Describing ECIR An Administrative Document Cannot Shield It From Judicial Review: Karnataka High Court

The Karnataka High Court on Wednesday ruled that merely describing an Enforcement Case Information Report (ECIR) as an internal or administrative document does not place it beyond judicial scrutiny.

It held that an administrative label cannot shield it from review where its continuance causes injustice or frustrates the efficacy of an order passed under the Code of Criminal Procedure.

"Therefore, the description of an ECIR as an internal or administrative document does not, by itself, erect an impregnable bar against the exercise of constitutional or inherent jurisdiction. An administrative label cannot become a judicial shield. If the continuance of such an administrative act occasions injustice or frustrates the efficacy of an order passed under the Cr.P.C., the High Court is neither denuded of its power nor divested of its constitutional obligation to intervene," observed Justice M. Nagaprasanna.

The observations came while the court was deciding the maintainability of a writ petition filed by Gameskraft Technologies Pvt. Ltd. and Nirdesa Network Pvt. Ltd. The companies challenged an ECIR registered by the Directorate of Enforcement (ED) along with all consequential proceedings initiated under the Prevention of Money Laundering Act (PMLA).

The dispute traces back to a complaint lodged on December 5, 2024. The complainant alleged that he had lost nearly ₹3 crore through the online gaming platforms operated by the two companies.

After investigating the complaint, the police filed a 'B' report concluding that no material existed to prosecute the companies. A Bengaluru court accepted the closure report after hearing the complainant. Nearly six months later, the ED registered an ECIR and initiated proceedings under the PMLA.

The companies argued that the High Court could exercise its constitutional jurisdiction to examine the legality of the ECIR and the proceedings flowing from it. The ED opposed the petition, contending that an ECIR is merely an internal administrative document and therefore could not be challenged before the High Court.

Rejecting that objection, the court held that once it is seized of the matter, it is concerned with the legality of the entire chain of proceedings flowing from the ECIR. Its jurisdiction extends to examining every consequential action to ensure an arbitrary or unsustainable investigation is not allowed to continue.

"The High Court, exercising its inherent jurisdiction, is concerned not with the nomenclature of the initiating document but with the legality of the entire chain of proceedings that emanates therefrom. Therefore, once the Court is seized of the matter, its jurisdiction extends to examine the validity of every consequential proceeding flowing from the impugned ECIR, lest an arbitrary or unsustainable investigation be permitted to continue merely because its point of origin is described as an administrative record," the court observed.

The court also rejected the ED's submission that describing an ECIR as an internal administrative document placed it outside judicial scrutiny. It noted that, despite that description, an ECIR authorises coercive measures under the PMLA, including searches, seizures, attachment of property and arrest.

"The submission of the Directorate of Enforcement, if accepted, would produce consequences startling in constitutional jurisprudence. An ECIR, though branded as an 'internal administrative document', authorises search, seizure, attachment of property, deprivation of liberty, arrest under one of the most stringent penal statutes in the country and prosecution carrying grave consequences. To describe such a document as merely administrative, yet simultaneously permit it to unleash the full coercive apparatus of the criminal law, is to embrace a contradiction that constitutional adjudication cannot countenance," the court observed.

The court further observed that "the label attached to a proceeding cannot eclipse its true character. Substance must always prevail over nomenclature."

The court also observed that the offence of money laundering derives its existence from the scheduled offence. It noted that where the predicate offence ceases to exist because of a discharge, acquittal, or acceptance of a closure report, an ECIR cannot survive independently, as the offence of money laundering cannot exist without the scheduled offence.

Holding that the writ petition was maintainable, the court rejected the ED's preliminary objection. It directed that the matter be listed for consideration on merits.

For Petitioners: Senior Advocates Dr. S. Muralidhar, Vikram Chaudhary, Sajan Poovayya, Sandesh J. Chouta, Suhaan Mukerji, Arshiya Ghose, Nithin N. Patil, Harshavardhan Mudhole, Aishwarya M, Sankalp A. SHrma, Diya Bhagwan, Varuni Aggarwal, Palash Maheshwari, Advocates

For Respondent: Senior Advocate Zoheb Hossain, Madhu N. Rao, Spl. PP, Anuparna Bordoloi, CGC