Ram Kishor Arora v. Directorate of Enforcement

No.336/2023 before this Court challenging the order dated 22.07.2023 passed by the Special Court dismissing his bail application. The said writ petition came to be withdrawn by the appellant with liberty to approach the High Court.

(x) Thereafter, the appellant filed the writ petition being W.P. (Crl.) NO. 2408/2023, which came to be dismissed by the High Court vide the impugned order dated 22.09.2023.

5. The respondent ED has filed an affidavit to counter the allegations made in the Appeal by the appellant, and asserted that the arrest was in accordance with Section 19 of the PMLA. Paragraph 16 of the counteraffidavit being relevant is reproduced herein below: -

6. The appellant without specifically denying the said assertion made by the respondent ED in paragraph 16 of the counter-affidavit, filed the response by filing an affidavit in rejoinder. The response of the appellant in the rejoinder to paragraph 16 of the counter-affidavit reads as under:- “i. It is respectfully submitted that the very fact that the respondent has now annexed the copy of the grounds of arrest establishes the fact that the petitioner was not served the copy of the grounds of arrest. Rather it is an admission on the part of the respondent that the copy of the grounds of arrest were not served on the petitioner. This Hon’ble Court in V. Senthil Balaji Vs State and Ors. 2023 SCC OnLine SC 934 in Para 39 has held that the ground of arrest is to be “served” to the arrestee. The same was also reiterated and clarified by this Hon’ble Court in Pankaj Bansal Vs Union of India and Others, ii. It is submitted that the compliance of serving the grounds of arrest must be at the time when the Petitioner’s arrest was made and not thereafter. iii. The non-service of grounds of arrest is an illegality and not an irregularity that can be regularized later. If the law requires that something be done in a particular manner, then it must be done in that manner, and if not done in that manner, then the same has no existence in the eye of law at all. iv. Mere perusal of grounds of arrest for getting it signed, without serving the same by providing a copy thereof at the time of arrest, does not meet the requirements in law and the arrest of the petitioner is thus illegal.” v. It is submitted that the filing the copy of the grounds of arrest at this stage (Annexure R-1 in counter affidavit, page no. 36), will not help Respondent to cure this illegality. This is an incurable illegality making the very arrest illegal.” LEGAL PROVISION: -

7. Since the entire controversy centres around the interpretation of Section 19 of PMLA which deals with the Power of the ED to arrest, the same is reproduced for ready reference.

SUBMISSIONS BY THE LEARNED COUNSELS: -

8. The Learned Senior Counsel Mr. Abhishek Manu Singhvi placing heavy reliance on the recent decision of this Court in Pankaj Bansal vs. Union of India and Others[1], submitted that mere informing the accused (the appellant herein) orally about the grounds of arrest and making him read the same and obtaining his signature thereon, and not furnishing in writing the grounds of arrest to the accused has been held to be not in consonance with the provisions contained in Section 19(1) of the PMLA. He further submitted that taking note of the inconsistent practice being followed by the officers of the respondent-ED, it has been directed 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. According to him, the said direction was the reiteration of the principle or doctrine already existing and also stated in

V. Senthil Balaji Vs. State represented by Deputy Director and

Others[2] and therefore the said decision in Pankaj Bansal case (supra) is required to be applied retrospectively though the word ‘henceforth’ has been used. To buttress his submission, Mr. Singhvi has relied upon 1 (2023) SCC Online SC 1244 2 (2023) SCC Online SC 934 the judgment in Assistant Commissioner, Income Tax, Rajkot vs. Saurashtra Kutch Stock Exchange Limited[3], in which it was opined that a judicial decision acts retrospectively.

