Kerala High Court Reserves Verdict On CMRL's Appeal Challenging ED Probe, Orders Status Quo Till June 5

The Kerala High Court on Monday reserved judgment on an appeal filed by Cochin Minerals and Rutile Limited (CMRL) challenging Enforcement Directorate summons issued in a money laundering probe linked to payments allegedly made to Exalogic Solutions Pvt Ltd, a company owned by Veena Vijayan, daughter of former Kerala Chief Minister Pinarayi Vijayan.

The Court directed the ED to maintain the status quo and not precipitate any proceedings against the appellants until June 5, when it is scheduled to pronounce its verdict.

A division bench of Justices Raja Vijayaraghavan V and K.V. Jayakumar reserved its verdict after hearing arguments on whether the Enforcement Directorate could invoke the Prevention of Money Laundering Act (PMLA) and issue summons in the absence of a valid predicate offence.

During the hearing, the bench questioned the company's objection to furnishing documents sought by the agency.

"You are a listed company and they have asked just an agreement entered into between CMRL and Exalogic, any invoices issued by Exalogic to certain person, ledger account containing the transactions," the bench noted. 

During the hearing, Senior Advocate Sidharth Luthra, counsel for the appellants, argued that the condition precedent for the invocation of jurisdiction under the Prevention of Money Laundering Act is the existence of "proceeds of crime" arising from a scheduled offence.

It was contended that certain findings rendered by the single judge were not in conformity with the law governing initiation of proceedings under the PMLA.

The ED, opposing the appeal, argued that neither a final report under Section 173 of the CrPC nor a complaint is a prerequisite for commencing an inquiry, investigation, or proceedings under the PMLA.

According to the agency, once a competent authority under the relevant statute is conducting an inquiry or investigation into a scheduled offence, the Enforcement Directorate is empowered to initiate proceedings under the PMLA.

The agency contended that, even independent of the SFIO's subsequent complaint, the initiation of proceedings was legally sustainable. It argued that the ED is vested with powers under Section 50 of the PMLA to conduct inquiries and investigations and, for the purpose of collecting evidence, is entitled to issue summons under Section 50(2) of the Act.

The appeal arises from a judgment of a single judge refusing to interfere with summons issued by the ED to officials of CMRL in a money laundering investigation linked to payments allegedly made to Exalogic Solutions.

CMRL had challenged the Enforcement Case Information Report registered under the PMLA and the summons issued by the agency, contending that the ED could not initiate proceedings in the absence of a valid predicate offence.

The company also relied on immunity granted by the Income Tax Settlement Commission following assessment proceedings arising out of an Income Tax Department search conducted in 2019.

Rejecting the challenge, the Single Bench held that a writ petition against summons issued during the course of an investigation was premature. The Court further held that immunity granted under the Income Tax Act could not extend to proceedings under the PMLA.

Taking note of the SFIO's complaint alleging offences under Section 447 of the Companies Act, a scheduled offence under the PMLA, the Court found no merit in the contention that the ED lacked jurisdiction to proceed with the investigation. Aggrieved by the decision, CMRL has preferred the present writ appeal before the Division Bench.

For Appellant: Senior Advocate Sidharth Luthra, Advocates M Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C Abraham and Raja Kannan

For Respondent: Advocates L Sundaresan, ASGI, Zoheb Hossain and Jaishankar V Nair