Mere Registration Of FIR In Scheduled Offence Does Not Require ED To Register PMLA Case: Madras High Court

The Madras High Court has refused to direct the Directorate of Enforcement (ED) to initiate proceedings under the Prevention of Money Laundering Act (PMLA) merely because a criminal case involving a scheduled offence has been registered.

A Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan held that the decision to register an Enforcement Case Information Report (ECIR) rests with the authorised officer.

The decision must be based on the material available before the agency.

“As per the provisions and scheme of the PMLA, the Authorized Officer, based on the predicate case for scheduled offences, can resort to proceedings under the PMLA based on his satisfaction of the involvement of proceeds of crime, and every stage is to be proceeded based on the reasons to believe recorded in writing from the materials in his possession,” the court observed.

The ruling came on a petition filed by Avon Solutions and Logistics Pvt Ltd. The company sought a direction to the ED to act on a representation submitted by it.

According to the company, a forensic audit conducted in November 2025 found that three former officials had allegedly misappropriated about ₹23.59 crore.

A complaint was thereafter lodged with the Chennai Crime Branch. This resulted in the registration of a criminal case alleging criminal breach of trust and cheating.

The company argued that cheating is a scheduled offence under the PMLA. It contended that the ED was therefore required to commence action under the statute. Alleging inaction by the agency, it approached the High Court.

The court, however, noted that the Supreme Court had already held that the existence of a predicate offence does not by itself justify a direction to the ED to register an ECIR.

“The registration of an FIR in a predicate offence does not ipso facto mandate the ED to register an ECIR, rather, it is purely based on the satisfaction of the Authorized Officer drawn from the materials available. This court cannot substitute the satisfaction of the ED, which is to be arrived at in accordance with the legislative mandates of the PMLA,” the bench held.

Avon Solutions also relied on an internal technical circular of the ED. According to the company, the circular contemplated an investigation where the amount involved exceeded ₹10 crore.

The court found no merit in the submission. It held that internal administrative guidelines cannot override statutory requirements governing the exercise of powers under the PMLA.

The bench also noted that the individuals accused of the alleged fraud had not been made parties to the proceedings. Any direction to initiate money-laundering proceedings could potentially affect their rights, the court observed.

Addressing the scope of a writ of mandamus, the court observed,

“Under the PMLA, the initiation of statutory inquiries, searches, or enforcement actions is a discretionary, quasi-judicial function dependent on internal administrative satisfaction and "reasons to believe" recorded in writing. A blanket mandamus cannot be sought to bypass the investigative assessment of the statutory authority.”

The petition was consequently dismissed.

The court, however, clarified that it remained open to the ED to decide whether any proceedings under the PMLA should be initiated on the basis of the material available to it. It also clarified that no opinion was being expressed on the merits of the allegations.

For Petitioner: Advocate G Karthikeyan

For Respondent: Advocate S Sidharthan, Special Public Prosecutor