High Court Can't Direct ED To Register ECIR Only Based On Its Prima Facie Finding On Predicate Offence: Supreme Court

The Supreme Court has set aside a High Court direction that had ordered the Enforcement Directorate (ED) to register an Enforcement Case Information Report (ECIR) under the Prevention of Money Laundering Act, 2002 (PMLA).

The Court was dealing with an appeal against the Judgment of the Division Bench of the Kerala High Court in a Writ Appeal directing the Enforcement Director to register an Enforcement Case Information Report (ECIR).

The Bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan ruled that the High Court had no justification for issuing such a directive based solely on its prima facie view that a predicate offence existed.

"According to us, the High Court had no reason to pass a drastic order of directing the Enforcement Directorate to register an ECIR only because the High Court prima facie came to a conclusion that a predicate offence exists. Therefore, we set aside that part of the impugned judgment by which a direction is issued to the Enforcement Directorate to register an ECIR," the Court held.

Senior Advocate Dama Seshadri Naidu appeared for the Petitioner, while AOR C.K. Sasi appeared for the Respondent.

The Bench further observed that the High Court's conclusion regarding offences of misappropriation, breach of trust, and cheating did not warrant a mandatory direction for ECIR registration. The Court clarified that the ED must independently decide whether to initiate proceedings under PMLA.

Consequently, the ECIR registered in compliance with the High Court’s order was quashed, and the matter was left to the ED's discretion. "Therefore, the ECIR registered on the basis of the impugned judgment is hereby quashed and set aside. We leave it to the Enforcement Directorate to take a call on the question of initiating proceedings under the Prevention of Money-laundering Act, 2002," the Court ordered.

Accordingly, the Court disposed of the Appeal.

Kerala High Court's Observation

On December 4, 2024, the Kerala High Court had ordered the Enforcement Directorate to register a case against all the persons involved in the Edamulackal Co-operative Bank Fraud.

The High Court had observed, "On perusal of the order passed as extracted above, it is evident that the FIR has been only registered firstly against only the Secretary. It is wholly intriguing as to how and in what manner the other surcharge persons has been let off with no criminal case. We would like to have the information from the Home Secretary and Additional Chief Secretary, Cooperative Societies, by way of an affidavit, explaining the circumstances and the reasons of not registering the FIR against the other persons, as it is settled law that both criminal and civil proceedings for recovery can go side by side, which will also state the stage of investigation or submissions of final report in the aforementioned FIRs."

"Prima facie, it is a case of breach of trust and cheating which which is a predicate offence as per the provisions of Section 3 of the Prevention of Money Laundering Act, 2002. Since we had issued a notice to Mr. Jayasankar, Standing Counsel for the Enforcement Directorate, we thus direct the Enforcement Director to register an ECIR as provided under the Act against all the persons involved, for misappropriation, breach of trust, cheating, as well as offences under the PC Act forthwith," the High Court had held.

Cause Title: R. Madhavan Pillai v. Rajendran Unnithan S. & Ors. [Special Leave to Appeal (C) No(s) 2987-2988/2025]

Appearance:-

Petitioner: Senior Advocate Dama Seshadri Naidu, Advocates Arun Chandran, P.S. Sudheer (AOR), Rishi Maheshwari, Anne Mathew, Bharat Sood, Jai Govind M J

Respondent: AOR C.K. Sasi, Advocate Meena K. Poulose

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