Be transparent, not vindictive in probes: SC to ED

The Supreme Court ruled that the Enforcement Directorate (ED) must provide a copy of the grounds of arrest to accused in money laundering cases, instead of just verbal information, in order to protect their constitutional rights. The judgment criticized the ED's "style of functioning" and emphasized the importance of maintaining fairness and probity. The ruling came as the court ordered the immediate release of arrested directors of real estate group M3M in a money laundering case. The judgment is in contrast to a previous ruling that denied accused persons a copy of the Enforcement Case Information Report (ECIR).

In a judgment that questioned the federal agency’s “style of functioning” and directed it to maintain “pristine standards of probity and fairness” instead of being vindictive, the Supreme Court on Tuesday ruled that the Enforcement Directorate (ED) is bound to provide a copy of the grounds of arrest to accused in a money laundering case, adding a mere verbal information would be construed as a breach of constitutional right of the arrested person.

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“We hold that it will be necessary for a copy of grounds of arrest to be furnished to the accused at the time of arrest,” ordered a bench of justices AS Bopanna and Sanjay Kumar, virtually taking the sting out of one of ED’s controversial powers that was affirmed by another top court judgment delivered last year.

The July 2022 judgment had held that informing an accused about the grounds of arrest is “sufficient compliance” of the mandate of Article 22(1) of the Constitution, which lays down that no arrested person shall be detained in custody without being informed of the grounds of arrest nor shall he be denied the right to legal representation of his choice.

However, taking a divergent view, the two-judge bench on Tuesday said that it is constitutional right of a person under Article 22(1) to be informed of the grounds of arrest and that this right can be effectively realised only when the grounds are supplied in a written form. This, the bench said, would enable the accused to take legal counsel based on the written grounds of arrest, adding the absence of written grounds of arrest will boil down to the word of ED against the word of the accused.

The judgment also clarified that the mere passing of an order of remand by a jurisdictional trial court cannot subsequently validate the grounds of arrest nor can it be said to be a sufficient fulfilment of ED’s obligation under the Constitution or the Prevention of Money Laundering Act (PMLA), 2002.

Flagging the lack of uniform practice followed by the ED for supply of the grounds of arrest to accused, the top court maintained that the situation required laying down norms for the entire country so that a right balance between an investigation and the right of accused could be struck.

The judgment came as the bench ordered immediate release of arrested directors of real estate group M3M in an alleged money laundering case. Pankaj and Basant Bansal were summoned by the ED on June 14 for questioning in connection with a money laundering case, but they were arrested in another case registered by the ED on the same day. The Bansals challenged their arrest citing breach of Article 22 and Section 19(1) of the PMLA, which provided that accused has to be contemporaneously informed about the grounds of arrest.

The agency, on its part, said that its officials read out the grounds of arrest to the Bansals at the time of their arrest. But the bench lashed out at the ED for not supplying them with a written copy of the grounds of their arrest.

“It (the chronology of events) speaks volumes about the ED and reflects poorly, if not negatively, on their style of functioning, especially since the agency being charged with the onerous responsibility of curbing debilitating economic offence of money laundering in the country...The ED has to be transparent, above board and conform to pristine standards of fairness and probity... and not be vindictive in its conduct,” maintained the bench in its judgment.

It added that merely reading out the grounds of arrest does not fulfil the mandate of either Article 22(1) of Constitution or Section 19(1) of the PMLA. “The clandestine conduct of the ED in proceeding against the accused does not commend satisfaction as it reeks of arbitrariness,” said the bench, declaring Bansals’ arrests as illegal.

The Bansals are accused by the ED of diverting ₹400 crore through several shell companies. The agency has further alleged that M3M, along with another realty firm Ireo Group, tried to manipulate the trial court proceedings in the ED cases by “indirectly” bribing a Panchkula special court judge, who was suspended from service on April 27.

The Supreme Court’s views on Tuesday are at a complete variance from the three-judge bench ruling in July 2022 when the court ruled that a person being arrested can be denied a copy of the Enforcement Case Information Report (ECIR) -- the equivalent of an FIR in an ordinary criminal case.

“Non-supply of ECIR, which is essentially an internal document of ED, cannot be cited as violation of constitutional right. Concededly, the person arrested, in terms of Section 19 of the 2002 Act, is contemporaneously made aware about the grounds of his arrest. This is compliant with the mandate of Article 22(1) of the Constitution... So long as the person has been informed about grounds of his arrest that is sufficient compliance of mandate of Article 22(1).” the 2022 judgment held.

This judgment affirmed the sweeping powers given to ED under the 2002 Act for summoning individuals, making arrests, conducting raids, and attaching properties of the suspects, saying that law enforcement agencies must be armed with an effective mechanism to safeguard the nation’s wealth from criminals. The 2022 judgment was criticised for a disquieting erosion of the safeguards to rights to life, liberty, property and against self-incrimination, especially at a time when a spate of ED raids and other actions against opposition leaders has mired the federal financial crime agency in allegations of politicisation.

Interestingly, the judgment on Tuesday came at a time when another three-judge bench has scheduled a hearing on October 18 to examine the correctness of the July 2022 judgment and take a call on referring the matter to a Constitution bench.

Last week, the Supreme Court said that it would revisit the previous judgment to reconsider if a person being arrested can be denied a copy of the Enforcement Case Information Report (ECIR), and whether the law can ascribe presumption of guilt on an accused as against the presumption of innocence. These two issues were flagged by the court on August 25, 2022, when it had agreed to consider reviewing the previous judgment. To be sure, if the matter goes to a five-judge bench, the entire judgment and not just the two issues flagged in the first order of review can be reconsidered by the larger bench.

The three-judge bench to consider a review of the previous judgment includes justices Sanjay Kishan Kaul, Sanjiv Khanna and Bela M Trivedi.