Supreme Court Allows ED Probe Against TN Minister V Senthil Balaji In Cash-for-Jobs Scam, Quashes HC Order For Fresh Investigation

Arguments raised against PMLA

The hearing of the case witnessed arguments being made against the Prevention of Money Laundering Act.

Senior advocate Kapil Sibal told the top court that the Supreme Court’s July 2022 decision in Vijay Madanlal Choudhary needed a ‘relook’. On another day, senior counsel C Aryama Sundaram argued that he would read the judgement “as it stood” to support his interpretation of the act, but such an interpretive scheme did not support the modus operandi of the ED which routinely conducted ‘fishing’ enquiries to implicate people in money laundering cases. The central agency’s modus operandi, Sibal said, was not only against all ‘canons of justice’, but also violative of the principles of federalism. Later, senior advocate Sidharth Luthra also weighed in, saying the haste with which and the manner in which the directorate had started working made it seem like they were ‘cowboys’ in the ‘Wild West’, and not an agency following statutory principles.

Besides emphasising the importance of the Prevention of Money Laundering Act as a part of the global response to transnational organised crime and other insidious activities taking place across geopolitical borders, in rejoinder, the solicitor-general addressed a number of contentions raised by the other side, including the argument that once an accused is discharged for a predicate offence, the Enforcement Directorate had no jurisdiction to investigate. The top law officer also reiterated that the involvement in any one or more of the following activities or processes connected with the proceeds of crime, namely, concealment, possession, acquisition, use, projecting it as untainted property, or claiming it as untainted property, would be an offence of money laundering under the Prevention of Money Laundering Act. He explained:

“Imagine a person has been accused in a corruption case. Now, based on that corruption case, the ED lodges an enforcement case information report. Its jurisdiction is to figure out where the money, which is the proceeds of the crime, goes. Even if such a person is in possession, he would be guilty of money laundering. It is not necessary for him to ‘launder’ the money in the conventional sense.”

One of the central planks of the argument by the other side was that the jurisdictional facts necessary for the directorate to begin an investigation was the commission of an offence, together with the generation of the proceeds of crime with respect to that offence. Sundaram submitted that the existence of identified property or ill-gotten gains in the hands of the accused were the sine qua non of an offence of money laundering. Luthra also raised a similar concern. Sibal went one step further and said that an interpretation which removed the difference between the proceeds of crime and money laundering was constitutionally suspect, and only when any tainted property was integrated into the formal economy, should charges of money laundering be attracted. Mehta responded to these contentions by saying:

“The moment a predicate agency, be it a state agency or the Central Bureau of Investigation, registers an FIR which falls within the predicate offence list in the schedule annexed, the jurisdiction of the Enforcement Directorate starts. There is no stay in its jurisdiction merely because the predicate offence is stayed. This court has read only one condition which is that the ED’s investigation will stop only if the accused is acquitted in the scheduled offence. The act has also provided for the director of the agency to share information relating to any proceeds of crime recovered during a raid from an accused, with another agency, where the predicate offence is gone. The Prevention of Money Laundering Act is a complete code taking into account all scenarios.”

The solicitor general also said that the provisions of the Prevention of Money Laundering Act were in compliance with the global standard set by the Financial Action Task Force (FATF) and a part of the intergovernmental response to organised crime.

Background

In the years 2014-2015, recruitment for the post of reserve crew drivers, crew conductors, junior tradesmen (JTM), junior assistant (JA), junior engineer (JE) and assistant engineer (AE) was conducted in all the transport corporations in the State of Tamil Nadu. It has been alleged that in these appointments, various officials of the transport department colluded jointly and severally, including the then-electricity minister Senthil Balaji in the AIADMK-led regime. Balaji currently holds, among others, the ‘electricity’ and ‘prohibition and excise’ portfolios in the Tamil Nadu cabinet, as a minister of Tamil Nadu’s ruling DMK party.

In 2018, a complaint was filed by K Arulmani against Balaji and others for taking bribes from job aspirants on the false promise of appointing them to various posts in the Metro Transport Corporation (MTC). Arulmani – an MTC technical staff – claimed that he had been approached by one of the accused in 2014, around the time of the issuance of a notification for recruitment to the posts of driver and conductor in the state transport corporation. Arulmani was allegedly told that these jobs could be secured by leveraging the influence of the transport minister (Senthil Balaji), in exchange for the payment of a sum of money.

It was further alleged that Arulmani collected about Rs 40 lakhs from a number of aspirants and paid the same to another conspirator – who, it has been claimed, received it in Balaji’s presence. However, those who had paid the accused to secure their jobs apparently did not find their names in the recruitment list that was published. Nor was their money returned.

Balaji and others were booked for offences under Sections 406 (punishment for criminal breach of trust), 420 (cheating) and 506 (punishment for criminal intimidation) of the Indian Penal Code, 1860. Subsequent to the lodging of an FIR in 2018, a charge sheet was filed in the following year. However, in 2021, the Madras High Court quashed the cheating case pending before a special court for Members of Parliament (MP) and Members of Legislative Assembly (MLA) in the state, after being told that the complainant and the thirteen alleged victims – arrayed as witnesses in the case – had arrived at a settlement with the accused. Two other FIRs filed in this connection were also stayed subsequently.

In the meantime, Balaji received a summons from the office of the Deputy Director, Enforcement Directorate, Madurai Sub Zonal Office in connection with the recruitment scam. The summons was challenged before the Madras High Court on the ground that there were no jurisdictional facts to initiate any proceedings under the Prevention of Money Laundering Act. This argument found favour with the bench which, in September 2022, allowed the petitions moved by Minister Senthil Balaji and two others and quashed the summons issued by ED.

Not long after this, a Supreme Court bench headed by Justice S Abdul Nazeer set aside the order of the Madras High Court by which it had quashed the proceedings against the former transport minister and restored the criminal complaint against him and the others.

In November of the same year, the Madras High Court ordered a fresh enquiry into the cash-for-job scam, with Justice V Sivagnanam observing that there were irregularities in the investigation conducted by the investigating agency and that it has overlooked certain crucial aspects.

The single-judge bench pronounced:

“The investigation should be conducted ab-initio comprehensively without reference to the earlier investigation on record covering all the aspects, including whether the offence under the Prevention of Corruption Act, 1988 are made out against the accused…Further, on completion of the investigation, if the investigating agency makes out a case for cognizance of offence against the accused then the investigating agency of the predicate offence shall provide the relevant materials/documents to the Directorate of Enforcement so as to enable it to invoke its jurisdiction to commence its enquiry under the PMLA Act thereafter.”

A batch of appeals that was disposed of by the apex court today was preferred against various orders of the Madras High Court.

Case Title

Y. Balaji v. Karthik Desari & Anr. | Special Leave Petition (Criminal) No. 12779-12781 of 2022 and other connected matters

Click Here To Read/Download Judgment