Bangalore: The Karnataka High Court has ruled that the Enforcement Directorate (ED) cannot act as a “super cop” or independently investigate every suspected offence that comes to its notice. The court said the ED cannot file a private complaint against someone under the Prevention of Money Laundering Act (PMLA) when the appropriate investigating agencies do not act on information shared by it. The ruling also explains the limits of the ED’s powers under Section 66(2) of the PMLA.
Karnataka High Court Restricts ED Powers
Justice M.I. Arun of the Karnataka High Court delivered the ruling while allowing five connected petitions involving the Enforcement Directorate.
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The petitions were filed by K.Y. Nanje Gowda, Y.B. Ashwathanarayana, K.N. Gopala Murthy, Nagesh N. and Dr. Raju Krishna C.
The petitioners had challenged different actions taken by the ED, including its money laundering investigation, seizure-related proceedings, summons and a private complaint filed before a special court in Bengaluru.
The court made it clear that the ED must work within the powers given to it under the PMLA. It cannot assume the powers of other investigating agencies.
Background Of The Land Scam And Job Scam Cases
The case began with allegations of illegal land distribution in Malur, Kolar district, Karnataka. K.Y. Nanje Gowda was the chairman of the Malur Land Grant Committee. A private complainant, K.C. Rajanna, alleged that the committee had illegally recommended the distribution of around 80 acres of land to approximately 38 people.
The complaint alleged that the land was distributed by misusing official positions. Based on these allegations, a criminal case was registered in 2022.
The Enforcement Directorate later treated the alleged land scam as a scheduled offence and started an investigation under the PMLA in 2023.
ED Discovered Alleged Irregularities In KOMUL Recruitment
During its investigation and searches, the ED reportedly found materials suggesting irregularities in the recruitment of employees at the Kolar and Chikkaballapur Milk Union Ltd. (KOMUL). This matter came to be known as the alleged job scam case.
The ED shared the information with the Karnataka Lokayukta Police under Section 66(2) of the PMLA. However, the Lokayukta Police did not initiate criminal proceedings based on the information provided by the ED.
Following this, the ED filed a private complaint before a special court in Bengaluru in September 2024. It sought an investigation into the alleged recruitment irregularities.
Land Scam Case Was Closed Due To Lack Of Sanction
Meanwhile, the local court received a closure report in the land scam case. The complainant challenged the closure report through a protest petition. However, the allegations involved public servants, and the required government sanction to continue the prosecution had not been obtained.
As a result, the trial court dismissed the case for non-prosecution. The petitioners argued that once the original scheduled offence was closed, the ED could not continue its money laundering investigation based on that offence.
They also challenged the ED’s decision to file a separate private complaint in the alleged job scam case.
What Did The Karnataka High Court Say About ED Powers
The High Court examined the powers of the ED under the Prevention of Money Laundering Act, 2002.
It focused on two important legal questions: whether the ED could continue a money laundering investigation after the related scheduled offence was closed, and whether it could file a private complaint when the concerned investigating agency did not act on information shared by it.
ED Cannot File A Private Complaint Under Section 200 CrPC
The court held that the ED is not empowered under the PMLA to file a private complaint under Section 200 of the Code of Criminal Procedure (CrPC), now corresponding to Section 223 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), for a scheduled offence in the circumstances of this case.
According to the court, Section 66(2) of the PMLA requires the ED to share information about other suspected offences with the concerned investigating agency.
It does not give the ED independent authority to take over the investigation of those offences.
The court explained that the ED must exercise only those powers that Parliament has specifically granted under the PMLA.
Court Says ED Cannot Become A ‘Super Cop’
The court strongly rejected the idea that the ED could file a private complaint whenever another government agency decided not to take action.
It observed that allowing such a practice would give the ED powers beyond those provided under the law. The court also referred to the constitutional principle of separation of powers.
It explained that different government institutions have different responsibilities. No single institution should be allowed to place itself above all other authorities. The court stated:
“The ED is not like any other person to file a complaint under Section 200 Cr.P.C./223 of BNSS.”
It further observed that allowing the ED to file private complaints in such situations would permit it to act as a “super cop”, which is not contemplated under the PMLA.
ED’s Powers Under PMLA Are Derivative, Not Original
Another important observation concerned the legal foundation of money laundering investigations. The court explained that the ED’s powers under the PMLA are derivative and not original.
In simple words, the ED’s authority to investigate money laundering depends on the existence of a scheduled or predicate offence.
A predicate offence is the original criminal activity that allegedly generates proceeds of crime.
The court referred to the Supreme Court’s decision in Vijay Madanlal Choudhary and Others v. Union of India and Others while explaining the legal relationship between scheduled offences and money laundering proceedings.
It held that if the predicate offence does not exist, proceedings under the PMLA cannot continue in the circumstances considered in the case.
The court also noted that the land scam case had reached finality after being dismissed for want of the required sanction. Therefore, continuing the ED investigation into alleged proceeds of crime arising from that particular case could not be legally sustained.
Karnataka High Court Allows All Five Petitions
After examining the facts and legal provisions, Justice M.I. Arun allowed all five connected writ petitions. The court also passed important directions concerning the ED’s actions.
Key outcomes of the judgment include:
- All five petitions were allowed.
- The seizure-confirmation order dated June 6, 2024, was quashed insofar as it concerned the petitioner in W.P. No. 18821 of 2024.
- The authorities were directed to return articles seized from that petitioner, if any.
- The ED’s private complaint and related proceedings were set aside to the extent covered by the court’s findings and directions.
- The court rejected the ED’s attempt to independently initiate proceedings for the alleged scheduled offence through a private complaint in the circumstances of the case.
The ruling provides an important clarification about the limits of the Enforcement Directorate’s powers under the PMLA.
FAQs
According to the Karnataka High Court’s November 6, 2026, ruling, the ED cannot file a private complaint under Section 200 CrPC, now Section 223 BNSS, for a scheduled offence in the circumstances considered in this case. Section 66(2) of the PMLA requires it to share relevant information with the concerned agency.
The Karnataka High Court said the ED cannot investigate every suspected offence or file private complaints when other competent investigating agencies do not act on information shared by it. It must exercise only the powers provided under the PMLA.
A PMLA investigation generally depends on the existence of a scheduled offence and alleged proceeds of crime. The Karnataka High Court held that proceedings could not continue in this case after the predicate offence was dismissed and had reached finality.
