Revisiting The Arrest And Bail Process Under PMLA: A Call For Review Of Vijay Madanlal Choudhary's Verdict
Akhilesh Sheshmani Dubey
11 April 2024 1:10 PM IST
In the realm of legal discourse, few judgments have sparked as much debate as the Supreme Court's ruling in the case of Vijay Madanlal Choudhary v. Union of India[1]. Delivered on 27th July 2022, the judgment upheld the validity of certain challenged provisions relating to the power of arrest, attachment, search and seizure conferred on the Directorate of Enforcement [“ED”] under...
In the realm of legal discourse, few judgments have sparked as much debate as the Supreme Court's ruling in the case of Vijay Madanlal Choudhary v. Union of India[1]. Delivered on 27th July 2022, the judgment upheld the validity of certain challenged provisions relating to the power of arrest, attachment, search and seizure conferred on the Directorate of Enforcement [“ED”] under the Prevention of Money Laundering Act, 2002 [“PMLA”]. Amongst other issues, the Supreme Court held that the ED is not obligated to provide the copy of the Enforcement Case Information Report [“ECIR”] to the accused at the time of arrest. This decision has been met with criticism, as it is seen to potentially hamper the accused's ability to challenge the initiation of proceedings. It is essential to delve into the intricacies of the landmark judgment of SC in Vijay Madanlal Choudhary and explore the urgent need for a review of its implications on the procedure of bail and arrest in PMLA.
While issuing notice in Karti P Chidambaram v. Directorate of Enforcement R.P. (Crl.) No. 219/2022 on 25th August 2022, a petition seeking review of the judgment passed in Vijay Madanlal Choudhary, even the Supreme Court agreed that two aspects of the judgment required reconsideration: First, the ECIR need not be supplied to the accused, and Second, the reversal of the presumption of innocence.[2] The said review petitions have not been heard to date and are slated to be heard in July 2024. The delay in hearing the review petition has deeply impacted the procedure relating to arrest and bail under the PMLA due to the ambiguity created by inconsistent interpretations by the Supreme Court.
For example, the SC's interpretation for informing the “grounds of arrest” under Section 19(1) of the PMLA in its judgments of Vijay Madanlal Choudhary v. Union of India, Pankaj Bansal v. Union of India,[3] and Ram Kishor Arora v. Directorate of Enforcement;[4] are not consistent. These judgments demonstrate the degree of confusion surrounding the interpretation of the provisions of arrest under the PMLA, necessitating the need to review the provisions related to the arrest and bail under the PMLA so as to uphold justice while safeguarding individual freedoms within the framework of the PMLA. Some of the provisions relating to arrest and bail, which require urgent reconsideration are:
Furnishing Copy of the Enforcement Case Information Report [ECIR]:
ECIR is an internal document created by the ED before taking legal action against individuals involved in activities related to the proceeds of crime. In Vijay Madanlal Choudhary's case, the SC held that PMLA being a special legislation, the complexity of investigations therein, may justify non-supply of ECIR in certain cases as the ECIR contains critical details and revealing them prematurely could impact the investigation's outcome.
It is pertinent to note that even though the officers of ED are empowered to arrest the accused under Section 19(1) of the PMLA, they are not empowered to file a chargesheet as they are not regarded as police officers as held by the SC. After investigation, the ED officers can file a complaint before the Special Court under Section 44(1)(b) of the PMLA. Thus, from the date of his arrest till the filing of the complaint under Section 44(1)(b) of the PMLA, the accused is unaware of the specifics of the allegations against him and is kept in the dark on the apprehension that he may hamper the investigation.
The lack of transparency in not providing a copy of the ECIR to the accused restricts his ability to mount an effective defence by denying him the opportunity to understand the precise nature of the allegations and gather evidence to refute them. This unilateral approach to investigations could have profound implications, potentially limiting an individual's liberty. The concept of 'audi alteram partem', which translates to 'let the other side be heard,' is a cornerstone of the doctrine of natural justice. By denying the accused access to the ECIR, he is essentially denied the right to a fair hearing, and the lack of transparency further undermines the principles of natural justice and fairness, which form the bedrock of our legal system.
