STRONG ARM OF THE STATE
AS THE ENFORCEMENT DIRECTORATE GOES AFTER HIGH-PROFILE OPPOSITION LEADERS, THE GOVERNMENT FACES CHARGES OF MOUNTING A POLITICAL WITCH-HUNT. INDIA TODAY INVESTIGATES
In the run-up to the Lok Sabha election, Prime Minister Narendra Modi mocked his adversaries as the ‘Khan Market gang’, in a damning reference to their supposed love of the tony market complex in central Delhi’s Lutyens Bungalow Zone, home to the national capital’s high and mighty—politicians, government officials, judges, businessmen… In other words, the power elite. Some of the politicos in this line-up are now squirming, as an Enforcement Directorate (ED) ‘gang’—operating from, ironically, the very same Khan Market—goes after them for alleged financial misdemeanours. They allege it is a witch-hunt at the behest of the Modi government. The allegation is that the ED, which investigates foreign exchange violations and money laundering, and the Central Bureau of Investigation (CBI) launch investigations and slap cases against leaders of BJP rivals just ahead of elections to threaten opponents. The charges are neither new nor novel. In fact, in May 2013, during the Congress-led UPA’s rule at the Centre, the Supreme Court called the CBI a ‘caged parrot’, an all-too-obvious reference to its lack of real autonomy. The ED, in its present avatar, is vying for the same honour, claim Modi’s rivals.
The ED, which works under the jurisdiction of the Union finance ministry, was set up in 1957. It acts as per the provisions of the Foreign Exchange Management Act (FEMA) of 1999, the Prevention of Money Laundering Act (PMLA) of 2002 and the Fugitive Economic Offenders Act (FEOA) of 2018. The agency directly recruits at the level of assistant director and also inducts officers from the customs, income tax and police departments.
The ED is the investigating agency for all offences committed under the PMLA. The law gives the ED powers for criminal prosecution and to attach the assets of the accused. The ambit of the Act was widened through multiple amendments, giving the ED the bite it now possesses. The amendments to the Act made this year have given the ED unprecedented powers—it can arrest an individual even without an FIR. All offences are now cognisable and non-bailable. Under PMLA, a statement recorded before an investigating officer is admissible in court as evidence.
The most recent ED case to make headlines is the summons sent to Nationalist Congress Party (NCP) chief Sharad Pawar in connection with the Rs 2,500 crore loan fraud in the Maharashtra State Cooperative Bank (MSCB). The case is based on a Mumbai police FIR registered in August 2019 on the directions of the Bombay High Court. The FIR names the bank’s directors, Sharad Pawar’s nephew and former Maharashtra deputy chief minister Ajit Pawar, and 70 former functionaries of the bank. The original complaint was lodged with the Economic Offences Wing (EOW) in 2015. Sharad Pawar has alleged a political witch-hunt ahead of the Maharashtra assembly election, scheduled on October 21, and declared that he won’t “bow before the Delhi throne”.
The BJP sprung to defence, saying the MSCB case was registered on the directions of the high court and neither the Centre nor the party’s government in Maharashtra had influenced the timing of the ED’s summons. What is intriguing, though, is that while the ED’s Enforcement Case Information Report (ECIR),
the equivalent of a police FIR, names Sharad Pawar, the Mumbai police FIR that the ED took cognisance of, does not. Pawar’s name features only in a supplementary statement given to the Mumbai police by the complainant, Surinder Arora, who said the scam wouldn’t have been possible without the NCP chief’s connivance.
This is not the first time a politician is under the ED lens in the run-up to an election. On August 26, the ED filed a prosecution complaint against former Haryana chief minister Bhupinder Singh Hooda and senior Congress leader Motilal Vora over alleged irregularities in land allotted in Panchkula to Associated Journals Limited, owned by Congress president Sonia Gandhi and son Rahul Gandhi. Haryana goes to polls on the same day as Maharashtra.
Less than three months before the 2017 Uttar Pradesh assembly poll, the ED had detected over Rs 104 crore in an account linked to the Bahujan Samaj Party (BSP) and around Rs 1.5 crore in the account of BSP chief Mayawati’s brother Anand Kumar. In January this year, ahead of the Lok Sabha election, the ED raided seven locations in UP in the Rs 1,400 crore Dalit memorials scam during Mayawati’s tenure as state chief minister. The same month, the ED registered a money-laundering case against former UP chief minister Akhilesh Yadav in an illegal mining case.
