If Not ECIR, ED Should At Least Provide Substance Of Allegations To Summoned Persons: Allahabad HC

While ruling most decisively on a very significant legal point, the Lucknow Bench of Allahabad High Court in a most remarkable, robust, rational and recent judgment titled Saurabh Mukund vs Directorate of Enforcement in Application u/s 482 No. – 2318 of 2024 and cited in Neutral Citation No.: 2024:AHC-LKO:26612 that was pronounced as recently as on 29.03.2024 has minced just no words absolutely to hold unequivocally that in case the Enforcement Directorate (ED) does not provide a copy of Enforcement Case Information Report (ECIR) to the person being summoned by the agency, it must at least inform such person about the substance of allegations. This is the real crux of the matter in this notable judgment. It must be noted here that the Single Judge Bench comprising of Hon’ble Mr Justice Mohd Faiz Alam Khan who authored this learned, laudable, landmark and latest judgment plainly stated that the inquiry or investigation is required to be fair to all stakeholders, particularly a person whose status is unknown while being summoned by the ED under Section 50 of the Prevention of Money Laundering Act (PMLA). Absolutely right!

While certainly very rightly taking due note of the irrefutable fact that the Supreme Court has ruled that it is not mandatory for the ED to furnish a copy of ECIR to the person summoned, Hon’ble Mr Justice Khan was pragmatic enough to still very rightly point out that, “If there is nothing extraordinary or special, in normal course, a person summoned by the ED in whatever capacity is required to get, at least the substance of accusation if not the copy of ECIR, so he can prepare himself accordingly or may also collect relevant documents to answer the questions which may be put by the ED when interrogating the person summoned.” But we must also note that the Court refused to quash the ECIRs and summons issued to the petitioner. The Court also made it crystal clear that no person is entitled in law to evade the summons issued by the ED under Section 50 of PMLA on the ground that there is a possibility of his arrest in the future.

At the very outset, this brief, brilliant, bold and balanced judgment sets the ball in motion by first and foremost putting forth clearly in para 3 that, “Shri Neeraj Jain, learned counsel for the petitioner/applicant submits that on 6.2.2024 the petitioner has received summons related to ECIR/25/LKZO/2023 requiring him to appear and furnish details about 111 Companies in respect of which not only a complaint has already been filed by serious fraud investigation office herein after referred to as ‘SFIO’ on 18.9.2017 being Criminal Case No. 720/2017 before the Special Judge Companies Act Dwarika, Delhi and with regard to it a Criminal Case No. 196/2022 filed by the Enforcement Directorate is also pending. In pursuance of an ECIR bearing No. ECIR/LKZO/ 02/2019.”

As it turned out, the Bench enunciates in para 4 that, “It is further submitted that on 17.2.2024 another summon pertaining to ECIR/13/LKZO/2019 was received by the petitioner and the said summons is arising out of the same recommendation of SFIO concerning 111 Companies, in respect of which complaint has already been filed by SFIO on 18.9.2017 being CC NO. 1720/2017 before learned Special Judge Companies Act Dwarika, Delhi.”

As we see, the Bench then points out in para 18 that, “Having heard learned counsel for the parties and having perused the record, it is reflected that against the petitioner one FIR and one ECIR has been registered by the Investigating Agency as well as by the Enforcement Directorate and after completing of the investigation a complaint with regard to the same has also been filed before the competent court at Dwarka, New Delhi.. The applicant appears to be aggrieved by the issuance of summons to him in ECIR/25/LKZO/2023 and ECIR LKZO/13/2019. The copies of summons which have been placed at page no. 58 and 65 of the paper book would reveal that with both the summonses a list of 119 entities have been given pertaining to which the details have been required by the E.D. The submission of learned counsel for the applicant is that it is with regard to the same cause of action the new ECIRs have been lodged/registered pertaining to which a complaint has already been filed by the E.D. The defence of Enforcement Directorate appears to be with these 2 ECIRs are not connected with the subject matter of earlier ECIR, pertaining to which a complaint has already been filed. It is also the case of Enforcement Directorate that they may provide the ECIRs in a sealed envelope to this Court but if the same would be brought on record by way of an affidavit, a copy of the same shall be provided to the applicant which may affect the investigation of the case and having regard to the law laid down by the Hon’ble Supreme Court in Vijay Madan Lal Chaudhary (supra) the ECIR is an internal document of the E.D.”

