The Supreme Court is set to examine whether the Enforcement Directorate can attach property under the Prevention of Money Laundering Act without an FIR being filed. This stems from a Madras High Court ruling that questioned the ED’s jurisdiction in investigating illegal sand mining. The outcome may influence the agency’s authority and anti-money laundering enforcement.
New Delhi: The Supreme Court is poised to address a critical question regarding the scope of the Enforcement Directorate’s (ED) powers under the Prevention of Money Laundering Act (PMLA):
Can the ED attach property without an FIR being registered for the scheduled offence?
This pivotal legal issue arose during a hearing on the ED’s appeal against a Madras High Court judgment that restrained the agency from investigating private contractors for alleged illegal sand mining. The High Court had observed that the ED initiated proceedings under the PMLA without identifying “proceeds of crime” or registering a case related to a scheduled offence.
The Supreme Court bench, comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar, emphasized the need for a harmonious interpretation of the first and second provisos of Section 5 of the PMLA.
- First Proviso: It restricts attachment orders unless a report under Section 173 of the CrPC or a complaint is filed with the Magistrate regarding the scheduled offence.
- Second Proviso: Allows the ED to attach property based on material indicating the likelihood of proceedings being frustrated if immediate action is not taken.
“We are primarily going by the reasoning of the High Court. The first and second proviso of Section 5 has to be harmonized,”
said CJI Sanjiv Khanna.
The ED had registered an Enforcement Case Information Report (ECIR) based on four FIRs related to illegal sand mining and argued that the illicit activity generated proceeds of crime. It also cited its authority under Section 156(3) of the CrPC to seek a court order for investigation if no FIR was registered.
The Madras High Court, however, quashed the provisional attachment orders, stating that:
- Sand mining is not a scheduled offence under the PMLA.
- The FIRs failed to reveal proceeds of crime linked to the contractors.
- Provisional attachment should only be used in exceptional cases, not routinely.
The court concluded that ED’s actions were “without jurisdiction” and unwarranted under the circumstances.
In a lighter vein, the Chief Justice commented on the ED’s extensive reach: “Your arms are so strong and long, nobody can purchase it.”
The bench issued a notice on the matter but refrained from granting a status quo on the attached property.
The case originated from ED’s investigation into alleged illegal sand mining, which included searches, summons, and attachment orders against private contractors. The contractors challenged these actions in the High Court, arguing that the ED lacked jurisdiction due to the absence of identified proceeds of crime.
This Supreme Court decision is expected to clarify the extent of the ED’s powers under the PMLA, especially concerning provisional attachment in the absence of an FIR or a clearly defined predicate offence.
As the legal debate continues, this case underscores the ongoing scrutiny of enforcement agencies’ powers in India. The court’s interpretation will likely have far-reaching implications for the enforcement of anti-money laundering laws.
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