Citation: (2023) SCC Online SC 1245
Court: Supreme Court of India
Bench: A.S. Bopanna & P.V. Sanjay Kumar, JJ.
Date of Judgment: 3 October 2023
1. FACTS
• Background FIR (April 2023):
- FIR No. 0006 dated 17.04.2023 was filed by the Anti-Corruption Bureau (ACB), Panchkula, under Sections 7, 8, 11, and 13 of the Prevention of Corruption Act, 1988 read with Section 120B of the IPC.
- The FIR charged Sudhir Parmar (then Special Judge, CBI and ED, Panchkula) with giving preference to undue benefit to:
- Lalit Goyal (Vice-Chairman, IREO Group)
- Roop Bansal (promoter, M3M Group)
- Basant Bansal (Roop’s brother, also from M3M Group),and other unknown people.
• Pankaj Bansal Not Mentioned in FIR:
- Curiously enough, Pankaj Bansal was not included in the FIR or in the initial ECIR (Enforcement Case Information Report) submitted by ED in June 2021 in regard to IREO Group.
- His name was also not mentioned in the ACB FIR.
• First ECIR – IREO Investigation:
- ED filed ECIR No. GNZO/10/2021 on 15.06.2021 to investigate money laundering allegations against IREO Group and promoters.
- In this, ED filed Prosecution Complaint No. 01/2022 (COMA/01/2022) against Lalit Goyal and others before the Special PMLA Court presided over by Sudhir Parmar.
- M3M Group and the Bansals were not named anywhere in this ECIR or prosecution complaint.
•ED Summons and Arrests in 2023:
- Even though not mentioned in the ECIR, on 12.05.2023 M3M India Pvt. Ltd. was called upon by the ED to furnish documents related to transactions.
- Roop Bansal was arrested on 08.06.2023 under the first ECIR.
- Pankaj and Basant Bansal expecting such action obtained anticipatory bail from the Delhi High Court on 09.06.2023, which granted interim protection until 05.07.2023.
• Second ECIR Filed by ED:
- On 13.06.2023, the ED filed a second ECIR (GNZO/17/2023) on the basis of FIR No. 0006/2023 against Sudhir Parmar, Ajay Parmar (his nephew and Legal Manager of M3M), Roop Bansal, and others unknown people.
- Although this ECIR had mentioned “owners of M3M Group”, Pankaj Bansal’s name was specifically not mentioned.
• Summons and Arrests on 14.06.2023:
- On the evening of 13.06.2023 (at 6:15 PM), ED issued summons to Pankaj and Basant Bansal to appear on 11:00 AM the next day, under the first ECIR.
- In compliance to this at ED’s office Rajokri on 14.06.2023:
- Pankaj Bansal was issued fresh summons in connection with the second ECIR to report at 5:00 PM the same day at 4:52 PM.
- Basant Bansal was arrested at 6:00 PM.
- Thereafter, Pankaj Bansal was arrested at 10:30 PM the same day under Section 19(1) of the PMLA.
•Post-Arrest Proceedings:
- Pankaj and Basant were produced in Panchkula and brought before the Vacation Judge.
- The learned Additional Sessions Judge remanded them to ED custody:
- First remand on 15.06.2023 for 5 days,
- Extended on 20.06.2023 and further on 26.06.2023,
- Then judicial custody.
•Legal Challenge:
- The Bansals challenged the arrest and remand orders:
- Filed writ petitions before the Punjab & Haryana High Court, which were dismissed on 20.07.2023 and 26.07.2023.
- They contended that their arrests was in contravention of Section 19 of the PMLA, and no material or valid reasons were given.
- They filed appeals before the Supreme Court, stating that their arrest and remand were arbitrary, unconstitutional, and in contravention of the procedural safeguards.
2. ISSUES RAISED
1. Whether the arrests were in conformity with Section 19(1) of the PMLA and Article 22(1) of the Constitution.
– Was there a legally documented “reason to believe” the appellants were guilty on the part of the ED?
– Were grounds of arrest communicated in an appropriate way and in accordance with constitutional and legislative requirements?
2. Whether remand orders given by the Magistrate were lawful.
– Was there sufficient judicial supervision on compliance with the procedural safeguards?
– Can an order of remand order legitimize an otherwise unlawful arrest?
3. Is written reason for arrest compulsory.
– Is oral communication effective under Section 19(1)?
