Telangana High Court Upholds ED's Power To Issue Summons, Carry Out Further Investigation Even After Filing Complaint Against Accused

The Telangana High Court has held that the Enforcement Directorate (ED) has the authority to issue summons under Section 50(2) and (3) of the Prevention of Money Laundering Act (PMLA) even after a complaint has been filed before a Special Court. The court held that such summons do not violate Article 20(3) of the Constitution and that the ED does not require prior permission from the Special Court to conduct further investigations or issue summons in ongoing cases. It held:

“The power conferred to the Enforcement Directorate to conduct further investigation/ issuing of summons to trade proceeds of the crime arising out of an offence under Section 3 of PMLA, cannot be restricted upon filing of the complaint on the file of Special Court, since even after filing of the complaint under Section 44 of the PMLA Act, the investigation agency is having power to file any subsequent complaint, in respect of further investigation that may be conducted to bring any further evidence against any accused."

Simply because, the petitioner is shown as an accused in the complaint, it does not take away the power of investigating authorities to further investigate the complaint for lodging of subsequent complaint and issuance of summons under Section 50 (2) and (3) of the PMLA Act," the Court added.

Justice C.V. Bhaskar Reddy passed the order in a Writ Petition wherein the summons issued by the ED to a director of M/s. Farmax India Limited in connection with an ongoing money laundering investigation were challenged.

Background:

The case originated from an FIR registered in 2013, which led to the ED registering an Enforcement Case Information Report (ECIR) in 2022. The petitioner, a former company director, was subsequently named as an accused in a complaint filed by the ED before the Special Court under the PMLA. After the complaint was taken cognizance of by the court, the ED issued summons to the petitioner for further investigation.

The petitioner argued that once the Special Court had taken cognizance of the case, the ED lacked the authority to issue summons without the court's permission. He contended that such action violated his fundamental rights, particularly Article 20(3) of the Constitution, which protects against self-incrimination.

On the other hand, the ED maintained that money laundering is a continuous offence, and ongoing investigations are permissible even after a complaint is filed. They argued that the PMLA provides for subsequent complaints based on further investigations and that the ED's powers are akin to those of a civil court in summoning individuals and collecting evidence.

In its reasoning, the court drew a distinction between "further investigation" and "reinvestigation." It held that while reinvestigation without prior permission is forbidden, further investigation is a statutory right of investigative agencies.

“In view of difference between further investigation and re-investigation, the investigation agencies under the PMLA Act, are allowed to carry out further investigation, even after filing a report under Section 173(2) Cr.P.C and even after acceptance of the same by the Special Court.”

The court, further, relied on Supreme Court judgments, including Vijay Madanlal Choudhary vs. Union of India and State Through Central Bureau of Investigation vs. Hemendhra Reddy, to support the above-mentioned conclusion.

The court emphasized that the mere issuance of summons does not violate Article 20(3), as compulsion in the context of self-incrimination must amount to legal duress. It clarified that the constitutional protection applies when an accused is compelled to make a statement, not when they are simply summoned to provide evidence or produce documents.

Furthermore, the court noted that Section 44 of the PMLA allows for subsequent complaints based on further investigations. It interpreted this provision as allowing the ED to continue its investigative activities even after filing an initial complaint.

Thus the Writ was dismissed, confirming the validity of actions taken up by the ED.

WRIT PETITION No.3681 of 2024

Counsel for petitioner: Advocate T Bala Mohan Reddy

Counsel for respondent: Central Government Standing Counsel Sri D Narendra Naik

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