ED Conducting ‘Fishing’ Enquiries To Implicate People in Money Laundering Cases: Senior Advocate C Aryama Sundaram

“The Enforcement Directorate proceeds under the Prevention of Money Laundering Act as though it is conducting a fishing expedition. This act cannot be invoked on basis of surmise. Summons cannot be issued under Section 50 to unearth the existence of facts and information that would allow the filing of an enforcement case information report. A first information report, for example, is filed only when information is received as to an offence. There must be a dead body to start with. You cannot file an FIR and then say, let us figure out if there was a crime. The same applies with respect to an ED investigation.”

A bench of Justices Krishna Murari and V Ramasubramanian was hearing a batch of appeals against an order of the Madras High Court ordering a fresh enquiry into the cash-for-jobs scam, in which Tamil Nadu minister, V Senthil Balaji, among others, has been accused of accepting bribes from job aspirants in exchange of appointments to the state transport corporation between 2011 and 2015.

Unlike senior advocate and Member of Parliament Kapil Sibal who told the top court yesterday that the Supreme Court’s July 2022 decision in Vijay Madanlal Choudhary needed a ‘relook’, Sundaram argued that he would read the judgement “as it stood” to support his interpretation of the act. “This is not to detract from what Mr Sibal argued but as an alternative. I would like to proceed on the scheme of the 2002 Act and how my interpretation is supported by the Vijay Madanlal Choudhary judgement,” Sundaram told the bench.

Sundaram alleged that the ED routinely conducted investigations into alleged money laundering charges without the necessary jurisdictional fact of the existence of identified property or ill-gotten gains in the hands of the accused. These were the sine qua non of an offence of money laundering, he said. In the absence of these, the anti-money laundering statute could not be invoked. “There may be a wrongdoer who is punished for a predicate offence, but this act cannot be invoked on the basis of the existence of an offence, in the absence of the existence of property or proceeds of crime,” the senior counsel explained. He added, “This error is made by the Enforcement Directorate not just in this case, but in all cases.” He also said:

“If summons can be issued under the PMLA without the existence of these jurisdictional facts, and so that the Enforcement Directorate could conduct fishing enquiries, the act would become draconian. As it is, the Prevention of Money Laundering Act by itself is harsh. It would become unreasonable and violative of Article 14 if the ED is allowed to exercise such unbridled power. It would allow the ED to pick up anyone and demand that they reveal details with respect to properties they have, irrespective of whether the directorate itself knew of such property. Not only this, but the threat of perjury also hangs over the person.”

On Monday, Sibal said that the application of the Prevention of Money Laundering Act and the directorate’s modus operandi were not only against all ‘canons of justice’, but also violative of the principles of federalism. “The PMLA is the most draconian statute that has ever seen the light of day in the country,” the senior counsel told the bench.

Case Title

Y. Balaji v. Karthik Desari & Anr. | Special Leave Petition (Criminal) No. 12779-12781 of 2022 and other connected matters