Supreme Court Rules ED Must Give Written Notice of Arrest Under PMLA

The Prevention of Money Laundering Act (PMLA) cannot be used as a justification for the Enforcement Directorate to make arbitrary arrests, according to a Supreme Court decision, which stipulates that the central organization must give the accused written notice of the arrest.

The court ruled that the accused had a constitutional and legal right to such protections. It criticized the central organization for its "clandestine conduct" in relation to the detention of a father and son from Haryana in a case involving money laundering.

The Narendra Modi administration has frequently been charged with utilizing the ED and other federal investigative agencies to settle disputes with members of the Opposition and its detractors.

Trial judges cannot habitually remand people who have been booked under the PMLA to custody without using their best judgment and by relying merely on the ECIR (similar to the FIR) and other papers presented to them by the ED, according to a ruling made on Tuesday by a bench of Justices A.S. Bopanna and Sanjay Kumar.

Written evidence

The Prevention of Money Laundering Rules, 2005, Rule 6, which addresses Forms of Records, was cited by the supreme court. According to the norm, the arresting officer must sign the arrest order in order to exercise his or her authority under Section 19(1) of the Act.

The Supreme Court stated: "On the above analysis, we hold that it would be necessary, going forward, that a copy of such written grounds of arrest be furnished to the arrested person as a matter of course and without exception. This is to give true meaning and purpose to the constitutional and statutory mandate of Section 19(1) of the Act of 2002 (PMLA) of informing the arrested person of the grounds of arrest."

The court stated that the timeline of events in the case of Pankaj Bansal and his father Basant Bansal, both realtors, "speaks volumes and reflects rather poorly, if not negatively, on the ED's style of functioning".

Every action taken by the ED during this exercise is expected to be open, honest, and in line with the highest standards of fair play in action because it is a premier investigating agency with the burdensome responsibility of reducing the crippling economic crime of money laundering in our nation.

"The ED, endowed with broad authority under the strict Act of 2002, is not expected to act with malice and must be seen to be functioning with the highest level of impartiality and justice. The facts of the case at hand show that the ED did not carry out its duties and wield its authority in accordance with these standards, the court ruled.

But how is it "evasive"?

The investigating officer "must specifically find reason to believe that they were guilty of an offence" under Section 19 of the PMLA, the court stated, adding that the appellants' failure to respond to the ED's questions was "not sufficient in itself for the investigating officer to opine that they were liable to be arrested under Section 19."

"Mere non-cooperation of a witness in response to the summons issued under Section 50 of the Act of 2002 would not be enough to render him/her liable to be arrested under Section 19," noted Justice Kumar, who wrote the decision.

The Bansals' arrest and custody were overturned by the bench after they raised an objection to the ED's conduct because their names were omitted from the initial FIR.

Based on three orders issued by a Panchkula court, the trial court as well as the Punjab and Haryana High Court had both upheld their detention and remand.

The Supreme Court drew attention to the ED's vague contention that Pankaj Bansal had been "evasive" in delivering pertinent facts. The court ruled that it was improper for the ED to demand an admission of guilt from a person who had been called in for questioning and claim that anything less would be a "evasive reply."

cause of the arrest

The supreme court pointed out that under Article 22(1) of the Constitution, no one who has been arrested may be held in custody without first being told of the reason(s) for their detention.

"This being the fundamental right guaranteed to the arrested person, the mode of conveying information as to the grounds of arrest must necessarily be meaningful in order to serve the intended purpose," Justice Kumar added.

The bench noted that Section 45 of the PMLA lays out two bail requirements: first, the court must be convinced that there are reasonable grounds to believe that the arrested person is not guilty of the offence after giving the public prosecutor a chance to oppose the application for release; and second, that he is not likely to commit any crimes while on bail.

The arrested person must be aware of the reasons why the authorized officer apprehended him or her under Section 19 as well as the foundation for the officer's "reason to believe" that he or she committed a crime punishable under the Act of 2002 in order to comply with this requirement.

The top court stated, "The arrested person would only be in a position to plead and prove before the special court that there are grounds to think that he/she is not guilty of such offence, in order to avail the relief of bail, provided he/she has knowledge of these facts.

"We may also note that the language of Section 19 of the Act of 2002 puts beyond any reasonable doubt that the authorized officer has to record in writing the reasons for believing that the person proposed for arrest is guilty of an offense punishable under the Act of 2002," it said. According to Section 19(2), the authorized officer must send a sealed envelope containing a copy of the arrest warrant and the evidence in his possession mentioned in Section 19(1) to the adjudicating authority.

The "clandestine conduct of the ED" was disapproved of by the court. It was said that the agency took action against the appellants by filing the second ECIR as soon as the father and son had obtained temporary protection in connection with the first ECIR. This "reeks of arbitrary exercise of power," the court declared.