The Karnataka High Court has held that the Enforcement Directorate (ED) is "not a super cop to investigate anything and everything which comes into its notice", quashing a money-laundering investigation against Congress MLA K. Y. Nanjegowda and four others, Bar and Bench, ANI and The Hindu reported on Saturday, November 7.

Source: Bar and Bench

Justice M. I. Arun held that the ED's power under the Prevention of Money Laundering Act (PMLA) is "derivative and not original". The agency, the court said, cannot initiate an investigation on its own merely on a standalone suspicion of money laundering, and money-laundering proceedings cannot exist if there is no predicate or scheduled offence.

Source: ANI via Daily Prabhat

Allowing a batch of writ petitions in Y. B. Ashwathanarayan v. Union of India, the court quashed the Enforcement Case Information Report (ECIR) dated November 30, 2023, the summons issued under it and all consequential proceedings against the petitioners. It also set aside proceedings arising from a private complaint filed by the ED and quashed an order of the PMLA Adjudicating Authority confirming the seizure of assets, directing the return of articles seized from one of the petitioners.

Source: Bar and Bench

What the case was about

Nanjegowda is the Congress MLA from Malur and chairman of the Kolar-Chikkaballapur District Cooperative Milk Producers Union Ltd (KOMUL). The other petitioners were Y. B. Ashwathanarayana, a former KOMUL director, K. N. Gopala Murthy, Nagesh N. and Raju Krishna C. The ED investigation was linked to allegations of irregularities in recruitment at KOMUL and to a land case alleging that about 80 acres had been granted to 38 persons illegally. Reports said the underlying land case had been closed after sanction for prosecution was denied.

Source: The Hindu via VidiaNews

The court held that the ED's role begins only after a police force or another primary law-enforcement agency registers an FIR or a formal criminal complaint for a scheduled offence. Filing a private complaint — under Section 200 of the Code of Criminal Procedure / Section 223 of the Bharatiya Nagarik Suraksha Sanhita — is not contemplated under the PMLA, the court said.

Source: ANI via Daily Prabhat

Where the ED comes across material suggesting a violation of another law, Section 66(2) of the PMLA requires it to share that information with the agency concerned instead of taking over the investigation itself, the court held. It added that the ED can exercise only those powers expressly conferred on it by the PMLA.

Source: Bar and Bench