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IN THE HIGH COURT OF JUDICATURE AT MADRAS
P.N. PRAKASH, A.A. NAKKIRAN, JJ.
R.K.M. Powergen Private Ltd. represented by its Director T.M. Singaravel, Chennai - Appellant
Versus
The Assistant Director/Officer on Special Duty Directorate of Enforcement, Chennai & Another - Respondent
W.P. No. 24700 of 2021 & W.M.P. No. 25993 of 2021
Decided On : 08-06-2022
Money Laundering - Jurisdiction of Investigation - Prevention of Money Laundering Act, 2002 - Section 3, Section 2(u) - Summary of Acts and Sections: The court discussed the jurisdiction of the Enforcement Directorate to investigate alleged money laundering in respect of offences under the Customs Act, 1962 and the Foreign Exchange Management Act, 1999. The court held that in the absence of a predicate offence under the Customs Act, 1962, and the alleged offence under the Foreign Exchange Management Act, 1999 not being a predicate offence under the Prevention of Money Laundering Act, 2002, there cannot be any offence of money laundering under Section 3 of the PML Act, 2002 qua these offences. The court issued a writ of mandamus restraining the Enforcement Directorate from exercising its powers under the PML Act, 2002, qua the investigation of alleged money laundering in respect of these offences alone. The court clarified that it did not interdict the investigation pertaining to the allegations of money laundering qua the predicate offences forming the subject matter of FIR No.RC 219 2014E 0018 which is being investigated by the CBI. These investigations will proceed in terms of the directions/orders of the Supreme Court in Manohar Lal Sharma v Union of India W.P. (C) No. 643 of 2012, unhindered, and uninfluenced by any of the observation(s)/direction(s) made in this order.
Fact of the Case:
The petitioner, RKM Company, sought a writ of mandamus forbearing the respondents from investigating under the Prevention of Money Laundering Act in Ref.No.ECIR/01/CEZO-11/PMLA/2015 against the petitioner company, as there is no proceeds of crime arising out of coal block allotted in the State of Chhattisgarh on 23.01.2008 which was cancelled on 29.07.2014, from which no coal was excavated, as it would be without jurisdiction.
Finding of the Court:
The court held that in the absence of a predicate offence under the Customs Act, 1962, and the alleged offence under the Foreign Exchange Management Act, 1999 not being a predicate offence under the Prevention of Money Laundering Act, 2002, there cannot be any offence of money laundering under Section 3 of the PML Act, 2002 qua these offences. The court issued a writ of mandamus restraining the Enforcement Directorate from exercising its powers under the PML Act, 2002, qua the investigation of alleged money laundering in respect of these offences alone.
Issues: The main issue was the jurisdiction of the Enforcement Directorate to investigate alleged money laundering in respect of offences under the Customs Act, 1962 and the Foreign Exchange Management Act, 1999.
Ratio Decidendi: The court held that in the absence of a predicate offence under the Customs Act, 1962, and the alleged offence under the Foreign Exchange Management Act, 1999 not being a predicate offence under the Prevention of Money Laundering Act, 2002, there cannot be any offence of money laundering under Section 3 of the PML Act, 2002 qua these offences. The court issued a writ of mandamus restraining the Enforcement Directorate from exercising its powers under the PML Act, 2002, qua the investigation of alleged money laundering in respect of these offences alone.
Final Decision: The court issued a writ of mandamus restraining the Enforcement Directorate from exercising its powers under the PML Act, 2002, qua the investigation of alleged money laundering in respect of offences under the Customs Act, 1962 and the Foreign Exchange Management Act, 1999 alone. The court clarified that it did not interdict the investigation pertaining to the allegations of money laundering qua the predicate offences forming the subject matter of FIR No.RC 219 2014E 0018 which is being investigated by the CBI. These investigations will proceed in terms of the directions/orders of the Supreme Court in Manohar Lal Sharma v Union of India W.P. (C) No. 643 of 2012, unhindered, and uninfluenced by any of the observation(s)/direction(s) made in this order.
JUDGMENT
(Prayer: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of mandamus forbearing the respondents from investigating under the Prevention of Money Laundering Act in Ref.No.ECIR/01/CEZO-11/PMLA/2015 against the petitioner company, as there is no proceeds of crime arising out of coal block allotted in the State of Chhattisgarh on 23.01.2008 which was cancelled on 29.07.2014, from which no coal was excavated, as it would be without jurisdiction.)
P.N. Prakash, J.
1. This is a petition under Article 226 of the Constitution of India seeking a mandamus forbearing the respondents from investigating Ref.No.ECIR/CEZO- 1/PMLA/2015 under the Prevention of Money-Laundering Act, 2002 (for brevity “the PML Act”) on the premise that the investigation is without jurisdiction.
2 The undisputed facts are as under:
i. Five women entrepreneurs incorporated a company which went by the name of “R.K. Powergen Pvt. Ltd., Chennai” (for brevity “RK Company”) and established a bio-mass power generation plant in Hiriyur, Karnataka sometime in 1991. The plant is stated to be functional as on date. On 15.12.2004, RK Company and Mudajaya Corporation, a Malaysian company (for brevity “Mudajaya”), joined hands and incorporated R.K.M. Powergen Pvt. Ltd., the petitioner herein (for brevity “RKM Company”) under the Companies Act, 1956, having its registered Office in Chennai, with the object of setting up coal-based power plants in India.
ii. On 13.07.2005, RK Company and Mudajaya entered into a joint venture agreement, in and by which, Mudajaya agreed to invest in the shares of RKM company at a premium.
iii. While so, on 13.11.2006, the Ministry of Coal invited applications for allotment of 38 coal blocks stating that a preferential allotment will be given to power plants based on coal as feed as well to cement and steel sectors. The said advertisement stated that no land would be allotted as such, but only an area would be designated for excavation of coal. The coal so excavated was to be used for captive consumption for the power generation plant that was to be set up by the allottee(s).
iv. In response to the said advertisement, RKM Company submitted an application, dated 13.11.2006, for allotment of a coal block in the State of Chhattisgarh.
v. On 08.02.2007, a shareholders' agreement was signed by RK Company, and Mudajaya, under which, it was agreed that there would an allotment of 26% of equity shares of RKM Company either to Mudajaya or to its nominee at a premium. The premium was calculated under the Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations, 2000, a threshold requirement for receipt of foreign investment into India.
vi. In 2007, RKM Company began establishing a power generation plant with coal as feed in Ucchpinda Village of Chhattisgarh. Coal for this power project was to be purchased via coal linkage from Coal India Limited and other subsidiaries of the Central Government.
vii. On 23.01.2008, the Ministry of Coal issued an order allotting Fatehpur East Coal Block in Chhattisgarh, jointly to RKM Company and four other companies, viz., (1) Green Infrastructure Pvt. Ltd., (2) Visa Power Ltd., (3) JLD Yavatmal Energy Ltd. and (4) Vandana Vidyut Ltd. As per the requirements of the Central Government, these five entities were required to join together and float one common entity for the purpose of harnessing coal from Fatehpur East in Chhattisgarh and use the coal so harnessed for their power plants.
viii. Accordingly, RKM Company and the other four entities joined together and floated an entity called “Fathepur East Coal Pvt. Ltd.” and furnished a bank guarantee for Rs.100 crores in favour of the Central Government in this regard.
ix. The jubilation of Fatehpur East Coal Pvt. Ltd. in getting the coal block allotment was short-lived because when they went and inspected the place that was allotted to them, they were shocked to fin
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