2023INSC866 Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

Criminal Appeal Nos 3051-3052 of 2023

{@ Special Leave Petition (Crl.) Nos. 9220-21 of 2023}

Pankaj Bansal … Appellant

Versus

Union of India & Ors. … Respondents

With

Criminal Appeal Nos. 3053-3054 of 2023

{@ Special Leave Petition (Crl.) Nos. 9275-76 of 2023}

J U D G M E N T

SANJAY KUMAR, J

1. Leave granted.

2. Challenge in these appeals is to the orders dated 20.07.2023 and

26.07.2023 passed by a Division Bench of the Punjab & Haryana High Court

dismissing CWP No. 14536 of 2023 filed by Pankaj Bansal and CWP No.

14539 of 2023 filed by his father, Basant Bansal. By the order dated

20.07.2023, the Division Bench opined that, as the constitutional validity of

Section 19 of the Prevention of Money Laundering Act, 2002 (for brevity, ‘the

Act of 2002’), had been upheld by the Supreme Court, the challenge to the

same by the writ petitioners could not be considered only because of the fact

that a review petition was pending before the Supreme Court. The prayer of

the writ petitioners to that effect was accordingly rejected. By the later order

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dated 26.07.2023, the Division Bench rejected the prayer of the writ

petitioners to quash/set aside their arrest orders along with their arrest memos

and the consequential proceedings arising therefrom, including the orders

dated 15.06.2023, 20.06.2023 and 26.06.2023 passed by the learned

Vacation Judge/Additional Sessions Judge, Panchkula, whereby they were

remanded to the custody of the Directorate of Enforcement (for brevity, ‘the

ED’) and thereafter, to judicial custody. The Division Bench further held that,

keeping in view the gravity of the allegations against them, their prayer to be

released from custody did not deserve acceptance and rejected the same. In

consequence, the Division Bench dismissed both the writ petitions. Hence,

these appeals by Pankaj Bansal and Basant Bansal.

3. The genesis of these appeals is traceable to FIR No. 0006 dated

17.04.2023 registered by the Anti-Corruption Bureau, Panchkula, Haryana,

under Sections 7, 8, 11 and 13 of the Prevention of Corruption Act, 1988, read

with Section 120B IPC for the offences of corruption and bribery along with

criminal conspiracy. The names of the accused in this FIR are:

‘i).Mr. Sudhir Parmar (the then Special Judge, CBI and ED, Panchkula);

ii).Mr. Ajay Parmar (nephew of Mr. Sudhir Parmar and Deputy Manager

(Legal) in M3M Group);

iii).Mr. Roop Bansal (Promotor of M3M Group); and

iv).other unknown persons.’

4. Significantly, prior to this FIR, between the years 2018 and 2020,

13 FIRs were gotten registered by allottees of two residential projects of the

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IREO Group, alleging illegalities on the part of its management. On the

strength of these FIRs, the ED recorded Enforcement Case Information

Report No. GNZO/10/2021 dated 15.06.2021 (hereinafter, ‘the first ECIR’) in

connection with the money laundering offences allegedly committed by the

IREO Group and Lalit Goyal, its Vice-Chairman and Managing Director.

Neither in the FIRs nor in the first ECIR were M3M Group or the appellants

herein arrayed as the accused. Further, no allegations were levelled against

them therein. On 14.01.2022, the ED filed Prosecution Complaint No.

01/2022, titled ‘Assistant Director, Directorate of Enforcement vs. Lalit Goyal

and others’, against seven named accused, under Section 200 Cr.P.C read

with Sections 44 and 45 of the Act of 2002. Notably, M3M Group and the

appellants did not figure amongst those named accused. The number of FIRs

had also increased from 13 to 30, as per this complaint. This case was

numbered as COMA/01/2022, titled ‘Directorate of Enforcement vs. Lalit

Goyal and others’, and was pending in the Court of Sudhir Parmar, Special

Judge. At that stage, the Anti-Corruption Bureau, Panchkula, received

information that Sudhir Parmar was showing favouritism to Lalit Goyal, the

owner of IREO Group, and also to Roop Bansal and his brother, Basant

Bansal, the owners of M3M Group. This led to the registration of FIR No. 0006

dated 17.04.2023. On 12.05.2023, the ED issued summons to M3M India Pvt.

Ltd., calling upon it to provide information and documents pertaining to

transactions with certain companies. Thereafter, on 01.06.2023, the ED raided

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the properties of M3M Group and effected seizures of assets and bank

accounts. Roop Bansal was arrested by the ED on 08.06.2023 apropos the

first ECIR.

5. Apprehending that action would be taken against them also in the

context of the first ECIR, Pankaj Bansal and Basant Bansal secured interim

protection from the Delhi High Court in Bail Application Nos. 2030 and 2031 of

2023. By separate orders dated 09.06.2023 passed therein, the Delhi High

Court noted that Pankaj Bansal and Basant Bansal had not been named in the

first ECIR and that the ED had not yet been able to implicate them in any of

the scheduled offences under the Act of 2002. Further, the High Court noted

that Pankaj Bansal had not even been summoned by the ED in that case. The

High Court accordingly granted them interim protection by way of anticipatory

bail, subject to conditions, till the next date of hearing, i.e., 05.07.2023.

Special Leave Petition (Crl.) Nos. 7384 and 7396 of 2023 were filed by the ED

assailing the orders dated 09.06.2023 before this Court and the same are

stated to be pending.

6. In the meanwhile, on the basis of FIR No. 0006 dated 17.04.2023,

the ED recorded another ECIR, viz., ECIR/GNZO/17/2023, on 13.06.2023

(hereinafter, ‘the second ECIR’) against:

i).Mr. Sudhir Parmar;

ii).Mr. Ajay Parmar;

iii).Mr. Roop Bansal; and

iv).others who are named in the FIR/unknown persons.

