ED Is Not A Super Cop To Investigate Anything & Everything Which Comes To Its Notice: Madras High Court

The Madras High Court remarked that the ED (Enforcement Directorate) is not a super cop to investigate anything and everything which comes to its notice.

The Court remarked thus in two Writ Petitions seeking to call for records, quash the Order under Section 17(1-A) of the Prevention of Money Laundering Act, 2002 (PMLA), and forbearing the authorities from proceeding in investigation.

A Division Bench comprising Justice M.S. Ramesh and Justice V. Lakshminarayanan observed, “If any criminal act takes place, it is certainly open to any individual to bring it to the notice of police or appropriate authorities who are entitled to register a complaint on these aspects. A perusal of the papers show that no complaint had been lodged with respect to any of the aforesaid alleged criminal activities. The ED is not a super cop to investigate anything and everything which comes to its notice.”

The Bench added that there should be a “criminal activity” which attracts the schedule to PMLA, and on account of such criminal activity, there should have been “proceeds of crime” and it is only then the jurisdiction of ED commences.

Senior Advocate B. Kumar and Advocate S. Ramachandran appeared on behalf of the Petitioner while Additional Solicitor General (ASG) AR.L. Sundaresan and Special Public Prosecutor (SPP) N. Ramesh appeared on behalf of the Respondents.

Facts of the Case

The Petitioner-company was incorporated in 1991 which was a venture by five women entrepreneurs. Its primary business was to set up and operate a Bio Mass Power Generation Plant in Karnataka. In 2005, a joint venture agreement was entered into between the Petitioner with another. The Petitioner wrote to the Secretary, Ministry of Coal, Government of India, seeking permanent coal linkage. Five months later, its request was renewed with a slight change. The application for allotment of coal block was taken up for consideration by the Ministry. The minimum capacity for coal block allocation was fixed at 500 MW. In all, 187 applications were received by the screening committee and out of 187 applications, 115 applications were found eligible. The Petitioner was one such eligible candidate and was found to be qualified for allotment. Along with it, four other companies were also allotted the Fatehpur East Coal Block and these five entities joined together and formed another entity.

After securing a coal block, when the entity went to inspect the property, it found that it was a reserved forest. Being a reserved forest, it was incapable of any non-forest activity which includes coal mining. Hence, a Writ Petition was filed by one, challenging the validity of such allotments. The Supreme Court held such allotments as illegal and the Central Bureau of Investigation (CBI) was called upon to investigate each of the allocations and take appropriate action. Resultantly, a case was registered for the offences under Sections 420 and 120B of the Indian Penal Code, 1860 (IPC) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act). Thereafter, ED registered a case and investigation was taken up under PMLA. Consequently, the ED passed an order, freezing all the bank accounts of the Petitioner.

Writ Petitions were filed before the High Court, which held that the Respondents had the power to pass the impugned order but set aside the same on the ground that the power is not unlimited or unbridled. The CBI filed a closure report as ‘mistake of fact’ before the Special Judge, which referred the matter back to CBI. There was not much progress in this case, but the Petitioner was repeatedly called upon for enquiry and investigation by ED. Hence, the case was before the High Court again, which allowed the Writ Petition. The ED preferred a Special Leave Petition (SLP) before the Apex Court but the same was withdrawn. ED conducted a search in the premises of the Directors and holding companies associated with Petitioner and then passed a freezing order, which was challenged before the High Court.

Court’s Observations

The High Court in view of the above facts, noted, “… mere existence of an alternate remedy by way of a statutory appeal, does not mean that this Court should not interfere. Mr.AR.L.Sundaresan is right in stating that the view which prevailed more than a decade and beyond was that, due to the existence of alternate remedy, the writ petition itself was held to be not maintainable. In the watershed case of Godrej, cited above, the Supreme Court made a difference between maintainability and entertainability. It is finally the discretion of a Court to decide whether it wants to entertain the writ petition or not, but certainly it cannot hold that the writ itself is not maintainable.”

The Court said that seeking writ by way of a Petition under Article 226 is too precious a constitutional right to be surrendered for the very existence of an alternate statutory remedy and in this case, not once, but twice, Writ Petitions have been entertained by the High Court and Orders have been passed in favour of the Writ Petitioner.

“The terminus a quo for the ED to commence its duties and exercise its powers is the existence of a predicate offence. Once there exists a predicate offence, and the ED starts investigation under the PMLA, and file a complaint, then it becomes a stand alone offence. As long as there is no predicate offence, ED cannot plead that since no one set up the criminal law into motion, it will rely on that doctrine and commence proceedings under the PMLA”, it further elucidated.

The Court reiterated that where an act has to be done in a particular way, it must be done in that way and in no other way. It added that the PMLA demands the existence of a predicate offence.

“When there is no predicate offence, initiation of proceedings under PMLA is a non starter. If the arguments of the Additional Solicitor General is accepted, then the ED on registration of an ECIR can conduct a roving enquiry with respect to other aspects also. That is not the position of law. To put it pithily, no predicate offence, no action by ED”, it also observed.

The Court emphasised that in case, the investigating agency does not find any case with respect to the aspects pointed out by the ED, then the ED cannot suo-motu proceed with the investigation and assume powers.

“The essential ingredient for the ED to seize jurisdiction is the presence of a predicate offence. It is like a limpet mine attached to a ship. If there is no ship, the limpet cannot work. The ship is the predicate offence and “proceeds of crime”. The ED is not a loitering munition or drone to attack at will on any criminal activity”, it remarked.

The Court, therefore, concluded that the impugned order suffers from a jurisdictional error and the order of attachment is per se without jurisdiction. It said that the ED does not and cannot possess jurisdiction based on the phantoms that it sees from the charge sheet.

Accordingly, the High Court allowed the Writ Petition and set aside the impugned order.

Cause Title- R.K.M. Powergen Private Limited v. The Assistant Director, Directorate of Enforcement & Anr. (Case Number: W.P.Nos.4297 & 4300 of 2025)

Click here to read/download the Judgment