– Is a written document necessary for the effective enjoyment of rights such as bail under Section 45?
4. Whether the action of the ED constituted a fair exercise of power.
– Was the second ECIR and arrest timed and mode-connected with vindictive intent?
– Had material facts been suppressed in front of the Delhi High Court?
5. Whether ED’s inconsistent arrest practices violate the right to equality under Article 14.
– Can the practice of different modes (oral and written) for similar situations be permitted?
3. CONTENTION
- Contentions by the Appellants (Pankaj Bansal and Basant Bansal):
1. Non-Compliance with Section 19(1) of the PMLA:
– The arrest was in gross disregard of Section 19(1), which requires the arresting officer to have a recorded “reason to believe” that the individual is guilty of money laundering.
– No legally admissible or credible material was presented to warrant their arrest.
– Pankaj Bansal was not even mentioned in the FIR (ACB Panchkula) or in either of the ECIRs.
– The arrest grounds were not provided in writing as mandated by law.
2. Violation of Article 22(1) of the Constitution:
– The arrest grounds were neither communicated physically nor delivered in writing to the accused.
– Reading out the grounds or oral summarisation thereof is not enough to fulfil the constitutional requirement to inform the arrestee “as soon as may be” of the causes of arrest.
3. Malicious and Colourable Exercise of Power by ED:
– The second ECIR was presented only the day before the arrests, immediately after the Delhi High Court had issued anticipatory bail in the first ECIR.
– The ED did not reveal the existence of FIR No. 0006 in front of the High Court, even when it was already aware of its existence.
– The ED used summons under the first ECIR intentionally to entice them into custody and later brought them into custody under the second ECIR — an action qualified as entrapment.
4. Mechanical and Non-Reasoned Remand Orders:
– The remand order of 15.06.2023 was passed perfunctorily without the judge having applied his mind to whether the arrest was according to law as per Section 19(1).
– The judge simply believed the version of the ED without examining whether the “reason to believe” requirement or the providing of grounds was met.
5. Differential Treatment and Lack of Uniform Procedure:
– The ED follows no consistent procedure regarding furnishing grounds of arrest. in some regions, written grounds are supplied; in others, they are only read out.
– This arbitrary variation across jurisdictions violates the principle of equality and procedural fairness.
6. Prayer for “Reading Down” Section 19(1):
– The appellants did not challenge the constitutionality of Section 19 per se.
– Rather, they prayed that the Court “read down” the provision according to the interpretation established in Vijay Madanlal Choudhary and Arnesh Kumar v. State of Bihar to forestall misuse and allow stringent compliance.
II. Arguments of the Respondents (Enforcement Directorate / Union of India):
- Lawful Arrest under Section 19(1):
- The ED asserted that it had adequate material and evidence to warrant the arrest.
- The “cause to believe” was documented in writing and the arrest was effected only upon failure to cooperate by the appellants during questioning.
- The arrest grounds were read out and explained to the appellants in Hindi, in the presence of independent witnesses.
2. Procedural Requirements Met:
- The ED contended that the conditions under Section 19 were met — written arrest orders were served and reasons were given orally.
- Grounds do not need to be given in writing by virtue of statutory requirement under PMLA or Article 22(1).
3. Remand Order Cures Any Procedural Defect:
- It was contended that upon issuance of a remand order by a competent court, any presumed illegality of arrest becomes irrelevant.
- The remand order established judicial oversight of the arrest and legitimized the detention.
4. No Malice or Abuse of Power:
- The ED rejected allegations of vindictiveness or abuse of power.
- It was argued that the second ECIR was founded on an independent FIR of bribery of a sitting Special Judge and was part of a broader probe into systemic corruption.
- Allegations of “malice” were speculative and unaided by direct evidence.
5. Reasons for arrest not necessarily in writing
- The ED has leaned on the Supreme Court judgment in Moin Akhtar Qureshi v. Union of India and the High Court of Bombay judgment in Chhagan Bhujbal v. UOI to assert that Section 19 doesn’t mandate the production of written reasons.
- For ED, the legal obligation is to “inform” rather than “serve” the reasons for arrest.
6. Non-Cooperation as Basis for Arrest
- The ED charged the appellants with evading earlier summons and with giving “evasive answers” during questioning.
- This lack of co-operation, it was contended, was enough to lead to the conclusion that custodial interrogation was essential.
