In a setback to the Enforcement Directorate (ED), the Supreme Court on Tuesday restrained the federal agency from investigating further or taking any coercive measures in connection with an alleged liquor syndicate scam in Chhattisgarh, noting 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.
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.
“Certainly, you cannot act on it until a court takes note of a predicate offence…Concerned authorities must stay their hands in all respect…there is nothing earth-shattering that’s going to happen,” directed a bench of justices Sanjay Kishan Kaul and Sudhanshu Dhulia, as it heard a batch of matters relating to the liquor syndicate case.
While additional solicitor general SV Raju, representing ED, vociferously opposed any restraining order against the agency, the lawyers for the Chhattisgarh government and some of the accused in the case argued that the agency lacked competence to probe the case since there is a no complaint of a predicate offence pending before any court of law.
Alleging that ED’s endeavour is to frame CM Baghel in the alleged scam, senior counsel Kapil Sibal, representing the Congress government in the state, submitted that at least three dozen officers of the state excise department have cited harassment and coercion by the agency.
Senior counsel Abhishek Manu Singhvi, appearing for some of the accused in the matter, complained that ED has been on the rampage, passing orders of provisional attachment of properties. “And all this is happening despite there being no predicate offence. How can they investigate? The only case that is pending as on date is an income tax case which is clearly not a scheduled offence empowering ED to step in,” Singhvi, assisted by advocate Arshdeep Singh Khurana, submitted.
Sibal and Singhvi also highlighted that a Delhi court had in April declined to take cognisance of any scheduled or predicate offence that ED can prosecute in this matter, citing lack of territorial jurisdiction. “The court returned their complaint. It took note of only the offences pertaining to income tax,” stressed Singhvi.
Countering their arguments, ASG Raju contended that the Delhi court returning the complaint cannot mean there is no predicate offence. Raju added that the money laundering case stems from a 2022 income tax department charge sheet filed against IAS officer Anil Tuteja and others before the Delhi court.
The bench, however, retorted: “But the court you moved returned it citing lack of jurisdiction. What have you done after that? Is there any order of any court taking cognisance of a predicate offence? The question here is what will happen when there is no predicate offence.”
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.
Raju banked on the same judgment to argue that ED’s powers to summon and provisionally attach properties have already been affirmed by the apex court.
But the bench pointed out that the ratification of the top court came for cases where predicate offences existed. “What would happen if there were no predicate offence? Will Vijay Madanlal Chaudhary apply at all?” it asked.
The bench then proceeded to restrain ED from further investigation and action in the matter. “Stay your hands…Wait for some time,” it told Raju.
The Chhattisgarh government moved its impleadment plea in May 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.
According to the agency, the scam 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.
Baghel, however, 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 the 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.
In March, a three-judge bench in the Supreme Court had 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 probe in the alleged liquor scam case, Tuteja and Anwar Dhebhar have also laid a challenge to 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.