9. Per contra, the learned ASG, Mr. S. V. Raju vehemently submitted that the decision in case of Pankaj Bansal (supra) was per incuriam, as the two-Judge Bench in the said case had deviated from the position of law settled by the prior three-Judge Bench judgment in Vijay Madanlal Choudhary and Others vs. Union of India and Others[4] with respect to the compliance of the provisions of Section 19 of PMLA. He also submitted that a bench of two judges cannot overlook or ignore a binding precedent of larger or even co-equal bench dealing with the issue, otherwise the two-judge bench decision would fall in the category of per incuriam, in view of the decision in case of Sundeep Kumar Bafna vs. State of Maharashtra and Another[5]. He further submitted that at the most the direction contained in paragraph 35 of the Pankaj Bansal case (supra) to furnish the grounds of arrest in writing, would be applicable “henceforth” as mentioned therein, meaning thereby it would have the prospective and not retrospective effect as sought to be submitted on behalf of the appellant. ANALYSIS: -

10. The validity of the various provisions including Section 19 of the PMLA was examined by the Three-Judge Bench in Vijay Madanlal Choudhary case (supra) in which the Bench while upholding the validity of Section 19 of the PMLA held that the said provision has reasonable nexus with the purposes and objects sought to be achieved by the PMLA. The relevant observations are reproduced herein below: -

37. The section534 also obliges the Customs Officer to inform the person arrested of the grounds of arrest as soon as may be. The law requires such person to be produced before a Magistrate without unnecessary delay.

38. The law thus, on the one hand, allows a Customs Officer to exercise power to arrest a person who has committed certain offences, and on the other hand, takes due care to ensure individual freedom and liberty by laying down norms and providing safeguards so that the power of arrest is not abused or misused by the authorities. ….” (emphasis supplied)

325. The safeguards provided in the 2002 Act and the preconditions to be fulfilled by the authorised officer before effecting arrest, as contained in Section 19 of the 2002 Act, are equally stringent and of higher standard. Those safeguards ensure that the authorised officers do not act arbitrarily, but make them accountable for their judgment about the necessity to arrest any person as being involved in the commission of offence of money-laundering even before filing of the complaint before the Special Court under Section 44(1)(b) of the 2002 Act in that regard. If the action of the authorised officer is found to be vexatious, he can be proceeded with and inflicted with punishment specified under Section 62 of the 2002 Act…….

326. Considering the above, we have no hesitation in upholding the validity of Section 19 of the 2002 Act. We reject the grounds pressed into service to declare Section 19 of the 2002 Act as unconstitutional. On the other hand, we hold that such a provision has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act of prevention of money-laundering and confiscation of proceeds of crime involved in moneylaundering, including to prosecute persons involved in the process or activity connected with the proceeds of crime so as to ensure that the proceeds of crime are not dealt with in any manner which may result in frustrating any proceedings relating to confiscation thereof.”

11. Further while dealing with the issue as to whether it was necessary to furnish a copy of ECIR to the person concerned apprehending the arrest or at least after his arrest, the Bench held in Vijay Madanlal (supra) as under: - “458. The next issue is: whether it is necessary to furnish copy of ECIR to the person concerned apprehending arrest or at least after his arrest? Section 19(1) of the 2002 Act postulates that after arrest, as soon as may be, the person should be informed about the grounds for such arrest. This stipulation is compliant with the mandate of Article 22(1) of the Constitution. Being a special legislation and considering the complexity of the inquiry/investigation both for the purposes of initiating civil action as well as prosecution, non-supply of ECIR in a given case cannot be faulted. The ECIR may contain details of the material in possession of the Authority and recording satisfaction of reason to believe that the person is guilty of money-laundering offence, if revealed before the inquiry/investigation required to proceed against the property being proceeds of crime including to the person involved in the process or activity connected therewith, may have deleterious impact on the final outcome of the inquiry/investigation. So long as the person has been informed about grounds of his arrest that is sufficient compliance of mandate of Article 22(1) of the Constitution. Moreover, the arrested person before being produced before the Special Court within twenty-four hours or for that purposes of remand on each occasion, the Court is free to look into the relevant records made available by the Authority about the involvement of the arrested person in the offence of money-laundering. In any case, upon filing of the complaint before the statutory period provided in 1973 Code, after arrest, the person would get all relevant materials forming part of the complaint filed by the Authority under Section 44(1)(b) of the 2002 Act before the Special Court.

