In a significant ruling, the Madras High Court has quashed all proceedings initiated by the Enforcement Directorate (ED) against private contractors in a sand mining money laundering case. The court, in its judgement, stated that the ED’s actions were without basis and highlighted procedural violations.
A bench comprising Justice MS Ramesh and Justice Sunder Mohan emphasised that the ED had initiated proceedings under the Prevention of Money Laundering Act (PMLA) without identifying any proceeds of crime. The judges pointed out that sand mining is not listed as a scheduled offence under the PMLA. Therefore, unless a scheduled offence is registered and generates proceeds of crime, the ED cannot initiate action.
The court noted that even if the ED’s claims of large-scale illegal mining and generation of illegal money were true, it did not justify their actions under the PMLA. The judges remarked, “We are thus of the view that unless information with regard to any case in the scheduled offence is registered and such an offence has generated proceeds of crime, which is dealt with by the petitioners, no action can be initiated.”
The court criticised the ED for violating prescribed procedures and noted that the FIRs cited by the ED in their Enforcement Case Information Report (ECIR) were not connected to the contractors, making the ED’s actions unjustifiable. The court acknowledged that while a person need not be an accused in the predicate offence to be prosecuted under the PMLA, it must be established that the person is involved with the proceeds of crime from a scheduled offence.
Citing the Supreme Court’s decision in Vijay Madhanlal Choudhary’s case, the court asserted that even if the contractors had ill-gotten money, the ED could not proceed under the PMLA without a scheduled offence. The court made it clear that the ED has the right to ensure a scheduled offence is registered against the contractors, but until then, their properties cannot be attached, nor any action initiated under the PMLA.
The court was responding to pleas from private contractors challenging the ED’s provisional attachment orders and proceedings. The ED had registered an ECIR based on four FIRs related to illegal sand mining, conducted searches, and issued summons. The petitioners argued that the ED lacked jurisdiction as the FIRs did not reveal any proceeds of crime, making the ED’s role in investigating illegal sand mining questionable.
The ED contended that the ECIR included more materials than the four FIRs and argued that illegal sand mining generated proceeds of crime. They maintained that the writ petition was not maintainable as the petitioners had alternative remedies and that the investigation needed to continue.
However, the court found that the ED had not clearly identified the scheduled offence committed by the petitioners or determined the proceeds of crime. The judges remarked that the ED could not assume jurisdiction to attach properties on the premise they were ill-gotten without proper justification.
In conclusion, the court quashed the ED’s actions, deeming them beyond jurisdiction and unwarranted, and stressed that provisional attachment should only be used in exceptional cases where urgent measures are required.
