The Madras High Court recently observed that the Enforcement Directorate (ED) is not a 'super cop' to investigate anything and everything that comes to its notice.
A Bench of Justices MS Ramesh and V Lakshminarayanan said,
"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 Court further emphasised that it is a well-established principle that when a law prescribes a specific manner for performing an act, it must be carried out in that prescribed manner and not in any other way.
"The essential ingredient for the ED to seize jurisdiction is the presence of a predicate offence. 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 Court made these observations while setting aside an account freezing order issued by the ED under Section 17(1A) of the Prevention of Money Laundering Act (PMLA).
In January 2025, the ED had frozen fixed deposits (FDs) worth ₹901 crore belonging to RKM Powergen (RKMP), which had been allotted a coal block by the Centre, later found to be located in a reserved forest. The Supreme Court subsequently declared the coal allocation illegal, prompting a Central Bureau of Investigation (CBI) probe.
The ED also launched its own probe and froze RKMP’s bank accounts and FDs. Challenging this action, the company approached the High Court.
Before the Court, the company argued that the coal block allocation was never operationalised and, therefore, no proceeds of crime were generated. It contended that the ED's claim regarding pricing differences was baseless, as the issue had already been settled by the appropriate tribunal.
The company further submitted that the foreign investments were made with Reserve Bank of India (RBI) approval and could not be deemed illicit. Since there was no predicate offence, the ED had no grounds to act under the PMLA.
In response, the ED asserted its jurisdiction, stating that earlier court proceedings had not barred it from investigating the coal allocation case. The agency also alleged that the company inflated its net worth to secure loans, amounting to offences under Sections 471 (forgery) and 420 (cheating) of the Indian Penal Code, justifying its intervention.
The Court clarified that the ED could not assume jurisdiction merely because the CBI filed a final report, unless the alleged conduct was part of the chargesheet.
"Unless and until proceeds of crime linked to the predicate offence are shown, ED by virtue of a combined reading of 2(1)(u), 2(1)(p), 3 read with Section 17, does not have the power to proceed further in fine lacks the jurisdiction to proceed further. In the light of the above decision, the impugned order is set aside. W.P.No.4297 of 2025 is allowed with costs. Cost memo to be filed within one week from today. Consequently, the connected miscellaneous petition is closed."
Senior Advocate B Kumar and Advocate S Ramachandran appeared for the petitioner company.
Additional Solicitor General ARL Sundaresan and Special Public Prosecutor N Ramesh appeared for the ED.
[Read Order]