Despite Weaponization Of ED Against Opposition, Supreme Court Sees No Urgency In Deciding PMLA Constitutional Issues

08 Jul 2024 22 min read  Share

Three critical cases impacting the PMLA and its use remained pending before the Supreme Court of India for the past 12 to 55 months. Despite promising to address the larger concern around the weaponization of these laws against political dissidents, Chief Justice D Y Chandrachud has yet to list them for hearing. At least five other PMLA matters have delayed or diluted the few safeguards. These events have raised concerns about the protection of individual liberties, with legal experts highlighting the urgent need for judicial intervention to ensure fair application of the laws.

Supreme Court of India/WIKIMEDIA COMMONS

Delhi: At the Oxford Union Society lecture on 4 June 2024, Chief Justice of India D Y Chandrachud emphasised the important role of courts in providing a space for “democratic and reasoned dialogue.” He highlighted how “the State may adopt a purpose-oriented approach [of larger good of society] while enacting laws, which may, have a consequential impact on constitutional values such as justice, equality, liberty, dignity, and individual autonomy.”

Referencing this, Chief Justice Chandrachud stressed on the importance of the role of courts when “the State may be unwilling to balance [individual] rights against weighty purposes.”

“This is where the courts step in,” he said. 

Yet, four months away from the end of his 24-month tenure as country’s top judge, the Supreme Court under Chief Justice Chandrachud has not stepped in to decide three long-pending crucial cases that experts said have a “direct nexus with individual rights,” including liberty.

These cases that directly challenge or raise questions about the constitutionality of various provisions of the “draconianPrevention of Money Laundering Act 2002 (PMLA) and impact its administration have remained unheard for the past 12 to 55 months.

Legal experts told Article 14 the “lack of finality” on crucial questions about the rule of law and protection of fundamental rights that these cases raise was “directly impacting” the rights of accused persons as guaranteed under the Constitution of India.

The Supreme Court’s refusal to take up these cases for deciding led to a situation where Prime Minister Narendra Modi and his government were accused of deploying the investigative agency PMLA empowers—the Enforcement Directorate (ED)—in a “selective and targeted” manner to cull political opponents and topple opposition-led state governments. Though Modi has returned as the Prime Minister, albeit in a coalition this time, many do not anticipate a change in the situation if the Supreme Court continues to ignore these cases selectively.

In at least five other cases concerning the PMLA and the ED, the court has postponed hearings despite urgent requests for them and passed final orders that have weakened crucial safeguards, like the time period within which the ED is to provide written grounds of arrest. Another of its orders has been criticised as “bizarre” by experts for its unfair treatment of PMLA-accused individuals.

“The issues involved in these cases have a direct nexus with the liberty of the individuals,” senior advocate Devadatt Kamat said.

Although Chief Justice Chandrachud in his Oxford lecture emphasised that a dehumanising law could be humanised by a judge by focussing on the law’s far-reaching impact on society and not just the legislative intent behind it, senior members of the bar, like the former law minister of India and current president of the Supreme Court Bar Association, Kapil Sibal, have criticised the Supreme Court for “not looking at the whole law [PMLA] and the impact of it on the polity of the country”.

Weaponizing The Law 

Compared to the Indian National Congress (INC)-led government between 2004 and 2014, India witnessed a fourfold jump in ED cases against politicians under the Bharatiya Janata Party (BJP)-led government between 2014 and 2022.

An investigation by The Indian Express revealed that 121 prominent politicians had been under ED probe since 2014 as of September 2022. Of them, at least 115—or 95% of them—were from the opposition and had been booked, raided, questioned, or arrested by the ED.

Overall, the number of cases concluded remains meagre—the ED could only dispose of 25 cases, or 0.42% of the total registered 5,906 cases, until January 2023.

Critics said that Modi’s government is instead using the ED to intimidate, arrest and incarcerate opposition leaders.

According to a report by The Indian Express, at least 23 prominent opposition politicians facing corruption charges from central agencies such as the ED have received relief after joining the BJP.

