SC upholds ED’s powers under PMLA, says power to arrest not arbitrary

The Supreme Court on Wednesday upheld the Enforcement Directorate’s (ED’s) powers to arrest, attach property, and search and seize under the Prevention of Money Laundering Act (PMLA), and said the “law is not arbitrary”.

The court’s order comes at a time when the ED, the executive body that enforces the PMLA law, is facing allegations of abuse of power to target the government’s political adversaries.

The ruling raised new fears and anxieties in political and business circles alike as the hope was that the court would review and rein in the ED’s powers. Many politicians, builders, and civil rights activists have charges of money laundering against them and are currently in ED custody. National Conference chief Farooq Abdullah was chargesheeted for money laundering on Tuesday, while Congress chief Sonia Gandhi and her son Rahul Gandhi have gone through extensive questioning by the agency in recent weeks. One of the petitioners, Karti Chidambaram (the Lok Sabha MP from Sivaganga), has already served a tenure in ED custody.

The court upheld the PMLA’s conditions stipulating that a public prosecutor can oppose the bail application of an accused, and bail can be granted to an accused only if there are reasonable grounds for the court to believe that the person would not commit an offense when out.

“Provisions for bail and anticipatory bail have to withstand the twin test. This will strengthen the hands of the ED in pursuing cases relating to money laundering,” said Gauri Rasgotra, partner and head (Delhi), Cyril Amarchand Mangaldas.

For the moment, however, the court said the proceeds of crime under the PMLA included money laundering and generation, possession, and concealment of tainted money, and that the ED was not required to prove whether it was legitimate money or not. This means that mere possession of the proceeds of crime is enough to attract the offence of money laundering, and the onus of proving innocence lies on the accused.

Saying that the Act provided a balancing act and showed how the proceeds of crime could be traced, the court held that there were enough safeguards for the accused under the law.

The court did not find any merit to challenges raised by petitioners who said the PMLA was arbitrary. The court said the process envisaged under the Act was not an investigation in the strict sense. “Authorities under the Act are not police officers and confessions under the Act are admissible,” the court said.

Bharat Chugh, a former judge and now an advocate in the Supreme Court, said that holding ED officials not to be ‘police officers’ would make them unaccountable and deprive the accused of their rights and freedom.

The court said that disclosing the reasons for the arrest to the accused was enough. “Even the ED manual is not to be published since it is an internal document. The Department has to explore the desirability of uploading broad objectives of the Act on its website,” the court held.

Meanwhile, some say the judgment could improve the ease of doing business in India. “Many of the amendments in issue, which have been upheld, were introduced based on the recommendations of the Financial Action Task Force (FATF), and compliance with the same enables India to be now listed favourably in the international sphere,” said Sanjeev Sharma, partner at Saraf & Partners.

The only leeway in the order was that amendments to the PMLA being passed as a money bill should be examined by a seven-judge Bench, the court said. A petition had challenged the amendments made in the PMLA, saying that such changes were part of an ordinary bill and not a money bill.

A money bill is a piece of legislation that can be introduced only in the Lok Sabha and the Rajya Sabha cannot amend or reject it.

Without directly commenting on the order, opposition leaders confessed they were stunned. Jairam Ramesh, a spokesman for the Congress, said the judgment on the powers of the ED would have “far-reaching implications for our democracy especially when governments are anchored in political vendetta”.

Rajasthan Chief Minister Ashok Gehlot said the ED was an instrument in making governments fall, and this had already been demonstrated. But it could not be used to constitute a council of ministers, he said. He was referring to Maharashtra, where there has been only a chief minister and a deputy chief minister for 28 days. “This should tell us in which direction the country is going”.

Former MP Anand Sharma said: “Being a student of law, I have believed in and still subscribe to the rule of law, and not the rule by law. It is a disturbing trend that laws are becoming more and more draconian which threatens the foundational values of the Indian constitution.”

Even as the court was passing the order, Sonia Gandhi’s questioning by the ED in the National Herald case concluded on Wednesday, but not before Congress leaders trooped out of Parliament onto Vijay Chowk, charging the government with intolerance on all fronts.

Sanjay Singh, Rajya Sabha MP from the Aam Aadmi Party, was suspended from the upper House for trying to throw papers at the chair, taking the number of suspended MPs to 20, the highest ever in history. Four MPs were suspended from the Lok Sabha two days ago. Referring to this and the fact that the government was not ready to discuss issues of price rise, Agnipath, and border incursions by China, Leader of Opposition Mallikarjun Kharge said the government simply did not want to listen.

However, the government said the reason no discussion could be held on price rise was that Finance Minister Nirmala Sitharaman was down with Covid-19. Asked about the suspension of MPs, Parliamentary Affairs Minister Prahlad Joshi said, “Their suspension can be revoked by the Chair if they apologise and assure that they would not again bring the placards in the house.”

The suspended MPs have started a 50-hour-long protest inside the Parliament complex. They are holding the relay protest near the Gandhi Statue and will stay at the site through the night, said Trinamool Congress (TMC) MP Dola Sen, one of the suspended parliamentarians.