By Sanjay Raman Sinha
As the Enforcement Directorate (ED) steps up action against Opposition leaders, its modus operandi is under the scanner from the apex court. The finer points of raid and arrest are being deliberated and defined anew.
In a case where a petition was filed by arrested directors of real estate group M3M in an alleged money laundering case, the government said that it would file a review petition.
In Pankaj Bansal vs Union of India, Pankaj Bansal and Basant Bansal, directors of M3M, had challenged an order of the Punjab and Haryana High Court which declined to set aside their arrest by the ED under the Prevention of Money Laundering Act (PMLA). However, the apex court said that the ED has to inform the grounds of arrest in writing and just citing non-cooperation on summons cannot be enough. The Supreme Court took serious exception to the ED officer reading out the grounds of arrest to the accused without giving a written copy of it. The bench said: “The ED has to be transparent, above board and conform to pristine standards of fairness and probity and not be vindictive in its stand.”
The Prevention of Money Laundering Act was enacted in 2002 and from July 1, 2005, the ED was entrusted with enforcing rigorous provisions of the Act. The ED also enforces the Foreign Exchange Management Act (FEMA) and the Fugitive Economic Offenders Act (FEOA).
In the Pankaj Bansal case, a three-member bench said in July last year that there was no need to give the Enforcement Case Information Report (ECIR) to the accused. Incidentally, an ECIR is a formal complaint lodged by the ED. This decision was rejected by the bench of Justices AS Bopanna and PV Sanjay Kumar which said that the ED will have to give the reason for the arrest. Now the centre is challenging this decision.
The bench also said that in the Vijay Madanlal Choudhary case, it was held that non-supply of ECIR in a given case cannot be found wrong. It held that ECIR cannot be equated with an FIR under the CrPC. This is because the ECIR may contain incriminating details. The material in the ED’s possession and its disclosure may have a detrimental effect on the final outcome of the investigation. It was also held that as long as the person is informed” about the grounds of arrest, it would be sufficient compliance with the mandate of Article 22(1) of the Constitution.
The judgment written by Justice Sanjay Kumar referred to Article 22(1) of the Constitution which provides that no person arrested shall be detained in custody without being informed as soon as possible of the grounds for it. The bench further said that as per Section 19 of the PMLA, ED officials can arrest a person if they have “reason to believe” that the accused is guilty of offenses under the Act. To get bail under Section 45 of the PMLA, the accused has to establish that there are no reasonable grounds to believe that he is guilty. That is, the burden of proof to prove innocence is on the accused.
Castigating the investigating agency, the apex court said the ED, which is given strong powers under the stringent PMLA, is not expected to be vindictive in its conduct. Commenting on Section 19 of the PMLA, the bench held that henceforth the ED would be required to furnish in writing the grounds of arrest to the accused without exception.
In a parallel case, the Delhi High Court heard petitions filed by NewsClick editor-in-chief Prabir Purkayastha and HR head Amit Chakraborty challenging their arrest in the UAPA case over alleged Chinese funding. NewsClick and Purkayastha had earlier approached the Delhi High Court seeking a copy of the ECIR registered by the ED in September 2020 in the money laundering case, in which the High Court had directed the ED not to take any coercive action against the website and its editor-in-chief. In a latest development, the Patiala House Court has sent the duo to 10 days judicial custody in the UAPA case.
With charges flying high against the ED for political witch-hunting, in July 2023 the ED reported a conviction rate of more than 93% in money laundering cases over the last nine years, the government informed the Parliament. It was also maintained that the high rate of conviction stands in contrast to 56% cases prosecuted under the IPC. The ED website states that the number of ECIRs recorded against existing and ex-MPs, -MLAs and -MLCs was 176.
Two points stand out in the arguments and the resultant verdict. First: Under the existing framework of law, the Court did its best to provide for liberty of the accused by insisting on the written ground for the arrest. However, this would not curb the cloak and dagger tactic of the ED as the law is loaded in favour of the investigative agency. For example, in the Finance Act, 2019, certain amendments were made in the provisions of the PMLA Act which gave the ED unwholesome powers.
In the said Act, Sections 17(1) And 18(1) were deleted from the PMLA. The result is that now an authorised officer under the PMLA can enter any property and conduct search and seizure even in the absence of any reporting of the scheduled
offence to a magistrate.
In July 2022, the Supreme Court upheld key amendments made to the PMLA which gave the government and the ED unbounded powers of summons, arrest and raids and made bail nearly impossible. It also shifted the burden of proof of innocence onto the accused rather than the prosecution.
In that case, senior lawyer Kapil Sibal had argued: “The ED assumes the powers of a civil court. The process curtails the liberty of individuals.” Bail was made very difficult for the accused.
“The offence of money laundering is no less a heinous offence than the offence of terrorism,” Justice Khanwilkar had said. There is a need for “creating a deterrent effect” through a stringent law. Even a plea for anticipatory bail would have to undergo the rigours of the twin conditions under PMLA.
The twin conditions of bail are that there should be “reasonable grounds for believing that the accused is not guilty of the offence” and that he “is not likely to commit any offence while on bail”. “The burden must shift on the person concerned to dispel that suspicion,” Justice Khanwilkar wrote. The only respite for the undertrial is that he could seek bail under Section 436A of the CrPC if he has already spent one half of the term of punishment in prison. However, this is not an “absolute right” and will depend from case to case, the judgment said.
The second point which the recent verdict underlined is that the ED should refrain from vindictive action. This was a rap on the knuckles of the investigative agency whose actions have raised the spectre of fear in the hearts of the Opposition. The list of targets is long and ever increasing.
The ECIR caveat might provide some relief, but the overall net of provisions of PMLA gives the ED scope to work with unbridled powers and impunity.