Prior Registration Of FIR Is Not Prerequisite For ED To Initiate Civil Attachment Or Issue Summons Under PMLA: Kerala High Court

The Kerala High Court held that the non-registration of a First Information Report (FIR) or the non-filing of a complaint regarding a predicate scheduled offence does not bar the Enforcement Directorate (ED) from initiating civil actions, such as provisional property attachment under Section 5 or issuing investigative summonses under Section 50 of the Prevention of Money Laundering Act (PMLA).

The Court clarified that while a pre-registered scheduled offence remains a mandatory foundation to launch a criminal prosecution under Section 3 of the Act, the civil limb operates independently to prevent the dissipation of the proceeds of crime.

Consequently, the Bench sustained the dismissal of the Writ Petition, noting that an Enforcement Case Information Report (ECIR) is an internal administrative mechanism that cannot be legally equated to a statutory FIR, rendering any prayer to quash it entirely misconceived at the summons stage.

The Division Bench of Justice Raja Vijayaraghavan V and Justice K. V. Jayakumar Vijesh observed, "In view of the discussion above, we hold that the non-registration of an FIR or non-filing of a complaint in respect of a scheduled offence will not bar the ED from initiating civil action under the PMLA. The registration of a scheduled offence is a prerequisite only for penal prosecution under Section 3 and not for the civil action of attachment under Section 5 or the exercise of inquiry powers under Section 50 of the PMLA. As regards the prayer to quash the ECIR, we hold that since the ECIR is not a statutory document and even the non-registration of an ECIR does not impede the commencement of civil action, the prayer to quash the ECIR cannot be granted in this case."

Senior Advocate Siddharth Luthra, Senior Advocate Arshdeep Singh Khurana appeared for the Appellants, while Additional Solicitor General of India A.R.L Sundaresan appeared for the Respondents.

Brief Facts of the Case

The Income Tax Department conducted a search at the premises of the Petitioner/Company and the residences of its key officials, which led to the issuance of assessment notices. Subsequently, the Company approached the Income Tax Settlement Commission, and an interim board passed a settlement order. The petitioners claimed that this order granted them immunity from prosecution for offences under the Income Tax Act.

Thereafter, a private complaint was submitted before the Ministry of Corporate Affairs (MCA) alleging financial irregularities in the Company. Acting on this, the MCA first appointed Inspectors to investigate the affairs of the Company and later entrusted the investigation to the Serious Fraud Investigation Office (SFIO).

While the SFIO probe was underway, the Enforcement Directorate (ED) registered an Enforcement Case Information Report (ECIR) under the Prevention of Money Laundering Act (PMLA) against another entity, M/s. Exalogic Solutions Private Limited, which had financial dealings with the Company. The ED subsequently issued summonses to the employee-petitioners, directing them to appear in person and produce documents. The petitioners requested copies of the ECIR and details of the scheduled offence, which the ED declined to furnish.

Consequently, the petitioners approached the High Court seeking to quash the ECIR, the summonses, and the consequential proceedings. The learned Single Judge dismissed the Writ Petition holding it to be premature, which was challenged by the petitioners in the present appeal.

Contentions of the Petitioners

It was submitted that the registration of an ECIR and the issuance of summonses under the PMLA were wholly without jurisdiction, as there was no valid First Information Report (FIR) or complaint registered by any competent investigating agency regarding a scheduled offence at the time of the initiation of the PMLA proceedings. It was argued that the settlement order passed under the Income Tax Act was conclusive in nature. Therefore, no matter covered under the said settlement could be reopened under any other law, rendering the parallel inquiry illegal.

Prejudicial Violation of Principles of Natural Justice: The petitioners contended that the learned Single Judge erred by relying on additional affidavits filed by the respondent after the case was reserved for judgment, without granting the petitioners an opportunity to respond or to point out that the SFIO proceedings had been stayed by the High Court of Delhi. It was urged that even if the ED initiated emergent action, it failed to establish that contemporaneous information was forwarded to the jurisdictional police for registering a predicate offence, or that any provisional attachment of properties was carried out as required by the law.

Contentions of the Respondents

It was contended that the Writ Petition was highly premature and non-maintainable. The respondent argued that an ECIR was merely an internal administrative document and not a statutory framework amenable to being quashed, and a person merely summoned could not be termed as an aggrieved party. The respondent argued that since the Company was a publicly listed entity involving public and government-sector shareholding, the fraudulent removal and concealment of corporate funds caused massive financial losses to the shareholders, thereby attracting the offence of cheating under the Indian Penal Code and fraud under the Companies Act, both being scheduled offences under the PMLA.

