[Esha Rathi is a final year B.B.A. LL.B. (Hons.) student at Jindal Global Law School]
Section 19 of the Prevention of Money Laundering Act 2002 (PMLA) empowers authorized officials of the Directorate of Enforcement (ED) to arrest persons based on the material in their possession, providing a reasonable basis to suspect that an individual has committed an offence punishable under the law. It mandates the recording of reasons for such belief in writing, with the grounds of arrest to be communicated to the accused “as soon as may be”. Within this framework, a persistent issue confronting the courts involves the oral communication of arrest grounds, raising concerns about transparency in certain ED arrests.
Having been the subject of litigation for an extended period, various High Courts have expressed differing opinions on the legality of orally communicating arrest grounds. The Supreme Court has recently intervened and opined on this issue. However, the resolution of this matter has not culminated in a single case but has extended over three different cases, all adjudged by the Supreme Court.
The latest verdict on this issue by the Supreme Court in December 2023 offers essential clarifications regarding preceding judgments and appears to bring an end to the prevailing confusion. Furthermore, a recent high profile case adjudged by the Delhi High Court in January 2024 brings the principles laid down by the Supreme Court into limelight once again.
The Legal Saga
In July 2022, the Supreme Court in Vijay Madanlal Choudhary v. Union of India upheld the validity of various contested provisions of the PMLA, including section 19 that deals with arrest, on the ground that all the provisions have a reasonable nexus with the objects sought to be achieved by the legislation in preventing money-laundering effectively. Furthermore, the Court did not object to the concerned arrest in this case, which was made without the accused receiving a copy of the Enforcement Case Information Report (ECIR), which is an internal document created by the ED upon beginning its investigation, or any other written information as to what necessitated the arrest.
Section 19(1) of the PMLA and Article 22(1) of the Constitution of India require that the accused be informed of the grounds of arrest. However, neither of the legal instruments provide the manner in which these grounds must be communicated. The aforesaid Supreme Court verdict continued to leave open the question of how the accused would be informed of the grounds of arrest short of the supply of the ECIR.
Moving forward, in June 2023, the Delhi High Court dismissed a petition to declare the arrest concerned in the case illegal and violative of fundamental rights to equality, life, and protection in respect of conviction for offences. It was contended by the accused that merely informing them of the grounds of arrest, by making them read said grounds and obtaining their signature at the time of arrest, does not amount to supplying the grounds of arrest in writing.
Subsequent to the aforesaid dismissal by the Delhi High Court, the case came up before the Supreme Court. In October 2023, in Pankaj Bansal v. Union of India, the Supreme Court emphasized that the communication of the grounds of arrest must be conducted in a written format for two compelling reasons. Firstly, verbal communication raises the potential for disputes over whether the grounds were actually conveyed, creating a contentious situation where the arrested person’s account clashes with that of the authorized officer. This ambiguity complicates the determination of the validity of the arrest. In the specific instance, the ED asserted that it orally communicated the grounds of arrest in Hindi before witnesses, while the accused contended that no such communication took place. Secondly, the Supreme Court highlighted the peculiar nature of the PMLA bail regime, which inhibits release as long as a reasonable case is established. To effectively argue against the arrest and seek bail, the accused must possess knowledge of the case against them. Consequently, the Court concluded that, in all instances of ED arrests, the grounds must be provided in a written format to ensure transparency and facilitate the accused’s understanding of the case, aligning with the principles of justice.
The case of Vijay Madanlal had created an air of ambiguity regarding how arrested persons are required to be informed about the grounds of arrest, which led to the ED following different procedures in different parts of the country. Setting the law, the subsequent case of Pankaj Bansal provided that the ED should furnish the grounds of arrest to the accused in a written form “as a matter of course and without exception”. However, the wheels did not stop spinning here, and yet another case, Ram Kishor Arora v. ED, presented itself before the Supreme Court.
Clarifications Issued by the Supreme Court
In December 2023, in the Ram Kishor case, the Supreme Court clarified the ED’s obligation to provide written grounds of arrest to the accused under section 19 of the PMLA at the time of arrest. In this particular instance, the ED had initially handed over a document containing the grounds of arrest to the accused upon his arrest. The accused had then endorsed the document by signing below the stated grounds. The legal issue presented to the Supreme Court was whether the ED’s action, involving the handover of the document, subsequent retrieval after endorsement, and failure to furnish a copy to the accused at the time of arrest, would render the arrest illegal under section 19 of the PMLA.
Section 19(1) of the PMLA stipulates that when a person is found guilty of an offence punishable under the Act, they may be arrested, and the grounds for such arrest must be communicated to them as soon as possible. The Supreme Court interpreted the expression “as soon as may be” to mean “as early as possible without avoidable delay” or “within a reasonably convenient” or “reasonably requisite period of time”. The Court opined that 24 hours from the time of arrest should be reasonably convenient or a reasonably requisite time to inform the accused of the grounds of his arrest in writing. Therefore, it was held that informing the accused orally at the time of arrest and providing a written communication within 24 hours would be deemed sufficient compliance.
Furthermore, the Supreme Court also highlighted its earlier verdict in the Pankaj Bansal case, which stated 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”, and explained that the use of the word “henceforth” implied that the said requirement was not retrospective in nature, and therefore not applicable in the arrest currently in question that had taken place before the verdict was issued in the Pankaj Bansal case.
The Delhi High Court’s recent verdict in January 2024 in Neeraj Singal v. ED aligns with the aforementioned principles established by the Supreme Court and offers insight into their applicability. The High Court stated that the Supreme Court’s verdict, requiring the grounds of arrest to be supplied in writing at the time of arrest, came after the accused was arrested in this case. At the time of the specific arrest, orally communicating the grounds of arrest was considered proper compliance with section 19(1) of the PMLA.
When the accused contested his arrest, stating he was only given an arrest memo and not shown the grounds of arrest or the arrest order, the ED argued that the grounds were orally communicated. The High Court supported this argument, emphasizing that the absence of the petitioner’s signature on each page of the “ground of arrest” does not undermine the existence of the document or the fact that the grounds were communicated.
Additionally, the High Court noted that the “remand application virtually contains the grounds of arrest”. Consequently, the accused was considered informed when presented before the Special Judge within 24 hours of arrest by the ED for seeking remand. This observation holds true specifically for this case, as it predates the Supreme Court’s verdict in the Pankaj Bansal case. For arrests following the said Supreme Court verdict, it is important to highlight that although the Supreme Court allows 24 hours for providing the reasons for arrest in writing, immediate communication of these reasons to the accused is crucial and should not be delayed until the remand stage. As emphasized by the Court, issuing a remand order without verifying and ensuring that the conditions in section 19 are duly satisfied and proper arrest procedures were followed by the ED amounts to a “failure of discharge of duty”. In such a case, “the order of remand would have to fail”. A remand order cannot be used to validate an unlawful arrest under the PMLA.
The judiciary’s interpretative role in shaping due process within the PMLA represents a significant stride. Emphasizing the written communication of arrest grounds is vital for transparency and accountability. However, this positive development raises practical questions for the ED. The nuanced compromise between oral communication and subsequent provision of written grounds reflects the judiciary’s understanding of law enforcement challenges.
An analysis of section 19 of the PMLA unveils a delicate interplay between legal principles, enforcement challenges, and evolving due process standards. The judiciary’s commitment to balancing prompt law enforcement with the protection of individual rights, particularly the right to receive timely notification of arrest grounds, not only adds value but also amplifies the ongoing conversation about the equitable consideration of security and justice in the context of any crime, whether financial or otherwise.
– Esha Rathi