ED’s journey from a small enforcement agency to becoming the ‘new CBI’https://indianexpress.com/article/india/enforcement-directorate-p-chidambaram-inx-media-case-d-k-shivakumar-5975982/

ED’s journey from a small enforcement agency to becoming the ‘new CBI’

The Enforcement Directorate is now investigating several high-profile cases, including the INX Media case against former Union minister P Chidambaram. The Indian Express on ED’s transformation from a small enforcement agency prosecuting civil offences to becoming “the new CBI”

Enforcement Directorate, Enforcement Directorate India, ED Chidambaram case, P Chidambaram INX Media case, Karti Chidambaram ED, ED CBI Chidambaram case, DK Shivakumar ED case, Indian Express. 
Congress leader P Chidambaram at the CBI court in Delhi. (File)

On September 2, when Karnal Singh, former Director of the Enforcement Directorate (ED), issued a press statement denying charges of alleged bribery levelled against him by a former deputy, the first to take a dig at him was Karti Chidambaram. He wrote on Twitter: “I feel the pain of Karnal Singh against “unsubstantiated allegations” @dir_ed (ED’s official twitter handle). The chickens come home to roost.”

Karti’s jibe was in reference to the INX Media case, in which he is a key accused and his father, former finance minister P Chidambaram, is in judicial custody in Delhi’s Tihar Jail. The entire INX media case is the result of a proactive ED chasing the Chidambaram’s for more than half a decade now.

In December 2015, ED had conducted searches at offices allegedly linked to Karti in Chennai and elsewhere. The raids were conducted in connection with the agency’s money-laundering probe into the Aircel-Maxis deal. During the searches, the agency stumbled upon documents that suggested that a company “indirectly controlled” by Karti had received payments from INX Media in the period that it was granted Foreign Investment Promotion Board (FIPB) approval for FDI.

Enforcement Directorate officials at Chidambaram’s residence. (Express photo: Praveen Khanna)

The agency promptly sent a reference, along with the seized documents, to the CBI, which registered a case in the matter in May 2017. The ED followed this up with a case of money laundering against Karti based on the CBI FIR. (Under the statute that governs the agency, the ED cannot initiate a money-laundering probe against anyone unless an FIR has been registered by another agency or state police on charges with financial implications.) In February 2018, the CBI arrested Karti.

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The ED further sent a reference, along with documents, on payments made by as many as four companies to some of Karti’s alleged firms around the time they received FIPB approvals. CBI sources now say the agency is probing the father-son duo in these cases as well.

Explained

What gives the ED its teeth

Armed with the Prevention of Money Laundering Act, a law that has been strengthened over the years since it came into force in 2005, the Enforcement Directorate has fast risen to be a powerful Central agency. The statute's provisions — granting the agency powers to arrest, and attach properties and assets of the accused, its stringent bail conditions, and making a statement recorded before an investigating officer admissible in a court as evidence, among others – have made the ED far more powerful than the CBI. Despite securing just eight convictions since 2005, over the past five years, the ED has been more proactive than the CBI in going after the accused in several key political cases, the most recent being the INX Media case against P Chidambaram and the alleged money laundering case against Karnataka Congress leader D K Shivakumar.

The series of events since 2015 is a pointer to how the ED has emerged as arguably the most proactive of Central investigative agencies, now at the centre of several high-profile cases, many of these involving members of opposition parties. Increasingly dreaded in the power corridors, it is now referred to as “the new CBI”.

As an ED officer put it: “Just listen to the statements of opposition leaders when they attack the government on ‘misuse of agencies’. Earlier, it used be ‘the government has unleashed CBI, IT and ED against its opponents’. These days, the order invariably is the ED, CBI and IT.”

Enforcement Directorate chief S K Mishra declined to offer his comments for this story.

A long list of cases

The ED’s swift, often bullish, approach has been evident in the way it has dealt with several other cases, among them the one involving Ratul Puri, nephew of Madhya Pradesh Chief Minister Kamal Nath. In July, Puri embarrassed the ED by escaping from its office where he had been called for questioning in connection with the Rs 3,600 crore AgustaWestland chopper deal case. Puri excused himself to visit the washroom and then never came back. By afternoon, he approached a Delhi court for anticipatory bail.

In subsequent days, the court saw unprecedented drama where, in a bid to win his custody, the ED went on to claim that a witness in the case may have been murdered.

With the anticipatory bail plea going on to linger in the Delhi High Court, the ED had the last laugh. Before the High Court could pronounce a verdict on August 20 on Puri’s anticipatory bail plea, the ED arrested him in another case, that of bank fraud. That afternoon, even his bail plea was rejected.

On September 3, the ED arrested Congress leader and former Karnataka minister D K Shivakumar after questioning him for over 30 hours starting August 30. The ED probe against Shivakumar is based on a chargesheet filed last year by the Income Tax Department alleging tax evasion.

