustain the Kolkata ECIR and complaint by additionally relying on the Kochi charge sheet, despite a separate PMLA proceeding already pending at Kochi. (iii) Whether section 66(2) of the Prevention of Money Laundering Act, 2002 could justify continuation of the impugned proceedings in the facts of the case.

Issue (i): Whether the ECIR and the connected PMLA proceedings could survive after the predicate Kolkata FIRs had ended in closure reports accepted by the Magistrate.

Analysis: The predicate offences were the two Kolkata FIRs on which the ECIR was founded. Both FIRs ended in closure reports on the ground of mistake of fact, and those reports were accepted by the Magistrate. The Court held that the foundation of the alleged proceeds of crime had therefore disappeared. Applying the post-Vijay Madanlal Choudhary line of authorities, the Court treated the existence of a live predicate offence and corresponding proceeds of crime as essential for the continuation of PMLA action. Once the scheduled offences stood negated and the acceptance of closure reports remained unaltered, the PMLA proceedings could not be sustained.

Conclusion: The ECIR and the connected PMLA proceedings could not survive on the basis of the two Kolkata FIRs alone.

Issue (ii): Whether the Enforcement Directorate could sustain the Kolkata ECIR and complaint by additionally relying on the Kochi charge sheet, despite a separate PMLA proceeding already pending at Kochi.

Analysis: The Court found no reliable material showing that the Kolkata ECIR was originally predicated on the Kochi charge sheet. The record instead showed that the Kolkata proceedings were tied to the two Kolkata FIRs and that the alleged proceeds of crime were quantified with reference to those FIRs. The Kochi charge sheet was already the subject of a separate PMLA proceeding at Kochi, where cognizance had been taken. The Court held that attempting to add the Kochi charge sheet to the Kolkata ECIR at that stage would amount to a second cognizance based on the same predicate material and would not be legally sustainable on the facts presented.

Conclusion: The Kochi charge sheet could not validly be used to preserve the Kolkata ECIR or the Kolkata complaint in the manner attempted.

Issue (iii): Whether section 66(2) of the Prevention of Money Laundering Act, 2002 could justify continuation of the impugned proceedings in the facts of the case.

Analysis: The Court held that section 66(2) is a mechanism for sharing information with the appropriate agency and does not, by itself, create or sustain a scheduled offence or generate proceeds of crime. It cannot revive a proceeding where the predicate offences have already been negated by accepted closure reports. The Court also held that the existence of pending applications under section 173(8) of the Code of Criminal Procedure, 1973 did not alter the present legal position, because the original closure orders had not been set aside.

Conclusion: Section 66(2) did not furnish a valid basis to continue the impugned proceedings.

Final Conclusion: The impugned ECIR and complaint were quashed, with liberty reserved to seek revival if the predicate position changes in accordance with law.

Ratio Decidendi: Where the predicate offences underlying a PMLA proceeding are concluded by accepted closure reports and the alleged proceeds of crime are traced only to those closed offences, the PMLA action cannot continue unless the predicate foundation is lawfully restored or otherwise survives independently.

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