FIR and ECIR in Financial Crimes: Parallel Investigations with Overlapping Implications
A. Introduction
In the year 1834, the first Indian Law Commission was constituted under the Chairmanship of Lord Thomas Babington Macaulay to examine, inter alia, the existing laws in force in India at that time. The Commission’s recommendation led to the eventual enactment of the Indian Penal Code in 1860. The aim was to substantively define various offences and their subsequent punishments. Subsequently, a separate Code of Criminal Procedure was enacted which came into force in 1973. The Code enshrined the gamut of various procedures which governed the registration of criminal cases, the process of investigation by law enforcement agencies, and thereafter the process of trial. These laws remained largely unchanged for about a century and a half, till the recent overhaul of criminal laws by the present government. Thereby, introducing the Bharatiya Nyaya Sanhita, 2023 (BNS, 2023) to replace the Indian Penal Code, 1860 and the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS, 2023) to replace the Code of Criminal Procedure, 1973.
Be that as it may, the aforesaid penal statutes are generic in nature and largely encompasses all forms of crimes. However, over the years there has been a substantial increase in commission of various financial crimes across the nation. Such financial crimes include illegal activities like fraud (such as accounting, insurance, securities fraud, etc.), money-laundering, Ponzi schemes, counterfeiting, amongst others. To tackle this growing domain of financial crimes, the legislature introduced the Prevention of Money Laundering Act, 2002 (PMLA, 2002) to specifically curb money-laundering as an offence as well as provide provisions for arrest, attachment, and recovery of tainted assets. Therefore, the PMLA, 2002, unlike the BNS, 2023, and the BNSS, 2023, is a comprehensive legislation which comprises both, the substantive as well as the procedural law.
While the intent of the legislature was to create a special statute in the form of PMLA, 2002, to tackle specific financial crimes, this unfortunately led to creation of parallel investigations conducted by separate law enforcement agencies, stemming from a common crime. This is because, on one hand, the police and/or a specialized investigating agency like the Central Bureau of Investigation (CBI) investigates the original crime, which in legal parlance is known as a predicate offence or a scheduled offence. On the other hand, any tainted money (black money) which is generated on the basis of the original crime, is investigated under the PMLA, 2002, by the Enforcement Directorate (ED). While the legislature intended that the specialized statute, i.e., PMLA, 2002, would streamline and fine tune the process of investigation, arrest, attachment, and recovery of tainted money, the real-world implications of overlapping jurisdictions created by parallel investigating agencies have led to unintended consequences. Such discrepancies and issues arise right from the very initiation of investigation by registration of a First Information Report (FIR) as per the BNSS, 2023 pertaining to a predicate offence vis-à-vis an Enforcement Case Information Report (ECIR) pertaining to an offence committed under the PMLA, 2002.
This update aims to highlight various overlapping implications of dual/parallel investigations being conducted by separate law enforcement agencies arising from the same focal point. It further aims to set out the legal architecture of the PMLA, 2002, and the nature of an ECIR, contrasting it with the traditional role of an FIR. It then explores landmark judicial pronouncements that have either reinforced or questioned the legitimacy of such parallel proceedings. Through real-life case studies like Benoy Babu’s prolonged custody, this update highlights the inconsistencies and operational dilemmas that arise from uncoordinated investigative processes. Finally, it concludes with recommendations for reform, including statutory clarity on ECIRs and proposals for a more streamlined inter-agency framework.
B. Understanding the Legal Framework
I. PMLA: A General Overview
As stated above, the PMLA, 2002, is a special legislation enacted with an objective to identify, detect, and penalize offences related to the laundering of proceeds of crime. To facilitate this, officers of the ED have been entrusted with significant investigative powers, including arrest, custodial remand, search and seizure of property and persons, among others.
The PMLA, 2002 criminalizes all dealings relating to the “proceeds of crime,” a term broadly defined under Section 2(1)(u). The term “proceeds of crime” refers to any property, like money, land, or assets, among other things, that someone has derived or obtained, either directly or indirectly, through illegal activities relating to a predicate offence. The said act further defines the commission of the offence of money laundering under Section 3 of the PMLA, 2002, as the direct or indirect attempt to indulge, assist, or be a party to an activity connected to the proceeds of crime. The attempt could be classified as either concealment, possession, acquisition, or use of the proceeds of crime. Notably, the taint of illegality attaches to the value of the asset itself, regardless of whether it has been converted, transformed, or transferred to another person. Where the original property is taken or held outside India, the law empowers authorities to trace and attach property of an equivalent value located domestically or abroad. In effect, any pecuniary benefit arising from unlawful activity, regardless of the form it assumes, or the methods employed to disguise it, can be pursued and penalized under the PMLA, 2002.
