Kerala High Court Asks ED Not To Act Against CMRL Until Verdict On Appeal Challenging Refusal To Quash PMLA Case, Order On June 5

The Kerala High Court on Monday (June 1) reserved its verdict in the appeal filed by Cochin Minerals and Rutile Limited (CMRL) and its officials challenging an order of the Single Bench that dismissed a plea seeking to quash the proceedings initiated by the Enforcement Directorate in an alleged case of misappropriation of public funds.

The verdict is likely to be pronounced on Friday (June 5). In the meantime the court asked the agency not to precipitate issue against the appellant until the verdict is pronounced.

The Division Bench of Justice Raja Vijayaraghavan V. and Justice K.V. Jayakumar heard detailed arguments advanced by Senior Advocate Siddharth Luthra appearing for the appellants, ASGI AR L Sundaresan and Zoheb Hossain (Spl. Counsel) appearing for the ED.

When the Court orally said that it was reserving its verdict, Luthra submitted: "These people should not be harassed. One gentleman is in the ICU right now." At this stage the court orally said to ED's counsel "In the meantime, will you maintain status quo till Friday? Don't precipitate any proceedings till Friday."

ED's counsel orally submitted that the same would be conveyed to the agency; he however submitted that the court may clarify that the direction not to precipitate the issue only applies with respect to the appellant. The court said that the issue will not be precipitated only in respect of the appellants.

The Court in its interim order dictated: "The counsel for the respondent (ED) has undertaken before us that till the judgment is passed, the issue will not be precipitated. Post on Friday."

Senior advocate Siddharth Luthra appearing for the appellant, questioned whether PMLA can be invoked by the ED without registration of an FIR or complaint in the predicate offence.

He said that the ED has consistently taken a stand that there was no predicate offence was registered and to invoke jurisdiction by any agency, there must be the jurisdiction fact which must be existence of the offence, which is missing in the present case.

To the court's query that ED can't initiate PMLA proceedings as SFIO is seized of the matter, Luthra said even if its assumed that SFIO has begun probe, the trigger for ED's invocation of jurisdiction would be filing of FIR or complaint; however here neither FIR nor complaint filed.

Submitting that till date there had been no attachment, Luthra said that the ED did not attach anything in 2024 when they registered the ECIR.

At this stage the court asked, "So let us assume that, like you said, something happened in 2019, inquiry was conducted and found that some sort of a listed co. has some cash transaction, digital transaction has taken place and some aspect of money laundering has taken place, some complaint was lodged against a particular Bangalore-based company. Now, some info is there with regard to the involvement of CMRL. He has to have 'reason to believe' under S.5 before getting info from you wrt, he has not, ECIR is there. It's just as Vijay Madanlal (SC decision) said that it's just a document and not akin to an fir. So ECIR is registered and thereafter, he issues summons to you and says, 'please just explain. these are the things in public domain. This is how you have channelised public funds to a particular individual. we just want to get info from you' and the issue summons to you....you can't just throttle the ED when there is positive material".

The court orally said that the agency wants to conduct an enquiry probably. Luthra however referred to Vijay Madanlal judgment and said that it emphasizes on the existence of a scheduled offence as understood, which is not made out in the present case.

He further referred to the summons and said that it clearly states that the agency did not attach the assets of the entity. He said that the company had challenged the ECIR as a "figment of imagination"; further the appellant had also challenged the investigation, actions taken in pursuance of the ECIR and all process initiated by agency, including the summons.

He said that in the reply to the summons issued, the company had raised the issue of jurisdiction of the agency.

The court however said that the appellant was a listed company and the ED had asked about the agreement entered into between CMRL and Exalogic, invoices issued by Exalogic to certain persons, ledger acc relating to certain transactions in CMRL.

However Luthra argued whether any company listed or otherwise can be put to investigation without jurisdiction.

Arguing that the ED cannot go beyond Section 5(Attachment of property involved in money-laundering) PMLA Luthra said, "See the language and tenor...'reply sent by you is tantamount to non-cooperation with investigation'. I can't write back in regard to your lack of jurisdiction?...We can't have a situation where an agency or any individual can approbate and reprobate... We did appear. There was harassment, there was pressure. We were put under pressure...rather distasteful but it is what it is".

He further said that proviso in Section 5 provides for immediate attachment and nothing more; That does not say that you can continue with investigation.

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.

It was alleged that CMRL 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.

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 by filing a writ petition. They sought 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.

The Single Judge had dismissed the plea after finding that the same, made at the stage of issuance of summons, was premature. The Single Judge 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.

Case Title: M/s Cochin Minerals and Rutile Limited and Ors. v. Directorate of Enforcement

Case No: WA 1140/ 2026

Counsel for the appellants: Gopikrishnan Nambiar M., K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Raja Kannan