2023 (10) TMI 175 - SC - Money Laundering

ED cannot arrest suspects under Section 19 for mere non-cooperation during Section 50 interrogation without reasonable belief of guilt

Pankaj Bansal Versus Union of India & Ors.

SC held that mere non-cooperation during ED interrogation under Section 50 of Prevention of Money Laundering Act, 2002 is insufficient for arrest under ... Money Laundering - offences of corruption and bribery along with criminal conspiracy - constitutional validity of Section 19 of the Prevention of Money Laundering Act, 2002 - Allegations of Abuse of Power by the Enforcement Directorate (ED) - HELD THAT:- The 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. As per its replies, it is the claim of the ED that Pankaj Bansal was evasive in providing relevant information. It was however not brought out as to why Pankaj Bansal’s replies were categorized as ‘evasive’ and that record is not placed before us for verification. 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’. In Santosh S/o Dwarkadas Fafat vs. State of Maharashtra [2017 (10) TMI 1478 - SUPREME COURT], this Court noted that custodial interrogation is not for the purpose of ‘confession' as the right against self-incrimination is provided by Article 20(3) of the Constitution. It was held that merely because an accused did not confess, it cannot be said that he was not co-operating with the investigation. Similarly, the absence of either or both of the appellants during the search operations, when their presence was not insisted upon, cannot be held against them. In Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT], this Court held that non-supply of the ECIR in a given case cannot be found fault with, as the ECIR may contain details of the material in the ED’s possession and revealing the same may have a deleterious impact on the final outcome of the investigation or inquiry. Having held so, this Court affirmed that so long as the person is ‘informed’ of the grounds of his/her arrest, that would be sufficient compliance with the mandate of Article 22(1) of the Constitution. There is no valid reason as to why a copy of such written grounds of arrest should not be furnished to the arrested person as a matter of course and without exception. There are two primary reasons as to why this would be the advisable course of action to be followed as a matter of principle - In the case on hand, that is the situation insofar as Basant Bansal is concerned. Though the ED claims that witnesses were present and certified that the grounds of arrest were read out and explained to him in Hindi, that is neither here nor there as he did not sign the document. Non-compliance in this regard would entail release of the arrested person straightaway, as held in V. Senthil Balaji [2023 (8) TMI 410 - SUPREME COURT]. Such a precarious situation is easily avoided and the consequence thereof can be obviated very simply by furnishing the written grounds of arrest, as recorded by the authorized officer in terms of Section 19(1) of the Act of 2002, to the arrested person under due acknowledgment, instead of leaving it to the debatable ipse dixit of the authorized officer. To give true meaning and purpose to the constitutional and the statutory mandate of Section 19(1) of the Act of 2002 of informing the arrested person of the grounds of arrest, it is held that it would be necessary, henceforth, that a copy of such written grounds of arrest is furnished to the arrested person as a matter of course and without exception - Further, the clandestine conduct of the ED in proceeding against the appellants, by recording the second ECIR immediately after they secured interim protection in relation to the first ECIR, does not commend acceptance as it reeks of arbitrary exercise of power. In effect, the arrest of the appellants and, in consequence, their remand to the custody of the ED and, thereafter, to judicial custody, cannot be sustained - the impugned order set aside - appeal allowed. Issues Involved:1. Challenge to the High Court Orders2. Validity of Arrest under Section 19 of the Prevention of Money Laundering Act, 20023. Compliance with Procedural Safeguards4. Allegations of Abuse of Power by the Enforcement Directorate (ED)5. Requirement to Inform Grounds of ArrestSummary:1. Challenge to the High Court Orders:The appellants challenged the orders dated 20.07.2023 and 26.07.2023 passed by the Punjab & Haryana High Court, which dismissed their writ petitions. The High Court had rejected their challenge to the constitutional validity of Section 19 of the Prevention of Money Laundering Act, 2002 (PMLA) and their request to quash their arrest orders, arrest memos, and consequential proceedings.2. Validity of Arrest under Section 19 of the PMLA:The genesis of the appeals traced back to FIR No. 0006 dated 17.04.2023, registered under various sections of the Prevention of Corruption Act, 1988, and IPC. The Enforcement Directorate (ED) recorded two Enforcement Case Information Reports (ECIRs) based on this FIR. The appellants argued that their arrest under Section 19 of the PMLA was a wanton abuse of power and blatantly illegal. The Supreme Court noted that the High Court failed to distinguish that the appellants were not challenging the constitutional validity of Section 19 but were seeking its 'reading down' and/or 'reading into' the provisions in light of previous judgments.3. Compliance with Procedural Safeguards:The Supreme Court emphasized that Section 19 of the PMLA prescribes stringent safeguards, including recording reasons for the belief in writing and informing the arrested person of the grounds of arrest. The Court noted that the learned Vacation Judge/Additional Sessions Judge, Panchkula, failed to discharge his duty by not recording a finding that he perused the grounds of arrest to ascertain compliance with Section 19. The Court highlighted that mere passing of a remand order does not validate an unlawful arrest.4. Allegations of Abuse of Power by the ED:The Court observed that the sequence of events, including the recording of the second ECIR immediately after the appellants secured anticipatory bail in the first ECIR, demonstrated a lack of bonafides and vindictive conduct by the ED. The Court noted that the ED's actions reflected a complete and utter lack of transparency and fairness, which is expected from a premier investigating agency.5. Requirement to Inform Grounds of Arrest:The Court held that the mode of informing the arrested person of the grounds of arrest must be meaningful and serve the intended purpose. The Court emphasized that the grounds of arrest should be furnished in writing to the arrested person to ensure compliance with Article 22(1) of the Constitution and Section 19(1) of the PMLA. The Court noted that the practice of merely reading out or allowing the arrested person to read the grounds of arrest was inadequate and did not fulfill the constitutional and statutory mandate.Conclusion:The Supreme Court allowed the appeals, set aside the impugned orders passed by the Punjab & Haryana High Court, the impugned arrest orders, arrest memos, and the orders of remand passed by the learned Vacation Judge/Additional Sessions Judge, Panchkula. The Court directed the immediate release of the appellants unless their incarceration was validly required in connection with any other case.