Supreme Court's Judgment In 'Pankaj Bansal' Is A Silver Lining For Putting Some Reins On ED

The Directorate of Enforcement (ED) was like a genie out of the bottle after the controversial judgment delivered by the Supreme Court in 2022 in Vijay Madanlal Choudhary v. Union of India, which upheld the drastic powers of the agency for arrest and seizure under the Prevention of Money Laundering Act. This judgment held that statements made to ED officers are admissible in evidence because they are, technically, not 'police officers', even while possessing all police powers of arrest and seizure. The judgment upheld the provisions relating to presumption of guilt, reversal of burden of proof and the stringent twin conditions for bail - one among them being the near impossibility that the Court should be satisfied that the accused will not commit any offence in the future. Also, the judgment expanded the interpretation of 'money laundering', which was further expanded by a subsequent judgment in Y.Balaji v. Karthik Desari , as a result of which the ED can launch its investigation automatically on registration of a predicate offence, even before tracing any proceeds of crime.

The Vijay Madanlal judgment, which came at a time when there were increased concerns about the political weaponization of the ED, sent ominous signals. Perhaps realizing that, the Supreme Court very soon agreed to consider a review of the judgment, at least on two aspects. Meanwhile, the perception of political bias in ED's actions heightened. As per a study, there is a four-fold jump in the cases registered by the ED since 2014 and 95% of them are against the opposition parties. As per some reports, the conviction rate in ED cases is very dismal - with 23 out of 5422 cases since 2005 (as on July 2022), which is a sorry figure of 0.5%. Earlier this year, 14 opposition parties jointly filed a petition contending that the ED was being misused by the Central Government. The Supreme Court refused to entertain the petition saying that politicians cannot claim a higher immunity and a general direction can't be passed. Yet, the concerns about the independence of ED remained unaddressed. .

This background is necessary to appreciate the real significance of the Supreme Court's recent judgment in Pankaj Bansal v. Union of India, in which it came down heavily on the ED for the illegal arrest of two accused in a money laundering case. Terming the arrests illegal and arbitrary, the Supreme Court said that the ED's approach in the case reflected poorly on its style of functioning.

The bench comprising Justices AS Bopanna and PV Sanjay Kumar reminded that the ED cannot be “vindictive in its conduct” and that its actions should be “transparent, above board and conforming to the pristine standards of fair play in action”.

The key legal takeaways from the remarkably bold judgment authored by Justice Sanjay Kumar are :

1. The ED should inform the grounds of arrest to the accused in writing. Mere oral reading out of the grounds will not suffice.

2. ED cannot arrest a person citing mere non-cooperation to the summons.

3. If arrest is invalid, then the subsequent remand order will also fail; judicial order of remand can't validate an illegal arrest.

The effect of the judgment was soon felt in the NewsClick case, where the Delhi High Court, pointing out that the UAPA provision was somewhat similar to the PMLA provision, questioned the remand order passed against Prabir Purkayastha for not citing the grounds of arrest. “There is a Supreme Court judgment staring in the eye”, said the High Court.

The second principle laid down in the judgment is of great practical relevance, given that ED very often cites “non-cooperation” to arrest the accused. One dangerous consequence of the Vijay Madanlal Choudhary judgment was that a statement made to an ED officer pursuant to a summons under Section 50, even if it is self-incriminating, was admissible as evidence. This dictum has the effect of undermining the protection under Article 20(3) of the Constitution when we consider the fact that the ED is possessed with great coercive powers. Therefore, “cooperation” in ED parlance, often translated to mean that the accused should confess. In Pankaj Bansal, the Supreme Court clearly understood this scenario, and categorically 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".

Another highlight of Pankaj Bansal is the reminder the Supreme Court sent to the trial courts regarding their duty to ascertain the validity of the arrest while remanding the accused.

“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,” the Court said. The judgment also pulled up the trial court for remanding the accused in the instant case without ascertaining the legality of the arrest.

The brilliance of the judgment is its 'straight talk'. It is a straightforward application of the principles under Article 22(1) and 20(3), backed with a simple and coherent logical explanation. Also, the Court displayed a pragmatic understanding of the ground realities, which was missing in the narrow-technical approach in Vijay Madanlal. Most remarkably, the Court displayed the courage to send a strong message to the agency which is seen by many as the most helpful 'political' ally of the Centre. Though this judgment can't put the genie back in the bottle, it has put some reins on the ED, sternly reminding the agency that it cannot be a law unto itself.

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