ED not a drone or super cop: HC

The Madras High Court has firmly stated that the Enforcement Directorate (ED) is not a “drone” that can attack at will or a “super cop” that can investigate everything it comes across. The observation came while the court set aside the ED’s seizure of ₹901 crore in fixed deposits belonging to RKM Powergen Private Ltd (RKMP) in a case under the Prevention of Money Laundering Act (PMLA).

A division bench of Justices M S Ramesh and V Lakshminarayanan made these remarks while hearing a plea filed by RKMP. The company had challenged the freezing order issued by the ED on January 31, 2025, based on an earlier FIR filed by the CBI in 2014 regarding coal block allocation for a power plant in Chhattisgarh.

Although the CBI filed a closure report in 2017 citing no irregularities, a special court rejected the report and called for further investigation. A supplementary report filed by the CBI in 2023 alleged offences under the IPC and the Prevention of Corruption Act.

Following this, the ED conducted searches and froze ₹901 crore in RKMP’s fixed deposits, prompting the company to approach the High Court.

The bench noted that under Section 66(2) of the PMLA, if the ED comes across violations of other laws, it must inform the appropriate authority. The ED can proceed only if that authority begins an investigation and finds evidence leading to “proceeds of crime”.

“The ED cannot act on its own if there is no registered complaint or predicate offence,” the judges ruled. “It is like a limpet mine attached to a ship. If there is no ship, the limpet cannot work. The ship is the predicate offence and ‘proceeds of crime’,” the court said.

The bench emphasized that there was no complaint filed regarding the alleged criminal activities mentioned by the ED. It added, “The ED is not a super cop to investigate anything and everything.”

The court concluded that without a proper criminal case or proceeds of crime linked to a scheduled offence under PMLA, the ED cannot assume jurisdiction on its own.

The court’s ruling is seen as a significant reminder of the ED’s limited powers under the PMLA and the necessity of following due legal process. Legal experts say the judgment reinforces the principle that investigative agencies must operate within the framework of law and cannot overstep their mandate based on assumptions or unverified information. The verdict is likely to influence how future cases under PMLA are handled, especially concerning the requirement of a predicate offence before ED can take action.