2023 (10) TMI 1569 - HC - Money Laundering

Document disclosure demands in monitored money-laundering probe upheld; appeal dismissed as applicant not aggrieved, ordered to comply

The dominant issue was whether the applicant could maintain an appeal against directions requiring disclosure of documents/information in a ... Money Laundering - Application for leave to prefer an appeal - learned Single Judge has assumed the role of a court of enquiry and/or a fact finding commission for the purpose of providing and/or returning recommendation on alleged incident and/or offence which is clearly violation of the basic tenets of a court monitored investigation - HELD THAT:- The information and documents that are called for are essential which a high profile investigating agency like ED possibly could not have overlooked. The investigating officers entrusted should be skilled enough to decide the nature of information and documents to be called for and expected to have experience to deal with matters concerning money laundering. Failure to call for information and documents essential for the investigation could be fatal and may create a public perception of lack of probity. ED has dedicated skilled investigators and we would expect that the investigation proceeds on a right direction. As a statutory authority it is bound by the procedure laid down in the statutes and must act with utmost probity and with the higher degree of dispassion and fairness. The summons were issued only to elicit information with regard to the affairs of the company in which admittedly the applicant was the director for almost two years and presently the CEO. Huge unaccounted money has been recovered from the Chief Operating Officer of the company. He is presently in custody. The appellant is a Member of Parliament. The disclosure cannot cause any prejudice to him. It is expected that he should cooperate with the investigation - the applicant are directed to disclose all document and information sought from him till date on or before 10th October, 2023. The investigation is pending for almost 19 months and any further delay would be prejudicial for all. The learned Single Judge in proceeding with the matter shall keep in mind that in monitoring the investigation, no adverse remark shall be made against any of the persons against whom the investigation is pending as it is likely to prejudice his rights in the event any proceeding is ultimately initiated upon conclusion of the investigation. The endeavour of the Court shall be to ensure a fair, speedy, impartial and time-bound investigation. It is to be remembered that any adverse observation against any of the persons summoned could be prejudicial to the interest of the said person and is likely to influence the investigation and the trial - The directions with regard to disclosure of information and documents in the impugned orders has to be read in the context of the email of 16th September, 2023 and consequence of non disclosure of such documents. The ED could not file a proper report due to insufficient materials. ED has admitted that such information are essential for a fair investigation. Even for an action to be initiated under Section 19 of the PMLA Act 2002 the authority has to form an opinion on the basis of the material gathered during investigation. In the instant case there is no observation in the impugned orders that can be prejudicial to the applicant and he cannot be a person aggrieved. The grievance is with regard to few observations found place in the transcripted version claimed to be authentic. However, no such observation has found its place in the impugned orders. The constitutional court cannot shut its eyes if there are glaring discrepancies or insufficiency of materials. The result of the investigation would be also relevant to decide the matters pending before the learned Single Judge. The investigating agency shall conduct the investigation in accordance with law. Both the appeal and the connected applications are disposed of. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the challenged directions and observations amounted to impermissible judicial interference with an ongoing investigation (i.e., the Court 'acting as a prosecutor' or 'supervising' investigation beyond permissible monitoring) and therefore warranted appellate interference. (ii) Whether the appellant, not being a party to the writ proceeding, had maintainable standing as a 'person aggrieved' to seek leave to appeal, and whether the impugned orders contained any prejudicial observations affecting the appellant's rights. (iii) What operative directions were necessary to balance a fair, impartial and time-bound investigation with protection against prejudice and confidentiality risks, including document disclosure timelines, future summons procedure, and confidentiality of investigative materials. