New Delhi: The Madras High Court Tuesday temporarily stayed the operation of summons issued by the Directorate of Enforcement (ED) to five district collectors in Tamil Nadu, observing that the move appeared to be part of a “fishing expedition” by the central agency to find out whether a scheduled offence had been committed, instead of probing a scheduled offence already registered.
The order was made public Wednesday.
The ED had issued the summons as a part of its probe into sand quarries across the state since September, on allegations of illegal sale of sand mined from riverbeds. According to media reports, the central agency is probing whether sand mined from riverbeds was being sold offline, instead of the online sales mechanism, causing a loss to the exchequer. Before the Madras High Court, the ED has alleged that the state government was attempting to shield the accused in the case.
While granting an interim stay on the operation of the summons, a bench comprising justices S.S. Sundar and Sunder Mohan observed, “It is just an attempt to investigate the possibility of identifying any proceeds of crime as a result of any criminal activity, which is not so far registered by the state agencies.”
“By this impugned summons, the respondent ventures into a fishing expedition to find out whether informations and evidence collected from the district administration can be processed further from other sources to find out commission of scheduled offence so that the respondent may then identify the proceeds of crime which will help them to proceed under the PMLA, 2002,” the court added.
The court was hearing petitions demanding that the summons issued to the collectors of Vellore, Tiruchirappalli, Karur, Thanjavur and Ariyalur districts under the Prevention of Money Laundering Act, 2002 (PMLA) be quashed. These summons required them to give evidence and produce records in connection with the investigation being undertaken by the ED. The petitions were filed by the state government and the collectors, challenging the summons, as well as the authority of the ED to investigate such offences without the consent of the state government.
The petitioners had also questioned the ED’s jurisdiction to conduct investigation in relation to sand mining, asserting that this was within the exclusive domain of the state government.
The ED files a complaint under the PMLA to probe allegations of money laundering of proceeds of crime. Money laundering is the act of converting money earned from illegal activities — or proceeds of crime — into “clean” money.
These proceeds, therefore, have to be linked to a separate criminal offence allegedly committed by the person based on which the ED files its independent complaint under the PMLA. The PMLA lists down these separate offences and laws in its schedule, and these are called scheduled offences or predicate offences. In simpler words, therefore, at least two cases run usually run in parallell— one under a scheduled offence, and another under the PMLA, for money laundering.
In this context, the court said that ED’s probe in the case appeared to be not in relation to the proceeds of crime but to find out whether any scheduled offence related to money laundering was committed. The matter has been posted for 21 December.
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The summons
The ED had asked the collectors to appear with a copy of their Aadhaar and passport-size photographs along with a list of all sand mining sites in the district concerned in the prescribed format. They were required to provide details of the sites under the heads: (a) name of the site, (b) complete address of quarry, (c) GPS coordinate of quarry, (d) complete address of depot, (e) GPS coordinate of depot, (f) permitted area, (g) permitted depth with the personal remarks.
From these queries, the court inferred that the ED’s probe was “not in relation to existing proceeds of crime, but to find out whether a scheduled offence has been committed in the district”.
Referring to past judgments, the court asserted that authorities under the PMLA, 2002, cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless such a case is registered with the police and such a complaint is pending enquiry or trial.
“[T]he summons were issued to find out (the) existence of a predicate offence by further investigation after getting basic information from the district collector. In other words, the investigation appears to be to identify the impact of illegal mining whether it leads to inference of commission of scheduled offence and then to infer the existence of ‘proceeds of crime’,” it observed.
(Edited by Smriti Sinha)
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