The Supreme Court recently observed that a court, while exercising its powers under Section 167 of CrPC remands any person arrested by the Enforcement Directorate, is duty bound to ensure that the arrest is valid under Section 19 of Prevention of Money Laundering Act, 2002, and if the court fails to do so, the order of remand would fail on that ground itself.
What is PMLA?
The Prevention of Money Laundering Act, 2002, or PMLA was enacted to enable the Government or the public authority to confiscate any property earned from illegally gained proceeds.
Specifically, section 19 of the PMLA provides for inbuilt safeguards which need to be adhered to by the authorized officers. These include recording reasons in writing for the belief incriminating towards the person’s involvement in the offence of money laundering and informing the grounds of arrest to the person.
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Observations made by the Division Bench
In the case against the directors of Gurugram-based realty group M3M, the division bench of the Supreme Court had ruled that the arrest was illegal and also made the following important observations.
Referring to the Supreme Court’s judgement in the case of V. Senthil Balaji vs. The State (2023), the Court observed that in this case, it is the bounded duty of the authorized officer of the ED to record in writing the reasons supporting his belief that a person is guilty and needs to be arrested. Also, this safeguard is meant for the accused to facilitate fairness and accountability.
Further, the Court observed that when dealing with the interplay between Section 19 PMLA and Section 167 of CrPC, the Magistrate is expected to balance as the investigation is to be completed within 24 hours as a matter of rule and it is necessary for the investigating agency to satisfy the Magistrate with adequate material for the need for custody of the accused.
It is important to note that in the Senthil Balaji case (Supra), the Supreme Court has held that in terms of Section 19(3) of PMLA and Section 167 of Cr.P.C. would necessarily have to be complied with once an arrest is made under Section 19 of PMLA.
These observations were made in light of the remand order passed by the Additional Sessions Judge, Panchkula, where there was a total failure in discharging his duty as per the standards set forth by the PMLA.
The Court pointed out that the concerned Judge, while did not even record a finding that he had perused the grounds of arrest to ascertain whether the arrest made by the ED had properly complied with the mandate under Section 19 of the said Act and where it had recorded reasons to believe that the appellants were guilty of an offence under the PMLA.
Furthermore, the bench observed that in the order, the Sessions Judge had merely stated that, given the seriousness of the offence and the investigative stage, he was convinced that custodial interrogation of the accused persons was required and thus, remanded them to the custody of the ED.
Taking note of these events, the Court remarked that it reflected rather poorly, if not negatively, on the concerned authorities. The Court also held that a person cannot be arrested by the ED for mere non-cooperation in response to a summons issued under Section 50 of the PMLA and these grounds would not be sufficient for the Investigating Officer to conclude that they were to be arrested under Section 19.
Most importantly, the Court held that the ED is duty bound by the mandate under Section 19 to furnish the grounds of arrest in writing to the accused at the time of the arrest.
