ED overstepped powers under PMLA by probing illegal sand mining: Madras High Court

The Enforcement Directorate overstepped its jurisdiction by probing illegal sand mining in Tamil Nadu since mining is not a scheduled offence under the Prevention of Money Laundering Act (PMLA), the Madras High Court recently held. has quashed the case registered by the Enforcement Directorate (ED) against a group of sand mining contractors in Tamil Nadu, holding that the agency had stepped outside its jurisdiction since mining is not covered under the scheduled list of offences under the Prevention of Money Laundering Act (PMLA)..In an order passed on July 16, a bench of Justices MS Ramesh and Sunder Mohan stayed action by ED against a group of sand mining contractors in Tamil Nadu and also quashed provisions attachment orders against them. The Court directed that their properties that ED had attached in the case be released."We are thus of the view that unless an information with regard to any case in the scheduled offence is registered and such an offence has generated proceeds of crime, which is dealt with by the petitioners, no action can be initiated. As stated earlier, the materials collected and the reasons shown in the Provisional Attachment Order, even if accepted to be true only suggests that the respondents have unearthed large scale illegal sand mining and that may have generated illegal money," the Court said..The matter pertains to alleged illegal sand mining across five districts in Tamil Nadu. ED had been investing the matter since September last year, and has claimed that illegal sand mining has caused a loss of up to ₹4,000 crore to the State exchequer.The petitioners, contractors K Govindaraj, Shanmugam Ramachandran, and K Rethinam had approached the Court seeking quashing of the ED proceedings on the ground that the central agency lacked jurisdiction to initiate action under PMLA. They claimed that the FIRs following which ED had initiated proceedings, did not reveal any proceeds of crime and that the reading of the ECIR and the provisional attachment orders would suggest that the central agency had assumed the role of investigating into illegal sand mining in the absence of any FIR registered for a scheduled offence indicating the generation of proceeds of crime..The High Court agreed with the petitioners’ submissions..It noted that ED had proceeded on the premise that a scheduled offence had been committed and that it had generated proceeds of crime. However, it had failed to spell out the exact scheduled offence committed by the petitioners, the Court said.“That apart, they have also not spelt out as to whether an FIR has been registered for a scheduled offence said to have been committed by either the petitioners or someone else whose proceeds of crime are held by the petitioners. Above all, the exact proceeds of crime, have not been determined,” the High Court said..The Court further said that in accordance with the Supreme Court’s judgements, in the absence of any scheduled offence that had resulted in proceeds of crime, ED cannot assume jurisdiction to initiate action under PMLA.“However, we would also make it clear that the respondents would have every right to initiate such action to ensure that the scheduled offence is registered and is investigated. Till such time, the properties of the petitioner cannot be subjected to attachment and the respondents otherwise cannot initiate any action under the PMLA. One cannot put the cart before the horse. Therefore, we are of the view that the impugned actions, which are challenged in the Writ Petitions, are without jurisdiction and they are liable to be quashed and as such, stand quashed,” the High Court said.It, therefore, ordered ED not to take any action against the petitioners unless a scheduled offence is registered."The respondents shall not continue further action pursuant to the Enforcement Case Information Report (ECIR) in so far as the petitioners are concerned, till such time the statutory and other legal requirements that we have pointed above are complied with. The provisional attachment orders impugned in the writ petitions are quashed," the Court ordered..In November last year, while hearing related matters, a bench of Justices SS Sundar and Sunder Mohan had termed ED’s probe into the sand mining allegations in Tamil Nadu a “fishing expedition.” At the time, the bench had stayed ED’s summons to five district collectors to share details of the quantum of sand mining in their respective districts. .[Read Order]