New Delhi: Every action of the Enforcement Directorate (ED) should be “transparent, above board and conform to the pristine standards of fair play in action” — this is what the Supreme Court said in a scathing judgment this week as it quashed the arrest of real estate group M3M’s promoters Basant Bansal and Pankaj Bansal.
The Bansals were arrested under the Prevention of Money Laundering Act (PMLA) on 14 June 2023. The father-son duo had questioned their arrest in appeals filed before the top court.
A two-judge bench of justices A.S. Bopanna and Sanjay Kumar concluded Tuesday that the arrest of Basant Bansal and his son Pankaj Bansal was in violation of Section 19 of the PMLA.
The section outlines the procedure of arrest in money-laundering cases, and warrants that the ED inform the arrested persons about the reasons for his/her arrest.
In the given case, the top court said the sequence of events showed the ED operated in a “clandestine” manner that “reeked of arbitrary exercise of power” to arrest the duo.
In the same judgment, the top court directed that the ED must provide in writing the grounds of arrest to people being arrested.
This, it held, is a mandate under Article 22(1) of the Constitution, which says that no person shall be detained without being informed about the grounds for his/her arrest, nor shall they be denied the right to consult a lawyer of his/her choice.
The court also came down heavily on the ED for failing to justify the Bansals’ arrest.
According to the ED, the two were evasive and uncooperative during interrogation. But when asked by the top court to verify the claim, the agency could not.
The bench went on to say that custodial interrogation is not “for the purpose of ‘confession’”.
Every individual has a right against self-incrimination, which is provided by Article 20(3) of the Constitution, it said. Merely because an accused did not confess, it cannot be said that they were not cooperating with the investigation, the bench added.
The judges did not even spare the trial court in Panchkula that allowed the ED to have the father son’s custody following their arrest.
The SC said the remand order “reflects total failure on his (the judge’s) part in discharging his duty as per the expected standard”.
The verdict comes at a time when the SC is scheduled to hear a batch of petitions demanding a review of the 2022 judgment that upheld the stringent powers of the ED under the PMLA.
One such provision is related to non-supply of the Enforcement Case Information Report (ECIR) — the ED equivalent of an FIR — to an accused at the time of arrest.
In the judgment Tuesday, the court said the 2022 verdict did not find fault with non-supply of ECIR, but at the same time affirmed an arrested person’s right to be informed about the grounds of arrest.
What last year’s judgment did not elaborate on was the mode of conveying this information, but the ruling Tuesday addressed it.
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‘Interesting’ sequence of events
As it analysed the manner in which the Bansals were arrested, the Supreme Court said “the sequence of events” in the case “makes for an interesting reading”.
The genesis of the case against the M3M promoters lies in an ECIR that the ED registered on 16 June 2021. This ECIR was filed in connection with a group of FIRs that were lodged between 2018 and 2020 on complaints filed by flat allottees against another realty group, IREO.
The top court’s order notes that neither Basant nor Pankaj was named as accused in either the FIR or the ECIR.
Meanwhile, on 17 April, the anti-corruption bureau (ACB) of Panchkula lodged an FIR against special judge Sudhir Parmar, alleging that he was “showing favouritism” to IREO group chairman Lalit Goyal and also to Basant and his brother Roop Bansal.
After conducting raids on M3M properties, the ED on 8 June 2023 arrested Roop Bansal.
Basant and Pankaj subsequently moved the Delhi High Court for anticipatory bail, and were granted protection on 9 June 2023 till the next date of hearing, 5 July.
On 13 June, the ED issued summons to Basant and Pankaj, asking them to appear at its office in Rajokri, Delhi, a day later.
The summons related to the ECIR linked to the allegations against IREO, in which the two were already under protection on the Delhi HC’s orders.
Then, however, a second ECIR emerged — the ED recorded an ECIR in connection with the Panchkula ACB’s FIR on 13 June.
Both Basant and Pankaj reached the ED’s office on 14 June at 11 am.
While they were at the ED office, the top court noted, the agency served Pankaj with summons at 4.52 pm — this summons required him to be present before another officer at 5 pm in connection with the second ECIR.
