Bengaluru : The Madras high court, in a sharp rebuke to the Enforcement Directorate (ED), has said the agency cannot act as a “super cop” or a “loitering munition or drone” to attack any matter and investigate it at will.
Emphasising that the central agency’s powers are conditional, the bench of justices MS Ramesh and V Lakshminarayanan reiterated that the agency can initiate action only when there is a predicate offence under the scheduled laws of the Prevention of Money Laundering Act (PMLA), and only if there exist identifiable “proceeds of crime” linked to such an offence.
“The ED is not a super cop to investigate anything and everything which comes to its notice. 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. It is only then the jurisdiction of ED commences,” the high court said in its judgment delivered on July 17.
The court made the observations while quashing a freezing order issued by the ED under Section 17(1A) of the PMLA. In January this year, ED had issued an order freezing fixed deposits worth ₹901 crore belonging to RKM Powergen (RKMP), a company that had been allotted a coal block by the Union government that was later found to lie in a reserved forest.
{{/usCountry}}The court made the observations while quashing a freezing order issued by the ED under Section 17(1A) of the PMLA. In January this year, ED had issued an order freezing fixed deposits worth ₹901 crore belonging to RKM Powergen (RKMP), a company that had been allotted a coal block by the Union government that was later found to lie in a reserved forest.
{{/usCountry}}Subsequently, the Supreme Court had declared such allocation illegal and following the court’s order, the Central Bureau of Investigation (CBI) had initiated a probe into the case.
However, ED, too, began its own investigation into the case and ordered freezing of all bank accounts and fixed deposits of RKMP. The firm moved the high court challenging ED’s order.
The court said ED had acted without sufficient basis or jurisdiction to presume the existence of “proceeds of crime”, which is a prerequisite for invoking provisions under PMLA. It added that even when the predicate offence –– the CBI charge sheet in the present case –– exists, ED cannot initiate proceedings without concrete evidence linking a property to the alleged crime.
“...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,” the high court said.