New Delhi: A Delhi court Saturday reprimanded the Enforcement Directorate (ED) for arresting an individual and treating him as an accused despite having listed the same person as a prosecution witness when it had filed its first prosecution complaint in a money laundering case.
Rejecting the ED’s counsel argument that its second investigating officer (IO) was well within his rights to arrive at a “different and independent opinion” from his predecessor, the court said that this would make the objectivity of the process dependent on the “uncontrolled whims and fancies” of the officers who have been conferred “extreme power of arrest”.
Additional sessions judge Dheeraj Mor was hearing the bail plea of Mangelal Sunil Agarwal, the proprietor of a UAE-based firm, who was arrested by the agency on 6 August this year.
The arrest was a departure from the initial proceedings in the case when Agarwal had been named as a witness in the first prosecution complaint filed in October 2022.
The remarks by the lower court come at a time when the Supreme Court has questioned the ED, in particular, for allowing an accused to become an approver in the Delhi Excise Policy case, and central probe agencies, in general, over the fairness of the investigation that they conduct.
This particular case was registered in September 2020 based on a First Information Report (FIR) filed by the Delhi Police Economic Offence Wing against one Sanjay Godhwani, the erstwhile managing director of Ligare Aviation Ltd, and 15 unknown accused on allegations that Godhwani defrauded the firm to the tune of Rs 18.88 crore by using fake invoices.
The ED’s case against Agarwal was that he, as the proprietor of UAE-based firm Metal And Steel Solution FZC, which deals in steel and metal spares and equipment, generated a bogus invoice of amount $1.3 million for supplying equipment and spares and for conducting maintenance for Ligare Aviation Ltd without actually doing so.
Out of the proceeds of the crime, Agarwal allegedly retained $4,725. However, Agarwal’s counsel argued that the invoice was generated based on instructions provided by Dubai-based broker Iqlaque Khan—whom Agarwal had known for 20 years and told that Ligare Aviation Ltd was looking to urgently pay their vendors in Dubai and was looking for a Letter of Credit.
The counsel further argued that Agarwal took approximately 0.37 percent of the overall amount based on market value while being unaware that the amount in consideration was thought to be “proceeds of crime”.
Noting the facts of the case and stage of the investigation, judge Mor said that Agarwal satisfied the twin conditions for bail in Prevention of Money Laundering Act (PMLA) cases—reasonable grounds to believe the accused not guilty of money laundering and that person is unlikely to commit any offence while on bail.
“In view of the discussion on the facts of the case based upon the material available on record, there is no admissible evidence on record to establish that the applicant had a mens rea when he dealt with the alleged POC (proceeds of crime) of this case. Accordingly, there are reasonable grounds to believe that the applicant is not guilty of the present offence,” judge Mor wrote in the order.
“Further, he does not have any other criminal involvement. Therefore, in these circumstances, there is no reason to believe that he is likely to commit any offence while on bail. Therefore, he has successfully managed to qualify the rigours of the mandatory twin conditions contained in Section 45 PMLA.”
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‘Subjective investigation is deprecated’
After considering the triple test (flight risk, influencing witnesses, tampering with evidence), which is part of the established norm when dealing with bail applications, the judge said the case had thrown up an “unpleasant” situation.
This was because the first IO of the ED had said Agarwal was a witness, while the next IO arrested him despite no fresh evidence or material on record against him. The judge observed that it was apparent that one of the IOs was wrong. The officer, the judge said, either considered facts “extraneous” to law for yet-to-be-established reasons or was unable to grasp the facts of the case.
Both the situations—one, where an accused would be freed, and the other, where the fundamental right to liberty of an innocent individual would be violated—were “perilous”, the judge noted.
“Before parting, the glaring and disturbing aspect of this case is required to be noted. The hallmark of investigation is its objectivity. Subjective interpretation of IO must be deprecated as it would make a supposed objective investigation dependent upon his uncontrolled whims and fancies, who has been conferred extreme power of arrest that leads to curtailing liberty of an individual,” the judge noted in the order.
“In the instant case, there is a very unpleasant situation wherein one IO chose to cite the applicant as a witness and the next IO opted to arrest him based upon exactly the same evidence available on record.”
“In these circumstances, it is apparent that one of the IOs was/is wrong and either acted upon the considerations extraneous to law for the reasons to be ascertained or he was incompetent to comprehend the facts of the case in proper perspective. Both the situations are perilous as it may allow an accused getting scot-free or result in unlawful curtailment of liberty of an individual thereby impinging his cherished fundamental rights of liberty,” the judge wrote.
Need to establish SOP
The judge further noted that the court would have summoned Agarwal had it found enough material on record against him at the time of taking cognisance of the prosecution’s complaint in November 2022 but chose not to do so.
“In these circumstances, the only inference that can be drawn is that the court did not find the evidence collected on record against the applicant to be sufficient to consider him as complicit or an accused enough to face trial for the present offence,” the judge said.
However, by arresting the same accused on the same set of materials, the IO chose to be an “appellate forum” against the court and had been trying to collect additional evidence against Agarwal by evaluating his mobile and email data in the hope of finding incriminating information.
Calling this nothing more than an attempt to justify the arrest, the judge said, “Admittedly, the IO has the prerogative to take a decision to arrest or not arrest any person. However, it cannot be arbitrary and when the evidence available with the IO and the court are exactly similar and the court desisted to summon him as an accused, the act of the IO to arrest him on the same evidence is an apparent overreach of his powers that deserves to be disapproved,” the judge remarked.
Emphasising the necessity of checks and balances in the power to arrest people, the judge opined that there should be unambiguous regulations or Standard Operating Protocol (SOP) in place to avoid situations such as in the case wherein two officers have taken “diametrically opposite” view of the same materials and facts of the case.
The judge asked the ED director to reply within a month if there is any SOP for senior officials to monitor the arrest of any accused in a case, which could be a “classic example” of a violation if any such mechanism was in place.
“The power to arrest must be directly proportional to its checks and balances coupled with unambiguous regulations or Standard Operating Protocol (SOP). Accordingly, worthy [?] director, ED is requested to apprise this court if there is any SOP or regulation for affecting arrest and what process is adopted by seniors to monitor the arrest of an accused. If these systems are evolved and are in place, this case is a classic example of its violation,” the judge remarked.
The judge directed the ED to conduct an inquiry and file the report within a month with its findings on whether either of the IOs “faulted in his duties” and if any action was taken against that official.
“In case the opposite views of both of them are found to be justifiable, though [this] doesn’t appeal to common sense, it [must] be clarified as to how to reconcile with this distasteful situation,” the judge concluded.
(Edited by Sanya Mathur)
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