The High Court of Karnataka has ruled that the Enforcement Directorate cannot continue investigations into alleged money laundering if the underlying predicate offence has been closed, marking a significant limitation on the federal agency’s investigative reach. Delivering the judgment on November 6, 2026, Justice M.I. Arun declared that the agency lacks the authority to act as a "super cop" and cannot initiate independent prosecutions via private complaints when jurisdictional police or other competent authorities have opted not to pursue criminal charges.

The ruling came in response to a batch of petitions filed by several individuals, including K.Y. Nanje Gowda, Y.B. Ashwathanarayan, and Dr. Raju Krishna C., who sought to challenge ongoing proceedings initiated by the Enforcement Directorate. The petitioners had been entangled in investigations related to a "Land Scam Case" and a subsequent "Job Scam Case" concerning recruitments at the Kolar and Chikkaballapur Milk Union Ltd. The court ordered the closure of the Enforcement Case Information Report (ECIR) registered in late 2023, the quashing of related private complaints, and the immediate return of all articles seized during the agency’s searches.

The core of the dispute revolved around the survival of money laundering probes after the collapse of the primary criminal case. In the Land Scam Case, the initial private complaint was dismissed by the trial court due to a lack of necessary government sanction, effectively ending the possibility of conviction. The Enforcement Directorate had maintained that even if the predicate offence was closed on technical grounds, it retained the power to investigate money laundering independently. The High Court rejected this, emphasizing that the existence of a scheduled offence is the foundational requirement for any prosecution under the Prevention of Money Laundering Act.

Judicial Limits on Agency Authority

Justice Arun highlighted that the power of the Enforcement Directorate under the Prevention of Money Laundering Act is strictly derivative rather than original. The court observed that the agency is not empowered to act upon a standalone suspicion of money laundering without a formal investigation or complaint regarding a scheduled offence having been registered by a primary law enforcement agency.

"The ED is not a super cop to investigate anything and everything which comes into its notice," the court stated in its judgment. It further elaborated that where the agency uncovers evidence of other potential crimes, its statutory duty is limited to sharing that information with the relevant local police or authority as per Section 66(2) of the Act . The bench underscored that the legislature did not intend for the agency to bypass these state-level institutions.

Regarding the agency’s practice of filing private complaints under Section 200 of the Code of Criminal Procedure or Section 223 of the Bharatiya Nagarik Suraksha Sanhita when local authorities failed to act on shared information, the court was equally critical. Justice Arun noted, "The Act does not expressly empower the ED or the authorities under the PMLA to prefer private complaint in respect of a scheduled offence and on the strength of it, thereafter, take up investigation against the accused therein under the provisions of PMLA."

Integrity of the Federal Structure

The court’s decision also emphasized the constitutional necessity of checks and balances within the criminal justice system. By asserting that the agency cannot assume the functions of the state police or attempt to supersede the decisions of sanctioning authorities, the ruling clarifies the jurisdictional boundaries of central investigative bodies. The court reasoned that if the agency were allowed to file private complaints after other government authorities deemed it inappropriate to proceed, it would fundamentally alter the spirit of the legislation, which requires the existence of a predicate offence to prevent abuse of power.

"Allowing the ED to prefer a private complaint, when the other government authorities deem it inappropriate to initiate any proceedings against anybody, will amount to permitting the ED to act as a super cop and it goes against the philosophy of the Act which requires a predicate offence to be in existence," the court noted.

The decision serves as a rebuke to the expansion of investigative actions in the absence of a live criminal case. By quashing the ECIR and the pending private complaint in the trial court, the High Court has underscored that the agency cannot maintain investigations based on "technical closure" of predicate offences. The court’s order mandates that all articles seized from Y.B. Ashwathanarayan during the investigation must be returned, as the legal basis for their retention has now evaporated.

Final Disposition of Proceedings

The operative order explicitly quashes the proceedings in PCR No. 32/2024 pending before the Additional City Civil and Sessions Judge in Bengaluru, insofar as they pertain to the petitioners. All consequential actions, including the show-cause notice issued by the Adjudicating Authority on February 16, 2024, have been rendered void. The court effectively ended the legal exposure of the petitioners in relation to these specific matters, emphasizing that the Enforcement Directorate must adhere to its defined role as a coordinating body for combating money laundering rather than an independent authority tasked with law and order functions traditionally reserved for local police forces.

The ruling reinforces that the agency's primary function—attachment, adjudication, and confiscation of proceeds of crime—is inextricably linked to the successful prosecution of the predicate criminal activity. With the primary complaints in the Land Scam and Job Scam cases lacking the necessary legal backing or sanction, the Enforcement Directorate’s path to further investigation is now legally blocked.