'ED is not a super cop': Karnataka HC quashes ECIR against Congress MLA, others

NEW DELHI: Quashing an Enforcement Case Information Report (ECIR) case against a Congress MLA and others, the Karnataka high court said the Enforcement Directorate (ED) “is not a super cop” empowered to investigate anything and everything that comes to its notice.

The ruling came in a batch of petitions arising from an ED investigation into alleged irregularities in recruitment at the Kolar-Chikkaballapur District Cooperative Milk Producers Union Ltd (KOMUL). Those accused in the case included Congress MLA KY Nanjegowda and others associated with him.

Taking note of submissions by the petitioners’ counsel, Justice MI Arun emphasised that the agency's powers under the Prevention of Money Laundering Act (PMLA) are “derivative and not original," and that money-laundering proceedings cannot survive independently of a scheduled offence.

"ED’s role under the PMLA commences only after a primary law-enforcement agency registers an FIR or a formal criminal complaint concerning a scheduled offence. Its power is derivative and not original and therefore, the agency cannot launch an investigation suo motu merely based on a standalone suspicion of money laundering," Justice Arun said, according to ANI.

The court further held that PMLA proceedings cannot continue if the underlying offence has been closed or the accused has been cleared of the charges. The alleged land scam case underlying the proceedings against Nanjegowda and the other petitioners had been closed after the requisite sanction for prosecution was denied. Since the closure had attained finality, the court held that the ED could not continue investigating the alleged proceeds of crime linked to the case.

Justice Arun held that the ED can exercise only those powers expressly conferred upon it under the PMLA. If the agency comes across information suggesting another scheduled offence during an investigation, Section 66(2) requires it to share the information with the appropriate investigating agency rather than initiate a private complaint and pursue proceedings under the PMLA, he added.

The bench then made the "super cop" remark. “The ED is not a super cop to investigate anything and everything which comes into its notice,” it said, adding that the agency can exercise only those powers specifically granted to it under the PMLA.

The petitioners had argued that the ED could not continue its investigation after the case against them was closed. The agency, however, contended that it could continue investigating money laundering even if the underlying offence had been closed on technical grounds. It also argued that it was entitled to file a private complaint under criminal procedure law.

Rejecting these arguments, Justice Arun held that allowing the ED to initiate prosecution in such circumstances would place it above other investigating agencies, a position not envisaged under the law.

Allowing the petitions, the bench quashed the Enforcement Case Information Repoet dated November 30, 2023, the summons issued pursuant to it and all consequential proceedings against Nanjegowda and the other petitioners. It also quashed the June 6, 2024 order of the PMLA Adjudicating Authority insofar as it concerned one of the petitioners and directed the return of articles seized from him.