Simanchala Dash, the ED’s principal special director, refutes allegations that the agency is acting as a tool for political vendetta. “The ED is certainly not on a witch-hunt. It steps in only after the police or the CBI has registered a case. In almost all the political cases, the courts have okayed the ED proceedings,” says Dash. Supreme Court lawyer Vijay Pal Dalmia, who has defended several clients in ED cases, agrees with Dash. “There is no doubt the ED has become aggressive in recent times. The timing of certain inquiries may be suspect, but the high and mighty in the country are perhaps now paying the price for their past sins,” he says.
Two recent examples of the ED’s zealous approach are the INX Media case, relating to irregularities in foreign exchange clearances to the company for overseas investment during P. Chidambaram’s tenure as Union finance minister, and the money-laundering charges against D.K. Shivakumar, Congress politician from Karnataka. Chidambaram is lodged in Delhi’s Tihar Jail, following arrest by the CBI, which is also investigating the INX Media case. The INX scam was detected by the ED in 2016 while it was investigating a similar approval given to the Aircel-Maxis deal in 2006, when Chidambaram was finance minister.
On September 3, about two weeks after Chidambaram’s arrest, the ED arrested Shivakumar following a probe based on income-tax raids at his Bengaluru home in 2017 and the recovery of alleged unaccounted for wealth. The former Karnataka minister is lodged in the same Tihar Jail unit as Chidambaram. Their incarceration has fuelled various conspiracy theories, one being that the central investigative agencies are
working overtime to ‘fix’ the duo for ‘humiliating’ Union home minister Amit Shah in the past. Chidambaram was Union home minister during Shah’s July 2010 arrest in the fake encounter case of Sohrabuddin Sheikh. In 2014, a CBI court acquitted Shah of all charges. Shivakumar played a key role in the Congress outsmarting the BJP twice—in 2017, during Congress treasurer Ahmed Patel’s election to the Rajya Sabha from Gujarat, and in 2018, during the formation of the Congress-Janata Dal (Secular) government in Karnataka. It’s a different matter the ED comes under the finance ministry.
Congress leaders claim the ED has not even sought Chidambaram’s custody, even though he offered to surrender, because it wants to step in only after he gets bail in the CBI case relating to INX Media. “It’s all orchestrated by agencies to ensure Chidambaram’s incarceration for a longer period,” says Abhishek Manu Singhvi, the Congress’s Rajya Sabha MP and a noted lawyer. “The ED will step in and seek remand only when the CBI, [in the course of] natural legal process, will not be able to keep him in jail any longer.”
Sonia Gandhi’s son-in-law Robert Vadra, too, has been on the radar of the CBI and ED for alleged irregularities in multiple land deals. Between the two agencies, the ED has been more hawkish, questioning Vadra eight times so far. It has raided the offices of Vadra’s Skylight Hospitality and attached assets. While a CBI court has given Vadra anticipatory bail, the ED has challenged the bail in the Delhi High Court. It says Vadra’s custodial interrogation is necessary
as a money trail directly linked to him has been unearthed. Ahmed Patel, Sonia’s most trusted lieutenant, has also been facing ED heat. In the past three months, the agency has questioned Patel’s son and son-in-law in the Sterling Biotech money-laundering case. On August 20, the ED arrested Madhya Pradesh chief minister Kamal Nath’s nephew Ratul Puri, in a multi-crore bank loan fraud case. Puri had, in the previous month, slipped out of an ED office, where he had been summoned for interrogation in the Agusta-Westland chopper scam. Opposition leaders allege the ED is being selective in picking its targets and is not pursuing cases against leaders of the BJP or its friends with the same intensity. Two examples cited are of Mukul Roy, who switched to the BJP from the Trinamool Congress (TMC), and Himanta Biswa Sarma, who crossed over from the Congress. Roy and Sarma’s names have come up in the Saradha chit fund scam, but the ED is yet to question them even as it has interrogated and charge-sheeted several TMC leaders. “I don’t have any ED case against me,” says Sarma. “The CBI questioned me in the Saradha investigation as a witness, not as an accused.” An ED officer from Kolkata throws light on the modus operandi. “Our job is to probe money-laundering and focus on recovery. We arrest a person only if we feel he is influential and can jeopardise the investigation. If we are allowing a person to stay outside jail, it means he is cooperating with the probe,” says the officer on condition of anonymity.
