PMLA- If Arrest Of Accused Isn't Valid & Lawful As Per Section 19, An Order Of Remand Shall Fail On That Ground: Supreme Court

The Top Court also held that in the event the Court fails to discharge this duty in right earnest and with the proper perspective, the order of remand would fail on that ground itself.

For context, Section 19 of the PMLA Act provides for inbuilt safeguards to be adhered to by the authorized officers, such as recording reasons in writing for the belief regarding the involvement of the person in the offence of money laundering and informing the person being arrested of the grounds of his arrest.

“The Court seized of the exercise under Section 167 CrPC of remanding the person arrested by the ED under Section 19(1) of the Act of 2002 has a duty to verify and ensure that the conditions in Section 19 are duly satisfied and that the arrest is valid and lawful. In the event, the Court fails to discharge this duty in right earnest and with the proper perspective, as pointed out hereinbefore, the order of remand would have to fail on that ground and the same cannot, by any stretch of the imagination, validate an unlawful arrest made under Section 19 of the Act of 2002,” a bench of Justice AS Bopanna and Justice Sanjay Kumar held.

Importantly, referring to the Supreme Court's August 2023 Judgment in the case of V. Senthil Balaji vs. The State represented by Deputy Director and others 2023 LiveLaw (SC) 611, the Court noted that in that case, it has been affirmed that it is the bounden duty of the authorized officer of the ED to record the reasons for his belief that a person is guilty and needs to be arrested and it was observed that this safeguard is meant to facilitate an element of fairness and accountability.

The Court also noted that in dealing with the interplay between Section 19 of the Act of 2002 and Section 167 CrPC, the Top Court had also observed that the Magistrate is expected to do a balancing act as the investigation is to be completed within 24 hours as a matter of rule and, therefore, it is for the investigating agency to satisfy the Magistrate with adequate material on the need for custody of the accused.

“This Court reiterated that Section 19 of the Act of 2002, supplemented by Section 167 Cr.P.C., provided adequate safeguards to an arrested person as the Magistrate has a distinct role to play when a remand is made of an accused person to an authority under the Act of 2002. It was held that the Magistrate is under a bounden duty to see to it that Section 19 of the Act of 2002 is duly complied with and any failure would entitle the arrestee to get released. It was pointed out that Section 167 Cr.P.C is meant to give effect to Section 19 of the Act of 2002 and, therefore, it is for the Magistrate to satisfy himself of its due compliance by perusing the order passed by the authority under Section 19(1) of the Act of 2002 and only upon such satisfaction, the Magistrate can consider the request for custody in favour of authority,” the Court noted.

It may be noted that in the Senthil Balaji case (Supra), the Apex Court has held that in terms of Section 19(3) of the Act of 2002, Section 167 Cr.P.C. would necessarily have to be complied with once an arrest is made under Section 19 of the Act of 2002.

These observations were made by the Supreme Court thus while declaring the arrests of directors of Gurugram-based realty group M3M, Pankaj Bansal and Basant Bansal, in a money laundering case as illegal.

The occasion to make these observations arose as the Supreme Court found that in the remand order (of June 15, 2023) passed by the Vacation Judge/Additional Sessions Judge, Panchkula, there was a total failure in discharging his duty as per the expected standard.

The Court noted that the Judge concerned, while remanding Bansals, did not even record a finding that he had perused the grounds of arrest to ascertain whether the ED had recorded reasons to believe that the appellants were guilty of an offence under the Act of 2002 and that there was proper compliance with the mandate of Section 19 of the Act of 2002.

The Court further observed that in the order, the concerned judge merely stated that, keeping in view the seriousness of the offences and the stage of the investigation, he was convinced that custodial interrogation of the accused persons was required in the present case and remanded them to the custody of the ED.

Moving ahead, the Top Court went on to examine as how the appellants were arrested to verify whether it was in keeping with the safeguards in Section 19 of the Act of 2002.

It noted that the first ECIR in the case was registered by the ED on June 15, 2021, and Roop Bansal was arrested in connection therewith on June 8, 2023, and therein, neither of the appellants was shown as an accused therein, however, Pankaj Bansal and Basant Bansal secured anticipatory bail in this matter till July 5, 2023.

Despite this, the Court noted, both the appellants were summoned on June 14, 2023, for interrogation in connection with the first ECIR, in which they had interim protection and summons in that regard were served upon them on June 13 to present themselves at ED's office on June 14.

Meanwhile, a second ECIR was also recorded on June 13, therein also, neither of the appellants was shown as an accused and it was only Roop Bansal who stood named as an accused.

Further, in compliance with the summons received by them ,vis-à-vis the first ECIR, both the appellants presented themselves at the ED's office on June and while they were there, Pankaj Bansal was served with a summons at 04.52 pm, requiring him to appear before another Investigating Officer after 8 minutes (at 05.00 pm) in relation to the second ECIR and it iss ED's case that since Basant Bansal refused to receive the summons in relation to the second ECIR, he was arrested at 06.00 pm on June 14.

On the other hand, Pankaj Bansal received the summons and appeared but as he did not divulge relevant information, the Investigating Officer arrested him at 10.30 pm on that day.

Taking note of this chronology of events, the Court remarked that it spoke volumes and reflected rather poorly, if not negatively, on the ED's style of functioning.

The Court was critical of the way in which the ED recorded the second ECIR immediately after the appellants secured anticipatory bail in relation to the first ECIR and then went about summoning them on one pretext and arresting them on another, within a short span of 24 hours or so, which, in the Court's opinion, manifested complete and utter lack of bonafide on their part.

In this regard, the Court also made a stern remark against ED's functioning in the following words:

“Being a premier investigating agency, charged with the onerous responsibility of curbing the 19 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.”

Against this backdrop, terming Bansals arrest as illegal, the Court also held that a person cannot be arrested by the Directorate of Enforcement for mere non-cooperation in response to a summons issued under Section 50 of the Prevention of Money Laundering Act 2002

The Court also added that the failure of the accused 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.

In this very judgment, the Court has also held that the ED has a mandatory duty to furnish the grounds of arrest to the accused in writing at the time of the arrest.

Other reports about the judgment can be read here.

Case Title : Pankaj Bansal v. Union of India SLP(Crl) No. 9220-9221/2023, Basant Bansal v. Union of India SLP(Crl) No. 9275-9276/2023

Citation : 2023 LiveLaw (SC) 844

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