Kerala HC reserves order on CMRL plea against ED probe

Kochi: High court on Monday reserved for Friday its order in an appeal filed by Cochin Minerals and Rutile Ltd (CMRL) challenging a single bench order that allowed the Enforcement Directorate (ED) to proceed with its probe into the alleged financial transactions between the company and Exalogic Solutions, a firm owned by T Veena, daughter of former chief minister Pinarayi Vijayan.

A bench comprising Justices V Raja Vijayaraghavan and K V Jayakumar also recorded the undertaking given by ED that it would not take any coercive steps against the appellants alone — CMRL and its officials — until the judgment is pronounced. Though the court had initially asked ED to maintain the status quo in respect of the proceedings against all the respondents, Zohaib Hossain, special standing counsel for ED, requested that the relief be confined to the appellants alone, which the court accepted. Consequently, ED is not restrained from proceeding against Veena and others, who are not parties to the appeal.

ED’s investigation stems from allegations arising from a report by the Interim Board for Settlement of the Income Tax Department, which stated that CMRL had paid Rs 1.72 crore to Exalogic Solutions, Veena’s company, during the assessment years 2017-18 to 2019-20 and that the payments did not qualify as business expenditure. Accordingly, ED registered an ECIR and issued summons to CMRL officials, which were challenged by the company in a petition filed in 2024.

The company’s case is that ED lacks jurisdiction to investigate the matter in the absence of a valid FIR or complaint relating to a predicate offence recognised as a scheduled offence under the Act. However, the single bench dismissed the petition, holding that the challenge was premature since the summons merely required a person to appear, state the truth, make statements, and produce documents, and that such proceedings did not require the registration of an FIR. Aggrieved by this finding, the company filed the present appeal. Appearing for the appellant, Sidharth Luthra, pointed out that ED had commenced its investigation as early as April 2024, nearly a year before SFIO registered a scheduled offence and without identifying any proceeds of crime under the Act.

Opposing the appeal, additional solicitor general A R L Sundaresan, appearing for the Union govt, submitted that the issuance of summons was only for the purpose of collecting material for initiating proceedings under other relevant provisions of PMLA and, therefore, could not be quashed. He further contended that the initial ECIR was registered on the basis that CMRL’s accounts reflected payments of about Rs 1.72 crore to Exalogic Solutions without any services having been rendered. According to ED, the payments were made illegally to secure favours in connection with the mining activities carried out by CMRL. Consequently, the agency alleged that the amount constituted proceeds of crime generated by the company and transferred to Exalogic.