ED cannot be a law unto itself, says SC

By, New Delhi
Aug 21, 2023 11:39 PM IST

The Supreme Court has restrained the Enforcement Directorate (ED) and the Uttar Pradesh government from proceeding with a fresh case against accused in an alleged liquor syndicate racket in Chhattisgarh. The court stated that the ED cannot act as a law unto itself and the agency or the police cannot take any coercive steps against the accused named in the first information report (FIR). The court also directed that the petitioners in the case would not be arrested or subjected to any other coercive steps.

Enforcement Directorate (ED) cannot be a law unto itself, the Supreme Court observed on Monday, restraining the federal agency and Uttar Pradesh government from proceeding in a fresh case registered by the former against some of the accused in an alleged liquor syndicate racket in Chhattisgarh.

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According to a bench led by justice Sanjay Kishan Kaul, the agency or UP police cannot take any coercive steps against the accused named in the first information report (FIR), which was registered on July 30 after ED provided information on fake holograms being manufactured in a company near Noida in UP.

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“ED cannot be a law unto itself,” the bench, which also comprised justice Sudhanshu Dhulia, told additional solicitor general SV Raju, who represented the agency.

On Monday, the court directed that the petitioners, Anil Tuteja, an IAS officer, and Yash Tuteja, would not be arrested nor subjected to any other coercive step in view of its July 18 order that stopped ED from investigating further or taking any coercive measures in connection with the alleged liquor syndicate racket in Chhattisgarh. At the time, the bench noted that the agency has so far been acting without any court having taken cognisance of a predicate offence under the money laundering law. A predicate offence is the foundational criminal offence that generates illegal proceeds of crime, leading to a separate probe by ED.

While the July 18 order restrained the agency from arresting or acting against Anil and Yash Tuteja apart from other accused named in the case, ED wrote a letter to UP Police on July 28 that led to the registration of the fresh FIR against the two by the UP police.

The Chhattisgarh government, which is also an applicant before the court in this case, has maintained that ED has been conducting the probe in the state without any jurisdiction and with the sole objective of implicating chief minister Bhupesh Baghel.

On August 7, senior advocate Mukul Rohatgi, assisted by advocates Arshdeep Singh Khurana and Malak Manish Bhatt, argued that the new FIR was a ploy by ED to create a scheduled offence so as to overcome its handicap in the liquor scam case. Rohatgi pointed out that the investigations in the case are currently premised on an income tax raid which is not a predicate offence under the Prevention of Money Laundering Act (PMLA), and thus, the new FIR was filed in UP.

The UP FIR talked about Prizm Holography Security Films Ltd, which was allegedly favoured by Chhattisgarh officials as part of a criminal conspiracy to produce fake holograms to be used to pass off illegal country made liquor bottles as authenticated products through the liquor vends. The main accused named in the UP FIR included Special Secretary Excise Arunpati Tripathi, Excise Commissioner Niranjan Das and IAS officer Anil Tuteja.

Highlighting the petitioners’ complaint that ED’s endeavour is aimed at circumventing the order of the Supreme Court passed on July 18, the bench asked the agency to come clear as to when the aspects relating to the new FIR came to ED’s notice.

On Monday, Raju conceded before the bench that it had information about the use of alleged fake holograms in the case before it wrote to the UP police for lodging a fresh FIR in the case.

At this, the bench directed ED and UP police to stay their hands and said that all the petitions relating to the case would be listed on September 26.

ED has alleged that the racket involved selective grant of licences to liquor manufacturers for commission, distribution of the collected money, and collection of commission from liquor shops. Last week, ED arrested Arunpati Tripathi, the special secretary of the Chhattisgarh Excise Department, along with three others, including Anwar.

Countering ED’s move, the Chhattisgarh government asked to be made part of the case on a petition filed by Anwar Dhebar, the elder brother of Raipur mayor and Congress leader Aijaz Dhebar, who was the first person to be arrested by the agency in this case on May 6. Anwar’s wife had also moved the top court seeking protection from arrest.

Baghel, in his interactions with the media, has maintained that the Bharatiya Janata Party (BJP) has been misusing ED as its “subordinate organisation”. “Our claim that ED has been acting as an agent of the BJP has proved right. The way it has been threatening people to implicate them in false cases, they are now trying to implicate me in the alleged excise scam. Their main aim is to defame the Congress government,” he said in May.

The July 18 order, which came as a setback to ED, was passed after the bench noted that no court in Chhattisgarh or anywhere else has taken cognisance of a predicate offence in the matter and that the only case pending as on date is an income tax case, which is not a scheduled offence empowering ED to step in.

In March, a three-judge bench in the Supreme Court agreed to consider a limited challenge to two provisions of the PMLA – Section 50 that requires a person summoned by ED to speak the truth, and Section 63, which provides punishment for giving false information.

Facing the probe in the alleged liquor scam case, Anil Tuteja and Dhebhar have also challenged sections 50 and 63 of PMLA. On April 28 and May 16, the top court issued notices on their petitions and sought the Centre and ED’s response.

ED initiates prosecution under the Prevention of Money Laundering Act (PMLA) predicated on a base FIR registered by CBI or any other law enforcement agency. ED registers an Enforcement Case Information Report (ECIR) in order to probe the cases of money laundering related to the proceeds of crime which have been committed prior and an FIR for such an offence already exists.

If the base FIR is quashed or the accused is exonerated of the charges, ED cannot continue its probe under PMLA, the Supreme Court held in its 2022 judgment in the Vijay Madanlal Chaudhary & Others v Union of India case.

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