When the Enforcement Directorate hands the State a report under Section 66(2), that report is the preliminary enquiry — and the police must register the FIR
Justice A. Badharudeen set aside the Government's decision to appoint a Special Investigation Team to enquire instead of registering a case, and directed the Vigilance and Anti-Corruption Bureau to register an FIR forthwith.
Section 66(2) of the Prevention of Money Laundering Act, 2002 says that if the Director of Enforcement forms the opinion, on material in his possession, that the provisions of any other law are being contravened, he shall share the information with the concerned agency for necessary action. What the concerned agency must then do with it is the question the Kerala High Court framed at the admission hearing of this writ petition and answered on 9 October 2026.
The question as framed was this: when information under Section 66(2) has been passed by the Enforcement Directorate to the State Police for registering an FIR for scheduled offences found during the Directorate's own investigation, does the State Police have any option other than registering the FIR, or may it go for a preliminary enquiry first?
The answer is that it must register, and the Government's decision to do something else has been set aside as illegal.
Who brought the petition, and what the Government did instead
The petitioner is Adv. K.M. Shajahan, a lawyer and social activist who held the post of Additional Private Secretary to the late V.S. Achuthanandan when he was Leader of the Opposition, and who later became Chief Minister of Kerala. He filed the petition as a citizen, aggrieved by what he said was inaction by the State in not registering an FIR on the information the Enforcement Directorate had forwarded, despite two applications he had made to the Vigilance Director seeking exactly that.
What happened in the meantime was that the Director General of Police issued an order appointing a Special Investigation Team, headed by Vikraman P., IPS, Superintendent of Police, Crime Branch, Kozhikode, to conduct a preliminary enquiry into the allegations — and by doing so refused the demand in those two applications.
Counsel for the petitioner argued that where a report under Section 66(2) has been forwarded to the State Police Chief recording a preliminary finding that the persons named had committed an offence under Section 13(1)(b) of the Prevention of Corruption Act, 1988, the Government has no option but to register an FIR, and that the preliminary enquiry ordered instead was contrary to the mandate of law. His submission was that the decision to go for a preliminary enquiry was made with an ulterior motive to save the corrupt. The Standing Counsel for the Directorate took the same position.
The Advocate General, Sri K. Jaju Babu, appearing for the State, the State Police Chief, the Vigilance Director and the Additional Director General of Police (Crime Branch), argued the contrary: that merely on receipt of information under Section 66(2) the State is not duty-bound to register an FIR, that it has the option of a preliminary enquiry to ascertain the truth of the allegations, and that none of the Supreme Court's decisions lays down a candid ratio that the option is completely curtailed.
The authorities on both sides
Both sides placed a substantial body of authority before the Court. For the petitioner and the Directorate: Vijay Madanlal Choudhary v. Union of India, the Constitution Bench in Lalita Kumari v. Government of U.P., Charansingh v. State of Maharashtra, State of Karnataka v. T.N. Sudhakar Reddy, Pradeep Nirankarnath Sharma v. State of Gujarat, State of Karnataka v. Channakeshava H.D., a Madras High Court Division Bench decision in K. Athinarayanan v. State said to have directed registration of an FIR without a preliminary enquiry on precisely such Section 66(2) information, and V.S. Achuthanandan v. R. Balakrishna Pillai.
For the State: State of Jharkhand v. Shiv Shankar Sharma, B. Singh v. Union of India, a Single Bench decision of the Kerala High Court in Nandakumar V.P. v. Deputy Director, Directorate of Enforcement for the proposition that disclosure by the Directorate does not exempt notified government agencies from undertaking an independent evaluation of whether any statutory provision has been contravened, and the Delhi High Court in Harish Fabiani v. Enforcement Directorate.
Twelve propositions
The Court summarised the legal position in twelve numbered points, and they repay reading as a whole because they do not simply abolish the preliminary enquiry.
A preliminary inquiry is not mandatory if the information received discloses the commission of a cognizable offence; if one is conducted, its scope is limited to determining whether the information prima facie reveals a cognizable offence and does not extend to verifying its truthfulness. The words “may be made” in Lalita Kumari underscore that the inquiry is discretionary, not a mandatory obligation. Following Managipet, the desirability of a preliminary inquiry in corruption cases vests no right in the accused to demand one. Once the officer recording the FIR is satisfied with the disclosure, he may proceed without any inquiry, on credible information. There are no fixed parameters for such an inquiry, so any formal or informal collection of information disclosing a cognizable offence to the satisfaction of the person recording the FIR is sufficient. A preliminary inquiry may not be necessary at all where the officer already possesses information disclosing a cognizable offence. Since a preliminary inquiry in corruption cases is not made mandatory by the Code, the Prevention of Corruption Act or even the CBI Manual, a court cannot direct one, which would amount to stepping into the legislative domain. Even when a preliminary inquiry is begun, it must stop as soon as enough material has been collected disclosing a cognizable offence.
The tenth proposition is the State's own point, preserved: the disclosure by the Enforcement Directorate would not exempt the notified government agencies from undertaking an independent evaluation to ascertain whether the accused has contravened any statutory provisions.
The eleventh is where the case turns. The facts and circumstances of each case are decisive. Where the information passed by the Directorate under Section 66(2) itself discloses the commission of a cognizable offence, that information “occupies the pew of preliminary enquiry report” — it is an adequate substitute for one. In such a case registration of the FIR becomes mandatory and the State agency has no option to go for a preliminary enquiry, particularly another preliminary enquiry, because the scope of such an enquiry is not wide enough to go beyond the Section 66(2) information itself.
