Delhi High Court: ED Not Empowered to Investigate any other Offence other than Money Laundering

Delhi High Court: ED Not Empowered to Investigate any other Offence other than Money Laundering

The Delhi High Court by its single judge Justice Yashwant Varma in the matter of M/s. Prakash Industries Ltd. vs. Union of India and another observed that the Enforcement Directorate (in short ED) does not have the powers to investigate any offence other than money laundering and the agency cannot assume by itself that a predicate offence has been committed.

The Court was hearing the petitions filed by firms- Prakash Industries Ltd. and Prakash Therma Power Ltd. challenging the Provisional Attachment Orders (in short PAO) issued by the ED on 29th November, 2018.

The ED's proceedings originated from the apportionment of the Fatehpur Coal Block in Chhattisgarh. It was stated that the petitioner and its joint venture partner misrepresented their net worth to procure the coal block.

An FIR was registered against the firm under provision of the Indian Penal Code, 1860 (in short IPC) and the Prevention of Corruption Act, 1988 (in short PC). Based on the FIR, the ED registered an Enforcement Case Information Report (in short ECIR) alleging that the criminal offence had led to generation of proceeds of crime.

It was in this backdrop that the Court had been called upon to consider whether the proceedings under the PMLA and the PAOs made could be sustained merely on the basis of an allocation letter having been obtained by misrepresentation or concealment of facts.

The Apex Court highlighted the ED's powers and scope of various sections of the PMLA and discussed about the objection that only the special court constituted as per the orders of the Apex Court can deal with all the cases related to coal block allocation scam.

The Top Court opined, "the Act places the ED under an important obligation of apprising the concerned agency of what it may view or consider as amounting to the commission of a scheduled offense. What needs to be emphasized is that while the adoption of peremptory measures by the ED may be justified and are so sanctioned by the Act, it would be incorrect to construe those powers as the ED alone being entitled to adjudge or declare that a predicate offense stands committed. The Court finds itself unable to countenance such a power being conferred upon the ED under the provisions of the Act."

Turning then to the facts of the present case the Apex Court found that till date the ED had failed to take any steps as are envisaged under Section 66(2) of the PMLA. As would be manifest from a reading of Section 66(2) if the Director or other authority based on material in its possession comes to form the opinion that the provisions of any other law in force are contravened, it is obliged to share that information with the concerned agency for necessary action, stated the Court.

"Section 66(2) thus fortifies the conclusion of the Court that ED does not stand conferred with any independent power to try offences that may be evidenced or may stand chronicled as offences under any other law," the Court added.

What the Court sought to highlight was that the jurisdiction and authority of the ED stood confined to consider whether an offence of money laundering stands evidenced. The Court noted that, if in the course of its enquiry and investigation, it were to come to the conclusion that the material in its possession evidences the commission of an offence created under any other enactment, it would be obliged to furnish requisite information in respect thereof to the concerned agency for necessary action.

The Top Court asserted that, "in any case and independent of Section 66(2), the Court finds itself unable to recognize ED as being statutorily empowered to either try or examine whether an offence under any other statue stands committed nor can it and more importantly pass a PAO on a mere assumption that an offence independently created under any other statute is established to have been committed."

The judge further said that if ED's arguments are accepted, it would essentially amount to recognizing a power inhering in the Special Judge to not only don the robes of the Adjudicating Authority under Section 8 of the PMLA but to also deprive the appellate forums of the jurisdiction to decide appeals against the orders that may ultimately come to be passed under Section 8 of the PMLA.

Lastly, the Top Court concluded that since the PMLA does not empower the ED to either proceed on the assumption that a scheduled offence stands committed or extend to it power to investigate or charge a person, the PAO deserves to be quashed.

Therefore, the Supreme Court quashed the PAO as well as the original complaint.