Telangana High Court upholds ED’s power to issue summons and conduct further investigation even after filing complaint against accused

The Telangana High Court has held that the Enforcement Directorate (ED) has the power to issue summons under Section 50 (2) and (3) of the Prevention of Money Laundering Act ( PMLA) even after a complaint has been filed in a special court. . The court held that such summons did not violate Article 20(3) of the Constitution and that the ED did not need prior permission from the Special Court to conduct further investigations or issue summons in current affairs. He held:

“The power vested in the Enforcement Directorate to conduct further investigation/issue summons for exchange of proceeds of crime arising out of offense under Section 3 of the PMLA cannot be curtailed during the filing of the complaint on the record of the Special Court, since even after filing of the complaint under Section 44 of the PMLA Act, the investigating agency has the power to file any subsequent complaint, regarding further investigation investigation that could be conducted to provide additional evidence against any accused. “

The mere fact that the petitioner is shown as an accused in the complaint does not detract from the power of the investigating authorities to further investigate the complaint with a view to filing a subsequent complaint and issuing summons under section 50 (2) and (3) of the Act. PMLA Act,” added the Court.

CV of Justice Bhaskar Reddy passed the order in a writ petition wherein the summons issued by the ED to a Director of M/s. Farmax India Limited in an ongoing money laundering investigation has been challenged.

Background:

The case stems from an FIR registered in 2013, which led the ED to register an Execution Case Information Report (ECIR) in 2022. The petitioner, a former business owner, was later named as an accused in a complaint filed by the ED before the Special Court under PMLA. After the complaint was heard by the court, the ED summoned the petitioner for further investigation.

The petitioner argued that once the Special Court took cognizance of the case, the ED no longer had the authority to issue subpoenas without the court’s permission. He argued that such action violated his fundamental rights, particularly Article 20(3) of the Constitution, which protects against self-incrimination.

On the other hand, the ED maintained that money laundering is a continuing offense and ongoing investigations are permitted even after a complaint is filed. They argued that the PMLA provides for subsequent complaints based on further investigations and that the ED’s powers are akin to those of a civil court in summoning individuals and collecting evidence.

In its reasoning, the court distinguished between “further investigation” and “reinvestigation.” He held that while further investigation without prior permission is prohibited, further investigation is a statutory right of investigating agencies.

“Considering the difference between further investigation and re-investigation, investigating agencies under the PMLA Act are authorized to conduct further investigation even after filing a report under Section 173 ( 2) Cr.PC and even after acceptance thereof. by the Special Court.

The court further relied on the judgments of the Supreme Court, including Vijay Madanlal Choudhary v. Union of India and State Through Central Bureau of Investigation v. Hemendhra Reddy, to support the conclusion mentioned above.

The court emphasized that the mere issuance of a summons does not violate Article 20(3), as duress in the context of self-incrimination must amount to legal duress. He clarified that constitutional protection applies when a defendant is compelled to make a statement, not when he or she is simply ordered to provide evidence or produce documents.

Additionally, the court noted that Section 44 of the PMLA permits the filing of subsequent complaints based on further investigations. She interpreted this provision as allowing the ED to continue its investigative activities even after the filing of an initial complaint.

Thus, the writ was dismissed, upholding the validity of the actions taken by the ED.

WRITTEN PETITION No. 3681 of 2024

Petitioner’s Advocate: T Bala Mohan Reddy

Counsel for the respondents: Gadi Praveen Kumar Dy. Solicitor General of India

Click here to read/download the order