Arrest under PMLA seen in view of Landmark Supreme Court Decision dated 3.10.2023 in the case of Pankaj Bansal vs Union of India& others
Published: Oct 09, 2023
By Pramod Kumar Rai, Advocate, Athena Law Associates
1. AFTER a long wait, citizens of the country facing undue harassment at the hands of the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA), 2002, have a reason to rejoice after the pronouncement of the decision by the Apex Court in the case of Pankaj Bansal versus UOI & Ors - 2023-TIOLCORP-06-SC-PMLA.
2. The investigating agency was emboldened by the Apex Court's decision in the case of Vijay Madan Lal Chaudhury versus Union of India - 2022-TIOLCORP-02-SC-PMLA-LBby which the constitutional validity of almost all the provisions of the Prevention of Money Laundering Act, 2002, were upheld. In this case, considering the mechanism of inquiry/investigation for proceeding against the property, being proceeds of crime under the PMLA, 2002, the court held that there is no need to formally register/record an Enforcement Case Information Report (ECIR) under PMLA, unlike the registration of an FIR by the Police under the Criminal Procedure Code (CrPc) 1973. The court held that ECIR is not a statutory document, but rather an internal document created by the Department, and there is no requirement under the PMLA to record ECIR or to furnish a copy thereof to the accused, unlike Section 154 of the CrPc. The court held that as long as the person being arrested has been informed about the grounds of his arrest, it is to be construed as sufficient compliance with Article 22(1) of the Constitution of India read with Section 19(1) of the PMLA, 2002. Empowered with this decision, the Enforcement Directorate has been technically on a rampage, which can be seen from the facts of the various investigations being undertaken by them, including the facts of the Pankaj Bansal Case supra.
3. In the Pankaj Bansal Case (Supra), the sequence of events has been highlighted in the order as follows: -
a. Pankaj Bansal and his father Basant Bansal (hereafter referred to as Appellants), who were part of the management of M3M Group, a real estate group, were arrested by the Enforcement Directorate on 14.06.2022, were remanded to ED and thereafter to Judicial Custody, and all these actions were validated by Orders of the Punjab and Haryana High Court with no bail to the accused.
b. Between 2018 and 2020, thirteen (13) FIRs (for simplicity hereinafter collectively referred as First FIR) were registered by allotees of Residential Projects of IREO Group alleging illegalities on the part of its management. On the strength of these FIRs, the ED recorded an ECIR dated 15.06.2021 (First ECIR) under PMLA, 2002. Neither in these FIRs nor in the ECIR, M3M Group or the Appellants, i.e., Pankaj Bansal or Basant Bansal, were portrayed as the accused.
c. Mr. Roop Bansal, who was also part of M3M management, was arrested in connection with the First ECIR on 08.06.2023. After the arrest of Mr. Roop Bansal, both the appellants, i.e., Pankaj Bansal or Basant Bansal, secured an Anticipatory Bail from Delhi High Court on the very next date, i.e., on 09.06.2023, which was valid up to 05.07.2023.
d. During the Period covered by this Anticipatory bail, both the Appellants were summoned by ED in connection with the First ECIR for appearance on 14.06.2023, for which summon was served to them through email on the previous evening, i.e., 13.06.2023.
e. Another FIR (Second FIR) was registered on 17.04.2023, by the Anti-Corruption Bureau, Haryana (ACB) under Prevention of Corruption Act, 1988, read with Section 120B of the Indian Penal Code, 1860, in which Mr. Roop Bansal, promoter of M3M group is assailed as an accused, but the FIR did not include the name of the two appellants referred herein as accused. In connection with this Second FIR, an ECIR has been recorded on 13.06.2023 (Second ECIR).
f. As per the facts recorded, both appellants presented themselves at ED office at 11 AM on 14.06.2023, in response to summon issued under First ECIR. [However, the possibility of a previous evening pickup by ED cannot be ruled out, and there may be a possibility that the Second ECIR was recorded when appellants were already in the ED Office.]
