Kerala High Court Dismisses CMRL's Plea To Quash ED Case Alleging Misappropriation Of Public Money
The Kerala High Court on Tuesday (May 26) dismissed the petition filed by the Cochin Minerals and Rutile Limited (CMRL) seeking to quash the proceedings initiated by the Enforcement Directorate in view of the bribery and money laundering allegation against the company.The petition was filed by CMRL and its officials seeking to quash the proceedings initiated by the ED arising out of...
The Kerala High Court on Tuesday (May 26) dismissed the petition filed by the Cochin Minerals and Rutile Limited (CMRL) seeking to quash the proceedings initiated by the Enforcement Directorate in view of the bribery and money laundering allegation against the company.
The petition was filed by CMRL and its officials seeking to quash the proceedings initiated by the ED arising out of Enforcement Case Information Report (ECIR) and to stay the summons issued against the officials. It was alleged that CMRL has handed bribes to Veena Thaikandiyil (Veena Vijayan), daughter of former Chief Minister Pinarayi Vijayan, her company Exalogic Solutions Pvt. Ltd., and other public servants, and carried out illegal financial transactions.
Justice T.R. Ravi observed that the present plea, made at the stage of issuance of summons, was premature.
The Court was also of the view that the contention of the petitioners that SFIO complainant was not there at the time of summons can no longer exist in view of the fact that SFIO filed a complaint against the petitioners, alleging scheduled offences under the PMLA, after the case was heard and taken for orders. It was further opined that FIR on scheduled offences not a pre-condition for issuing summons under the PMLA.
After the decision was pronounced, the CMRL's counsel sought for a 2 weeks' extension of the interim order passed by the Court deferring the summoning of the CMRL officials till the disposal of the plea. However, the Court was not inclined to allow the request.
The Court orally remarked, "I'm not really inclined. I don't think it should be done. Even otherwise, I feel that without a further notice, they'll not be able to do anything. So when a further notice comes, you are always free to."
Factual Background
In 2023, a complaint was filed by Shone George before the Ministry of Corporate Affairs seeking an investigation into the affairs of CMRL under Sections 210 [Investigation into Affairs of Company] and 212 [Investigation into Affairs of Company by Serious Fraud Investigation Office] of the Companies Act.
Following this, orders were passed by the Ministry, appointing three Inspectors to carry out the investigation and assigning SFIO to look into the affairs of CMRL. Later, CMRL came to know from a media report that a case have been registered under the PMLA (Prevention of Money-Laundering Act, 2002) in relation to Exalogic based on a SFIO complaint.
The ED issued summons to the office bearers to personally appear before it but CMRL gave a reply that the PMLA proceedings were initiated without jurisdiction. However, ED replied that the reply cannot be accept and mandated their personal appearance, leading them to approach the High Court in the present proceedings.
CMRL's arguments
According to the petitioners, the ED could not have initiated or issued summons in the absence of any scheduled offences and therefore, the entire proceedings are without jurisdiction. Moreover, investigation under the PMLA can be based only on a valid FIR/complaint by a criminal investigation agency in respect of a schedule offence under the Act and the agency comes to a prima facie conclusion that a criminal offence involving "proceeds of crime has been committed".
Another contention raised was that only SFIO has jurisdiction to investigate an offence under the Companies Act.
They also claimed that the company has been granted immunity under the Income Tax Act and therefore, is entitled to immunity under PMLA.
Contentions put forth by the ED
The ED opposed the plea and contended that the same was premature. It was also stated that the person summoned cannot be a person aggrieved as rights have not be curtailed. Further, it was submitted that ECIR cannot be quashed, being an internal document.
It was argued that Companies Act provision cannot take away the ED's power to investigate PMLA offences.
Moreover, it was submitted that the Income Tax Department search revealed that CMRL had inflated its expenditures by around 133.82 crores by booking bogus expenses in cash under the heads transportation and sludge handling, during the financial years 2012-2013 to 2018-2019, and generated, cash which was used for making illegal payments to politicians, parties, media houses and public servants.
Court's findings
Placing reliance on the decision in C.M.Raveendran v. Union of India, it was opined that the plea was premature:
"The case at hand is similar on facts and the challenge has been made at the stage of issuance of the summons. No cause of action can be said to have been arisen at this stage, since the summons only calls upon the person to state the truth or to make statements and produce documents. I hence find that the writ petition is premature and is liable to be dismissed."
Immunity under the PMLA can't be claimed based on the immunity granted under the Income Tax Act
The Court referred to Section 245(C) of the IT Act, which states that an assessee can apply to have his case settled at any stage of a case as well as Sections 245(D)(4), 245(H), 245(I). It then remarked:
"As such, the immunity, if any, available to the 1st petitioner, is only regarding prosecution under the Income Tax Act. Moreover, the Settlement Commission constituted under Section 245B of the Income Tax Act has not been vested with any power to deal with complaints regarding money laundering and can only deal with settlement of cases under Chapter XIXA of the Income Tax Act. Hence, the contention that the petitioners are entitled to immunity from proceedings under the PMLA cannot be countenanced."
FIR on scheduled offences not a pre-condition for issuing summons under the PMLA
To answer the question whether PMLA enquires can commence in the absence of an FIR in respect of scheduled offences, the Court looked into Section 50 PMLA (Power to issue summons, production of documents, etc.) as well as the Apex Court decision in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors.
"A reading of the summons issued would show that what has been initiated is only an investigation. At this stage it is not possible to state what the outcome of the investigation would be. 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 held.
ED's power under PMLA are not dependent on the final report by SFIO under Companies Act
After the Court heard the parties and reserved its verdict, the ED filed an affidavit that the SFIO has filed a complaint against CMRL alleging commission of offences under the Companies Act, 2013 and 1956, including scheduled offences under the PMLA. It was then said that the contention regarding non-existence of scheduled offence no longer survives and the very foundation of the plea is lost.
This was opposed by the petitioners, who said that no further materials can be brought in and the same cannot be considered by the Court.
Disagreeing, the Court opined:
"The Court is dealing with a writ petition filed under Article 226 of the Constitution of India and any fact that has come into existence prior to the pronouncement of the judgment in the writ petition is bound to be considered by the Court. The Court cannot shut its eyes to such facts which are virtually admitted, and which has a bearing on the contentions raised in the writ petition...At the time of rendering the judgment, the Court must bear in mind the fact situation as it prevails on that day. A decision otherwise will be purely academic. I hence find that this Court is bound to look onto the subsequent events while rendering the judgment. In view of the above conclusion, it has necessarily to be held that the foundation of the argument of the petitioners that the summons had been issued without any scheduled offence no longer exists."
The Court was of the view that it is not necessary to interfere with the summons at the present stage on the ground that there was no complaint by the SFIO at the time when the summons was issued. It thus dismissed the plea.
Case Title: WPC 15757/2024
Case Number: M/S. Cochin Minerals and Rutile Limited and Ors. v. Directorate of Enforcement
Citation: 2026 LiveLaw (Ker) 291
Counsel for the petitioner: Sidharth Luthra (Sr.), M. Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Raja Kannan, Arshdeep Singh Khurana, Sulakshan V.S., Himanshu Kasturi, Kartikeye Dang, Manan Khanna, Aditya Chopra
Counsel for the respondent: ARL Sundaresan - ASGI, Zoheb Hossain - Spl. Counsel, Jaishankar V. Nair