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However, summons were issued by the ED to Pankaj Bansal and

Basant Bansal on 13.06.2023 at 06.15 pm in relation to the first ECIR,

requiring them to appear before the ED on 14.06.2023 at 11.00 am. Though

the copy of the summons placed before this Court pertains to Pankaj Bansal

alone, the email dated 13.06.2023 of the Assistant Director of the ED, bearing

the time 06.15 pm, was addressed to both Pankaj Bansal and Basant Bansal

and required their compliance with the summons on 14.06.2023 at 11 am.

While Pankaj Bansal and Basant Bansal were at the office of the ED at

Rajokri, New Delhi, in compliance with these summons, Pankaj Bansal was

served with fresh summons at 04.52 pm on 14.06.2023, requiring him to be

present before another Investigating Officer at 05.00 pm on the same day.

This summons was in connection with the second ECIR. There is lack of

clarity as to when summons in relation to the second ECIR were served on

Basant Bansal. According to the ED, he was served the summons on

13.06.2023 itself and refused to receive the same. However, it is an admitted

fact that Basant Bansal was also present at the ED’s office at Rajokri, New

Delhi, on 14.06.2023 at 11.00 am. It is also not in dispute that, while he was

there, Basant Bansal was arrested at 06.00 pm on 14.06.2023 and Pankaj

Bansal was arrested at 10.30 pm on the same day. These arrests, made in

connection with the second ECIR, were in exercise of power under Section

19(1) of the Act of 2002. The arrested persons were then taken to Panchkula,

Haryana, and produced before the learned Vacation Judge/Additional

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Sessions Judge, Panchkula. There, they were served with the remand

application filed by the ED. The learned Vacation Judge/Additional Sessions

Judge, Panchkula, initially passed order dated 15.06.2023 holding that

custodial interrogation of the arrested persons was required and granted their

custody to the ED for 5 days with a direction to produce them before the Court

on 20.06.2023. By the later orders dated 20.06.2023 and 26.06.2023, their

remand to the custody of the ED was extended by 5 more days and thereafter,

they were sent to judicial custody.

7. Assailing the first remand order dated 15.06.2023, Pankaj Bansal

and Basant Bansal approached the Delhi High Court, vide WP (Crl.) Nos.

1770 and 1771 of 2023. However, by order dated 16.06.2023, the Delhi High

Court opined that the appropriate remedy for them would be to approach the

Punjab & Haryana High Court and challenge the said order of remand.

Holding so, the Delhi High Court dismissed their miscellaneous applications

but ordered notice in the writ petitions. Aggrieved by the Delhi High Court’s

order, Pankaj Bansal and Basant Bansal filed SLP (Crl.) Nos. 7443 and 7444

of 2023 before this Court. The SLPs were disposed of as withdrawn on

04.07.2023, reserving liberty to approach the Punjab & Haryana High Court

against the remand orders. This Court further held that WP (Crl.) Nos. 1770

and 1771 of 2023 before the Delhi High Court were rendered infructuous.

Thereupon, Pankaj Bansal and Basant Bansal filed the subject writ petitions

before the Punjab & Haryana High Court which came to be dismissed, vide

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the impugned orders of the Division Bench.

8. Though Basant Bansal is not shown as an accused along with his

brother, Roop Bansal, in FIR No. 0006 dated 17.04.2023 on the file of the Anti-

Corruption Bureau, Panchkula, his name finds mention in the body of the FIR

as one of the owners of M3M Group to whom favouritism was shown by

Sudhir Parmar, Special Judge. However, the name of Pankaj Bansal does not

find mention even in the contents of the FIR. It was the specific case of the

father and son in their writ petitions before the High Court that their arrest

under the provisions of the Act of 2002 was a wanton abuse of power/authority

and an abuse of process by the ED, apart from being blatantly illegal and

unconstitutional. They also asserted that the ED acted in violation of the

safeguards provided in Section 19 of the Act of 2002. In this milieu, they made

the following prayers:

‘In view of the facts and circumstances mentioned above, it is,

therefore, respectfully prayed that this Hon’ble Court may kindly be

pleased to issue appropriate writ(s), order(s) and/or direction(s) to:-

A. Read Down and/or Read Into as well as expound,

deliberate upon and delineate the ambit, sweep and scope of

Section 19(1) of PMLA in consonance with the principles, inter

alia, enunciated by the Hon’ble Supreme Court in “Vijay

Madanlal Choudhary Versus Union of India & Ors. 2022 SCC

OnLine SC 929” and hold that: -

i.The expression “material in possession” occurring

therein must be confined, circumscribed and limited to legally

admissible evidence of sterling quality and unimpeachable

character on the basis whereof “reasons to believe” could be

recorded in writing that the arrestee is “guilty” of the offence

under Section 4 of PMLA;

ii.The word “guilt” occurring therein would qualify a higher

yardstick than a mere suspicion and the Ld. Court at the stage

of remand is required to apply its judicial mind to the grounds

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as well as necessity for arrest as, inter alia, held in “Arnesh

Kumar Versus State of Bihar, (2014) 8 SCC 273” and as

accorded imprimatur in “Satender Kumar Antil Versus

Central Bureau of Investigation and another 2022 SCC

online sc 825”;

iii. The expression ‘communicate’ occurring therein would

definitely entail physical communication and furnishing the

grounds of arrest to the arrestee in the context of the obligation

for “reason for such belief to be recorded in writing” read with

Rules 2(1)(g) & 2(1)(h) of the PMLA Rules 2005 (Arrest Rules)

which postulates the meaning of the word “order” to include the

grounds of such arrest.’

9. It is, therefore, clear that Pankaj Bansal and Basant Bansal did not

assail the constitutional validity of Section 19 of the Act of 2002 but sought

‘reading down’ and/or ‘reading into’ the provisions thereof. Further, they

asserted that the remand orders were passed in a patently routine and

mechanical manner by the learned Vacation Judge/Additional Sessions Judge,

Panchkula, without satisfying himself about due compliance with the mandate

of Section 19 of the Act of 2002, and more particularly, whether the threshold

requirements of the provision were duly satisfied. In consequence, they

prayed for a direction to quash the remand orders as well as the underlying

arrest orders and arrest memos.

