Court Holds That ED Cannot Assume Powers Of Other Investigating Agencies Under PMLA; Money Laundering Proceedings Cannot Continue In Absence Of A Sustainable Predicate Offence
The Karnataka High Court has ruled that the Enforcement Directorate (ED) cannot act as a ‘super cop’ by independently investigating every suspected offence that comes to its notice. The Court held that the ED is not empowered under the Prevention of Money Laundering Act, 2002 (PMLA) to file a private complaint before a Magistrate seeking investigation into a scheduled offence merely because the concerned local police or investigating agency has not acted upon the information shared by it.
Justice M.I. Arun passed the ruling while allowing a batch of petitions filed by Congress leader K.Y. Nanje Gowda and others, challenging various proceedings initiated by the ED, including money laundering investigations, seizure orders, summons and a private complaint.
The Court observed that Section 66(2) of the PMLA requires the ED to forward information concerning offences under other laws to the concerned investigating agency. However, the provision does not confer independent powers upon the ED to initiate criminal proceedings by filing a private complaint when the concerned agency does not act upon such information.
The Court observed:
"The ED is not a super cop to investigate anything and everything which comes into its notice."
It further held that the PMLA does not expressly empower the ED or its authorities to file a private complaint concerning a scheduled offence and subsequently initiate an investigation against the accused on that basis.
Background of the Case
The matter originated from allegations concerning the alleged illegal distribution of approximately 80 acres of land to around 38 persons by the Land Grant Committee of Malur in Kolar District, Karnataka, when K.Y. Nanje Gowda was its Chairman.
A private complaint was filed by social activist K.C. Rajanna in 2022, alleging irregularities in the distribution of land. Based on the complaint, criminal proceedings were initiated against Nanje Gowda and others.
The ED subsequently registered a money laundering case in 2023, treating the alleged land scam as a predicate offence.
During its investigation, the ED also came across certain materials relating to alleged irregularities in recruitment to the Kolar and Chikkaballapur Milk Union Ltd. (KOMUL). The information concerning the alleged recruitment irregularities was forwarded to the Lokayukta Police under Section 66(2) of the PMLA.
However, when the local investigating agency did not initiate proceedings on the basis of the information shared by the ED, the agency filed a private complaint before the Special Court in 2024, seeking an investigation into the alleged job scam.
Meanwhile, the original land scam complaint was dismissed for want of sanction to prosecute the public servants.
The petitioners challenged the continuation of the ED investigation as well as its authority to file a separate private complaint in relation to the alleged recruitment irregularities.
Court's Observations
1. ED Cannot Continue PMLA Proceedings Without A Sustainable Predicate Offence
The High Court referred to the Supreme Court's decision in Vijay Madanlal Choudhary v. Union of India, reiterating that an investigation into proceeds of crime under the PMLA requires the existence of a scheduled offence.
The Court observed that the ED's role under the PMLA commences after a primary law enforcement agency registers an FIR or a formal criminal complaint concerning a scheduled offence.
Since the land scam complaint had been closed for want of sanction from the competent authority, the Court held that the ED could not sustain its investigation into the alleged proceeds of crime arising out of that offence in the facts and circumstances of the case.
2. ED Cannot File A Private Complaint Under Section 200 CrPC / Section 223 BNSS
On the question of the ED filing a private complaint concerning the alleged job scam, the Court examined Section 66(2) of the PMLA.
It held that the provision contemplates forwarding information to the concerned agency where the ED comes across material indicating the commission of an offence under another law.
However, it does not authorise the ED to file a private complaint under Section 200 of the CrPC, corresponding to Section 223 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), and thereby seek an investigation into the scheduled offence.
The Court emphasised that the ED cannot assume the powers of the local police or other investigating agencies merely because they have chosen not to initiate proceedings.
3. Separation Of Powers Must Be Maintained
The High Court further observed that the Constitution envisages separation of powers among different organs of the Government to ensure that no institution becomes supreme or exercises powers beyond its statutory authority.
The Court observed:
"Allowing the ED to prefer a private complaint, when the other government authorities deem it inappropriate to initiate any proceedings against anybody, will amount to permitting the ED to act as a super cop and it goes against the philosophy of the Act."
The Court also emphasised that maintaining law and order is the responsibility of the State and not the Centre.
Final Decision
Allowing the batch of five writ petitions, the Karnataka High Court set aside the impugned proceedings to the extent covered by its findings.
The Court also quashed the relevant seizure-confirmation order and directed the ED to return the seized articles to the concerned petitioner.
The ruling clarifies that the ED's powers under the PMLA are statutory and derivative in nature and cannot be expanded to assume the investigative functions of other law enforcement agencies.
Case Details:
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