The Supreme Court has decided to examine whether the Enforcement Directorate (ED) can attach property in the absence of an FIR related to the scheduled offence that the property is allegedly tied to. A bench comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar issued notice on a challenge to the Madras High Court’s ruling, which had restrained the ED from investigating private contractors accused of illegal sand mining under the Prevention of Money Laundering Act (PMLA).
The Legal Issue
The crux of the matter revolves around the interpretation of Section 5 of the PMLA, which allows the ED to attach property involved in money laundering. The first proviso to Section 5 states that attachment can only occur once an FIR or a complaint has been filed related to a scheduled offence. The second proviso allows attachment based on material that gives reason to believe that property may frustrate proceedings under the PMLA.
The Madras High Court had earlier ruled that the ED’s initiation of proceedings under the PMLA was unfounded because there was no FIR or evidence of proceeds of crime related to the alleged illegal sand mining. The Court also noted that sand mining was not covered under the scheduled offences under PMLA, thus preventing the ED from initiating action without identifying proceeds of crime.
ED’s Arguments
The ED contended that it had the authority to proceed with its investigation under the PMLA even in the absence of an FIR, citing the provisions of Section 156(3) of the Code of Criminal Procedure (CrPC). This provision allows magistrates to order investigations into cognizable offences if an FIR has not been registered. Senior Advocate Mukul Rohatgi, representing the private contractors, argued that the ED’s approach of using Section 156(3) was an overreach since the police had not filed the FIR and there were no proceeds of crime identified.
The Court’s Inquiry
During the proceedings, Chief Justice Khanna questioned the course of action in scenarios where no FIR was filed. The bench expressed concern over harmonizing the first and second provisos of Section 5 of the PMLA and emphasized the need to ensure a balanced interpretation that safeguards the rights of those accused of offences under the Act. The bench issued a notice but did not grant a status quo order on the attachment of the property in question.
The Madras High Court’s Findings
The Madras High Court had previously observed that the ED’s actions were without a proper legal basis, noting that unless a scheduled offence was registered and it generated proceeds of crime, the ED could not initiate proceedings. The Court also emphasized that provisional attachment orders should only be used in exceptional cases, not as a routine measure. The High Court ultimately quashed the provisional attachment orders passed by the ED, leading to the current petition before the Supreme Court.
The Broader Context
The ED had registered an Enforcement Case Information Report (ECIR) against certain private contractors based on four FIRs related to illegal sand mining. Following this, the ED conducted searches, issued summons, and passed provisional attachment orders regarding the contractors’ properties. The contractors, including K. Govindaraj, challenged the proceedings, arguing that the ED lacked jurisdiction under the PMLA because the FIRs did not reveal proceeds of crime.
The matter now awaits further scrutiny by the Supreme Court, with a ruling likely to clarify the ED’s powers under the PMLA and the legal requirements for attaching property in the absence of a registered FIR. The case highlights the ongoing tension between the ED’s broad investigative powers and the safeguards designed to protect individuals’ property rights under Indian law.
Case Title
DIRECTORATE OF ENFORCEMENT AND ANR. v. K. GOVINDARAJ AND ANR.
SLP(Crl) No. 14355/2024
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