The Supreme Court has held that mere non-cooperation of a witness in response to the summons issued under Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA) would not be enough to render him/her liable to be arrested under Section 19 of PMLA. It has set aside the arrest of persons saying that the same was not as per Section 19(1) of PMLA and that the clandestine conduct of the Enforcement Directorate (ED) did not commend acceptance.

The Court was dealing with a batch of appeals challenging the orders passed by the Punjab and Haryana High Court whereby it dismissed the plea of the accused. By the order, the Division Bench observed that as the constitutional validity of Section 19 of PMLA had been upheld by the Supreme Court, the challenge to the same by the writ petitioners could not be considered only because a review petition was pending before the Supreme Court.

The two-Judge Bench comprising Justice A.S. Bopanna and Justice Sanjay Kumar said, “… 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, as already noted supra, 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. In effect, the arrest of the appellants and, in consequence, their remand to the custody of the ED and, thereafter, to judicial custody, cannot be sustained.”

Senior Advocates Mukul Rohatgi, A.M. Singhvi, Randeep Rai, and Vikram Chaudhary represented the appellant while ASG S.V. Raju and Advocate Zoheb Hossain represented the respondents.

In this case, the genesis of the appeals was related to the FIR registered by the Anti-Corruption Bureau, Panchkula, Haryana, under Sections 7, 8, 11, and 13 of the Prevention of Corruption Act, 1988, read with Section 120B IPC for the offences of corruption and bribery along with criminal conspiracy. Significantly, prior to this FIR, between the years 2018 and 2020, 13 FIRs were registered by allottees of two residential projects of the IREO Group, alleging illegalities on the part of its management. On the strength of these FIRs, the ED recorded Enforcement Case Information Report (ECIR) in connection with the money laundering offences allegedly committed by the IREO Group, its Vice-Chairman and Managing Director.

Neither in the FIRs nor in the first ECIR were M3M Group or the appellants arrayed as the accused. Further, no allegations were levelled against them therein. The ED filed Prosecution Complaint against seven accused, under Section 200 Cr.P.C read with Sections 44 and 45 of PMLA. Notably, M3M Group and the appellants did not figure amongst those named accused. The number of FIRs also increased from 13 to 30, as per this complaint. The ED raided the properties of M3M Group and effected seizures of assets and bank accounts. The accused persons were arrested and the matter was therefore before the Apex Court.

The Supreme Court in view of the facts and circumstances of the case noted, “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 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. In the case on hand, the facts demonstrate that the ED failed to discharge its functions and exercise its powers as per these parameters.”

The Court further observed that the grounds of arrest recorded by the authorized officer, in terms of Section 19(1) of the Act of 2002, would be personal to the person who is arrested and there should, ordinarily, be no risk of sensitive material being divulged therefrom, compromising the sanctity and integrity of the investigation.

The Court also 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. As per its replies, 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 Pankaj Bansal’s replies were categorized as ‘evasive’ and that record is not placed before us 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’."

“In the event any such sensitive material finds mention in such grounds of arrest recorded by the authorized 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”, added the Court.

Accordingly, the Apex Court allowed the appeals, set aside the orders of the High Court, and ordered release of the accused persons.

Cause Title- Pankaj Bansal v. Union of India & Ors. (Neutral Citation: 2023INSC866)

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