The arrest of Delhi Health Minister Satyendar Jain on 30 May has led to a political war of words, with Delhi Chief Minister Arvind Kejriwal claiming that ED is acting at the behest of the BJP over the upcoming Himachal Pradesh elections.
The agency on Monday, 6 June, carried out raids on Jain's residence as part of a "follow up" in the case.
The ED's move has reignited controversy over the way in which the central agency has been seen to target Opposition leaders in states across the country, from P Chidambaram and his son Karti, to DK Shivakumar and Nawab Malik.
Of course, just because the ED has focused on Opposition leaders when it comes to politically-connected accused doesn't mean the cases brought by it don't have any merit.
However, even if the cases do have merit, there are a number of issues with the way the ED approaches these cases that have raised legal concerns – and which will soon (we hope) be addressed in a much-awaited judgment by the Supreme Court.
Jain's case highlights some of these issues – in particular, the way in which the ED makes arrests and demands custody even in cases where the investigation can proceed without placing the accused in custody.
Delhi Health Minister Satyendar Jain arrested by ED for money laundering in connection with a CBI case from 2017 about disproportionate assets
ED does not follow Supreme Court's Arnesh Kumar guidelines, under which arrests should not be made if max punishment is 7 years or less
This means they arrest the accused even if they aren't a flight risk and cannot tamper with evidence, which is documentary and in the ED's possession
Supreme Court to soon decide if ED's stance that Code of Criminal Procedure norms don't apply to their money laundering cases is correct
Arrests are made easier for ED since accused find it difficult to get anticipatory bail/protection since ECIRs are not provided
Satyendar Jain's Case & the Nature of PMLA Cases
The ED's primary role is to prosecute offences under the Prevention of Money Laundering Act 2002 (PMLA).
The offence of money laundering, unlike most other criminal acts, is not a standalone offence. By its very definition, such an offence can only be triggered if proceeds from another economic offence have been dealt with in an illegal manner, i.e., by concealing them, projecting them as untainted money, etc.
The PMLA contains a schedule, listing offences defined under various legislations. If any offences covered in this schedule (called scheduled offences for the purposes of PMLA) are being investigated by the police or an agency like the CBI or even the tax authorities, the ED can launch a parallel investigation to trace the flow of proceeds from such offences.
The ED's case against Jain arises out of an FIR registered by the Central Bureau of Investigation against him and other individuals in 2017, under the Prevention of Corruption Act. The CBI alleges that from February 2015 to May 2017, Jain obtained assets disproportionate to his declared sources of income.
The CBI has alleged that Jain acquired the money through four companies that are beneficially owned and controlled by him and his family. The money itself is supposed to have come in the form of 'accommodation entries' (i.e., hawala transfers) in the companies' books from shell companies in Kolkata.
According to previous statements by the ED, the money received by the four companies amounted to Rs 4.81 crore. The CBI filed a chargesheet in December 2018 which said that Jain himself had acquired assets to the tune of Rs 1.47 crore, which was stated to be 217.20 per cent in excess of his known income, as reported by the Economic Times back then.
There appears to have been no progress in the case filed by the CBI thus far, and the agency had to clarify that it has not dropped the case following the ED's arrest of Jain.
As money laundering is technically an offence independent of the scheduled offences listed in the PMLA (though it requires a scheduled offence to trigger money laundering charges), a trial for money laundering is conducted independent of the trial for scheduled offences.
However, since the facts in the two trials are so closely interconnected, the PMLA provides that the same court shall conduct both the trials.
How the ED Doesn't Follow General Rules on Arrests
The ED does have the power of conducting arrests without a warrant; and the offence of money laundering is non-bailable, i.e., bail is granted at the discretion of the court and is not a matter of right.
However, even when it comes to non-bailable cases, to prevent relentless arrests by investigating agencies, the Supreme Court in Arnesh Kumar vs State of Bihar, held that arrests should not be the norm for offences which are not of a very serious or heinous nature.
In line with provisions of the Code of Criminal Procedure (CrPC), the apex court ruled that while investigating offences punishable with a maximum term of seven years’ imprisonment, investigating agencies should not conduct arrests and should rather issue notice upon the accused person (under Section 41A of the CrPC) to appear and cooperate with the investigation.
While the judgment does not impose a blanket ban on arrests, it requires the investigating agency to record and present before the Magistrate’s Court the special reasons justifying such arrests.
According to Section 41 of the CrPC and the apex court, the police should only arrest such a person if this is necessary:
to prevent them from committing a further offence;
for proper investigation of the offence;
to prevent them from tampering with evidence;
to prevent them from threatening/influencing witnesses;
to prevent them from absconding
The Supreme Court further went on to rule that non-adherence to its guidelines in the Arnesh Kumar judgment shall invite departmental action and criminal prosecution for contempt of court against the offending officers.
