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Legal Safeguards and Transparency Under S. 19 Of The PMLA: Pankaj Bansal v. Union of India

Introduction

The case at hand pertains to a significant legal matter involving the interpretation and application of s. 19 of the Prevention of Money Laundering Act, 2002 ('PMLA'). This particular section delineates the protocols for apprehending individuals suspected of committing offenses under the PMLA, with a specific focus on conveying the rationale for arrest to the apprehended individuals. This case underscores the paramount significance of furnishing comprehensive written grounds for arrest, stressing the imperative to uphold the rights of individuals in detention.

Facts

  • The case arises from a series of FIRs that were lodged against the IREO Group. Subsequently, based on these FIRs the Enforcement Directorate ('ED') initiated an Enforcement Case Information Report ('First ECIR'). At this initial stage, neither M3M Group nor the appellants (Pankaj Bansal and Basant Bansal), who are the key members of M3M Group, were explicitly named or implicated in FIR and ECIR. Nevertheless, the ED issued a summon to M3M India Pvt., requesting information and documents pertaining to transactions involving specific companies.

  • Following this, the ED raided the properties of M3M Group and confiscated assets and bank accounts. In anticipation of potential actions against them, the appellants sought and obtained interim protection from the Delhi High Court through anticipatory bail.

  • Subsequently, the ED filed a Prosecution Complaint in the year 2022, targeting numerous as accused. Once again, M3M Group and the appellants remained conspicuously absent from the list of the named accused in this complaint. However, it was alleged that during the course of these proceedings, the Special Judge displayed a perceived bias in favour of the accused, including the owners of the M3M Group.

  • Following this, in response to these developments, the Anti-Corruption Bureau in Panchkula, Haryana, initiated the registration of a second FIR. This new FIR encompassed allegations of corruption, bribery, and criminal conspiracy.

  • Consequently, the ED registered another ECIR based on the second FIR ('Second ECIR'). Later, summons were issued to the appellants on 13.06.2023 directing them to appear before the ED on 14.06.2023 regarding the First ECIR. While the appellants were at the ED's office in compliance with this summons, Pankaj Bansal was served with a fresh summons at 04.52 pm on 14.06.2023, requiring his presence before another Investigating Officer at 05.00 pm on the same day in connection with the second ECIR. The exact timing of the summon concerning the second ECIR served on Basant Bansal was not clear. Further, both the appellants were arrested on the same day in connection with the second ECIR under s. 19(1) of the PMLA.

  • The arrested individuals were taken into custody and presented before Panchkula’s Vacation Judge/Additional Sessions Judge. Initially, their remand to the ED’s custody was granted, and this remand was extended twice.

  • In response to these developments, the appellants filed writ petitions in the Punjab & Haryana High Court ('P&H HC'), alleging that their arrest and the provisions of s. 19 of the PMLA were unconstitutional and violated the safeguards provided under the PMLA. They also argued for the physical communication of the grounds for their arrest. The P&H HC dismissed these petitions, prompting the appellants to file the present appeal before the Hon'ble Supreme Court.

Held

  • The ED argued that the arrests of the appellants were made in accordance with s. 19 of the PMLA, which obligates them only to communicate the grounds of arrest to the accused, without a specific requirement for providing those grounds in writing.

  • Further, the ED argued that the appellants were non-cooperative during the investigation; justifying the necessity of their arrest. Moreover, the ED asserted that since a remand order has already been issued, any potential defect in the arrest process is presumed to be cured.

  • In response, the court held that a mere issuance of a remand order would not suffice to validate the arrests if the ED did not comply with the requirements of s. 19 of the PMLA. The court also questioned the ED's characterization of the appellants' responses as non-cooperative during the investigation, emphasizing that non-cooperation alone could not automatically justify arrests.

  • The court further took note of the timing of the second ECIR, which was initiated shortly after the appellants had been granted interim protection from arrest regarding the First ECIR. This timing raised concerns about the ED's motives and actions, implying that the swift retaliatory move may not have been made in good faith.

  • The court underscored the critical importance of informing the arrested person about the grounds of their arrest as a constitutional requirement, enshrined in a. 22(1) of the Constitution of India. The court held that this requirement must be adhered to without exception, and it affirmed that a copy of the written grounds of arrest should be provided to the arrested person as a matter of routine.

  • However, the court acknowledged that the ECIR might contain sensitive information that could potentially impact the outcome of the investigation. In such cases, withholding the complete ECIR might be justifiable. The court also recognized that sensitive material within the grounds of arrest could be redacted to safeguard the integrity of the ongoing investigation.

  • Consequently, the court set aside the arrest orders, ruling that the arrest and subsequent remand did not comply with the provisions of s. 19(1) of the PMLA.

Analysis

The recent ruling in this case carries significant implications for safeguarding the rights of individuals, particularly in the context of arrests made under the PMLA. The court's decision underscores the fundamental right of arrested individuals to be informed of the grounds for their arrest. It also provides a clear and stringent interpretation of s. 19 of the PMLA, stressing the necessity for authorized officers to meticulously document, in writing, the reasons behind their belief that the arrested person is guilty of a PMLA offense. This emphasis on written communication ensures transparency and accountability in the process of arrest and detention.

In delivering this judgment, the Hon'ble Supreme Court has also effectively overturned previous rulings by the Delhi High Court and the Bombay High Court in the cases of Moin Akhtar Qureshi v. Union of India[i] and Chhagan Chandrakant Bhujbal v. Union of India[ii]respectively. These rulings had previously interpreted Section 19 of the PMLA to imply that the obligation was merely to inform the arrestee of the grounds for arrest, without necessitating the provision of written documentation.

This case serves as a significant milestone in standardizing arrest procedures across the country, thereby protecting the rights of accused individuals who were previously disadvantaged by vague or unclear grounds for their arrest. For instance, s. 45 of the PMLA places the burden on the accused to demonstrate reasonable grounds to believe that they are not guilty of the alleged offense. To fulfill this requirement, it is essential that the arrested person is informed, in writing, of the specific grounds for their arrest by the authorized officer.

This ruling assumes great significance in light of the prevailing concerns surrounding individuals suspected of PMLA violations, especially considering recent judgments like Vijay Madan Lal Chaudhry v. Union of India[iii] and Rana Ayyub v. ED[iv].

In sum, the court's decision highlights a commitment to upholding the rule of law, safeguarding individual rights, and ensuring transparency within the arrest and detention process under the PMLA. It reinforces the principle that the protection of individual liberties remains paramount, even in the context of stringent legislation aimed at combating money laundering and related offenses.


End Notes:

[i]2017 SCC OnLine Del 12108.

[ii] 2017 (1) AIR Bom R (Cri) 929.

[iii] 2022 SCC OnLine SC 929.

[iv] SLP (Cri.) Nos. 12779-12781 of 2023.


For ready reference, the two related court rulings previously published can be found below, providing valuable context and insights into the legal landscape surrounding PMLA:


Authored by Shivam Mishra, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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