While refusing to interfere with the proceedings initiated by the Enforcement Directorate (ED) against an agrifurane company, the Madras High Court recently observed that unless there is a misuse of power, courts are not expected to stall investigation, which is the exclusive domain of the executive.
The bench of Justice PN Prakash and Justice N Anand Venkatesh said, “If we are convinced that the investigation taken up by the respondent (ED) is within their powers and there is no misuse of powers, we cannot act as a stumbling block in the further progress of the investigation”.
Southern Agrifurane Industries Private Ltd by its director Joseph Anand Muthu alias MGM Anand moved a writ petition before the high court for forbearing the ED from proceeding under the provisions of the Prevention of Money Laundering Act, 2002(PMLA) against it.
The contention raised by the petitioner company was that the ED was acting beyond its jurisdiction since the allegation of contravention of the Foreign Exchange Management Act (FEMA) does not fall within the schedule to PMLA.
The counsel for the company mainly argued that since provisions of FEMA have not been made a schedule offence, the ED was indirectly conducting the investigation by taking advantage of the FIR.
He asserted that as per the complaint filed against the company by the Axis Bank, through which the company used to make overseas remittances, only contravention of the provisions of FEMA were alleged and there was no IPC offence involved in this case.
The allegation against the company was that it made false declaration which induced the authorised dealer to deliver valuable foreign exchange and such remittances in the hands of the wholly owned subsidiaries of the company, situated outside India.
Since the FIR disclosed the commission of an offence under Section 420 IPC, which is a scheduled offence under the PMLA, the ED registered a case and issued summons to the company. The company challenged the same before the high court.
Before the division bench, the Special Public Prosecutor appearing on behalf of the ED submitted that there were sufficient materials to establish that the so-called investments as alleged by the company outside India never took place and the money had been siphoned off.
He apprised the court that till now the ED was able to find out that the siphoning has taken place to the tune of Rs 216.40 crore out of India at the cost of foreign exchange of the country.
He also told the court that MGM Maran who is holding almost 91% of the shares in the petitioner company is not cooperating for the investigation.
Therefore, while arguing that the case involves serious cross-border money laundering and the investigation is at a crucial stage, he appealed to the court to dismiss the plea.
The court referred to the ruling of the Apex Court in Vijay Madanlal Choudhary and Others Vs Union of India and Others (2022) and observed that to start an investigation under PMLA, there must be a predicate offence which must be a schedule offence as specified in the schedule to the PMLA and that apart, a prima facie material to show that the schedule offence has generated proceeds of crime.
The court held the predicate offence under Section 420 IPC was prima facie made out and the other requirement was also satisfied.
Moreover, though various contentions were raised on the merits of the case by both side, the court opined, “We do not want to deal with any issue touching upon the merits of the case by taking the role of the investigation agency”.
The court further said it only needed to satisfy itself that the ED was acting within the four corners of PMLA and not misusing the powers of investigation.
Therefore, while dismissing the plea, the court left it open to the company to submit their explanation to the ED along with all supporting documents and asked the agency to proceed further with the investigation within the scope of PMLA.
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