Madras High Court
R.K.M Powergen Private Limited vs The Assistant Director on 31 January, 2025
Author: M.S.Ramesh
Bench: M.S.Ramesh
W.P.Nos.4297 & 4300 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on: Pronounced on:
17.06.2025 15.07.2025
CORAM
THE HONOURABLE MR.JUSTICE M.S.RAMESH
and
THE HONOURABLE MR. JUSTICE V.LAKSHMINARAYANAN
W.P.Nos.4297 & 4300 of 2025
and
W.M.P.Nos.4807 & 4809 of 2025
R.K.M Powergen Private Limited,
Represented by its Director,
T.M.Singaravel,
45/14, Dr.Giriappa Road,
T, Nagar,
Chennai – 600 017. .. Petitioner
(in both cases)
Vs.
1.The Assistant Director,
Directorate of Enforcement,
Govt. of India, Chennai Zonal Office,
No.2, 5th and 6th Floor,
BSNL Administrative Building,
Kushkumar Road, Nungambakkam,
Chennai – 600 034.
2.The Joint Director,
Directorate of Enforcement,
Govt. of India, Chennai Zonal Office,
No.2, 5th and 6th Floor,
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BSNL Administrative Building,
Kushkumar Road, Nungambakkam,
Chennai – 600 034. .. Respondents
(in both cases)
Prayer in W.P.No.4297 of 2025: Writ Petition filed under Article
226 of the Constitution of India praying to issue a Writ of
Certiorari, to call for the records and to quash the order under
Section 17(1-A) of the PMLA 2002 dated 31.01.2025 freezing the
fixed deposits on the file of the 1st respondent and quash the
same.
Prayer in W.P.No.4300 of 2025: Writ Petition filed under Article
226 of the Constitution of India praying to issue a Writ of
Mandamus, forbearing the respondents from proceeding in
investigation since there are no proceeds of crime or in the
alternative restrict such investigation to matters connected with
the coal block until its cancellation.
(In both cases):
For Petitioner : Mr.B.Kumar,
Senior Counsel
for Mr.S.Ramachandran
For Respondents : Mr.AR.L.Sundaresan
Additional Solicitor General
Assisted by
Mr.N.Ramesh
Special Public Prosecutor (ED)
COMMON ORDER
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(Order of the Court was made by V.LAKSHMINARAYANAN, J.)
These two writ petitions seek for the following reliefs:
“W.P.No.4297 of 2025: to issue a Writ of
Certiorari, to call for the records and to quash
the order under Section 17(1-A) of the PMLA
2002 dated 31.01.2025 freezing the fixed
deposits on the file of the 1st respondent and
quash the same.”“W.P.No.4300 of 2025: to issue a Writ of
Mandamus, forbearing the respondents from
proceeding in investigation since there are no
proceeds of crime or in the alternative restrict
such investigation to matters connected with the
coal block until its cancellation.”Facts leading to the Writ Petition
2.A private company was incorporated in the year 1991. It
was titled as ‘R.K.Powergen Private Limited, Chennai’ (hereinafter
referred to as ‘RKPP’). This was a venture by five women
entrepreneurs. The primary business of the company was to set
up and operate a Bio Mass Power Generation Plant in Karnataka.
Subsequently, on 15.12.2004, this company and one Mudajaya
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Corporation, an entity based out of Malaysia, incorporated
another company under the name and style of ‘R.K.M.Powergen
Private Limited’ (hereinafter referred to as ‘RKMP’). This entity
was set up for the purpose of creating, establishing and operating
coal powered electricity generation plant.
3.On 13.07.2005, a joint venture agreement was entered
into between Mudajaya and RKPP. In terms of the agreement,
Mudajaya agreed to invest in RKMP. Pursuant to this agreement,
on 08.02.2007, a shareholders’ agreement was entered into
between RKPP and Mudajaya. Under this agreement, 26% of the
equity shares of RKMP were to be allotted to Mudajaya, or its
nominee. The allotment would not be at face value, but at a
premium. The premium was to be calculated in line with the
Foreign Exchange Management (Transfer or Issue of Security by
a person resident outside India) Regulations, 2000.
4.RKMP began preparation for establishing a coal based
power generation plant in the State of Chattisgarh. In order to
have an uninterrupted supply of coal for this plant, which is the
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fundamental and basic ingredient, RKMP wrote to the Secretary,
Ministry of Coal, Government of India on 24.01.2005, seeking
permanent coal linkage. Five months thereafter, this request was
renewed with a slight change. In January, 2005, RKMP had
proposed to install 5 x 210 MW power plant. This was revised in
May, 2005, to a 4 x 300 MW power plant. Taking this proposal
forward on 15.12.2005, RKMP wrote another letter to The
Additional Secretary (Coal) and Chairman, Standing Linkage
Committee, Ministry of Coal, New Delhi, giving details of its coal
requirement. RKMP stated that the requirement per annum
would be 9.072 million tonnes and the period of operation would
be around 50 years. Thereby, specifying its total requirement as
453.6 million tonnes.
5.It is pertinent to point out here, even while making the
application for permanent coal linkage, RKMP had stated that in
case of allotment of captive coal blocks in its favour, and if such
coal block would provide adequate coal supply, it would migrate
to the captive coal mining system. Simultaneously, RKMP
approached M/s.Power Finance Corporation Limited, a
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Government of India undertaking, for a project appraisal. The
Power Finance Corporation also issued an information
memorandum for Phase-I of this project. Phase-I of this project
was supposed to install and operate a power generating plant
with a capacity of 350 MW. Subsequently, for Phase-II of this
project, another information memorandum was made ready by
the Power Finance Corporation in September, 2008.
6.Soon after the first project appraisal report was issued by
the Power Finance Corporation, RKMP entered into an agreement
with an entity called MIPP Capitals International Limited. The
purpose of this agreement was to supply equipment for the
project. It was one of the terms of the contract that it would come
into force from the date of issuance of “notice to proceed”, as
defined under Clause 3.24.0, read with Clause 8.1.0 of the said
contract. Pursuant to the agreement so signed on 18.07.2007,
RKMP also made payment of US $500,000 on the same day.