459. Viewed thus, supply of ECIR in every case to person concerned is not mandatory. From the submissions made across the Bar, it is noticed that in some cases ED has furnished copy of ECIR to the person before filing of the complaint. That does not mean that in every case same procedure must be followed. It is enough, if ED at the time of arrest, contemporaneously discloses the grounds of such arrest to such person. Suffice it to observe that ECIR cannot be equated with an FIR which is mandatorily required to be recorded and supplied to the accused as per the provisions of 1973 Code. Revealing a copy of an ECIR, if made mandatory, may defeat the purpose sought to be achieved by the 2002 Act including frustrating the attachment of property (proceeds of crime). Non-supply of ECIR, which is essentially an internal document of ED, cannot be cited as violation of constitutional right. Concededly, the person arrested, in terms of Section 19 of the 2002 Act, is contemporaneously made aware about the grounds of his arrest. This is compliant with the mandate of Article 22(1) of the Constitution. It is not unknown that at times FIR does not reveal all aspects of the offence in question. In several cases, even the names of persons actually involved in the commission of offence are not mentioned in the FIR and described as unknown accused. Even, the particulars as unfolded are not fully recorded in the FIR. Despite that, the accused named in any ordinary offence is able to apply for anticipatory bail or regular bail, in which proceeding, the police papers are normally perused by the concerned Court. On the same analogy, the argument of prejudice pressed into service by the petitioners for non-supply of ECIR deserves to be answered against the petitioners. For, the arrested person for offence of money-laundering is contemporaneously informed about the grounds of his arrest; and when produced before the Special Court, it is open to the Special Court to call upon the representative of ED to produce relevant record concerning the case of the accused before him and look into the same for answering the need for his continued detention. Taking any view of the matter, therefore, the argument under consideration does not take the matter any further.”

12. Since, much reliance has been placed on the decisions in case of

V. Senthil Balaji vs. State (supra) and in Pankaj Bansal vs. Union of

India (supra), the relevant part thereof also deserve to be reproduced. In V. Senthil Balaji (supra), the two-Judge Bench while dealing with Section 19 of PMLA observed as under: -

13. In Pankaj Bansal case (supra), the two-Judge Bench after analyzing the provisions contained in Section 19(1) of PMLA observed as under:-

14. It hardly needs to be emphasized that as well settled, it is in order to guard against the possibility of inconsistent decisions on the points of law by different Division Benches that the Rule of precedent has been evolved. It is in order to promote the consistency and certainty in the development of law and its contemporary status that the statement of law by a Division Bench is considered binding on a Division Bench of the same or lesser number of Judges. In this regard, we may refer to the pronouncement of the Constitution Bench judgment in Union of India and Another vs. Raghubir Singh (Dead) by LRs. Etc.[6]

15. Another Constitution Bench in Chandra Prakash and Others vs. State of U.P. and Another[7] highlighting the utmost importance of the doctrine of binding precedent in the administration of judicial system and following the decision in Raghubir Singh’s case (supra) observed as under: -

16. In Sundeep Kumar Bafna vs. State of Maharashtra (supra) also the above stated jurisprudence has been followed: -

17. In view of the afore-stated proposition of law propounded by the Constitution Benches, there remains no shadow of doubt that the law laid down by the Three-Judge bench in Vijay Madanlal Choudhary case (supra) that Section 19(1) of the PMLA has a reasonable nexus with the purposes and objects sought to be achieved by the PML Act and that the said provision is also compliant with the mandate of Article 21(1) of the Constitution of India, any observation made or any finding recorded by the Division Bench of lesser number of Judges contrary to the said ratio laid down in Vijay Madanlal Choudhary (supra) would be not in consonance with the jurisprudential wisdom expounded by the Constitution Benches in cases referred above. The Three-Judge Bench in Vijay Madanlal Choudhary case (supra) having already examined in detail the constitutional validity of Section 19 of PMLA on the touchstone of Article 22(1) and upheld the same, it holds the field as on the date.

18. It is true that the expression “as soon as may be” has not been specifically explained in Vijay Madanlal Choudhary (supra). Even the said expression has not been interpreted in either V. Senthil Balaji or in Pankaj Bansal case. In V. Senthil Balaji, it is held inter alia that after forming a reason to believe that the person has been guilty of an offence punishable under the PMLA, the concerned officer is at liberty to arrest him, while performing his mandatory duty of recording the reasons, and that the said exercise has to be followed by way of an information being served on the arrestee of the grounds of arrest. In Pankaj Bansal case also the court after highlighting the inconsistent practice being followed by the respondent-ED about the mode of informing the person arrested, held 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.