10. Though the appellants did not challenge the constitutional validity

of Section 19 of the Act of 2002 in their writ petitions and had only sought

‘reading down’ and/or ‘reading into’ the provisions thereof in the light of the

judgment of this Court in Vijay Madanlal Choudhary and others vs. Union

of India and others

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, the Division Bench of the Punjab & Haryana High Court

failed to note this distinction and disallowed their prayer under the mistaken

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2022 (10) SCALE 577

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impression that they were challenging the constitutional validity of the

provision. The finer connotations and nuances of the language used in Section

19 of the Act of 2002, to the extent left uncharted by this Court in Vijay

Madanlal Choudhray (supra), were still open to interpretation and resolution

and, therefore, the High Court would have been well within its right to

undertake that exercise. Be that as it may.

11. Saket Singh, IRS, Deputy Director, Directorate of Enforcement,

Gurugram Zonal Office, Rajokri, New Delhi, deposed to the replies filed by the

ED before this Court. Therein, he acknowledged that the second ECIR was

recorded on 13.06.2023 based on FIR No. 0006 dated 17.04.2023. He stated

that the name of Pankaj Bansal and the owners of M3M Group specifically

found mention in the said FIR. However, perusal of the FIR reflects that the

name of Pankaj Bansal is not mentioned. Reference to ‘the owners of M3M

Group’ was in the context of Roop Bansal and his brother, Basant Bansal, and

not in a generic sense, as is now sought to be made out so as to rope in

Pankaj Bansal also. Saket Singh further stated that though M3M Group,

Pankaj Bansal and Basant Bansal were not named in the connected FIRs of

the first ECIR, investigation therein had shown that the promoters of M3M

Group were also involved in money laundering. According to him, Basant

Bansal refused to accept the summons issued on 13.06.2023 in relation to the

second ECIR and did not give any information relating thereto. Manual

summons dated 14.06.2023 were stated to have been issued to Pankaj

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Bansal on 14.06.2023 for his personal appearance and for recording of his

statement before the ED’s Investigating Officer on the same day. He alleged

that Pankaj Bansal accepted the summons but remained evasive in providing

relevant information to the ED. He justified the issuance of summons on an

immediate basis, by claiming that it was a necessity as the promoters/key

persons of M3M Group, including Pankaj Bansal and Basant Bansal, had

been deliberately avoiding investigation in the first ECIR as well and were not

complying with the previously issued summons on multiple occasions. He

alleged that Pankaj Bansal failed to comply with the summons in respect of

the first ECIR on multiple occasions, i.e., with the summons dated 04.06.2023,

06.06.2023 and 07.06.2023. Again, this statement is factually incorrect as

these summonses were issued to Basant Bansal and not to Pankaj Bansal.

12. Saket Singh then went on to state that when Pankaj Bansal came

to the ED’s office on 14.06.2023, the Investigating Officer of the second ECIR

served a summons upon him and as the Investigating Officer had evidence to

show that Pankaj Bansal was guilty of the offence of money laundering, he

arrested him after following the due procedure prescribed under the Act of

2002 and the rules framed thereunder. He asserted that the arrests were

made in accordance with Section 19 of the Act of 2002 and the

information/details regarding the arrests of Pankaj Bansal and Basant Bansal

were duly communicated to Mrs. Abha Bansal and Ms. Payal Kanodia over

the telephone immediately after their arrests. He stated that the written

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grounds of arrest were first read out to Basant Bansal but he refused to sign

the same. Subsequently, the written grounds of arrest were read over and

explained in his language, viz., Hindi, to Basant Bansal in the presence of

witnesses and the witnesses signed on the same as a token of correctness.

Saket Singh again asserted that issuance of summons on immediate basis

was a necessity as both of them had been deliberately avoiding investigation

in the other case as well and were not complying with the previously issued

summons on multiple occasions. This reiteration is incorrect as the first

summons issued to Pankaj Bansal was on 13.06.2023 at 06.15 pm requiring

him to appear at 11.00 am on 14.06.2023 in connection with the first ECIR,

which he duly complied with, and again, while he was in the ED’s office at

New Delhi, he was served with the summons in connection with the second

ECIR at 04.52 pm requiring him to be present at 05.00 pm, which he again

complied with. According to Saket Singh, during the investigation, both of

them were found to be actively involved in money laundering and deliberately

attempted to withhold information, that was in their exclusive knowledge,

which was crucial to establish their roles and to take the money laundering

investigation to its logical end. He asserted that they adopted an attitude of

non-cooperation during the investigation and the fact that they had bribed the

ED Judge to take benefit in the existing proceedings showed that they were

capable of influencing witnesses/authorities involved in the case. He alleged

that they were capable of tampering with the evidence and hence, Pankaj

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Bansal was arrested on 14.06.2023 around 10.30 pm on the basis of

incriminating evidence. The written grounds of arrest were stated to have been

read by Pankaj Bansal in the presence of witnesses and, thereafter, Pankaj

Bansal and the witnesses signed on the same.

13. Though much was stated and argued by both sides on the merits

of the matter in terms of the involvement of the appellants in the alleged

offence of money laundering, we make it clear that we are not concerned with

that issue at this point. The only issue for consideration presently is whether

the arrest of the appellants under Section 19 of the Act of 2002 was valid and

lawful and whether the impugned orders of remand passed by the learned

Vacation Judge/Additional Sessions Judge, Panchkula, measure up. In that

context, we may also make it clear that the mere passing of an order of

remand would not be sufficient in itself to validate the appellants’ arrests, if

such arrests are not in conformity with the requirements of Section 19 of the

Act of 2002. Though judgments were cited by the ED which held to the effect

that legality of the arrest would be rendered immaterial once the competent

Court passes a remand order, those cases primarily dealt with the issue of a

writ of habeas corpus being sought after an order of remand was passed by

the jurisdictional Court and that ratio has no role to play here. The

understanding of the ED and its misplaced reliance upon that case law begs

the question as to whether there was proper compliance with Section 19(1) of

the Act of 2002 and as to whether the learned Vacation Judge/Additional

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Sessions Judge, Panchkula, correctly considered that issue while passing the

remand orders. Therefore, as the very validity of the remand orders is under

challenge on that ground, the issue as to whether the arrest of the appellants

was lawful in its inception may also be open for consideration.