7.As stated in its letter to the Ministry of Coal on
26.05.2005, RKMP approached the Union of India for the
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allocation of a coal block. On 13.11.2006, the Ministry of Coal
decided to make allocations for 38 coal blocks. Out of the 38
blocks, 15 blocks were reserved for power projects, and the
remaining 23 blocks for steel and cement companies. Preferential
allocation of coal blocks had been a policy decision taken by the
Ministry of Coal from 1993 onwards. The Ministry of Coal, after
consultation with Coal India Limited and other similar bodies,
would allot coal blocks for captive mining for eligible end user
companies. For this purpose, a screening committee was created
by the Union of India. In order to guide the screening committee,
as to how to identify the determining factors and for evaluation,
the Ministry of Coal used to issue appropriate guidelines. The
screening committee followed these guidelines and on that basis,
granted allocation. The aforesaid advertisement in 2006, calling
for allotment of coal blocks, in which the petitioner participated,
was one such allocation.
8.Pursuant to the advertisement, RKMP applied for
allocation of a coal block in Fatehpur East coal block. This
application was made on 14.11.2006. RKMP had stated that in
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case, a coal block is allotted to it, it would be utilized for the
1200 MW thermal power plant. At the time of making the
application, the company mentioned that its net worth was
306.14 crores. Within a month, it amended its net worth from
306.14 crores to 2752.19 crores.
9.The application for allotment of coal block was taken up
for consideration by the Ministry of Coal. Presentations were
made to the 35th Screening Committee. When feedback forms
were submitted, the net worth of the company was revised once
again from 2752.19 crores to 2963.37 crores.
10.On the basis of the guidelines that had been issued, the
net worth of a company had to be Rs.0.50 crores per MW of the
maximum capacity. The minimum capacity for coal block
allocation was fixed at 500 MW. In all, 187 applications had been
received by the screening committee. Out of 187 applications,
115 applications were found eligible. RKMP was one such eligible
candidate. After the analysis of all the 115 applications, RKMP
was found to be qualified for allotment. It was recommended for
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allocation of Fatehpur East Coal Block. Along with RKMP, four
other companies were also allotted the Fatehpur East Coal Block.
The other companies are:
(i)M/s.JLD Yavatmal Energy Ltd.;
(ii)M/s.Green Infrastructure Pvt. Ltd.;
(iii)M/s.Visa Power Ltd.;
(iv)M/s.Vandana Vidhyut Energy Ltd.
11.These five entities joined together and formed another
entity in the name and style of ‘M/s.Fatehpur East Coal Private
Limited’. In accordance with the regulations, this entity also
furnished a Bank Guarantee of Rs.100 crores in favour of the
Union of India. After securing a coal block, when Fatehpur East
Coal Private Limited went to inspect the property, they found that
it was a reserved forest. Being a reserved forest, it is incapable of
any non-forest activity which includes coal mining.
12.Taking note of allotment of coal blocks through the
screening committee route and Government dispensation route, a
writ petition was filed by one Manoharlal Sharma. The Public
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Interest Litigation challenged the validity of such allotments. A
three Judges Bench of the Supreme Court, headed by Mr.Justice
R.M.Lodha, CJ, heard the matter. Judgement was pronounced
on 25.08.2014, holding that such allotments were illegal. The
judgment is reported in [2014 (9) SCC 516]. At the time of
disposal of this writ petition, taking into consideration the facts
placed before the Court, the Supreme Court decided that an
investigation / enquiry has to be ordered into the same.
Accordingly, the Central Bureau of Investigation (hereinafter
referred to as ‘CBI’) was called upon to investigate each of the
allocations and take appropriate action.
13.Insofar as the case at hand is concerned, the CBI
registered a case in FIR.RC.219 201 4E 0018 on 07.08.2014. FIR
was registered for the offences under Sections 420 and 120B of
the Indian Penal Code read with Section 13(1)(d) of the
Prevention of Corruption Act, 1988.
14.On the registration of the offences, the Enforcement
Directorate (hereinafter referred to as ‘ED’) registered a case on
07.01.2015. Investigation was taken up under the provisions of
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the Prevention of Money Laundering Act, 2002 (Act 15 of 2003)
[hereinafter referred to as ‘PMLA’]. The ED came to a prima facie
conclusion that there appeared to be an offence of money
laundering as defined under Section 3 of PMLA. Consequently, it
passed an order on 22.05.2015, freezing all the bank accounts of
RKMP.
15.At that relevant time, RKMP had taken loans from
several financial institutions. On account of the freezing order, it
could not carry out its operations. On 20.02.2015, ED also
informed the bankers of RKMP not to permit any operations. This
letter and other proceedings came to be challenged by way of writ
petitions in W.P.Nos.7854, 10643, 14448 and 15317 of 2015.
Those writ petitions came to be ordered on 26.08.2015. This
Court held the respondents had the power to pass the impugned
order therein, but set aside the same on the ground that the
power is not unlimited or unbridled. It held the power of freezing
is only a prelude to a proposed action and cannot operate as a
substitute. It further found that on account of the freezing order,
the entire activity of RKMP had come to a grinding halt. Salaries
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could not be paid and the project could not be commenced. It
placed reliance upon the letter issued by the Power Finance
Corporation dated 22.05.2015, wherein it was specifically stated
that the accounts of RKMP were under a “trust and retention”
form duly monitored by the lenders at the time of the release.
16.This Court further found that the fixed deposits had
been created only to augment interest and that none of those
factors had been taken into consideration by the respondents. It
was also pointed out that the respondents had treated the power
exercisable during investigation with the one available under
Section 5, and that no justification was provided for the
prolonged investigations.
17.Consequent to this discussion, the Court held the
continued freezing of the accounts was improper. It consequently
allowed the writ petition. The ED pleaded that it was proposing to
file an appeal and sought for interim stay of the proceedings.
Though this Court granted the relief, no appeal had been
preferred by the ED. This judgement rendered by Hon’ble
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Mr.Justice M.M.Sundresh (As His Lordship then was) is reported
in 2015 Writ L.R. 851.
18.Subsequent to the order, RKMP completed the project
and had commissioned both phases of power generation. The
first phase was commissioned on 27.11.2015 and the second
phase was commissioned on 12.02.2016.
19.Turning to the FIR, CBI did not find any material to
proceed further. Therefore, it filed a closure report as ‘mistake of
fact’ before the Special Judge, CBI (Coal Blocks Allocation Cases),
Patiala House Courts, New Delhi. The closure report was filed on
21.07.2017.