II. Distinction between an FIR and an ECIR
The primary distinction between a FIR and an ECIR lies in their legal status, procedural requirements, and subsequent obligations for disclosure of the same. An FIR, governed by the Bharatiya Nagarik Suraksha Sanhita, 2023, is a statutory document that initiates a police investigation into a cognizable offence and must be furnished to the accused, kept in the records of a Magistrate, and the proceedings arising therefrom are conducted under judicial oversight. In contrast, an ECIR is not defined in the PMLA, 2002 and is claimed by the ED to be an internal document. Despite its status, the ECIR serves as the foundation for initiating proceedings under the PMLA, 2002 much like an FIR which forms the foundation of a criminal case under BNSS, 2023. However, unlike an FIR, it is not mandatorily disclosed to the accused, raising concerns around procedural fairness and transparency. The ED often contends that making the disclosure of an ECIR mandatory would undermine the very objectives of the 2002 Act, particularly by frustrating the attachment of property identified as proceeds of crime, and executing arrests of the suspects/accused. Since the ECIR is essentially an internal document of the ED, its non-supply cannot be construed as a violation of Constitutional rights. Another issue which arises due to the non-disclosure of the ECIR is that when a person is named as an accused in an ECIR, he/she does not get access to the allegations drawn up against him/her by the ED. Such a disadvantage does not arise with regard to the related predicate offence, which is being investigated under the BNSS, 2023, by the police authorities. However, the ED contends that the PMLA, 2002 ensures that any person arrested is promptly informed of the grounds for their arrest under Section 19 of the PMLA, 2002, thereby satisfying the requirements of Article 22(1) of the Constitution of India. At the same time, since the PMLA, 2002 provides for its own arrest procedures, the ED is not required to adhere to the guidelines laid by the Hon’ble Supreme Court in the case of Arnesh Kumar v. State of Bihar & Anr.,[1] thereby empowering it to make arrests irrespective of the term of imprisonment. As a result, the opaque and non-transparent nature of the ECIR regime, particularly its non-disclosure and disregard for judicial precedents, continues to be a point of significant legal contention and policy debate.
III. Distinction between bail under BNSS, 2023, and PMLA, 2002
One of the most debated divergences between general criminal law and the PMLA, 2002 lies in the bail regime. Under BNSS, 2023, the general principle governing bail is guided by the gravity of the offence, likelihood of the accused absconding, tampering with evidence, and other routine considerations. The presumption of innocence of the accused remains intact. Conversely, Section 45 of the PMLA, 2002 imposes what are popularly known as the “twin conditions” for bail, which are: (1) The public prosecutor must be given an opportunity to oppose the bail application; (2) The court must be satisfied that there are reasonable grounds to believe that the accused is not guilty and is unlikely to commit any offence while on bail. These twin conditions reverse the presumption of innocence at the pre-trial stage - an exception to settled bail jurisprudence.
IV. Distinction between attachment under the PMLA, 2002 vis-à-vis attachment under the BNSS, 2023
Section 5 of the PMLA, 2002 empowers the ED to provisionally attach property if it has “reason to believe,” based on material in its possession, that such property constitutes proceeds of crime and is likely to be concealed, transferred, or otherwise dealt with in a manner that may frustrate its eventual confiscation. This attachment can be initiated even before the completion of investigation or the framing of formal charges in the predicate offence, thereby reflecting its preventive and pre-emptive character. In contrast, the Section 107 of the BNSS, 2023, mandates prior judicial approval, underlining the emphasis on judicial safeguards and procedural due process. This difference underscores the PMLA, 2002’s distinct legislative intent to provide officers of the ED with independent authority to provisionally attach property, based on an internal assessment, subject to confirmation by an Adjudicating Authority, as a form of rapid and preventive action against money laundering, which is procedurally more aggressive, when compared to the court-supervised, and comparatively restrained, attachment process under the BNSS, 2023.
C. Key Judicial Decisions and Courtroom Interpretations
I. Caught Between Two Agencies - The Parallel Pathway Puzzle
In white collar crimes, recovery of assets is crucial. But when multiple agencies initiate parallel proceedings, it can complicate asset tracking and recovery. This multiplicity of forums results in inter-agency delays, conflicting claims, and frustration of victims’ interests. For instance, the parallel invocation of an FIR by the police or CBI and an ECIR by the Enforcement Directorate often gives rise to jurisdictional overlap, procedural confusion, and inconsistent treatment of the same individual across different proceedings. This duality not only burdens the accused with simultaneous legal battles but also undermines the coherence of the investigation itself. Without a harmonised legal framework to reconcile these concurrent powers, enforcement agencies risk working at cross-purposes, thereby affecting investigative outcomes and eroding judicial efficiency. The case of Benoy Babu v. Directorate of Enforcement[2] serves as a prominent example of this dilemma. This case illustrates one of the most legally fraught outcomes of parallel investigations by two independent investigating agencies regarding the conflicting statuses of the same individual. Benoy Babu, while merely named as a witness in the CBI’s investigation into the alleged liquor licence cartelisation, was simultaneously treated as an accused by the Enforcement Directorate, resulting in his custody for about 13 odd months on the basis of the ED’s independent ECIR. The Hon’ble Supreme Court, in ultimately granting him bail, criticised the excessive pre-trial detention and highlighted the legal incongruity of treating the same person as both witness and accused across overlapping proceedings.
