Supreme Court Upholds ED’s Power to Summon Under PMLA: Abhishek Banerjee vs. Directorate of Enforcement (2024)

Introduction

Date of the Judgment: 09 September 2024
Citation: 2024 INSC 668
Judges: Bela M. Trivedi, J. and Satish Chandra Sharma, J.

Can the Enforcement Directorate (ED) compel individuals to appear at their offices in Delhi, even if they reside elsewhere? The Supreme Court of India recently addressed this question in a case involving allegations of money laundering. The court examined the extent of the ED’s powers under the Prevention of Money Laundering Act, 2002 (PMLA), and whether these powers are consistent with the fundamental rights guaranteed by the Constitution. The core issue was whether the ED could summon individuals to appear in New Delhi, rather than their place of domicile, for questioning. The bench comprised Justices Bela M. Trivedi and Satish Chandra Sharma, who delivered a unanimous judgment.

Case Background

The case originated from an FIR registered by the Central Bureau of Investigation (CBI) in Kolkata on November 27, 2020, concerning illegal coal excavation and theft in the leasehold areas of Eastern Coalfields Limited (ECL). The FIR implicated Anup Majee, also known as Lala, and certain ECL employees. Following this, the ED registered an Enforcement Case Information Report (ECIR) on November 28, 2020, at its Head Investigative Unit in New Delhi. The investigation revealed a money laundering operation involving approximately ₹1300 crores. It was alleged that Inspector Ashok Mishra of Bankura Police Station received ₹168 crores from Anup Majee to be delivered to political figures, with these funds being transferred through vouchers to Delhi and overseas. The ED issued summons to Abhishek Banerjee and Rujira Banerjee, requiring their appearance in New Delhi for questioning, which led to the legal challenge.

Timeline

Arguments

Arguments by the Appellants:

• Abhishek Banerjee:

  • Section 50 of the PMLA lacks procedural guidelines for summoning, especially concerning territorial jurisdiction and the summoning of vulnerable individuals.
  • The absence of a clear procedure violates Article 21 of the Constitution, which requires a fair, just, and reasonable procedure established by law.
  • The Code of Criminal Procedure (CrPC) should apply to the PMLA to the extent that they are not inconsistent, and the CrPC requires a territorial nexus for investigations.
  • The ED has not shown why it cannot examine him in Kolkata, where the ED has a Zonal Office, and where he is a permanent resident.
  • Summons for personal appearance under PMLA is an abuse of process, as Section 91 of CrPC only deals with summons for production of documents.

• Rujira Banerjee:

  • Summoning her to Delhi is illegal and mala fide, as she is a homemaker and mother, and the ED has an office in Kolkata.
  • She is neither an accused in the predicate offense nor in the money laundering offense.
  • Protections for women under Section 160 of CrPC should apply to PMLA.
  • The procedure for summons under PMLA must be just and reasonable, as it curtails her right to life and liberty under Article 21.

Arguments by the Respondent (ED):

• Section 91 of CrPC does not have jurisdictional limits or provisions for women, minors, or the elderly, unlike Section 160 CrPC.
• Section 160 of CrPC applies to police investigations under Chapter XII, while Section 50 of PMLA is an inquiry, not an investigation, as per the ruling in Vijay Madanlal Choudhary vs. Union of India [ (2022) SCC OnLine SC 929 ].
• The ED has the power to summon any person for evidence or to produce records under Section 50 of PMLA.
• Statements under Section 50 of PMLA are admissible as evidence, unlike statements under Section 161 of CrPC.
• The Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005, provide the procedure for exercising power under Section 50 of PMLA.
• The ED has a nexus with Delhi as the proceeds of crime were transferred there.
• Regional offices of the ED are for administrative convenience and do not limit the scope of inquiry.
• Section 5 r/w Section 4(2) of CrPC allows special laws to regulate investigations.
• Section 50 of PMLA is gender-neutral, and no exceptions can be carved out for women.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the summons issued by the ED under Section 50 of the PMLA, requiring the appellants to appear in New Delhi, are valid.
2. Whether the provisions of the CrPC, specifically Section 160, relating to the attendance of witnesses, apply to proceedings under Section 50 of the PMLA.
3. Whether Section 50 of the PMLA violates Article 21 of the Constitution due to lack of procedural safeguards.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon:

• Vijay Madanlal Choudhary vs. Union of India [(2022) SCC OnLine SC 929] – Supreme Court of India: This case was heavily relied upon by the court to establish that the PMLA is a self-contained code and its provisions prevail over the CrPC where there is an inconsistency. The court also clarified the nature of proceedings under Section 50 of PMLA, stating it is an inquiry and not an investigation.
• Rana Ayyub vs. Directorate of Enforcement [(2023) 4 SCC 357] – Supreme Court of India: This case was cited to support the ED’s argument that a prosecution complaint could be filed in Delhi, establishing a nexus with the territory of Delhi.