20.The CBI Court did not agree with the closure report. It
queried with the Investigating Officer regarding the other claims
made by the Government in the application submitted to the
Ministry of Coal and also regarding land and water
environmental clearance during the said process leading to the
allocation of the coal block. As the investigation was silent on
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these aspects, the learned Judge referred the matter back to CBI
for further investigation on the following aspects:
“…. the claims made by applicant company
M/s R.K.M. Powergen Pvt. Ltd qua all
aspects / issues as were made in their
application submitted to MOC or at any
subsequent stage during the processing of
their application in MOC leading to allocation
of Fatehpur East Coal Block to it may also
be properly investigated and the result
thereof is duly reflected in the final report to
be filed in the court.”
21.The learned CBI Judge was cautious enough to hold that
he would not go into any further depth in this matter, at this
stage.
22.After this order was passed in the year 2017, there was
not much of a progress in this case. However, the petitioner, its
contractors and its suppliers were repeatedly called upon for
enquiry and investigation by the ED. Consequently, RKMP
approached this Court again by way of another writ petition in
W.P.No.24700 of 2021. The prayer in that writ petition was for a
mandamus forbearing the ED from investigating the
ECIR/01/CEZO-11/PMLA/2015 under the Prevention of Money
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Laundering Act, 2002, as the investigation is without
jurisdiction.
23.This matter came up for hearing before a Division Bench
of this Court. After hearing both sides, the writ petition was
allowed on 08.06.2022.
24.The relevant portions of the Division Bench order are
extracted hereunder:
“24.Coming to the allegation of “round
tripping” which was strenuously pursued by
the learned Additional Solicitor General, it is
necessary to briefly notice the import of this
expression. “Round tripping” can be defined
as a practice by which funds are transferred
from one country to another and transferred
back to the origin country for purposes like
black money laundering or to get the benefit
of tax concession/evasion/avoidance from
countries like Mauritius, which enjoy low
taxes, etc. It is the case of the Enforcement
Directorate, as discernable from the ECIR,
that a 10 rupee share of RKM Company was
sold at a premium of Rs.240. In this way, it
is contended that the Malaysian promoter
had paid only Rs.1174.92 crore for acquiring
26% equity, whereas, the Indian promoter
paid Rs.133.75 crore for acquiring 74% of
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Company.
25.In this connection, our attention was
invited to the letters dated 04.07.2008 and
28.09.2012 issued by the Reserve Bank of
India to RKM Company acknowledging the
statutory declarations made by them under
the Foreign Exchange Management (Transfer
or issue of security by a Person Resident
Outside India), Regulations 2000. These
communications clearly demonstrate that the
sale of shares with a face value of Rs.10/~
each at a premium of Rs.240/~ per share
was reported to the Reserve Bank of India
by submitting the statutory declarations.
This belies the contention of the Enforcement
Directorate that RKM Company engaged in a
clandestine deal with Mudajaya. On the
contrary, these facts were fully reported to
the Reserve Bank as statutorily required
under Rule 9 of the 2000 Regulations.
27.It is necessary to point out that the
case of the Enforcement Directorate in the
ECIR is grounded on the twin allegation that
RKM Company had obtained the allocation
of Fatehpur East Coal Block by resorting to
misrepresentation of facts. However, it is an
undisputed fact that there was no mining
from the said coal block with the result that
RKM Company did not derive any benefit
from the same. The Enforcement Directorate
admits to this factual position as is evident
from paragraph 18 of its counter affidavit
wherein it is stated thus:
“Admittedly, the evidences
available on record implied that
no mining activity was carried out
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W.P.Nos.4297 & 4300 of 2025Private Limited, the joint venture
created by the joint allottees of the
subject Coal Block and no mine
land was even purchased, but the
entity had incurred expenditure
on mine development activities.”
It is, therefore, clear that even according to
the Enforcement Directorate, no mining was
carried out and on the other hand, RKM
Company had expended funds from its
coffers on mine development activities. Once
it is held that RKM Company had not derived
any benefit from the allocation of the coal
block, it follows that the corpus delicti of the
offence viz., the proceeds of crime, does not
exist.
28.The allegation of round~tripping,
even assuming there is one, as alleged by
the Enforcement Directorate, is a criminal
activity, falling within the domain of Foreign
Exchange Management Act (FEMA), there is
no arrest provision under the provisions of
FEMA, whereas, threat of arrest looms large
in an investigation under the PML Act with
bail conditions being very stringent.
29.As regards the contention of the
Enforcement Directorate that Customs Duty
was not paid properly for the imports that
were made by RKM Company, be it noted,
this falls within the domain of the Customs
authorities under the Customs Act. Moreover,
these imports of plant and machinery were
made by RKM Company for commissioning
their power plant in Ucchpinda Village in
Chhattisgarh during 2011 and after the said
imports, the power plant itself has been
commissioned, as stated above. In any
event, as on date there is no predicate office
under the Customs Act, 1962. The
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Enforcement Directorate cannot exercise its
powers of investigation under the PML Act,
2002 to discover the existence of a predicate
offence which is tantamount to putting the
cart before the horse.”
25.On the basis of these findings, the Court came to the
following conclusion:
“39.In view of the above discussion, we hold
that in the absence of there being any
predicate offence under the Customs Act,
1962, for the present, and the fact that the
alleged offence under the FEMA, 1999, is not
a predicate offence under the PML Act, 2002,
it follows that there cannot be any offence of
money~laundering under Section 3 of the
PML Act, 2002 qua these offences.
Consequently, a writ of mandamus is issued
restraining the Enforcement Directorate from
exercising its powers under the PML Act,
2002, qua the investigation of alleged
money~laundering in respect of these
offences alone. We make it abundantly clear
that we have not interdicted the
investigation pertaining to the allegations of
money~laundering qua the predicate
offences forming the subject matter of FIR
No.RC 219 2014E 0018 which is being
investigated by the CBI. These
investigations will proceed in terms of the
directions/orders of the Supreme Court in
Manohar Lal Sharma v Union of India9,
unhindered, and uninfluenced by any of the
observation(s)/direction(s) made in this
order.”
26.Aggrieved by this order, ED preferred a Special Leave
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Petition to the Supreme Court. This was in
S.L.P.(Criminal).Nos.8975 – 8976/2022.