14. At this stage, it would be apposite to consider the case law that

does have relevance to these appeals and the issues under consideration. In

Vijay Madanlal Choudhary (supra), a 3-Judge Bench of this Court observed

that Section 65 of the Act of 2002 predicates that the provisions of the Code of

Criminal Procedure, 1973, shall apply insofar as they are not inconsistent with

the provisions of the Act of 2002 in respect of arrest, search and seizure,

attachment, confiscation, investigation, prosecution and all other proceedings

thereunder. It was noted that Section 19 of the Act of 2002 prescribes the

manner in which the arrest of a person involved in money laundering can be

effected. It was observed that such power was vested in high-ranking officials

and that apart, Section 19 of the Act of 2002 provided inbuilt safeguards to be

adhered to by the authorized officers, such as, of recording reasons for the

belief regarding involvement of the person in the offence of money laundering

and, further, such reasons have to be recorded in writing and while effecting

arrest, the grounds of arrest are to be informed to that person. It was noted

that the authorized officer has to forward a copy of the order, along with the

material in his possession, to the Adjudicating Authority and this safeguard is

to ensure fairness, objectivity and accountability of the authorized officer in

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forming an opinion, as recorded in writing, regarding the necessity to arrest

the person involved in the offence of money laundering. The Bench also noted

that it is the obligation of the authorized officer to produce the person so

arrested before the Special Court or Judicial Magistrate or a Metropolitan

Magistrate, as the case may be, within 24 hours and such production is to

comply with the requirement of Section 167 Cr.P.C. It was pointed out that

there is nothing in Section 19 of the Act of 2002 which is contrary to the

requirement of production under Section 167 Cr.P.C and being an express

statutory requirement under Section 19(3) of the Act of 2002, it has to be

complied by the authorized officer. It was concluded that the safeguards

provided in the Act of 2002 and the preconditions to be fulfilled by the

authorized officer before effecting arrest, as contained in Section 19 of the Act

of 2002, are equally stringent and of higher standard when compared to the

Customs Act, 1962, and such safeguards ensure that the authorized officers

do not act arbitrarily, by making them accountable for their judgment about the

necessity to arrest any person involved in the commission of the offence of

money laundering, even before filing of the complaint before the Special

Court. It was on this basis that the Bench upheld the validity of Section 19 of

the Act of 2002. The Bench further held that once the person is informed of the

grounds of arrest, that would be sufficient compliance with the mandate of

Article 22(1) of the Constitution and it is not necessary that a copy of the ECIR

be supplied in every case to the person concerned, as such a condition is not

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mandatory and it is enough if the ED discloses the grounds of arrest to the

person concerned at the time of arrest. It was pointed out that when the

arrested person is produced before the Court, it would be open to the Court to

look into the relevant records presented by the authorized representative of

the ED for answering the issue of need for continued detention in connection

with the offence of money laundering. It was, in fact, such stringent

safeguards provided under Section 19 of the Act of 2002 that prompted this

Court to uphold the twin conditions contained in Section 45 thereof, making it

difficult to secure bail.

15. This Court had occasion to again consider the provisions of the Act

of 2002 in V. Senthil Balaji vs. The State represented by Deputy Director

and others

2

, and more particularly, Section 19 thereof. It was noted that the

authorized officer is at liberty to arrest the person concerned once he finds a

reason to believe that he is guilty of an offence punishable under the Act of

2002, but he must also perform the mandatory duty of recording reasons. It

was pointed out that this exercise has to be followed by the information of the

grounds of his arrest being served on the arrestee. It was affirmed that it is the

bounden duty of the authorized officer to record the reasons for his belief that

a person is guilty and needs to be arrested and it was observed that this

safeguard is meant to facilitate an element of fairness and accountability.

Dealing with the interplay between Section 19 of the Act of 2002 and Section

167 Cr.P.C, this Court observed that the Magistrate is expected to do a

2

Criminal Appeal Nos. 2284-2285 of 2023, decided on 07.08.2023

15

balancing act as the investigation is to be completed within 24 hours as a

matter of rule and, therefore, it is for the investigating agency to satisfy the

Magistrate with adequate material on the need for custody of the accused. It

was pointed out that this important factor is to be kept in mind by the

Magistrate while passing the judicial order. This Court reiterated that Section

19 of the Act of 2002, supplemented by Section 167 Cr.P.C., provided

adequate safeguards to an arrested person as the Magistrate has a distinct

role to play when a remand is made of an accused person to an authority

under the Act of 2002. It was held that the Magistrate is under a bounden duty

to see to it that Section 19 of the Act of 2002 is duly complied with and any

failure would entitle the arrestee to get released. It was pointed out that

Section 167 Cr.P.C is meant to give effect to Section 19 of the Act of 2002

and, therefore, it is for the Magistrate to satisfy himself of its due compliance

by perusing the order passed by the authority under Section 19(1) of the Act of

2002 and only upon such satisfaction, the Magistrate can consider the request

for custody in favour of an authority. To put it otherwise, per this Court, the

Magistrate is the appropriate authority who has to be satisfied about the

compliance with safeguards as mandated under Section 19 of the Act of 2002.

In conclusion, this Court summed up that any non-compliance with the

mandate of Section 19 of the Act of 2002, would enure to the benefit of the

person arrested and the Court would have power to initiate action under

Section 62 of the Act of 2002, for such non-compliance. Significantly, in this

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case, the grounds of arrest were furnished in writing to the arrested person by

the authorized officer.

16. In terms of Section 19(3) of the Act of 2002 and the law laid down

in the above decisions, Section 167 Cr.P.C. would necessarily have to be

complied with once an arrest is made under Section 19 of the Act of 2002. The

Court seized of the exercise under Section 167 Cr.P.C. of remanding the

person arrested by the ED under Section 19(1) of the Act of 2002 has a duty

to verify and ensure that the conditions in Section 19 are duly satisfied and

that the arrest is valid and lawful. In the event the Court fails to discharge this

duty in right earnest and with the proper perspective, as pointed out

hereinbefore, the order of remand would have to fail on that ground and the

same cannot, by any stretch of imagination, validate an unlawful arrest made

under Section 19 of the Act of 2002.

