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Supreme Court Rejects Retrospective Application of Pankaj Bansal Case in Supertech Founder’s Arrest under PMLA

Introduction

In the matter of Ram Kishor Arora v. Directorate of Enforcement[i] (‘ED’), the Hon’ble Supreme Court (‘Apex Court’) held that if the Appellant was indisputably informed about the grounds of arrest, and had put his signature on the document, with the endorsement of having been informed to the Appellant, then due compliance with the provisions contained in s. 19 of the Prevention of Money Laundering Act, 2002 (‘PMLA’) was established. Consequently, his arrest could not be deemed a violation of a. 22(1) of the Constitution of India, 1950 (‘the Constitution’). 

The ruling pronounced that due process was followed and upheld the legality of the arrest, stating that the Appellant was duly informed of the grounds for his arrest, as evidenced by his signature and the accompanying endorsement on the arrest document.

Brief Facts

  • The Appellant was the founder of M/s Supertech Ltd. and was arrested by the ED on 27.06.2023 leading to subsequent remands and judicial custody.

  • The said arrest was made during the pendency of insolvency proceedings filed against M/s Supertech Ltd. before the National Company Law Tribunal (‘NCLT’). Due to various reasons, 26 First Information Reports (‘FIRs’) came to be registered against the Appellant in various jurisdictions. In 2021, the ED registered an Enforcement Case Information Report (‘ECIR’) against the company, and in 2022, insolvency proceedings commenced against M/s Supertech Ltd.

  • On 28.06.2023, the Appellant was remanded to ED custody till 10.07.2023 by the Special Court, New Delhi. Subsequently, the Appellant was sent to judicial custody for 14 days till 24.07.2023.

  • The Appellant filed a bail application on 12.07.2023 before the Special Court, which was dismissed on 22.07.2023 and he was sent to judicial custody for a further period of 14 days i.e., till 07.08.2023, which was subsequently extended till 21.08.2023.

  • The Appellant then filed a writ petition before the Apex Court challenging the order dated 22.07.2023 passed by the Special Court, which dismissed his bail application. The said petition came to be withdrawn by the Appellant with liberty to approach the Delhi High Court. After that, the Appellant filed a writ petition, which came to be dismissed by the Delhi High Court vide the impugned order dated 22.09.2023.

  • Hence, the present appeal was filed against the aforesaid order dated 22.09.2023 passed by the Delhi High Court dismissing the petition seeking a declaration that the arrest of the Appellant on 27.06.2023 by the ED was illegal and a violation of the fundamental rights guaranteed to the Appellant under a. 14, 20 and 21 of the Constitution, and seeking direction to release the Appellant forthwith.

Held

  • The Apex Court dismissed the appeal and held that orally informing the detained party about the arrest grounds at the time of arrest (as per the existing rules) is considered sufficient compliance under s. 19 of the PMLA and a. 22(1) of the Constitution. In this case, since the Appellant confirmed that he had received and understood the written grounds of arrest upon being detained, even though he did not immediately get a copy, the Apex Court concluded that the arrest complied with the legal requirements of s. 19 of the PMLA and a. 22(1) of the Constitution, thus upholding its lawfulness.

  • The Apex Court observed that the expression ‘as soon as may be’ contained in s. 19 of the PMLA would mean that the arrested person should be informed of the grounds of arrest as early as possible without avoidable delay or within a reasonably convenient or requisite time being 24 hours from arrest.

  • The Apex Court by relying upon the case of Vijay Madanlal Choudhary and Ors. v. Union of India and Ors.[ii], observed that fulfilling the mandate of informing the accused of the grounds of arrest satisfies the requirements of a. 22(1) of the Constitution.

  • The Apex Court further clarified that during the 24-hour window before presenting the arrested person before the Special Court or considering remand, the relevant Court can access relevant records confirming the money-laundering charges. Therefore, informing the person of the accusation verbally when arrested, followed by written details within 24 hours, satisfies both s. 19 of the PMLA and a. 22(1) of the Constitution.

  • The Apex Court, by relying upon the case of Pankaj Bansal v. Union of India and Ors.[iii], clarified that it is mandatory to furnish written grounds to anyone arrested under s. 19 of the PMLA, starting from the date of the judgment, as it was not a legal requirement before the said judgment.

Analysis

The above case is per incuriam because it conflicts entirely with Pankaj Bansal's (supra) pronouncement on the same legal question, without declaring Pankaj Bansal (supra) itself as bad in law. The postponement rules as articulated in this case, displaces the immediate-furnishing rule, as laid down in Pankaj Bansal (supra), and the two cannot coexist. This conflict arises from the interpretation and application of the rules governing the furnishing of arrest grounds.

Therefore, the only correct interpretation of this current case would restrict its application to arrests made before the Pankaj Bansal (supra) decision. In this context, the oral furnishing of grounds alongside a postponed delivery of written grounds would not vitiate an arrest (provided, it occurred before the Pankaj Bansal case). This case requires reconsideration so that the postponement rule is limited in its application to pre-Bansal arrests, and the immediate-furnishing rule for post-Bansal arrests is affirmed.

Based on this analysis, it is argued that the Apex Court’s decision in this case lacks robust reasoning in its departure from the immediate-furnishing rule established in Pankaj Bansal (supra). This shift towards a postponement rule for post-Bansal cases not only contradicts the earlier ruling but also risks misinterpretation in future cases. Therefore, it is imperative that this case be revisited soon to clarify the precedent and uphold the integrity of the immediate-furnishing rule in the context of arrest procedures.


End Notes:

[i] 2023 SCC OnLine SC 1682

[ii] (2022) SCC Online SC 929

[iii] (2023) SCC Online SC 1244


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 Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.

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