SUPREME COURT HOLDS ENFORCEMENT DIRECTORATE CONDUCT ARBITRARY AS IT FAILED TO FURNISH GROUNDS OF ARREST

A two-Judge Bench of the Supreme Court comprising of Justice A.S. Bopanna and Justice Sanjay Kumar passed a Judgment dated 03-10-2023 in the matter of Pankaj Bansal Vs. Union of India and Ors. Criminal Appeal Nos. 3051-3052 / 2022 and observed that the Directorate of Enforcement (ED) must explain reasons for an arrest being made under the Prevention of Corruption Act, 2002. The Bench held that this is in line with the Constitution, which requires that the grounds for arrest be communicated to the accused person.

 FACTS

i) That the aforesaid Appeal filed before the Apex Court by one, Pankaj Bansal (Appellant) against the Union of India (U.O.I) and the Directorate of Enforcement (ED) one, Assistant Director (AD) (Respondents), challenged the decision of Division Bench of the Hon’ble High Court of Punjab and Haryana, (High Court), which dismissed both the Writ Petitions, and their prayer for release from custody was denied.

ii) That the Appeals in question originated from FIR No. 0006 dated 17.04.2023, registered by the Anti-Corruption Bureau, Panchkula, Haryana. Further in this FIR accused Mr. Sudhir Parmar (the then Special Judge, CBI and ED, Panchkula), Mr. Ajay Parmar (nephew of Mr. Sudhir Parmar and Deputy Manager (Legal) in M3M Group), Mr. Roop Bansal (Promotor of M3M Group), and other unknown persons were accused of corruption, bribery, and criminal conspiracy under the Prevention of Corruption Act, 1988, read with Section 120B of Indian Penal Code (IPC) (Punishment of Criminal Conspiracy).

iii) Between the years 2018 and 2020, 13 FIRs were registered by Allottees of two residential projects of the IREO Group, leading to the first Enforcement Case Information Report No. GNZO/10/2021 dated 15.06.2021 (hereinafter, ‘the first ECIR’) related to money laundering allegations against the IREO Group and Lalit Goyal. The M3M Group and Appellants were not initially named or implicated in these cases.

iv) Further, the ED issued a summons to M3M India Pvt. Ltd on 12.05.2023, and thereafter they conducted raids on M3M Group’s properties and seized assets and bank accounts on 01.06.2023, subsequently, Roop Bansal was arrested on 08.06.2023 in connection with the first ECIR.

v) That one Pankaj Bansal and one Basant Bansal obtained interim protection from the Delhi High Court in anticipation of potential action against them related to the first ECIR.

vi) Subsequently, a second ECIR (ECIR/GNZO/17/2023) was recorded on 13.06.2023, naming Mr. Sudhir Parmar, Mr. Ajay Parmar, Mr. Roop Bansal, and others. Pankaj Bansal and Basant Bansal were summoned on 13.06.2023 in relation to this ECIR and subsequently arrested on 14.06.2023.

vii) That Pankaj Bansal along with one Basant Bansal challenged their arrests and remand orders, initially in the Delhi High Court, but they were directed to file before the correct authority and later in the Punjab & Haryana High Court, where their Writ Petitions were dismissed.

viii) The Appellants did not challenge the constitutional validity of Section 19 of the Prevention of Money Laundering Act, 2002 (PMLA) (Power to arrest)[1] but sought clarification on its interpretation. Further, they argued that their arrests and remand orders were illegal and unconstitutional. As a result, the Division Bench of the Punjab & Haryana High Court dismissed their Petitions.

HIGH COURT FINDINGS:

The High Court of Punjab and Haryana vide Order dated 20.07.2023 and 26.07.2023 in Writ Petition (Criminal No.) 14536 /2023 filed by Pankaj Bansal and Writ Petition (Criminal No.) 145309 /2023 filed by his father made the following observations

a) That the Hon’ble High Court noted that the challenge to the constitutional validity of Section 19 of the Prevention of Money Laundering Act, 2002 (PMLA) was raised by the Writ Petitioners. However, the Court opined that since the Supreme Court had already upheld the constitutional validity of Section 19, the challenge in the High Court could not be considered merely because a review Petition on this issue was pending before the Supreme Court. As a result, the prayer of the Writ Petitioners related to the constitutional validity of Section 19 was rejected.

b) Further, in the later Order dated 26.07.2023, the Division Bench rejected the Writ Petitioners’ prayer to quash or set aside their arrest Orders, along with their arrest memos and the subsequent proceedings, including the remand orders. Further, the Division Bench took into consideration the gravity of the allegations against them and concluded that their request for release from custody did not merit acceptance. Consequently, the Division Bench dismissed both Writ Petitions.

