ED needs to be transparent and not vindictive in its functioning, says Supreme Court

The Supreme Court on Tuesday told the Enforcement Directorate to be transparent and not vindictive in its functioning, reported the Hindustan Times.

A bench of Justices AS Bopanna and Sanjay Kumar made the observation while granting bail to the directors of real estate firm M3M in a money-laundering case.

Pankaj Bansal and Basant Bansal were arrested on June 14 in connection with a first information report filed against former Special judge Sudhir Parmar, reported Bar and Bench. The Enforcement Directorate claimed that it has information about Parmar favouring the Bansal brothers in the money-laundering case that is related to another real estate firm called IREO.

The brothers challenged their arrest under Section 19 of the Prevention of Money Laundering Act, arguing that it was illegal.

The section allows Enforcement Directorate authorities to arrest any person whom they have “reason to believe” is guilty of money-laundering based on the material in their possession.

The Bansals also questioned an order of the Punjab and Haryana High Court refusing to set aside their arrest.

At Tuesday’s hearing, the Supreme Court noted that an officer of the Enforcement Directorate verbally read out the grounds of arrest to the accused men without giving them a written copy, reported the Hindustan Times.

“It speaks volumes about the ED and reflects poorly on their style of functioning, especially since the agency is charged with preserving the financial security of the country,” the bench said.

The court noted that there is no uniform practice followed by the central agency to inform accused persons about why action is being taken against them.

“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,” the court said while asserting the guidelines that need to be followed.

This observation on arrests adds to the verdict in the Vijay Madanlal case, in which it was held that the Enforcement Directorate does not need to provide an Enforcement Case Information Report – equivalent to a first information report – to the accused persons and just informing them about the grounds of arrest would suffice, reported Bar and Bench.

In its Tuesday order, the court agreed with the verdict in the Vijan Madanlal case stating that the Enforcement Case Information Report may contain sensitive information and revealing it could have an “deleterious impact on the final outcome of the investigation”.

However, the division bench asserted that the accused need to be given a written copy on the grounds of arrest but sensitive case information can be redacted.

The court also said that in cases when a written copy is not supplied, the issue may boil down to the word of the authorised officer against that of the accused person. “Non-compliance in this regard would entail release of the arrested person straightaway, as held in [Tamil Nadu minister] V Senthil Balaji [case],” it said, reported Bar and Bench.

The judges also said that Article 22(1) of the Constitution protects people from such action by allowing them to seek legal counsel based on written grounds of arrest.

“ED’s investigating officer merely read out the grounds of arrest,” the Supreme Court said. “This does not fulfil the mandate of Article 22(1) of the Constitution and Section 19(1) of the PMLA. The clandestine conduct of ED in proceeding against the accused does not commend of satisfaction as it reeks of arbitrariness.”

In the money-laundering case, the central agency has accused the brothers of diverting over Rs 400 crore through several shell companies. It has also alleged that investigations showed that M3M, along with IREO, tried to manipulate the trial court proceedings in the Enforcement Directorate cases against them by indirectly bribing special judge Sudhir Parmar, who was later suspended on April 27.