In a significant legal observation regarding the extent of central agency powers, the Karnataka High Court has ruled that the Enforcement Directorate (ED) is “not a super cop” empowered to investigate any matter it deems fit. The court’s remarks came as it quashed an Enforcement Case Information Report (ECIR) filed against Congress MLA KY Nanjegowda and several other individuals associated with him.
The legal battle originated from an ED investigation into alleged irregularities regarding recruitment at the Kolar-Chikkaballapur District Cooperative Milk Producers Union Ltd (KOMUL). While the agency had initiated proceedings under the Prevention of Money Laundering Act (PMLA), the underlying criminal investigation—a land scam case—had already been closed after the necessary sanction for prosecution was denied. Given that the closure of the primary case had attained finality, the court found the ED's continued pursuit of the matter legally untenable.
Justice MI Arun, presiding over the case, emphasised that the agency's authority under the PMLA is strictly "derivative and not original." The court clarified that the ED’s jurisdiction is triggered only after a primary law enforcement agency files a formal FIR or criminal complaint involving a scheduled offence. Consequently, the agency lacks the mandate to launch an investigation suo motu based merely on a standalone suspicion of money laundering, Justice Arun noted.
The court further held that proceedings initiated under the PMLA cannot survive or independently continue if the accused has been cleared of the underlying charges or if that specific criminal case has been closed. Addressing the arguments presented, the bench stated that permitting the ED to initiate prosecution in instances where the primary offence has been dismissed would effectively place the agency above other established investigative bodies, a position that the current legal framework does not support.
During the proceedings, the ED had contended that it maintained the authority to investigate money laundering regardless of whether the underlying offence was closed on technical grounds, and asserted its right to file a private complaint under criminal procedure laws. However, Justice MI Arun rejected these submissions, highlighting that if the agency uncovers information suggesting a separate scheduled offence during an inquiry, it is required under Section 66(2) of the PMLA to share that information with the appropriate investigative authorities rather than unilaterally pursuing its own complaints.
As a result of the ruling, the court officially quashed the ECIR dated November 30, 2023, along with all associated summons and consequential proceedings against Nanjegowda and the other petitioners. Furthermore, the bench set aside the June 6, 2024, order issued by the PMLA Adjudicating Authority, directing the return of any articles seized from the individuals concerned during the investigation.
This ruling serves as a notable reminder of the procedural boundaries governing central financial investigations. By reiterating that the ED is restricted to the powers expressly conferred upon it by statute, the court has underscored the requirement for procedural compliance when handling cases where the predicate or scheduled offence is no longer active.
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