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Arrest under PMLA

JANUARY 10, 2024

By Vijay Kumar

ON JUNE 11, 2023, the Economic Times reported:

The Enforcement Directorate on Friday arrested Neeraj Singhal, promoter and former managing director of Bhushan Steel Ltd, followed by a search operation at his residence in connection with its probe in a bank fraud case of Rs 56,000 crore. Singhal has been remanded in ED custody by a special court here till June 20.

The Delhi High Court on 8th January 2024 dismissed his bail petition in an interesting order. - 2024-TIOLCORP-03-HC-DEL-PMLA

The brief story:

1.  The petitioner is a businessman and was the ex-promoter, Vice Chairman and Managing Director of Bhushan Steel Ltd. (BSL).

2.  Directorate of Enforcement (ED) registered the case under the provisions of Prevention of Money Laundering Act, 2002 (PMLA) alleging that the petitioner is involved in one of the biggest banking frauds coupled with the offence of money laundering. It is alleged that the petitioner has caused loss to the public to the tune of more than Rs. 46,000 Crores.

3. The petitioner received summons dated 03.06.2023 from the ED directing him to appear on 09.06.2023. On 09.06.2023, the petitioner failed to attend due to his alleged illness and requested his appearance to be postponed to some other date or that he may be allowed to appear through video conferencing. The petitioner on the said date also sent his authorized representative to appear before the ED.

4. It is the case of the petitioner that on the same day, at about 04:50 pm the Enforcement Directorate officials entered and searched his residential premises and thereafter, the petitioner was arrested by ED at 10:25 pm.

5. The petitioner was produced before the Special Judge, Rouse Avenue Court on 10.06.2023, when the Judge granted remand for 10 days which was further extended vide order dated 20.06.2023.

The controversy raised in the present cases revolves around the non-compliance of the mandate of Section 19 of the PMLA. During pendency of the petition, the law on the interpretation of Section 19(1) of the PMLA has evolved through various judicial pronouncements of the Supreme Court.

Section 19(1) reads as:

19. Power of Arrest: (1) If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as maybe, inform him of the grounds for such arrest.

In V. Senthil Balaji vs. State = 2023-TIOLCORP-04-SC-PMLA - August 07, 2023), the Supreme Court held that an authorized officer under the PMLA Act, 2002 is not duty bound to follow the rigours of Section 41A of the CrPC, inasmuch as, there is already an exhaustive procedure contemplated under the PMLA containing sufficient safeguards in favour of the person arrested. It was further held that the arrest is bound to be followed by an information being 'served' on the arrestee of the grounds of arrest and any non-compliance of the mandate of Section 19(1) of the PMLA, 2002 would vitiate the very arrest itself.

In Pankaj Bansal =  2023-TIOLCORP-06-SC-PMLA -October 3, 2023), it was held that the grounds of arrest shall be furnished to the accused / arrested person without exception. Further, the Supreme Court observed that informing the arrested person of the grounds of arrest in writing would be necessary ' henceforth' .

It was argued on behalf of the ED that the decision in Pankaj Bansal is prospective in its application because the Supreme Court has expressly held that the obligation of furnishing the grounds of arrest shall become effective 'henceforth'. On the contrary, it was argued on behalf of the petitioner that the Supreme Court has only clarified the position of the existing law, that is, Section 19 of the PMLA and has not formulated any new law, therefore, the said judgment is retrospective in its application.

The question whether the directions passed in Pankaj Bansal will apply prospectively or not, came up for consideration before the Supreme Court in Ram Kishor Arora vs. Directorate of Enforcement = 2023-TIOLCORP-10-SC-PMLA DECEMBER 15th, 2023). The Court held that the use of expression 'henceforth' in Pankaj Bansal implied that the requirement of furnishing grounds of arrest in writing to the arrested person as soon as after his arrest was not mandatory or obligatory till the date of pronouncement of the said judgment and accordingly, non-furnishing of grounds of arrest in writing till the said date 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.

