Karnataka HC Quashes ED Complaint In Alleged Milk-Union Job Scam, Says PMLA Does Not Let ED File Private Predicate-Offence Complaints

The Enforcement Directorate (ED) registered ECIR/BGZO/41/2023 based on allegations in a land-grant case involving alleged irregular recommendations for grants of approximately 80 acres.

During its investigation, the ED discovered material it considered indicative of a separate recruitment-related “Job Scam” at KOMUL.

The original land-scam case was closed after the jurisdictional police filed a closure report and the trial court dismissed the matter for want of sanction to prosecute.

The ED nevertheless continued its PMLA investigation, sought confirmation of seizure, and shared information about the job-scam allegations under Section 66(2) of the PMLA.

After the relevant authority did not initiate proceedings on that information, the ED filed PCR No. 32/2024 under Section 200 Cr.P.C., seeking investigation into alleged offences under the Prevention of Corruption Act and IPC.

The petitioners challenged the continued PMLA proceedings, the seizure-confirmation order, and/or the ED’s private complaint and the cognizance order.

Under Sections 2(1)(u) and 3 of the PMLA, “proceeds of crime” must arise from criminal activity relating to a scheduled offence, and the existence of such proceeds is essential to PMLA action.

Section 66(2) provides for the ED to forward information about contraventions of other laws to the relevant agency; the Court held that this provision does not empower the ED to investigate or prosecute the separate offence itself by filing a private complaint.

The Court relied on *Vijay Madanlal Choudhary v. Union of India*, (2023) 12 SCC 1, particularly paragraphs 148, 149, 151, 152 and 211, on the required connection between a scheduled offence and proceeds of crime, and on the limits of PMLA authorities’ powers.

It also relied on *V. Senthil Balaji v. Deputy Director, Directorate of Enforcement*, 2024 SCC OnLine SC 2626, paragraph 21, for the proposition that a scheduled offence is a sine qua non for proceeds of crime.

The Court treated the land-scam case as having reached finality after dismissal for want of sanction, and held that the ED could not continue investigating proceeds allegedly derived from that case when the predicate proceedings could no longer result in conviction.

It further reasoned that Section 66(2) required the ED to refer information about the separate job-scam allegations to the competent agency, but did not authorize the ED to substitute itself for that agency by filing a private complaint and thereby creating a basis for PMLA proceedings.

The Court considered that permitting such a course would exceed the powers conferred on the ED by the PMLA and undermine the Act’s scheme, which depends on the existence of a predicate offence.

It quashed the seizure-confirmation order in O.A. No. 1132/2024 insofar as it concerned the petitioner in W.P. No. 18821/2024 and directed the return of articles seized from him, if any.

It also quashed the specified ECIR, summons and consequential proceedings, including the show-cause notice, insofar as they concerned the petitioners in W.P. Nos. 8914/2024 and 22460/2025; and quashed PCR No. 32/2024 insofar as it concerned the petitioners in W.P. Nos. 22460/2025, 4630/2025 and 5168/2025.