Law enforcement agencies are never expected to ignore evidence of crime in plain view, even outside their jurisdiction. A Directorate of Revenue Intelligence officer investigating a customs case may discover child pornography on a seized device; an income tax officer may encounter evidence of human trafficking during a search. While they must not turn a blind eye, equally, they must not usurp the competent agency’s jurisdiction.
The Financial Action Task Force (FATF) recommends domestic coordination between competent authorities.[1] India’s response is Section 66 of the Prevention of Money Laundering Act, 2002 (PMLA). Section 66(1) empowers the Directorate of Enforcement (ED) to share information to assist specified government agencies. Section 66(2) mandates disclosure to the competent agency where the ED believes a person has committed an offence under any law other than the PMLA.
Though innocuous, Section 66 can shield the ED’s investigations from existential threat. PMLA proceedings cannot commence without a predicate or scheduled offence[2] neither can it survive independently per controlling precedent.[3] This leaves the ED’s cases (civil forfeiture or criminal prosecution) vulnerable when the scheduled First Information Report (FIR) risks discharge, acquittal, or being quashed. Legislative intent puts the ED firmly in the backseat of scheduled offence investigation. Of late, the ED has been attempting to drive.
In a novel combination of anti-money laundering enforcement and actuarial sciences, the ED has invented the ‘Insurance FIR’: when a predicate offence is likely to be quashed, the ED ’shares information’ with another agency under Section 66(2), prompting registration of a fresh FIR. This creates a new predicate offence to ensure that PMLA proceedings survive.
The Delhi High Court deprecated this practice in Uppal Chadha Hi Tech Developers (P) Ltd. v. State (NCT of Delhi), applying the ‘test of sameness’ to find that the ED’s letter under Section 66(2) disclosed no new offence. The Court found that the police had mechanically registered a fresh FIR solely to preserve the ED’s jurisdiction.[4] The Court consequently quashed the Insurance FIR.
Interestingly, the petitioner had pointed out that the ED, while sharing information under Section 66(2), had requested the police to inform it of “action taken, if any, on the basis of information shared”.[5]
Section 66 PMLA is an information-sharing provision. It does not empower the ED to compel the recipient agency to act by diktat or indirectly by ‘requesting’ updates. The indirect approach likely reflects the constitutional reality that public order and police are State subjects.[6]A naked legislative attempt to grant the ED (an agency of the Union) powers to supervise State investigations would face an immediate, cut-and-dry vires challenge.
Courts have previously held that the ED cannot supervise state police, and the Bombay High Court rightly reaffirmed this position in Directorate of Enforcement v. State of Maharashtra.[7] In Ashok Kumar Singh v. Union of India, a former ED officer went to the extent of disclosing that the ED routinely uses Section 66 to pressurise the CBI and other agencies to register FIRs.[8]
The recipient agency’s responsibility is equally important. In Harish Fabiani v. Directorate of Enforcement, the Delhi High Court held that mere disclosure under Section 66(2) does not crystallise a scheduled offence.[9] In V.P. Nandakumar v. Enforcement Directorate, the Kerala High Court held that even where the ED shares information, the recipient agency must conduct its own, independent investigation arriving at its own, informed decision.[10]
This duty of independent application of mind by the recipient agency matters most where a ‘fresh’ FIR repeats allegations in a previous FIR. In T.T. Antony v. State of Kerala, the Supreme Court held that there can be no second FIR for the same offence or occurrence.[11] Later judgments refined this into a ‘test of sameness’.[12] Recipient agencies must apply this test before acting on shared information.
Preserving India’s federal structure does not mean that criminals should escape prosecution because the investigator discovering drug trafficking, child pornography, or terror financing wore the wrong uniform. Inter-agency information sharing is a good thing. The FATF endorses it, India has embraced it, and Section 66 PMLA reflects it. India’s 2024 Mutual Evaluation Report specifically acknowledged effective cooperation and coordination between Indian authorities in anti-money laundering efforts.[13] The ED only needs to learn to respect boundaries.
One cannot expect the ED to self-correct out of deference to India’s federal structure when its primary utility lies in its (alleged) ability to upset it.[14] As debates over political capture rage on, it falls to other investigating agencies and courts to guard against the ED’s insidious creep.