The twelfth restates the rule from Pradeep Nirankarnath Sharma: the scope of a preliminary inquiry is limited to situations where the information received does not prima facie disclose a cognizable offence but requires verification; where it clearly discloses one, the police have no discretion to conduct a preliminary inquiry before registering an FIR. Lalita Kumari creates no absolute rule that a preliminary inquiry must precede every FIR; it reaffirms that the police are obliged to register when the information prima facie discloses a cognizable offence.
The rule, and its exception
The Court then put it in a nutshell. When information under Section 66(2) is forwarded for registering an FIR, based on inputs in an investigation initiated by the Directorate and disclosing the commission of a scheduled offence for which only the State Police is competent to register, it is obligatory — a must — for the State Police to register an FIR for the offences disclosed.
That obligation is subject to one exemption, and the Court spelt it out rather than leaving it implied. Disclosure by the Directorate does not exempt the notified agencies from an independent evaluation where the Section 66(2) information lacks the materials to register an FIR, that is, where it does not disclose inputs sufficient for registration. The exemption therefore turns on the facts of each case, and the room for adding to the Section 66(2) information by a further enquiry without registering an FIR is narrow.
What the information contained
The judgment reproduces substantial parts of the Directorate's communication, and it is important to be precise about their status: these are the Directorate's own findings and assertions as recorded in the information it sent to the State, reproduced in a judgment which directs that a case be registered and investigated. Nothing in them has been tested at a trial, no court has returned any finding of guilt, and the registration of an FIR is the start of an investigation rather than the end of one.
On that footing, the information asserts payments by Cochin Minerals and Rutile Limited to Smt. Veena T, daughter of the then Chief Minister of Kerala, and to her company M/s Exalogic Solutions, which the Directorate puts at a total of ₹3.28 crore on its verification of bank statements. It asserts that monthly retainers were paid without invoices for an initial period and, in the Directorate's characterisation, in the absence of actual services or any ERP implementation; that when examined under Section 50 of the PMLA she could not produce source codes, agreements, reports, emails or deliverables to substantiate that IT consultancy services were delivered; and that a former Chief Financial Officer admitted under oath that she continued to be paid for the public relations avenues she brought. The information fastens on the words of the engagement letter of 30 December 2016, which recorded that she was being hired “considering the infrastructure and public relations avenues she and her establishment have”.
The information also refers to a notebook seized during the investigation, to entries said to disclose local and overseas electronic transactions handled through a UAE-based associate, to foreign currency figures, and to a statement recorded under Section 17 of the PMLA about cash routed through a hawala agent on five occasions. It names a former Minister for Public Works, Tourism and Youth Affairs in connection with those entries, and records the Directorate's view that systematic entries of that kind, where no official source of income exists, “needs separate investigations to prove the same under the Prevention of corruption Act” — which is, in terms, a statement that the matter requires investigation and not that anything has been established.
Why the earlier proceedings were no bar
The State's further answer was that earlier revision petitions had been dismissed. The Court held that those proceedings and the orders of this Court and of the Supreme Court in them would not stand in the way, because the findings there would not operate as a bar to acting on the Directorate's findings, which were communicated to the Director General of Police as information with a request to register an FIR.
The reason given is factual rather than technical. Apart from the notebooks and diaries, the information passed to the Director General contains materials including statements of many witnesses and suspected persons; and most importantly, many of the materials referred to in it were collected after the dismissal of those revision petitions, and in fact led to the passing of the information under Section 66(2). Earlier proceedings therefore could not stand in the way of an effective investigation based on sufficient materials disclosed in the information.
The directions
The writ petition was allowed. The Government's decision to form a Special Team to conduct an enquiry without registering an FIR was found illegal in the facts of the case and set aside.
The Director, Vigilance and Anti-Corruption Bureau, Thiruvananthapuram, was specifically directed to register an FIR based on the information furnished under Section 66(2) of the PMLA for the offences disclosed in it under the Prevention of Corruption Act, against the suspected persons specifically mentioned in it, forthwith and without any delay; to investigate the allegations through competent officers of the Bureau; and to file the final report without much delay.
The Court also removed the practical obstacle to that happening. The Director General of Police, or the head of the Special Investigation Team, having custody of the Section 66(2) information, was ordered to hand it over to the Vigilance Director forthwith, and the Vigilance Director to obtain it for the purpose of registering the FIR and proceed in accordance with law. The Directorate was directed to forward all necessary documents to him forthwith, and he was left free to call for any other documents required for the investigation after registration. Finally, the Advocate General was specifically directed to communicate the order to all concerned, forthwith and without fail.
The appendix to the judgment sets out the trail the petitioner laid before coming to court: his petitions to the State Police Chief and the Vigilance Director, both acknowledged on 22 September 2026; an order of the Interim Board for Settlement of June 2023; an investigation report of November 2024; a complaint of the Serious Fraud Investigation Office pending before the District Court at Ernakulam, with cognizance taken in April 2025; a press release of the Enforcement Directorate of August 2026; and the Director General's order of 23 September 2026 appointing the Special Investigation Team — the order which, a fortnight later, was set aside.
Nothing in the judgment decides whether any of those allegations is true. What it decides is who must now look into them, and that the State was not entitled to appoint itself to look into them first.