In a significant ruling, the Madras High Court has observed that the Enforcement Directorate (ED) cannot act as a “drone” attacking at will, nor is it a “super cop” empowered to investigate all alleged illegalities that come to its notice. The court emphasised that the ED must strictly act within the framework of the Prevention of Money Laundering Act (PMLA) and cannot exceed its mandate.
A division bench comprising Justice M S Ramesh and Justice V Lakshminarayanan made these strong observations while hearing a petition filed by Chennai-based RKM Powergen Private Ltd. The company had challenged the ED’s freezing of its fixed deposits worth ₹901 crore in connection with a money laundering case linked to the allocation of coal blocks in Chhattisgarh.
The ED’s action stemmed from a 2014 FIR filed by the CBI concerning alleged irregularities in coal block allocations. Although the CBI filed a closure report in 2017 citing no wrongdoing, the special court rejected the report and directed further investigation. A supplementary report was eventually filed in 2023 citing sufficient material for prosecution under the IPC and the Prevention of Corruption Act.
Following this, the ED conducted raids at various premises linked to RKM Powergen and on January 31, 2025, froze ₹901 crore in fixed deposits. The company contested this order, which the High Court ultimately set aside.
Clarifying the scope of the ED’s powers, the court stated that under Section 66(2) of the PMLA, if the agency encounters evidence of offences beyond its remit, it must refer the matter to the appropriate investigating body. The ED cannot independently probe such matters unless a predicate offence — the basis for money laundering — exists.
“In case the investigating agency does not find any case with respect to the aspects pointed out by the ED, then the ED cannot suo motu proceed with the investigation and assume powers,” the bench noted. It likened the ED’s jurisdiction to a “limpet mine attached to a ship,” asserting that without a predicate offence, the ED has no standing. “The ED is not a loitering munition or drone to attack at will on any criminal activity,” the court added.
The judges concluded that since no complaint had been filed in relation to the alleged offences identified by the ED, and absent any proceeds of crime from a scheduled offence, the ED’s actions were unsustainable.