Three of these cases were closed, while the remaining 20 have either been stalled or put into cold storage following their switch.

The opposition termed this the “washing machine effect”—the process through which politicians accused of corruption avoid legal consequences by resigning from their party and joining the BJP.

Those charged under the PMLA often remain incarcerated for a long period of time, given the law’s stringent bail provisions endorsed by the Supreme Court in a July 2022 judgment. 

Experts said the law makes it impossible for courts to grant bail.

Opposition leaders alleged that the BJP is using the ED to paralyse state administrations by intimidating state bureaucrats (here and here).

On 2 April this year, the ED successfully challenged a Madras High Court order that granted relief to the opposition-ruled Tamil Nadu government against summonses issued by the agency to its district collectors in alleged illegal sand mining cases.

The state had argued that the ED lacked jurisdiction, but the bench of Justices Bela Madhurya Trivedi and Pankaj Mithal rejected the state’s arguments.

Supreme Court’s Indifference 

In March 2023, 14 opposition parties, including the INC and AAP, filed a petition before the Supreme Court alleging “arbitrary use” of the ED and Central Bureau of Investigation (CBI) against its leaders.

The petitioners asked the court to lay down arrest, remand, and bail guidelines.

“Mass arrests are a threat to democracy,” senior advocate Abhishek Manu Singhvi told the bench presided by Chief Justice of India D Y Chandrachud, consisting of Justice J B Pardiwala.

“It is a sign of authoritarianism. The process becomes the punishment…skewed application of the law has a chilling effect on our democracy,” Singhvi said. 

On 5 April 2023, the bench refused to entertain the petition, with Chief Justice Chandrachud stating there could not be exclusive guidelines only for politicians.

More importantly, the Chief Justice asked the petitioners to approach the court in individual cases where there has been “a specific instance or instances of the agencies being used to selectively target leaders”.

“On the basis of the law that we have laid down, we can evolve general principles with respect to the facts of the [individual] case,” the bench promised.

However, more than 15 months later and 20 months into his 24-month tenure, Chief Justice Chandrachud, as master of roster, has failed to list any of the at least three pending challenges that experts said could help evolve these general principles concerning the PMLA.

The Chief Justice’s privilege and administrative power to constitute benches and allocate cases at their absolute discretion is called the ‘master of roster’ system.

Arrests and raids have, however, continued unabated amid loud allegations of weaponization of agencies. 

At least two top leaders have been arrested by the ED since April 2023—Arvind Kejriwal, the sitting Chief Minister of Delhi, was arrested on 21 March 2024 in the alleged 100-crore ‘Delhi Liquor Scam’ and Hemant Soren, who resigned as the Chief Minister of Jharkhand shortly before his arrest, on 31 January 2024 in an alleged land scam case. 

Kejriwal secured interim bail from the Supreme Court on 10 May for election campaigning but was asked to surrender on 2 June. A few days before his surrender, the Supreme Court Registry, under Chief Justice Chandrachud’s direction, did not admit his application for extension on health grounds because it was unmaintainable. On 20 June, he was granted bail by a lower court, only to be stayed by the Delhi High Court the next day. On 26 June, the day the Supreme Court was set to hear his appeal, the CBI arrested him in the same case leading him to withdraw his petition from the apex court and return with a fresh challenge.

Soren on the other hand, after several failed attempts, obtained bail from the Jharkhand High Court on 28 June after the judge found he had no prima-facie reasons to find him guilty. 

Cases That Strike At The PMLA

Three significant legal challenges are currently before the Supreme Court, focusing on the interpretation and application of key aspects of the PMLA.

These cases, which have been pending listing, are pivotal in addressing fundamental questions regarding arrest, remand, and bail procedures under the anti-money laundering law.

Experts anticipate far-reaching implications for legal standards and practices related to financial crimes and the country’s broader landscape of law enforcement and judicial process when these cases are finally decided.

“If the decisions are in favour of those opposing the State, it could potentially change the ambit of ED’s powers,” Shally Bhasin, advocate on record at the Supreme Court, said.