27.Pending the appeal before the Supreme Court, the CBI
filed a supplementary final report on 30.08.2023. This
supplementary final report found that there are sufficient
incriminating materials warranting prosecution under Section
120-B read with 420, 471 of IPC, Section 13(2) read with 13(1)(d)
of the Prevention of Corruption Act, 1988. As the final report had
been filed, ED withdrew its SLP before the Supreme Court. The
order of the Supreme Court dated 19.11.2024 is extracted as
hereunder:
“The learned Additional Solicitor General,
who appears on behalf of the petitioners,
states that the petitioners will not press the
present special leave petitions in view of
subsequent developments and as the
Central Bureau of Investigation has filed the
charge sheet. While relying on the
observations made in the impugned
judgment, which give liberty to the
petitioners to initiate proceedings under the
Prevention of Money Laundering Act, 2002,
in accordance with the law, she seeks
permission to withdraw the present special
leave petitions.
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withdrawn with liberty as prayed.”
28.After the withdrawal of the SLP, ED conducted a search
from 31.01.2025 to 01.02.2025 in the premises of the Directors
& holding companies associated with RKMP. On the very same
day, on 31.01.2025, a freezing order was passed under Section
17(1A) of PMLA. By that order, the fixed deposit to the tune of
Rs.901,00,00,000/- was frozen by the ED. The present writ
petition challenges the said order.
29.We heard Mr.B.Kumar, Senior Counsel for
Mr.S.Ramachandran for the writ petitioner, Mr.AR.L.Sundaresan,
Additional Solicitor General of India for Mr.N.Ramesh, Special
Public Prosecutor (ED) for the respondents.
Submission of the petitioner:
30.Mr.B.Kumar after narrating the facts, submitted as
follows:
(i)The coal allocation was never given effect to as the land
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between Fatehpur East Coal (P) Limited and the Union of India
became frustrated. Consequently, a demand for return of bank
guarantee has been made. The Union of India also returned the
bank guarantee. No prospecting license was given to the
aforesaid company, and therefore, there was no money
generated, and consequently, there could not be any proceeds of
crime.
(ii)Charging of premium of Rs.240/- on the allotment of
shares was a subject matter before the Income Tax Department.
The Transfer Pricing Officer (hereinafter referred to as ‘TPO’) has
adopted the “other method” as provided under Rule 10AB of the
Income Tax Rules, 1962. He made a downward adjustment of a
sum of Rs.407,25,95,597/- to the value of import of plant and
machinery. The Assessing Officer relied upon the said
adjustment made by the TPO and passed a final order under
Section 143(3) read with Section 92CA of the Income Tax Act, on
31.03.2017. Challenging the order, the assessee preferred an
appeal before the Commissioner of Income Tax (Appeals). The
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Appellate Authority passed an order modifying the order passed
by the Assessing Officer on 20.03.2023. Challenging the same,
the petitioner had preferred a further appeal to the Income Tax
Appellate Tribunal at Chennai. The Tribunal analysed all the
issues and came to the conclusion that the order of the lower
authorities cannot be sustained and partly allowed the appeal.
This order is reported in [(2024) 160 Taxmann.com 480].
Similarly, the Assistant Commissioner of Income Tax had also
preferred an appeal before the Tribunal which came to be
dismissed in Assistant Commissioner of Income Tax Vs. RKM
Power Limited, [(2024) 169 Taxmann.com 692]. Therefore,
Mr.B.Kumar pleads the differences in pricing that is relied upon
by the respondents cannot be valid, as the very order has been
set aside by the jurisdictional Tribunal.
(iii)The investments that had been made by the foreign
entities had approval from the Reserve Bank of India. Therefore,
those amounts cannot be treated as “proceeds of crime”.
(iv)“Round tripping”, which is the basis on which ED has
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commenced enquiry, cannot be a subject matter of investigation,
since the CBI in its final report had stated that it has to be
looked into by the aforesaid Directorate under The Foreign
Exchange Management Act, which is not a scheduled offence.
(v)The reason for leaving it to the ED is because it is the
Directorate of Enforcement which has the jurisdiction to
investigate such matters under the Foreign Exchange
Management Act (FEMA). This aspect has been overlooked by the
ED. He adds that any infringement of FEMA will not
automatically trigger the investigation under PMLA, as FEMA is
not one of the legislations found in the schedule.
(vi)Insofar as the alleged misrepresentation and
classification of records are concerned, he states there is no
predicate offence and hence, no investigation can proceed under
PMLA. For the said purpose, he relied upon the celebrated
judgment of the Supreme Court in Vijay Madanlal Choudhary
and others Vs. Union of India and others, 2022 SCC Online
SC 929. He pleads that this issue having been settled by the
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Division Bench of this Court in W.P.No.24700 of 2021 on the
previous occasion, and that in case ED proceeds further, it is in
violation of the mandamus issued under that order.
(vii)The amounts which lie in the hands of RKMP are in
“trust and retention” basis, and therefore, there is no question of
any fear of the flight of the amounts pending investigation. He
pleads repeated attachments is illegal, and therefore, requires
interference.
(viii)He adds that the CBI charge sheet does not expand the
scope of coal allocation offence, and therefore, there is no
predicate offence for the respondents to proceed. Hence, he
pleads the writ petition be allowed and the impugned order be set
aside.
31.Insofar as W.P.No.4300 of 2025 is concerned, he urges
that as an order has already been passed by this Court in
W.P.No.24700 of 2021, the said writ petition also deserves to be
allowed.
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Respondent’s submission:
32.Mr.AR.L.Sundaresan, learned Additional Solicitor
General for India argues as follows:
(i)Section 17(1-A) is linked to Section 17(1) and if there are
any “proceeds of crime”, then the authority gets the jurisdiction
to attach the amount, even if there is no predicate offence.
(ii)He points out the judgment of this Court in 2015 Writ
L.R. 851 does not prevent the present impugned order, since,
when the order was passed on 20.02.2015, no further steps were
taken under Section 5 of PMLA. This constrained this Court to
interfere. However, in the present situation, not only have the ED
proceeded under Section 17(4), but have also taken steps under
Section 5 of the PMLA, in relation to the fixed deposits.
(iii)With respect to the order passed in W.P.No.24700 of
2021, he points out that this Court had not restrained the ED
from proceeding further with respect to the coal allocation cases,
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and since the CBI had subsequently filed a charge sheet, the ED
can pass the present order.
(iv)He points out the correctness of the allegations made by
the CBI cannot be examined by this Court in this writ petition
challenging an order under Section 17. It would have to be dealt
with independently, by the jurisdictional Special Court in Delhi.