Even in the AgustaWestland case, the ED has been steps ahead of the CBI in terms of arrests or legal submission in the form of chargesheets. While the CBI registered an FIR in the case in March 2013 and the ED initiated its money laundering probe only later, it was the ED that made the first arrest in the case — middleman Gautam Khetan was held in September 2014 and the agency subsequently filed the first prosecution complaint (equivalent to a chargesheet) in the case. It even chargesheeted British middleman Christian Michel much before he arrived in India.

The CBI, on the other hand, made its first arrest in the case — that of former IAF chief SP Tyagi — only in May 2016. It has since filed multiple chargesheets in the case.

While probing former Haryana Chief Minister Bhupinder Hooda or the Gandhi family too, the ED has shown greater alacrity than the CBI.

In July 2016, taking cognisance of a Haryana Vigilance Bureau FIR registered in May that year, the ED registered a case of money laundering against Hooda for allotting a plot in Panchkula to Associate Journals Ltd (AJL), the publisher of National Herald newspaper. AJL is owned by Young India, which in turn is run by the Gandhi family. The ED has since not only taken possession of the land but even filed a prosecution complaint against Congress leaders Motilal Vora and Hooda. The CBI registered a case in the matter only in April 2017.

Similarly, in the case of Robert Vadra, son-in-law of Congress president Sonia Gandhi, it was the ED which first raided the offices of Skylight Hospitality, a company at the heart of several dubious land deals in Rajasthan and Haryana and owned by Vadra.

In December 2018, the ED raided the offices of Skylight Hospitality, claiming the searches were in connection with certain properties owned by Vadra in London through controversial arms dealer Sanjay Bhandari. Vadra has denied these charges. The agency was also the first to question Vadra and has interrogated him eight times following the raids.

Even in the Bikaner land scam case, the ED registered a case even before the CBI could, taking cognisance of state police FIRs in 2015. The CBI registered a case only in August 2017.

It was again based on a reference sent by the ED and the evidence provided by the agency that the CBI in June registered a case against Sanjay Bhandari and Swiss company Pilatus Aircrafts Ltd for alleged bribery in the 2012 deal for purchase of 75 trainer aircraft from Pilatus at a cost of Rs 2,895 crore. It has already sent details of alleged bribery in an ONGC-Samsung Engineering deal associated with Bhandari to the CBI for further action.

Even in the Rs 14,000 crore bank fraud case against Gujarat businessmen Chetan and Nitin Sandesara of the Sterling Biotech group, while it was the CBI which registered a case first, the ED has taken the lead by questioning Congress leader Ahmed Patel’s son Faisal and son-in-law Irfan Siddiqui in the case.

In 2016, it was based on references sent by the ED that the CBI began probing the role of former CBI directors A P Singh and Ranjit Sinha in the Moin Qureshi case.

A new, aggressive ED

For much of its existence since 1957, the ED remained a small enforcement agency with its domain limited to the corporate world and often prosecuting civil offences. It was only in 1973, with amendments brought into FERA, that the ED acquired some teeth.

Over the next three decades, it handled many high-profile cases, and booked the likes of Maharani Gayatri Devi, J Jayalalithaa, T T V Dhinakaran, Hema Malini, Feroz Khan, Vijay Mallya (then just a liquor baron), Reliance rival Orkay Group, Weston TV and then BCCL chairman Ashok Jain for alleged FERA violations.

“FERA, 1973, was a very powerful law. It allowed even an Enforcement Officer (equivalent to an inspector) to arrest anyone and enter any business premises without a warrant. Even an Assistant EO could search any vehicle or person without a warrant. With so much power, the ED then even courted allegations of third-degree torture in custody. But even then, the ED’s domain was largely limited to the corporate world. It remained a dreaded agency among businessmen until the ’90s,” says a senior ED officer who has spent close to 30 years in the agency.

With the liberalisation of the economy, FERA began to be viewed as an excessively coercive and obsolete law and was repealed in January 2000. It was replaced by the Foreign Exchange Management Act (FEMA), which turned forex violations into civil offences, compoundable after payment of a fine. The move served to defang the ED as it could no more arrest or take people into custody.

“At that time, even a debate had begun whether an agency like the ED was needed. The staff which was used to taking coercive action had its morale down. Officers stopped coming on deputation to the agency,” the ED officer says.

This was also the time, however, when 9/11 attacks brought international focus on terror financing. The Financial Action Task Force (FATF) had already been established and there was pressure on India to bring in mechanism to deal with money laundering. And thus was born the Prevention of Money Laundering Act (PMLA).

