Can ED attach properties sans FIR over scheduled offence? Supreme Court agrees to examine plea

New Delhi: The Supreme Court on Monday decided to examine a significant legal question, whether the Enforcement Directorate possessed powers, under the anti-money laundering law, to attach properties if there is no prior FIR for scheduled offences.

A bench of Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar sought a response from the respondent K Govindaraj and others on a plea filed by the ED.

The central agency approached the apex court challenging an order passed by the Madras High Court, restraining it from taking action against private contractors allegedly involved in illegal sand mining.

Referring to a verdict of the apex court, Additional Solicitor General S V Raju, representing the ED, contended that the central agency could seek a direction from a competent court under CrPC, if the concerned authority declined to register an FIR in the main scheduled offences.

Senior advocate Mukul Rohatgi, appearing for private contractors, vehemently opposed ED’s contention. Rohatgi said the ED was overstepping its jurisdiction by acting without a predicate offence.

On ED’s powers, the bench observed, "Your arms are so strong and long, nobody can purchase them".

The bench said it will issue notice in the matter.

“We are not passing any order,” the bench said.

The court noted the ASG has relied upon first and the second proviso of the Section 5 of the Prevention of Money Laundering Act.

Section 5 of the law empowers the ED to attach properties involved in money laundering cases. Its first provision mandates an FIR for attachment, and the other allows attachment without an FIR if the ED initiates a money laundering probe.

During the hearing, the bench also declined to order a status quo on the provisional attachment orders.

There was a need to give a harmonious interpretation to two provisions of Section 5 of the Prevention of Money Laundering Act, the bench said.

“We are primarily going by the reasoning of the high court that seems to be at variance because the first and second proviso have to be harmonised," the bench said.

Rohatgi insisted, “There cannot be an attachment".

The court scheduled the hearing in the week commencing February 17, 2025.

The issue arises from an ECIR (complaint) filed by the ED against the private contractors based on four FIRs alleging illegal sand mining.

The high court had quashed the ED’s actions, stating that sand mining was not listed as a scheduled offence under the PMLA. The probe agency conducted searches, issued summons, and passed provisional attachment orders on the contractors' properties.