One might think this means that when it comes to cases involving public figures like Jain or Chidambaram – who are unlikely to be flight risks, and where the evidence is documentary and already in the investigating agency/government's possession – the ED cannot, in fact, just arrest the accused.
However, the ED argues that the probe norms under the CrPC do not apply to offences under the PMLA – this is the stand it took in the batch of petitions in the apex court in which we are awaiting a judgment.
As a result, the protection against arrest granted (whether statutorily or by interpretation) under the general statute prescribing procedure for criminal trials in India, is not adhered to by the ED, unlike every other investigating agency.
The ability to make arrests without being constrained by the Arnesh Kumar guidelines is extremely useful for the ED as the test which a court needs to follow to grant bail to accused persons is more onerous for PMLA offences.
As per the PMLA, the court hearing a bail application must ensure that the public prosecutor i.e. the lawyer representing the State, must get a chance to oppose the bail application.
Further, after considering such opposition, the court must record a finding that there are reasonable grounds for believing that the accused person has not committed the offence of money laundering and is also not likely to commit any offence while out on bail.
Hence, in PMLA cases, a court is effectively required to conduct a mini trial even while considering the issue of bail. This offers an opportunity to deny bail to an accused even if the classic conditions for grant of bail, i.e., being a flight risk, or likely to tamper with evidence/threaten witnesses, are in favour of the accused.
How Does This Play Out? Are Arrests Really Required?
Former Union Minister P Chidambaram spent 106 days in jail after his arrest by the ED in the INX Media case, and was only released pursuant to a Supreme Court order, after hearings that dragged on for weeks.
The Delhi High Court when rejecting Chidambaram's plea for bail had noted that there was no chance for tampering with the material since it was in the possession of the authorities. They also observed that the statements of relevant witnesses had already been taken so there was no need to worry about influencing witnesses.
Despite this, the high court accepted the ED's contention that when it comes to grant of bail, the gravity of the offence needs to be taken into account, and since economic offences are extremely serious, bail shouldn't be granted.
The Supreme Court acknowledged this argument, but noted eventually that according to its own precedent, when assessing the gravity of an offence, the extent of punishment was also relevant.
"One of the circumstances to consider the gravity of the offence is also the term of sentence that is prescribed for the offence the accused is alleged to have committed," the court observed. Even when a case is considered to be a grave economic offence, this doesn't mean the accused has to be denied bail.
"In that regard, what is also to be kept in perspective is that even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case since there is no such bar created in the relevant enactment passed by the legislature nor does the bail jurisprudence provides so."Supreme Court in P Chidambaram bail judgment, para 21
So, if the gravity of the offence doesn't in itself necessitate pre-trial detention, the person isn't a flight risk, and they aren't likely to tamper with evidence or influence witnesses, how does the ED justify its arrests and demands for custodial interrogation?
The key argument used by them across high-profile cases is the need to confront the accused with the material they have against them.
This does not of course require an arrest, and could be possible even if the person were sent a notice to appear before the agency like the notice procedure under Section 41A of the CrPC.
The ED in fact has even greater powers to compel cooperation with an investigation. Under Section 50 of the PMLA, it can not only summon any person but also record statements by them under oath, making them admissible in evidence unlike statements recorded before police.
The fact that statements to them are admissible evidence even without being recorded before a magistrate is also perhaps one of the reasons why the ED is so quick to make arrests, as it makes it easier to extract confessional statements which support their investigation.
The point, however, is that they don't actually need to make an arrest in many cases given their ability to summon people to appear before them, especially when the case is based on documentary records which are already in their possession.
The Supreme Court's eventual decision on whether or not the CrPC applies to PMLA cases will, therefore, prove extremely important. The only real way to stop unnecessary arrests will be if the Arnesh Kumar guidelines are found to also bind the ED – and even then, as we have seen with continued police misuse, that is no guarantee.
Why Don't Accused Just Get Protection From Arrest From the Courts?
One way in which a person can seek to avoid being arrested in a case where their custodial interrogation isn't really necessary or where the case against them is sketchy is to approach the courts for anticipatory bail or get some sort of interim protection from a high court while it hears a plea to quash the case.
However, this becomes extremely difficult when it comes to ED cases.
Unlike FIRs registered by the police, an ECIR (the ED's equivalent) is treated as an internal document by the ED and a copy of the same is not served upon the accused.
Hence, the accused person is not aware of the exact allegations against him – even after an arrest in many cases.
As the nature of allegations against a person are not made known to him, he has no grounds to approach a court and justify his apprehension of being arrested. Thus, more people are subjected to unjustified arrests than in regular criminal cases.
(Ishan Khanna is a Principal Associate in the Disputes practice of Khaitan & Co., and specialises in white collar criminal litigation and advisory. Vakasha Sachdev is the Associate Editor - Legal at The Quint. This is an opinion article and the views expressed are the authors' own. The Quint neither endorses nor is responsible for them.)