‘Even Private Persons Can Make Arrests, But Can They Seek Police Remand?’: Sibal In Supreme Court Argues Against ED Custody Of Senthil Balaji

“The investigation by the Enforcement Directorate is an inquiry for the purposes of the Prevention of Money Laundering Act. In other words, the ED officers conduct inquiries, gather evidence, and make arrests once a conclusion of guilt is reached before filing a complaint. All statements recorded during this inquiry are admissible. Now, in this context, the question arises: If ED officers are neither police officers, nor officers in charge of a police station, and the ‘investigation’ is in the nature of an inquiry, then under what power will they seek police remand?”

A bench of Justices AS Bopanna and MM Sundresh was hearing a batch of pleas in connection with the ED seeking custody of DMK leader and Tamil Nadu minister Senthil Balaji in connection with a cash-for-jobs scam in the state. The minister and his wife have both filed separate petitions challenging a verdict of the Madras High Court holding that the central agency was entitled to take him into custody.

Sibal argued before the apex court bench today that the Enforcement Directorate seeking custody of the minister was illegal inasmuch as they were not ‘police officers’ under the Prevention of Money Laundering Act, as per the decision of the Supreme Court in the 2022 Vijay Madanlal Choudhary judgement. In response to a query from the bench as to why the central agency could not seek police remand even though it had the power to make an arrest, Sibal said:

“In regulatory statutes, the police is given the power of remand and not the officer of the concerned agency. Under the Customs Act or Foreign Exchange Regulation Act, there is still a specific provision which allows an officer, as the officer in charge of a police station, to grant bail in case of bailable offences. For non-bailable offences and further investigation, the officer will hand it over to the police. Even a provision like this does not exist in the PMLA.”

To illustrate his contention that the power of arrest did not necessarily confer on an agency the power to seek police remand, Sibal used the examples of the Customs Act, 1962, and the Foreign Exchange Regulation Act, 1973:

“Can a FERA officer seek police remand? He has the power to arrest. No. Can a Customs officer – who also has the power to arrest – seek police remand? The answer is no. In a customs case, for example, after a person is caught and their statement recorded, they are handed over to the police authority who seek remand. Under the Code of Criminal Procedure, even a private person can make an arrest. Will he get remand? No. There is no such law. A person has to be a police officer or an officer in charge of a police station in order to seek remand.”

“In my opinion, the Vijay Madanlal Choudhary judgement is wrong and the ED officers are police officers,” the senior counsel argued, before quickly adding, “But that is for another court to decide. We cannot travel beyond the judgement.” In fact, the contentions advanced on behalf of the petitioners were based on the 2022 judgement, he insisted. He told the bench that the Vijay Madanlal Choudhary bench had rejected his argument that ED officers were police officers since they had the power to investigate:

“There are two kinds of statutes in this area – regulatory statutes like the Customs Act and the Foreign Exchange Regulation Act; and penal statutes like the Narcotic Drugs and Psychotropic Substances Act. I had contended before the court that ED officers are police officers, subject to such provisions in PMLA which are inconsistent with the Code of Criminal Procedure. This is because they have been given the powers to investigate, arrest, and file a complaint in the nature of a charge sheet. This argument was rejected. The court held that the PMLA was a regulatory statute intended to protect the proceeds of crime and ED officers were not police officers. It had also held that ‘investigation’ and ‘inquiry’ were interchangeable.”

Sibal argued that the Enforcement Directorate’s insistence on taking Balaji into custody flew in the face of the Vijay Madanlal Choudhary judgement, in which the agency had received a favourable ruling:

“They now say, after having argued and gotten a judgement that the ED officers are not police officers, that word ‘investigation’ is there. So either Vijay Madanlal is right, or they are right. They cannot change their position. This entire scheme under the PMLA is inconsistent with the Code of Criminal Procedure. Now, they cannot bring in CrPC and insist on police remand for the purposes of an investigation.”

Sibal again reiterated that no provision under the PMLA allowed the ED to seek the police remand of Senthil Balaji, saying:

“There is no provision under the Prevention of Money Laundering Act to seek the remand of an accused into its own custody in same manner as a police officer or an officer in charge of police station may do, in exercise of Section 167 of the Code of Criminal Procedure. If an ED officer is not a police officer when a person accused of predicate offence has to compulsorily answer questions after being summoned or face prosecution – statements which are admissible in a court of law – then at what stage, do they become a police officer?”

