Madras High Court rules it cannot be a hurdle in ED investigation unless the agency misuses power

Madras High Court rules it cannot be a hurdle in ED investigation unless the agency misuses power

Dismisses petition registered under the Prevention of Money Laundering Act

The Madras High Court has refused to interfere with the proceedings initiated by the Enforcement Directorate (ED) against a private firm. It said that the courts must not act as stumbling blocks to ongoing investigations by probe agencies.

In the Southern Agrifurne Industries vs The Assistant Director case, the bench of Justice PN Prakash and Justice N Anand Venkatesh dismissed a writ petition seeking to restrain the ED from proceeding further on its Enforcement Case Information Report (ECIR) registered against a private firm, Southern Agrifurane Industries, under the provisions of the Prevention of Money Laundering Act (PMLA), 2002.

The court ruled, "Time and again, the Supreme Court has frowned upon interference in investigations conducted by the investigating agency. The courts are not expected to stall investigations, which fall within the exclusive domain of the executive, unless the investigation is found to be without jurisdiction or there is a misuse of the power of investigation, or such an investigation is an abuse of the process of law."

The petitioner firm had argued that a case under the Foreign Exchange Management Act (FEMA) was registered against it on the allegation that it had sent money abroad in violation of the norms.

Based on the complaint by Axis Bank, where the petitioner has a bank account, the ED had registered an ECIR.

The petitioner maintained that the ED was conducting a probe to confirm any contravention of FEMA regulations in remitting the money outside India. Since the offences under the provisions were not scheduled offences under PMLA, the ED was indirectly conducting the investigation, based on the bank's complaint, by taking advantage of the FIR.

However, the ED told the court that it had collected sufficient material to prove that the investments that the petitioner firm claimed to have made outside India, never took place. Instead, Rs.200 crore had been siphoned off. It thus urged the court to dismiss the plea.

The court said that an ECIR was an internal document and could not be equated with an FIR. The ECIR merely paved the way for commencing an investigation under PMLA. For such an investigation, the existence of a predicate offence, a scheduled offence, as specified under the PMLA, was required.

The bench held, "If the ED had prima facie material to believe that the scheduled offence had generated proceeds of crime, it was enough for the agency to launch a probe under PMLA. Since both the requirements were present, we do not agree that the respondent lacked the jurisdiction to investigate the case."

It further stated, "If we are convinced that the investigation taken up by the respondent is within their powers and there is no misuse, we cannot act as a stumbling block in the progress of the investigation. It is up to the petitioner company to submit their explanation to the respondent along with all supporting documents. We expect the respondent to proceed further with the investigation within the scope of PMLA."