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Synopsis

In an important judgement, the Supreme Court has on October 3 held it mandatory for the Enforcement Directorate (ED), to disclose grounds of arrest as a matter of course and without exception in money laundering cases.

The apex court also ruled that mere non-cooperation of a witness in response to the summons issued under Section 50 of the Prevention of Money Laundering Act of 2002 would not be enough to render him or her liable to be arrested under Section 19. 

"The ED, mantled with far-reaching powers under the stringent Act of 2002, is not expected to be vindictive in its conduct and must be seen to be acting with utmost probity and with the highest degree of dispassion and fairness," a bench of Justices A S Bopanna and Sanjay Kumar.

"We have no hesitation in holding that their arrest was not in keeping with the provisions of Section 19(1) of the Act of 2002. Further, the clandestine conduct of the ED in proceeding against the appellants, by recording the second ECIR immediately after they secured interim protection in relation to the first ECIR, does not commend acceptance as it reeks of arbitrary exercise of power," the bench said.

In a strong castigation for the Enforcement Directorate, the bench noted that the appellants were arrested in a "retaliatory" move by the ED in second case after the interim protection was granted to them by the Delhi High Court.

"This chronology of events speaks volumes and reflects rather poorly, if not negatively, on the ED’s style of functioning. Being a premier investigating agency, charged with the onerous responsibility of curbing the debilitating economic offence of money laundering in our country, every action of the ED in the course of such exercise is expected to be transparent, above board and conforming to pristine standards of fair play in action," the bench said. 

"In the case on hand, the facts demonstrate that the ED failed to discharge its functions and exercise its powers as per the parameters," the bench pointed out.

The way in which the ED recorded the second ECIR immediately after the appellants secured anticipatory bail in relation to the first ECIR, though the foundational FIR dated back to April 17, 2023, and then went about summoning them on one pretext and arresting them on another, within a short span of 24 hours or so, manifests complete and utter lack of bonafides, the court said.

"Significantly, when the appellants were before the Delhi High Court seeking anticipatory bail in connection with the first ECIR, the ED did not even bring it to the notice of the High Court that there was another FIR in relation to which there was an ongoing investigation, wherein the appellants stood implicated," the bench said.

The court noted the second ECIR was recorded four days after the grant of bail and it is not possible that the ED would have been unaware of the existence of the FIR lodged on April 17, 2023 at that time. 

"Surprisingly, in its ‘Written Submissions’, the ED stated that it started its inquiries in respect of this FIR in May, 2023, itself, but strangely, the replies filed by the ED do not state so! It is in this background that this suppression before the Delhi High Court demonstrates complete lack of probity on the part of the ED. Its prompt retaliatory move, upon grant of interim protection to the appellants, by recording the second ECIR and acting upon it, all within the span of a day, so as to arrest the appellants, speaks for itself and we need elaborate no more on that aspect," the bench said.

The court said the failure of the appellants to respond to the questions put to them by the ED would not be sufficient in itself for the Investigating Officer to opine that they were liable to be arrested under Section 19, as that provision specifically required him to find reason to believe that they were guilty of an offence under the Act of 2002. 

"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," the bench said.

The court said it is the claim of the ED that Pankaj Bansal was evasive in providing relevant information. It was however not brought out as to why his replies were categorized as ‘evasive’ and that record is not placed before it for verification. 

"In any event, it is not open to the ED to expect an admission of guilt from the person summoned for interrogation and assert that anything short of such admission would be an ‘evasive reply’," the bench said.

With regard to how the ED is required to ‘inform’ the arrested person of the grounds for his/her arrest, the bench said, "Surprisingly, no consistent and uniform practice seems to be followed by the ED in this regard, as written copies of the grounds of arrest are furnished to arrested persons in certain parts of the country but in other areas, that practice is not followed and the grounds of arrest are either read out to them or allowed to be read by them."

Referring to Article 22(1) of the Constitution, the bench said, it would be essential for the arrested person to be aware of the grounds on which the authorised officer arrested him/her under Section 19 and the basis for the officer’s ‘reason to believe’ that he/she is guilty of an offence punishable under the Act of 2002. 

"It is only if the arrested person has knowledge of these facts that he/she would be in a position to plead and prove before the Special Court that there are grounds to believe that he/she is not guilty of such offence, so as to avail the relief of bail. Therefore, communication of the grounds of arrest, as mandated by Article 22(1) of the Constitution and Section 19 of the Act of 2002, is meant to serve this higher purpose and must be given due importance," the bench said.

The court further said in the event any sensitive material finds mention in such grounds of arrest recorded by the authorised officer, it would always be open to him to redact such sensitive portions in the document and furnish the edited copy of the grounds of arrest to the arrested person, so as to safeguard the sanctity of the investigation. 

"To give true meaning and purpose to the constitutional and the statutory mandate of Section 19(1) of the Act of 2002 of informing the arrested person of the grounds of arrest, we hold that it would be necessary, henceforth, that a copy of such written grounds of arrest is furnished to the arrested person as a matter of course and without exception," the bench said.

The top court also declared that the decisions of the Delhi High Court in Moin Akhtar Qureshi case and the Bombay High Court in Chhagan Chandrakant Bhujbal case, which hold to the contrary, do not lay down the correct law. 

Case Title: Pankaj Bansal & Ors. Vs. Enforcement Directorate