Delhi HC Quashes ED's ECIR Against Aristo Group Family After Predicate FIR Cancelled, Strikes Down 2025 Addendum as Colourable Exercise of Power
Justice Anish Dayal held that ECIR/DLZO-II/72/2021 could not survive once the EOW's cancellation report in the sole predicate FIR was accepted, and that a belated addendum adding an older, unrelated FIR was legally unsustainable.
The High Court of Delhi, in a judgment pronounced on 18 August 2026, quashed Enforcement Case Information Report No. ECIR/DLZO-II/72/2021 registered by the Directorate of Enforcement against members of the family of the late Dr. Mahendra Prasad, founders of the Aristo Group of Companies, along with directors and senior employees of the group. Justice Anish Dayal, sitting singly, held that once the Economic Offences Wing filed a cancellation report in FIR No. 27/2021 — the sole predicate offence on whose basis the ECIR had been registered — and the Additional Chief Judicial Magistrate, Patiala House Courts, accepted that report on 12 June 2025, the ECIR lost its legal substratum. The Court further held that an addendum issued on 20 August 2025 to incorporate an older FIR (No. 279/2019) as an additional scheduled offence was “vitiated by illegality and procedural impropriety” and bore the imprint of a colourable exercise of power. All coercive steps taken pursuant to the addendum were quashed and status quo ante was directed to be restored in favour of all petitioners.
The Aristo Family Dispute and the ED's Investigation
Dr. Mahendra Prasad, a seven-time Member of Parliament and chairman-promoter of M/s Aristo Pharmaceutical Pvt. Ltd., passed away on 27 November 2021, leaving behind a registered will dated 18 July 2011. His death sharpened a pre-existing family dispute between two factions: on one side, his daughter-in-law Kanchana Rai (second wife of his son Devendra Rai) and her children Achintya Rai and Aradhya Rai; on the other, his sons Rajeev Sharma and Ranjit Sharma along with his widow Smt. Satula Devi, who passed away on 12 June 2022.
Two FIRs are central to the litigation. The first FIR, No. 279/2019, was registered on 21 September 2019 at Police Station Crime Branch on allegations of wrongful confinement of Smt. Satula Devi, removal of jewellery, and offences under the Passports Act 1967. A chargesheet was filed against Smt. Uma Devi and five domestic helps under Sections 323, 344, 406, 509, 411, 34, and 420 IPC and Section 12 of the Passports Act. Charges had not been framed and the matter remained pending.
The second FIR, No. 27/2021, was registered on 10 February 2021 by the Economic Offences Wing under multiple IPC sections relating to forgery and fraud. The allegations were that share transfers involving Aristo Pharmaceuticals and Aristo Laboratories had been carried out by forging the signatures of Smt. Satula Devi. It was on this second FIR alone that the Directorate of Enforcement registered ECIR/DLZO-II/72/2021 on 28 December 2021.
Following investigation, the EOW filed a cancellation report on 8 December 2022, concluding that no offence was made out — the Forensic Science Laboratory had confirmed that the disputed signatures on share transfer forms and cheques were genuine. A protest petition filed by legal representatives of Smt. Satula Devi was dismissed by the ACJM on 12 June 2025, formally accepting the cancellation report and closing the investigation in the second FIR.
More than two months after this closure, on 20 August 2025, the ED issued an addendum to ECIR/DLZO-II/72/2021 incorporating the first FIR as an additional scheduled offence. Searches under Section 17 of the PMLA followed on 25 September 2025. Summons under Section 50 of the PMLA were issued on 30 September 2025 and again on 16 January 2026, the latter requiring petitioners to furnish details of all movable and immovable properties and bank accounts dating back to 1998 and details of entities with which they had been associated since 1988.
Four Questions Before the Court
Justice Dayal identified four issues for determination: whether civil writ petitions were maintainable to challenge an ECIR; whether petitioners should be relegated to the statutory remedy before the Adjudicating Authority; whether the ECIR could lawfully continue after the acceptance of the cancellation report in the predicate FIR; and whether the addendum incorporating the first FIR was legally sustainable.
The ED contested maintainability, arguing that the challenge arose from search-and-seizure powers exercised pursuant to an ECIR and that two Original Applications had already been filed before the Adjudicating Authority. The complainant additionally pressed Section 41 of the PMLA, which bars civil court jurisdiction over matters falling within the domain of the authorities constituted under the Act.