Judgment Upholding the PMLA

Chief Justice Chandrachud has not listed the review petitions against a July 2022 judgment upholding the constitutionality of various provisions of the PMLA.

A three-judge bench headed by Justice A M Khanwilkar—now the Lokpal of India—and consisting of Justice Dinesh Maheshwari and Justice C T Ravikumar had upheld some of the most contentious and controversial ED powers relating to arrest, attachment, search, and seizure that experts have termed “too wide.”

Their judgment validated the ED’s power to search any property and seize any record, even if there is no FIR in the case. Although only high-ranking officers of the ED can authorise such a search and seizure, obtaining a warrant from a court is not required—a “reason to believe” suffices.

The court also upheld the requirement that an accused prove that they are prima-facie not guilty and will not commit further offence to be granted bail—termed the ‘twin condition of bail’—thus shifting the burden of proof on the accused. 

In 2017, a bench of Justices Rohinton F Nariman and S K Kaul held this requirement to be unconstitutional. However, the centre reintroduced this condition through an amendment to the PMLA in 2018. Around eight months after Justice Khanwilkar’s bench upheld this provision, the Kerala High Court termed it “very, very dangerous”.

“This is in the teeth of the basic principle of criminal law of ‘presumption of innocence’. On the contrary, proceedings under the PMLA proceed with a ‘presumption of guilt’ against the accused,” said Kamat, the senior advocate.

The judgment also held that there is no legal requirement to provide a copy of the ECIR—the equivalent of an FIR—to the accused. Critics said this prevented a person from effectively defending themself.

Shortly after the judgment was delivered, a review petition was filed before the Supreme Court challenging some of its findings..

On 25 August 2022, a bench comprising the then Chief Justice N V Ramana and Justices Maheshwari and Ravikumar admitted the review petition and stated that “at least two of the issues” require reconsideration—the ECIR and the reversal of the presumption of innocence.

While Chief Justice Ramana retired the next day, the matter was taken up once in the short two-month tenure of Chief Justice U U Lalit, who directed the matter to be listed on 30 November 2022.

After Chandrachud took over as the Chief Justice on 8 November 2022, the matter was never listed either on that date or after.

“If the Supreme Court is to overturn the Vijay Madanlal judgment and declare that Section 19 (power to arrest) or 45 (bail conditions) of the PMLA are unconstitutional, a lot of people who are currently languishing in jails as undertrial prisoners would find it much easier to secure bails,” Kamat said.

Money Bill

Although Justice Khanwilkar’s judgment upheld the PMLA, it referred to the question of whether Modi’s government’s procedure to amend this law through the money bill route and introduce the stringent provisions was constitutional to a seven-judge bench.

Only specific types of financial matters, outlined in clauses (a) to (g) of Article 110(1) of the Indian constitution, can be certified as money bills. They can only be taxation, public expenditure, and appropriation of money from the Consolidated Fund of India.

A money bill can be introduced only in the Lok Sabha after the Speaker’s certification.

The money bill is unique because unlike other legislations, such a bill is not required to be put to vote in the Rajya Sabha—the upper house can only make recommendations—not amend or reject—within 14 days, else the bill will automatically stand passed.

A government that may lack a majority in the Rajya Sabha can potentially forgo its scrutiny by wrongly certifying normal bills as money bills.

Experts said that Modi’s government passed some of the most “draconian” changes to the PMLA, like bringing back the reverse burden of proof to an accused’s disadvantage, through the money bill route—not the general legislative route. 

The PMLA has been amended through 5 money bills—the Finance Act of 2015, the Finance Act of 2016, the Finance Act of 2018, the Finance Act (No. 1) of 2019, and the Finance Act (No. 2) of 2019. 

Cumulatively, the amendments gave the ED its “unbridled powers”.

Petitioners before the Supreme Court had contended that the PMLA could not have been amended via the money bill route as the amendments do not relate to taxation or other conditions outlined in Article 110(1) of the Indian constitution.