(v)He refers to para.Nos.16.45, 16.48, 16.53 to 16.57 of the
chargesheet filed by the CBI, to urge that the ED has jurisdiction
to pass the impugned order.
(vi)He points out that the net worth of the company was
puffed up, which resulted in the detailed project report to be
submitted to the Power Finance Corporation and other financial
institutions, on which basis, loans had been availed. This
attracts the provisions of Section 471 & 420 of IPC, which are
scheduled offences, and therefore, the ED has jurisdiction to deal
with the matter.
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(vii)He points out, it is not a case of total lack of jurisdiction,
but a situation of exercise of proper jurisdiction by the
authorities and hence, an order under Section 17(1-A) cannot be
interdicted.
(viii)In any event, he states there is an alternate remedy for
the petitioner and therefore, the writ petition is unsustainable.
33.In response, Mr.B.Kumar points out that invoking
Section 66(2) of the PMLA, the ED had written to the CBI, but the
CBI had not filed any fresh complaint. The letter had been
written as early as on 18.07.2019. Till date, no proceedings had
been initiated. He points out the ED can investigate only with
respect to the predicate offence pointed out in the final report,
and cannot expand on the basis of the said report.
34.He adds the argument of Mr.AR.L.Sundaresan is literally
an attempt to re-argue what had already been settled in
W.P.No.24700 of 2021, and hence, is impermissible. He points
out the entire argument of ED is with regards to the “round
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tripping”, which had already been interdicted by the Court. He
states order under Section 17(1-A) passed after a period of nine
years is erroneous. He urges new materials should have been
produced before the ED in order to take a different view after
such a long lapse of time. Finally he states that as there is no
affirmation that ED have come out with the existence of proceeds
arising out of the agreement; remedy by way of a writ petition is
maintainable.
35.The learned counsels relied on the following authorities:
*Petitioner’s side:
(i)Himachal EMTA Power Limited Vs. Union of
India and Others, 2018 SCC OnLine Del
11078;
(ii)Prakash Industries Ltd. and another Vs.
Directorate of Enforcement, 2022 SCC
OnLine Del 2087;
(iii)M/s.Pawanjay Steel and Power Ltd. & anr.
Vs. The Deputy Director, Directorate of
Enforcement, Kolkata, 2024 (12) TMI 292;
(iv)K.Govindaraj and others Vs. Union of India,
(2024) 3 MLJ (Crl) 251;
(v)Dr.Natesha D.B., Vs. Directorate of
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Enforcement, W.P.No.32956 of 2024 (GM-
RES);
(vi)Bishnu Ram Borah and another Vs. Parag
Saikia and others, (1984) 2 SCC 488;
(vii)Dr.Jaya Thakur Vs. Union of India and
others, (2023) 10 SCC 276;
(viii)Tusharbhai Rajnikantbhai Shah Vs. Kamal
Dayani and others, (2025) 1 SCC 753;
(ix)M/s.Indian Bank, Egmore, Chennai Vs.
Government of India, 2012 Writ L.R. 702 and
(x)The Government of India Vs. M/s.Indian
Bank, Egmore, Chennai, W.A.Nos.2614 and
2615 of 2012.
*Respondent’s side:
Ghulam Ghouse and another, 2004 SCC
OnLine SC 57;
(ii)United Bank of India Vs. Satyawati Tondon
and others, 2010 SCC OnLine SC 776;
(iii)Raj Kumar Shivhare Vs. Assistant Director,
Directorate of Enforcement and another,
2010 SCC OnLine SC 459;
(iv)Vijay Madanlal Choudhary and others Vs.
Union of India and others, 2022 SCC OnLine
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SC 929;
(v)South Indian Bank Ltd. and others Vs.
Naveen Mathew Philip and another, 2023
SCC OnLine SC 435;
(vi)Santiago Martin and another Vs. Union of
India, 2023 SCC OnLine Ker 6259;
(vii)Santiago Martin and another Vs. Union of
India, W.A.No.1450 of 2023 dated
21.09.2023;
(viii)V.R.Balamurugan Vs. Union of India and
others, W.P.Crl.No.871 of 2024 dated
07.08.2024 and
(ix)Enforcement Directorate & Ors. Vs. Satish
Motilal Bidri, Special Leave to Appeal (Crl.)
No.13429 of 2024.
36.We have heard the counsels in detail and have gone
through the records.
Issue No.I – Maintainability of writ petition:
37.As an issue of maintainability has been raised by the
learned Additional Solicitor General, we will deal with that issue
first.
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38.We have to point out that there is a difference between
“maintainability” and “entertainability” of a writ petition.
Maintainability of a writ petition goes to the root of the matter. If
a Court comes to a conclusion that the writ is not maintainable,
it means that the Court is not entitled to even look into the
papers. “Entertainability” implies that the writ is maintainable,
but the Court will not exercise its discretion and deal with the
matter. This issue is no longer res integra. It has been settled by
the Supreme Court in Godrej Sara Lee Ltd. Vs. Excise and
Taxation Officer cum Assessing Authority, (2023) SCC
OnLine SC 95. The relevant portion is extracted hereunder:
“4.Before answering the questions, we feel
the urge to say a few words on the exercise
of writ powers conferred by article 226 of
the Constitution having come across certain
orders passed by the High Courts holding
writ petitions as “not maintainable” merely
because the alternative remedy provided by
the relevant statutes has not been pursued
by the parties desirous of invocation of the
writ jurisdiction. The power to issue
prerogative writs under article 226 is
plenary in nature. Any limitation on the
exercise of such power must be traceable in
the Constitution itself. Profitable reference in
this regard may be made to article 329 and
ordainments of other similarly worded31 of 52
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W.P.Nos.4297 & 4300 of 2025articles in the Constitution. Article 226 does
not, in terms, impose any limitation or
restraint on the exercise of power to issue
writs. While it is true that exercise of writ
powers despite availability of a remedy
under the very statute which has been
invoked and has given rise to the action
impugned in the writ petition ought not to be
made in a routine manner, yet, the mere fact
that the petitioner before the High Court, in a
given case, has not pursued the alternative
remedy available to him/it cannot
mechanically be construed as a ground for
its dismissal. It is axiomatic that the High
Courts (bearing in mind the facts of each
particular case) have a discretion whether to
entertain a writ petition or not. One of the
self-imposed restrictions on the exercise of
power under article 226 that has evolved
through judicial precedents is that the High
Courts should normally not entertain a writ
petition, where an effective and efficacious
alternative remedy is available. At the same
time, it must be remembered that mere
availability of an alternative remedy of
appeal or revision, which the party invoking
the jurisdiction of the High Court under
article 226 has not pursued, would not oust
the jurisdiction of the High Court and render
a writ petition “not maintainable”. In a long
line of decisions, this court has made it clear
that availability of an alternative remedy
does not operate as an absolute bar to the
“maintainability” of a writ petition and that
the rule, which requires a party to pursue
the alternative remedy provided by a
statute, is a rule of policy, convenience and
discretion rather than a rule of law. Though
elementary, it needs to be restated that
“entertainability” and “maintainability” of a
writ petition are distinct concepts. The fine32 of 52
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not to be lost sight of. The objection as to
“maintainability” goes to the root of the
matter and if such objection were found to
be of substance, the courts would be
rendered incapable of even receiving the lis
for adjudication. On the other hand, the
question of “entertainability” is entirely
within the realm of discretion of the High
Courts, writ remedy being discretionary. A
writ petition despite being maintainable may
not be entertained by a High Court for very
many reasons or relief could even be refused
to the petitioner, despite setting up a sound
legal point, if grant of the claimed relief
would not further public interest. Hence,
dismissal of a writ petition by a High Court
on the ground that the petitioner has not
availed the alternative remedy without,
however, examining whether an exceptional
case has been made out for such
entertainment would not be proper.”
