In a significant ruling, the Madras High Court has clarified that the Enforcement Directorate (ED) cannot begin an investigation under the Prevention of Money Laundering Act (PMLA) unless there is a clear predicate offence and established proceeds of crime. The court emphasized that the ED does not have unlimited powers and cannot act as a "super cop" or "loitering munition."
“The ED is not a super cop to investigate anything and everything which comes to its notice,”
— observed the bench of Justice M.S. Ramesh and Justice V. Lakshminarayanan.
The court explained that criminal activity must be linked to a scheduled offence under the PMLA. Only then can ED initiate any proceedings. Without such a link, the agency’s jurisdiction does not arise.
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“It is like a limpet mine attached to a ship. If there is no ship (predicate offence and proceeds of crime), the limpet cannot work,”— the court added.
The ruling came in response to a petition filed by R.K.M Powergen Pvt. Ltd, which challenged the ED’s move to freeze its fixed deposits. The company was previously allotted a coal block in the Fatehpur East region, which was later declared a reserved forest, making mining activity illegal. Following a PIL, the Supreme Court held the coal allocation illegal and directed the CBI to investigate.
The CBI registered an FIR under Sections 420, 120B IPC, and Section 13(1)(d) of the Prevention of Corruption Act. Based on this, ED launched its own probe and froze the company’s accounts. However, RKM Powergen argued there was no actual coal extraction, hence no money was generated, and no proceeds of crime were involved.
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The ED justified its action by citing the CBI’s supplementary chargesheet, and claimed the company had misrepresented its financial worth to secure loans, invoking Sections 471 and 420 IPC. ED also said courts had not restrained its probe earlier, and thus it had jurisdiction.
The petitioner, however, maintained that foreign investments were made with RBI approval, and the pricing dispute raised by the ED had already been settled by the competent tribunal.
Referring to Section 66(2) of the PMLA, the court clarified:
“If ED comes across a violation of law during investigation, it must inform the appropriate agency. It cannot assume investigative powers itself.”
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The court criticized the ED for freezing the company’s assets without proving that the deposits were linked to proceeds of crime. It stressed that even though the CBI had filed a chargesheet, unless the offences listed fall within the scheduled offences under PMLA, ED could not take action independently.
In conclusion, the court ruled that in the absence of a predicate offence, the freezing order and attachment by the ED were without jurisdiction and quashed the agency’s actions.
“If an act is required to be done in a particular way, it must be done in that way and no other,”— the court noted firmly.
Case Title: R.K.M Powergen Pvt. Ltd v. The Assistant Director and Others
Case Nos.: W.P. Nos. 4297 & 4300 of 2025
Petitioner's Counsel: Mr. B. Kumar, Sr. Adv. for Mr. S. Ramachandran
Respondents’ Counsel: Mr. AR.L. Sundaresan, ASG assisted by Mr. N. Ramesh, Special PP (ED)