Legal Provisions Considered:

• Section 4(2) of the Code of Criminal Procedure, 1973 (CrPC): This section states that offenses under other laws are dealt with according to the CrPC, but subject to any specific law regulating the manner of investigation.
• Section 5 of the CrPC: This section states that the CrPC does not affect any special or local law in force.
• Section 91 of the CrPC: This section deals with summons to produce documents or other things.
• Section 160 of the CrPC: This section empowers a police officer to require the attendance of witnesses during an investigation. It also provides certain protections for women and other vulnerable individuals.
• Section 161 of the CrPC: This section deals with the examination of witnesses by the police.
• Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA): This section grants powers to authorities regarding summons, production of documents, and giving evidence.
• Section 51 of the PMLA: This section deals with the jurisdiction of authorities and allows the Central Government to issue directions for the exercise of powers.
• Section 63 of the PMLA: This section provides punishment for false information or failure to give information.
• Section 65 of the PMLA: This section states that the provisions of the CrPC shall apply to proceedings under the PMLA, as far as they are not inconsistent with the PMLA.
• Section 71 of the PMLA: This section gives the PMLA an overriding effect over other laws.
• Rule 11 of the Prevention of Money-Laundering (Forms, Search and Seizure or Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005: This rule prescribes the form for issuing summons under Section 50 of PMLA.
• Section 174 of the Indian Penal Code (IPC): This section deals with the offense of non-attendance in obedience to an order from a public servant.

Authorities Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court relied heavily on Vijay Madanlal Choudhary vs. Union of India [(2022) SCC OnLine SC 929], stating that the PMLA is a self-contained code and its provisions prevail over the CrPC where there is an inconsistency. The Court also cited Rana Ayyub vs. Directorate of Enforcement [(2023) 4 SCC 357] to support the ED’s claim that a prosecution complaint could be filed in Delhi. The Court distinguished Section 91 of CrPC from Section 50 of PMLA, and held that Section 160 of CrPC does not apply to proceedings under Section 50 of PMLA. The court also considered the Prevention of Money Laundering Rules, 2005, and held that it provides the procedure for exercising power under Section 50 of PMLA.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the legal framework of the PMLA and the interpretation provided in Vijay Madanlal Choudhary vs. Union of India [(2022) SCC OnLine SC 929]. The Court emphasized that the PMLA is a self-contained code with an overriding effect over other laws, including the CrPC. The Court also highlighted that the proceedings under Section 50 of the PMLA are for inquiry and not investigation, and the statements made under this section are admissible in evidence. The Court also took into account the fact that the proceeds of crime were transferred to Delhi, establishing a nexus with the territory of Delhi. The Court also noted that the Appellant No.1 had a residence in Delhi, and that the regional offices of the ED are for administrative convenience and do not limit the scope of inquiry.

Fact:Law Ratio

The Court’s decision was more influenced by legal considerations (70%) than factual aspects (30%). The court focused on the interpretation of the PMLA and its overriding effect, the nature of proceedings under Section 50, and the admissibility of statements made under this section.

Logical Reasoning:

The Court did not consider any alternative interpretations, and upheld the validity of Section 50 of PMLA. The Court rejected the arguments that the ED should examine the appellants in Kolkata, as the ED has a nexus with Delhi and the appellants have a residence in Delhi. The Court also rejected the argument that the procedure for summons under PMLA must be just and reasonable under Article 21, as the Court held that the procedure under Section 50 is a fair, just, and reasonable procedure established by law and does not violate Article 21.

The Court’s decision was clear: the ED has the power to summon individuals under Section 50 of the PMLA, and the provisions of the PMLA prevail over the CrPC. The Court also clarified that the proceedings under Section 50 are for inquiry and not investigation, and the statements made under this section are admissible in evidence. The Court upheld the validity of Section 50 of PMLA and rejected the arguments of the appellants.

Reasons for the Decision:

• The PMLA is a self-contained code with an overriding effect over other laws, including the CrPC.
• The proceedings under Section 50 of the PMLA are for inquiry and not investigation.
• The statements made under Section 50 of the PMLA are admissible in evidence.
• The ED has a nexus with Delhi as the proceeds of crime were transferred there.
• The appellants have a residence in Delhi.
• The Prevention of Money Laundering Rules, 2005, provide sufficient procedural guidelines for Section 50 of PMLA.
• Section 50 of PMLA does not violate Article 21 of the Constitution.

Conclusion

The Supreme Court dismissed the appeals, upholding the power of the Enforcement Directorate (ED) to summon individuals to its offices for inquiry under Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA). The Court clarified that the ED’s power is not restricted to the place of residence of the person summoned and that the provisions of the PMLA prevail over the Code of Criminal Procedure (CrPC) where there is an inconsistency. The Court emphasized that the PMLA is a self-contained code and the procedure under Section 50 is a fair, just, and reasonable procedure established by law.

Impact of the Judgment:

• Strengthened ED Powers: The judgment reinforces the ED’s authority to summon individuals for inquiry under the PMLA, even if it requires them to travel outside their place of residence.
• Clarity on PMLA vs. CrPC: The ruling provides clear guidance on the precedence of the PMLA over the CrPC in matters of money laundering investigations, especially regarding summons and inquiry procedures.
• No Special Protections: The Court clarified that Section 160 of the CrPC, which provides certain protections to women and other vulnerable individuals, does not apply to proceedings under Section 50 of the PMLA.
• Admissibility of Statements: The judgment reiterates that statements made under Section 50 of the PMLA are admissible as evidence, which is a crucial aspect of money laundering investigations.
• Territorial Jurisdiction: The Court upheld that the ED has a nexus with Delhi as the proceeds of crime were transferred there, and regional offices of the ED are for administrative convenience and do not limit the scope of inquiry.

This judgment is significant as it clarifies the legal framework for money laundering investigations in India and strengthens the hand of the ED in combating financial crimes. It underscores the importance of the PMLA as a key tool for tackling money laundering and related offenses.