LI Network
Published on: October 5, 2023 at 10:42 IST
The Supreme Court has emphasized that when a court exercises its authority under Section 167 CrPC to remand an individual arrested by the Directorate of Enforcement (ED), it has a primary responsibility to ensure that the arrest complies with the validity and legality requirements of Section 19 of the Prevention of Money Laundering Act (PMLA) 2002.
Also Read; The Prevention of Money Laundering Act, 2002 (PMLA): Constitution & Jurisdiction
The Supreme Court has further decreed that if the court fails to fulfill this duty diligently and appropriately, the remand order itself would be rendered invalid.
Section 19 of the PMLA establishes inherent safeguards that authorized officers must adhere to. These include the obligation to provide written reasons for believing that an individual is involved in money laundering and to inform the person being arrested about the grounds of their arrest.
The bench, consisting of Justice AS Bopanna and Justice Sanjay Kumar, affirmed that the court handling the remand under Section 167 CrPC must confirm that the conditions in Section 19 are duly met, ensuring that the arrest is lawful and valid. The Court explicitly stated that if this duty is not met properly, the remand order cannot legitimize an unlawful arrest under Section 19 of the Act.
The Supreme Court referred to its August 2023 Judgment in the case of V. Senthil Balaji vs. The State, where it reiterated the responsibility of the authorized officer of the ED to record the reasons for arrest and noted that this safeguard promotes fairness and accountability.
The Court also highlighted the interplay between Section 19 of the PMLA and Section 167 CrPC, emphasizing the role of the magistrate.
The magistrate is expected to strike a balance as investigations are typically required to be completed within 24 hours. Therefore, it is the duty of the investigating agency to present sufficient evidence to convince the magistrate of the need for the accused’s custody.
The Court noted that Section 19 of the PMLA, complemented by Section 167 CrPC, offers adequate safeguards to arrested individuals. The magistrate is required to ensure proper compliance with Section 19 of the PMLA, and only then can they consider the request for custody by the authority.
Furthermore, the Court cited its decision in the Senthil Balaji case, which held that Section 19(3) of the PMLA mandates compliance with Section 167 CrPC once an arrest is made under Section 19.
These pronouncements came as the Supreme Court declared the arrests of Pankaj Bansal and Basant Bansal, directors of the Gurugram-based realty group M3M, in a money laundering case as illegal.
The Supreme Court raised concerns about the ED’s functioning, particularly the manner in which it recorded a second ECIR (Enforcement Case Information Report) immediately after the appellants obtained anticipatory bail for the first ECIR. The Court criticized the ED’s summons and subsequent arrests within a short time span, labeling it as a lack of bona fides on their part.
In light of these issues, the Court ruled that the arrests were illegal. It further clarified that a person cannot be arrested by the Directorate of Enforcement solely for non-cooperation in response to a summons issued under Section 50 of the Prevention of Money Laundering Act 2002. Non-cooperation alone does not warrant an arrest under Section 19.
The Supreme Court also emphasized that the ED is obligated to provide the grounds of arrest in writing to the accused at the time of arrest.
This judgment underscores the significance of adhering to legal and procedural safeguards during arrests under the PMLA, ensuring fairness, transparency, and accountability in the enforcement process.
Case Title: Pankaj Bansal v. Union of India SLP(Crl) No. 9220-9221/2023, Basant Bansal v. Union of India
