The structure of the law against money laundering is bound to throw up perplexing questions about the possible violation of federal principles. One such question has arisen in Tamil Nadu, where the Enforcement Directorate (ED) is trying to find out whether illegal sand mining in the State is due to corruption and if the “proceeds” are being laundered. The Prevention of Money Laundering Act (PMLA) allows the ED to probe the money laundering aspect of crimes registered by the police in various States. Allegations of rampant illegal sand mining, either by extraction in excess of permitted limits or without any permission, are quite common in Tamil Nadu. In ruling that District Collectors are obliged to respond to summonses issued by the ED, the Supreme Court of India has underscored Tamil Nadu’s duty to cooperate with investigations under central laws. However, this may not necessarily mean that the ED’s attempt to assess the likely loss to the exchequer as a result of unchecked mining is within its jurisdiction. A final determination may be required on this. The top court has stayed the operation of a Madras High Court order, which had earlier stayed the summonses to the Collectors. The State government and the District Collectors concerned had filed writ petitions in the High Court against the “usurpation” of the State’s powers by the central agency and the validity of the summonses.
The Court has now described these petitions as thoroughly misconceived and that the High Court’s order was due to “utter misconception of law”. It has cited Section 50 of PMLA on the ED’s power to summon any person to give evidence or produce any record necessary for the investigation. It has noted that the probe is based on first information reports registered in Tamil Nadu, and some of the sections in those cases were scheduled offences under the PMLA. However, it does not take into account the High Court’s reasoning, based on the Court’s verdict upholding the PMLA in Vijay Madanlal Choudhary vs Union of India (2022), that the summonses indicated that the “proceeds of crime” have not been identified at all, and that the probe was nothing more than a “fishing expedition” to find out whether any scheduled offence has been committed. The High Court had cited the 2022 judgment on the point that the ED cannot pursue cases on a notional basis, on the assumption that an offence has been committed. While asking officials to cooperate with an investigation is unobjectionable in itself, it cannot be forgotten that the ED’s low credibility and obvious lack of independence make its actions vulnerable to the criticism of being biased against States ruled by the political adversaries of those in power at the Centre.
