New Delhi: The Enforcement Directorate (ED) has asserted its right to enforce a provisional attachment of properties based on strong suspicions about those properties being a part of the proceeds of crime. In an appeal filed before the Supreme Court, the central agency Monday said that its power to attach such properties should be independent of whether an FIR is for a scheduled/predicate offence.
The ED appeal challenges a Madras High Court judgment, which, in July this year, quashed the agency’s provisional attachment orders (PAOs) against 48 persons and mining companies accused of illegal sand mining in Tamil Nadu by the agency. At the time, the HC said there was no evidence to prove whether those who received the PAOs committed the scheduled offence for which the Tamil Nadu Police had registered FIRs against them, and hence, there was nothing to back the PAOs. With that, the HC also restrained the ED from conducting a probe against the 48 persons and mining companies whose petition against the PAOs it had been hearing.
After the Tamil Nadu Police registered four FIRs against the 48 parties in 2018, the ED initiated its probe into the illegal sand mining case under the Prevention of Money Laundering Act (PMLA), 2002. The police FIRs included sections from the erstwhile Indian Penal Code (IPC), and the Prevention of Corruption Act, 1988.
The subsequent ED investigation was predicated on the FIRs making out an offence identified as a scheduled offence under the PMLA. The FIRs contained the Prevention of Corruption Act sections—scheduled offences—the ED noted in its appeal before the SC.
A scheduled offence comes under the arbitration of one of the PMLA sections, which empowers the adjudicating authority of the law to issue attachment orders against properties identified as proceeds of crime. It does not matter where the properties are from or whether they are directly/indirectly from activity relating to the scheduled offence.
On Monday, the ED presented its arguments to continue its probe against the 48 persons/mining companies before the SC, citing references from a 2022 controversial judgment by the top court to reiterate that it has attachment powers under the PMLA. ED says it has the right to provisionally attach properties based on strong suspicion arising during PMLA probe. Section 5 of the PMLA provides for the provisional attachment of properties even if an FIR does not make out a scheduled offence, the ED said.
An FIR for a scheduled offence is just a starting point of an investigation, not an encyclopedia, which would mention every detail of the offence committed by the accused, it said. The argument was that in its probe, the ED might unearth facts about a predicate offence and could initiate provisional attachment of the properties while asking the other authorities concerned to continue the probe from its end.
Besides, the ED asserted that it has statutory authority under Section 5(b) of the PMLA to issue PAO even if the FIR made out no scheduled offence. Such an action conforms to the legislative intent of the PMLA—securing the proceeds of crime as soon as possible to prevent the PMLA proceedings from getting frustrated.
The ED intervention in connection with the illegal sand mining in Tamil Nadu has been a flashpoint between the anti-money laundering agency and the state government, with the latter accusing the ED of conducting a roving inquiry to harass its officers.
The latest appeal by the ED in the top court is the second round of litigation related to the illegal sand mining case. During the first appeal, the ED moved the top court when the Madras HC stayed its summons against district collectors with the Tamil Nadu government. The SC ordered the collectors to cooperate with the ED probe later in February this year.
Now, the ED has questioned the Madras HC relief for the 48 petitioners whose properties the agency attached in January this year. The appeal comes amid several setbacks to the ED in high-profile cases, where courts, taking a view against the agency, have granted bail to the accused.
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Not the first appeal
On Monday, the ED said that the HC’s myopic order in the illegal sand mining case defied the legislative prescription to secure the proceeds of crime. The HC, it added, failed to appreciate the direct nexus of the properties attached to the scheduled offence despite the properties being proceeds of crime generated directly and indirectly from the scheduled offence concerned.
The HC did not even appreciate that the investigations by the ED led to the identification of individuals and companies engaged in unlawful sand mining activities—a few private parties forming a nexus with the state machinery to illegally monopolise all sand mining activities in the state and generating proceeds of crime from the monopoly.
The larger conspiracy angle emerged during the PMLA probe, and hence, the HC should not have stalled the ED probe by stopping the agency from holding an inquiry against the 48 petitioners, the ED submitted.
It also quoted the SC’s February 2024 order, which asked Tamil Nadu’s district collectors to appear before the ED. In this context, the HC could have refrained from interfering and rendering the ED’s Enforcement Case Information Report or ECIR—similar to an FIR—as infructuous, the ED submitted.
In the ED’s view, the HC “erred in not comprehending the sweep” of PMLA Section 5, which authorised the agency’s adjudicating authority to issue attachment orders. It said the provision is not limited to the accused person named in the scheduled offence but includes any person involved in any activity connected with the proceeds of the crime.
“It is submitted that based on the documents and investigation done by the petitioner (ED) it is established that the property of the respondents—which is attached to the PAO—is part of the proceeds of crime. On careful analysis of the bank accounts of the respondents, it is found that there have been substantial cash deposits by their families and their firms and companies. The cash deposited has been subjected to continuous transfers through different accounts to hide the source of the funds,” the ED appeal said about the illegal sand mining FIRs.
On Monday, a bench led by Justice Sanjiv Khanna took up the ED’s petition. It, however, did not issue any notice to the 48 persons that the Madras HC has given relief. During the brief hearing, lawyers appearing for the respondents told the bench that the FIRs, which became the foundation for the PMLA investigation, had been closed. The bench adjourned the hearing by two weeks.
(Edited by Madhurita Goswami)
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