Investigative agencies in India are notorious for using procedural tactics as a form of punishment. By exploiting legal technicalities and, at times, even engaging in clear violations of the law, they force the accused to move from one court to another in pursuit of bail, all while remaining imprisoned.
A similar scenario unfolded in the Delhi liquor policy case where the accused – former Delhi chief minister Arvind Kejriwal, Aam Aadmi Party (AAP) member Vijay Nair, Bharat Rashtra Samithi (BRS) leader K. Kavitha, former deputy chief minister Manish Sisodia, AAP leader Sanjay Singh and businessmen Abhishek Boinpally and Benoy Babu – were granted bail by the Supreme Court as early as December.
While granting bail in the respective petitions, the court repeatedly expressed concern over pre-trial incarceration, noting that it is unlikely to conclude anytime soon. All the other accused were also granted bail by either the high court or trial courts. However, one of the accused, Amandeep Singh Dhall, has a pending plea before the Supreme Court regarding the high court’s refusal to grant him bail in the corruption case. He was granted bail in the money laundering case by the Delhi high court.
To establish a money laundering case, there must be an underlying illegal act from which the accused is alleged to have received tainted money, which is then laundered. In the Delhi liquor policy case, the alleged crime – where politicians are accused of intentionally creating loopholes in the now-repealed excise policy – is being investigated by the Central Bureau of Investigation (CBI), while the alleged money laundering activity related to that crime is under investigation by the Enforcement Directorate (ED).
The threshold for obtaining bail in cases under the Prevention of Money Laundering Act (PMLA) is higher compared to other offences, as courts are statutorily required to make a prima facie finding that the accused is not guilty of the offence. Earlier this year, the Madras high court noted that the principle of ‘bail being the rule and jail the exception’ appears to be reversed under the PMLA. However, the Supreme Court, in an unrelated PMLA case involving an aide of Jharkhand chief minister Hemant Soren, reiterated, while granting bail, that this dictum is applicable even in money laundering cases. This was reaffirmed when the court granted bail to Nair in the Delhi liquor policy case.
In the Sisodia judgement, the court emphasised that prolonged incarceration and delays in the trial should be considered under Section 439 of the Code of Criminal Procedure, which deals with bail in general criminal matters, and Section 45 of the Prevention of Money Laundering Act, which specifically addresses bail in money laundering offences.
Interestingly, Singh was granted bail in the ED case based on the ED’s concession that they no longer needed his custody. However, this concession came only after the Supreme Court orally warned the agency that if it had to rule on the merits in favour of Singh, it would have to make a prima facie finding, as required by Section 45 PMLA, that Singh is not guilty of money laundering. This was because no money had been recovered, there was no trace of the alleged funds and Singh was jailed primarily based on the statement of accused-turned approver, Dinesh Arora. The court also observed that such a finding could have significant ramifications during the trial.
In Kejriwal’s case, Justice Ujjal Bhuyan questioned the CBI’s conduct saying that it appeared as though the CBI merely wanted to prevent Kejriwal from receiving the benefit of bail in the ED case, which had been granted just days before the CBI formally arrested him. The roles of the two agencies were reversed in the case of Boinpally, where the ED formally arrested him after he had been granted bail in the CBI case.
Also read: Reforming Anti-Money Laundering Laws: Insights from Supreme Court Rulings
ED authorities are not police officers
The PMLA empowers the investigating officer to exercise powers that are typically associated with police officers. ED has wide-ranging powers, including seizure, attachment and sale of the proceeds of crime or property obtained from such proceeds. The powers of arrest and detention are also available to the directorate.
The Constitution and subsequent jurisprudence provide safeguards to citizens against unlawful arrest and detention. One such safeguard includes the right against self-incrimination, where an accused person cannot be forced to provide testimony that could incriminate them, and a confession made to a police officer cannot be used as proof of guilt. This protection extends beyond the trial itself, applying even during investigations or interrogations, where accusations have been made and prosecution is possible.