The validity of this procedure adopted to amend the PMLA is now tagged to a November 2019 reference made by a five-judge constitution bench on the larger issue of the scope of the money bill.

In November 2019, in the case of Roger Mathew vs. South Indian Bank Ltd, a five-judge bench headed by the then Chief Justice of India Ranjan Gogoi referred to a larger bench the issue and question of whether amendments of this nature could be passed as a money bill.

In that case, the petitioners argued that at least one of the provisions in a bill must fall under the conditions set under Article 110(1) and that the rest of the provisions must be “incidental”—that is, support or relate to the bill’s main provision. Lacking this, they said, the other provisions that are not incidental to the main provision are unconstitutional.

On the other hand, the government of India said that it is enough if the dominant provision of the bill that forms its core falls under one of the conditions. 

“Other minor provisions, even if not strictly incidental, could take the dominant colour and could be passed along with it as a Money Bill,” the then Attorney-General for India, K K Venugopal, had said.

“In the event that the Money Bill verdict is unfavourable to the centre,” Bhasin, the advocate on record, said, “it would cause many crucial amendments to the PMLA to fall foul of the constitution.” 

This, in turn, would impact several petitions pending in various courts and the ongoing investigations.

Still Not Heard

On 6 October 2023, Chief Justice Chandrachud remarked in open court that he would list the issue of money bills “next week.” 

The next day, a notice issued by the Supreme Court registry listed six matters, including this one, for directions of the seven-judge bench on 12 October 2023.

On the day, petitioners urged the court to “prioritise” the money bill matter—including the PMLA reference from Khanwilkar’s bench—as it was a “live issue,” hinting at the arrests of political dissidents.

Solicitor-General Tushar Mehta opposed the request, saying the court ought not to decide priorities based on petitioners’ “political exigencies”.

A circular issued by the Supreme Court on 22 December 2023 notified that the case would be listed for hearing on 30 January 2024, but that did not happen.

Importantly, Chief Justice Chandrachud, as a judge in the Supreme Court, has already dealt with the issue of money bill, in his dissenting judgment striking down as “unconstitutional” the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act 2016—which was also passed as a money bill.

Stating that a money bill must “only contain” provisions that satisfy one or all conditions in sub-clauses (a) to (g) in Article 110(1), Justice Chandrachud held that “provisions which fall outside their scope will not qualify to be a Money Bill.”

“Passing of a Bill as a Money Bill, when it does not qualify for it, damages the delicate balance of bicameralism which is a part of the basic structure of the Constitution…It constitutes a fraud on the Constitution,” he had said.

Even during the Question & Answer session following his lecture at Oxford, Chief Justice Chandrachud talked about an “extremely important” stance taken by the Supreme Court on judicial review. Comparing the systems in the United Kingdom and India, he said that although procedural irregularities in passing of a law are not subject to challenge in India’s courts, substantive illegality can be. In other words, violations that go beyond procedural faults and infringe upon constitutional principles or fundamental rights can be called into question in the court of law.

Such a challenge, although limited, he said, was “extremely important.”

However, petitions assailing the substantive legality of amendments made to the PMLA through Money Bill route continue to remain pending before Chief Justice Chandrachud.

Kamat said that in the recent past, several instances of the Speaker abusing their powers under Article 110 to defeat the purpose of a bicameral constitutional scheme have come to light.

“If the issue of money bill is decided to hold that the speaker’s decision is not immune from judicial review and can be questioned on account of lack of transparency, arbitrariness and/or fairness, it will certainly be a welcome and much-needed change in protecting the ideals and scheme of the constitution,” he said.

The Right To Default Bail

The Supreme Court has not listed a case in which it effectively granted a stay over its own judgment, declaring the right to default bail a fundamental right.

In Ritu Chhabaria vs Union of India, a bench consisting of Justices Krishna Murari and Ravikumar ruled on 26 April 2023 that an accused person is entitled to default bail if the prosecution’s chargesheet is found to be incomplete and requires further investigation.

