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Persons must appear on ED summons: Supreme Court

Feb 28, 2024 05:01 AM IST

Supreme Court suspended a Madras high court order that restrained ED from seeking the personal presence of five district collectors of the state

The Supreme Court on Tuesday held that persons summoned under the Prevention of Money Laundering Act (PMLA) must appear before the Enforcement Directorate (ED) to cooperate with an ongoing investigation, dismissing the Tamil Nadu government’s attempt to stop the federal agency from questioning some of its district collectors in relation to alleged illegal sand mining in the state.

The SC called the state government’s petition “thoroughly misconceived” because it sought a relief that the court said would indirectly derail ED’s investigation into the case.
The SC called the state government’s petition “thoroughly misconceived” because it sought a relief that the court said would indirectly derail ED’s investigation into the case.

Suspending a Madras high court order that restrained ED from seeking the personal presence of five district collectors of the state, the top court maintained that the officers are “required to respect and respond to the summons” of the agency and ordered the collectors to appear before the investigators on the date assigned by the agency.

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“The impugned summonses have been issued by ED in exercise of the powers conferred upon it under Section 50 of PMLA. From a bare reading of the Act, it clearly transpires that the concerned authority has power to summon any person if it considers their attendance necessary during the course of investigation or proceedings under the Act...district collectors and persons to whom summonses have been issued are obliged to respect and respond to said summonses,” held a bench of justices Bela M Trivedi and Pankaj Mithal.

The court order comes at a time when states headed by political parties other than the Bharatiya Janata Party have accused the Union government of targeting political rivals with the help of federal agencies like the Central Bureau of Investigation and ED.

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On Monday, Delhi chief minister Arvind Kejriwal skipped the seventh ED summons for questioning in the money laundering case linked to alleged irregularities in the now-scrapped Delhi excise policy 2021-22. In a statement, the Aam Aadmi Party (AAP) later said that Kejriwal would not appear before the ED since the matter is sub-judice. ED has filed a complaint in a Delhi court against Kejriwal for “disobeying” its summons. The court granted Kejriwal an exemption from personally appearing in court until March 16 when the matter will be heard.

On Tuesday, the bench was hearing an appeal filed by ED against the Madras high court order passed in November 2023, staying the summons issued to five district collectors of the state in connection with alleged illegal sand mining. The high court passed the stay order after the state government filed a petition, complaining against ED’s summons to its officers.

The SC called the state government’s petition “thoroughly misconceived” because it sought a relief that the court said would indirectly derail ED’s investigation into the case.

“Some of these offences are scheduled offences under PMLA. It hardly needs to be mentioned that Article 256 of the Constitution obligates the state government to exercise its executive power to ensure compliance with the laws made by Parliament,” stated the court in its order, adding the state government’s writ petition in the high court was filed under a “misconception of law”.

“Accordingly, the operation and execution of the interim order of the high court is stayed and district collectors shall appear and respond to the summonses in question on the next date indicated by ED,” directed the bench.

Last week, the bench pressed the MK Stalin government to justify how the state government was aggrieved by the summons to the district collectors by a central agency that was looking into allegations of money laundering.

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During the hearing on Monday, the court remarked that all state governments are obligated to comply with federal legislations, including PMLA, and added that a state government should assist ED in looking into allegations of money laundering instead of countering it. The bench had also cited Article 256 of the Indian Constitution which mandates that the executive power of every state shall be so exercised as to ensure compliance with the laws made by Parliament.

Continuing the proceedings on Tuesday, the bench wondered why the state government was unhappy over a preliminary inquiry being carried out by ED to gather some information. “These are only preliminary inquiries being conducted by them. The information sought from collectors is to do with the predicate offences in these FIRs...If information is sought from collector, how is state aggrieved?” it asked.

Senior counsel Kapil Sibal and Amit Anand Tiwari appeared for the MK Stalin government while senior advocate Mukul Rohatgi represented the district collectors. Sibal and Tiwari emphasised that ED lacked jurisdiction to summon the officials because there was no scheduled offence and proceeds of crime involved in the matter at all.

“Question of law is what jurisdiction does ED have to issue summons without there being any FIR, any crime being set out, without any proceeds of crime... An investigation or inquiry by the ED has to be in relation to a scheduled offence under the Act but illegal sand mining is not a scheduled offence. How can ED ask for any information relating to any matter which it thinks it has something to do with,” Sibal contended.

Responding, additional solicitor general SV Raju, representing the agency, said that ED is trying to unearth whether the proceeds of crime have travelled to different districts in the state.

“We are against a wall. We need to see where the money is travelling. If we reveal the probe at this point, they will cover their tracks...the state is supposed to be fair. Why should the state oppose this,” the ASG added.

The bench replied: “We are also wondering about it.”

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At this point, Rohatgi requested the bench to exempt the district collectors from personal presence before the ED, saying they will send whatever documents are required. But the bench shot down the plea. “No, no... they have to personally appear. If their personal assistance is required, they are bound to provide that to the Enforcement Directorate,” it said.

ED registered a complaint in September last year based on four FIRs filed in the state in connection with the offences under the Prevention of Corruption Act and other provisions of the Indian Penal Code.

Citing a study conducted by ED using an expert team, the agency claimed that the value of sand mining carried out in Tamil Nadu was to the tune of 4,730 crore as against the state records’ declared revenue (from sand mining) of 36.45 crore. Subsequently, ED conducted raids at 34 locations throughout the state to discover the connection between local mafia and state authorities. As a result, cash, incriminating documents, and digital devices were allegedly seized, relying on which, summons were issued to five district collectors on November 17 asking for their presence before the ED investigators along with certain records.

Aggrieved, the state government moved the Madras high court, contending that such enquiry by ED without consent of state or by the direction of any constitutional court was unlawful because it violates the basic structure of the Constitution envisaging federalism and separation of powers.

The high court, in its interim order, stayed the summons while noting that the issuance of summons was not within the jurisdiction of ED. “It is just an attempt to investigate the possibility of identifying any proceeds of crime as a result of any criminal activity, which is not so far registered by the state agencies,” the high court said in its November 28 order.

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