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 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 BackgroundIn 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 argumentsAccording 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 EDThe 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 findingsPlacing 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 ActThe 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...

Kerala High Court Dismisses CMRL's Plea To Quash ED Case Alleging Misappropriation Of Public Money

K. Salma Jennath

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K. Salma Jennath

Kerala High Court Dismisses CMRL's Plea To Quash ED Case Alleging Misappropriation Of Public Money

K. Salma Jennath

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K. Salma Jennath

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