'ED Is Not a Super Cop That Can Probe Everything', Says Madras High Court
“The ED is not a super cop to investigate anything and everything which comes to its notice,” the Madras High Court has remarked, as it quashed the Enforcement Directorate’s (ED) order freezing Rs. 901 crore in fixed deposits belonging to R.K.M Powergen Private Limited.
Court stressed that the ED’s jurisdiction under the Prevention of Money Laundering Act (PMLA) is triggered only upon the existence of a predicate offence, a scheduled criminal activity, which was missing in the present case.
The case dates back to the controversial 2008 allotment of Fatehpur East coal block, which was later found to be part of a reserved forest, rendering mining operations legally untenable. R.K.M Powergen was one of five companies allotted the block, but no extraction ever took place, and the allocation itself was later struck down by the Supreme Court in 2014.
Following the top court’s directions for a probe into illegal coal allocations, the CBI registered an FIR in 2014 but eventually filed a closure report, citing lack of evidence. A special CBI court, however, called for further investigation in 2017. Based on this, the ED had initially frozen RKMP’s accounts in 2015, a move the High Court set aside the same year.
In 2022, the Madras High Court again restrained the ED from investigating the company under PMLA, finding no predicate offence. Despite this, the ED resumed its probe after the CBI filed a supplementary chargesheet in 2023 and proceeded to freeze RKMP’s fixed deposits worth Rs. 901 crore on January 31, 2025.
Quashing this fresh action, a division bench of Justices M.S. Ramesh and V. Lakshminarayanan held that the ED could not invoke its powers in the absence of proceeds of crime.
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 observed.
Court held that no new evidence had emerged to justify the ED’s freezing order. It reiterated that foreign investment into RKMP, which had earlier been questioned as "round tripping", had been made with full disclosure to the Reserve Bank of India and did not constitute a scheduled offence under PMLA. Any violation of FEMA (Foreign Exchange Management Act), the court clarified, cannot be used as a backdoor to trigger ED jurisdiction under PMLA.
"Invocation of Section 17(1-A) arises when the officer comes to a conclusion that the property, whether attached, seized or frozen, is a result of money laundering," the court said, adding that the impugned order merely copied statutory language without applying any mind as in this case, the Panchanama/seizure memo showed that the fixed deposits were frozen in order to prevent frustration of the investigation into the proceeds of crime in the case.
Court also dismissed ED’s claim that the existence of a CBI chargesheet automatically enabled PMLA proceedings, noting that unless the charges specifically establish proceeds of crime linked to a scheduled offence, ED has no ground to act.
"The terminus a quo for the ED to commence its duties and exercise its powers is the existence of a predicate offence. Once there exists a predicate offence, and the ED starts investigation under the PMLA, and file a complaint, then it becomes a stand alone offence. As long as there is no predicate offence, ED cannot plead that since no one set up the criminal law into motion, it will rely on that doctrine and commence proceedings under the PMLA," court said.
Case Title: R.K.M Powergen Private Limited vs. The Assistant Director, Directorate of Enforcement and Another
Order Date: July 15, 2025
Bench: Justices M.S. Ramesh and V. Lakshminarayanan