Enforcement Directorate Entitled To Maintain Writ Petition Against State Govt : Kerala High Court

The Kerala High Court on Wednesday held that the Enforcement Directorate can prefer a writ petition against the State Government despite being a statutory body since its Officers were empowered to exercise powers under the Prevention of Money Laundering Act. 

Justice P.B. Suresh Kumar made this observation in a  plea filed by the ED under Article 226 of the Constitution of India challenging the State's notification which constituted a judicial commission to inquire into the allegations of falsification of statements to implicate the Chief Minister in the gold smuggling case. 

The Government order was accordingly stayed, and Judicial Commission, headed by former High Court judge Justice V K Mohanan, has been restrained from exercising any power or taking any action in exercise of the said powers conferred upon it by the Commission of Inquiry Act, 1952.

Brief Facts: 

The State Government issued a notification under Section 3 of the Commissions of Inquiry Act, 1952 (the Act), thereby constituting a Commission of Inquiry consisting of a former Judge of the High Court o inquire into the question whether the contents of a voice clip and a letter stated to have been issued by the accused persons in a gold smuggling case investigated by the various central agencies would reveal any conspiracy to falsely implicate the leaders of the political front of the State. 

This Order of the State was challenged by the Enforcement Directorate.

 Contentions Raised:

Solicitor General of India Tushar Mehta appeared for the petitioner and submitted that the subject matter of the inquiry being relatable to the Entries enumerated in List-I of the Seventh Schedule to the Constitution, the State is incompetent to order an inquiry into the same under Section 3 of the Act. 

It was therefore argued that State's notification dated 7th May 2021 was invalid for the reason that only the Central Government can constitute a judicial commission in the matter.

Advocate General Gopalakrishna Kurup appeared for the State raised preliminary objections as to the locus standi of the petitioner to institute the writ petition and also as to the maintainability of the writ petition.

The State argued that the Enforcement Directorate is only a Department of the Central Government, that and a Department of the Centre cannot file a writ petition, for it is not a juristic person which can sue or be sued, relying on the decision rendered by the Supreme Court in Chief Conservator of Forests, Govt. of A.P. v. Collector & Ors. 

Attacking the maintainability of the petition, the State also submitted that if it is a case where the Centre is aggrieved by the impugned notification, only the remedy provided for under Article 131 could be invoked for redressal of the same.

Observations of the Court:

The Court agreed with the State that the ED is a statutory body established by the Central Government under Section 36 of the Foreign Exchange Management Act, 1999. 

However, the Bench placed reliance on a notification issued by the Centre on 1st June 2000,  according to which Officers of the Directorate exercise the powers of the authorities under the Prevention of Money Laundering Act. 

For this reason, the State's argument that ED is merely a Department of the Centre was rejected. The Court observed as follows:

"The proposition that a statutory body is entitled to file a writ petition invoking Article 226 of the Constitution cannot be doubted. In other words, the Directorate of Enforcement is certainly entitled to institute a writ petition in its name."

Additionally, the Bench noted that in the very decision cited by the State to reject the maintainability of the petition, the Supreme Court had clarified that where an official of the Government acting as a statutory authority sues or pursues further proceedings in its name, it will not be a suit or proceedings for or on behalf of a State/Union of India, but by the statutory authority as such. 

The Single Bench relied on Section 48 of the PML Act, the Deputy Director of the ED is one of the statutory authorities under the PML Act. Similarly, reference to a notification issued by the Ministry of Finance on 13th September 2005 was made to establish that the Deputy Director of ED has been notified as Deputy Director for the purposes of the PML Act.

From the above provision and notification, the Court inferred that the Deputy Director of Enforcement is a statutory authority under the PML Act, and in that capacity, he is certainly entitled to file a writ petition. 

"As such, even assuming that the Directorate of Enforcement is not entitled to institute a writ petition in its name, it cannot be said that the Deputy Director of Enforcement has no locus standi to institute the petition. The Deputy Director of Enforcement is not shown as the petitioner in the petition. Instead, the ED represented by the Deputy Director of Enforcement is shown as the petitioner in the writ petition. This is a trivial defect that can be rectified by amending the cause title." 

In matters of this nature, what is to be seen is the substance, not the form, the Bench reiterated. 

Another aspect of the matter was that the inquiry was ordered into the question of whether the contents of a voice clip and a letter allegedly issued by the accused in the gold smuggling case investigated by various central agencies including the ED according to the PML Act would reveal any conspiracy to falsely implicate the political leaders of the State.

Commenting on the merits of the case, the Court observed as such:

"The question of conspiracy in a case of this nature is one to be examined by the Special Court supervising the investigation. If parallel investigations and inquiries are conducted into questions of the said nature, I am of the prima facie view that the same would impede and derail the investigation and would ultimately go to the benefit of the accused, defeating the object of the legislation under which the accused are booked." 

Therefore, the petition was admitted, and interim relief was granted to the Directorate. 

Case Title: Enforcement Directorate v. State of Kerala & Ors. 

Click Here To Read The Order