New Delhi: No requirement of a First Information Report (FIR) for initiating a money-laundering probe and the investigation remaining unaffected by the immunity granted under the Income Tax Act were among the takeaways of the Kerala High Court judgement lifting a stay on an Enforcement Directorate (ED) probe in a case involving the daughter of former chief minister Pinarayi Vijayan as one of the beneficiaries.
The court also held that proceedings under the Prevention of Money Laundering Act, 2002 run independently of any parallel probe by agencies such as the Serious Fraud Investigation Office (SFIO).
Justice T. R. Ravi of the Kerala High Court made these key observations while dismissing a writ petition of Cochin Minerals and Rutile Limited (CMRL) and its senior officials, including the founder and managing director and the chief financial officer, who are facing an ED probe over inflated expenses.
Vijayan’s daughter, Veena Vijayan, is accused of receiving Rs 1.72 crore under the head of Software Services from CMRL. The fund was routed through her software firm, Exalogic Solutions, without rendering any services, probe agencies have alleged.
A day after the high court dismissed the writ petitions, finding it unnecessary to interfere with the probe and calling the petitions premature, the ED carried out raids at 10 premises in Kerala, including those of Vijayan and his daughter.
Shortly after the searches began, many workers of the Communist Party of India (Marxist) arrived at Vijayan’s Kannur house and staged a sit-in protest. Meanwhile, senior Communist leader Muhammad Riyas put out a Facebook post, saying that he “would continue to protest till his last breath”.
“Corner if you want (sic). But will never bow before the Sangh Parivar. Will fight till the last breath,” Riyas said.
Roots of the case
The saga began with raids by the Income Tax Department on the factory and offices of the CMRL as well as the premises of its managing director and key employees in January 2019. Later, they were issued notices under the provisions of the Income Tax Act to examine documents for assessment years 2013-14 to 2019-20.
The ED has alleged that the I-T searches revealed that CMRL had inflated its expenditures by Rs 133.82 crore by booking bogus cash expenses under the heads of transportation and sludge handling between 2012 and 2019.These inflated expenses led to the generation of illicit cash, which the agency claimed the CMRL MD admitted before the I-T authorities as being used for illegal payments to politicians, parties, media houses, and public servants to ensure smooth business operations, as the business was facing threats of closure and environmental challenges.
After proceedings with the I-T department, the company approached the Income Tax Settlement Commission and admitted claims of inflated expenses amounting to Rs 134.27 crore, quantifying Rs 57.78 crore as additional income after deducting Rs 73.38 crore as eligible expenses.
However, the company claimed that the payment of Rs 1.72 crore to Veena Vijayan’s firm was genuine. The Settlement Commission passed an order concluding the matter on 12 June 2023.
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Multi-agency probe
Months after the settlement of the income tax case, Kerala Bharatiya Janata Party (BJP) leader Shone George approached the Ministry of Corporate Affairs seeking an investigation into the affairs of the CMRL, later petitioning the high court for a similar move.
The SFIO initiated its probe in January 2024, with an initial timeline of eight months. Meanwhile, the ED initiated an Enforcement Case Information Report in March 2024, which the firm’s counsels, including senior advocate Siddharth Luthra, argued was beyond the scope of the PMLA since the SFIO’s final report was filed only in April last year.
It was argued that the provisions of the Income Tax Act do not fall within the scheduled offences under the PMLA; hence the ED could have initiated its money-laundering proceedings only if the SFIO had filed its report under Section 212 of the Companies Act. Justice Ravi, however, said that SFIO had initiated a probe under Companies Act in January 2024, and that the complaint was just a subsequent development in the case.
“The affidavit filed by the respondent shows that an order under Section 212 referring the matter to the SFIO was issued pursuant to an order dated 12.01.2024 under Section 210 (1)(c) of the Companies Act. It speaks of the subsequent events, like the complaint filed by the SFIO on 03.04.2025, to contend that the primary contention that the summons had been issued even without the existence of a scheduled offence no longer survives,” Justice Ravi observed.
“This court cannot ignore the above fact and decide the case. At the time of rendering the judgement, the court must bear in mind the fact situation as it prevails on that day. A decision otherwise will be purely academic. I hence find that this court is bound to look into the subsequent events while rendering the judgement.”
On the contrary, ED’s special counsel Zoheb Hussein argued that PMLA proceedings can be initiated even in the absence of an FIR as a predicate offence and that the petitioners were only issued summons. He had also referred to the writ petitions under Article 226 of the Constitution as premature, as the rights of the firm or its top office-bearers were not being curtailed.
“The case at hand is similar on facts and the challenge has been made at the stage of issuance of the summons. No cause of action can be said to have been arisen at this stage, since the summons only calls upon the person to state the truth or to make statements and produce documents. I hence find that the writ petition is premature and is liable to be dismissed,” Justice Ravi observed, citing a Supreme Court judgment in a similar case.
He also observed that the court “cannot shut its eyes to such facts which are virtually admitted” by the petitioners before the Settlement Commission.
Additionally, he also held that the Settlement Commission constituted under Section 245B of the Income Tax Act is empowered to grant immunity only under Act and, hence, settlement of the case by the commission will have no bearing on the money-laundering probe.
Meanwhile, Kannur CPI(M) district secretary K.K. Ragesh said the searches were part of a larger attempt by the Narendra Modi-led BJP government against Kerala’s Left government.
Calling it the continuation of a strategic scheme to weaken the Left Front, implemented with Congress support, he said that that allegation of a CPI(M)-BJP deal was part of the plan. In the run-up to the recent Assembly polls, the Congress had alleged that the CPI(M) had a secret understanding with the BJP in the state to defeat them.
“For a long time, the ED has been trying to prepare its usual script against the Opposition parties to destroy CPI(M)’s tallest leader, Pinarayi Vijayan, using his family. In reality, Vijayan and his family are being targeted in a false case by the BJP government. This just didn’t happen in Kerala; we saw how the ED was used to target Arvind Kejriwal. Later, the Supreme Court said it was a false case. Now they are using the ED to target Vijayan. It’s to destroy the Left Front,” Ragesh said at Kannur.
(With inputs from Aneesa P.A.)
(Edited by Nardeep Singh Dahiya)
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