Petitioners — represented by Senior Advocates Siddharth Agarwal, Dayan Krishnan, and N. Hariharan — contended that the ECIR is an internal administrative document (a position acknowledged by the ED itself and by the Supreme Court in Vijay Madanlal Choudhary v. Union of India (2023) 12 SCC 1), that no complaint had yet been filed before the Special Court under Section 44 of the PMLA, and that the challenge to the foundational jurisdictional fact underlying the ECIR fell outside the remit of the Adjudicating Authority entirely.
Civil Writ Jurisdiction and the PMLA's Hybrid Character
Justice Dayal held that the PMLA operates through two distinct streams. The civil stream covers attachment under Section 5, search and seizure under Section 17, freezing of property under Section 17(1A), and adjudication before the Adjudicating Authority under Section 8, with appeals to the Appellate Tribunal under Section 26 and to the High Court under Section 42. The criminal stream commences only with the filing of a prosecution complaint before the Special Court under Section 44, with appeals under Section 47. Since no complaint had been filed and no arrest had been effected, the challenge was squarely in the civil domain.
The Court drew on the Supreme Court's analysis in Vijay Madanlal Choudhary, which held that the ECIR is not a statutory document, that there is no requirement to formally register an ECIR (unlike an FIR under Section 154 of the Cr.P.C.), and that the inquiry undertaken pursuant to an ECIR is not, sensu stricto, an investigation for initiating prosecution. The Court also relied on this Court's earlier Division Bench decision in Vakamulla Chandrashekhar v. Enforcement Directorate, 2017 SCC OnLine Del 12810, which had recognised the hybrid civil-criminal character of the PMLA and was cited with approval by the Supreme Court.
On the alternative remedy question, the Court accepted the petitioners' submission that the Adjudicating Authority's jurisdiction under Section 8 extends only to the validity of provisional attachment and consequential proceedings under Sections 5, 17, and 18, and does not encompass the legality of the ECIR itself or the validity of an addendum to it. The availability of proceedings before the Adjudicating Authority did not, therefore, constitute an efficacious alternative remedy for the challenge raised. Relying on the Supreme Court's observations in Godrej Sara Lee Ltd. distinguishing “maintainability” from “entertainability”, the Court declined to relegate petitioners to the statutory route.
The ECIR's Fate After the Predicate FIR Is Closed
On the third issue, Justice Dayal found the legal position clear. He traced a line of Supreme Court orders in which, upon acceptance of a closure report in the predicate offence, the Solicitor General or Additional Solicitor General had fairly conceded that PMLA proceedings could not continue, and the Supreme Court had quashed the respective ECIRs while reserving liberty to revive them if the predicate offence were subsequently revived.
These included the orders in Directorate of Enforcement v. Obulapuram Mining Company Pvt. Ltd. (2 December 2022), Naresh Kumar Kejriwal v. Director of Enforcement (order dated 25 April 2023), and Adjudicating Authority (PMLA) v. Ajay Kumar Gupta (2 December 2022). The Calcutta High Court in Future Gaming of Hotels Services Pvt. Ltd. v. ED Kolkata (2025) SCC OnLine Cal 10189 had synthesised the same principle: whether a predicate case is closed by way of acquittal, discharge, quashing, or acceptance of a closure report, the PMLA proceedings cannot continue so long as the closure order is not itself set aside.
A coordinate bench of this Court in Rajinder Singh Chadha v. Union of India, 2023:DHC:8429, had applied the same principle but declined to quash the ECIR in that case because a third, subsequent FIR relating to the same transaction had been incorporated. The ED relied on that decision, but the Court found it distinguishable on the key point that the additional FIRs there were subsequent in time and arose from the same transaction.
The ED also argued that the ACJM's order accepting the cancellation report had been challenged in Crl.M.C. 4884/2025 and 4885/2025, which remained pending before this Court, and that finality within the meaning of Vijay Madanlal Choudhary had not been attained. Justice Dayal rejected this. The challenge had been filed but no stay of the ACJM's order had been passed. Pendency of a challenge to an unstayed order does not confer jurisdiction on the ED to continue investigation.
The 2025 Addendum: Timing, Nexus, and Colourable Exercise of Power
The fourth issue proved equally decisive. Petitioners argued that the first FIR was always within the ED's knowledge — it was expressly mentioned in the Section 156(3) application filed by Smt. Satula Devi, in the second FIR itself, in the cancellation report in the second FIR, and in the ED's own counter-affidavit filed in W.P.(C) 9799/2023 in August 2023. The ED's written submissions filed on 11 February 2026 had claimed it came to know of the first FIR only in July 2025; the Court found this assertion belied by its own prior filings.
