Union government claims legal competence of the Parliament in giving extraordinary extension to ED director

A three-judge Supreme Court Bench was hearing petitions challenging the third extension given to Sanjay Kumar Mishra as director of the Enforcement Directorate. The Union government claims that since the statutory provision is changed, the order of mandamus no longer applies. On the other hand, the petitioners challenge the urgency of the Financial Action Task Force review and urge that mandamus cannot be neutralised.

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ON Monday, a three-judge Supreme Court Bench heard petitions challenging the third extension given to Sanjay Kumar Mishra as Director of the Enforcement Directorate (ED). On May 3, the Bench, comprising Justices B.R. Gavai, Vikram Nath and Sanjay Karol, heard Solicitor General of India Tushar Mehta's claim that continuity of Mishra's tenure as Director of the Enforcement Directorate (ED) has transboundary implications and is essential for the peer review process of the Financial Action Task Force (FATF).

In September 2021, the Supreme Court had refused to quash the Union government's order extending the tenure of Mishra with retrospective effect, making it a three-year tenure against the initial two years, even though Mishra had attained superannuation in the interregnum, that is, before the expiry of two years. The court had, however, clarified that Mishra would not be given any further extension beyond November 17 when he completes three years of his tenure. The court, thus, issued a mandamus, which specifically directed that Mishra could not be granted any further extension.

On November 15, 2021, the Union government, however, introduced amendments to the Central Vigilance Commission Act, 2003 (CVC Act) and the Delhi Special Police Establishment Act, 1946 that deal with appointing the heads of the ED and the Central Bureau of Investigation, respectively. Section 25(d) of the CVC Act that deals with the appointment of officers of the ED was amended.

The amendment provides that the period of office of the director of the ED could be extended by up to one year at a time. It also states that no extension of tenure could be granted after the completion of a five-year term by the director of the ED.

Order contextual to the prevailing statutory regime

On Monday, continuing his contentions, Mehta made two fundamental submissions— firstly, that the order of mandamus of the court is contextual to the statutory provision prevailing at the time when the order was passed; and secondly, since the statutory provision is changed, the order of mandamus no longer applies.

Mehta referred to the FATF's peer review process and stated that 2023 is a crucial year for India's assessment. He asserted that although Mishra is not indispensable, in view of the peculiar circumstances, his continuity in the position of director of ED is required till the month of November, when the major part of the FATF is predicted to be over. It was reiterated by Mehta that India is currently being assessed for the fourth round of the FATF, and that it is essential that the FATF is satisfied about granting India the appropriate grading.

According to Mehta, although no organisation is ineffective on account of the discontinuance of any members, the presence of a person who has led the organisation "makes the difference". With this argument, Mehta asserted that the government has appropriate justification for Mishra's continuation. He emphasised that the post of director of ED is not promotional, but is based on selection from a common pool of officers from the Indian Administrative Service, the Indian Police Service and the Indian Revenue Service, after the due contemplation of the CVC.

On Justice Gavai's enquiry, Mehta informed the Court that the Union government got the knowledge that the FATF peer review would be conducted in 2019. To this, Justice Gavai questioned the government's failure to argue Mishra's extension for his presence at the FATF review process, during the hearing in 2021, pertaining to which the mandamus was issued. It was also highlighted by Justice Gavai that there was nothing on record to show that the mandamus of the Court was placed before the Parliament at the time of passing of the amendment.

On Justice Gavai's further enquiry, Mehta apprised the Bench that the consideration of the FATF's review, although not a primary concern of the CVC meeting in 2021, was part of both CVC meetings, held in 2021 and 2022, which granted Mishra further extensions to his tenure.

Mehta referred to a catena of the court's judgments, including in Indian Aluminium Co. Etc. versus State of Kerala & Ors (1996), Madan Mohan Pathak versus Union of India & Ors. (1978) and Justice K.S. Puttuswamy (Retd) versus Union of India (2018), to argue that the legal competence of the legislature to enact a law retrospectively does not cause an intrusion of mandamus issued by the court. Mehta submitted that, in other words, the Parliament had the legal competence to enact the amendment.

Justice Gavai noted that the order of mandamus was granted due to the discrepancy between Section 25 of the CVC Act and Fundamental Rule 56, which states that there cannot be any extension of the service of the Director of Enforcement.

Mehta submitted that the court would not have passed the previous order of mandamus in view of the present statutory regime. The legislature had removed the basis of the mandamus by providing an "outer limit" of five years for extension of tenure, he stated.

He pointed out the court's ruling of September 2021 that stated, "There is no proscription on the government to appoint a Director of Enforcement beyond a period of two years". He prayed for the Bench to consider the change in the situation in the present case that necessitated Mishra to continue his position as director of the ED.

