Possession of unaccounted property per se cannot be a reason for ED to invoke PMLA, rules Madras High Court

Madras High Court rules ED cannot initiate PMLA proceedings without evidence of crime proceeds, quashes attachment orders.

Possession of unaccounted property or illegal money per se cannot be a reason for the Enforcement Directorate (ED) to initiate proceedings under the Prevention of Money Laundering Act (PMLA), 2002 unless there are materials to believe that the ill-gotten wealth is the proceeds of a crime related to a scheduled offence under the Act, the Madras High Court has held.

A Division Bench of Justices M.S. Ramesh and Sunder Mohan said, the ED “cannot put the cart before the horse” by initiating PMLA proceedings even before the jurisdictional police registers a case for any of the criminal offences listed in a schedule appended to the PMLA. The judges also made it clear that the ED could not take action on the basis of assumptions and presumptions.

The verdict was delivered on a batch of 24 writ petitions filed by individuals and companies who were probed as part of the ED’s action against alleged illegal sand mining activities in Tamil Nadu. The petitioners, included P. Karikalan, S. Ramachandran, K. Rethinam, A. Rajkumar and K. Govindaraj. All of them had challenged the Enforcement Case Information Report (ECIR) itself.

Apart from urging the court to quash the ECIR, thirteen of the writ petitioners had also challenged the provisional attachment of their properties. Disposing of all their cases by way of a common judgement, the Bench held that the ED could not proceed against the petitioners on the basis of the ECIR unless the jurisdictional police registers any case for the predicate offence.

The Bench also quashed the provisional attachment orders. It, however, made it clear that the ED would have every right to share the information collected by it with the jurisdictional police in order to ensure that the scheduled offence, if any, gets registered and investigated. Till such time, no action could be initiated against the writ petitioners on the basis of the ECIR, the judges added.

The Bench agreed with senior counsel Vikram Chaudhri and Abdul Saleem, representing the petitioners, that their clients had absolutely nothing to do with the four illegal sand mining First Information Reports (FIRs), on the basis of which the ED had registered the ECIR, and therefore, their properties ought not to have been attached under the provisions of the PMLA.

The judges said, the ED could attach properties, even in the absence of a pre-registered case, only in exceptional cases which require the investigating agency to initiate urgent steps and not as a matter of routine. “An attachment of property would result in serious consequences for the persons concerned and cannot be based on assumptions made by the respondents (ED),” they observed.