17. In the matter of Madhu Limaye and others

3

was a 3-Judge

Bench decision of this Court wherein it was observed that it would be

necessary for the State to establish that, at the stage of remand, the

Magistrate directed detention in jail custody after applying his mind to all

relevant matters and if the arrest suffered on the ground of violation of Article

22(1) of the Constitution, the order of remand would not cure the constitutional

infirmities attaching to such arrest.

18. Viewed in this context, the remand order dated 15.06.2023 passed

by the learned Vacation Judge/Additional Sessions Judge, Panchkula, reflects

3

(1969) 1 SCC 292

17

total failure on his part in discharging his duty as per the expected standard.

The learned Judge did not even record a finding that he perused the grounds

of arrest to ascertain whether the ED had recorded reasons to believe that the

appellants were guilty of an offence under the Act of 2002 and that there was

proper compliance with the mandate of Section 19 of the Act of 2002. He

merely stated that, keeping in view the seriousness of the offences and the

stage of the investigation, he was convinced that custodial interrogation of the

accused persons was required in the present case and remanded them to the

custody of the ED! The sentence – ‘It is further (sic) that all the necessary

mandates of law have been complied with’ follows – ‘It is the case of the

prosecution….’ and appears to be a continuation thereof, as indicated by the

word ‘further’, and is not a recording by the learned Judge of his own

satisfaction to that effect.

19. In consequence, it would be necessary for us to examine how the

appellants were arrested and verify whether it was in keeping with the

safeguards in Section 19 of the Act of 2002. In this context, the sequence of

events makes for an interesting reading. The first ECIR was registered by the

ED on 15.06.2021 and Roop Bansal was arrested in connection therewith on

08.06.2023. Neither of the appellants was shown as an accused therein.

However, it is the case of the ED that investigation in relation to the first ECIR

is still ongoing. In any event, after the arrest of Roop Bansal, both the

appellants secured interim protection by way of anticipatory bail on

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09.06.2023, albeit till the next day of hearing, viz., 05.07.2023, from the Delhi

High Court. However, both the appellants were summoned on 14.06.2023 for

interrogation in connection with the first ECIR, in which they had interim

protection. Summons in that regard were served upon them on 13.06.2023 at

06.15 pm. Significantly, the second ECIR was recorded only on that day, i.e.,

on 13.06.2023, in connection with FIR No. 0006 which was registered on

17.04.2023. Therein also, neither of the appellants was shown as an accused

and it was only Roop Bansal who stood named as an accused. In compliance

with the summons received by them vis-à-vis the first ECIR, both the

appellants presented themselves at the ED’s office at Rajokri, New Delhi, at

11.00 am on 14.06.2023. While they were there, Pankaj Bansal was served

with summons at 04.52 pm, requiring him to appear before another

Investigating Officer at 05.00 pm in relation to the second ECIR. As already

noted, there is ambiguity as to when Basant Bansal was served with such

summons. It is the case of the ED that he refused to receive the summons in

relation to the second ECIR and he was arrested at 06.00 pm on 14.06.2023.

Pankaj Bansal received the summons and appeared but as he did not divulge

relevant information, the Investigating Officer arrested him at 10.30 pm on

14.06.2023.

20. This chronology of events speaks volumes and reflects rather

poorly, if not negatively, on the ED’s style of functioning. Being a premier

investigating agency, charged with the onerous responsibility of curbing the

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debilitating economic offence of money laundering in our country, every action

of the ED in the course of such exercise is expected to be transparent, above

board and conforming to pristine standards of fair play in action. The ED,

mantled with far-reaching powers under the stringent Act of 2002, is not

expected to be vindictive in its conduct and must be seen to be acting with

utmost probity and with the highest degree of dispassion and fairness. In the

case on hand, the facts demonstrate that the ED failed to discharge its

functions and exercise its powers as per these parameters.

21. In this regard, we may note that, though the appellants did not

allege colourable exercise of power or malafides or malice on the part of the

ED officials, they did assert in categorical terms that their arrests were a

wanton abuse of power, authority and process by the ED, which would

tantamount to the same thing. On that subject, we may refer to the

observations of this Court in State of Punjab vs. Gurdial Singh

4

: -

‘The question, then, is what is malafides in the jurisprudence of

power? Legal malice is gibberish unless juristic clarity keeps it separate

from the popular concept of personal vice. Pithily put, bad faith which

invalidates the exercise of power — sometimes called colourable exercise

or fraud on power and oftentimes overlaps motives, passions and

satisfactions — is the attainment of ends beyond the sanctioned purposes

of power by simulation or pretension of gaining a legitimate goal. If the use

of the power is for the fulfilment of a legitimate object the actuation or

catalysation by malice is not legicidal. The action is bad where the true

object is to reach an end different from the one for which the power is

entrusted, goaded by extraneous considerations, good or bad, but

4

(1980) 2 SCC 471

20

irrelevant to the entrustment. When the custodian of power is influenced in

its exercise by considerations outside those for promotion of which the

power is vested the court calls it a colourable exercise and is undeceived

by illusion. In a broad, blurred sense, Benjamin Disraeli was not off the

mark even in law when he stated: “I repeat . . . that all power is a trust —

that we are accountable for its exercise — that, from the people, and for

the people, all springs, and all must exist”. Fraud on power voids the order

if it is not exercised bona fide for the end designed. Fraud in this context is

not equal to moral turpitude and embraces all cases in which the action

impugned is to effect some object which is beyond the purpose and intent

of the power, whether this be malice-laden or even benign. If the purpose

is corrupt the resultant act is bad. If considerations, foreign to the scope of

the power or extraneous to the statute, enter the verdict or impel the

action, mala fides or fraud on power vitiates the acquisition or other official

act.’