For clarity, the Bench clarifies in para 19 that, “So far as the submissions of Ld. Counsel for the petitioner pertaining to lodging of second FIR is concerned, at first it is to be recalled that an ECIR is not an FIR as held by the Apex Court in Vijay Madanlal Choudhary and Ors. vs. Union of India (UOI) and Ors. (27.07.2022-SC): MANU/SC/0924/2022. Secondly the contents of the two ECIR’S has still not been revealed by the ED and in absence of relevant material no opinion may be expressed with regard to these ECIR’s.”

Do note, the Bench notes in para 21 that, “It is apparent from the reading of Section 50 of PMLA as well as decision in Vijay Madanlal Choudhary (supra) that the power conferred upon the authorities by virtue of Section 50 of PMLA empower them to summon ‘any person’ whose attendance may be crucial either to give some evidence or to produce any records during the course of investigation or proceedings under PMLA. The persons so summoned are also bound to attend in person or through authorised agent and are required to state truth upon any subject concerning which such person is being examined or is expected to make statement and produce documents as may be required in a case.”

While citing a relevant case law, the Bench observes in para 22 that, “In the case of Commissioner of Customs, Calcutta v. M.M. Exports (2010) 15 SCC 647, the Hon’ble Apex Court, while dealing with a case of issuance of summons under Section 108 of Customs Act, had expressed that except in exceptional cases, High Courts should not interfere at the stage of issuance of summons.”

Be it noted, the Bench while citing the relevant case law observes in para 24 that, “While discussing the requirement of supply of copy of ECIR to the person who has been apprehending arrest Apex Court in Vijay Madanlal Choudhary (Supra) observed as under:-

“178. The next issue is: whether it is necessary to furnish copy of ECIR to the person concerned apprehending arrest or at least after his arrest? Section 19(1) of the 2002 Act postulates that after arrest, as soon as may be, the person should be informed about the grounds for such arrest. This stipulation is compliant with the mandate of Article 22(1) of the Constitution. Being a special legislation and considering the complexity of the inquiry/investigation both for the purposes of initiating civil action as well as prosecution, non-supply of ECIR in a given case cannot be faulted. The ECIR may contain details of the material in possession of the Authority and recording satisfaction of reason to believe that the person is guilty of money-laundering offence, if revealed before the inquiry/investigation required to proceed against the property being proceeds of crime including to the person involved in the process or activity connected therewith, may have deleterious impact on the final outcome of the inquiry/investigation. So long as the person has been informed about grounds of his arrest that is sufficient compliance of mandate of Article 22(1) of the Constitution. Moreover, the arrested person before being produced before the Special Court within twenty-four hours or for that purposes of remand on each occasion, the Court is free to look into the relevant records made available by the Authority about the involvement of the arrested person in the offence of money-laundering. In any case, upon filing of the complaint before the statutory period provided in 1973 Code, after arrest, the person would get all relevant materials forming part of the complaint filed by the Authority Under Section 44(1) (b) of the 2002 Act before the Special Court.

179. Viewed thus, supply of ECIR in every case to person concerned is not mandatory. From the submissions made across the Bar, it is noticed that in some cases ED has furnished copy of ECIR to the person before filing of the complaint. That does not mean that in every case same procedure must be followed. It is enough, if ED at the time of arrest, contemporaneously discloses the grounds of such arrest to such person. Suffice it to observe that ECIR cannot be equated with an FIR which is mandatorily required to be recorded and supplied to the Accused as per the provisions of 1973 Code. Revealing a copy of an ECIR, if made mandatory, may defeat the purpose sought to be achieved by the 2002 Act including frustrating the attachment of property (proceeds of crime). Non-supply of ECIR, which is essentially an internal document of ED, cannot be cited as violation of constitutional right. Concededly, the person arrested, in terms of Section 19 of the 2002 Act, is contemporaneously made aware about the grounds of his arrest. This is compliant with the mandate of Article 22(1) of the Constitution. It is not unknown that at times FIR does not reveal all aspects of the offence in question. In several cases, even the names of persons actually involved in the commission of offence are not mentioned in the FIR and described as unknown Accused. Even, the particulars as unfolded are not fully recorded in the FIR. Despite that, the Accused named in any ordinary offence is able to apply for anticipatory bail or regular bail, in which proceeding, the police papers are normally perused by the concerned Court. On the same analogy, the argument of prejudice pressed into service by the Petitioners for non-supply of ECIR deserves to be answered against the Petitioners. For, the arrested person for offence of money-laundering is contemporaneously informed about the grounds of his arrest; and when produced before the Special Court, it is open to the Special Court to call upon the representative of ED to produce relevant record concerning the case of the Accused before him and look into the same for answering the need for his continued detention. Taking any view of the matter, therefore, the argument under consideration does not take the matter any further.””

