FIR For Scheduled Offence Not Necessary For ED Investigation : Kerala High Court In CMRL Case

The Kerala High Court has held that the absence of an FIR for a scheduled offence does not bar the Enforcement Directorate (ED) from initiating investigation proceedings under the Prevention of Money Laundering Act (PMLA).

Justice T.R. Ravi dismissed a writ petition filed by Cochin Minerals and Rutile Ltd (CMRL) and its officials challenging the ED proceedings initiated in connection with the alleged CMRL-Exalogic transactions.

The petitioners had contended that the ED could not have registered the ECIR or issued summons under Section 50 of the PMLA in the absence of a scheduled offence and without a valid FIR or complaint relating to a predicate offence.

Rejecting the contention, the Court relied on the Supreme Court's ruling in Vijay Madanlal Choudhary v. Union of India and held that registration of an FIR is not a pre-condition for the ED to commence inquiry or investigation under the PMLA. The High Court specifically relied on the following observation of the Supreme Court:

"The fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating “civil action” of “provisional attachment” of property being proceeds of crime."

The Court observed:

“As the law has already been laid down by the Hon'ble Supreme Court, that the existence of an FIR is not a pre-condition for issuing summons under Section 50 of the PML Act, it only needs to be followed by this Court.”

The Court noted that the summons issued to the company officials were only for the purpose of investigation and collection of evidence. It said the documents sought by the ED related to agreements and transactions between CMRL and Exalogic Solutions Pvt Ltd and that the investigation was still at a preliminary stage.

CMRL had argued that proceedings under the PMLA could begin only after a criminal investigation agency registered a predicate offence and concluded that “proceeds of crime” existed. The company further contended that under the Companies Act, only offences under Section 447 relating to fraud are scheduled offences under the PMLA and that action could arise only after the Serious Fraud Investigation Office (SFIO) completed its investigation and filed a report.

The ED, however, argued that ECIR is merely an internal document and that proceedings under the PMLA can commence even without an FIR. It also contended that the powers of the ED under the PMLA are independent of proceedings before the SFIO.

The High Court accepted the ED's submissions and held that the powers of the ED under the PMLA are not dependent on the filing of a final SFIO report.

The Court also rejected the company's claim that it was entitled to immunity under the PMLA because the Income Tax Settlement Commission had granted immunity from prosecution under the Income Tax Act. The Court held that such immunity was confined to proceedings under the Income Tax Act and could not extend to PMLA proceedings.

The case arose from an Income Tax Department search conducted in January 2019 at CMRL's premises. According to the ED, the searches revealed that the company had allegedly inflated expenditures and generated unaccounted cash used for illegal payments to politicians, media houses and public servants. The ED also alleged that ₹1.72 crore was paid to Exalogic Solutions Pvt Ltd, associated with Veena Vijayan, without any actual services being rendered.

During the pendency of the writ petition, the ED informed the Court that the SFIO had filed a complaint on April 3, 2025 alleging offences under the Companies Act, including offences under Section 447, which is a scheduled offence under the PMLA.

Holding that the writ petition was premature since it challenged only summons issued under Section 50 of the PMLA, the Court ultimately dismissed the petition.

Case Title: WPC 15757/2024