Information Shared Under Tax Treaties Can Be Accessed By Other Probe Agencies Like ED For Investigation: Punjab & Haryana High Court - 2025-09-03

Punjab & Haryana HC: Tax Treaty Secrecy Clause Not a Bar on ED Inspecting Court Records in Amarinder Singh Case

Chandigarh: The Punjab and Haryana High Court has delivered a significant ruling on the scope of information sharing between government agencies, holding that the Enforcement Directorate (E.D.) can inspect court documents filed by the Income Tax Department, even if the information was obtained under a Double Taxation Avoidance Convention (DTAC) with a foreign nation.

Justice Tribhuvan Dahiya dismissed petitions filed by former Punjab Chief Minister Amarinder Singh and his son, Raninder Singh, who sought to prevent the E.D. from accessing documents related to their alleged undisclosed foreign assets. The court affirmed that an accused individual cannot object to one government agency accessing information from another for investigation by citing the secrecy clause of an international treaty.

Background of the Case

The case originates from a complaint filed by the Income Tax (I.T.) Department against Amarinder Singh under Section 277 of the Income Tax Act and various provisions of the Indian Penal Code. The complaint alleged that Singh was a beneficiary of undisclosed foreign assets and bank accounts, based on "credible information" received from French authorities under the India-France DTAC. This information was submitted to a Ludhiana magistrate's court as part of the complaint.

Subsequently, the Enforcement Directorate, which was conducting a parallel investigation into the matter under the Foreign Exchange Management Act (FEMA), 1999, filed an application before the magistrate seeking permission to inspect the documents on the court's judicial file. Both the Magistrate and the Additional Sessions Judge in Ludhiana allowed the application, prompting the petitioners to approach the High Court.

Arguments of the Parties

Petitioner's Contentions: - Amarinder Singh’s counsel argued that the lower court orders caused "grave prejudice." - The primary objection was based on Article 28 of the India-France DTAC, which mandates that any information exchanged between the two countries "shall be treated as secret." - It was argued that this information could only be disclosed to authorities involved in tax assessment or prosecution, and the E.D., being a "stranger" to the tax proceedings, was barred from accessing it. - The petitioners contended that allowing the E.D. to inspect the file was an indirect method of circumventing the treaty's confidentiality provisions.

Respondent's Defence: - The E.D.'s counsel countered that the inspection was permissible under the Punjab and Haryana High Court Rules, which allow a "stranger" to inspect a court record for sufficient reason. - Crucially, the respondents relied on the Supreme Court's landmark judgment in Ram Jethmalani and others v. Union of India and others (2011) . In that case, the Supreme Court interpreted a similar secrecy clause (Article 26) in the India-Germany tax treaty and held that it did not constitute an absolute bar on disclosure, particularly in "public court proceedings."

Court's Rationale and Key Findings

Justice Dahiya, agreeing with the respondents, provided a detailed reasoning for dismissing the petitions.

1. Interpretation of Tax Treaties: The court extensively quoted the Supreme Court's analysis in the Ram Jethmalani case. It noted that the apex court had found that clauses allowing disclosure in "public court proceedings" act as an exception to the general rule of secrecy. The High Court concluded that Article 28 of the India-France treaty, being pari materia to the clause in the Germany treaty, was "no obstacle to disclosure of information."

2. No Right to Object for the Accused: The judgment emphasized that the DTAC is an agreement between two sovereign nations—India and France. If the disclosure of information violated the treaty, it would be for the Government of India (specifically the I.T. Department) to raise an objection, not the accused.

In a pivotal observation, the Court stated:

"It is the Government of India which has entered into this Agreement with the French Republic, whereunder the information has been handed over to the I.T. Department. In case disclosure of information causes any violation of terms of the Agreement, including that of Article 28, it is for the Department to oppose it on that ground and not for the petitioners."

3. Duty to Investigate Wrongdoing: The court further relied on the Supreme Court's pronouncement that if any entity, including an organ of the State, possesses information about potential wrongdoing, it has an obligation to investigate.

"Here, the information is being sought by an organ of the State/the E.D. itself for the purpose of investigation which cannot be taken exception to in view of the settled law," the Court held.

Final Decision and Its Implications

The High Court dismissed all three petitions, upholding the orders of the lower courts. It permitted the E.D. to inspect the records of the complaints before the Magistrate and access the relevant documents. However, it added a rider that the information "shall not be disseminated publicly unless permitted in accordance with law," thereby balancing the needs of investigation with privacy concerns.

This judgment reinforces the principle of inter-agency cooperation in tackling financial crimes and clarifies that international tax treaties cannot be used by an accused as a shield to thwart investigations by other domestic law enforcement agencies. It sets a strong precedent for cases involving cross-border financial information, affirming that the ultimate goal of preventing fiscal evasion and prosecuting wrongdoing takes precedence over narrow interpretations of treaty confidentiality clauses.