In Crl Apl 3051-3052 - SC - Enforcement Directorate must give information about grounds of arrest in writing to those arrested by it: rules SC while holding that ED mantled with far-reaching powers under stringent PMLA, must not be vindictive in its conduct but be fair & transparent
Justices A S Bopanna & Sanjay Kumar [03-10-2023]

Read Order: Pankaj Bansal v. Union of India & Ors

LE DESK

New Delhi, October 4, 2023: In a significant ruling, the Supreme Court has pulled up the Enforcement Directorate for failing, in many cases, to ‘inform’ those arrested by it of the grounds for their arrest despite it being a Fundamental Right as well as a procedural requirement under section 19 of the Prevention of Money Laundering Act (PMLA), 2002.

A Bench of Justice A S Bopanna and Justice P V Sanjay Kumar held the language of Section 19 of the PML Act of 2002 puts it "beyond doubt” that the authorized officer has to record in writing the reasons for forming the belief that the person proposed to be arrested is guilty of an offence punishable under the Act of 2002. It said that section 19(2) requires the authorized officer to forward a copy of the arrest order along with the material in his possession, referred to in Section 19(1), to the Adjudicating Authority in a sealed envelope.

“Though it is not necessary for the arrested person to be supplied with all the material that is forwarded to the Adjudicating Authority under Section 19(2), he/she has a constitutional and statutory right to be ‘informed’ of the grounds of arrest, which are compulsorily recorded in writing by the authorized officer in keeping with the mandate of Section 19(1) of the Act of 2002,” the bench observed.

The Apex Court said it was “surprising” that no consistent and uniform practice seems to be followed by the ED in regard to informing the arrested person of the grounds for his/her arrest. It noted that written copies of the grounds of arrest are furnished to arrested persons in certain parts of the country but in other areas, that practice is not followed and the grounds of arrest are either read out to them or allowed to be read by them.

“We may note that Article 22(1) of the Constitution provides, inter alia, that no person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest. This being the fundamental right guaranteed to the arrested person, the mode of conveying information of the grounds of arrest must necessarily be meaningful so as to serve the intended purpose.”

The Top Court also criticised the Enforcement Directorate for suppressing facts before the Delhi High Court, saying it demonstrates complete lack of probity on the part of the investigative agency.

“The way in which the ED recorded the second ECIR immediately after the appellants secured anticipatory bail in relation to the first ECIR, though the foundational FIR dated back to 17.04.2023, and then went about summoning them on one pretext and arresting them on another, within a short span of 24 hours or so, manifests complete and utter lack of bonafides,” the bench said.

The bench further noted that “Significantly, when the appellants were before the Delhi High Court seeking anticipatory bail in connection with the first ECIR, the ED did not even bring it to the notice of the High Court that there was another FIR in relation to which there was an ongoing investigation, wherein the appellants stood implicated. The second ECIR was recorded 4 days after the grant of bail and it is not possible that the ED would have been unaware of the existence of FIR No. 0006 dated 17.04.2023 at that time.”

The bench specified that failure of the appellants to respond to the questions put to them by the ED would not be sufficient in itself for the Investigating Officer to opine that they were liable to be arrested under Section 19, as that provision specifically requires him to find reason to believe that they were guilty of an offence under the Act of 2002. “Mere non-cooperation of a witness in response to the summons issued under Section 50 of the Act of 2002 would not be enough to render him/her liable to be arrested under Section 19,” the bench said.

“In any event, it is not open to the ED to expect an admission of guilt from the person summoned for interrogation and assert that anything short of such admission would be an ‘evasive reply’,” the bench said while criticising the the investigative agency.

“This chronology of events speaks volumes and reflects rather poorly, if not negatively, on the ED’s style of functioning,” the bench noted.“Being a premier investigating agency, charged with the onerous responsibility of curbing the debilitating economic offence of money laundering in our country, every action of the ED in the course of such exercise is expected to be transparent, above board and conforming to pristine standards of fair play in action."

“The ED, mantled with far-reaching powers under the stringent Act of 2002, is not expected to be vindictive in its conduct and must be seen to be acting with utmost probity and with the highest degree of dispassion and fairness. In the case on hand, the facts demonstrate that the ED failed to discharge its functions and exercise its powers as per these parameters.”

The Top Court, in its judgement, observed that more important issue presently is as to how the ED is required to ‘inform’ the arrested person of the grounds for his/her arrest.

“In Vijay Madanlal Choudhary Versus Union of India & Ors.a 3-Judge Bench of this Court observed that Section 65 of the Act of 2002 predicates that the provisions of the Code of Criminal Procedure, 1973, shall apply insofar as they are not inconsistent with the provisions of the Act of 2002 in respect of arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings thereunder. It was noted that Section 19 of the Act of 2002 prescribes the manner in which the arrest of a person involved in money laundering can be effected. It was observed that such power was vested in high-ranking officials and that apart, Section 19 of the Act of 2002 provided inbuilt safeguards to be adhered to by the authorized officers, such as, of recording reasons for the belief regarding involvement of the person in the offence of money laundering and, further, such reasons have to be recorded in writing and while effecting arrest, the grounds of arrest are to be informed to that person,” the bench noted in its judgement.

The apex court made these observations while allowing the appeals challenging the orders dated 20.07.2023 and 26.07.2023 passed by a Division Bench of the Punjab & Haryana High Court that had dismissedthe pleas filed by Pankaj Bansal and his father Basant Bansal. The Division Bench had opined that, as the constitutional validity of Section 19 of the Prevention of Money Laundering Act, 2002 had been upheld by the Supreme Court, the challenge to the same by the writ petitioners could not be considered only because of the fact that a review petition was pending before the Supreme Court.

The Division Bench of the High Court had rejected the prayer of the writ petitioners to quash/set aside their arrest orders along with their arrest memos and the consequential proceedings arising therefrom. The Division Bench had further held that, keeping in view the gravity of the allegations against them, their prayer to be released from custody did not deserve acceptance and rejected the same.

The Top Court, however, allowed the appeals thereby setting aside the impugned orders passed by the Division Bench of the Punjab & Haryana High Court as well as the impugned arrest orders and arrest memos along with the orders of remand passed by the learned Vacation Judge/Additional Sessions Judge, Panchkula, and all orders consequential thereto.

“The appellants shall be released forthwith unless their incarceration is validly required in connection with any other case,” the bench said.

The genesis of these appeals is traceable to an FIR dated 17.04.2023 registered by the Anti-Corruption Bureau, Panchkula, Haryana, under Sections 7, 8, 11 and 13 of the Prevention of Corruption Act, 1988, read with Section 120B IPC for the offences of corruption and bribery along with criminal conspiracy.The names of the accused in this FIR are:Sudhir Parmar (the then Special Judge, CBI and ED, Panchkula);Ajay Parmar (nephew ofSudhir Parmar and Deputy Manager (Legal) in M3M Group); Roop Bansal (Promotor of M3M Group); and other unknown persons.