ED Moves Supreme Court Against Madras HC Order Restraining Probe Under PMLA Into Alleged Illegal Sand Mining

The Enforcement Directorate has approached the Supreme Court against a Madras High Court judgment which restrained it from carrying out investigation under the Prevention of Money Laundering Act against private contractors in connection with alleged illegal sand mining.

The matter was listed today before a bench of Justices Sanjiv Khanna and Sanjay Kumar which, without issuing notice at this stage, asked the parties to file their notes on the aspect of provisional attachment under PMLA in absence of a predicate offense, as dealt with in Vijay Madanlal Choudhury v. Union of India.

To recapitulate, ED registered an ECIR against certain private contractors based on four FIRs relating to illegal sand mining. Following this, searches were conducted and summons sent to District Collectors and private parties. Provisional attachment orders were also passed in relation to the properties of the contractors.

K Govindaraj and 2 other contractors approached the High Court, challenging the proceedings on the primary ground that ED lacked jurisdiction to initiate action under PMLA. It was submitted that the FIRs, based on which the PMLA proceedings were initiated, did not reveal any proceeds of crime and thus, ED could not assume jurisdiction.

ED, on the other hand, argued that merely because the ECIR referred to four FIRs did not mean that those were the only material available to the authority. The agency contended that there was illicit sand mining in the state that would generate proceeds of crime. Regarding the provisional attachment orders, ED asserted that the petitioners had an alternative remedy and the writ petition was not maintainable.

After perusing the record, the High Court observed that ED initiated the proceedings under PMLA without any basis and without identifying any proceeds of crime. Further, it noted that sand mining was not covered as a scheduled offence under PMLA.

The High Court was also of the view that unless a case regarding scheduled offence was registered and such an offence generated proceeds of crime, ED could not have initiated any action. It further observed that ED did not spell out the exact scheduled offense committed by the petitioners or whether the acts alleged in the FIRs were committed by them.

The Court added that even if there were proceeds of crime, ED could not assume jurisdiction to attach property on the premise that they were ill-gotten.

With regard to the provisional attachment orders, it was opined that ED's power to make provisional attachment could be resorted to only in exceptional cases where an urgent measure was required and not as a matter of routine. In the facts of the present case, it was said that initiating proceedings under PMLA was unwarranted.

Thus, noting that ED's actions were without jurisdiction, the High Court deemed it fit to quash the provisional attachment orders. Assailing this decision, ED filed the present petition.

Appearance: ASG SV Raju (for ED); Senior Advocate Mukul Rohatgi (for respondent-contractors)

Case Title: DIRECTORATE OF ENFORCEMENT AND ANR. Versus K. GOVINDARAJ AND ANR., SLP(Crl) No. 14355/2024