39.This view has been adopted by the Bombay High Court
in Hikal Limited Vs. Union of India and Others, (2024) SCC
OnLine Bom 620. We respectfully adopt the reasoning in the
aforesaid judgments.
40.Further, even if there is an alternate remedy, it is only a
factor that has to be taken into consideration by the Court before
coming to a conclusion as to whether the writ does not deserve a
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consideration by it. At the time of considering the writ petition, a
holistic view has to be taken by the High Court after referring to
all relevant factors. (See, Maharashtra Chess Association Vs.
Union of India, (2013) 13 SCC 285). In case, there is a threat to
the Rule of Law, the writ jurisdiction of the High Court should
come to the aid of justice, and for the mere fact that an alternate
remedy exists, the Court need not throw up its hands and push
the petitioner away from its doors.
41.Hence, we conclude that the mere existence of an
alternate remedy by way of a statutory appeal, does not mean
that this Court should not interfere. Mr.AR.L.Sundaresan is right
in stating that the view which prevailed more than a decade and
beyond was that, due to the existence of alternate remedy, the
writ petition itself was held to be not maintainable. In the
watershed case of Godrej, cited above, the Supreme Court made
a difference between maintainability and entertainability. It is
finally the discretion of a Court to decide whether it wants to
entertain the writ petition or not, but certainly it cannot hold
that the writ itself is not maintainable.
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42.Seeking writ by way of a petition under Article 226 is too
precious a constitutional right to be surrendered for the very
existence of an alternate statutory remedy. Furthermore, in this
case, not once, but twice, writ petitions have been entertained by
this Court and orders have been passed in favour of the writ
petitioner.
43.At the first instance, the ED did not choose to file an
appeal, and at the second instance, it chose to file an appeal, but
it withdrew the SLP. Furthermore, being a complicated issue of
law, we feel that this Court has jurisdiction to deal with the
issue.
44.Even the alternate remedy that Mr.AR.L.Sundaresan
refers to is the appeal under Section 42 of the PMLA. Under
Section 42, the High Court has jurisdiction over the orders
passed by the Appellate Tribunal. The Appellate Tribunal
exercises jurisdiction as against any orders passed by the
adjudicating authority, or under any authority under this Act.
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The adjudicating authority passes an order, in terms of Section 8
of the Act. It is true that an application had been filed under
Section 17(4), which can be adjudicated upon by the authority
under Section 8. While these authorities deal with law and facts,
we confine ourselves only with the aspect of jurisdiction.
45.We have set forth the facts in detail. CBI enquiry
commenced due to the order passed by the Supreme Court in
Manoharlar Sharma‘s case. CBI had originally filed a final report
stating that the case against the petitioner may be closed. It was
remitted for further investigation by an order of the Special Court
dated 29.07.2017, stating that the CBI should undertake a
further investigation to find out if any public servant is involved
in the matter. The Court had further given liberty to the CBI to
investigate any other aspect of the matter which may come to its
notice during the course of investigation. For the mere fact that
the CBI had filed a positive final report does not mean that the
ED automatically acquires the jurisdiction to enquire into
matters not covered by the charge sheet. This requires us to read
Section 17 of the said Act. It reads as follows:
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W.P.Nos.4297 & 4300 of 2025“17. Search and seizure.– (1) Where the
Director, on the basis of information in his
possession, has reason to believe (the reason for
such belief to be recorded in writing) that any
person—
(i) has committed any act which
constitutes money-laundering, or
(ii) is in possession of any proceeds of
crime involved in money-laundering, or
(iii) is in possession of any records
relating to money-laundering,
(iv) is in possession of any property
related to crime,then, subject to the rules made in this behalf, he
may authorise any officer subordinate to him to—
(a) enter and search any building, place,
vessel, vehicle or aircraft where he has
reason to suspect that such records or
proceeds of crime are kept;
(b) break open the lock of any door, box,
locker, safe, almirah or other receptacle
for exercising the powers conferred by
clause (a) where the keys thereof are not
available;
(c) seize any record or property found as
a result of such search;
(d) place marks of identification on such
record or make or cause to be made
extracts or copies therefrom;
(e) make a note or an inventory of such
record or property;
(f) examine on oath any person, who is
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W.P.Nos.4297 & 4300 of 2025any record or property, in respect of all
matters relevant for the purposes of any
investigation under this Act:
(1-A) Where it is not practicable to seize such
record or property, the officer authorised under
sub-section (1), may make an order to freeze such
property whereupon the property shall not be
transferred or otherwise dealt with, except with
the prior permission of the officer making such
order, and a copy of such order shall be served on
the person concerned:
Provided that if, at any time before its confiscation
under sub-section (5) or sub-section (7) of section
8 or section 58-B or sub-section (2-A) of section
60, it becomes practical to seize a frozen property,
the officer authorised under subsection (1) may
seize such property.
