Who is afraid of the Enforcement Directorate?

Opposition says the agency is acting at the Union government’s behest

gallery-image Imaging: Binesh Sreedharan
gallery-image On the hunt: ED officials during a raid at Congress leader P. Chidambaram’s residence in Delhi in August 2019 | PTI

Mystique has long surrounded the Gandhis of the Congress, helping them survive many a political upheaval in India. That mystique, however, suffered a major blow when the Enforcement Directorate—the agency under the Union ministry of finance tasked with investigating money laundering cases and violations of foreign exchange regulations—summoned Congress president Sonia Gandhi and her son, Rahul Gandhi. The summonses were stamped and barcoded, and uploaded to the ED’s official website, so that both leaders could verify the authenticity of the documents.

The ED began issuing digitally verifiable summonses after complaints arose of people getting forged notices. Since the Gandhis were the first family of the Congress, the agency was extra cautious. It wanted to question Sonia and Rahul at its new, swanky headquarters—Pravartan Bhawan, on Abdul Kalam Road in Delhi. They are to be grilled in connection with their alleged role in a case related to the transfer of shares of Associated Journals Ltd (AJL), the holding company that publishes the newspaper National Herald, to another company called Young Indian Ltd.

Being a woman, Sonia could have asked ED officials to come to her residence for questioning. The rules permitted it, but she informed the ED that she would visit the headquarters on June 8, knowing fully well the political significance of such a move. Rahul wrote to the agency saying he was travelling; his questioning was postponed to June 13. Before Sonia, 75, could visit the ED office, though, she contracted Covid. She mailed the ED on the night of June 7, seeking postponement. Her advisers say she is determined on visiting Pravartan Bhawan.

The Gandhis have now joined a roll call of opposition leaders who are under the ED’s scanner, bringing the war of words between opposition parties and government to its zenith. West Bengal Chief Minister Mamata Banerjee, former Punjab chief minister Charanjit Singh Channi, Rajasthan Chief Minister Ashok Gehlot, the Abdullahs of Jammu and Kashmir, left leaders of Kerala, the Thackerays of Maharashtra, the Samajwadis of Uttar Pradesh, the Aam Aadmi Party’s Arvind Kejriwal and Jharkhand Chief Minister Hemant Soren have all cried foul because of ED investigations against them or their relatives or close political associates.

The opposition has responded by casting aspersions on the ED’s independence and integrity, saying the BJP-led Union government is using it to carry out a political witch hunt. But the ED maintains that it is functioning well within its jurisdiction, and that it has the backing of relevant laws and time-tested judicial processes.

“The law is focused on anything that relates to money laundering or the proceeds of crime,” said BJP spokesperson Nalin Kohli. “It does not see a person’s profession. Therefore, anyone of any profession can be the subject of an investigation.”

This is not the first time that the ED has questioned a top Congress leader. In July 2020, ED officials called on Ahmed Patel, MP and Sonia’s man Friday in the party, and questioned him for nearly ten hours straight in a money laundering case. The pandemic was raging and Patel, 70, informed the ED that the Union home ministry had advised senior citizens to stay indoors. The investigators then decided to visit Patel’s house to question him. In all, he was questioned four times for a total of 30 hours.

Patel, who died in November 2020, had termed it “political vendetta”, but the Congress chose not to escalate it into a major confrontation with the BJP. But now, with the ED having summoned Sonia and Rahul, the party is going full steam ahead in trying to defend them.

At the centre of the battle is the AJL case. According to the ED, Sonia and Rahul took over, allegedly by fraudulent means, commercial properties worth around Rs800 crore belonging to AJL. The agency says this was done by incorporating Young Indian Ltd in 2010, with a share capital of Rs5 lakh. In April this year, the ED questioned former Union minister Pawan Bansal and veteran Congress leader Mallikarjun Kharge. Bansal, treasurer of the All India Congress Committee, was questioned in his capacity as principal officer of AJL; Kharge was questioned on his role as principal officer for Young Indian Ltd. Under the Companies Act, the principal officer is responsible for ensuring statutory compliance of the companies.

The ED says AJL has properties in posh areas of Delhi, Mumbai, Patna, Lucknow and Panchkula in Haryana, most of which were allotted to it by Central and state governments over the decades for specific, non-profit purposes. The agency alleges that the Gandhis tried to profit from these properties by devising a scheme wherein shares of AJL were allotted to Young Indian Ltd.

