Kerala HC Upholds ED Summons In Probe Linked To Payments To Ex-Kerala Chief Minister's Daughter's Company

The Kerala High Court has declined to interfere with summons issued by the Enforcement Directorate to officials of Cochin Minerals and Rutile Limited in a money laundering investigation linked to payments allegedly made to Veena Vijayan, daughter of former Kerala Chief Minister Pinarayi Vijayan, and her company, Exalogic Solutions Pvt Ltd.

Justice T.R. Ravi dismissed a petition filed by Cochin Minerals and its officers challenging an Enforcement Case Information Report (ECIR) registered by the ED under the Prevention of Money Laundering Act (PMLA), as well as summons issued to company officials requiring their appearance before the agency.

The dispute traces back to an Income Tax Department search conducted at the company's premises and the residences of its senior officials on January 25, 2019. Following assessment proceedings, the company approached the Income Tax Settlement Commission and obtained an order granting immunity from prosecution under the Income Tax Act for the relevant assessment years.

Subsequently, a complaint was lodged before the Ministry of Corporate Affairs seeking investigation into the affairs of the company. Acting on it, the Centre first ordered an investigation under the Companies Act in January 2024 and later entrusted the matter to the Serious Fraud Investigation Office (SFIO).

While the SFIO investigation was underway, the ED registered an ECIR and issued summons to company officials seeking documents relating to agreements entered into between the company and Exalogic Solutions, invoices raised for services allegedly rendered, and ledger entries reflecting the transactions.

The company questioned the ED's jurisdiction to initiate proceedings under the PMLA and sought details regarding the basis of the investigation. After the agency insisted on the appearance of the summoned officials, the petitioners approached the Kerala High Court.

The petitioners argued that the ED could initiate proceedings under the PMLA only on the basis of a valid FIR or complaint relating to a scheduled offence. They contended that since Section 447 of the Companies Act is the relevant scheduled offence, ED proceedings could not begin in the absence of a predicate offence being formally set in motion. They also argued that the immunity granted by the Income Tax Settlement Commission barred further proceedings.

Opposing the plea, the ED argued that the writ petition was premature as it challenged only summons issued during investigation. It contended that an ECIR is merely an internal document and not liable to be quashed.

On merits, the agency alleged that the company had inflated expenditure by booking bogus expenses and specifically booked bogus software service expenses of ₹1.72 crore, which was allegedly paid to Veena Vijayan and Exalogic without any services being rendered.

On maintainability, the Court relied on its earlier decision in C.M. Raveendran v. Union of India and held that a writ petition against summons at the investigation stage was premature.

“The case at hand is similar on facts and the challenge has been made at the stage of issuance of the summons. No cause of action can be said to have been arisen at this stage, since the summons only calls upon the person to state the truth or to make statements and produce documents. I hence find that the writ petition is premature and is liable to be dismissed,” the Court said.

Rejecting the company's argument on immunity, the Court examined Section 245H of the Income Tax Act and held that the immunity claimed by the company could not extend to proceedings under the PMLA.

“The proviso to the Section says that no immunity from prosecution for any offence under the Indian Penal Code or under any Central Act other than the Income Tax Act and the Wealth Tax Act, 1957, can be granted to a person who makes an application under Section 245(C) on or after 01.06.2007,” the Court noted.

The bench also rejected the contention that the ED required a prior FIR to commence inquiry or investigation under the PMLA, relying on the Supreme Court's ruling in Vijay Madanlal Choudhary v. Union of India.

“A reading of the summons issued would show that what has been initiated is only an investigation. At this stage it is not possible to state what the outcome of the investigation would be,” the Court observed.

During the pendency of the writ petition, the SFIO filed a complaint on April 3, 2025 alleging offences under Section 447 of the Companies Act, which is a scheduled offence under the PMLA. Taking note of this subsequent development, the Court held that the petitioners' core challenge that no scheduled offence existed no longer survived.

Holding that the ED's powers under the PMLA are not dependent on the SFIO first filing its final report, the Court dismissed the petition.

For Petitioners: Advocates M Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C Abraham, Raja Kannan, Sidharth Luthra, Arshdeep Singh Khuarana, Sulakshan V.S, Himanshu Kasturi, Kartikeye Dang, Manan Khanna and Aditya Chopra

For Respondent: Advocates Arl Sundaresan, ASGI, Zoheb Hossain, Special Counsel and Jaishankar V Nair, Retainer Counsel