Elaborating further, the Court observed that it would be sufficient compliance of not only Section 19 of PMLA but also of Article 22(1) of the Constitution of India, if the person arrested is informed or made aware 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 without avoidable delay' and within 'reasonably convenient' and 'reasonably requisite' period of time, which would be twenty-four hours of the arrest.

It is the case of the petitioner that he was not furnished/supplied a copy of the grounds of arrest in writing at the time of his arrest.

The High Court observed,

As laid down by the Supreme Court in Ram Kishor Arora, the requirement of furnishing grounds of arrest to the accused/arrested person in writing was not mandatory or obligatory till the date of directions passed in Pankaj Bansal on 3rd October, 2023, therefore, non-furnishing of grounds of arrest to the petitioner in writing, who was arrested on 09.06.2023, could not be held illegal.

Now reverting to the factual conundrum which still looms large in the present case was whether the petitioner was orally communicated, or in other words, shown, the grounds of arrest at the time of his arrest.

The High Court observed,

Clearly, the document 'ground of arrest' bears the signatures of the petitioner at two points. One, immediately after the conclusion of narration of grounds of arrest. Secondly, below the endorsement made in terms of the judgment of the Supreme Court in D.K. Basu to the effect that the petitioner has been intimated about his rights as an arrestee and his wife has been informed about his arrest "physically" at "22.28" on 09.06.2023.

Therefore, merely because each page of the 'ground of arrest' is not signed by the petitioner cannot be a reason to disbelieve the existence of the said document, or to negate the fact that the grounds of arrest were shown and informed to the petitioner.

The panchnama which was prepared contemporaneously also records that the Arresting Officer had presented the 'Arrest Memo' to the petitioner and informed him the grounds of arrest and that the petitioner signed the Arrest Memo as token of him being informed the grounds of his arrest. The panchnama is also signed by the wife of the petitioner. It is not in dispute that a copy of the panchnama was supplied by the respondent to the petitioner / his wife and the same has also been annexed with the petition. Just because the panchnama does not specifically mention that the petitioner signed the 'ground of arrest' as a token of acknowledgement of having been informed the grounds of his arrest, cannot be reason to discard what is recorded in the panchnama when the same has not been disputed at any stage.

The contention of the petitioner that the 'Arrest Order' dated 09.06.2023 records that the petitioner was arrested at Parvartan Bhawan shows that the said document was not in existence at the time, the search was carried out at the residence of the petitioner, does not hold water. A perusal of the 'Arrest Order' shows that the petitioner apart from affixing his signature has also appended the date "9/6/23", and the time "22:28" at which his wife was informed about his arrest, in his own handwriting, therefore, the said document cannot be said to be ante-dated or ante-timed. Insofar as the place of arrest is concerned, it is evident from the 'Arrest Memo' that the place of arrest of the petitioner is shown as his residence viz., W-29, Greater Kailash-II, New Delhi and this document was available with the petitioner from the date of arrest itself but there is no whisper either in the petition or in the bail application that place of arrest is wrongly recorded nor any such objection seems to have been taken before the learned Special Judge. The search panchnama also reveals that the arrest was affected at the residence of the petitioner in the presence of two independent witnesses. The wife of the petitioner has also signed the panchnama. Merely because there is some typographical error in the 'Arrest Order' with regard to the place of arrest, the same will not ensure to the benefit of the petitioner and vitiate his arrest.

Furthermore, the source of 'ground of arrest' and other contemporaneous documents viz., Arrest Memo, Panchnama and Arrest Order is official i.e., the Enforcement Directorate, therefore, they would carry presumption of correctness under Section 114(e) of the Evidence Act, 1872 that official acts have been regularly performed.

In light of the aforesaid discussion, it cannot be said that the arrest of the petitioner is illegal. Under the circumstances, BAIL APPLN 2356/2023, deserve to be dismissed and is accordingly dismissed.

The Court made it clear that the merits of the case have not been considered as the same were not urged either in the petition or in the bail application.

Until next week


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