**Madras High Court Critiques ED’s Investigative Authority in Financial Cases**
The Madras High Court has asserted that the Enforcement Directorate (ED) does not possess unfettered powers to act independently, clarifying that it is neither a “super cop” with limitless investigative authority nor a “loitering munition” that can indiscriminately target financial institutions. This statement was made by a division bench consisting of Justice M.S. Ramesh and Justice V. Lakshminarayanan during the hearing of a petition filed by RKM Powergen Private Ltd, a Chennai-based company contesting the ED’s decision to freeze its fixed deposits amounting to Rs 901 crore in connection with a money laundering investigation.
The ED’s actions were initiated following an FIR lodged by the Central Bureau of Investigation (CBI) in 2014 regarding the allocation of coal blocks for a power plant in Chhattisgarh. However, in 2017, the CBI concluded its investigation with a closure report, indicating no wrongdoing in the allocation process. Despite this, a special CBI court expressed dissatisfaction with the closure report and mandated further investigation. In 2023, the CBI submitted a supplementary final report, revealing sufficient incriminating evidence that warranted prosecution under relevant sections of the Indian Penal Code and the Prevention of Corruption Act.
Subsequently, the ED conducted searches at the premises of directors and holding companies linked to RKM Powergen. On January 31 of this year, the ED issued an order freezing the company’s fixed deposits of Rs 901 crore. The company challenged this order, which the court subsequently overturned.
In light of these developments, the Madras High Court emphasized that under Section 66(2) of the Prevention of Money Laundering Act (PMLA), the ED cannot assume the role of investigating other legal violations it may uncover. If the ED identifies potential breaches of law, it is required to notify the appropriate agency authorized to investigate those matters. The court stated, “If that agency, upon the ED’s notification, initiates an investigation and files a complaint, then the ED can also investigate those aspects, provided there are proceeds of crime.”
The court further clarified that if the investigating agency finds no basis for the issues raised by the ED, the latter cannot proceed with its investigation or assume jurisdiction. The court likened the ED’s jurisdiction to a limpet mine attached to a ship, asserting that without a predicate offense, the ED’s actions are unfounded. “The ship is the predicate offense and ‘proceeds of crime’. The ED is not a loitering munition or drone to attack at will on any criminal activity,” the bench remarked.
Additionally, the court noted that no separate complaint had been filed regarding the alleged new offenses highlighted by the ED, reiterating that the ED is not a super cop with the authority to investigate any matter that comes to its attention. The court concluded that there must be a clear “criminal activity” that falls under the PMLA for the ED to take action.
**FAQ**
**Q: What did the Madras High Court say about the ED’s powers?**
A: The Madras High Court stated that the ED cannot act arbitrarily and must operate within the confines of the law, emphasizing that it is not a super cop with unlimited investigative authority.