Mandamus can be diffused by specific enactment 

Highlighting the mandamus, Additional Solicitor General of India S.V. Raju contended that it was entirely based on the provisions of Fundamental Rule 56. He reiterated that the mandamus was issued in peculiar circumstances and would not have been issued in view of the present facts. He argued that the mandamus was issued to resolve the conflict between Fundamental Rule 56 and Section 25 of the CVC Act, and urged that since the amendment removes the conflict, the foundation for which the mandamus was granted is changed.

Raju referred to judgments of the Supreme Court in Kishan Lal Lakhmi Chand & Ors versus State of Haryana and Ors (1993) and Welfare Association A.R.P., Maharashtra & Anr versus Ranjit P. Gohil & Ors. (2003), and emphasised that subject to the legal competence of a legislature, an order of mandamus by the court can be "diffused" by a specific enactment.

Justice Gavai observed that there is no fundamental change in the circumstances after the amendment since the mandamus was issued considering that the ED director's tenure could be extended for five years or more. He explained that the mandamus took into consideration that the CVC Act provided for a minimum tenure of two years and that there was no prohibition on the government to appoint an ED director for more than two years. The amendment only clarified the appointment and the extension of the tenure of the ED director, Justice Gavai stated.

Raju emphasised on the order of the court that upheld the power of the Union government to extend the tenure of the ED director beyond the superannuation of the incumbent, provided it is done in rare and exceptional circumstances, which led to the order of mandamus. He asserted that the condition of "rare and exceptional" cases is removed by the amendment. Since now the superannuation is based on tenure and not age, the condition of superannuation of age relied upon while issuing the mandamus no longer holds, he explained.

Mandamus not neutralised

Senior advocate Gopal Sankarnarayanan, appearing for the petitioner Common Cause, a public interest organisation, referred to the final mandamus issued by the court and pointed out that the court was conscious of the remaining short period of the tenure in allowing the extension. According to Sankarnarayanan, since the mandamus was issued in relation to the extension of tenure of a specific individual, the legislature would have to pass a law pertaining to one such person to nullify the mandamus. Such an enactment would be arbitrary in law, he added.

Delving into the Union government's contention that Mishra's continuity is required for FATF's peer review process, Sankarnarayanan sought to clarify that the FATF was set up by the G7 countries for examining money laundering tactics and giving recommendations to deal with the issue. He negated Mehta's claim that the FATF is a part of the United Nations. He urged that the recommendations of the FATF have no bearing on the term or appointment of the officials and instead lay emphasis on the autonomy and independence of the organisation, that is, the ED.

On the FATF's current stage of evaluation, Sankarnarayanan asserted that India has not been evaluated yet. He urged that the FATF states India's "possible" onset of evaluation in 2023, which will end in June 2024 at the earliest, by which Mishra's tenure is stated to have ended.

Sankarnarayanan submitted that the Union Government's argument that Mishra is supervising certain important cases that are in the advanced stages of investigation is not unique and can be applied to every position.

Challenge to ED's independent functioning

Sankarnarayanan challenged Mehta's contention of the CVC's independence from the ED. He urged that the insulation of the ED, abiding by fixed tenures, and protection of such tenures are important. As opposed to fixing a tenure, "the extension gives the government a handle to make it incremental", Sankarnarayanan claimed.

Further, he delved into the CVC's exercise of limited control. Pointing to the Delhi Special Police Establishment Act, he drew a contrast with the ED and stated that except for corruption cases, the CVC has no role to play. Thus, in all non-corruption cases, he pointed out, the Union government has control over the matters.

Sankarnarayanan emphasised that the ED is under the Department of Revenue, and there is no statutory clause authorising the CVC's supervision over the ED. The function of the CVC is limited to the purposes of appointment and for recommending extensions of tenures, he claimed.

Advocate Prashant Bhushan, appearing for the petitioners, submitted that tenure should be fixed for a specific period and that extension of tenure should be granted only in exceptional cases. He highlighted that the court, in its previous order of September 2021, did not interfere with the extension since Mishra was retiring.  Bhushan claimed that 95 percent of the persons arrested by the ED belong to opposition political parties. The independence of the ED would be compromised if the extension is granted, he urged.

Senior advocate K.V. Viswanathan, the amicus curiae in the present matter, submitted that the legislature fails to mention that the amendment was passed notwithstanding the mandamus of the court, and thus, the mandamus is not neutralised. If a person has attained superannuation, there must be a parameter to grant an extension to tenure, he urged. He pointed out that in the present case, the extension is granted beyond the original tenure.

Viswanathan expressed the fear of successive governments misusing the amendment, if it is not struck down by the Bench. He opined that irrespective of the credentials of the officers, in the larger interests of democracy, the amendment and the resulting extension of Mishra's tenure are invalid.