However, this protection is not available during interrogations by the ED. The directorate maintains – and the Supreme Court agrees – that the ED is not a police force. The law established by the top court holds that the protection against self-incrimination in PMLA cases only begins when a person is formally arrested, not during earlier stages like when someone is summoned. Therefore, an extra-judicial confession may lead to a conviction in a PMLA case if made before a formal arrest.
It is also possible for a police officer to conduct an investigation in a PMLA case if permitted by the government. However, it remains unclear to what extent these safeguards will apply in such cases.
ECIR, not FIR
There is no requirement for a First Information Report (FIR) or a formal complaint to initiate an investigation under the PMLA by the ED. The initial document or formal entry of any complaint in ED records is made by registering an Enforcement Case Information Report (ECIR). However, the ED maintains that the ECIR is an internal document and need not be produced at the time of arrest or otherwise to any accused.
This creates uncertainty for individuals summoned by the ED under Section 50 of the PMLA as it is unclear whether they are being summoned as an accused or as a witness. This issue arose in Kejriwal’s case, where he was repeatedly summoned under Section 50, which he failed to attend nine times. Subsequently, the ED conducted a search of his residence under Section 17 of the PMLA, which stipulates that a search can be carried out when the ED has reason to believe that a person has committed money laundering, or possesses proceeds of crime, or holds records related to money laundering.
Later, Kejriwal was arrested under Section 19 of the PMLA, which authorises the ED to arrest an individual if it has reason to believe, based on the material in its possession, that the person is guilty. It was only after Kejriwal’s formal arrest by the ED that it became clear that he was being considered an accused. This lack of clarity is a common issue in ED cases.
Initially, the ED summoned Kejriwal as a witness. The agency would have straightaway arrested him if it had met the threshold of having “reasons to believe,” based on material it possessed, that he was guilty. It then conducted a search, for which the only requirement is the recording of reasons to conduct the search. It is known that no incriminating material was recovered during the search and it remained unclear what new developments had occurred that led the ED to arrest the Delhi chief minister.
The ED maintained that the arrest was necessitated due to Kejriwal’s non-cooperation with the agency. However, the Supreme Court refuted this claim, and while granting bail to Kejriwal, observed that “mere interrogation” is not a sufficient ground for arrest under Section 19 of the PMLA. The legality of Kejriwal’s arrest in both the ED and CBI cases is now to be determined by a larger bench.
Review of the money laundering judgement and the agencies’ future
In 2022, through the Vijay Madanlal Chaudhary judgement, the Supreme Court dismissed constitutional challenges to various provisions of the PMLA. In this ruling, the court held that ED officers are not considered police officers and that the non-production of the ECIR is a valid exercise. It also upheld the reversal of the presumption of innocence and the twin conditions for bail, following a legislative amendment that cured the defect which had previously led the court to declare those conditions unconstitutional. Additionally, it broadened the definition of the ‘offence of money laundering’.
After delays and changes in the bench composition due to retirements, and with the state requesting adjournments, the special bench constituted to review this judgement will now begin proceedings on October 16 and 17, 2024. The two key issues for consideration are:
- Is the ED obligated to provide the accused with the ECIR filed against them?
- Is the reversal of the presumption of innocence in money laundering cases constitutionally valid?
Justice C.T. Ravikumar, the only remaining judge from the original three-judge bench that delivered the Vijay Madanlal Choudhary ruling, is set to retire on January 5, 2025. This gives the bench approximately three months to hear arguments and render a decision.
This review petition, titled Karti P. Chidambaram v. Enforcement Directorate, will have far reaching consequences for the enforcement of the PMLA and the protection of individual rights. A ruling that mandates the supply of the ECIR and imposes checks on ED officials would not only provide sufficient safeguards against the political misuse of agencies but would also help free these agencies from their image as “caged parrots” in the hands of political masters. Justice Bhuyan aptly said in his ruling, while granting bail to Kejriwal, “Like Caesar’s wife, an investigating agency must be above suspicion.”
Nakashvir Singh Aulakh is an advocate practising in the Punjab and Haryana High Court.