The ED and complainants argued that both FIRs formed part of a continuous sequence of events arising from the alleged misappropriation of Dr. Mahendra Prasad's estate during his period of mental deterioration. They contended that the second FIR was in continuation of the first, the first FIR having captured only part of the alleged criminal conduct because of the complainant's medical condition at the time.
Justice Dayal examined whether the two FIRs constituted the “same transaction” applying the tests in State of A.P. v. Cheemalapati Ganeswara Rao (1963 SCC OnLine SC 38) — unity of purpose and design, proximity of place and time, continuity of action — and State of Jharkhand v. Lalu Prasad Yadav (2017) 8 SCC 1. He also noted the Bombay High Court's test in Sagar Maruti Suryawanshi v. Enforcement Directorate, 2024 SCC OnLine Bom 3348, that the genesis of subsequent FIRs and the prior FIR must be the same for subsumption into an existing ECIR.
The Court found the differences between the two FIRs material. The first FIR was registered in 2019 and concerned wrongful confinement of Smt. Satula Devi, theft of jewellery, and a passport-related allegation under Section 12 of the Passports Act — none of which are scheduled offences under the PMLA except Sections 411 and 420 IPC. The jewellery had been recovered during investigation. The second FIR registered in 2021 concerned the fraudulent transfer of shares and monies relating to the Aristo group going back to the 1990s. The principal accused in the first FIR was Smt. Uma Devi; the principal accused in the second FIR was Kanchana Rai. The sets of accused persons were different. The underlying transactions were materially different. The offences alleged had no direct nexus except a common complainant and an overarching family dispute.
Section 12 of the Passports Act, the Court noted, is not a scheduled offence. The jewellery alleged to have been stolen was recorded in the chargesheet as recovered from an unlocked wooden almirah. On the passport allegation, there was no evidence that any “proceeds of crime” were generated. The Court concluded that “similarities in the parties involved, or the existence of a broader familial dispute, cannot, by themselves, render otherwise distinct alleged offences, part of the ‘same transaction’”.
Beyond the “same transaction” issue, the Court identified a separate and independently sufficient ground: the ECIR had already ceased to legally subsist when the addendum was issued. An addendum to a dead ECIR cannot resuscitate it. The Court also held that even if an addendum were otherwise permissible in law (and it accepted that adding FIRs to an existing ECIR is not per se illegal, as held in Satinder Singh Bhasin v. State of U.P., 2025:AHC:228033-DB), this particular addendum was issued almost six years after the first FIR was registered, two and a half years after the cancellation report in the second FIR was filed, and only two months after the ACJM accepted that cancellation report. The ED had never previously treated the first FIR as generating “proceeds of crime” warranting PMLA action. If it had genuinely considered the first FIR to disclose a scheduled offence generating proceeds of crime, nothing had prevented it from registering a separate ECIR or taking steps at the appropriate time. The timing and sequence rendered the addendum a colourable exercise of power intended to keep alive an investigation whose original foundation had collapsed.
Order
Justice Anish Dayal disposed of the batch of nine writ petitions on 18 August 2026 with the following directions:
The High Court has jurisdiction in a civil writ petition to consider a challenge to an ECIR and to proceedings emanating therefrom, including steps under Section 17(1) of the PMLA. Petitioners are not required to pursue the alternative remedy before the Adjudicating Authority.
The ED cannot initiate or continue any proceedings under ECIR/DLZO/II/72/2021, including investigation in connection with FIR No. 27/2021, unless and until this Court or a superior court passes further orders reviving the investigation of the predicate offence. All consequential proceedings, including coercive action, emanating from the ECIR stand quashed. Status quo ante is to be restored in favour of the respective petitioners.
The addendum dated 20 August 2025 to ECIR/DLZO/II/72/2021, seeking to initiate PMLA proceedings in respect of FIR No. 279/2019 as an additional scheduled offence, is legally unsustainable. All consequential proceedings, including coercive action, pursuant to the addendum are quashed. Status quo ante is to be restored in favour of the respective petitioners.
Pending applications were rendered infructuous. The Court reserved liberty to the ED to revive ECIR proceedings if the closure of the predicate offence is set aside by a competent court.