Kerala High Court affirms stay on judicial enquiry ordered by State into ED

The Kerala High Court on Friday upheld the stay on the judicial inquiry ordered by the State government to investigate alleged attempts by central agencies, including the Enforcement Directorate (ED) and Customs, to implicate Chief Minister Pinarayi Vijayan and other political leaders in the UAE gold smuggling case. [State of Kerala and Ors. v Enforcement Directorate & Anr.].The Division bench of Justices Sushrut Arvind Dharmadhikari and Syam Kumar VM dismissed the State government's appeal against a 2021 interim order passed by a single-judge which had stayed the judicial inquiry.The Court observed that the commission of inquiry was only a fact finding body and allowing it to proceed parallel to pending criminal proceedings under PMLA could potentially derail the course of justice. "So far as staying Ext.P1 is concerned, the learned Single Judge took into consideration the fact that, in the light of Ext.P1 notification, continuation of the Commission would run parallel to and interfere with criminal investigations and prosecutions pending before the Special Court under Section 44 of the PMLA 2002, and permitting the Commission at this stage to inquire into such matters would prejudice the accused, derail the course of justice, and is impermissible under the settled law that a Commission of Inquiry is only a fact-finding body without adjudicatory powers," the Court said..The single-judge's order had temporarily stayed the judicial inquiry commission set up in May 2021 under the Commissions of Inquiry Act, 1952, (COI Act) through a government notification, with retired Justice VK Mohanan as its chairperson.The Justice VK Mohanan Commission was tasked to examine alleged jurisdictional overreach and political bias by central agencies, particularly the ED, in attempting to link the Chief Minister and other State officials to the gold smuggling case.The gold smuggling case can be traced back to July 2020 when the ED investigated large scale gold smuggling and money laundering in Kerala which was operated through diplomatic channels.The ED arrested several suspects including Swapna Suresh and Sandeep Nair. A voice clip of Suresh which surfaced online and a letter sent by Sandeep to the sessions judge in Ernakulam suggested that they were coerced by ED officials to implicate the then Principal Secretary to the Chief Minister and the Home Minister.The State thus established the VK Mohanan commission to probe these allegations..The ED subsequently moved the High Court seeking to quash the State's notification constituting the commission, contending that such exercise of power by the State was malafide and against the principles of federalism.Finding merit in the ED's contention, the single-judge issued an interim order staying the notification.The State then filed an appeal against the single-judge's order.It argued that the ED had no locus to maintain a writ petition and added that any grievance against the notification should have been raised by the Central government under Article 131 (Original jurisdiction of the Supreme Court) of the Constitution.However, the ED stated that inquiries into matters under the Prevention of Money Laundering Act, 2002 (PMLA) and Unlawful Activities (Prevention) Act, 1967 (UAPA), both central legislations, fell within the powers of the Central government and not the State.The ED also argued that owed its statutory existence to Section 36 of the Foreign Exchange Management Act, 1999 and was acting through its Deputy Directors who were notified as statutory authorities under Section 48 of the PMLA..After going through the submissions, the Division Bench observed that the ED had locus to maintain the writ petition and upheld the single-judge's interim order."The objection as to the locus standi raised by the appellants is without any substance inasmuch as the Directorate of Enforcement is a statutory body... The learned Single Judge was right in coming to the conclusion that the writ petition filed through the Deputy Director is, thus, maintainable. The argument of non juristic personality is a matter of form and not substance, and therefore, it cannot defeat the statutory right of recourse under Article 226 of the Constitution of India," the Court held..Advocate General K Gopalakrishna Kurup appeared for the State.Additional Solicitor General ARL Sundaresan and advocate Jaishankar V Nair appeared for the Central Government and the Enforcement Directorate..[Read Judgment]