Enforcement Directorate is not a ‘super cop’, says Karnataka High Court

Karnataka HC ruled that the ED’s power under the Prevention of Money-Laundering Act (PMLA) is “derivative and not original”. File

In a set back to the Directorate of Enforcement (ED), the High Court of Karnataka has held that the ED is “not a super cop” and cannot file a private complaint to initiate a money-laundering probe when the competent agencies decline to prosecute a scheduled offence based on the information filed by the ED.

The Court ruled that the ED’s power under the Prevention of Money-Laundering Act (PMLA) is “derivative and not original”, and that filing a private complaint under Section 200 Code of Criminal Procedure (Cr.P.C.) / Section 223 Bharatiya Nagarik Surakasha Sanhita is not contemplated under the PMLA Act.

“... one institution in the country does not become supreme so that it is in a position to abuse the powers conferred on it. Law recognises the requirements of checks and balances. The ED is not a super cop to investigate anything and everything which comes into its notice,” the Court observed, adding that the ED must exercise only those powers expressly conferred on it by the PMLA.

Justice M.I. Arun passed the order while allowing a batch of writ petitions filed by Congress Party MLA from Malur constituency K.Y. Nanjegowda, who is also Chairman of the Kolar and Chikkaballapur Milk Union Ltd. (KOMUL), Y.B. Ashwathanarayana then Director of KOMUL, K.N. Gopala Murthy, Nagesh N. and Raju Krishna C.

The petitioners had challenged the ED’s ECIR registered in November 2023, the Adjudicating Authority’s order confirming seizure of articles, summons issued to them, and the private complaint filed by the ED before a special court.

The case stemmed from the criminal proceedings initiated based on a private complaint on “land scam” lodged by one K.C. Rajanna before a trial court in Kolar alleging irregularities in the grant of about 80 acres of land to 38 persons by the Malur Land Grant Committee, of which Mr. Nanjegowda was chairman.

Treating this case it as a predicate offence, the ED had registered ECIR in 2023. During searches conducted based in this ECIR, the ED agency claimed to have stumbled upon material indicating irregularities in recruitments to the KOMUL, which it termed a separate “job scam.” Further, the ED had shared with the Karnataka Lokayukta police the information on alleged “job scam” that it had discovered during the searches.

However, the “land scam” case ended in a closure report by the jurisdictional police, and the trial court dismissed it for want of sanction to prosecute a public servant even though complainant Mr. Rajanna protested against closure report.

As the Lokayukta police did not act on the information shared by it under Section 66(2) of the PMLA), the ED itself had filed a private complaint before a special court in Bengaluru on KOMUL “job scam.”

It was argued in behalf of the petitioners that once the predicate offence collapses, even on technical grounds, the ED cannot continue PMLA proceedings, and that when ED uncovers a different scheduled offence, its only permissible course is to share information with the competent agency and not filling a separate private complaint and probe it.

Accepting petitioners’ contentions, the Court held that Section 66(2) casts a duty on the ED to intimate the concerned agency, not to take up the investigation itself.

“In law, where an act is to be done in a particular way, it must be done in that way and in no other way,” the Court said, invoking the constitutional separation of powers and the need for checks and balances.

The Court pointed out that the PMLA does not expressly empower the ED or its authorities to file a private complaint in respect of a scheduled offence and, on that strength, investigate the accused under the PMLA.

Allowing the ED to prefer a private complaint by itself, when the other government authorities deem it inappropriate to initiate any proceedings against anybody, “would amount to permitting the ED to act as a super cop and it goes against the philosophy of the Act which requires a predicate offence to be in existence for the ED to initiate proceedings as contemplated under the PMLA” the Court said.

“The ED is not like any other person to file a complaint under Section 200 Cr.P.C./223 of BNSS... If the ED is permitted to file a private complaint, it will be in a position to file a private complaint against any person by itself and take up investigation against them. This is not contemplated under the provisions of the PMLA,” the Court clarified.