It was submitted that the immunity granted under the Income Tax Act did not extend to independent statutory offences like money laundering. Furthermore, by virtue of the PMLA, any person summoned was under a strict statutory obligation to attend, state the truth, and produce the required records, and the ongoing SFIO probe could not interdict the ED from discharging its statutory duties.

Observations of the Court

The High Court observed that an Enforcement Case Information Report (ECIR) could not be equated with a First Information Report (FIR) registered under Section 154 of the Code of Criminal Procedure. While an FIR was a statutory document mandatorily recorded by a police officer upon receiving information of a cognizable offence, there was no corresponding provision under the Prevention of Money Laundering Act (PMLA) requiring the formal registration of an offence.

The Court noted that an ECIR was merely an internal administrative document created by the Department before initiating penal action or prosecution against individuals involved in activities connected with the proceeds of crime. Furthermore, the Court highlighted that the non-registration of an ECIR did not impede the commencement of an inquiry or civil action, and since its existence was not a legal prerequisite for Enforcement Directorate (ED) action, the prayer to quash the ECIR was misconceived and had no operative legal consequence.

The Court also observed that the power to issue summonses and record statements under Section 50 of the PMLA was primarily an instrument of the civil limb of the enactment, directed at establishing whether the property in question qualified as "proceeds of crime." It was held that the nominal use of the word "investigation" in Section 50 did not transform an inquiry into a penal prosecution, and at the stage of issuing summons, the recipient did not assume the character of an accused.

The Court further held that the existence of a prior registered scheduled offence was not a jurisdictional prerequisite for the exercise of powers under Section 50. Consequently, the summonses were legally valid, and the prayer to quash them could not be entertained as prosecution was a potential, but not an inevitable, consequence of such an inquiry.

The Court drew a crucial distinction between the civil and penal limbs of the PMLA, observing that while the initiation of a criminal prosecution for an offence under Section 3 required a pre-registered scheduled offence as a foundational prerequisite, the initiation of civil actions—such as provisional attachment under Section 5 or an inquiry under Section 50—did not depend on a prior registered crime or complaint.

The Court explained that the machinery provisions of the Act could not be construed in a manner that would frustrate the preservation of the proceeds of crime. It was further observed that Section 66(2) of the PMLA acted as a bridge, requiring the ED to share information with the jurisdictional police contemporaneously when initiating civil action without a prior FIR; however, any subsequent non-registration of an FIR by the jurisdictional police would not render the civil action already initiated by the ED illegal or without jurisdiction.

"Thus, the Section 66(2) mechanism in the PMLA would act as a bridge. When the ED proceeds to initiate civil action without a prior FIR, involving a scheduled offence, the law requires the ED to send information to the jurisdictional police under Section 66(2) contemporaneously. On receipt of such information, the jurisdictional police would be obliged to register the case by way of FIR if it is a cognizable offence or as a non-cognizable offence, as the case may be. If the offence so reported is a scheduled offence, only in that eventuality, the property recovered by the authorised officer would partake the colour of proceeds of crime under Section 2(1)(u) of the PMLA , enabling him to take further action under the Act in that regard", the Court said.

The Court rejected the contention that the settlement order passed by the Income Tax Settlement Commission under Section 245D(4) of the Income Tax Act operated as a bar against PMLA proceedings. It was observed that by virtue of the second proviso to Section 245H, the Settlement Commission lacked the jurisdiction to grant immunity from prosecution for offences punishable under the Indian Penal Code or any Central enactment other than the Income Tax Act and the Wealth-tax Act.

The Court noted that the PMLA was an independent statute with a distinct legal regime and cause of action focused on the laundering of proceeds of crime, whereas tax settlement proceedings were confined to the concealment of income and tax penalties. Therefore, the determination by the Settlement Commission operated strictly within the four corners of the Income Tax Act and had no res judicata or estoppel effect on the jurisdiction of the ED to investigate money laundering activities.

Accordingly, the Court dismissed the appeal.

Cause Title: M/s Cochin Minerals and Rutile Limited & Ors. v. Directorate of Enforcement and Anr. [Neutral Citation:2026:KER:38687]

Appearances:

Appellants: Senior Advocate Siddharth Luthra, Senior Advocate Arshdeep Singh Khurana, Advocate Sulakshan V.S., Advocate Kartikeya Dang, Advocate Himanshu Kasturi, Advocate Simran Khurana, Advocate Somansh Gupta, Advocate M.Gopikrishnan Nambiar, Advocate K.John Mathai, Advocate Joson Manavalan, Advocate Kuryan Thomas, Advocate Paulose C. Abraham, Advocate Raja Kannan, Advocate Vidisha Bajaj.

Respondents: Additional Solicitor General of India A.R.L Sundaresan, Special Counsel Zoheb Hussain, Retainer Counsel ED Jayashankar V. Nair.

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