Madras High Court stays ED summons to district collectors in sand mining case, says ED on "fishing expedition"

The Madras High Court on Tuesday temporarily stayed the operation of summons issued by the Enforcement Directorate (ED) to district collectors in Tamil Nadu, remarking that the move appeared to be part of a "fishing expedition" by the Central agency..The Court passed the order of stay on a petition by the Tamil Nadu government which moved the Court challenging the ED summons issued in a money laundering case that has been tied to an alleged case of illegal sand mining..A bench of Justices SS Sundar and Sunder Mohan opined today that prima facie, ED had no jurisdiction to issue the summons to any of the State's district collectors..“Prima facie the impugned summons are not within the jurisdiction of the respondent (ED) and they are just an attempt to investigate the possibility of identifying any proceeds of crime as a result of any activity that is not so far registered by the State authorities,” the Court said. .However, the bench clarified that it has not imposed any stay on ED’s ongoing investigation in the case..The Court also remarked that the ED's actions so far appeared to be part of a "fishing expedition."“The respondent (ED) has launched a fishing expedition to identify possible proceeds of crime from information that might be furnished before the respondent about illegal mining,” the Court said.The "fishing expedition" remark was objected to by Additional Solicitor General ARL Sundaresan who represented the ED. The Court recorded the said objection and said it will hear the matter on merits next month..The Court also dismissed the objections raised by ED on whether the Tamil Nadu government had the locus standi to file a petition to challenge the ED's issuance of summons.The bench replied that the State had every right to approach the Court if it felt that the Central government was trying to preserve power in its own hand or if the Centre was acting in breach of the country’s federal structure.“According to this Court, prima facie, the writ petitions filed by the State government and the district collectors are maintainable. Specific allegations have been made in the affidavit (by the Tamil Nadu government) questioning the jurisdiction of the respondent authority (ED) to conduct the investigation. The State is not subordinate to the Central government. It can file the plea as its concern is the preservation of power by the Central government that interferes with the administration of the State,” the High Court said..Pertinently, the Court noted that as per annexures to the notice of summons, the ED had asked the district collectors concerned to appear physically before the Central agency and submit a list of sand mining sites in the district.Details of addresses and GPS coordinates of the quarries, etc. were also to be presented before the ED as per the notice of summons, the Court observed. In view of such queries, the Court said that that ED’s investigation appeared to be “not in relation to the proceeds of crime but to find out whether any scheduled offence related to money laundering had been committed in the State.".Last week, the TN government and the five Collectors who were summoned by ED, had jointly filed 10 writ petitions challenging the ED's issue of summons and the ED’s power to investigate such offences without the consent of the State government..On Monday, Senior Advocate Dushyant Dave, who represented the Tamil Nadu government, argued before the Court that the ED’s investigation was illegal.The ED’s attempt to investigate and turn the mining case into one of money laundering was against federalism and the basic structure of the Constitution, Dave contended..In its interim order on Tuesday, the Court said that the Supreme Court had made it clear that under the Prevention of Money Laundering Act (PMLA), the ED cannot prosecute an offence unless "proceeds of crime", as defined under the Act, exist.“As per the Supreme Court, under the PMLA, there must be three essentials that include commission of a crime which is a scheduled offence, generation of proceeds of crime, and laundering of such proceeds. In the present case, the investigation appears to be one to identify the scheduled offence. The very purpose of issuing summonses is to make out an offence that is scheduled and then to make a presumption that it involves illegal money that can be categorised as proceeds of crime,” the High Court observed while staying the ED's summons..The matter will be heard again next month.