The case has now set off a political slugfest, with opposition parties accusing the ED of acting as the BJP’s tool to exact political revenge. ED officers, however, maintain that they are merely doing their job. “I have seen that in cases where politicians, in connivance with other people, are involved in corrupt practices, thereby exploiting and misusing the country’s development funds, they call it political targeting,” said former ED director Karnal Singh.

The ED recently made a high-profile arrest in another case—Satyendar Jain, Delhi health minister, was taken into custody for allegedly laundering Rs16 crore. Jain is now lodged in one of the four lock-ups in the new Pravartan Bhawan complex. Earlier, it used facilities at the police stations near Tughlak Road, Parliament Street and Kamla Nagar.

Also under ED custody is Gurupada Majhi of West Bengal, arrested on charges of having received Rs66 crore from an alleged coal scam. The ED had earlier questioned Abhishek Banerjee, Trinamool Congress MP and Mamata Banerjee’s nephew, in connection with the case.

The ED cells housing Jain and Majhi have a raised platform for a bed, and no ceiling fan or air conditioner. There are vents to ensure air circulation, meals are cooked in the ED kitchen for inmates and staff. Jain has apparently asked for home-cooked food and the ED has obliged. Majhi, though, has to make do with dal, roti and vegetables. Because of quality-control issues, the ED does not serve nonvegetarian food.

The ED is the only Central agency in the country that does not require permission from the government to summon or prosecute politicians or government functionaries for committing economic offences like money laundering. While the mandate of the National Investigation Agency is limited to investigating terror-related crimes, the Delhi Police Special Establishment Act, 1946, makes it mandatory for the CBI to obtain the consent of state governments. And, when the CBI wants to prosecute corrupt officials, it requires sanction from concerned government departments.

The timing of the ED cases is making politicians see red. Opposition parties usually allege that raids by Central agencies like the ED and the CBI pick up pace before crucial polls, but the all-important 2024 general elections are still two years away. But the assembly elections in Himachal Pradesh and Gujarat are due later this year, while Rajasthan, Karnataka and Telangana go to the polls next year. The Aam Aadmi Party alleges political conspiracy behind the arrest of Jain, as he was the party’s election in-charge in Himachal Pradesh. In BJP-ruled Karnataka, Congress leader D.K. Shivakumar has been under the ED scanner for some time now. In Jammu and Kashmir, which is yet to hold its first assembly elections after the voiding of Article 370 in 2019, former chief ministers Omar and Farooq Abdullah were recently grilled by the ED.

Critics of the ED say it is time to rein in the agency’s aggression. They point to the fact that the ED has been focusing on keeping the accused in custody rather than actually proving the charges against them. Some of the accused who are currently in custody include NCP leaders Anil Deshmukh and Nawab Malik, and Channi’s nephew Bhupinder Singh Honey. Politicians who spent long periods in judicial custody because of ED cases include Congress leaders P. Chidambaram (more than 100 days) and D.K. Shivakumar (around 80 days), and former Maharashtra chief minister Chhagan Bhujbal (more than two years).

Around 250 petitions have been filed in the Supreme Court challenging the ED’s powers under the Prevention of Money Laundering Act (PMLA), 2002, to summon and arrest suspects, and carry out searches and seizures. Leading this legal charge is Rajya Sabha member and senior advocate Kapil Sibal, who has represented several accused in ED cases such as Deshmukh, Malik, Shivakumar, Abhishek Banerjee, Chidambaram and his son, Karti, and the Jharkhand government.

“There is a lack of transparency in the entire process of investigation by the ED,” Sibal told THE WEEK. “Ideally, the ED should step in only when the state police or any other investigating agency accesses through investigation some prima facie evidence of money laundering.”

Satya Prakash, former deputy legal advisor of the ED, said the petitions against the ED had the effect of slowing down the investigations, as officers have to defend themselves in court. “The common man may not have the money to get into endless litigations, but the politician does. Officers are spending six to eight hours every other day battling court cases,” he said.

According to Kohli, even though politicians who are under the ED scanner are crying foul, they have not been getting any legal relief. “This leads to the counterargument that they are making attempts to cover up unexplained, high-value transactions that fall within the PMLA’s ambit,” he said.

Opposition leaders say the government has been using the PMLA as a tool to harass political rivals. “Ultimately, the Supreme Court should either strike down the law or moderate its draconian provisions,” said Saugata Roy, Trinamool Congress MP.

Tanvir Ahmed Mir, lead counsel in several petitions against the ED, said the PMLA suffers from inherent problems such as giving the ED broad powers to arrest the accused. Also, the government gave new teeth to the law in 2019 by taking the money bill route to pass amendments. “The changes to the law should have been discussed in both the houses of Parliament, but that did not happen. It is the convenient use of the law that makes it draconian,” he said.

