31 FAQs on SEBI–ED Nexus for Investigations and Adjudications Across India

Summary: The Darshan Mala Series examines the relationship between the Securities and Exchange Board of India (SEBI) and the Enforcement Directorate (ED) in investigations, adjudications and enforcement proceedings across India. Through 31 frequently asked questions, the author distinguishes SEBI’s regulatory jurisdiction under the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996 from the ED’s responsibilities under the Prevention of Money Laundering Act, 2002 (PMLA) and the Foreign Exchange Management Act, 1999 (FEMA). The discussion explains how suspected market manipulation, insider trading, fraudulent practices and disclosure violations may generate information relevant to an independent ED investigation, without automatically constituting a money-laundering offence. It emphasises the importance of identifying a scheduled offence, criminal activity connected with that offence, identifiable proceeds of crime and the alleged process or activity involving those proceeds. The questions address information sharing, anti-money-laundering and know-your-customer obligations, searches, attachment, prosecution, pending predicate-offence proceedings and the consequences of acquittal, discharge or quashing. The author also refers to decisions of the Supreme Court and several High Courts, including Pavana Dibbur and Gautam Kundu, to discuss the relationship between predicate offences and PMLA liability. The concluding defence matrix sets out the records and legal questions that may be relevant when responding to allegations involving SEBI findings and ED action. The article is an educational overview of the author’s supplied material, not a substitute for examining the current statutory provisions and full judgments in individual cases.

1. What is SEBI ED nexus for investigations and adjudications across the India?

(i) There is a significant institutional nexus between SEBI and ED, particularly where a securities-market violation also involve money laundering, Proceeds of Crime (PoC) or foreign-exchange violations.

(ii) However, Securities and Exchange Board of India (SEBI) under the SEBI Act, 1992 and Enforcement Directorate (ED) under the PMLA, 2002 have distinct statutory jurisdictions

2. What is basic division of the SEBI’s roles and the ED’s roles for investigations?

S.No	The SEBI under the SEBI Act, 1992	The ED under the PMLA, 2002
(i)	Working as securities-market regulator.	Working as financial investigation and enforcement agency.
(ii)	Enforces the 3 acts: (a) The SEBI Act, 1992 (b) The Securities Contracts (Regulation) Act (SCRA) 1956 (c) The Depositories Act, 1996 (d) Applicable securities regulations.	Enforces the 2 acts: (a) The PMLA, 2002 (b) The FEMA, 1999
(iii)	Investigates the 4 areas: (a) Market manipulation (b) Insider trading (c) Fraudulent unfair trade practices (d) Disclosure violations	Investigates the 2 areas: (a) Money laundering under PMLA, 2002 (b) The FEMA contraventions under the FEMA, 1999.
(iv)	Permitted to pass the 4 orders: (a) Regulatory orders (b) Adjudicatory orders (c) Penalties orders (d) Debar orders	Permitted to do the 4 activities: (a) To investigate the Proceeds of Crime (PoC) (b) To provisionally attach properties (c) To conduct searches (d) To make arrests where the legally permissible (e) To prosecute against the offences.
(v)	Focuses on 3 areas: (a) Investor protection (b) Securities-market integrity (c) Orderly market development.	Focuses on 2 areas: (a) To combat money laundering (b) To enforce foreign-exchange laws
(vi)	Exercises powers on 2 areas: (a) Securities laws (b) Securities regulations	Exercises powers on 3 Acts: (a) Under the PMLA, 2002 (b) Under the FEMA, 1999 (c) Under the other applicable laws

3. What is difference between ED under PMLA, 2002 and SEBI under SEBI Act, 1992?

(i) The ED itself describes its statutory mandate as enforcement of PMLA, 2002 and FEMA, 1999

(ii) The SEBI’s statutory powers to include:

(a) To obtain information

(b) To share information with authorities for detection of violations of other laws.

4. What is flow chart for SEBI ED nexus?

SEBI detects securities-market irregularity under the SEBI Act, 1992

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Investigate manipulation or fraud and movement of money under the SEBI Act, 1992

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To find PMLA scheduled offence and Proceeds of Crime (PoC) under the SEBI Act, 1992

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Information or material may be shared with ED or another competent agency under the SEBI Act, 1992

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ED examines PMLA angle under the PMLA, 2002

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ED traces the laundering or proceeds and to investigates money laundering under PMLA, 2002

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To attach or to prosecute proceedings when statutory requirements are satisfied under the PMLA, 2002.

