The Karnataka High Court has refused to quash an FIR registered against multiple individuals accused of operating an alleged foreign funding network through international debit cards, holding that the Enforcement Directorate (ED) is empowered under Section 66(2) of the Prevention of Money Laundering Act (PMLA) to share information with law enforcement agencies when it discovers violations of other laws.
The bench of Justice M. Nagaprasanna has observed that, at the investigation stage, the material collected by the ED disclosed sufficient prima facie grounds to permit investigation to continue and that judicial interference would be unwarranted.
The case originated after one of the accused was intercepted at Kempegowda International Airport, Bengaluru, where authorities allegedly recovered 24 international debit cards. According to the ED, subsequent searches conducted under FEMA uncovered an alleged network involving a US-based organisation, The Timothy Initiative (TTI), and several individuals accused of facilitating the withdrawal and utilisation of foreign funds in India.
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The ED alleged that approximately ₹92.55 crore (USD 99,95,240) was withdrawn between November 2025 and April 2026. Around ₹40 crore was withdrawn across states including Karnataka, Chhattisgarh and Assam during January 2024 to March 2026. More than 1,000 foreign debit cards were allegedly distributed in India under a common name to conceal the identities of actual users and bypass Know Your Customer (KYC) norms.
The agency further claimed that several accused coordinated ATM withdrawals, managed financial operations and oversaw the distribution of foreign funds within India.
The ED informed the Court that investigation revealed unusual cash withdrawals in Left Wing Extremism (LWE)-affected regions, particularly in Dhamtari and Bastar, Chhattisgarh.
According to the agency about ₹6.34 crore was withdrawn in LWE-affected districts over the past few years. Nearly ₹3.2 crore was withdrawn through approximately 3,200 ATM transactions from a single ATM in Dhamtari. The pattern of withdrawals suggested organised movement of foreign funds capable of facilitating unlawful activities in Naxal-affected areas.
Based on these allegations, the ED concluded that offences under the UAPA were prima facie attracted and shared its findings with the Karnataka Police under Section 66(2) of the PMLA, following which the FIR was registered.
The petitioners argued that the ED had no authority to communicate information leading to registration of an FIR under the UAPA. The investigation originally arose under FEMA and not under the PMLA. There was no Enforcement Case Information Report (ECIR) registered. The allegations did not disclose the ingredients necessary to invoke Sections 13, 17 and 18 of the UAPA. Invocation of anti-terror provisions was arbitrary and unsupported by evidence.
The petitioners also contended that the organisation was engaged in charitable and missionary activities and that the allegations were based merely on suspicion.
Opposing the petitions, the Enforcement Directorate submitted that the investigation had uncovered a much larger financial network than initially suspected. Although only 24 cards were recovered from one accused, nearly 900 debit cards had allegedly been issued. Approximately ₹100 crore had been withdrawn through these cards. The investigation suggested that the funds were being channelled towards Left Wing Extremist organisations operating in Karnataka, Chhattisgarh and Jharkhand. Investigation was still at an early stage and should not be curtailed.
The court held that Section 66(2) of the PMLA expressly authorises the Director or authorised officers of the ED to share information with the appropriate agency whenever material indicates violations of any other law.
The Court observed that the provision is intended to ensure that information uncovered during one investigation does not remain confined merely because it reveals offences under another statute.
It held that interpreting the provision narrowly would defeat the legislative purpose and undermine inter-agency cooperation.
The Court also rejected the contention that information gathered during FEMA proceedings could not be shared with police authorities, holding that FEMA and the PMLA must be read harmoniously rather than in isolation.
On the challenge to the invocation of the UAPA, the High Court held that the Court was not required to determine guilt at the investigation stage.
Instead, it only had to consider whether sufficient prima facie material existed to justify investigation.
The Court found that the detailed communication sent by the ED under Section 66(2) described the alleged movement of foreign funds into LWE-affected regions and the suspected financial network in sufficient detail to justify further investigation. It held that the material could not be described as so deficient as to warrant quashing the FIR.
While refusing to interfere, the High Court underscored the broader importance of investigating allegations involving extremist financing.
The Court observed that national security rests upon preventing clandestine funding of extremist activities, noting that financial support functions as the “oxygen” enabling extremist organisations to survive and expand.
It further held that courts must exercise great caution before stifling investigations where allegations involve economic offences intertwined with national security concerns, observing that robust intelligence gathering, regulatory oversight and inter-agency coordination are essential to dismantle covert financial networks.
Dismissing both petitions, the Karnataka High Court held that the ED was legally empowered under Section 66(2) of the PMLA to communicate information to the police. The FIR could not be quashed at the threshold. The allegations disclosed sufficient prima facie material to permit investigation under both the BNS and the UAPA. The petitioners remain free to pursue all remedies available in law after completion of investigation and filing of the final report.
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