CHENNAI: In its significant order delivered on Tuesday, asking the Enforcement Directorate (ED) not to take further action against petitioners who approached the court in the sand mining case and quashing ED’s orders attaching their properties, the Madras High Court has pointed out that the procedures for registering a money laundering case was not properly followed by the central agency.
The court held that ED cannot initiate action under the Prevention of Money Laundering Act (PMLA) unless it is able to register the information regarding any case (filed by jurisdictional police) under the scheduled offences of the Act and that such an offence has generated proceeds of crime.
A division bench of Justices MS Ramesh and Sunder Mohan gave the ruling on a batch of petitions in connection with the ED’s Enforcement Case Information Report (ECIR) registered in September 11, 2023 against contractors K Rethinam, P Karikalan and S Ramachandran and other suppliers of machineries for allegedly generating proceeds of crime through illegal sand mining to the tune of Rs 4,730 crore.
The bench ordered ED to not take further action until the statutory requirements of case registration on scheduled offence is complied with. It observed that neither the counter-affidavit nor the provisional attachment orders of the ED spelt out the ‘exact scheduled offence’ committed by the petitioners and whether an FIR has been registered for a scheduled offence.
Citing the order in the Vijay Madhanlal Choundary’s case, the bench said the SC had made it clear that in order to assume jurisdiction to proceed under the PMLA, ED has to first satisfy a scheduled offence is committed and the same is registered with jurisdictional police or it is pending enquiry by way of a complaint before the competent forum.
The HC added that the possession of unaccounted property or illegal money ‘cannot be considered as proceeds of crime’ unless it is associated with the ‘scheduled offence’.
It said the ED cannot resort to action against any person on the assumption that the property acquired from them must be the proceeds of crime and that a scheduled offence has been committed.
Saying that the FIRs relied upon by the ED are ‘not even remotely connected’ to the petitioners and there is no FIR as on date to connect the alleged proceeds of crime in the possession of the petitioners, the court pointed out that the agency was unable to justify in its provisional attachment orders as to how they concluded that the “value of the properties attached would be equivalent to the proceeds of crime.”
Though provisional attachment orders were passed as early as January 2024, the bench pointed out that the ED did not take any action to inform the jurisdictional police concerned, but it ‘strangely’ chose to write a letter to the DGP on June 13, 2024, purporting to be a communication under Section 66 (2) of PMLA reiterating the materials available with it.
“There was no reason as to why the respondents had suddenly felt the need to send a letter on June 13, when the matters were heard on June 12. We are also conscious of the fact that the ECIR is an internal document and does not have any statutory recognition. However, that does not mean that even if any excesses are pointed out, we have no right to interfere,” the court said.
The court stressed it has not expressed any opinion on the allegations or the materials collected by the ED on illegal mining, but it is only concerned with the ‘procedure’ adopted.