The Karnataka High Court has affirmed the Enforcement Directorate’s statutory authority to share financial intelligence with police for investigations under the Unlawful Activities (Prevention) Act, 1967, when such data reveals potential threats to national security. This ruling clarifies the scope of inter-agency coordination under the Prevention of Money Laundering Act and sets a critical precedent for cases involving clandestine foreign funding of extremist networks.
Background & Facts
The Dispute
Criminal Petition No. 8401 of 2026 and Criminal Petition No. 8417 of 2026 were filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking quashing of FIR Crime No. 202 of 2026, registered by Kothanur Police Station on 11.06.2026. The FIR invokes offences under Sections 318(4), 335(a)(ii), 336(3), 238, 61(2), and 190 of the Bharatiya Nyaya Sanhita, 2023, and Sections 13, 17, and 18 of the Unlawful Activities (Prevention) Act, 1967 (UAPA). The petitioners, six individuals and an entity named The Timothy Initiative (USA), allege that the FIR was illegally registered based on an unauthorized communication from the Directorate of Enforcement (ED), and that the invocation of UAPA is baseless and politically motivated.
Key Facts
- On 18.04.2026, accused No.2, Micah Mark, was intercepted at Kempegowda International Airport, Bengaluru, in possession of 24 international debit cards issued by Truist Bank, USA.
- The cards were all printed under the generic name "Santosh Kumar" and region-coded as "NE-1", "NE-2", "Southern Region-1", etc., circumventing Know Your Customer (KYC) norms.
- The ED conducted search and seizure operations on 18.04.2026 and 19.04.2026 at premises of the accused under Section 37 of the Foreign Exchange Management Act (FEMA), 1999.
- Analysis of seized documents revealed that over 900 such debit cards had been distributed across India over several years.
- Between November 2025 and April 2026, approximately ₹92.55 crores (USD 99,95,240) were withdrawn from ATMs across India using these cards.
- Between January 2024 and March 2026, ₹40 crores were withdrawn in Left Wing Extremism (LWE)-affected regions including Dhamtari (Chhattisgarh), Bastar, and Assam.
- A single ATM in Vijay Plaza, Bastar Road, Dhamtari, recorded 3,200 cash withdrawals of ₹10,000 each using just two cards.
- Accused No.3, Ajit Varghese Mathai, is alleged to be the Finance Head of The Timothy Initiative in India, operating through shell entities Lead LLP and Crosswise LLP.
- Accused No.1, Jonathan S. Rajan, is alleged to be the Operations Head, overseeing training, recruitment, and fund deployment for extremist activities.
- Accused Nos. 4, 5, and 6 (Varghese Chacko, Bablu Kurmi, Supreme Joy) are alleged field-level facilitators who withdrew cash in LWE zones.
- On 18.04.2026, Micah Mark admitted to remotely deleting backend data from The Timothy Initiative’s servers during the ED search, constituting destruction of evidence.
- The ED’s investigation revealed that over ₹95 crores had been spent by The Timothy Initiative in India between November 2025 and April 2026.
- The ED communicated its findings to the Director General of Police, Karnataka, via letter dated 06.05.2026 under Section 66(2) of the PMLA.
- Two follow-up communications were issued on 06.06.2026 and 10.06.2026, reinforcing the prima facie case.
- The FIR was registered on 11.06.2026.
Procedural History
- 18.04.2026: Search and seizure conducted by ED at premises of accused persons under FEMA.
- 18.04.2026: Micah Mark intercepted at Bengaluru airport with 24 foreign debit cards.
- 06.05.2026: ED issued formal communication under Section 66(2) of PMLA to DG Police, Karnataka, detailing alleged UAPA violations.
- 06.06.2026: ED issued follow-up communication in Kannada, reiterating findings.
- 10.06.2026: ED issued third communication, requesting legal action under UAPA.
- 11.06.2026: FIR Crime No. 202 of 2026 registered by Kothanur PS under BNS and UAPA.
- 11.06.2026: Writ Petition No. 13156 of 2026 filed by Micah Mark challenging ED’s custody and summons.
