2018 (2) TMI 1327 - HC - Money Laundering

Court Identifies Procedural Lapses in PMLA Arrest Process

RAJBHUSHAN OMPRAKASH DIXIT Versus UNION OF INDIA AND ANR

The court found procedural lapses in the arrest process, particularly non-compliance with Section 19 of the Prevention of Money Laundering Act (PMLA) and ... Offence under PMLA - Seeking issuance for a writ of habeas corpus for releasing the Petitioner from custody - Are the PMLA offences cognizable? - Held that:- When Form III uses the word ‘order’ that has to include, as per Rule 2 (1) (h) of the PML Arrest Rules, the grounds of arrest. The basic idea is not merely to inform the person arrested of the grounds of arrest but to also furnish him a copy thereof. Even Rule 3 (1) of the PML Arrest Rules requires the order and material to be forwarded to the Adjudicating Authority. The Court is conscious that in Vakamulla Chandrashekhar v. Enforcement Directorate (2017 (7) TMI 177 - DELHI HIGH COURT) a Division Bench of this Court came to the opposite conclusion and held that notwithstanding the 2005 amendment to Section 45 PMLA, there is no positive indication in Section 45 that the offences under the PMLA had become non-cognizable. Admittedly the arrest of the Petitioner in the present case has taken place without following Section 19 PMLA read with the relevant PML Arrest Rules and Form III. The grounds of arrest were furnished not “as soon as may be” as mandated by Section 19 (1) PMLA but only along with the short reply filed on 13th February 2018 more than two weeks after the arrest. Also, it is doubtful that the said grounds would have been furnished if the present petition had not been filed. That prima facie renders the arrest of the Petitioner illegal. Added to this is the failure to follow the detailed guidelines pertaining to arrest as laid down in D.K. Basu v. State of West Bengal (1996 (12) TMI 350 - SUPREME COURT) which as clarified by the Supreme Court applies with equal force to “other governmental agencies” which expressly included the DOE.. Maintainability of the writ of habeas corpus - Held that:- Finally, on whether a petition seeking a writ of habeas corpus is maintainable, the Court is again unable to subscribe to the view expressed in Moin Akhtar Qureshi (2017 (12) TMI 289 - DELHI HIGH COURT) that only because the trial Court is now seized of the matter and has ordered the remand of the Petitioner, this Court cannot entertain the present petition. Consistent with judicial discipline, since this Bench is of the view that the decisions of the coordinate Bench of this Court in Moin Akhtar Qureshi v. Union of India (supra) and Vakamulla Chandrashekhar v. Enforcement Directorate [supra] require reconsideration, it refers to a larger Bench, the following questions for consideration: (i) Consequent upon the amendment in Section 45 of the PMLA with effect from 1st July 2005, are the offences under the PMLA cognizable or noncognizable? (ii) Do the provisions of Chapter XII Cr PC apply to PMLA insofar as the offences under the PMLA are concerned and if so, to what extent? (iii) Under Section 19 of PMLA read with Rules 2 (h) and 2 (g) of the PML Arrest Rules read with Rule 6 and Form III thereof, does a person arrested under Section 19 (1) of the PMLA have to be furnished a copy of the grounds of arrest? If so, should they be furnished soon enough to enable the person arrested to apply for bail or to oppose the application for remand? What are the consequences of the failure to do so? (iv) Notwithstanding that the remand of the person arrested is under the orders of a Competent Court under the PMLA, will a writ of habeas corpus still maintainable if the initial arrest is itself shown to be unlawful? (v) In the context of the above questions, do the decisions of the Division Bench of this Court in Vakamulla Chandrashekhar v. Enforcement Directorate (supra) Moin Akhtar Qureshi v. Union of India (supra) require reconsideration? The writ petition now be placed before the Hon’ble the Acting Chief Justice for being referred to a larger Bench to answer the above questions. Seeking interim bail - Held that:- The Petitioner has been in custody since 25th January 2018. The DOE had, through orders of the trial Court, his custody extended till 7th February 2018. He now stands remanded to judicial custody by the order of the trial Court. The DOE has not explained why it requires the Petitioner to remain in judicial custody. On the part of the Petitioner, the