Under the Code of Criminal Procedure (CrPC) 1973 and now the Bharatiya Nagarik Suraksha Sanhita (BNSS) 2023, the stipulated time frame for an investigative agency to complete an investigation and file a charge sheet ranges from 60 to 90 days, depending on the type of case. 

If the agency fails, an accused is entitled to default bail.

However, investigative agencies routinely file chargesheets despite not completing the probe just to defeat the right to default bail, resulting in an accused remaining incarcerated for a long time.

Justice Murari’s bench noted that a chargesheet that explicitly states the investigation is pending cannot, under any circumstances, be used to undermine the right to default bail.

The bench further held that the right of an accused to default bail is a fundamental right.

Bhasin, the advocate on record, said that the ED cannot finish an investigation within the 60-day deadline given in the PMLA to file a complaint (equivalent to a chargesheet). 

This entitles the arrested to be released on default bail after 60 days.

“However, the ED is filing a half-baked complaint (chargesheet) against the person in custody with the sole intention of defeating the accused’s right to default bail and continue his incarceration,” she said. “In that context, the judgment is progressive and important since it protects the accused’s rights and ensures they are not incarcerated for long periods.”

Four days after the judgment, on 1 May 2023,  the ED, through Solicitor General Mehta, challenged a Delhi High Court order granting default bail to a PMLA accused on the basis of the Ritu Chhabaria judgment. The matter and a recall application were mentioned for urgent hearing before Chief Justice Chandrachud-led two-judge bench consisting of Justice Pardiwala. 

Amongst other grounds, Solicitor General Mehta stated that the judgment raises “practical difficulties” for central agencies, like ED, as not all investigations could be finished in 60 or 90 days.

Mehta proposed immediately keeping the judgment in abeyance, asking the court to order that the “judgment may not be relied upon,” but Chief Justice Chandrachud refused, saying keeping the judgment in abeyance is “far-fetched”. 

Chandrachud noted that a court’s judgment cannot be stayed during the interim period before considering the recall application.

However, in the written order, his bench directed that the applications for default bail filed across the country based on the Ritu Chhabaria judgment be “deferred” until 4 May. 

This was later extended until 12 May.

This order, passed by a two-judge bench effectively staying a judgment of another two-judge bench, was widely criticised for “abuse of power” and for creating an “appellate court within the Supreme Court itself.”

Although an equal strength bench could disagree with another bench’s judgment, this disagreement must be well reasoned and recorded, which this very short order lacks.

Experts said that a bench of equal strength cannot simply overrule it. 

“If it believes that a previous case has been wrongly decided, it is required to refer the decision to a larger bench, which can then reconsider it. It is settled law,” Kamat told this reporter. 

But the Chief Justice’s bench did neither.

On 12 May 2023, Chief Justice Chandrachud and Justice Pardiwala sat in a larger bench of three judges, including Justice P S Narasimha, to consider the centre’s recall application. The bench ordered that courts could still consider granting default bail but should not rely upon the Ritu Chhabaria judgment to do so—effectively staying the judgment.

This short order was again bereft of any reasoning why the Bench deemed it fit to stay the judgment.

The principles laid down by the Ritu Chhabaria  judgment, like default bail being fundamental right and an absolute proposition that it has to be granted when chargesheet mentions investigation is still ongoing, is affected by this stay. While courts can still grant bail, lower courts especially are  hesitant when "investigation is ongoing". The judgment would have given them the force of law to grant bail. 

So far as Justice Khanna's statements r concerned, they're just oral remarks, the questions to ED not even reproduced in the order of that day. No force of law. 

Those opposing the centre’s recall application questioned why the centre did not file a review petition that would have gone to the same bench, which is the only available remedy in such cases.

“We are in the process of filing a review in the judgment,” Solicitor General Mehta had stated.

Although the Chief Justice’s bench ordered the matter to be listed in July 2023, the case has not been listed ever since. It is also unknown if the centre has filed a review petition against the judgment. 