(2) The authority, who has been authorised under
sub-section (1) shall, immediately after search
and seizure, forward a copy of the reasons so
recorded along with material in his possession,
referred to in that sub-section, to the Adjudicating
Authority in a sealed envelope, in the manner, as
may be prescribed and such Adjudicating
Authority shall keep such reasons and material
for such period, as may be prescribed.
(3) Where an authority, upon information obtained
during survey under section 16, is satisfied that
any evidence shall be or is likely to be concealed
or tampered with, he may, for reasons to be
recorded in writing, enter and search the building
or place where such evidence is located and seize
that evidence:
Provided that no authorisation referred to in sub-
section (1) shall be required for search under this
sub-section.
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under this section, shall, within a period of thirty
days from such seizure, file an application,
requesting for retention of such record or property,
before the Adjudicating Authority.”
46.A reading of Section 17(1) to 17(4), shows that there
must be in possession of the officials, materials or information
suggesting that there has been money laundering or possession
of any proceeds or property related to crime, with the person who
is the target of the agency. The Parliament has defined the scope
of money laundering. Section 2(p) states money laundering has
the meaning assigned to it under Section 3 of the Act. Hence, we
turn to Section 3. Section 3 reads as follows:
“3.Offence of money-laundering.–
Whosoever directly or indirectly attempts to
indulge or knowingly assists or knowingly is
a party or is actually involved in any
process or activity connected with the
proceeds of crime and projecting it as
untainted property shall be guilty of offence
of money laundering.”
47.All these Sections have been analysed in Vijay Madanlal
Choudhary‘s case in detail. The Supreme Court held that for the
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mere fact that there is a crime, does not mean there is money
laundering. Even paragraph No.300 (as given in SCC OnLine
reports) that was relied upon by the learned Additional Solicitor
General of India, points out there has to be satisfaction that the
property involved is a result of money laundering. We are mindful
of the position of law that for the invocation of Section 17, there
need not be a complaint on file. However, that situation does not
arise here, since the investigation has been going on for over a
decade and the ED has not brought forth any new materials in
order to show that the fixed deposits attached in this case are the
result of money laundering. We should point out here that the
fixed deposits had been created in January, 2025.
48.Invocation of Section 17(1-A) arises when the officer
comes to a conclusion that the property, whether attached,
seized or frozen, is a result of money laundering. A perusal of the
Panchanama / seizure memo that has been produced in this
case shows that the fixed deposits were frozen in order to prevent
frustration of the investigation into the proceeds of crime in the
case. However, in the impugned order, nowhere has the authority
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stated that the fixed deposits are the result of proceeds of a
crime. The conclusion portion is a mere extract of the provisions
of Section 17(1-A). Such a reproduction does not pass ouster.
Definition of Jurisdiction:
49.Before we proceed to the merits of the case, we would
like to discuss the meaning of jurisdiction. Jurisdiction has its
origin in Latin. It is a mixture of two words: ‘juris’, which means
law, and ‘dictio’ which means speaking. In conjunction, it means
“speaking of the law”. Jurisdiction is defined as the territory
within which a Court or Government Agency may properly
exercise its powers. [See, Ruhrgas AG Vs. Marathon Oil
Company, ETAL 526 US 574 (1999)].
50.Having stated what jurisdiction means in law, we will
now proceed to refer to a few authorities which deal with
jurisdictional error. The High Court of Australia, in LPDT Vs.
Minister for Immigration, Citizenship, Migration services
and multi cultural affairs, [2024] HCA 12 has given an
indication on jurisdictional errors and the principles to be
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applied in such cases. The Court held:
“jurisdictional error can refer to breach of an
express or implied condition of a statutory
conferrer of decision – making authority,
which results in a decision made in the
purported exercise of that authority lacking
the legal force attributed to exercise of that
authority by statute. Though a decision
affected by jurisdictional error is a decision
in fact, it is “in law … no decision at all” and
in that sense void.”
51.To reach this conclusion, that Court applied the
principles in two earlier precedents, namely, Minister for
Immigration and Multi Cultural Affairs Vs. Bharadwaj,
2002 (209) CLR 597, 616 and Hossain Vs. Minister for
Immigration and Border Protection, (2018) 264 CLR 123 at
133, 143. The view rendered in LPDT’s case found acceptance at
the hands of the Supreme Court in Bhudev Mallick Alias
Bhudeb Mallick and another Vs. Ranajit Ghoshal and
others, (2025) 2 MLJ 395 (SC). The Supreme Court in this
Judgement pointed out the difference between the old Rule and
the new Rule in matters of errors of fact and errors of law. For
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ready understanding, the same is given in the tabular column
below:
Errors of fact:
Old Rule New Rule
The Court would quash only if the The Court will quash if an erroneous
erroneous fact was jurisdictional. and decisive fact was
(a) jurisdictional
(b) found on the basis of no evidence;
or
(c) wrong, misunderstood or ignored.
Errors of law:
Old Rule New Rule
The Court would quash only if the The Court will quash for any decisive
error was error, because all errors of law are
now jurisdictional.
(a) jurisdictional; or
(b) on the face of the record.
52.The Court further held that the test for establishing
jurisdictional error is two fold. First, it must be established that
an error occurred and secondly, the error must be material such
that the decision affected by error could realistically have been
different if there was no error.
53.In the very judgement, the Court held that such re-
defined jurisdictional errors is for the benefit of all the Courts
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across the country to be applied when any matter comes up
before it for judicial review. The Court also pointed out that not
every breach of an express or implied condition of making a
decision will render the decision, “no decision” at all.
54.We would apply the revised test as laid down by the Full
Court of the High Court of Australia as approved by the Supreme
Court during the course of discussion in this case.
55.Though there are several precedents of the Supreme
Court, we refer only a couple of them, namely, Central Potteries
Ltd. Nagpur v. State of Maharashtra, AIR 1966 SC 932 and
P.Dasa Muni Reddy Vs. P.Appa Rao, AIR 1974 SC 2089. The
Supreme Court, in Central Potteries pointed out the difference
between want of jurisdiction and irregular assumption to
jurisdiction. The said portion is extracted hereunder:
“In this connection it should be
remembered that there is a fundamental
distinction between want of jurisdiction and
irregular assumption of jurisdiction, and that
whereas an order passed by an authority
with respect to a matter over which it has no
jurisdiction is a nullity and is open to
collateral attack, an order passed by an44 of 52
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matter, but has assumed it otherwise than
in the mode prescribed by law, is not a
nullity. It may be liable to be questioned in
those very proceedings, but subject to that it
is good, and not open to collateral attack.”