A few years later, in Collector (District Magistrate), Allahabad

and another vs. Raja Ram Jaiswal

5

, this Court held as under:

‘Where power is conferred to achieve a purpose, it has been

repeatedly reiterated that the power must be exercised reasonably and in

good faith to effectuate the purpose. And in this context “in good faith”

means “for legitimate reasons”. Where power is exercised for extraneous

or irrelevant considerations or reasons, it is unquestionably a colourable

exercise of power or fraud on power and the exercise of power is vitiated.’

Again, in Ravi Yashwant Bhoir vs. Collector

6

, it was held thus:

‘Malafide exercise of power does not imply any moral turpitude. It

means exercise of statutory power for “purposes foreign to those for which

it is in law intended”. It means conscious violation of the law to the preju-

dice of another, a depraved inclination on the part of the authority to disre-

gard the rights of others, where intent is manifested by its injurious acts.

5

(1985) 3 SCC 1

6

(2012) 4 SCC 407

21

Passing an order for unauthorized purpose constitutes malice in law.’

22. The way in which the ED recorded the second ECIR immediately

after the appellants secured anticipatory bail in relation to the first ECIR,

though the foundational FIR dated back to 17.04.2023, and then went about

summoning them on one pretext and arresting them on another, within a short

span of 24 hours or so, manifests complete and utter lack of bonafides.

Significantly, when the appellants were before the Delhi High Court seeking

anticipatory bail in connection with the first ECIR, the ED did not even bring it

to the notice of the High Court that there was another FIR in relation to which

there was an ongoing investigation, wherein the appellants stood implicated.

The second ECIR was recorded 4 days after the grant of bail and it is not

possible that the ED would have been unaware of the existence of FIR No.

0006 dated 17.04.2023 at that time.

23. Surprisingly, in its ‘Written Submissions’, the ED stated that it

started its inquiries in respect of this FIR in May, 2023, itself, but strangely, the

replies filed by the ED do not state so! It is in this background that this

suppression before the Delhi High Court demonstrates complete lack of

probity on the part of the ED. Its prompt retaliatory move, upon grant of interim

protection to the appellants, by recording the second ECIR and acting upon it,

all within the span of a day, so as to arrest the appellants, speaks for itself and

we need elaborate no more on that aspect.

24. Further, when the second ECIR was recorded on 13.06.2023 ‘after

preliminary investigations’, as stated in the ED’s replies, it is not clear as to

22

when the ED’s Investigating Officer had the time to properly inquire into the

matter so as to form a clear opinion about the appellants’ involvement in an

offence under the Act of 2002, warranting their arrest within 24 hours. This is a

sine qua non in terms of Section 19(1) of the Act of 2002. Needless to state,

authorities must act within the four corners of the statute, as pointed out by

this Court in Devinder Singh v. State of Punjab

7

, and a statutory authority is

bound by the procedure laid down in the statute and must act within the four

corners thereof.

25. We may also note that the failure of the appellants to respond to

the questions put to them by the ED would not be sufficient in itself for the

Investigating Officer to opine that they were liable to be arrested under Section

19, as that provision specifically requires him to find reason to believe that

they were guilty of an offence under the Act of 2002. Mere non-cooperation

of a witness in response to the summons issued under Section 50 of the Act of

2002 would not be enough to render him/her liable to be arrested under

Section 19. As per its replies, it is the claim of the ED that Pankaj Bansal was

evasive in providing relevant information. It was however not brought out as to

why Pankaj Bansal’s replies were categorized as ‘evasive’ and that record is

not placed before us for verification. In any event, it is not open to the ED to

expect an admission of guilt from the person summoned for interrogation and

assert that anything short of such admission would be an ‘evasive reply’. In

7

(2008) 1 SCC 728

23

Santosh S/o Dwarkadas Fafat vs. State of Maharashtra

8

, this Court noted

that custodial interrogation is not for the purpose of ‘confession' as the right

against self-incrimination is provided by Article 20(3) of the Constitution. It was

held that merely because an accused did not confess, it cannot be said that

he was not co-operating with the investigation. Similarly, the absence of either

or both of the appellants during the search operations, when their presence

was not insisted upon, cannot be held against them.

26. The more important issue presently is as to how the ED is required

to ‘inform’ the arrested person of the grounds for his/her arrest. Prayer (iii) in

the writ petitions filed by the appellants pertained to this. Section 19 does not

specify in clear terms as to how the arrested person is to be ‘informed’ of the

grounds of arrest and this aspect has not been dealt with or delineated in

Vijay Madanlal Choudhary (supra). Similarly, in V. Senthil Balaji

(supra), this Court merely noted that the information of the grounds of arrest

should be ‘served’ on the arrestee, but did not elaborate on that issue.

Pertinent to note, the grounds of arrest were furnished in writing to the

arrested person in that case. Surprisingly, no consistent and uniform practice

seems to be followed by the ED in this regard, as written copies of the

grounds of arrest are furnished to arrested persons in certain parts of the

country but in other areas, that practice is not followed and the grounds of

arrest are either read out to them or allowed to be read by them.

27. In this context, reliance is placed by the ED upon the decision of a

8

(2017) 9 SCC 714

24

Division Bench of the Delhi High Court in Moin Akhtar Qureshi vs. Union of

India and others

9

, wherein it was observed that Section 19 of the Act of 2002

uses the expression ‘informed of the grounds of such arrest’ and does not use

the expression ‘communicate the grounds of such arrest’ and, therefore, the

obligation cast upon the authorized officer under Section 19(1) is only to

inform the arrestee of the grounds of arrest and the provision does not oblige

the authority to serve the grounds for such arrest on the arrestee. Reliance is

also placed by the ED on the judgment of a Division Bench of the Bombay

High Court in Chhagan Chandrakant Bhujbal vs. Union of India and

others

10

, which held that the grounds of arrest are to be informed to the

person arrested and that would mean that they should be communicated at

the earliest but there is no statutory requirement of the grounds of arrest being

communicated in writing.

28. No doubt, in Vijay Madanlal Choudhary (supra), this Court held

that non-supply of the ECIR in a given case cannot be found fault with, as the

ECIR may contain details of the material in the ED’s possession and revealing

the same may have a deleterious impact on the final outcome of the

investigation or inquiry. Having held so, this Court affirmed that so long as the

person is ‘informed’ of the grounds of his/her arrest, that would be sufficient

compliance with the mandate of Article 22(1) of the Constitution.

