New Delhi: The money laundering charges brought against Surender Panwar, Congress MLA from Sonipat, Haryana, by the Enforcement Directorate (ED) are not listed as scheduled offences under the Prevention of Money Laundering Act (PMLA), the Punjab and Haryana High Court has held.
While quashing Panwar’s arrest under the anti-money laundering law Monday, the high court stressed that there can be no arrest under the PMLA unless there is “material evidence” to substantiate the involvement of the accused. The decision clamps down on the powers of the ED to arrest while the agency is already in a hotspot for its arbitrary approach in the PMLA cases, particularly those against the Opposition leaders.
The PMLA is a stringent legislation intended to prevent money laundering but premised on a category of crimes described as scheduled offences under the Act. The law authorises ED to probe into the proceeds of crime generated on the commission of any scheduled or predicate offences mentioned in the PMLA.
Surender Panwar was arrested on 20 July this year, 10 days before the Election Commission of India announced the dates for the Haryana assembly elections.
The ED alleged that Panwar headed the company, which, as part of a syndicate, indulged in illegal mining between 2016 and 2022 in Yamuna Nagar, Haryana. Besides, the ED charged him with Sections 15 and 16 of the Environment Protection Act (EPA) as a predicate offence under the PMLA. These sections describe penalties for discharging environmental pollutants over the prescribed standards without complying with procedural safeguards.
However, the HC ruled that while the PMLA does not list illegal mining as a scheduled offence, the EPA violations were removed as a predicate offence in August 2023 through the Jan Vishwas Bill. Since both were not listed as predicate offences under the PMLA, Justice Mahabir Singh Sidhu termed Panwar’s arrest “illegal”.
In the absence of a direct or indirect involvement in any activity — defined as illegal under the PMLA — there was no ground for Panwar’s arrest on the premise that he was guilty of a money laundering offence, the high court further said.
The HC, however, did not set aside the PMLA complaint against Surender Panwar because the lawmaker had not challenged the complaint but his arrest, contending the PMLA did not make it mandatory for the ED to take an accused into custody.
Panwar argued that the provision for arrest in the PMLA used the word “may” and not “shall”, which, he said, raised the bar for the ED to arrest an accused charged with money laundering.
Though Justice Sidhu opined that there was insufficient material to arrest Surender Panwar, he left it to the special PMLA court in Ambala to give an independent finding on the merits of the ED’s complaint, asserting his observations should not be construed as a commentary.
In its order, the HC also reproached the ED for interrogating Pawar for 14 hours and 40 minutes, saying it was a “not heroic” act on the part of the agency. Terming the constant interrogation as “against the dignity of a human being” — promised under Article 21 of the Constitution — the HC advised the ED to take remedial measures and sensitise its officers to follow some reasonable “time limit” for their probe.
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Case against Panwar
After 14 hours and 40 minutes of “constant” interrogation, the Gurugram zonal office of the ED arrested Surender Panwar on 20 July this year. The arrest came 10 days before the Election Commission of India announced the dates for the Haryana assembly elections and more than six months after the agency questioned Panwar. The Congress MLA was sent to the ED’s custody twice — once on 20 July and then on the 29th — and remanded for a total of 12 days.
In the grounds of arrest, the ED referred to the FIRs lodged under the Mines and Minerals (Regulation and Development) Act, 1957, and the EPA. The ED claimed that during its investigation, the agency learned that Surender Panwar, his wife, and sons were shareholders in Development Strategies India Private Limited (DSPL), which, as part of a syndicate, carried out illegal mining, causing a huge revenue loss to the state.
The ED referred to a National Green Tribunal (NGT) observation against the DSPL and two more companies for their alleged violations of environmental norms during mining operations. The NGT had imposed a fine on them for the procedural irregularities.
The ED quoted account books of a company named GM Company, under whose umbrella DSPL and other companies part of the syndicate carried out the illegal mining operations, claiming that the unauthorised activities generated cash or proceeds of crime.
The agency said that since Surender Panwar’s family was 32 percent shareholders in DSPL and the GM Company accounts remained in their name, Panwar was a beneficiary of the proceeds of crime, roughly Rs 26 crore.
The ED purportedly referred to Panwar’s election affidavit filed before the 2019 Haryana elections, in which the Congress MLA declared him and his wife as DSPL shareholders. However, during their interrogation, the couple gave false replies about their ownership to mislead the investigation, the ED said.