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Limits of court monitoring of investigation and whether the impugned orders crossed into impermissible supervision Legal framework (as discussed by the Court): The Court proceeded on the distinction between permissible 'monitoring' of an investigation by a constitutional court (to ensure free, fair, impartial and time-bound progress) and impermissible 'supervision' that dictates the manner and mode of investigation. The Court accepted that courts must be cautious not to make remarks that could prejudice persons under investigation and must not assume the role of a prosecutor. Interpretation and reasoning: The Court examined the substance of the impugned orders and held that the challenged directions were issued in the context of inadequate or incomplete investigative reporting and non-availability/non-supply of essential documents. It found that asking whether relevant information had been received, and requiring disclosure of documents relevant to tracing the money trail (including corporate and banking information connected to the entity with which the appellant was associated), did not amount to channeling the investigation into a particular prosecutorial theory. The Court acknowledged that some questions reflected in the transcribed proceedings were 'avoidable,' but held that those questions were not reflected in the impugned orders themselves. The Court attributed the impugned directions to the need to address tardy progress and an incomplete report, while reiterating that the court must avoid prejudicial comments during monitoring. Conclusions: The Court concluded that the learned Single Judge had not transgressed jurisdiction and that the impugned directions, properly contextualised, did not constitute impermissible interference with investigation. No appellate interference was warranted on the contention that the orders converted monitoring into prohibited supervision or prosecution. Issue (ii): Maintainability/standing to appeal and whether the appellant was a 'person aggrieved' by the impugned orders Legal framework (as discussed by the Court): The Court recognised that a constitutional court is duty-bound to protect rights under Articles 20 and 21 and that an individual may, in principle, be entitled to raise objections if observations in a pending proceeding are likely to adversely affect participation in investigation. However, maintainability depended on whether the impugned orders contained prejudicial observations that could adversely affect the appellant. Interpretation and reasoning: The Court assessed the asserted prejudice and found it was substantially founded on alleged observations in a transcript of live-streamed proceedings, not on the text of the impugned orders. The Court held that no prejudicial observation against the appellant was contained in the impugned orders. Since the grievance related to transcripted remarks not forming part of the orders under challenge, the appellant could not be treated as a person aggrieved by the impugned orders themselves. At the same time, the Court noted the broader responsibility of the constitutional court not to ignore glaring discrepancies or insufficiency of materials relevant to issues pending before the Single Judge. Conclusions: Although the Court accepted that, conceptually, objections may be raised where investigation-related observations threaten constitutional rights, it held that in the present case the impugned orders contained nothing prejudicial to the appellant; therefore, the appellant could not claim to be a person aggrieved on that basis. Issue (iii): Directions to ensure fair, speedy investigation while preventing prejudice and preserving confidentiality Legal framework (as discussed by the Court): The Court emphasised fairness, impartiality, probity, and confidentiality during investigation, and underscored that investigative materials shared with the Court should not be publicly disclosed in a manner that hampers investigation or prejudices persons under investigation. The Court also proceeded on the premise that investigative action must be based on material gathered during investigation. Interpretation and reasoning: The Court accepted that the documents sought from the appellant were essential to trace the money trail, and that delay in disclosure could impede the investigation. It balanced the requirement of cooperation with safeguards: ED was directed to examine documents first, and only if presence was necessary could it issue summons with advance notice. The Court explicitly cautioned that ED should act fairly and not be swayed by transcripted remarks. The Court also addressed confidentiality concerns by directing that investigative reports and materials filed or shared with the Court be kept confidential, and that ED must maintain confidentiality of collected materials and documents supplied during investigation. The Court further issued time-related expectations to prevent undue delay, including a targeted completion timeline, while also creating a short protective window during which the appellant was not to be called. Conclusions: The Court ordered (a) disclosure by the appellant of all sought documents/information by a fixed date; (b) ED to issue any further summons only if necessary, with 48 hours' prior notice; (c) expectation that investigation be concluded by a specified date; (d) a limited period during which ED would not call the appellant; and (e) strict confidentiality to be maintained for investigative reports/materials both in Court and within ED during the investigation, coupled with a caution to the Single Judge to avoid adverse remarks that could prejudice rights.