Court has been assured that he would continue to cooperate with the DOE and appear as and when required subject to whatever terms that the Court may direct. For the aforementioned reasons, the Court directs that the Petitioner be released on bail during the pendency of the present writ petition subject to execution of bond and other detailed formalities. Issues Involved:1. Legality of the issuance of a non-bailable warrant (NBW) and subsequent arrest.2. Cognizability of offences under the Prevention of Money Laundering Act (PMLA).3. Applicability of Chapter XII of the Code of Criminal Procedure (CrPC) to PMLA.4. Compliance with procedural safeguards under Section 19 PMLA.5. Maintainability of the writ of habeas corpus.6. Grant of interim bail.Issue-wise Detailed Analysis:1. Legality of the Issuance of NBW and Subsequent Arrest:The Petitioner challenged the issuance of the NBW dated 24th January 2018 and his arrest on 25th January 2018 under ECIR/HQ/17/2017, claiming it violated Articles 14, 21, and 22 of the Constitution. The court noted that the NBW was issued after the Directorate of Enforcement (DOE) failed to secure the Petitioner’s presence through summons. The Petitioner was informed of the grounds of arrest, and his signature was obtained on the warrant. However, the court found procedural lapses in the arrest, particularly the non-compliance with Section 19 PMLA and related rules.2. Cognizability of Offences under PMLA:The court examined the legislative intent behind the 2005 amendment to Section 45 PMLA, which aimed to make offences under PMLA non-cognizable. Despite the unchanged heading of Section 45, the court concluded that the offences are non-cognizable, aligning with the Finance Minister's clarification and the Statement of Objects and Reasons for the amendment. The court disagreed with previous judgments that held PMLA offences as cognizable, noting a need for reconsideration.3. Applicability of Chapter XII CrPC to PMLA:The court reaffirmed that Chapter XII of the CrPC applies to PMLA, as established by the Supreme Court in Ashok Munilal Jain v. Assistant Director, Directorate of Enforcement. This includes procedures for arrest, search, seizure, and investigation. The court noted that the DOE must follow CrPC procedures unless explicitly overridden by PMLA provisions, ensuring compliance with Articles 21 and 22 of the Constitution.4. Compliance with Procedural Safeguards under Section 19 PMLA:The court found that the DOE did not comply with Section 19 PMLA, which mandates recording reasons for arrest and informing the detainee of the grounds of arrest. The court emphasized that merely reading out the grounds is insufficient; a written copy must be provided. The court highlighted that failure to follow these procedural safeguards rendered the arrest illegal, referencing the Supreme Court's guidelines in D.K. Basu v. State of West Bengal.5. Maintainability of the Writ of Habeas Corpus:The court held that a writ of habeas corpus is maintainable even if the detainee is under judicial custody, provided the initial arrest was unlawful. The court cited the Supreme Court's decision in Re: Madhu Limaye, which stated that routine remand orders do not cure constitutional infirmities in the arrest process. The court disagreed with the contrary view expressed in Moin Akhtar Qureshi v. Union of India.6. Grant of Interim Bail:The court granted interim bail to the Petitioner, noting the prima facie case of procedural lapses in his arrest and the Supreme Court's decision in Nikesh Tarachand Shah v. Union of India, which struck down restrictive bail conditions under Section 45 PMLA. The court imposed conditions, including a personal bond, surrender of passport, and cooperation with the investigation, to ensure the Petitioner’s compliance.Conclusion:The court referred the following questions to a larger bench for reconsideration:1. Are PMLA offences cognizable or non-cognizable post the 2005 amendmentRs.2. Does Chapter XII CrPC apply to PMLA, and to what extentRs.3. Must a person arrested under Section 19 PMLA be furnished with a copy of the grounds of arrestRs.4. Is a writ of habeas corpus maintainable if the initial arrest is unlawful, despite judicial remandRs.5. Do the decisions in Vakamulla Chandrashekhar v. Enforcement Directorate and Moin Akhtar Qureshi v. Union of India require reconsiderationRs.The court directed the Acting Chief Justice to place the matter before a larger bench for answering these questions.