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The Punjab and Haryana High Court, in a significant ruling,held that the Enforcement Directorate (ED) cannot restrict individuals' movements within their premises during its search and seizure operations. 

The decision, rendered on two separate petitions, by Justice Vikas Bahl, underscored a crucial distinction between the right to conduct searches and the violation of fundamental rights concerning personal liberty of individuals. The court held that while the ED can ask individuals to open containers such as safes or almirahs during searches, this authority does not permit the ED to restrict individuals' movements within their own premises.

The court set aside the detention order of the petitioners, Dilbagh Singh and Kulwinder Singh, deeming the said ordersillegal as they were held without the proper legal basis and without compliance with the necessary provisions of the Prevention of Money Laundering Act (PMLA).

The case stems from multiple FIRs registered at the Police Station in Yamuna Nagar District, Haryana, under various sections of the Indian Penal Code, which are considered scheduled offences under the Prevention of Money Laundering Act 2002 (PMLA). These registrations led to the Enforcement Directorate (ED) initiating an Enforcement Case Information Report (ECIR) against several accused, including the petitioners, to investigate money laundering activities associated with illegal mining operations.

Despite the serious allegations, it was noted that, as of the date of arrest on January 8, 2024, neither of the petitioners had been formally accused in the eight FIRs mentioned in the investigation. 

The ED conducted extensive searches from January 4 to January 8, 2024, at the residences of the petitioners among other locations. The petitioners contended that they were illegally detained from the onset of the search, which constituted an unlawful arrest since they were not allowed to leave their premises during the search period.

Furthermore, the legal grounds presented for their arrests and the manner of their detention were challenged for not adhering to the procedural requirements stipulated by the PMLA. For example, the official grounds of arrest presented to the petitioners were linked to previous FIRs and alleged non-cooperation during the ED's inquiry, rather than concrete evidence of money laundering activities.

Subsequently, the petitioners were remanded to custody first by the Special Judge (PMLA) in Gurugram and then moved to judicial custody. 

 

The core of the petitioners' legal challenge lies in the assertion that their initial detention was illegal, the process flawed, and their subsequent custody lacked a legal basis, thereby violating the provisions of the PMLA and their constitutional rights​.

 

The ED’s arguments primarily relied on the premise that the presence of the accused during the search and seizure operations was essential to facilitate a thorough and effective search, ensuring that all pertinent materials could be correctly identified and seized, since the accused were in possession of the property and documents under scrutiny.  It was contended that, “it was important to secure their presence within the premises in order to have access to inspect/examine the content and to avoid any sort of tampering with the potential proceeds of crime. Also, they were allowed to follow their daily routine. In no circumstances they were detained or asked compulsorily be in the premises.” 

 

It was further argued that “the condition under Section 19(1) of the 2002 Act is referable to Article 22 of the Constitution of India, but the compliance of Section 19(2) of the 2002 Act is not referable to the same and thus, delay in compliance of the same would be a mere irregularity and not an illegality.”

 

Contrastingly, the petitioner’s counsel argued that their clients, Dilbagh Singh and Kulwinder Singh, were unlawfully detained within their premises from January 4 to January 8 during the ED's operations, which constituted a violation of their fundamental rights. They contended that this detention was unauthorized by law, as it lacked a solid legal foundation and did not comply with the statutory procedures outlined in the PMLA. Specifically, with Section 19 of the PMLA, which dictates the process for arrest and detention under the Act.

 

The counsel for the petitioners also contended thatSection 18of the PMLA was never invoked. They argued that without invoking Section 18, detaining individuals beyond 24 hours without presenting them to a Gazetted Officer or Magistrate was unlawful. The Panchnama evidence did not justify the prolonged detention, making the actions of the authorities legally untenable

 

Upon reviewing the case, Justice Bahl found substantial merit in the petitioner's arguments. The court observed that while the ED's powers under the PMLA are extensive, they do not include the authority to confine individuals to their premises without a legal basis. 

 

The court clarified that an individual's failure to answer questions posed by the Enforcement Directorate (ED) is not sufficient grounds for arrest under Section 19 of the Prevention of Money Laundering Act (PMLA) 2002. It emphasised that non-cooperation alone does not fulfil the requirement of having a "reason to believe" that the individual has committed an offence under the Act. 

 

The court emphasised the constitutional right under Article 22(1) that mandates informing a person of the grounds for their arrest. Moreover, “the law laid down in the case of Pankaj Bansal”, by the Supreme Court, which is crucial under the PMLA, was not complied with. Further, Section 45 of the Act lays out stringent bail conditions, requiring the arrested individual to be informed of the reasons for their detention, the court noted.

 

It was determined that the petitioners were effectively under arrest from the beginning of their confinement, contradicting the ED's claim that they were free until January 8.

 

The court concluded that the ED had illegally confined the petitioners from January 4 to January 8, 2024, deeming this an illegal arrest since the petitioners were not produced before a court within 24 hours as mandated. Furthermore, the authorities failed to comply with procedural requirements outlined in sections 19(1), 19(2), and 19(3) of PMLA, leading to the decision that the arrest and subsequent orders, including remand orders, were unlawful and thus voided. The court, therefore, ordered the immediate release of the appellants.

Cause Title : Dilbag Singh @ Dilbag Sandhu vs Union of India and another & Kulwinder Singh vs Union of India and another [CRM-M-2191-2024 (O&M) and CRM-M-3385-2024 (O&M)]