On October 3, the Supreme Court delivered its judgment in Pankaj Bansal vs Union of India, holding that Section 19(1) of the Prevention of Money Laundering Act (PMLA), 2002 – which requires the Enforcement Directorate (ED) to inform the accused of the grounds of arrest – necessitates providing such grounds in a written format.
Non-compliance with this requirement vitiates an arrest, and entitles the accused to be set free unconditionally. Therefore, in the instant case, the court ordered the immediate release of real estate group M3M’s directors Pankaj Bansal and Basant Bansal in a money laundering case.
In this piece, I analyse the judgement and locate it in case law interpreting the PMLA’s provisions. I argue that it furnishes at least three principles under section 19, non-compliance of which can be invoked as the sole ground to be released – first, that the accused has a right to receive the grounds of their arrest in a written format; second, that a refusal to cooperate during interrogation cannot be the mode through which a “reason to believe” in one’s guilt – which is the threshold requirement for arrest – can be developed; and third, that the ED cannot arrest with mala fides.
Principle 1: The accused must receive written grounds of arrest
The ED begins its investigation through the registration of an Enforcement Case Information Report (ECIR), which has been described as an “internal document created by the department” in Vijay Madanlal Choudhary vs Union of India. The document has no legal basis, for no law authorises or empowers the ED to register it.
In the instant case, an ECIR concerning Basant Bansal was registered, who was arrested without receiving a copy of this ECIR, or receiving written information as to what necessitated his arrest. Section 19(1) of the PMLA and Article 22(1) of the constitution require that the accused be informed of the grounds of arrest. Neither the constitution nor the section, however, provides the manner in which these grounds must be communicated.
The court held that the communication of the grounds of arrest must be necessarily done in a written manner, offering two reasons.
First, in case the grounds are read out verbally, the issue of whether such grounds were in fact communicated “boil[s] down to the word of the arrested person against the word of the authorised officer”. This makes adjudication of the arrest’s validity a difficult task.
In the instant case, the ED claimed to have read out the grounds of arrest in Hindi in front of witnesses, while Bansal claimed that no such attempt was made. This state of affairs, the court noted, is “neither here nor there”.
Second, it noted that the PMLA’s bail regime is such that it prevents one’s release as long as a reasonable case is present, which – in order to be argued by the accused – necessitates their own knowledge of the case against them.
On this basis, it held that whenever the ED makes an arrest, it must necessarily furnish its grounds in a written format.
The court was also confronted with VM Choudhary, which held the ECIR’s supply non-mandatory as long as the accused was informed of the grounds of their arrest one way or another. In the instant case, the court held that VM Choudhary left open the question of how the accused would be informed of the grounds of arrest short of the ECIR’s supply, an area of law that could be developed separately.
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Principle 2: Non-cooperation during interrogation cannot be a ground for arrest
When the ED summons an accused using its powers under Section 50 of the PMLA, it dons a judicial character, for Section 50(4) converts all summons proceedings into judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (IPC), 1860. The person being interrogated must furnish truthful answers to all questions asked. Non-compliance with directions to attend or produce evidence is punishable with fines under Section 63(2). False answers may invite the penalty under Section 193 of the IPC, carrying a term of up to seven years in prison.
This setup was challenged based on its incompatibility with the guarantee against self-incrimination in VM Choudhary. The court upheld it on the ground that the person undergoing questioning is not formally an “accused” at the summons stage, making Article 20(3) of the constitution inapplicable. In that case, the court also noted that since interrogation during summons assumes a judicial character, Section 25 of the Evidence Act – which makes confessions to the police inadmissible– would not apply.
In the present case, the ED interrogated Pankaj Bansal at the summons stage, who – according to the ED – furnished “evasive” answers. His uncooperative behaviour, the ED admitted, caused his arrest.
The court held that providing evasive answers or exhibiting generally uncooperative behaviour during summons cannot be grounds for arrest. It noted that the extraction of confessions cannot be the sole pursuit of the summons stage, and the accused’s refusal to incriminate themselves does not constitute uncooperative behaviour.
This observation carries a notable dissonance with VM Choudhary, for the basis of the court’s conclusion that evasiveness cannot constitute a ground for arrest lies – ultimately – in the applicability of the guarantee against self-incrimination during summons. This is because the court cites case-law to the effect that interrogation, overall, must not be discriminatory:
“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 Santosh vs. State of Maharashtra, 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.”