While the PMLA is a necessary tool in the fight against financial crimes, its enforcement must be balanced with the need for transparency and fairness. Withholding of the ECIR from the accused is a matter of concern that needs to be addressed by reconsidering the related findings in Choudhary's case. Recently, the Allahabad High Court in Saurabh Mukund v. Directorate of Enforcement[5], observed that if the matter is not extraordinary or special, a person summoned by ED, in whatever capacity, is required to get the substance of the accusation, if not the copy of ECIR.
Informing Grounds of Arrest to the Accused
Section 19(1) of the PMLA empowers the authorised ED officer to arrest a person and “as soon as may be”, inform him of the grounds for such arrest. However, there is no clarity in the PMLA regarding the mode of informing the grounds of arrest to the accused.
In the case of Vijay Madanlal Choudhary, the Supreme Court, without clarifying the mode of informing the grounds of arrest to the accused, held that as long as the accused has been informed about the reasons at the time of his arrest, it sufficiently fulfils the mandate of Article 22(1) of the Constitution. However, in the case of Pankaj Bansal, the two-judge Bench of the Supreme Court clarified the mode of information of grounds of arrest has to be in writing, failing which an arrest made by the ED is unlawful as it infringes upon the protections granted in the Constitution of India under Article 22(1) and Section 19(1) of the PMLA. Subsequently, in Ram Kishor Arora v. Directorate of Enforcement, the SC ruled that if a person arrested by the ED is orally informed or made aware of the reasons for the arrest at the time of the arrest and is provided a written communication about the reasons for the arrest as soon as possible within 24 hours of his arrest, that would be sufficient compliance of Section 19 of the PMLA and Article 22(1) of the Constitution.
A clear understanding of the grounds of arrest is crucial to safeguarding individual rights and preventing arbitrary actions. Therefore, it is essential to review the interpretation dealing with informing grounds of arrest under Section 19(1) of PMLA.
Constitutional Validity of Twin Condition for Release on Bail:
The SC in Nikesh Tarachand Shah v. Union of India,[6] declared that Section 45(1) of the PMLA, 2002, insofar as it imposes twin conditions for release on bail, to be unconstitutional as it violates Articles 14 and 21 of the Constitution of India. While doing so, the Supreme Court observed that Section 45 is a drastic provision that undermines the presumption of innocence, which is inherently harmful to any individual accused of an offence.
However, the judgement of the SC in Nikesh Tarachand's case was held not to be a good law in Vijay Madanlal Choudhary's judgment by observing that the twin conditions provided under Section 45 of the PMLA, as applicable post-amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the PMLA to combat the menace of money laundering having transnational consequences including impacting the financial systems and sovereignty and integrity of the countries.
Although while coming to the said conclusion, the SC relied upon the Preamble and the Statement of Objects and Reasons to the PMLA, the legislative assembly debates, and the Financial Action Task Force (FATF) recommendations, it is pertinent to observe that questions regarding the harshness of Section 45 were unanswered in the Parliament on the ground that it was done to bring it in consonance with the FATF recommendations. However, despite giving much weightage to the FATF recommendations in the judgment, Choudhary's case does not reflect any recommendation of FATF proposing stringent twin conditions for granting bail as is reflected in Section 45. Thus, it is essential to reconsider whether the twin conditions for release on bail under Section 45 of the PMLA were incorporated owing to specific international commitments made by India. If not, the reasonability of the said twin conditions needs to be revisited. The recent judgment of the SC shows a trend of granting bails despite the twin conditions. However, it is unfortunate that the accused has to travel to the SC to get relief.
The above circumstances demonstrate that Choudhary's judgment has sparked a pressing need to review the findings surrounding the arrest and bail provisions as they significantly impact individuals' rights, procedural fairness, and the balance between law enforcement and civil liberties. By revisiting the interpretations of the provisions of PMLA in Vijay Madanlal Choudhary's judgment, consistency, transparency, and protection against arbitrary actions under the PMLA can be ensured by the Supreme Court.
Author: Akhilesh Sheshmani Dubey, Advocate and Solicitor Practising in Mumbai and Delhi. Views are personal.
2022 LiveLaw (SC) 633 . ↑
https://www.livelaw.in/top-stories/supreme-court-prevention-of-money-laundering-act-pmla-enforcement-directorate-vijay-madanlal-choudhary-242867 ↑
2023 LiveLaw (SC) 844. ↑
2023 LiveLaw (SC) 1059 ↑
Petition u/s 482 CrPC No. 2318 of 2024 [Order dated: 29-03-2024]. ↑
(2018) 11 SCC 1. ↑
