In a significant ruling, the Supreme Court has set aside the Kerala High Court’s directive to the Enforcement Directorate (ED) to register an Enforcement Case Information Report (ECIR) under the Prevention of Money Laundering Act (PMLA) in connection with an alleged cooperative bank fraud. The Apex Court ruled that the High Court had no authority to issue such a direction merely based on a prima facie determination of a predicate offence.
Background of the Case
The case involved allegations of financial mismanagement and misappropriation of funds amounting to ₹24 crore from a cooperative bank. A depositor had approached the Kerala High Court, questioning why action was taken only against the bank’s former secretary while other officials were left out of the criminal proceedings. The High Court, while reviewing the case, took note of the FIR registered against the former secretary and the surcharge proceedings under the Kerala Co-operative Societies Act, which imposed a liability of ₹24,22,95,724 on 14 former governing body members.
The High Court, in its ruling, observed:
“It is intriguing how and in what manner other responsible persons have been let off without facing any criminal case.”
Additionally, the court noted that since offences of breach of trust and cheating constitute predicate offences under the PMLA, it warranted an ECIR registration. Consequently, the High Court directed the ED to initiate an investigation under the money laundering laws.
Upon appeal, the Supreme Court, comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan, held that the High Court exceeded its jurisdiction by directing the ED to register an ECIR. The Supreme Court ruled:
"The High Court had no reason to pass a drastic order directing the ED to register an ECIR only because it prima facie concluded that a predicate offence exists."
The Supreme Court emphasized that the ED should independently assess whether an investigation under the PMLA is warranted rather than acting on the High Court’s directive.
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Quashing of ECIR: As a result of this ruling, the ECIR registered following the Kerala High Court’s directive stands quashed.
No Direct Orders for ECIR Registration: The Supreme Court clarified that a High Court cannot compel the ED to register an ECIR simply based on prima facie findings of a predicate offence.
ED’s Discretion in PMLA Investigations: The ED retains full discretion to determine whether to proceed with an investigation under the PMLA, based on its independent assessment of the case.
This judgment establishes a critical precedent regarding the scope of judicial intervention in money laundering investigations. It reaffirms that investigating agencies like the ED must act independently without being influenced by judicial directives unless explicitly empowered by law.
By setting aside the Kerala High Court’s order, the Supreme Court has reinforced the principle that judicial oversight must align with statutory provisions, ensuring that investigative agencies function within their legal mandate.
Case : P Madhavan Pillai vs Rajendran Unnithan and others
