'ED Action Without Any Basis' : Madras High Court Stops Money Laundering Probe Against Contractors Over Sand Mining

The Madras High Court recently restrained the Enforcement Directorate from carrying out its investigation under the Prevention of Money Laundering Act against private contractors in connection with alleged illegal sand mining.The Court noted that there was no scheduled offence in the present case and hence the PMLA investigation was not sustainable. Till there was a scheduled offence registered and detection of the proceeds of crime, the ED cannot carry out its investigation."...we cannot allow the citizens to be at the mercy of such investigating officers. Since the very action to initiate proceedings under the PMLA is without any basis, we are not impressed with the submissions made by the Additional Solicitor General that this Court would not interfere in proceedings when there is an alternative remedy," the Court observed. The bench of Justice MS Ramesh and Justice Sunder Mohan observed that the ED had initiated the proceedings under the Prevention of Money Laundering Act without any basis and without identifying any proceeds of crime. It noted that sand mining was not covered under the scheduled offences under the PMLA. The court added that unless a case in the scheduled offence was registered and such an offence generated proceeds of crime, the ED could not have initiated any action. The court further observed that even if ED's materials were to be accepted, it would only show that they have unearthed large-scale illegal mining that generated illegal money. “We are thus of the view that unless an information with regard to any case in the scheduled offence is registered and such an offence has generated proceeds of crime, which is dealt with by the petitioners, no action can be initiated. As stated earlier, the materials collected and the reasons shown in the Provisional Attachment Order, even if accepted to be true only suggests that the respondents have unearthed large scale illegal sand mining and that may have generated illegal money,” the court observed. Stressing that the procedure prescribed under the law could not be violated, the court added that the reasons put forward by the ED did not justify their actions. The court noted that the FIRs relied upon by the ED in the ECIR were not connected to the petitioner contractors that would justify proceeding against them. While the court acknowledged that a person need not be an accused in the predicate offence to be prosecuted under the PMLA, the court highlighted that it should be established that the person is involved with the proceeds of crime derived from a scheduled offence. “We are only concerned with the procedure adopted by the respondents. Even assuming that the respondents have the object to curb the illegal sand mining in the State, the procedure prescribed under the law cannot be violated. The four FIRs which were the basis for recording the ECIR, are not even remotely connected to the petitioners. The other reasons assigned by the respondents in the provisional attachment order and in the counter affidavits to justify their action against the petitioners do not satisfy the requirements under the PMLA, as reiterated by the Hon'ble Supreme Court in Vijay Madhanlal Choudhary's case (cited supra),” the court said. Relying on the Apex Court decision in Vijay Madhanlal Choudhary's case, the court added that even if the contractors had ill-gotten money, the ED could not assume jurisdiction and proceed against them under the PMLA in the absence of a scheduled offense. The court added that while the ED had every right to ensure that a scheduled offense is registered against the contractors, the court added that till such time, the ED could not attach their properties or initiate any action under the PMLA as it would be putting the cart before the horse."However, we would also make it clear that the respondents would have every right to initiate such action to ensure that the scheduled offence is registered and is investigated. Till such time, the properties of the petitioner cannot be subjected to attachment and the respondents otherwise cannot initiate any action under the PMLA. One cannot put the cart before the horse," the court said. The court was hearing the pleas filed by private contractors against the proceedings initiated by the ED and the provisional attachment order issued by the department. The ED had registered an ECIR based on four FIRs in connection with illegal sand mining. Following this, searches were conducted and summons were sent to the District Collectors and private parties. Provisional attachment orders were also passed in relation to the properties of the petitioners. The court had earlier stayed the summons to the District Collectors and the private contractors. The petitioner challenged the proceedings on the primary ground that the ED lacked jurisdiction to initiate action under the Prevention of Money Laundering Act. It was submitted that the...

'ED Action Without Any Basis' : Madras High Court Stops Money Laundering Probe Against Contractors Over Sand Mining

Upasana Sajeev

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