In Santosh vs State of Maharashtra, a case where the state opposed an accused’s bail due to their refusal to confess, the court noted that a conceptualisation of undertrial interrogation such that it was wholly for the purpose of extracting confessions was an unconstitutional expectation. This was because Article 20(3) possessed an “exalted status” in the constitutional scheme.
The court’s holding that the ED cannot expect “admissions of guilt” during the summons stage means that the accused is not bound to incriminate. In other words, this means that the accused’s right against self-incrimination may apply even during the summons stage Under Section 50. This proposition conflicts with VM Choudhary, which may be settled by a three-judge bench reviewing that case soon.
Congress MPs holding banners and placards stage a protest march at Parliament House against the Enforcement Directorate. Photo: PTI/Kamal Kishore
Principle 3: The ED cannot arrest with mala fides
Pankaj and Basant Bansal, the two accused in the present case, obtained anticipatory bail from the Delhi high court when they obtained information about the filing of an ECIR against a third person connected with their company. The ED, however, registered a second ECIR against both accused within four days of their anticipatory bail, and arrested them within 24 hours thereafter.
The court labelled the arrests a “colourable exercise of power”, noting that the ED’s actions showed a “complete and utter lack of bonafides”. Since the threshold of arrest under Section 19 is that the ED, based on the material in its possession, believes in the accused’s guilt, the court noted that a period of 24 hours from an ECIR’s registration would be inadequate for this belief’s formation.
The court also held that the ED’s suppression of materials at an anticipatory bail hearing, which could be used for re-arrest, indicated an abuse of power and vitiated the arrest.
Shifting interpretive lenses – institutional omnipotence or procedural rights?
The prevailing trend in case law interpreting the PMLA has been to bolster the ED’s investigative powers, based on an abstract fear of the money-laundering offence. In the quest to create an omnipotent entity to eradicate money laundering, courts have painted it with immense illegibility, holding that the offence’s sui generis character necessitates an institution that defies classification.
In VM Choudhary, the court held that the ED doesn’t consist of the police, and confessions made to (or extracted by) its officers would be admissible in evidence. Recently, in Senthil Balaji vs State, the court held that despite the ED’s officials not being the “police”, they are still entitled to take an accused into “police custody” in order to undertake even more interrogation.
In Balaji, it was also held that Section 41-A of the Code of Criminal Procedure, which provides for a “notice of appearance” as a lesser rights-restrictive alternative to police custody, would be inapplicable to the PMLA in toto. The following reasoning was offered:
“Following Section 41A of the CrPC, 1973 for an arrest under the PMLA, 2002 would only defeat and destroy the very inquiry/investigation under the PMLA, 2002. Till summons are issued to a person, he is not expected to be in the know-how. Any prior intimation, other than what is mandated under the PMLA, 1973 might seriously impair the ongoing investigation.”
The interpretive lens of strengthening the ED was dominant in case law. Consistency of propositions, such as the decision over whether the ED consisted of the “police”, was open to compromises.
Bansal marks a degree of dissent from this interpretive lens of offering the ED unconditional strength, as well as from legal propositions laid down in such case law. For example, the court veers towards applying the guarantee against self-incrimination to the ED’s “judicial” interrogation, and makes mandatory the supply of written grounds of arrest.
The Supreme Court of India. Photo: The Wire
New procedural challenges to arrest
The significance of the judgment, however, lies in the fact that it introduces a new set of legal challenges capable of immediate fructification by those arrested under the PMLA. All PMLA undertrials, therefore, can now argue for the invalidity of their arrests based on Bansal’s three principles – first, the non-supply of written grounds; second, the absence of grounds other than mere “evasiveness”; and third, the presence of mala fides.
This is because of the court’s observation that the passage of an initial order of remand is immaterial to the analysis of the arrest’s overall validity:
“[W]e 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.”
The judgement in Bansal, therefore, is a valuable step towards making basic procedural rights applicable to the ED. Compliance with Bansal’s three principles may afford greater institutional accountability and may offer some relief to PMLA undertrials by equipping them to challenge the validity of their arrests.
Kartik Kalra is a student at the National Law School of India University, Bengaluru.