ED's attachment of fixed deposits set aside for failing to prove proceeds of crime linkage

The HC allowed the writ petition challenging ED's attachment of fixed deposits. The court held that mere existence of statutory appeal remedy does not render writ petition non-maintainable, distinguishing between maintainability and entertainability per SC precedent. Regarding ED's jurisdiction, the court ruled that ED cannot investigate matters not covered by the charge sheet unless the appropriate investigating agency registers a complaint based on ED's intimation. The essential ingredient for ED jurisdiction is presence of a predicate offence and proceeds of crime linked thereto. Since ED failed to demonstrate that the attached fixed deposits (created in January 2025) were proceeds of crime from the coal allocation scam, and could not trace proceeds of crime to the predicate offence despite decade-long investigation, the attachment order suffered from jurisdictional error. The court emphasized ED lacks jurisdiction to proceed on "phantoms" from charge sheets without establishing clear linkage between proceeds of crime and predicate offence. The impugned attachment order was set aside.

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ISSUES:

1. Whether the writ petition challenging the freezing order under Section 17(1-A) of the Prevention of Money Laundering Act, 2002 (PMLA) is maintainable despite the existence of alternative statutory remedies.
2. Whether the Enforcement Directorate (ED) has jurisdiction to investigate and freeze properties in the absence of a predicate offence under PMLA.
3. Whether the impugned freezing order under Section 17(1-A) of PMLA is valid when the alleged proceeds of crime are not established or linked to the predicate offence.
4. Whether "round tripping" allegations and other financial irregularities fall within the jurisdiction of ED under PMLA or are matters under Foreign Exchange Management Act (FEMA) or Customs Act.
5. The scope and limits of jurisdictional error in the context of orders passed under PMLA and the principles governing judicial review of such orders.
6. Whether the ED can expand its investigation beyond the predicate offence without a fresh complaint or new material.

RULINGS / HOLDINGS:

1. The writ petition is maintainable under Article 226 of the Constitution despite the availability of alternative statutory remedies, as "maintainability" and "entertainability" are distinct concepts, and the existence of an alternative remedy does not oust the High Court's jurisdiction to entertain a writ petition.
2. The ED lacks jurisdiction to investigate or freeze properties under PMLA in the absence of a predicate offence; the "terminus a quo" for ED's jurisdiction is the existence of a predicate offence and "proceeds of crime."
3. The impugned freezing order under Section 17(1-A) of PMLA is set aside as the authority failed to record a reasoned conclusion that the fixed deposits were "the result of proceeds of a crime," rendering the order a jurisdictional error and void ab initio.
4. Allegations of "round tripping" and Customs Duty irregularities fall outside the scope of PMLA investigation as they pertain to FEMA and Customs Act, which are not scheduled offences under PMLA; therefore, ED cannot proceed under PMLA on these grounds.
5. Jurisdictional error includes errors of law and fact that are decisive, such as acting without jurisdiction or ignoring material facts; such errors render the decision "no decision at all" and liable to be quashed.
6. ED cannot expand its investigation beyond the predicate offence without a fresh complaint or new material; reliance on ancillary or unrelated allegations without predicate offence is impermissible.

RATIONALE:

1. The Court applied the Supreme Court's clarification distinguishing "maintainability" and "entertainability" of writ petitions under Article 226, emphasizing the plenary nature of writ jurisdiction and discretion in entertaining petitions despite alternate remedies.
2. The statutory framework under PMLA, particularly Sections 2(1)(p), 2(1)(u), 3, and 17, was examined to establish that ED's powers to investigate and attach property are contingent upon the existence of a predicate offence and proceeds of crime.
3. The Court relied on the Supreme Court's decision in Vijay Madanlal Choudhary & others v. Union of India & others, which held that money laundering investigation under PMLA requires a predicate offence and that mere existence of a crime does not automatically trigger PMLA jurisdiction.
4. The Court referred to authoritative principles on jurisdictional error from the High Court of Australia and the Supreme Court of India, including the distinction between want of jurisdiction and irregular exercise of jurisdiction, and the modern approach that all errors of law are jurisdictional errors warranting judicial review.
5. The Court noted that the ED's impugned order merely recited statutory provisions without a reasoned conclusion linking the frozen fixed deposits to proceeds of crime, constituting a jurisdictional error as per the redefined test of jurisdictional error.
6. The Court emphasized that ED's role is not that of a "super cop" with unfettered powers to conduct roving enquiries; it must confine itself to investigating offences listed in the schedule to PMLA and predicate offences with established proceeds of crime.
7. The Court further held that the ED must notify and coordinate with appropriate agencies for offences outside PMLA's scope and cannot proceed suo motu without a complaint or fresh material, consistent with Section 66(2) of PMLA.
8. In light of the CBI's charge sheet and the Supreme Court's directions in the coal allocation scam case, the Court held that ED's jurisdiction is limited to proceeds of crime traceable to the predicate offence and not to ancillary or unrelated allegations.

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