- 17.06.2026: Criminal Petitions No. 8401 and 8417 of 2026 heard and reserved.
- 01.07.2026: Judgment pronounced.
The Parties' Positions
The petitioners (accused persons) contend:
- The ED has no statutory power under PMLA or FEMA to initiate or communicate for registration of a criminal case under UAPA.
- The ED’s role is confined to PMLA investigations and cannot act as a conduit for UAPA cases.
- The invocation of UAPA is a tactic to harass individuals engaged in charitable work.
- There is no direct link between the petitioners and any banned terrorist organization.
- The ED’s communication lacks specific evidence of terrorist intent.
The respondents (State and ED) contend:
- Section 66(2) of PMLA explicitly empowers the ED to share information with any agency when it forms an opinion that another law has been contravened.
- The material gathered reveals a systematic, nationwide network using foreign funds to finance LWE activities, which qualifies as "unlawful activity" under Section 2(o) of UAPA.
- The withdrawal of ₹92.55 crores in cash in Naxal-affected areas, using forged debit cards, constitutes a threat to national security.
- The destruction of digital evidence during the search further supports criminal intent.
- The ED’s communication is detailed, documented, and legally valid.
Relief Sought
The petitioners seek:
- Quashing of FIR Crime No. 202 of 2026.
- Cessation of all proceedings under UAPA and BNS.
- Declaration that the ED lacked authority to initiate the investigation.
- Protection from further harassment or custodial action.
The Legal Issue
The central question is whether the Enforcement Directorate, under Section 66(2) of the Prevention of Money Laundering Act, 2002, has the statutory authority to communicate information to police authorities for the registration of an FIR involving offences under the Unlawful Activities (Prevention) Act, 1967, when the information reveals prima facie evidence of foreign fund flows into Naxal-affected regions.
Arguments Presented
For the Appellant/Petitioner
The petitioners, represented by senior counsel Sri M.S. Shyam Sundar and Sri S. Basavaraj, argued that Section 66(2) of PMLA permits information sharing only for offences under the same statutory framework or those directly linked to money laundering. They contended that UAPA is a distinct, non-economic statute dealing with national security and terrorism, and its invocation requires independent investigation by police or NIA, not a referral from ED. They further argued that the ED’s communication was speculative, lacked specific evidence of terrorist intent, and that the petitioners were engaged in humanitarian work. They cited State of Maharashtra v. Bharat Shanti Lal Shah to argue that courts must intervene at the earliest stage to prevent abuse of draconian laws. They emphasized that the absence of any direct link between the accused and a banned organization rendered the UAPA charges unsustainable.
For the Respondent/State
The State and ED, represented by Sri B.N. Jagadeesha and Sri Madhu N. Rao, countered that Section 66(2) is broad and unambiguous: it empowers the ED to share information whenever it forms an opinion that any other law is being contravened, regardless of the nature of the offence. They submitted that the ED’s communication was not a mere suspicion but a detailed dossier with transactional data, geo-location patterns, and digital evidence linking foreign funds to LWE zones. They relied on Union of India v. R. Rajagopal to argue that national security concerns justify a lower threshold for initiating investigations. They emphasized that the systematic use of forged debit cards to withdraw ₹92.55 crores in cash in conflict zones constitutes an "unlawful activity" under Section 2(o) of UAPA, and that funding such activities is punishable under Sections 13, 17, and 18. They further argued that judicial intervention at the investigation stage would undermine inter-agency coordination and enable criminal networks to evade detection.
The Court's Analysis
The Court undertook a rigorous statutory interpretation of Section 66 of the Prevention of Money Laundering Act, 2002. It observed that subsection (2) explicitly states: "If the Director or other authority specified under sub-section (1) is of the opinion, on the basis of information or material in his possession, that the provisions of any other law for the time being in force are contravened, then the Director or such other authority shall share the information with the concerned agency for necessary action." The phrase "any other law" is unqualified and includes statutes such as the UAPA, which are not economic in nature but are equally vital to the state’s constitutional obligations.
