Karnataka HC says ED is not a ‘super cop’, quashes money laundering proceedings against Congress MLA

The Karnataka High Court has ruled that the Enforcement Directorate (ED) cannot investigate offences beyond the powers granted to it under the Prevention of Money Laundering Act (PMLA), observing that the agency “is not a super cop to investigate anything and everything which comes into its notice”.

Justice MI Arun held that the ED’s powers under the PMLA are “derivative and not original” and that money laundering proceedings cannot continue if the scheduled offence forming their basis no longer survives.

Allowing a batch of petitions, the Court quashed the Enforcement Case Information Report (ECIR) dated November 30, 2023, and consequential proceedings against Karnataka Congress MLA KY Nanjegowda and others. It also set aside proceedings arising from a private complaint filed by the ED.

The case involved an ED investigation into irregularities in the recruitment of employees at the Kolar-Chikkaballapur District Cooperative Milk Producers Union Ltd (KOMUL).

The Court noted that the underlying land scam case had been closed after the required sanction for prosecution was not obtained. Since the closure had attained finality, the ED could not continue its investigation into proceeds of crime linked to the case.

It also held that the ED cannot independently initiate a private complaint concerning a scheduled offence. Under Section 66(2) of the PMLA, the agency must share information about suspected violations of other laws with the relevant investigating agency instead of taking over the investigation.

Rejecting the ED’s contention that it could continue the money laundering probe despite the closure of the predicate offence, the Court said statutory powers must be exercised only in the manner prescribed by law.

The High Court also quashed a June 6, 2024, order of the PMLA Adjudicating Authority confirming the seizure of assets in relation to one petitioner and directed the return of the seized articles.