5. Whether SEBI violation is “automatically” become a PMLA case?

• No

(i) A SEBI violation by itself does “not automatically” become a PMLA case.

(ii) The PMLA requires the statutory ingredients concerning Proceeds of Crime (PoC) arising from “criminal activity” relating to a PMLA scheduled offence under the PMLA, 2002.

6. Whether SEBI directly refer a case to ED?

• Yes

(i) Practically information or material can share between the SEBI and the ED, but the legal position should be stated carefully.

(ii) The SEBI has express powers to obtain information and to share information with authorities in India having similar functions in relation to prevention or “detection of violations of other laws”.

(iii) The ED also maintains a mechanism for receiving information regarding the PMLA schedule offences under the PMLA, 2002 and FEMA contraventions under the FEMA, 1999

(iv) Therefore, a SEBI investigation can become an important source of intelligence or material for ED, but ED does not simply act as SEBI’s executing arm.

7. What is distinction for litigation with the SEBI and the ED?

(i) The SEBI allege manipulation of shares and wrongful gains of ₹50 crore.

(ii) The ED need to establish the PMLA statutory chain i.e.

(a) The existence of “criminal activity” relating to a PMLA scheduled offence under the PMLA, 2002

(b) The existence of Proceeds of Crime (PoC) under the PMLA, 2002.

(iii) The SEBI violation is “not automatically” a PMLA schedule offence under the PMLA, 2002

(iv) However, SEBI investigation and a PMLA scheduled offence + Proceeds of Crime (PoC) + money laundering is a potential PMLA case under the PMLA, 2002.

• This distinction can be extremely important when examining an ED’s ECIR, summons, search, attachment or prosecution complaint under PMLA, 2002.

8. What is SEBI’s Anti Money Laundering (AML) and Know Your Customer (KYC)?

(i) The SEBI-regulated intermediaries are also subject to KYC or AML obligations under the PMLA, 2002.

(ii) The SEBI materials expressly refer to the PMLA Rules and Central KYC Records Registry requirements applicable to registered intermediaries.

9. What is a practical example for SEBI ED nexus?

(i) The SEBI is a securities-market regulator and first-line market enforcement agency

(ii) The ED is investigator for Proceeds of Crime (PoC) or money-laundering and a FEMA enforcement agency.

(iii) The SEBI’s information, financial trails, KYC/AML information and underlying securities-market offences can move from SEBI’s regulatory investigation into ED’s independent PMLA or FEMA investigation under the PMLA, 2002.

10. Whether ED is permitted to proceed because SEBI alleged a violation?

• No

(i) For a PMLA prosecution, there must be a legally sustainable a PMLA scheduled offence and identifiable Proceeds of Crime (PoC) connected with “criminal activity” relating to the PMLA scheduled offence under the PMLA, 2002.

(ii) The Supreme Court has repeatedly treated existence of Proceeds of Crime (PoC) as a condition precedent to a PMLA scheduled offence under the PMLA, 2002.

(iii) Therefore, SEBI’s SCN or order is not by itself establish a PMLA scheduled offence under the PMLA, 2002.

(iv) The ED is required independently to satisfy requirements of PMLA under PMLA, 2002.

11. What is status of a PMLA’s case when SEBI’s case is quashed?

(i) The Supreme Court held in Pavana Dibbur v. Directorate of Enforcement, 2023 INSC 1029 that where prosecution for the PMLA scheduled offence under the PMLA, 2002 ends in acquittal of all accused, discharge of all accused, or quashing of the scheduled-offence proceedings in their entirety, the scheduled offence ceases to exist and consequently there can be no Proceeds of Crime (PoC) for a PMLA prosecution based upon that offence under the PMLA, 2002.

(ii) The Supreme Court expressly concluded that even a person who was not an accused in the PMLA scheduled offence under the PMLA, 2002 can obtain the benefit of such acquittal, discharge or quashing.

12. Whether a person is escaped PMLA when not accused in predict offence under SEBI?

• No

(i) A person does not escape PMLA merely because he was not named as an accused in the predicate offence under the SEBI Act, 1992.

