Case at a Glance
The Enforcement Directorate (ED) registered a money-laundering case on the back of a land-grant cheating case, and while investigating stumbled on material about an alleged recruitment scam. When the land case was closed and the police did not act on the information ED forwarded under Section 66(2) of the PMLA, ED itself filed a private complaint before the Special Court under the Prevention of Corruption Act and the IPC. Justice M.I. Arun held that ED’s power is “derivative and not original”, that PMLA proceedings cannot survive once the predicate offence has ended, and that “Filing of a private complaint by the ED is not contemplated under the PMLA.” The ECIR, the attachment confirmation, the summons and ED’s private complaint were quashed for the petitioners.
The so-called ‘Land Scam Case’ (a private complaint registered as a crime in 2022) alleged that land had been improperly granted to about 38 persons, and invoked Sections 420, 464, 465, 468, 471 and 120B IPC. Treating these as scheduled offences, ED registered an ECIR in 2023, issued summons, seized material and obtained confirmation of the seizure from the PMLA Adjudicating Authority on 6 June 2024. The predicate case, however, did not survive: the police filed a ‘B’ (closure) report, sanction to proceed against the public servant was not granted, and the trial court dismissed the case for non-prosecution.
During its investigation ED said it had found material on a separate ‘Job Scam Case’ concerning recruitment to KOMUL, a milk union. It shared this with the police under Section 66(2) PMLA, but the police did not register a case. ED then filed PCR No. 32 of 2024, a private complaint dated 11 September 2024, alleging offences under Sections 7, 11, 12 and 13 of the Prevention of Corruption Act and several IPC provisions. On 30 October 2024 the Special Court took cognizance and called for a status report. The petitioners challenged the ECIR, the attachment order, the summons and the private complaint.
The Key Question Before the Court
Can ED continue a PMLA investigation after the predicate offence has been closed, and if the police do not act on information ED shares under Section 66(2), can ED itself file a complaint under Section 200 CrPC / Section 223 BNSS for the scheduled offence?
A Derivative Power, Not a Roving One
Reading Section 3 with the definition of “proceeds of crime” in Section 2(1)(u), and relying on Vijay Madanlal Choudhary v. Union of India, (2022) 07 SC CK 0102, the Court held that money laundering presupposes a scheduled offence that has generated proceeds. “The power of the ED is derivative and not original,” the Court said; it “cannot initiate an investigation suo motu based on a standalone suspicion of money laundering.” Following V. Senthil Balaji v. Deputy Director, Directorate of Enforcement, (2024) 09 SC CK 0057, it held that “If there is no existence of the predicate offence, then in that event, proceedings under PMLA cannot exist”. Since the closure of the Land Scam Case had attained finality, the ECIR and everything flowing from it could not be sustained.
On the second question, the Court read Section 66(2) as a duty to pass on information, not a source of investigative power. When ED comes across material about another offence, “it is duty bound to intimate the concerned agency and not take up the investigation by itself.” In a line that is likely to be widely quoted, the Court said: “The ED is not a super cop to investigate anything and everything which comes into its notice.” ED’s reliance on Mukesh Singh v. State (Narcotic Branch of Delhi), (2020) 08 SC CK 0046 was rejected because that decision dealt with the NDPS Act. The Court concluded that “Filing of a private complaint by the ED is not contemplated under the PMLA.”
What the Court Actually Held
- ED’s power under the PMLA is derivative; it depends on the existence of a scheduled (predicate) offence that has produced proceeds of crime.
- Once the predicate offence has ended in favour of the accused and that result is final, the ECIR, attachment and summons cannot continue.
- Section 66(2) only obliges ED to share information with the concerned agency; it does not authorise ED to investigate or prosecute the scheduled offence itself.
- ED cannot file a private complaint for the scheduled offence when the police do not act; PCR No. 32 of 2024, the ECIR, the Adjudicating Authority’s order of 6 June 2024 (for the petitioner concerned) and the consequential summons were quashed, and seized articles were ordered to be returned.
Why This Judgment Matters
- It draws a clear line around ED’s role after Vijay Madanlal Choudhary: no predicate offence, no money-laundering case.
- It closes a route by which ED could have kept a matter alive by turning complainant when the police declined to register a case.
- Persons facing PMLA action where the base case has been closed, compromised or dropped now have a direct High Court ruling to rely on in Karnataka.
What Should Advocates Take Away From the Judgment?
For Persons Facing ED Action
- Check the status of the predicate offence first: closure, discharge or acquittal that has become final can end the PMLA case too.
- If ED has filed a complaint for a scheduled offence in its own name, this ruling supports a challenge to it.
- Seized articles may be recoverable once the attachment confirmation falls with the ECIR.
For Counsel
- Frame the challenge around Sections 2(1)(u), 3 and 66(2) PMLA and the derivative-power reasoning in Vijay Madanlal Choudhary and V. Senthil Balaji.
- Distinguish NDPS-based precedents such as Mukesh Singh, as the Court did.
- Note that the ruling is by a single Judge; watch for any appeal by the Union.
Key Takeaways
- No scheduled offence, no PMLA case: closure of the predicate offence ends the ECIR.
- Section 66(2) is a duty to inform, not a licence to investigate.
- ED cannot become a private complainant for a scheduled offence the police chose not to pursue.
- The Court quashed the ECIR, attachment confirmation, summons and ED’s private complaint for the petitioners.
Frequently Asked Questions
Can ED continue a money-laundering case if the main (predicate) case is closed?
According to this ruling, no. Relying on Supreme Court decisions, the Karnataka High Court held that PMLA proceedings cannot exist once the predicate offence has ended in the accused’s favour and that result is final.
What does Section 66(2) of the PMLA allow ED to do?
It requires ED to share information about other offences it discovers with the concerned agency. The Court held it does not allow ED to take up the investigation of that offence itself.
Can ED file a private complaint if the police refuse to act?
The Court held that it cannot. It said filing a private complaint by ED is not contemplated under the PMLA and quashed ED’s complaint before the Special Court.
Conclusion
The judgment keeps the Enforcement Directorate within the four corners of the PMLA. ED can follow the money from a scheduled offence, but it cannot keep a case going once that offence is gone, and it cannot step into the shoes of the police or a private complainant when an agency declines to act on its information.
Practical takeaway: In any PMLA matter, first track the fate of the predicate offence and check whether ED has gone beyond Section 66(2); either can be decisive.
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