PMLA court closes ED probe in MCX-SX case

Mumbai: In a relief to Jignesh Shah and erstwhile members of the Securities & Exchange Board of India (Sebi), a special court under the Prevention of Money Laundering Act (PMLA) in Mumbai has ordered the closure of the Enforcement Directorate's (ED) money-laundering case arising from the MCX-SX matter, holding that the proceedings cannot survive in the absence of a subsisting scheduled offence.

Additional sessions Judge RB Rote, designated as special judge under PMLA, allowed ED's application and accepted the closure report.

The ED probe stemmed from a CBI case registered in 2014 following a preliminary enquiry initiated in March that year into the functioning of MCX-SX. The preliminary enquiry was subsequently converted into an FIR, naming MCX promoter Jignesh Shah, then Sebi officials Muralidhar Rao, Vishakha More and Rajesh Dangeti, and former Sebi executive director JN Gupta. Gupta had served a two-year term from July 2009 and was in charge of key departments including market regulation, surveillance, derivatives and new products at Sebi.


In 2016, CBI arrested Shah in the said case on allegations of cheating and suppression of material facts to obtain an extension from Sebi for MCX-SX to continue operations as a private stock exchange, allegedly in violation of regulatory norms.

The agency had alleged that the promoters of MCX-SX entered into buyback arrangements with a nationalised bank in violation of the Securities Contracts (Regulation) Act, 1956 and the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006. According to CBI, Shah, in connivance with Sebi officials, deliberately suppressed these arrangements while applying for an extension of recognition to operate in the currency derivatives segment and fraudulently secured the extension in 2009.

Similar allegations were levelled against Financial Technologies India, which sold 7.18 crore shares to IFCI in July 2009 and allegedly entered into a buyback arrangement assuring returns, leading to an alleged wrongful gain of over ₹42 crore.

However, after nearly nine years of investigation, CBI filed a closure report in November 2023, which was accepted by the CBI special court in January 2024. CBI subsequently informed that it had not filed any appeal against the acceptance of the closure report.

Relying on the Supreme Court's ruling in Vijay Madanlal Choudhary vs Union of India, the PMLA court observed that proceedings under the money-laundering law cannot continue once the predicate offence itself has been closed. The court therefore held that continuation of the ECIR was not maintainable and ordered its closure while granting liberty to the ED to reopen the investigation in accordance with law if the closure of the predicate offence is subsequently set aside.