(ii) The Supreme Court in Pavana Dibbur held that a person can be prosecuted under PMLA even when he was not an accused in the PMLA scheduled offence provided the PMLA scheduled offence exists and the PMLA allegations otherwise satisfy the statutory requirements under the PMLA, 2002.

(iii) Therefore, a person is not escaped PMLA’s case under the PMLA, 2002 when “not accused” in predicate offence under the SEBI Act, 1992:

(iv) The PMLA’s case is existed when a “criminal activity” constituting a PMLA scheduled offence and has specific property or money is alleged as Proceeds of Crime (PoC) under the PMLA, 2002.

13. What is a sequence for SEBI ED nexus?

(i) Identify the SEBI allegation under the SEBI Act, 1992:

(a) Insider trading

(b) Market manipulation

(c) Fraudulent or unfair trade practice

(d) Diversion of funds

(e) False disclosure

(f) Violation of SEBI Act, 1992 or SCRA provisions

(ii) Identify the exact PMLA Schedule offence entry under the PMLA, 2002:

• A SEBI’s violation is “not automatically” a PMLA schedule offence under the PMLA, 2002.

(iii) Identify the predicate “criminal activity” under the PMLA, 2002:

• What exactly was the “criminal activity” under the PMLA, 2002?

(iv) Quantify and trace the Proceeds of Crime (PoC) under the PMLA, 2002:

• Which INR amount or property is alleged to have been generated from that “criminal activity” under the PMLA, 2002?

(v) Establish the laundering activity under the PMLA, 2002:

• How did the accused:

(a) Conceal

(b) Possess

(c) Acquire

(d) Use

(e) Project or

(f) Claim the proceeds as untainted?

14. What is difference between SEBI’s orders and a PMLA schedule offence?

(i) A SEBI’s regulatory finding under the SEBI Act, 1992 and a criminal finding of a PMLA scheduled offence under the PMLA, 2002 are “not necessarily the same thing”.

(ii) The SEBI may determine a regulatory contravention and impose regulatory consequences.

(iii) The ED, however, is required to establish the statutory ingredients of PMLA, 2002 including the existence and linkage of Proceeds of Crime (PoC).

(iv) Therefore, when ED’s ECIR or SCN is required to mention that:

• SEBI found X, therefore X generated Proceeds of Crime (PoC), therefore money laundering occurred under the PMLA, 2002.

(v) The ED is required to examine very closely the reasons.

(vi) The ED is required to find answers of “certain” questions like:

(a) What is the PMLA scheduled offence under the PMLA, 2002?

(b) When was PMLA schedule offence committed under the PMLA, 2002?

(c) Who committed the PMLA schedule offence committed under the PMLA, 2002?

(d) What exact property constitutes Proceeds of Crime (PoC) under the PMLA, 2002?

(e) How was that property derived from the PMLA schedule offence committed under the PMLA, 2002?

(f) What laundering activity is attributed to the notice under the section 3 of PMLA, 2002?

15. What is difference between receipt of money and money laundering?

• An important defence when the ED says that X amount was received by the Noticee

(i) Was the receipt itself the Proceeds of Crime (PoC) under the PMLA, 2002?

(ii) Who generated the alleged Proceeds of Crime (PoC) under the PMLA, 2002?

(iii) Is a PMLA scheduled offence under the PMLA, 2002?

(iv) Was the Noticee aware of the alleged tainted character?

(v) What subsequent process or activity did the Noticee undertake?

(vi) What evidence establishes that activity?

• A mere financial transaction should not be allowed to substitute for the statutory ingredients of the section 3 of PMLA, 2002.

16. Whether pending SEBI’s proceedings are not stopping ED’s investigations?

• Yes

(i) The defence should not argue that ED is legally barred from investigating merely because SEBI proceedings are pending.

(ii) The ED is permitted to investigate independently, but its eventual PMLA case must satisfy the statutory ingredients independently under the PMLA, 2002.

17. What are suggested prayers to the PMLA Adjudicating Authority?

(i) To drop the allegations against the Noticee under the PMLA, 2002.

(ii) To hold that the alleged property has not been established as Proceeds of Crime (PoC) under the PMLA, 2002.