Also in the spotlight are ED cases relating to Rajya Sabha MPs Y.S. Chowdary and Narayan Rane. The ED has been probing Chowdary’s role in an alleged bank loan fraud case and had attached his assets worth Rs 316 crore in April, while he was a Telugu Desam Party (TDP) MP. Two months later, Chowdary joined the BJP. Former Maharashtra chief minister Rane has been facing a probe for alleged moneylaundering. A PIL has been filed in the Bombay High Court,
raising apprehensions that the ED might go slow on the case now that Rane is an independent Rajya Sabha MP enjoying the BJP’s support.
Allegations that the ED was being used to settle political scores were made even during the tenure of the Manmohan Singh-led UPA government. While former Karnataka minister G. Janardhana Reddy was chargesheeted by the CBI in 2012 in a mining scam, a moneylaundering case was registered against YSR Congress chief Jagan Mohan Reddy, who was engaged in a power tussle with the Congress in Andhra Pradesh. Cases were also filed against yoga guru Ramdev and his close aide Balakrishna. The ED closed the cases in 2014 after the BJP-led government came to power at the Centre.
Besides facing allegations of yielding to political pressure, the ED has also seen some of its officers being accused of wrongdoing. In 2018, a journalist, Rajneesh Kapur, filed a PIL in the Supreme Court, seeking a probe against ED official Rajeshwar Singh for allegedly amassing disproportionate assets. The Supreme Court allowed the Centre to initiate a probe; Singh has since been transferred out of the ED. In 2018, the CBI arrested former ED joint director J.P. Singh for allegedly accepting a bribe to favour an accused in the IPL betting scam. J.P. Singh complained to the Central Vigilance Commission that he was being framed by then ED director Karnal Singh, who had allegedly taken money from bookies to stall the betting probe. Karnal Singh, who headed the ED between 2016 and 2018, has refuted the allegation.
In July this year, the ED booked B.S. Gandhi, a former ED official, on charges of money-laundering. The same month, the CBI raided Gandhi’s home and allegedly
found disproportionate assets worth over Rs 3.74 crore. Gandhi had probed the disproportionate assets cases against Jagan Mohan Reddy, now Andhra Pradesh chief minister.
Eyebrows were raised this March when news came of the transfer of ED joint director Satyabrata Kumar, who was probing the Punjab National Bank fraud case against diamantaire Nirav Modi. The order came when Kumar was in London to assist in Modi’s extradition. ED chief S.K. Mishra reversed the order, but not before exposing the infighting and politics within the agency.
Last month, the ED approached the Supreme Court, seeking permission to transfer 42 officials probing the coal blocks allocation cases. The top court has barred the transfer of officers of all agencies investigating the coal scam cases without its permission. ED sources said the move was aimed at speeding up the coal scam probe. Since Mishra took charge in
October 2018, 36 officers, who were on deputation from various services, were sent back to their respective organisations over issues of transparency and efficiency. Money-laundering cases were slapped against two ED officers. “The ED is getting streamlined now. Because of the power granted under PMLA, some ED officials had turned extortionists, driving terror within the business community,” says Kapur.
PMLA, passed by the A.B. Vajpayee-led NDA government, brought about a massive transformation in the ED. The Act, however, was brought into effect in 2005, when, ironically, Chidambaram was the finance minister.
Lawyer Vijay Pal Dalmia says the ambiguities in PMLA can both embolden and confuse ED officers. “There is no clarity as to when a person can be arrested,” he says. Before the 2019 amendment, the ED could attach a property only if it had reason to believe it had been acquired with the ‘proceeds of the crime’ and the accused may dispose it of during the probe, says Dalmia. “The agency has sought to attach property even when it has already been attached by another agency. How can such a property be disposed of? The PMLA needs more amendments,” he adds.
If a person has committed a crime under any of the 29 laws and 160 sections of PMLA, the money accrued from it or assets acquired with it qualify as ‘proceeds of crime (POC)’, and the ED can attach such money or property. In 2015, the definition of POC was expanded to allow the ED to attach equivalent value of property in India if the accused has moved the POC out of the country. The 2019 amendments include properties and assets created, derived, or obtained through any criminal activity related to the scheduled offence, even if it is not under PMLA. Once the ED attaches an asset, an adjudicating authority confirms the decision within six months. Thereafter, the ED has to file a prosecution complaint within 90 days.