29. In this regard, we may note that Article 22(1) of the Constitution

9

WP (Crl.) No. 2465 of 2017, decided on 01.12.2017 = 2017 SCC OnLine Del 12108

10

2017 Cri LJ (NOC 301) 89 = 2017 (1) AIR Bom R (Cri) 929

25

provides, inter alia, that no person who is arrested shall be detained in

custody without being informed, as soon as may be, of the grounds for such

arrest. This being the fundamental right guaranteed to the arrested person, the

mode of conveying information of the grounds of arrest must necessarily be

meaningful so as to serve the intended purpose. It may be noted that Section

45 of the Act of 2002 enables the person arrested under Section 19 thereof to

seek release on bail but it postulates that unless the twin conditions

prescribed thereunder are satisfied, such a person would not be entitled to

grant of bail. The twin conditions set out in the provision are that, firstly, the

Court must be satisfied, after giving an opportunity to the public prosecutor to

oppose the application for release, that there are reasonable grounds to

believe that the arrested person is not guilty of the offence and, secondly, that

he is not likely to commit any offence while on bail. To meet this requirement, it

would be essential for the arrested person to be aware of the grounds on

which the authorized officer arrested him/her under Section 19 and the basis

for the officer’s ‘reason to believe’ that he/she is guilty of an offence

punishable under the Act of 2002. It is only if the arrested person has

knowledge of these facts that he/she would be in a position to plead and prove

before the Special Court that there are grounds to believe that he/she is not

guilty of such offence, so as to avail the relief of bail. Therefore,

communication of the grounds of arrest, as mandated by Article 22(1) of the

Constitution and Section 19 of the Act of 2002, is meant to serve this higher

26

purpose and must be given due importance.

30. We may also note that the language of Section 19 of the Act of

2002 puts it beyond doubt that the authorized officer has to record in writing

the reasons for forming the belief that the person proposed to be arrested is

guilty of an offence punishable under the Act of 2002. Section 19(2) requires

the authorized officer to forward a copy of the arrest order along with the

material in his possession, referred to in Section 19(1), to the Adjudicating

Authority in a sealed envelope. Though it is not necessary for the arrested

person to be supplied with all the material that is forwarded to the Adjudicating

Authority under Section 19(2), he/she has a constitutional and statutory right

to be ‘informed’ of the grounds of arrest, which are compulsorily recorded in

writing by the authorized officer in keeping with the mandate of Section 19(1)

of the Act of 2002. As already noted hereinbefore, It seems that the mode of

informing this to the persons arrested is left to the option of the ED’s

authorized officers in different parts of the country, i.e., to either furnish such

grounds of arrest in writing or to allow such grounds to be read by the arrested

person or be read over and explained to such person.

31. That apart, Rule 6 of the Prevention of Money Laundering (The

Forms and the Manner of Forwarding a Copy of Order of Arrest of a Person

along with the Material to the Adjudicating Authority and its Period of

Retention) Rules, 2005, titled ‘Forms of records’, provides to the effect that the

arresting officer while exercising powers under Section 19(1) of the Act of

27

2002, shall sign the Arrest Order in Form III appended to those Rules. Form

III, being the prescribed format of the Arrest Order, reads as under: -

‘ARREST ORDER

Whereas, I………. Director/Deputy Director/Assistant Director/

Officer authorized in this behalf by the Central Government, have

reason to believe that ….. [name of the person arrested] resident of

….. has been guilty of an offence punishable under the provisions of

the Prevention of Money-laundering Act, 2002 (15 of 2003);

Now, Therefore, in exercise of the powers conferred on me under

sub-section (1) of section 19 of the Prevention of Money-laundering

Act, 2002 (15 of 2003), I hereby arrest the said ….. [name of the

person arrested] at ….. hours on ….. and he has been informed of

the grounds for such arrest.

Dated at ….. on this ….. day of ….. Two thousand …..

Arresting Officer

Signature with Seal

To

……………………..

……………………..

[Name and complete address of the person arrested]’

Needless to state, this format would be followed all over the

country by the authorized officers who exercise the power of arrest under

Section 19(1) of the Act of 2002 but, in certain parts of the country, the

authorized officer would inform the arrested person of the grounds of arrest by

furnishing the same in writing, while in other parts of the country, on the basis

of the very same prescribed format, the authorized officer would only read out

or permit reading of the contents of the grounds of arrest. This dual and

disparate procedure to convey the grounds of arrest to the arrested person

cannot be countenanced on the strength of the very same arrest order, in the

aforestated prescribed format.

32. That being so, there is no valid reason as to why a copy of such

28

written grounds of arrest should not be furnished to the arrested person as a

matter of course and without exception. There are two primary reasons as to

why this would be the advisable course of action to be followed as a matter of

principle. Firstly, in the event such grounds of arrest are orally read out to the

arrested person or read by such person with nothing further and this fact is

disputed in a given case, it may boil down to the word of the arrested person

against the word of the authorized officer as to whether or not there is due and

proper compliance in this regard. In the case on hand, that is the situation

insofar as Basant Bansal is concerned. Though the ED claims that witnesses

were present and certified that the grounds of arrest were read out and

explained to him in Hindi, that is neither here nor there as he did not sign the

document. Non-compliance in this regard would entail release of the arrested

person straightaway, as held in V. Senthil Balaji (supra). Such a precarious

situation is easily avoided and the consequence thereof can be obviated very

simply by furnishing the written grounds of arrest, as recorded by the

authorized officer in terms of Section 19(1) of the Act of 2002, to the arrested

person under due acknowledgment, instead of leaving it to the debatable ipse

dixit of the authorized officer.

