SUPREME COURT HOLDS THAT FURNISHING THE REASONS FOR ARREST IS SUFFICIENT COMPLIANCE OF PROCEDURE OF ARREST UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002

A two Judge Bench of the Supreme Court, comprising of Justice Bela M. Trivedi and Satish Chandra Sharma, passed a judgement dated 15.12.2023 in Ram Kishor Arora vs. Directorate of Enforcement SLP (Crl.) No. 12863 of 2023 wherein the Bench held that once the Arrestee is duly informed about the grounds of arrest and is also furnished a written copy of the same, then such arrest cannot be held as violative of Article 22(1) of the Constitution and Section 19 of the Prevention of Money Laundering Act 2002. The Apex Court was deciding an Appeal against the final Judgement and Order dated 22.09.2023 passed in Writ Petition (Crl.) No. 2408 / 2023 by the High Court of Delhi at New Delhi.

Facts:                    

The Appellant, Mr. Ram Kishor Arora was the Founder of a Real Estate Company named M/s Supertech Ltd. and had undertaken various projects in Delhi NCR and at other places in Uttar Pradesh during the period of 1988-2015. Due to various reasons, 26 FIRs were filed against the Appellant in various jurisdictions. On 09.09.2021, the Respondent, Directorate of Enforcement (ED) registered an Enforcement Case Information Report (ECIR) against M/s Supertech Ltd. and others and started investigation under the Prevention of Money Laundering Act 2002 (PMLA). The Appellant was also summoned under Section 50 of PMLA (Powers of authorities regarding summons, production of documents and to give evidence, etc) on various dates during which his statements were also recorded.

Thereafter, the ED passed a Provisional Attachment Order dated 11.04.2023 and provisionally attached certain personal properties of the Appellant and also, filed an Original Complaint bearing OC No. 1974/2023 dated 04.05.2023 before the Ld. Adjudicating Authority, seeking confirmation of the Provisional Attachment Order in terms of Section 8 of PMLA (Adjudication).  The Adjudicating Authority issued a Notice dated 12.05.2023 under Section 8(1) of PMLA calling upon the Appellant to show cause as to why it should not confirm the provisional attachment of the properties, as the properties were involved in money laundering.

Before the Appellant could reply to the said Notice, he was arrested by ED. The Appellant contended that ED had arrested him on 27.06.2023 without presenting the grounds of arrest in writing. After the arrest, the Appellant was produced before the Special Court bearing ECIR No. STF/21/2021 on 28.06.2023, and was sent to judicial custody for 14 days till 24.07.2023. Meanwhile, the Appellant filed a Bail Application dated 12.07.2023 before the Special Court and the same was dismissed by the Special Court, vide Order dated 22.07.2023.

Hence, aggrieved by the Special Court Order dated 22.07.2023, the Appellant filed a Writ Petition bearing Writ Petition (Crl.) No. 2408 / 2023 in the Delhi High Court, which was also dismissed by the High Court, vide Impugned Order dated 22.09.2023. Hence, SLP (Crl.) No. 12863 of 2023 was filed in the Supreme Court.

Issues:

I) Whether the arrest made by ED was in accordance with Section 19 of PMLA which provides the ‘Power to Arrest’?

II) Whether the arrest made was illegal and violated the Fundamental Rights provided under Article 14, 20, 21 and 22 of Constitution of India?

Analysis by Supreme Court:

As the Appellant contended that the arrest was not made as per Section 19 PMLA, and since the controversy revolved around this Section, the Apex Court looked into the meaning of Section 19 of PMLA. In this regard, various judgements were relied upon by both the Parties.

The Counsel for the Appellant relied on the judgement of Pankaj Bansal vs. Union of India and Others[1] and submitted that by merely informing the accused (such as the Appellant herein) orally about the grounds of arrest, making him read, obtaining his signatures and not furnishing the grounds of arrest in writing, is not in consonance with Section 19(1) of PMLA.

On the other hand, the Counsel for the Respondent contended that the judgement relied on by the Appellant was per incuriam (lacked care) as the two Judge Bench in Pankaj Bansal (supra) had deviated from the position of law settled by the prior three-Judge Bench judgment in Vijay Madanlal Choudhary and Others vs. Union of India and Others[2]. He also submitted that a Bench of two judges cannot overlook or ignore a binding precedent of larger or even co-equal Bench dealing with the issue, otherwise the two-Judge Bench decision would fall in the category of per incuriam. In Madanlal Choudhary (supra), the Supreme Court upheld the validity of Section 19 of PMLA and also held that as long as the person being arrested is informed of the grounds of his arrest, it is sufficient compliance of mandate of Article 22(1) of the Constitution.

Decision by Supreme Court:

The Apex Court relied on the judgement of Union of India and Another vs. Raghubir Singh (Dead) by LRs. etc.[3] and held that a statement of law provided by a larger Division Bench is binding on a Division Bench of the same or lesser number of Judges. It is important to promote the consistency and certainty in the development of law and in order to safeguard the sanctity of Indian hierarchical judicial system.

Since the Appellant was indisputably informed about the grounds of arrest and he also put his signature and the endorsement on the said document of having been informed, the Court was of the view that the arrest was in compliance of Section 19 of PMLA. The Supreme Court further held that if a person arrested by the ED is informed or made aware orally about the grounds of arrest at the time of his arrest and is furnished a written communication about the grounds of arrest as early as possible within reasonably convenient and requisite time of 24-hour of his arrest, that would be sufficient compliance of not only Section 19 of PMLA (Power to Arrest) but also of Article 22(1) of the Constitution, which provides that any person arrested must be informed of grounds of arrest. The said Appeal was dismissed by the Hon’ble Supreme Court.

Conclusion

The facts and issues of the present case clearly provide that the Appellant was provided the grounds of arrest in written form as his signatures were present on it. Even otherwise, the Supreme Court, while interpreting the provisions of PMLA, held that not furnishing the grounds for arrest in written form would not invalidate an arrest. Hence, the Apex Court held that the Authorities had duly complied Section 19 of PMLA while arresting the Appellant. As a result, the Appeal filed by the Appellant-Arrestee was dismissed by the Hon’ble Supreme Court.

 

Arjav Jain

Associate

The Indian Lawyer and Allied Services

 

[1] (2023) SCC Online SC 1244

[2] (2022) SCC Online SC 929

[3] (1989) 2 SCC 754