g. While these appellants were in the ED office in connection with the summon issued under First ECIR dated 15.06.2021, Pankaj Bansal was served another Summon at 4:52 PM under Second ECIR requiring him to appear before another investigating officer at 5.00 PM. Pankaj Bansal, who was already in the ED Office under First ECIR, appeared under summon issued under Second ECIR, and as per ED stand he did not divulge relevant information, and therefore, he was arrested by Investigating Officer on the same day at 10:30 PM.
h. Further, as per ED, his father Mr. Basant Bansal refused to receive the similar summon in relation to the Second ECIR, and thus he was arrested much earlier on the same date, i.e., 14.6.2023, at 6.00 PM.
4. The whole chain of events creates serious doubt that the Second ECIR was recorded at the last moment to frustrate the anticipatory bail granted to the Appellants under the First ECIR, just four days ago. When the appellants approached Delhi High Courts for anticipatory bail under the First ECIR on 09.06.2023, the Second FIR of April 2023 was very much in existence and, in fact, being looked into by ED since May 2023, but its existence and the involvement of appellants were not brought to the knowledge of Hon'ble High Court. [Probably, had it been disclosed, the anticipatory bail granted by Delhi High Court under PMLA would have covered all the FIRs, including the Second FIR.] In view of the peculiar facts of the case, the court has come down heavily on the ED's style of functioning. The observations of the court can be summarized as follows:
a. The ED, mantled with far-reaching powers under PMLA, 2002, is not expected to be vindictive in its conduct. [The observation suggests that the court has sensed the act of vindictiveness on the part of the ED].
b. The court has observed that the facts demonstrate that ED has failed to discharge its functions and failed to exercise its powers with probity and fairness.
c. The ED recorded the Second ECIR after the appellants secured anticipatory bail in relation to the First ECIR. Then ED summoned the appellants on the pretext of the First ECIR, and finally arrested them under the Second ECIR within a short span of 24 hours from the time of registering the Second ECIR. This act of ED manifests complete and utter lack of bonafide.
d. The ED stated that it started its inquiries in respect of the Second FIR in May 2023, but yet this Second FIR was not mentioned before Delhi High Court, and this again demonstrates complete lack of probity on the part of ED.
e. When the Second ECIR was recorded on 13.06.2023, where was the time for the investigating officer to properly inquire and to form a clear opinion about the appellants' involvement in a PMLA offense warranting their arrest within 24 hours, which is a mandatory requirement for arrest under Section 19(1) of the PMLA, 2002.
f. The court has noted that the failure of the appellant to respond to the questions put to them by ED would not be sufficient in itself for the arrest under Section 19 of PMLA 2002.
g. Similarly, not responding to an ED question cannot become a reason to believe that the appellants are guilty of an offense under the PMLA 2002.
h. The court has also noted that mere non-cooperation by a witness/accused in response to a summon issued under Section 50 of the Act would not be enough to arrest the person under Section 19 of the Act.
i. The court also noted that it is not open to ED to expect an admission of guilt from a person summoned for interrogation and to assert that a person not admitting guilt is evasive in reply and not cooperating with the Investigation.
j. The court noted that Custodial Interrogation is not for the purpose of confession as “No person accused of an offense shall be compelled to be a witness against himself/herself," as guaranteed under Article 20(3) of the Constitution of India. Therefore, merely because an accused did not confess his guilt, it cannot be asserted that he was not cooperating in the investigation. Cooperation in the investigation does not mean admitting whatever is alleged by the Investigating Officers.