Most significantly, the Bench mandates in para 28 that, “The copy of ECIR’S in question, which are sought to be quashed, has not been placed on record by the ED despite promise in this regard was extended by Ld Counsel representing Enforcement Directorate, thus this Court is not in a position to examine the contents of the same. It is stated that the copies of the ECIR’S may be placed before this Court in sealed cover for perusal. This Court is not inclined to promote the culture of sealed covers in judicial proceedings and this aspect of the matter, as to whether the ED in each and every case may refuse to provide the copy of ECIR to an accused person or even to a witness, may be deliberated in depth by this Court in an appropriate case, but suffice is to say that if there is nothing extra ordinary or special, in normal course, a person summoned by the ED in whatever capacity is required to get, at least the substance of accusation if not the copy of ECIR, so he can prepare himself accordingly or may also collect relevant documents to answer the questions which may be put by the ED when interrogating the person summoned. The inquiry or investigation, as the case may be, is required to be fair to all stake holders, moreso towards a person whose status before the ED is not known yet. But as of now It appears not mandatory for the Directorate of Enforcement to furnish a copy of ECIR’S to the person, as held by Hon’ble Apex Court in Vijay Madanlal Choudhary (supra), as the petitioner herein has only been summoned under Section 50 of PMLA.”

Most precisely, the Bench holds in para 29 that, “This Court is of the considered opinion that this petition has been filed by petitioner on mere apprehension. If the Investigating Authorities are having enough materials to proceed against a person in a manner known to law and by adhering strictly to the provisions of law, then they are duty bound to do so as the law so warrants and permits them to adopt such course of action. These are all the decisions to be taken only after completing an effective investigation or at least preliminary investigation. The investigation process should not be hampered at this initial stage. The decisions in this regard are to be taken only after the completion of the investigation by the competent authorities by strictly following the provisions of law. The Courts cannot presume that what possible actions could be taken by the competent authorities at this or that stage, even before the completion of the investigation. Thus, this Court is of a strong opinion that interference at this stage in respect of the facts and the circumstances of the present case on hand, is certainly unwarranted. At the cost of repetition it is reiterated that the petitioner himself is not aware as to whether he is being summoned under Section 50 of PMLA as an accused or as a witness, as already an ECIR was registered against him. The Directorate of Enforcement has not filed any complaint against the petitioner and he is yet not an accused in the present ECIR’S and it cannot be said at this uncertain stage that Directorate of Enforcement is identifying the petitioner as an accused, in absence of any formal accusation to this effect.”

Do note, the Bench notes in para 29 that, “Thus, having gone through the facts and circumstances of present case and for the reasons given herein before and also in view of the judicial precedents discussed above, this Court finds no good ground to quash the summons issued under Section 50 of PMLA to the petitioner or the impugned ECIR’s.”

Finally, the Bench then concludes by holding in para 30 that, “Resultantly the instant petition preferred by the petitioner is dismissed.”

In conclusion, it is made indubitably clear by the Lucknow Bench that if not ECIR, ED should at least provide substance of allegations to summoned persons. In the same vein, the Court also makes it clear that no person is entitled in law to evade summons issued by the ED on the ground that there is a possibility of his arrest in the future. We thus see that the Court rejected the petitioner’s contention to quash the ECIRs and summons issued to the petitioner. Very rightly so!

Sanjeev Sirohi, Advocate,

s/o Col (Retd) BPS Sirohi,

A 82, Defence Enclave,

Sardhana Road, Kankerkhera,

Meerut – 250001, Uttar Pradesh.