4. RATIONAL
The Supreme Court ruled the arrests unlawful because of the failure to meet Section 19(1) of the PMLA and Article 22(1). The ED never provided written reasons for arrest, which is necessary in order to facilitate access by the accused to lawyers and apply for bail. Simply reading out or stating the reasons verbally was not enough, particularly where the arrest related to complicated charges.
The Court underscored that remand orders should be based on judicial application of mind. In the current case, the Magistrate remanded ED in custody without ensuring compliance with statutory safeguards or considering whether the “reason to believe” test was fulfilled.
The Court also held the ED’s action arbitrary and devoid of bona fides, especially in registering the second ECIR immediately after anticipatory bail to the appellants in the first ECIR. The chronological order indicated that the ED intended to act in a retaliatory manner instead of investigative requirements.
The Court determined that from now on, furnishing a written copy of arrest reasons is obligatory, whereas ensuring uniformity in enforcement and protection of constitutional rights.
5. LAWS DEFECTS
• Vagueness of Section 19(1):
The expression “informed of the grounds” is not clear on mode, allowing varied practices and diluting enforcement standards.
• Furnishing ECIR not obligatory:
While FIRs are not confidential, ECIRs are not required to be furnished to accused persons, so that they may understand the case being made against them in the early stages of the process.
• Judicial oversight is usually perfunctory:
As in this case, sometimes magistrates issue remand orders without checking compliance with arrest safeguards, which contradicts constitutional guarantees.
• Abuse of sequential ECIRs:
The ED’s issuance of one back-to-back ECIR after another to avoid interim bail indicates a structural flaw allowing for process manipulation.
• No accountability for ED violations:
The legislation is devoid of penalty consequences or disciplinary actions where ED officers violate procedural requirements, and this creates a power disparity.
6. INFERENCE
1. Procedural Due Process is Non-Negotiable
The Court made it categorically clear that adherence to procedural safeguards in Section 19(1) is not a matter of choice. The arresting official has to:
• Have a sincere, written, reasoned belief of culpability,
• Hand over the reasons of arrest to the accused in writing, and not merely verbally,
• And stand the test of judicial scrutiny that is genuine, not perfunctory.
This ruling ensures that executive discretion must operate within constitutional boundaries, especially in legislation such as PMLA which severely limits personal freedom.
2. Consistency in Arrest Procedure is Now Compulsory
By mandating that a written record of the reasons for arrest be provided in every case, the Court brought the ED’s practices, which varied from state to state, to an end. This guarantees:
• Equal treatment of arrestees across the country (securing Article 14),
• Improved access to legal remedies, particularly bail under Section 45 of PMLA,
• And improved transparency and accountability in the use of coercive powers.
This effectively overturns earlier High Court rulings permitting simply oral communication, thus bringing arrest practice into conformity with the constitutional ethos of Article 22(1).
3. Malafide and Strategic Arrests Will Not Be Tolerated
The Court’s comment that the second ECIR was enrolled conveniently after the appellants secured anticipatory bail in the first ECIR reflects its unease with vindictive investigation. In checking on the timing and sequence of the arrests, the Court:
• Identified the prospect of abuse of procedural law to circumvent judicial protection,
• Sent a strong message that resort to such strategies will prompt judicial correction,
• And emphasized that investigative authorities need to act with probity and objectivity, not strategic reprisal.
4. Magistrates Need to Actively Protect Liberty
The ruling also serves as a cautionary reminder to judicial officers who preside over remand proceedings:
• They need to exercise judgment independently to determine whether the arrest conforms to statutory requirements,
• Cannot pass remand orders mechanically, solely on agency submissions,
• And are under a constitutional obligation to avoid illegal detention.
This supports the contention that judicial oversight is the first line of defence against arbitrary state action.
5. Towards a More Rights-Conscious Anti-Corruption Framework
The Court recognized the gravity of money laundering as a national issue but sounded a warning against correlating seriousness of offence with erosion of rights. In being insistent on procedural exactness, it made clear:
• That firm laws do not necessarily mean untrammelled powers,
• And that even in economic crimes, the liberty of the individual is inviolate.
This judgment weights the State’s concern for financial accountability against the citizen’s entitlement to fair treatment—and thus becomes a pillar in the developing jurisprudence of white-collar crime and preventive detention.
Yash Gupta
Jindal Global Law School.