In a distinct but equally telling case, Arvind Kejriwal v. CBI[3], the Hon’ble Supreme Court, while enlarging Arvind Kejriwal on bail, was constrained to observe that the courts should be alive to both ends of the spectrum: the need to ensure proper enforcement of criminal law on the one hand, and the need to ensure that the law does not become a ruse for targeted harassment on the other hand. The Hon’ble Court further clarified that ‘the CBI did not feel the need and necessity to arrest Arvind Kejriwal until after the Learned Special Judge granted him regular bail in the ED case, only then did the CBI activated its machinery, and took him into custody. Such action, on the part of the CBI, raises a serious question mark not only on the timing of the arrest, but perhaps on the arrest itself. In the circumstances, a view may be taken that such an arrest by the CBI was perhaps intended only to frustrate the bail granted to him in the ED case.’ This shows that, at times, the investigating agencies working/operating under BNSS and PMLA may act in tandem to harass a particular individual for extraneous reasons. In this case, even though Arvind Kejriwal was successfully enlarged on bail under the more stringent PMLA regime, he faced further impediments under the general law governed by the BNSS, 2023.
ii. The Domino Effect - FIR Quashed, ECIR at Risk?
White collar crimes often involve offences that are, inter alia, recognized under general penal laws such as the Indian Penal Code, 1860 (IPC), or under special legislations like the Prevention of Corruption Act, 1988. These predicate offences are primarily investigated by the police or specialised agencies such as the Central Bureau of Investigation (CBI), among others. When such offences are suspected to have generated proceeds of crime, the ED is empowered to initiate action under the PMLA, 2002, marking a separate line of enquiry specifically targeting money laundering. The Supreme Court in the case of Vijay Madanlal Choudhary v. Union of India[4] held that the proceedings under the PMLA, 2002, are independent and supplementary to those concerning the predicate offence. This dual structure enables the ED to register an ECIR even while the trial or investigation concerning the predicate offence is ongoing. However, the Court also made it clear that if the accused is ultimately exonerated - whether by acquittal, discharge, or the quashing of the FIR - in relation to the predicate offence, then further proceedings under the PMLA, 2002 cannot be sustained against such accused persons. Despite this, divergent judicial interpretations have emerged. In the case of Vijayraj Surana vs The Directorate of Enforcement[5], the Hon’ble Madras High Court has held that the mere quashing of an FIR in the predicate offence on procedural or technical grounds may not, by itself, lead to the collapse of PMLA proceedings. These interpretations suggest that where the FIR is quashed without a substantive examination of the merits of the alleged offence, the ED’s investigation into money laundering may, in some circumstances, continue. Such findings represent a nuanced departure from the precedent set in Vijay Madanlal, and they raise important questions about the threshold required to sustain or terminate money-laundering investigations/proceedings in the absence of a conclusive finding in the predicate offence.
D. Conclusion
The legal framework to curb financial crimes in India exposes a significant gap between the general criminal procedure and the specialised regime established under the PMLA, 2002. While the ECIR plays a central role in money laundering investigations, its non-statutory status and lack of disclosure obligations raise legitimate concerns about transparency and due process. The coexistence of FIRs and ECIRs, often involving overlapping facts but divergent legal treatment, creates procedural ambiguity, risks arbitrary enforcement, and places undue strain on the suspect/accused. As observed in cases like Benoy Babu and Arvind Kejriwal, the absence of coordinated investigation protocols undermines both fairness and efficiency. Addressing these gaps through statutory clarity on ECIRs, stronger inter-agency coordination, and safeguards against potential overreach and misuse is essential to uphold constitutional rights without compromising the aim and objectives of the PMLA, 2002. Additionally, multiple agencies conducting parallel investigations create inconsistencies. Legislative reform is the sine qua non to resolve these overlaps and to ensure that enforcement actions remain unbiased, do not come at the cost of the constitutional rights of suspects/accused, and do not compromise procedural fairness. As these challenges continue, it will be up to the courts to gradually bring clarity and balance through their decisions, and only time will reveal how these developments unfold.
This Update has been prepared by Soumen Mohanty, Piyush Ray, Agnish Basu, Syed Kishwar,
Vipul Vedant, Upasana Mohanty and Gaurav Bose who can be reached at [email protected], [email protected] , [email protected], [email protected], [email protected], [email protected], [email protected] respectively. This Update is only for informational purposes and is not intended for solicitation of any work. Nothing in this Update constitutes legal advice and should not be acted upon in any circumstance.
[1] Arnesh Kumar v. State of Bihar & Anr., AIR 2014 SC 2756.
[2] Benoy Babu v. Directorate of Enforcement, 2023 SCC OnLine SC 1881.
[3] Arvind Kejriwal v. CBI, 2024 SCC OnLine SC 2550.
[4] Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1.
[5] Vijayraj Surana v. The Directorate of Enforcement, 2024 SCC OnLine Mad 8404.
30 June 2025