Madras High Court Rebukes ED: ‘Not a Drone to Attack at Will, Nor a Super Cop Without Limits’
In a strongly worded verdict underscoring the constitutional limitations of investigative agencies, the Madras High Court has made critical observations regarding the powers and conduct of the Enforcement Directorate (ED).
The Court emphasised that the ED cannot operate like a “drone” capable of striking arbitrarily at targets of its choosing, nor can it act as a “super cop” investigating all manner of wrongdoing beyond its legal mandate.
Background of the Case
The observations were made by a division bench comprising Justice M.S. Ramesh and Justice V. Lakshminarayanan while hearing a petition filed by RKM Powergen Private Limited, a Chennai-based power company.
The firm had approached the High Court challenging a freezing order issued by the ED on January 31, 2025, which froze fixed deposits worth ₹901 crore belonging to the company. The action was taken under the Prevention of Money Laundering Act (PMLA).
The ED’s action stemmed from an FIR registered by the Central Bureau of Investigation (CBI) in 2014, regarding the allocation of coal blocks for a power project in Chhattisgarh. However, in 2017, the CBI had filed a closure report, stating that it had not found any irregularities in the coal block allocation.
Later, the CBI court rejected the closure report and directed further investigation. In 2023, the CBI filed a supplementary final report, indicating that it had now uncovered sufficient evidence warranting prosecution under the Indian Penal Code (IPC) and the Prevention of Corruption Act.
Following this, the ED conducted searches at premises linked to the directors and holding companies of RKM Powergen and proceeded to freeze ₹901 crore in fixed deposits. The company challenged this move, leading to the High Court’s intervention.
Key Observations by the Court
In its ruling, the High Court set aside the ED’s freezing order, noting that the agency had exceeded its statutory boundaries. The bench focused heavily on the interpretation of Section 66(2) of the PMLA, which outlines how the ED should act upon discovering potential violations of other laws during its investigations.
According to the court:
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If the ED, while conducting a probe under the PMLA, discovers possible violations of other laws, it must inform the appropriate law enforcement authority.
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Only if that authority takes cognisance, initiates an investigation, and registers a complaint, can the ED then investigate the financial aspects under PMLA, provided there is a clear link to “proceeds of crime.”
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The court emphasised that ED cannot proceed “suo motu”—that is, on its own accord—in the absence of a predicate offence, which refers to an underlying or scheduled offence under PMLA that generates illicit financial gains.
A Striking Analogy: Limpet Mine and the Ship
In a powerful analogy, the bench likened the ED’s power under the PMLA to a limpet mine—a weapon that must attach to a larger object to function.
“The essential ingredient for the ED to seize jurisdiction is the presence of a predicate offence. It is like a limpet mine attached to a ship. If there is no ship, the limpet cannot work. The ship is the predicate offence and the proceeds of crime,” the court stated.
The bench further remarked:
“The ED is not a loitering munition or drone to attack at will on any criminal activity.”
This metaphorical language served to reinforce the idea that the ED’s actions must be tethered to specific legal triggers—namely, the existence of a scheduled criminal offence and identifiable proceeds of crime derived from it.
No Basis for ED Action in This Case
The Court also scrutinised the documentary evidence and concluded that no formal complaint or criminal case had been registered against RKM Powergen or its directors related to the specific allegations that triggered the ED’s action. It stated that the agency cannot function autonomously, venturing into domains meant for other agencies.
“The ED is not a super cop to investigate anything and everything which comes to its notice,” the bench declared. “There should be a criminal activity which attracts the schedule to PMLA, and on account of such criminal activity, there should have been proceeds of crime.”