Matters Pushed Down,  Diluted 

Although the Supreme Court asked political leaders to approach it in individual cases where there has been a specific instance or instances of the agencies being used to target leaders, some matters that did end up there have been pushed down the docket, leading to the continued incarceration of the accused.

Petitions seeking reconsideration of certain “problematic aspects” of the Supreme Court’s July 2022 PMLA validity judgment are being heard by a three-judge ‘special bench’ consisting of Justices Sanjiv Khanna, M M Sundresh and Bela M Trivedi.

These petitions are different from the review petitions filed against the Justice Khanwilkar-led three-judge bench PMLA validity judgment, which have not been listed for a hearing, as explained earlier in this story.

However, the petitioners in this ‘reconsideration’ case have asked the court to refer the matter to a larger bench since the current three-judge bench led by Justice Khanna cannot overturn another three-judge bench’s judgment.

On 19 March 2024, Justice Khanna’s bench was unwilling to hear the matter and listed it for the latter half of July. 

“I can only urge that there is a real urgency in this because of factors that your Lordship is aware of,” Senior Advocate Sibal reportedly told the bench.

“We can’t give you a date before that,” Justice Khanna replied.

On 22 March this year, member of the Telangana legislative council K Kavitha, arrested by the ED in the same case as Chief Minister Kejriwal, approached the Supreme Court challenging the legality of her arrest by ED, and the constitutionality of certain provisions of the PMLA. Justice Khanna’s bench did not accede to the first request and asked Kavitha to approach the trial court for relief. For the latter, the court tagged her petition along with the PMLA reconsideration case which is posted for July 2024.

While Chief Minister Kejriwal continues to be incarcerated, his challenge to the legality of his arrest by the ED is pending a judgment since 17 May, after it was reserved by a Justice Khanna-led bench.

Another judgment of the Supreme Court, deemed “progressive” by experts, was diluted by another bench.

A 3 October 2023 judgment by a bench of Justices A S Bopanna and Sanjay Kumar that held that the ED should furnish the grounds of arrest to the accused in writing was diluted by a bench of Justices Trivedi and  Satish Chandra Sharma on 15 December who held that such grounds need not be provided in writing at the time of arrest but only within 24 hours.

Seeking Government Cooperation

In one PMLA case, experts have noted that the Supreme Court actively sought the government’s cooperation to avoid ruling against them.

On 2 April this year, the Supreme Court’s bench of Justices Khanna, Dipankar Datta and P B Varale granted bail to AAP’s Rajya Sabha Member of Parliament Sanjay Singh in the alleged Delhi Liquor Scam case.

However, as the court’s order noted, the ED conceded that they no longer needed Singh in their custody. This was after Justice Khanna actively asked the ED’s lawyer to seek instructions on whether they still needed Singh in their custody.

“Please keep in mind that if we are with him [Sanjay Singh], we are required to record in terms of section 45 [bail provision] that he has prima facie not committed an offence. That could have its own ramifications in the trial,” Justice Khanna reportedly told the ED.

It was only after this heads-up that ED’s counsel conceded later in the day to avoid a negative judgment that could have diluted ED’s entire case and possibly its powers.

“If you pause to think about this for a moment,” legal scholar Gautam Bhatia wrote on his blog, “there is something bizarre about a Court actively seeking the State’s cooperation so as to avoid ruling against the State. This is no part of the functions of a Court of law.”

Instead, Bhatia said, “It is exactly the kind of case where it is incumbent upon the Court to hold the State to be legal and constitutional standards and to make it abundantly clear—through written, enforceable judicial orders—if the State is failing in its obligations.”

“Again, one would have thought that if you have spent six months in jail without trial, this would be the least you are entitled to from a court of law,” Bhatia said.

However, the order in Singh’s case, who was in jail for six months, is short and avoids any reasoning.

Justice Khanna’s bench instead stated that the order should “not be treated as a precedent” in other cases.

“For a bench to say that its order should not be treated as precedent directly goes against Article 141, which mandates that the law laid down by the Supreme Court is binding throughout the country,” Kamat said.

(Saurav Das is an independent investigative journalist based in New Delhi, India)