(iii) To hold that no sufficient nexus has been demonstrated between the property and the alleged a PMLA scheduled offence under the PMLA, 2002.

(iv) To distinguish SEBI’s regulatory findings from the statutory requirements of PMLA, 2002

(v) To release, de-freeze properties or accounts wherever legally appropriate

(vi) To provide an opportunity for personal hearing before any adverse order.

• The Supreme Court and High Courts Judgments for the NCB ED Nexus

18. What is Supreme Court’s case of Hemant Soren v. ED (2024)?

• This judgement expressed the distinction between the PMLA scheduled offence and money-laundering activity and examines possession or use of alleged Proceeds of Crime (PoC) under the PMLA, 2002.

19. What is Supreme Court’s case of Vijay Choudhary v. Union of India, (2023)?

(i) This is foundational PMLA judgment under the PMLA, 2002.

(ii) The Proceeds of Crime (PoC) are the core ingredient under the PMLA, 2002.

(iii) There must be “criminal activity” relating to a PMLA scheduled offence under PMLA

(iv) The ED cannot proceed merely on a notional assumption that a PMLA scheduled offence occurred under the PMLA, 2002.

20. What is Supreme Court’s case of Pavana Dibbur v. ED (2023)?

(i) This judgement expressed that a person need not himself be an accused in the PMLA scheduled offence to face consequences under the PMLA, 2002.

(ii) However, the existence of the PMLA scheduled offence and Proceeds of Crime (PoC) is a condition precedent under the PMLA, 2002.

(iii) Moreover, when proceedings against “all accused” in the PMLA scheduled offence are acquitted, discharged or quashed entirely, the foundation for PMLA disappears under the PMLA, 2002.

(iv) The Supreme Court held that when prosecution for the scheduled offence ultimately fails then the PMLA scheduled offence ceases to exist and, consequently, there can be no Proceeds of Crime (PoC) in relation to that offence results in:

(a) Acquittal of all accused

(b) Discharge of all accused or

(c) Quashing of the scheduled-offence proceedings in their entirety

21. What is Supreme Court’s case of Tarun Kumar v. ED (2023)?

(i) This judgement expressed that the PMLA schedule offence under the PMLA, 2002 is different from the predicate offence under the SEBI Act, 1992

(ii) This judgement is relevant for analysing the person’s alleged connection with the process or activity involving Proceeds of Crime (PoC) under the PMLA, 2002.

22. What is Supreme Court’s case of Rohit Tandon v. ED (2017)?

(i) This judgement expressed the existence of a PMLA scheduled offence is the trigger for PMLA investigation under the PMLA, 2002

(ii) However, the PMLA proceedings are different from proceedings concerning the PMLA scheduled offence under the PMLA, 2002.

23. What is Supreme Court’s case of Gautam Kundu v. ED (2015)?

(i) This case is directly concerns the section 24 of the SEBI Act, 1992 as a PMLA scheduled offence under the PMLA, 2002.

(ii) This case is particularly relevant because SEBI itself was the source of the ED action.

(iii) The SEBI had taken proceedings concerning Rose Valley.

(iv) The SEBI’s communication alleged violations under the SEBI Act, 1992

(v) The ED subsequently registered an ECIR alleging an offence under Section 24 of the SEBI Act, 1992 which was then treated as a PMLA scheduled offence under the PMLA, 2002.

(vi) The Supreme Court not agreed that every SEBI violation automatically constitutes a PMLA schedule offence under the PMLA, 2002.

(vii) The Supreme Court held that the question whether the SEBI’s predicate offence was made out had to be examined on the investigation material and by the competent court.

24. What is Delhi High Court’s case of ED v. Mahanivesh Oil & Foods (2026)?

(i) This judgement expressed that scheme of Sections 3, 5 and 8 and the requirement of a PMLA scheduled offence or Proceeds of Crime (PoC) before attachment under the PMLA, 2002.

25. What is Delhi High Court’s case of Anshad Badruddin v. ED (2026)?

(i) The Delhi High Court’s decision is useful that an absence of a PMLA scheduled offence, there can be no Proceeds of Crime (PoC) and consequently no Section 3 PMLA offence under the PMLA, 2002.

(ii) This case gives a clean framework for challenging an ED’s case when the predicate offence itself is legally defective or has disappeared under the SEBI Act, 1992.