56.In P.Dasa Muni Reddy Vs. P.Appa Rao, AIR 1974 SC
2089, the Court held:
“ 12. ….. Want of jurisdiction must be
distinguished from irregular or erroneous
exercise of jurisdiction. If there is want of
jurisdiction the whole proceeding is coram
non judice. The absence of a condition
necessary to found the jurisdiction to make
an order or give a decision deprives the
order or decision of any conclusive effect.
(See Halsbury’s Laws of England, 3rd Edn.
Vol. 15, para 384).”
57.Since the issues of jurisdiction have been raised, on this
ground too, we are entertaining this writ petition.
How this case falls outside the jurisdiction of ED
58.On the aspect of jurisdiction, we need not labour much
for. The Supreme Court had made it very clear in Vijay Madanlal
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Choudhary‘s case and subsequent cases that the condition
precedent for an enquiry by the ED is the existence of a predicate
offence. The predicate offence, which led the CBI to file a final
report, is the coal allocation scam case. The alleged offence of
“round tripping” of funds, diversion of public loans and misuse of
share premiums are not relatable to coal allocation scam. In
paragraph No.7 of the counter, the ED has pleaded that the
aforesaid three aspects have led it to withdraw the SLP and
continue with its investigation. Even assuming that they are
true, for the purpose of ED to investigate into these aspects,
there should have been a complaint at the instance of the Power
Finance Corporation and other financial institutions, who had
lent monies to RKMP, for ED to swing into action.
59.When this aspect was pointed out to
Mr.AR.L.Sundaresan, the Additional Solicitor General pointed
out that criminal law can be set into motion by any person. That
is a general principle of criminal law. No one can dispute it, and
we certainly are not going to do it. If any criminal act takes place,
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it is certainly open to any individual to bring it to the notice of
police or appropriate authorities who are entitled to register a
complaint on these aspects. A perusal of the papers show that no
complaint had been lodged with respect to any of the aforesaid
alleged criminal activities. The ED is not a super cop to
investigate anything and everything which comes to its notice.
There should be a “criminal activity” which attracts the schedule
to PMLA, and on account of such criminal activity, there should
have been “proceeds of crime”. It is only then the jurisdiction of
ED commences. The terminus a quo for the ED to commence its
duties and exercise its powers is the existence of a predicate
offence. Once there exists a predicate offence, and the ED starts
investigation under the PMLA, and file a complaint, then it
becomes a stand alone offence. As long as there is no predicate
offence, ED cannot plead that since no one set up the criminal
law into motion, it will rely on that doctrine and commence
proceedings under the PMLA.
60.It is too well settled that where an act has to be done in a
particular way, it must be done in that way and in no other way.
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The PMLA demands the existence of a predicate offence. When
there is no predicate offence, initiation of proceedings under
PMLA is a non starter. If the arguments of the Additional Solicitor
General is accepted, then the ED on registration of an ECIR can
conduct a roving enquiry with respect to other aspects also. That
is not the position of law. To put it pithily, no predicate offence,
no action by ED.
61.A careful perusal of Section 66(2) of PMLA points out
that if during the course of investigation, the ED comes across
violations of other provisions of law, then it cannot assume the
role of investigating those offences also. It is to inform the
appropriate agency, which is empowered by law to investigate
into that offence. If that Agency, on the intimation from the ED,
commences investigation and registers a complaint, then
certainly the ED can investigate into those aspects also, provided
there are “proceeds of crime”. In case, the investigating agency
does not find any case with respect to the aspects pointed out by
the ED, then the ED cannot suo motu proceed with the
investigation and assume powers. The essential ingredient for the
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ED to seize jurisdiction is the presence of a predicate offence. It
is like a limpet mine attached to a ship. If there is no ship, the
limpet cannot work. The ship is the predicate offence and
“proceeds of crime”. The ED is not a loitering munition or drone
to attack at will on any criminal activity.
62.As there is no predicate offence with respect to the three
aspects in paragraph No.7 of the counter, we conclude that the
impugned order suffers from a jurisdictional error and the order
of attachment is per se without jurisdiction. We come to this
conclusion because this is not a case where the CBI is yet to
come up with the offence. The Supreme Court had directed
registration of the offence in 2014. The complaint was also
registered in the year 2015. After a period of nine years, the ED’s
jurisdiction to attach and investigate is being traced to the CBI
charge sheet. We entirely agree that the ED has jurisdiction if it
can trace “proceeds of crime” from coal allocation scam. It does
not and cannot possess jurisdiction based on the phantoms that
it sees from the charge sheet.
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63.Unless and until proceeds of crime linked to the
predicate offence are shown, ED by virtue of a combined reading
of 2(1)(u), 2(1)(p), 3 read with Section 17, does not have the
power to proceed further in fine lacks the jurisdiction to proceed
further. In the light of the above decision, the impugned order is
set aside. W.P.No.4297 of 2025 is allowed with costs. Cost memo
to be filed within one week from today. Consequently, the
connected miscellaneous petition is closed.
W.P.No.4300 of 2025:
64.Since there is already an order of this Court in
W.P.No.24700 of 2021 dated 08.06.2022, apart from reiteration
of para No.39 of the said order, no further directions are required
in W.P.No.4300 of 2025. Consequently, the connected
miscellaneous petition is closed.
(M.S.R., J) (V.L.N., J)
15.07.2025
krk
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Index : Yes / No
Internet : Yes / No
Neutral Citation : Yes / No
To
1.The Assistant Director,
Directorate of Enforcement,
Govt. of India, Chennai Zonal Office,
No.2, 5th and 6th Floor, BSNL Administrative Building,
Kushkumar Road, Nungambakkam, Chennai – 600 034.
2.The Joint Director,
Directorate of Enforcement,
Govt. of India, Chennai Zonal Office,
No.2, 5th and 6th Floor,
BSNL Administrative Building,
Kushkumar Road, Nungambakkam,
Chennai – 600 034.
M.S.RAMESH, J.
and
V.LAKSHMINARAYANAN, J.
krk
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W.P.Nos.4297 & 4300 of 2025
15.07.2025
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