“Law cannot be made to measure. That can happen only when the tailor is designing your clothes. The law must apply to every situation,” Sibal told the bench.

“We are not concerned with the person involved,” Justice Bopanna concurred.

“Therefore, let us forget the person,” Sibal contended, “This court has to lay down the law for posterity. This is why I am rising above the individual issue here and trying to explain the whole purpose.” The senior counsel added, “The question is whether the ED is entitled to police remand at this stage. Can a police remand be sought or will it only be a judicial remand? There is no judgement on this. This court will have to decide this in the context of the peculiar features of this act and in light of the judgement of this court, beyond which we cannot travel.”

In June, DMK leader V Senthil Balaji and cabinet minister in the MK Stalin-led Tamil Nadu government was arrested by the Enforcement Directorate for his alleged role in a cash-for-job scam in the state, which is believed to have taken place between 2011-2016 during his tenure as the transportation minister under the then-AIADMK regime. This development came after the Supreme Court in May set aside a direction of the Madras High Court staying the proceedings in the money laundering case lodged by the Enforcement Directorate, effectively removing all fetters to the ED investigation. The top court also gave a nod to the agency to include the offences under the Prevention of Corruption Act in the investigation.

In the same month, the Madras High Court denied interim bail to Balaji but allowed his family’s request to transfer him to a private hospital. Balaji was arrested by the central agency after an 18-hour-long extensive search and interrogation conducted at his official residence, his official chamber at the state secretariat and his brother’s residence. After the minister’s arrest, his wife filed a habeas corpus petition before the high court praying, inter alia, that the legislator be allowed to be shifted to a private hospital to undergo medical treatment.

The Enforcement Directorate challenged the high court agreeing to take the petition on board and passing an interim order before the Supreme Court, arguing that it was not maintainable. But a vacation bench of the top court adjourned the hearing in the central agency’s plea, choosing to wait for the high court to deliver its verdict first.

However, earlier in July, the high court delivered a split verdict. On the one hand, Justice Nisha Banu observed that the habeas corpus petition filed by Balaji’s family was maintainable since, inter alia, the ED officers did not have the powers of a station house officer under the Prevention of Money Laundering Act, and as such, could not have moved for the custody of the minister. On the other hand, Justice Bharatha Chakravarthy held that Balaji's arrest did not amount to illegal detention, observing not only that the ED officers were competent to seek custody, but also that Balaji’s family had not made out a case of illegal custody or a mechanical remand order, which would have warranted the interference of the high court by way of a habeas corpus petition.

Hours after this verdict, the State sought to convince the top court to hear the appeals and finally decide the matter. However, a bench headed by Justice Surya Kant refused to heed the request of the central agency to decide the questions of law involved in the case and opted to continue waiting for the outcome of the litigation pending before the high court, as it had done earlier. However, the Supreme Court requested the Madras High Court Chief Justice to place the habeas corpus petition filed by Senthil Balaji's wife Megala before a larger bench at the earliest for an expeditious decision.

Following this split verdict, Justice CV Karthikeyan, who was assigned by the chief justice to resolve the split decision in this habeas corpus petition, has settled the conflicting views by holding that the central agency was entitled to seek the custody of the minister in a money laundering case over an alleged cash-for-jobs scam in the state. Endorsing the view of Justice Chakravarthy, Justice Karthikeyan held that while officers of the Enforcement Directorate were not police officers, they were competent to take an accused into custody for further investigation and this right of the agency to take Senthil Balaji could not be denied.

After this, the Tamil Nadu minister moved the Supreme Court in appeal against the high court’s verdict, inter alia, challenging the Enforcement Directorate’s power to seek custody of an accused in the absence of a specific provision under the Prevention of Money Laundering Act, 2002. His wife, Megala, also filed an appeal against the Madras High Court’s decision.

Last week, the Supreme Court issued notice in the batch of pleas over Senthil Balaji’s arrest. In view of this, yesterday, the high court division bench of Justices Banu and Chakravarthy decided to close the proceedings in the habeas corpus petition pending before it, without recording any observation regarding the starting date of the minister’s custody.

Case Details

1. Megala v. The State | Special Leave Petition (Criminal) No. 8652-8653 of 2023
2. V Senthil Balaji v. The State | Diary No. 28176 of 2023
3. Directorate of Enforcement & Anr. v. Megala | Special Leave Petition (Criminal) No. 8750 of 2023