The Supreme Court's judgment in the case of Pankaj Bansal and Basant Bansal v. Union of India & Others provides a critical examination of the procedures followed by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA), 2002. The case specifically focuses on the legality of arrests made by the ED and the subsequent remand orders passed by the Punjab & Haryana High Court. The judgment underscores the necessity for strict compliance with legal procedures under Section 19 of the PMLA, which governs the arrest of individuals suspected of involvement in money laundering.
Section 19 of the Prevention of Money Laundering Act (PMLA), 2002, in India, deals with the power to arrest under the Act. This section gives authorized officers the authority to arrest a person believed to be involved in the offense of money laundering
Case Background
The case arose from the arrest of Pankaj Bansal and Basant Bansal, prominent figures associated with the M3M Group, a real estate company. Their arrests were linked to an ongoing investigation into money laundering activities connected to the IREO Group and its Vice-Chairman, Lalit Goyal. The sequence of events leading to their arrest is as follows:
1. First ECIR (15.06.2021): The first Enforcement Case Information Report (ECIR) was registered by the ED based on multiple FIRs filed by allottees of two residential projects of the IREO Group, alleging illegal activities by the company’s management.
2. Arrests in First ECIR: While Lalit Goyal and other IREO officials were named in this investigation, neither Pankaj nor Basant Bansal were initially implicated. However, the ED eventually expanded its investigation to include the M3M Group.
3. FIR No. 0006 (17.04.2023): This FIR was registered by the Anti-Corruption Bureau, Panchkula, alleging corruption and bribery involving Sudhir Parmar, the then Special Judge (CBI and ED, Panchkula), and others. The FIR mentioned favoritism shown to the Bansals by Parmar, though Pankaj Bansal was not named in the FIR.
4. Second ECIR (13.06.2023):Following this FIR, the ED registered a second ECIR, focusing on the alleged corruption involving Sudhir Parmar and the Bansals. It was based on this ECIR that the Bansals were arrested.
Issues with the Arrests
The Bansals challenged their arrests, arguing that the ED's actions were arbitrary, vindictive, and a blatant abuse of power. The Supreme Court scrutinized the manner in which the arrests were carried out:
1. Timing and Sequence of Events: The judgment points out the suspicious timing of the second ECIR. It was recorded on 13.06.2023, shortly after the Bansals secured anticipatory bail in relation to the first ECIR. The Court observed that the ED acted with undue haste, summoning the Bansals and arresting them within a day, which raised serious questions about the agency’s intent.
2. Failure to Comply with Section 19 of the PMLA: The Supreme Court highlighted several lapses in the ED's adherence to Section 19 of the PMLA, which sets out strict requirements for the arrest of individuals suspected of money laundering:
- Recording Reasons for Arrest: The ED is required to record the reasons for believing that the person is guilty of money laundering. This written record is meant to ensure that arrests are not made arbitrarily and that there is substantial evidence to justify such action.
- Informing the Accused: The accused must be informed of the grounds for their arrest, which is a constitutional right under Article 22(1) of the Indian Constitution. The Court found that the ED failed to adequately inform the Bansals of the specific reasons for their arrest, either by not providing written grounds or by inadequately communicating them.
3. Inconsistent Practices by the ED: The judgment also notes the inconsistency in the ED’s practices across different cases and regions. While in some cases, the grounds for arrest are provided in writing, in others, they are merely read out or explained orally. The Court found this disparity unacceptable, emphasizing that the constitutional and statutory mandate requires uniformity and transparency.
4. Lack of Transparency and Fairness: The Supreme Court was critical of the ED's overall approach, describing it as lacking transparency, fairness, and adherence to the principles of natural justice. The Court stressed that the ED, as a premier investigative agency with significant powers, must operate with the highest standards of integrity and avoid any appearance of vindictiveness or arbitrariness.
Supreme Court's Ruling
Based on these observations, the Supreme Court ruled in favor of the Bansals, setting aside their arrests and the subsequent orders of remand. The key points of the ruling include:
1. Arrests and Remand Orders Invalid: The Court declared that the arrests of Pankaj and Basant Bansal were not conducted in accordance with the law, particularly the requirements under Section 19 of the PMLA. Consequently, their remand to ED custody and then to judicial custody was also deemed unlawful.
2. Immediate Release: The Court ordered the immediate release of the Bansals, unless they were required to be detained in connection with any other valid case.
3. Future Compliance with Section 19: The judgment clarified that, henceforth, a copy of the written grounds for arrest must be provided to the arrested person as a matter of course. This is necessary to fulfill the constitutional and statutory requirements and to ensure that the arrested individual has the information needed to seek legal remedies, such as applying for bail.
Significance of the Judgment
This judgment is significant because it reaffirms the importance of following due process in criminal investigations, particularly in cases involving serious allegations like money laundering. It serves as a reminder to investigative agencies that they must operate within the bounds of the law and maintain transparency and fairness in their actions. The ruling also sets a precedent for ensuring that the rights of individuals are protected during the arrest process, particularly under laws like the PMLA, which grant extensive powers to enforcement agencies.
More Blogs on PMLA:
https://www.mrmlxp.in/post/supreme-court-upholds-bail-as-the-rule-principle-in-money-laundering-case
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