Much of the ED’s current aggression, followed by frenetic media coverage, has come about in the past one decade since the ED began to handle political cases under the PMLA. Ironically, much of it happened during the tenure of P Chidambaram as Finance Minister. It was under him that the PMLA came into force in 2005 — though it was the Atal Bihari Vajpayee government that brought the PMLA Bill to Parliament, which passed it in 2002 — and the ED acquired criminal prosecution powers that had been snatched from it after the repeal of FERA.

It was under Chidambaram that the ED began to frequently take up political cases and regularly hit headlines with actions in the Madhu Koda case, the 2G scam probe, the Aircel-Maxis case, the CWG case, the Sahara case, the Bellary mining case involving the BJP’s Reddy brothers, the Vanpic projects case involving Y S Jagan Mohan Reddy and cases against Baba Ramdev during the UPA regime.

The cases against Ramdev were closed after the NDA came to power. The Madhu Koda case became the first in the history of the agency to end in conviction. The 2G scam case has fallen through in court and the accused in the Aircel-Maxis case have been discharged. The CWG case and the Sahara case are still on. In the cases against the Reddy Brothers and Jagan, there have been no major developments since the NDA came to power.

Some other cases, which both the CBI and ED have been probing, include the chit fund scams against former Trinamool leader Mukul Roy and former Congress leader Himanta Biswa Sarma. Investigations against both have seen no significant development since these leaders joined the BJP. Similarly, no legal action has been reported against former TDP MP Sujana Chowdhary in a money laundering case associated with bank fraud since he joined the BJP in June.

The PMLA’s ambit was increased through amendments in 2009 and 2013, giving the ED the teeth it now has. Its provisions practically make the ED far more powerful than the CBI. It’s the only Act in the country where a statement recorded before an investigating officer is admissible in a court as evidence. Laws with such provisions, such as TADA and POTA, have long been repealed.

In 2011, the ED underwent massive restructuring, becoming a force of 2,067 officers (sanctioned strength) and staff, up from 758 earlier, even as its offices increased from 21 to 49 across the country. In comparison, the CBI has 4,000 officers and staff.

Until 2017, the Act had a provision that an arrested accused could be granted bail only if the court was satisfied that the accused was not guilty. The provision was struck down by the Supreme Court on the ground that it presupposed the trial at the stage of bail itself.

Until this provision was in force, those accused under the PMLA rarely got bail before an incarceration that could last anywhere between two and three years. Given that money laundering offences attract between three and seven years of punishment in jail, this was considered practically like serving the sentence. Almost no one got bail until a chargesheet in the case was filed. Of the over 120 persons accused by the ED and arrested under the PMLA between 2005 and 2017, no more than two or three people secured bail in a matter of months.

Kashmiri separatist leader Shabbir Shah, who was booked by the ED in connection with an alleged terror funding case in 2017, is still behind bars. NCP leader Chhagan Bhujbal, arrested in March 2016 in a money laundering case, was granted bail in May 2018 after two years of incarceration.

But the most potent and coercive tool that the Act grants the ED is the power to attach properties of the accused. The PMLA also puts the burden of proof on the accused as it presumes intent. Under the statute, if a person possesses a property that the agency can prove has been bought with the proceeds of a crime, it is not bound by law to prove that the person had an intention to launder money. Similarly, Section 22 states that where any property or records are seized from any person under this Act, it shall be presumed that such a person is the owner of such property or records.

These properties, often worth crores of rupees and sometimes residences of the accused— 50% of Chidambaram’s Jor Bagh bungalow has been attached by the ED — can become out of bounds for the accused for years if the agency takes possession of it.

In contrast, the CBI can only arrest and prosecute people.

Only 8 convictions since 2005

However, for all its powers and show of strength, the agency has a rather poor record in terms of taking cases to the logical conclusion. Of around 2,400 cases that it has registered under the PMLA since 2005, only eight have ended in conviction. Its investigation too has remained tardy, with prosecution complaints having been filed in only 688 cases till June 2019.

It’s this record that has remained a matter of concern for the Ministry of Finance. In 2016, then Revenue Secretary Hansmukh Adhia had chided the agency for slow investigations and no convictions. In reply, then ED Director Karnal Singh had said that ED cases were delayed because they were associated with “influential people”.

Agency sources said poor conviction did not reflect on the agency but rather on the judiciary. “Till date, there has been just one acquittal in PMLA cases. All our prosecution complaints have been taken cognisance of. Our investigation is tardy because we have just 1,000 staff,” a senior officer says.

Besides, they point out, the PMLA came into effect only in 2005, and 14 years is not a long time to secure convictions in Indian courts.

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For a small agency, the ED has been punching way above its weight. It continues to work under severe stress with close to 50% vacancies even as the number of cases entrusted to it keep on rising. The agency does not even have its own building. With no detention rooms of its own, unlike the CBI, the ED sends arrested accused to dingy lock-ups of local police stations — the reason why many politicians resist an ED custody more forcefully than the CBI’s.