![ED Is Not A Super Cop To Investigate Anything And Everything Which Comes To Its Notice: Madras High Court [READ ORDER]](https://www.jurishour.in/wp-content/uploads/2025/07/Madras-HC-5.webp "Madras HC (5)")
Madras High Court Slams ED for Overreach Under PMLA, Quashes Fixed Deposit Freeze Order
The Madras High Court has held that Enforcement Directorate (ED) is not a super cop to investigate anything and everything which comes to its notice.
The bench of Justice M.S.Ramesh and Justice V.Lakshminarayanan has observed that there should be a “criminal activity” which attracts the schedule to Prevention of Money Laundering Act (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.
A private company was incorporated in the year 1991. It was titled as ‘R.K.Powergen Private Limited, Chennai’ (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 Corporation, an entity based out of Malaysia, incorporated another company under the name and style of ‘R.K.M.Powergen Private Limited’ (RKMP). This entity was set up for the purpose of creating, establishing and operating coal powered electricity generation plant.
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 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 (CBI) was called upon to investigate each of the allocations and take appropriate action.
On the registration of the offences, the Enforcement Directorate (ED) registered a case on
07.01.2015. Investigation was taken up under the provisions of the Prevention of Money Laundering Act, 2002. 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.
The 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.
“The PMLA requires the presence of a scheduled offence and the existence of proceeds of crime. Without these two critical elements, any action under the Act is a nonstarter,” the bench observed, underscoring the foundational requirements for invoking the agency’s jurisdiction.
The judges drew a powerful metaphor, likening ED’s authority under the PMLA to a limpet mine — a device that only functions when attached to a vessel. “Here, the vessel is the predicate offence and the proceeds of crime. Without it, the mine cannot be activated,” the court remarked.
In a direct rebuke to the expanding reach of the agency, the court further stated that the ED is not a “super cop” that can intervene in every matter that comes to its attention. It emphasized that the agency must operate within the boundaries of the law and cannot assume powers beyond what is provided under the PMLA.
Case Details
Case Title: R.K.M Powergen Private Limited Versus Assistant Director
Case No.: W.P.Nos.4297 & 4300 of 2025
Date: 15.07.2025
Counsel For Petitioner: B.Kumar
Counsel For Respondent: AR.L.Sundaresan
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Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