Opposition parties have started taking counteractions to stop ED in its tracks. In March, ED officers inquiring into the alleged Rs1,300-crore coal scam in West Bengal were served a notice by the West Bengal Police under section 160 of the Code of Criminal Procedure (power to police officer to require attendance of witnesses). The officers subsequently moved Delhi High Court and obtained a stay order. The court also asked the state government to ensure that the ED team had police protection when they visited the state.

Last year, the Kerala government constituted a judicial commission to probe whether deliberate attempts were made by ED officials to implicate Chief Minister Pinarayi Vijayan in a case related to gold smuggling in which a senior bureaucrat was implicated. The ED’s high-profile inquiry in the case happened during the run-up to the assembly polls in the state, prompting Vijayan to call it a “political ploy” to taint his government. Vijayan, who came back to power, however, received a setback when the Kerala High Court stayed the judicial inquiry.

The PMLA, which is at the centre of this slugfest, is interestingly a product of both the BJP-led National Democratic Alliance and the Congress-led United Progressive Alliance. It is the first law in independent India to allow the confiscation of financial proceeds from economic crimes. The PMLA was enacted in 2002 by the A.B. Vajpayee government, but its rules were framed in 2005 by the Manmohan Singh government. Chidambaram was finance minister at the time. The PMLA came into effect largely because of India’s commitment to the United Nations General Assembly’s declaration in 1999 that money laundering was a serious threat to the integrity, sovereignty and financial systems of member nations.

Twenty years later, though, there are big questions about whether the legislation has turned into an unwieldy weapon. “The PMLA is a relatively new legislation and a judicial review is taking place. We have to see its outcome,” said Karnal Singh.

Interestingly, despite criticism that the ED is ‘trigger-happy’, the number of money-laundering cases that India registers every year remains low compared with other countries. Most countries have money laundering as a standalone offence, but in India, such cases are tied to other cases registered by the police or other law enforcement agencies.

“I like to call it the valentine act. [A PMLA case] always needs a partner. The predicate offence (the component offence of a larger crime) is that partner,” said Satya Prakash. According to him, the ED does not act on its own; rather, it is the FIR registered by the police or other law enforcement agencies that becomes the basis of the PMLA case. The ambivalence comes when the “valentine case” is withdrawn. “If there is no offence, why would the courts take cognisance? I have not come across a single case where the judiciary refused to admit the ED case,” said Satya Prakash.

ED officers say there is no selective targeting of opposition leaders, and that there have been cases in which BJP leaders were the accused. In 2020, the ED charged P.V.S. Sarma, former vice president of the BJP in Surat, for allegedly swindling government and private advertisements companies of Rs2.7 crore. “We are comparing apples and oranges, but it’s a mixed bag,” said an officer.

Come July, and a three-member special bench of the Supreme Court is expected to announce its verdict on 14 key legal issues raised by the petitioners. The verdict can impact the functioning of Central agencies like the ED, Customs and the Directorate of Revenue Intelligence (all three do not fall under the definition of “police agencies”) and their powers to carry out arrests, searches and seizures.

While the accused are hopeful of getting relief, the ED is confident that it will continue to have the judiciary’s backing to fight the ever-evolving nature of financial crimes. “The PMLA is a futuristic law,” said a senior ED officer. “It came into existence as part of the global efforts to prevent money laundering.”

Experts say any dilution of the law can impact its effectiveness, affecting India’s standing in the Financial Action Task Force, the international body that frames policies to combat money laundering and related crimes. They cite the example of Pakistan being put on the FATF’s grey list, which can have deep financial implications.

ED officials and politicians, however, agree on one thing—that provisions in the PMLA can be made more humane, because not everyone who is involved in a money-laundering case is an “accused”. “What about innocent buyers or investors who get affected? The process of restoring their property needs to be speeded up,” said an official.

Also, the protracted trials in PMLA cases can be a punishment in itself. Such cases are often put on the back-burner because courts, at times, wait for years for the predicate offence to be proved. This has resulted in long delays in trials in money-laundering cases, which in turn has contributed to the ED’s poor conviction rate.

What the ED is caught in, say experts, is really an image crisis.

The agency has been walking a tightrope to safeguard its integrity by speeding up investigations and court procedures. The need of the hour could be systemic fixes—and not shrill calls to throw the baby out with the bathwater.