Considering the Congress MLA was in exclusive possession of “material evidence”, the ED, purportedly apprehensive that he might abuse his power and influence to tamper with it, pronounced him guilty and placed him under arrest. The PMLA reverses the burden of proof on the accused, and there is a presumption of guilt against the person arrested.
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Panwar’s & ED’s arguments
The Congress MLA sought to quash his arrest with a declaration against the two police remands ordered by the special PMLA court against him in Ambala. His challenge was multifold.
Panwar said the eight FIRs that formed the basis for the ED complaint and the ninth FIR that invoked money laundering charges after the ED complaint did not name him.
He denied his involvement in the alleged illegal mining operations and the EPA violations, saying the ED had failed to assign him any role in the operations while seeking his remand. He charged the agency with adopting a “pick-and-choose policy”. While it arrested him, the rest remained at large, he told the court.
It was also his contention that arrest under the PMLA is not mandatory. Going by the definition of Section 19 of the PMLA, which empowers the ED to arrest an accused, he contended an officer “may” arrest but treat the same as a last resort. Arrest under PMLA has been kept on a very high pedestal and cannot be at the whims and fancies of the ED, he said. It should come only when concrete evidence can justify the arrest and not amid suspicions.
Panwar claimed that though there was no concrete evidence against him, he appeared and cooperated with the agency whenever summoned.
Moreover, he argued his arrest was to prevent him from campaigning in the upcoming state elections — he was taken into custody seven months after the ED searched his premises.
As for his association with DSPL, Panwar said he had ceased to be its director in November 2013, and no liability could be fastened upon him.
The ED countered Panwar’s plea by challenging the HC’s power to conduct a judicial review of the arrest and remand order. On merits, the agency said, there was sufficient material to show a nexus between Panwar and the co-accused, who indulged in illegal mining, leading to the generation of the proceeds of crime.
Claiming to possess incriminating material, the ED said that it meticulously complied with the arrest provisions under the PMLA and took Panwar into custody after acquiring evidence, which it disclosed to Panwar in writing at the time of his arrest.
Asserting it relied upon the NGT order on the EPA violations, the ED also denied that the arrest was to impede Panwar from participating in the elections.
HC declares arrest ‘illegal’
Rejecting the ED’s view that it can not review the legality of Surender Panwar’s arrest, the HC noted the Congress MLA was not an accused in the first eight FIRs nor the ninth one. The ED, however, “tried to implicate him on the premise that he is the Director of DSPL”. The court said this after the ED failed to produce material to substantiate its assertion that Panwar was either its director or a person in charge of the company affairs.
The court went by the information on the Ministry of Company Affairs (MCA) website, showing that Panwar ceased to be DSPL’s director in November 2013. Since it was a disclosure in a public document, the HC treated it as admissible evidence. Notably, the ED could not contradict this revelation made on the MCA website.
On the NGT’s fine on DSPL, the HC said it could not interpret the NGT move to hold Panwar liable under the PMLA. The SC had stayed the NGT move, subject to the payment of 60 percent of the penalty amount.
The HC also debunked the ED’s theory that Panwar was the director, promoter, and shareholder of GM Company. The ED could not prove the company’s existence or its operation under the law.
Given that the illegal mining allegations against Panwar did not constitute predicate offence under the PMLA, the HC said that he, prima facie, cannot be prosecuted on the count of being a beneficiary of proceeds of crime. Moreover, in February, a co-ordinate bench of the HC quashed the arrest of Panwar’s two co-accused in the same case, the HC noted.
According to the HC, the EPA violations were also not sustainable — they had been deleted from the list of scheduled offences by an amendment in August 2023.
“Since the offence is no longer in existence, hence prosecution on that count also would be unwarranted,” it said, adding grounds of Panwar’s arrest were “found to be unsustainable in law”.
Impact
Unless set aside by the Supreme Court, the HC judgment may impact the cases the ED has started probing based on FIRs against illegal mining in the Opposition-ruled states particularly.
Tamil Nadu is one such state where the ED has launched investigations based on criminal cases lodged by the local police and summoned senior state bureaucrats for questioning.
Upon a challenge by the Tamil Nadu government, the Madras HC, in July this year, stalled the ED’s investigations, observing that the PMLA did not list illegal sand mining as a scheduled offence.
However, after the intervention of the SC, where the ED challenged the Madras HC order, the Tamil Nadu government provided the documents sought by the ED later. Afterwards, the top court disposed of the ED’s plea in August.
One of the ED investigations against former Jharkhand chief minister Hemant Soren also has links to illegal stone mining charges.
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