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2025 Supreme(Online)(Mad) 35158
IN THE HIGH COURT OF JUDICATURE AT MADRAS
V.Lakshminarayanan, J
R.K.M.Powergen Private Limited – Appellant
Versus
Enforcement Directorate – Respondent
W.P.No.4297 of 2025|W.P.No.4300 of 2025
For the Appellants/Petitioners: Mr.B.Kumar, Mr.S.Ramachandran
For the Respondents: Mr.AR.L.Sundaresan, Mr.N.Ramesh
The Enforcement Directorate lacks jurisdiction to freeze assets without a predicate offence or established proceeds of crime under the Prevention of Money Laundering Act, 2002.
Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 17(1-A) and 3 - Writ petitions challenging the freezing of fixed deposits and the jurisdiction of the Enforcement Directorate (ED) - The court found that the ED's order to freeze accounts lacked jurisdiction as there were no proceeds of crime and no predicate offence established. The freezing order was deemed improper and set aside. (Paras 25, 39, 60, 63)
(B) Jurisdiction - The court clarified that the ED can only act if there is a predicate offence, which was not present in this case, leading to the conclusion that the investigation by the ED was unwarranted. (Paras 60, 62)
Facts of the case:
Two writ petitions were filed to challenge the freezing of fixed deposits under the PMLA, 2002, by the ED, which was based on allegations of money laundering connected to a coal block allocation. The petitioners argued that the coal allocation was never effective as the land was a reserved forest, and thus, there were no proceeds of crime.
Findings of Court:
The court held that the ED's freezing order was without jurisdiction, as there was no predicate offence or proceeds of crime established, and the order was set aside.
Issues: The primary issue was whether the ED had jurisdiction to freeze the fixed deposits without a predicate offence being established.
Ratio Decidendi: The court ruled that the ED's authority under the PMLA is contingent upon the existence of a predicate offence, which was absent in this case, thus invalidating the freezing order.
Result: Writ petitions allowed.
| Table of Content |
|---|
| 1. factual background of the case (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 2. court's observations and analysis (Para 24 , 25 , 26 , 27 , 28 , 29 , 37 , 38 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61) |
| 3. arguments presented by the petitioner (Para 30 , 31 , 32 , 33 , 34 , 35) |
| 4. ratio decidendi regarding jurisdiction and predicate offence (Para 39 , 62) |
| 5. final conclusion on the writ petitions (Para 63) |
(Order of the Court was made by V.LAKSHMINARAYANAN, J.)
These two writ petitions seek for the following reliefs:
“W.P.No.4297 of 2025: to issue a Writ of Certiorari, to call for the records and to quash the order under Section 17 (1-A) of the PMLA 2002 dated 31.01.2025 freezing the fixed deposits on the file of the 1st respondent and quash the same.”
“W.P.No.4300 of 2025: to issue a Writ of Mandamus, forbearing the respondents from proceeding in investigation since there are no proceeds of crime or in the alternative restrict such investigation to matters connected with the coal block until its cancellation.”
Facts leading to the Writ Petition
2.A private company was incorporated in the year 1991. It was titled as 'R.K.Powergen Private Limited, Chennai' (hereinafter referred to as 'RKPP'). This was a venture by five women entrepreneurs. The primary business of the company was to set up and operate a Bio Mass Power Generation Plant in Karnataka. Subsequently, on 15.12.2004, this company and one Mudajaya Corporation, an entity based out of Malaysia, incorporated another company under the name and style of 'R.K.M.Powergen Private Limited' (hereinafter referred to as 'RKMP'). This entity was set up for the purpose of creating, establishing and operating coal powered electricity generation plant.
3.On 13.07.2005, a joint venture agreement was entered into between Mudajaya and RKPP. In terms of the agreement, Mudajaya agreed to invest in RKMP. Pursuant to this agreement, on 08.02.2007, a shareholders' agreement was entered into between RKPP and Mudajaya. Under this agreement, 26% of the equity shares of RKMP were to be allotted to Mudajaya, or its nominee. The allotment would not be at face value, but at a premium. The premium was to be calculated in line with the Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000.
4.RKMP began preparation for establishing a coal based power generation plant in the State of Chattisgarh. In order to have an uninterrupted supply of coal for this plant, which is the fundamental and basic ingredient, RKMP wrote to the Secretary, Ministry of Coal, Government of India on 24.01.2005, seeking permanent coal linkage. Five months thereafter, this request was renewed with a slight change. In January, 2005, RKMP had proposed to install 5 x 210 MW power plant. This was revised in May, 2005, to a 4 x 300 MW power plant. Taking this proposal forward on 15.12.2005, RKMP wrote another letter to The Additional Secretary (Coal) and Chairman, Standing Linkage Committee, Ministry of Coal, New Delhi, giving details of its coal requirement. RKMP stated that the requirement per annum would be 9.072 million tonnes and the period of operation would be around 50 years. Thereby, specifying its total requirement as 453.6 million tonnes.
5.It is pertinent to point out here, even while making the application for permanent coal linkage, RKMP had stated that in case of allotment of captive coal blocks in its favour, and if such coal block would provide adequate coal supply, it would migrate to the captive coal mining system. Simultaneously, RKMP approached M/s.Power Finance Corporation Limited, a Government of India undertaking, for a project appraisal. The Power Finance Corporation also issued an information memorandum for Phase-I of this project. Phase-I of this project was supposed to install and operate a power generating plant with