"The statutory architecture is clear: the provision is intended to ensure that information uncovered in the course of investigation under one enactment does not remain siloed where it reveals infractions under another."
The Court rejected the petitioners’ argument that PMLA and UAPA operate in watertight compartments. It held that statutes operating in cognate fields - financial regulation and national security - must be read harmoniously. The ED’s role under PMLA is not confined to tracing proceeds of crime under PMLA alone; it is empowered to act as a sentinel for broader financial crimes that threaten national integrity.
The Court examined the communication dated 06.05.2026 and found it to be a comprehensive, fact-based dossier. It detailed the origin of the cards, the pattern of withdrawals, the geographic concentration in LWE zones, the destruction of digital evidence, and the structural hierarchy of The Timothy Initiative. The Court held that this material, even at the preliminary stage, satisfies the threshold for a prima facie case under Section 2(o) of UAPA, which defines "unlawful activity" as any action that "causes or is intended to cause disaffection against India" or "disrupts the sovereignty and territorial integrity of India."
The Court further noted that the ED’s communication was not an isolated act but followed by two additional communications, indicating a deliberate, documented process. It emphasized that the Court’s role at this stage is not to determine guilt but to assess whether there is sufficient material to justify investigation. The Court cited State of U.P. v. Krishna Kumar to affirm that judicial interference at the investigation stage is impermissible unless the complaint is manifestly frivolous or mala fide.
The Court also addressed the petitioners’ claim of being "missionaries helping the poor." It held that the nature of the accused’s stated purpose is irrelevant; what matters is the objective impact of their actions. The systematic withdrawal of ₹92.55 crores in cash in conflict zones, using forged instruments, cannot be dismissed as charitable activity. The Court observed:
"Funding, therefore, becomes the oxygen that enables extremist movements to survive and proliferate. The danger of extremist financing lies not merely in the money transferred, but in the consequences it unleashes."
The Court concluded that the invocation of UAPA was neither arbitrary nor retaliatory, even if the petitioners had previously challenged ED’s summons. The timing of the FIR, following the ED’s communication, was consistent with procedural norms and not evidence of malice.
The Verdict
The petitions were dismissed. The Court held that the Enforcement Directorate acted lawfully under Section 66(2) of the PMLA in sharing information with the State Police for the registration of FIR Crime No. 202 of 2026 under the UAPA and BNS. The investigation into the alleged unlawful activities, including the financing of Left Wing Extremism through foreign debit cards, is permitted to continue. The Court clarified that the petitioners remain at liberty to avail all legal remedies, including challenging the final chargesheet, should they be filed. All pending applications are disposed of. The Court emphasized that its observations are confined to the jurisdiction under Section 528 of BNSS and shall not bind or influence the ongoing investigation.
What This Means For Similar Cases
Inter-Agency Communication Under PMLA Is Broadly Permissible
- Practitioners must now recognize that Section 66(2) of PMLA permits the ED to share information with any agency for any law contravened - including UAPA, FCRA, FEMA, and even IPC offences - if a prima facie case is formed.
- A mere allegation of "charitable intent" will not shield financial networks from UAPA scrutiny if funds are routed to conflict zones.
- The ED’s communication need not be a formal complaint; a detailed dossier with transactional data suffices to trigger police action.
UAPA Threshold Is Lower at Investigation Stage
- Courts will not intervene to quash UAPA FIRs at the initial stage merely because direct links to banned organizations are absent.
- Systematic fund flows into LWE zones, especially using forged instruments and cash withdrawals, constitute prima facie "unlawful activity" under Section 2(o) of UAPA.
- Destruction of digital evidence during a search operation strengthens the inference of criminal intent.
National Security Overrides Procedural Formalities
- In cases involving foreign funding of extremism, courts will defer to investigative agencies unless the material is demonstrably fabricated or devoid of any factual basis.
- The doctrine of "national security as constitutional obligation" now explicitly justifies expansive inter-agency coordination.
- Lawyers must advise clients that even non-terrorist organizations may be drawn into UAPA investigations if their financial activities align with patterns of extremist financing.