33. The second reason as to why this would be the proper course to

adopt is the constitutional objective underlying such information being given to

the arrested person. Conveyance of this information is not only to apprise the

arrested person of why he/she is being arrested but also to enable such

29

person to seek legal counsel and, thereafter, present a case before the Court

under Section 45 to seek release on bail, if he/she so chooses. In this regard,

the grounds of arrest in V. Senthil Balaji (supra) are placed on record and we

find that the same run into as many as six pages. The grounds of arrest

recorded in the case on hand in relation to Pankaj Bansal and Basant Bansal

have not been produced before this Court, but it was contended that they

were produced at the time of remand. However, as already noted earlier, this

did not serve the intended purpose. Further, in the event their grounds of

arrest were equally voluminous, it would be well-nigh impossible for either

Pankaj Bansal or Basant Bansal to record and remember all that they had

read or heard being read out for future recall so as to avail legal remedies.

More so, as a person who has just been arrested would not be in a calm and

collected frame of mind and may be utterly incapable of remembering the

contents of the grounds of arrest read by or read out to him/her. The very

purpose of this constitutional and statutory protection would be rendered

nugatory by permitting the authorities concerned to merely read out or permit

reading of the grounds of arrest, irrespective of their length and detail, and

claim due compliance with the constitutional requirement under Article 22(1)

and the statutory mandate under Section 19(1) of the Act of 2002.

34. We may also note that the grounds of arrest recorded by the

authorized officer, in terms of Section 19(1) of the Act of 2002, would be

personal to the person who is arrested and there should, ordinarily, be no risk

30

of sensitive material being divulged therefrom, compromising the sanctity and

integrity of the investigation. In the event any such sensitive material finds

mention in such grounds of arrest recorded by the authorized officer, it would

always be open to him to redact such sensitive portions in the document and

furnish the edited copy of the grounds of arrest to the arrested person, so as

to safeguard the sanctity of the investigation.

35. On the above analysis, to give true meaning and purpose to the

constitutional and the statutory mandate of Section 19(1) of the Act of 2002 of

informing the arrested person of the grounds of arrest, we hold 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.

The decisions of the Delhi High Court in Moin Akhtar Qureshi (supra) and

the Bombay High Court in Chhagan Chandrakant Bhujbal (supra), which

hold to the contrary, do not lay down the correct law. In the case on hand, the

admitted position is that the ED’s Investigating Officer merely read out or

permitted reading of the grounds of arrest of the appellants and left it at that,

which is also disputed by the appellants. As this form of communication is not

found to be adequate to fulfil compliance with the mandate of Article 22(1) of

the Constitution and Section 19(1) of the Act of 2002, we have no hesitation in

holding that their arrest was not in keeping with the provisions of Section 19(1)

of the Act of 2002. Further, as already noted supra, the clandestine conduct of

the ED in proceeding against the appellants, by recording the second ECIR

31

immediately after they secured interim protection in relation to the first ECIR,

does not commend acceptance as it reeks of arbitrary exercise of power. In

effect, the arrest of the appellants and, in consequence, their remand to the

custody of the ED and, thereafter, to judicial custody, cannot be sustained.

36. The appeals are accordingly allowed, setting aside the impugned

orders passed by the Division Bench of the Punjab & Haryana High Court as

well as the impugned arrest orders and arrest memos along with the orders of

remand passed by the learned Vacation Judge/Additional Sessions Judge,

Panchkula, and all orders consequential thereto.

The appellants shall be released forthwith unless their

incarceration is validly required in connection with any other case.

In the circumstances, we make no orders as to costs.

………………………..,J

(A.S. BOPANNA)

………………………..,J

(SANJAY KUMAR)

October 3, 2023;

New Delhi.

32

ITEM NO.1501 COURT NO.16 SECTION II-B

S U P R E M E C O U R T O F I N D I A

RECORD OF PROCEEDINGS

Criminal Appeal No(s). 3051-3052/2023

PANKAJ BANSAL Appellant(s)

VERSUS

UNION OF INDIA & ORS. Respondent(s)

FOR ADMISSION and I.R. and IA No.147707/2023-EXEMPTION FROM FILING

C/C OF THE IMPUGNED JUDGMENT

IA No. 147707/2023 - EXEMPTION FROM FILING C/C OF THE IMPUGNED

JUDGMENT

IA No. 155713/2023 - INTERLOCUTARY APPLICATION)

WITH Crl.A. No. 3053-3054/2023 (II-B)

(FOR ADMISSION and I.R. and IA No.148433/2023-EXEMPTION FROM FILING

C/C OF THE IMPUGNED JUDGMENT)

Date : 03-10-2023 These appeals were called on for pronouncement of

judgment today.

For Appellant(s) Mr. Mukul Rohatgi, Sr. Adv.

Dr. A.M. Singhvi, Sr. Adv.

Mr. Randeep Rai, Sr. Adv.

Mr. Vikram Chaudhary, Sr. Adv.

Mr. Vijay Agarwal, Adv.

Mr. Malak Manish Bhatt, AOR

Ms. Neeha Nagpal, Adv.

Mr. Vijay Nair, Adv.

Mr. Rajat Joneja, Adv.

Mr. Vishvendra Tomar, Adv.

Mr. Mandeep Singh, Adv.

Mr. Anmol Kumar, Adv.

Mr. Yash Verma, Adv.

Ms. Rubina Virmani, Adv.

Mr. Kunal Dawar, Adv.

Mr. Avishkar Singhvi, Adv.

Mr. Nikhil Rohatgi, Adv.

Mr. Siddhart, Adv.

For Respondent(s) Mr. S.V. Raju, ASG

Mr. Zoheb Hossain, Adv.

Mr. Annam Venkatesh, Adv.

Mr. Sairica Raju, Adv.

Mr. Vivek Gurnani, Adv.

Mr. Ankit Bhatia, Adv.

Mr. Madhumitha Kesavan, Adv.

Ms. Manisha Dubey, Adv.

33

Mr. Hitarth Raja, Adv.

Mr. Mukesh Kumar Maroria, AOR

Leave granted.

Appeals are allowed in terms of the reportable signed

judgment, which is placed on the file.

Pending application(s),if any stands disposed of.

(DR. NAVEEN RAWAL) (MATHEW ABRAHAM)

ASTT. REGISTRAR-cum-PS COURT MASTER (NSH)

34