High Court upholds jurisdiction under Article 226, restricts ED from investigating money laundering under FEMA/Customs.

The High Court held that the writ petition under Article 226 was maintainable, emphasizing its jurisdiction as a basic feature of the Constitution. It restrained the Enforcement Directorate from investigating alleged money laundering under FEMA and the Customs Act, stating that the ED's jurisdiction under the PML Act did not extend to these areas. The Court allowed the investigation to proceed for predicate offences under the CBI's FIR as per the Supreme Court's directions. The writ petition was disposed of without costs.

---

---

Issues Involved:
1. Jurisdiction of the High Court under Article 226 of the Constitution.
2. Validity of the Enforcement Directorate's investigation under the PML Act.
3. Allegations of "round tripping" and their implications.
4. The relationship between the PML Act, FEMA, and Customs Act.
5. The impact of the Supreme Court's directions in related coal block allocation cases.

Detailed Analysis:

Jurisdiction of the High Court under Article 226:
The High Court addressed the preliminary objection regarding its jurisdiction to entertain the writ petition. The Court concluded that the writ petition under Article 226 was maintainable, citing a previous instance where the Supreme Court permitted the petitioner to raise all contentions before the High Court. The Court emphasized that its jurisdiction under Article 226 is a basic feature of the Constitution and cannot be taken away even by a constitutional amendment. The Court can issue a writ of mandamus to stop an investigation if it finds that the investigating officer is misusing his powers.

Validity of the Enforcement Directorate's Investigation under the PML Act:
The Court examined whether the Enforcement Directorate's (ED) investigation under the PML Act was valid. The ED's case was grounded on the allegation that the petitioner company had obtained the allocation of Fatehpur East Coal Block by misrepresenting facts, which led to the generation of proceeds of crime. However, the Court found that no mining activity was carried out, and no proceeds of crime were generated. The Court held that the ED could not continue its investigation under the PML Act in the absence of any proceeds of crime.

Allegations of "Round Tripping" and Their Implications:
The ED alleged "round tripping" transactions between the Indian and overseas entities, suggesting that the petitioner company engaged in money laundering. The Court noted that the transactions were reported to the Reserve Bank of India as required by law, and there was no clandestine deal. The Court found that the ED's allegations were not substantiated by evidence and that the ED could not proceed with the investigation based on these allegations.

Relationship Between the PML Act, FEMA, and Customs Act:
The Court discussed the interplay between the PML Act, FEMA, and the Customs Act. It noted that while the ED could investigate under the PML Act, it could not investigate under FEMA or the Customs Act using the powers granted under the PML Act. The Court emphasized that the ED's powers of investigation must be exercised strictly within the terms of the PML Act and that any information related to other statutes should be shared with the relevant agencies as per Section 66(2) of the PML Act.

Impact of the Supreme Court's Directions in Related Coal Block Allocation Cases:
The Court acknowledged that the Supreme Court was monitoring the investigation into coal block allocations and had issued various directions. The Court decided to refrain from interfering with the investigation of alleged offences under the PML Act related to the coal block scam cases being monitored by the Supreme Court. However, the Court found that the ED's investigation into the petitioner company for alleged violations under FEMA and the Customs Act was beyond its jurisdiction under the PML Act.

Conclusion:
The Court issued a writ of mandamus restraining the ED from exercising its powers under the PML Act concerning the investigation of alleged money laundering related to offences under FEMA and the Customs Act. The Court clarified that it did not interfere with the investigation of money laundering allegations related to the predicate offences forming the subject matter of the CBI's FIR, which would proceed as per the Supreme Court's directions. The writ petition was disposed of on these terms, with no order as to costs.

---