Supreme Court indicts ED for arbitrary exercise of powers under Prevention of Money Laundering Act, 2002

Satya Prakash

New Delhi, October 4

Indicting the Enforcement Directorate for arbitrary exercise of powers conferred on it under the Prevention of Money Laundering Act, 2002, the Supreme Court has said that the probe agency must act in a transparent and non-vindictive manner, conforming to pristine standards of fair play in its actions.

While granting bail to Gurugram-based realty group M3M’s directors Basant Bansal and Pankaj Bansal in a money laundering case, a Bench of Justice AS Bopanna and Justice Sanjay Kumar on Tuesday ruled that it’s necessary for the probe agency to furnish a copy of grounds of arrest to the arrested person “as a matter of course and without exception.”

It said, “The clandestine conduct of the ED in proceeding against the appellants (Bansals), 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.”

Citing Article 22(1) of the Constitution which provides that no person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest, it noted, “This being the fundamental right guaranteed to the arrested person, the mode of conveying information of the grounds of arrest must necessarily be meaningful so as to serve the intended purpose.”

Earlier, in Vijay Madanlal Choudhary case, a three-judge Bench of the top court had in July 2022 held that non-supply of the Enforcement Case Information Report (ECIR) in a given case cannot be found fault with, as the ECIR may contain details of the material in the ED’s possession and revealing the same may have a deleterious impact on the final outcome of the investigation or inquiry. It had said that so long as the person was ‘informed’ of the grounds of his/her arrest, that would be sufficient compliance with the mandate of Article 22(1) of the Constitution.

Now, the Bench, has clarified that “in the event any such 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.”

It said, “Being a premier investigating agency, charged with the onerous responsibility of curbing the 19 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.”

After examining the events leading to the arrest of the accused duo, the Bench said, “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 17.04.2023, 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 bona fides.”

It said, “This chronology of events speaks volumes and reflects rather poorly, if not negatively, on the ED’s style of functioning.”

Writing the judgment for the Bench, Justice Kumar said, “The ED, mantled with far-reaching powers under the stringent (Prevention of Money Laundering) 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.”

Indicting the probe agency for suppression of certain facts before the Delhi High Court, the top court said it demonstrated “complete lack of probity on the part of the ED.”

It said, “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 (of PMLA).”

The Bench said, ‘Though it is not necessary for the arrested person to be supplied with all the material that is forwarded to the Adjudicating Authority under Section 19(2), he/she has a constitutional and statutory right to be ‘informed’ of the grounds of arrest, which are compulsorily recorded in writing by the authorized officer in keeping with the mandate of Section 19(1) of the Act of 2002.”

It said, “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 top court said, “It seems that the mode of informing this to the persons arrested is left to the option of the ED’s authorised officers in different parts of the country, i.e., to either furnish such grounds of arrest in writing or to allow such grounds to be read by the arrested person or be read over and explained to such person… That being so, there is no valid reason as to why a copy of such written grounds of arrest should not be furnished to the arrested person as a matter of course and without exception.”