26. What is Himachal High Court’s case of Nishant Sareen v. ED (2026)?

(i) This judgement expressed the difficulty of finally determining PMLA liability where the predicate-offence trial itself has not concluded under the PMLA, 2002.

27. What is Gujarat High Court’s case of Rajendrakumar Patel v. ED (2026)?

(i) This judgement discussed the distinction between the predicate offence under the SEBI Act, 1992 and PMLA schedule offence under the PMLA, 2002

(ii) This judgement also discussed the consequences when the predicate proceedings remain pending.

28. What is Calcutta High Court’s case of ED v. Papia Rozario (2026)?

(i) This judgement expressed that PMLA proceedings can proceed independently during the pendency of the predicate case under the SEBI Act, 1992 when there is material indicating the PMLA scheduled offence and the Proceeds of Crime (PoC) under the PMLA, 2002.

29. What is Bombay High Court’s case of Ushik Mahesh v. ED (2024)?

(i) This judgement discussed Gautam Kundu under the section 24 and the requirement to examine whether the SEBI’s scheduled offence is actually made out under the SEBI Act, 1992.

30. What are defences for SEBI violations “not automatically” PMLA schedule offence?

(i) The Supreme Court’s formulation in Vijay Madanlal Choudhary and Pavana Dibbur makes this foundational connection extremely important.

(ii) The SEBI identified an alleged unlawful gain of INR 50 crore through market manipulation, insider trading or fraudulent practice

(iii) The “ED not permitted” for presuming that the SEBI’s violation of INR 50 crore unlawful gain is become Proceeds of Crime (PoC) equivalent to money laundering under the PMLA, 2002.

(iv) There should be a legally sustainable chain for ED’s investigations and adjudications under the PMLA, 2002:

The PMLA Scheduled offence under the PMLA, 2002

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“Criminal activity” relating to PMLA scheduled offence under the PMLA, 2002

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Property derived or obtained from the “criminal activity” under the PMLA, 2002

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Proceeds of Crime (PoC) under the Section 2(1)(u) of PMLA, 2002

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Process or activity involving those proceeds under the PMLA, 2002

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Offence specified under the section 3 of the PMLA, 2002

31. What is SEBI ED defence matrix against the adjudication proceedings?

S. No	The ED’s allegation	Document relied upon by the ED	Legal question or defence scrutiny
	SEBI’s violation	SEBI’s Show Cause Notice (SCN), order or investigation report	Does the alleged violation constitute a PMLA scheduled offence under the PMLA, 2002, or only a regulatory contravention?
	Criminal activity	SEBI’s investigation material, complaint, FIR or prosecution complaint	What specific “criminal activity” relating to the PMLA scheduled offence under PMLA, 2002 is alleged, and what evidence supports it?
	INR X crore unlawful gain	SEBI’s findings, transaction data and ED calculations	How has the amount been calculated? and What is its demonstrated connection with the alleged PMLA scheduled offence under the PMLA, 2002?
	Proceeds of Crime (POC)	Bank statements, demat records, trade logs and asset documents	Which identifiable property is alleged to be POC? and How is it derived or obtained from “criminal activity” relating to the PMLA scheduled offence under the PMLA, 2002?
	Money laundering	The ED’s statements, bank transactions and financial records	Which specific act under Section 3 of the PMLA is alleged? and What evidence establishes the statutory ingredients under the PMLA, 2002?
	Role of noticee	Statements, emails, contracts, account records and transaction documents	What evidence to connects the particular noticee to the alleged activity, including the any required knowledge or involvement?
	SEBI finding	SEBI’s adjudication or final order	Is the finding regulatory, civil, adjudicatory or criminal? What exactly has been decided, and is the order final or under challenge?
	Predicate offence case	FIR, complaint, charge-sheet, cognisance order and subsequent court orders	What is the current legal status of alleged scheduled offence? Has the case been quashed, discharged, compounded where legally permissible, or otherwise concluded?
	Final judicial outcome	Final judgment or operative court order	What has the competent court actually decided about the scheduled offence, the alleged criminal activity and the POC? What is the effect on the PMLA proceedings?

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(Author can be reached at email address [email protected] or on Mobile No. 9811081957)

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