19. In view of the above, the interpretation of the expression “as soon as may be” assumes significance. In our opinion, the interpretation of the said expression should not detain us more in view of the Constitution Bench Judgment in case of Abdul Jabar Butt and Another vs. State of Jammu & Kashmir.[8] In the said case, the Constitution Bench while interpreting Section 8 of Jammu & Kashmir Preventive Detention Act 2011, had an occasion to interpret the expression “as soon as may be” and it observed thus:-

20. Again, a three-judge bench in Durga Pada Ghosh vs. State of West Bengal[9] while considering the scheme of Article 22 of the Constitution held as under: -

21. In view of the above, the expression “as soon as may be” contained in Section 19 of PMLA is required to be construed as- “as early as possible without avoidable delay” or “within reasonably convenient” or “reasonably requisite” period of time. Since by way of safeguard a duty is cast upon the concerned officer to forward a copy of the order along with the material in his possession to the Adjudicating Authority immediately after the arrest of the person, and to take the person arrested to the concerned court within 24 hours of the arrest, in our opinion, the reasonably convenient or reasonably requisite time to inform the arrestee about the grounds of his arrest would be twenty-four hours of the arrest.

22. In Vijay Madanlal Choudhary (supra), it has been categorically held that so long as the person has been informed about the grounds of his arrest, that is sufficient compliance of mandate of Article 22(1) of the Constitution. It is also observed that the arrested person before being produced before the Special Court within twenty-four hours or for that purposes of remand on each occasion, the Court is free to look into the relevant records made available by the Authority about the involvement of the arrested person in the offence of money-laundering. Therefore, in our opinion the person asserted, if he is informed or made aware orally about the grounds of arrest at the time of his arrest and is furnished a written communication about the grounds of arrest as soon as may be i.e as early as possible and within reasonably convenient and requisite time of twenty-four hours of his arrest, that would be sufficient compliance of not only Section 19 of PMLA but also of Article 22(1) of the Constitution of India.

23. As discernible from the judgment in Pankaj Bansal Case also noticing the inconsistent practice being followed by the officers arresting the persons under Section 19 of PMLA, directed to furnish the grounds of arrest in writing as a matter of course, “henceforth”, meaning thereby from the date of the pronouncement of the judgment. The very use of the word “henceforth” implied that the said requirement of furnishing grounds of arrest in writing to the arrested person as soon as after his arrest was not the mandatory or obligatory till the date of the said judgment. The submission of the learned Senior Counsel Mr. Singhvi for the Appellant that the said judgment was required to be given effect retrospectively cannot be accepted when the judgment itself states 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. Hence non furnishing of grounds of arrest in writing till the date of pronouncement of judgment in Pankaj Bansal case could neither be held to be illegal nor the action of the concerned officer in not furnishing the same in writing could be faulted with. As such, the action of informing the person arrested about the grounds of his arrest is a sufficient compliance of Section 19 of PMLA as also Article 22(1) of the Constitution of India, as held in Vijay Madanlal (supra).

24. In so far as the facts of the present case are concerned, it is not disputed that the appellant was handed over the document containing grounds of arrest when he was arrested, and he also put his signature below the said grounds of arrest, after making an endorsement that “I have been informed and have also read the above-mentioned grounds of arrest.” The appellant in the rejoinder filed by him has neither disputed the said endorsement nor his signature below the said endorsement. The only contention raised by the learned Senior Counsel, Mr. Singhvi is that he was not furnished a copy of the document containing the grounds of arrest at the time of arrest. Since the appellant was indisputably informed about the grounds of arrest and he having also put his signature and the endorsement on the said document of having been informed, we hold that there was due compliance of the provisions contained in Section 19 of PMLA and his arrest could neither be said to be violative of the said provision nor of Article 22(1) of the Constitution of India.

25. In that view of the matter, the Appeal being devoid of merits is dismissed..…..….…………………………..J. [BELA M. TRIVEDI]...……………………………..…..J. [SATISH CHANDRA SHARMA] NEW DELHI,