5. The court has deliberated as to how the ED is required to inform the arrested person of the grounds of his/her arrest. Court noted that PMLA, 2002, does not specify in clear terms as to how the arrested person will be informed about the grounds of his/her arrest. The court also noted that at present divergent practices are followed in the country. Written copies of the grounds of arrest are furnished in some parts of the country, and in other parts, this process is not followed, and the grounds of arrest are either read out to the accused or the accused is allowed to read it by himself/herself. The court analyzed the fundamental right under Article 22: Protection Against Arrest and Detention, of the Constitution of India in conjunction with arrest provisions under Section 19 of the PMLA 2002 and concluded that:
a. The authorized officer under PMLA has to record in writing the reasons to believe that the accused proposed to be arrested is guilty of an offense punishable under PMLA 2002.
b. There is no valid reason as to why a copy of the written ground of arrest should not be furnished to the accused without exception. It is not possible to remember the verbal grounds of arrest by an accused person who has beenjust arrested. He must not be calm and composed by the sudden arrest or may not be capable of understanding legal complications and communicating with his lawyer. The court noted that the written communication of grounds of arrest, compared to the practice of orally reading it out to the accused, will eliminate the dispute as to what grounds were communicated. Further, this communication will be in line with the constitutional objective of providing such information to the arrested person under Article 22 of the Constitution. Further, this will also enable the arrested person to seek legal remedies and present a case before the Court under Section 45 to seek release on bail.
c. The court also noted that the grounds of arrest under Section 19(1) of the Act will be personal to the person arrested and thus, ordinarily there will be no risk of sensitive material being divulged therefrom compromising the investigation. In the event, if the authorized officer finds any sensitive material which can be divulged therefrom comprising the sanctity of the investigation, it would be always open to the officer to redact such sensitive portion and submit the edited/redacted copy of the grounds of arrest.
6. With the above observations, the Court holds that henceforth, it would be necessary for ED to provide a copy of the written grounds of arrest to the arrested person as a matter of course and without exception. All the earlier decisions, taking a contrary view, stand overruled.
7. And of course, with the above observations in the case of Appellants, Court holds that their arrest was not in keeping with the provisions of Section 19(1) of the Act of 2002. Furthermore, 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 warrant acceptance as it reeks of arbitrary exercise of power. Court concluded that there was an arbitrary exercise of power in the case of Appellants, and therefore their arrest and consequential remand to ED and thereafter to Judicial Custody cannot be sustained. Accordingly, the appeals were allowed, and arrest orders/arrest memos along with orders of remand and the orders of Punjab and Haryana High Court have been set aside.
8. Thus, the decision is truly landmark for ensuring fairness in the investigation. However, only time will tell as to how this is going to be perceived and used by the authorities. The bottom line in the present case also remains that in the end, the actual sufferers are the Appellants, in spite of being released by the Hon'ble Supreme Court, and there is no suffering for Government Authorities who have exercised their powers arbitrarily. Therefore, the repeat arbitrary exercise of powers by the investigating agency is not ruled out.
9. Actually, this lack of accountability on the part of investigating agencies is the primary reason for arbitrary action on their part. If their actions are ratified by courts, which has happened in this case also, up to the High Court level, they are very upbeat. Even if their actions are set aside by superior courts, they have already caused damage to their targets without incurring any kind of repercussions for themselves. Thus, irrespective of the outcomes in the litigation, their unfair actions continue, and they continue to punish their targets as “Process is the Punishment." Unless officials are held accountable for their arbitrary actions and upper hand tactics, the misuse of powers will continue.
10. For improving the administration of law and raising the professional expertise of investigating agencies, they must be made accountable, at least for those actions where their action is mala fide and biased on the face of it. The government can maintain a live decision index of officers in their career, for which the numerator should be the number of decisions taken by officers that hold good at that point in time, and the denominator should be the total number of decisions taken by the officer. This is possible in this digital age by creating a Document Identification Number (DIN) for each decision and monitoring their status. This index should become one of the parameters in their promotions. The moment this is implemented, we can surely expect better decision-making from government officials. A higher index shall signify better decision-making at the hands of officials. Linkage of this index for their promotion will ensure that they will refrain from taking arbitrary decisions.
(The views expressed are personal views of the author Pramod Kumar Rai , Managing Partner B.Tech (IIT Kanpur), LLB (Gold Medal), LLM (USA) Former IRS & Sr. Standing Counsel Delhi HC)
