On December 19, Justice PN Prakash and Justice Anand Venkatesh of the Madras High Court's division bench dismissed a company's petition challenging the actions taken by the Enforcement Directorate under the Prevention of Money Laundering Act. They noted that the two requirements to begin an investigation by the ED are I commission of a predicate offence (which was a schedule offence) and (ii) prima facie evidence to show that such a schedule offence has generated proceeds of crime.

The court noted that once these requirements are met and it is satisfied that the Directorate is conducting the investigation within its authority, it will not be able to act as a "stumbling block" to the investigation's progress.

We have to satisfy ourselves as to whether the respondent is acting within the four corners of PML Act and not misusing the powers of investigation. If we are convinced that the investigation taken up by the respondent 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 conducted by the respondent.

According to Southern Agrifurane Industries Private Ltd, the Directorate was working outside of its authority under the Prevention of Money Laundering Act, hence the court should refrain from pursuing an Enforcement Case Information Report (ECIR).

The court also discovered that Section 420 was in fact violated. According to the court, the petitioner made false statements that led the authorised dealer to transmit valuable foreign currency, and when these remittances end up in the hands of the petitioner Company's fully owned subsidiaries outside of India, they become the profits of crime. As a result, it was claimed that they had stolen substantial sums of money.

Therefore, the court found no justification to intervene with the inquiry and rejected the petition because the basic conditions for the ED to begin an investigation were satisfied.

Case Title: Southern Agrifurane Industries Private Ltd., v. The Assistant Director, Directorate of Enforcement
Case No: W.P.No.28140 of 2022