The biggest blot for the ED is its abysmal conviction record. Of the over 2,500 cases filed since 2005 under PMLA, only 18 have ended in conviction. Prosecution complaints have been filed in around 689 cases—more than 450 in the past four years. This spurt in activity can be attributed to the administrative reforms during the tenure of Karnal Singh, who introduced a policy of vigilance checks before the induction of officials into the ED. A ‘special investigation incentive’ was granted to agency sleuths on the lines of what CBI officials are given. Six dedicated forensic labs across the country and field forensic kits to quickly clone hardware during raids were made available. “Regular monthly trainings were conducted for our officials,” says Singh.
If PMLA has empowered the ED, one of its handicaps is that it cannot register a case on its own. Another agency, such as the CBI or the state police, must register a predicate offence based on which the ED can file an ECIR. The ED can independently receive complaints and do two rounds of probes—T1 (primary) and T2 (detailed investigation) in ED parlance—before referring the case to a predicate agency. It can take months before a predicate agency acts on the ED’s reference. The ED wrote to the CBI about
irregularities in the INX Media case in December 2016. The CBI filed a criminal case in May 2017.
Lack of coordination among agencies and limited flow of information from abroad also hamper probes. ED officials claim they are quite successful in collecting evidence of wrongdoing within India, but find it difficult to do so abroad. In the 2G case, for example, eight of the 10 countries approached for information on alleged money-laundering did not respond to the letters rogatory. These are Russia, the UAE, Norway, Mauritius, Libya, the Isle of Man, British Virgin Islands and Singapore. Cyprus and France responded. Letters rogatory are formal communication from a competent court to a foreign court to obtain financial information. These are processed by the external affairs ministry on behalf of the probe agencies.
The second phase of delay happens in courts, claim ED officials. The ED files prosecution complaints—equivalent of a police charge-sheet—in dedicated courts. The number of such courts is gradually increasing. For instance, all sessions courts in Delhi are now ED courts. “The legal constitution of ED is such that its cases have to reach the court within a year of attachment of properties,” says Dash. Most experts concur that the length of the case in courts depends on two factors—the ED’s efficiency and political intervention. So depending on the dispensation in power, certain cases get pace, others slow down. “The courts can decide based on evidence gathered,” says Dalmia. If the case filed by the CBI or police fails in court, the ED case collapses automatically. A classic example is the 2G spectrum scam. The CBI court acquitted the accused, automatically giving them reprieve in the ED probe associated with the scam. “We have challenged this in court and sought that ED cases be allowed to stand on their own,” says Karnal Singh.
ED officers say the agency builds watertight cases despite constraints. If the ED has secured only 18 convictions in 15 years, there was also just one acquittal, they argue. Dash points to some big achievements— the agency not losing a single case against Vijay Mallya and Nirav Modi being jailed in the UK on the basis of an ED testimony. The agency has also been dealing with multiple cases of terror financing—13 cases have been registered in recent times. Dash says the ED has already managed convictions in two cases.
These developments have happened even though the ED is functioning at half its strength—it has just over 1,005 officials against a sanction of 2,024 personnel. Unlike the CBI, the ED does not have office premises of its own. While the CBI has a lock-up with ‘VIP facilities’ for high-profile accused, those arrested by the ED have to spend nights at lock-ups in the nearest police station.
Despite such handicaps, under PMLA, the ED attached assets worth over Rs 55,000 crore between 2014 and 2019—all suspected to be money-laundering gains. For comparison, assets worth Rs 1,214.6 crore were attached between 2005 and 2012. The strike rate is expected to go up substantially following the enforcement of FEOA, which aims to bring to justice suspected economic offenders who flee India.
The law gives the ED powers to irreversibly confiscate property within and outside India of fugitive economic offenders—whether or not the properties have been purchased from proceeds of the crime, provided the value exceeds Rs 100 crore. Mallya has been declared India’s first fugitive economic offender under FEOA and the ED has moved court to confiscate his assets, totalling over Rs 12,500 crore. The loan his company defaulted on is Rs 9,000 crore.
On September 12, PM Modi said in Jharkhand: “Our fight is against corruption and those who indulge in such activities. In 100 days, we took decisions against such persons. Some have been sent to jail.” The ED can play a massive role in this fight against corruption, but the war will be won only when investigative agencies like the ED and CBI remain transparent and combative in all seasons, against all offenders, irrespective of their political affiliations and money power. ■