SUPREME COURT:

Aggrieved by the Orders dated 20.07.2023 and 26.07.2023 passed by the Hon’ble High Court, the Appellant filed a Criminal Appeal Nos. 3051-3052 / 2022 before the Hon’ble Supreme Court on 31.07.2023. The Apex Court, in its observations, addressed the crucial issues which are as follows:

ISSUES:

(I) The primary issue, in this case, pertains to the interpretation and application of Section 19 of the PMLA, 2002, specifically regarding whether it necessitates providing arrested individuals with a written copy of the grounds for their arrest, and whether the practice of orally conveying these grounds complies with constitutional and statutory requirements.

(II) Additionally, the case questions the validity of the Appellants’ arrest and detention by the Directorate of Enforcement (ED), their access to constitutional and statutory rights, such as seeking bail under Section 45 of the PMLA Act, (Offences to be cognizable and non-bailable) and the timing and validity of a second Enforcement Case Information Report (ECIR) filed against them in relation to their earlier interim protection, all within the context of alleged money laundering activities.

OBSERVATIONS:

1) That the Hon’ble Supreme Court observed that Section 19 of the PMLA does not specify in clear terms how the arrested person is to be “informed” of the grounds for arrest. The Bench noted that different practices exist in different parts of the country, with some areas providing written copies of the grounds of arrest, while in others, the grounds are read out to the arrestee.

2) Further, the Apex Court emphasized the importance of conveying information about the grounds of arrest in a meaningful manner. The Bench noted that the purpose of this communication is not only to inform the arrested person of why they are being arrested but also to enable them to seek legal counsel and present their case effectively.

3) The Supreme Court highlighted that Article 22(1) of the Indian Constitution guarantees the right of arrested persons to be informed of the grounds for their arrest as soon as possible. Further, the Bench stressed that the mode of conveying this information must be meaningful to serve the intended purpose.

4) The Supreme Court held that, to give true meaning and purpose to the constitutional and statutory mandate of Section 19(1) of the PMLA, it is necessary that a copy of the written grounds of arrest be furnished to the arrested person as a matter of course and without exception and disagreed with earlier decisions that suggested oral communication of the grounds was sufficient.

5) The Apex Court recognized that the grounds of arrest might contain sensitive information related to the investigation. It suggested that authorized officers can redact sensitive portions of the document to protect the integrity of the ongoing inquiry.

6) Subsequently, the Bench also expressed concerns about the timing of the second Enforcement Case Information Report (ECIR) following the Appellants’ interim protection, suggesting that this may indicate an arbitrary exercise of power by the Enforcement Directorate (ED).

CONCLUSION:

Thus, based on aforesaid observations, the Supreme Court emphasized the critical importance of upholding the constitutional and statutory rights of arrested persons. It further, clarified that arrested individuals must be provided with a written copy of the grounds for their arrest as a standard practice, ensuring transparency and enabling them to exercise their legal rights effectively. The Apex Court reaffirmed the fundamental right under Article 22(1) of the Indian Constitution, stressing the need for meaningful communication of arrest reasons. The Bench also acknowledged the need to protect sensitive investigative material while still ensuring proper disclosure. The Supreme Court expressed concerns about the potential misuse of power by law enforcement agencies and ordered the immediate release of the Appellants unless their continued detention was justified in another case, thereby reinforcing the principle of fairness and due process in criminal proceedings.

Therefore, the Appeals were allowed and the Orders issued by the Division Bench of the High Court, as well as the arrest orders and memos, and the remand orders issued by the Vacation Judge/Additional Sessions Judge in Panchkula, were set aside.

Editor’s Comments

While the power to arrest is the right given to the Police and Enforcement Agencies these Authorities cannot exercise these powers arbitrarily. The Constitution protects every citizen who is to be arrested by mandating that every person who is to be arrested must be given reasons in writing for such arrest. This allows for a system of checks and balances preventing arbitrary arrest or misuse of power by such Authorities. As already explained by the Supreme Court the right to know reasons for arrest allows the alleged accused to seek the appropriate remedy in the appropriate forum.

 

Sakshi Raghuvanshi

Legal Associate

The Indian Lawyer

 

Edited by Sushila Ram

Chief Consultant

The Indian Lawyer

 

[1]1) If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.

(2) The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub-section (1), forward a copy of the order along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed.

(3) Every person arrested under sub-section (1) shall, within twenty-four hours, be taken to a 1[Special Court or] Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction:

Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the 1[Special Court or] Magistrate’s Court.