At 6 pm, the ED arrested Basant Bansal, claiming that he did not comply with the summons issued to him in the second ECIR.
Four-and-a-half hours later, Pankaj was arrested on the grounds that he did not “divulge the relevant information”.
Both challenged their arrest before the Delhi High Court, which said the Punjab and Haryana High Court was the appropriate forum for the relief sought by them.
On an appeal, the top court made a similar observation, prompting them to approach the Punjab and Haryana High Court, which declined to interfere with the arrests.
In two orders — dated 20 July and 26 July — the high court refused to set aside their arrest memos as well as three remand orders, dated 15, 20 and 25 June, sending the two to the ED’s custody and then to judicial custody.
The Bansals then moved the Supreme Court to appeal against the HC orders.
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‘Arbitrary exercise of power’
Declaring that the Bansals’ arrests were not in line with Section 19 of the PMLA, the top court refrained from going into the merits of the allegations against them.
But, the court said, the “chronology of events speaks volumes and reflects rather poorly, if not negatively, the ED’s style of functioning”.
First, the bench raised questions over Basant’s arrest and said there was ambiguity as to whether he was served with summons.
It rejected the ED’s assertion that Pankaj didn’t comply with the agency’s summons, observing that he was present in its office on 14 June.
“The ED, mantled with far-reaching powers under the stringent Act of 2002 [PMLA], 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,” the bench said.
In the case on hand, the facts demonstrate that the ED failed to discharge its functions and exercise its powers in keeping with these parameters.
The judgment also raises questions about the recording of the ED’s second ECIR, which it observed was done four days after Basant and Pankaj secured anticipatory bail in the first ECIR.
The foundational FIR that was the basis of the second ECIR, it further noted, was lodged on 17 April 2023.
The fact that the Bansals may be probed in connection with this FIR was not conveyed to the Delhi HC when it gave them protection in the first ECIR, the court said.
The agency then, it recorded, went about summoning the two Bansals on one pretext or another, within a short span of 24 hours. This, the court said, “manifests complete and utter lack of bonafides”.
Moreover, since the second ECIR was recorded a day prior to their arrest, the bench wondered whether the ED had the time to “properly inquire into the matter so as to form a clear opinion about” the involvement of the Bansals under the PMLA.
A proper inquiry before an arrest is an essential condition for arrest under Section 19 of the PMLA, the bench said.
It frowned upon the ED’s “clandestine conduct of proceeding against the appellants” and said it reeks of “arbitrary exercise of power”.
The judgment also underlined that the agency is bound to inform the arrested person about the grounds of arrest.
The 2022 judgment, it said, did not deal with the aspect of how the information must be passed on, but emphasised the inbuilt safeguards of Section 19.
Article 22(1) of the Constitution, it said, says that no person shall be arrested without being informed of the grounds of the arrest. However, the court added, the mode of conveying this information is absent in the law and was not dealt with in the 2022 judgment.
Noting that no consistent and uniform practice seems to be followed by ED in this regard, the court ordered that the grounds of arrest must be furnished in writing to the arrested person.
It also said that, to meet the twin conditions under Section 45 of the PMLA — which allows an alleged money-laundering offender to seek bail — it was necessary that the arrested person is aware of the grounds of their arrest (the twin conditions are that the court should be convinced there are reasonable grounds to believe that the accused is not guilty of such offence; and that she/he is not likely to commit any offence while on bail).
This will enable them to get legal counsel too, the court said.
“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,” the court said.
It added that the language used in Section 19 imposes a condition on the ED to record in writing the reasons for arresting a person. This is because the ED is required to forward a copy of the arrest order — along with material in possession (evidence) — to the adjudicating authority so that the latter can pass orders permitting the ED to confiscate properties of the accused.
The ED’s argument that, in the Bansals’ case, it had conveyed the grounds of arrest orally was rejected. The court said in case the grounds of arrest are voluminous, it would be impossible for the accused to remember and recall them so as to avail legal remedies.
“More so, as a person who has just been arrested [they] 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 court said.
If any sensitive material finds mention in the grounds, the authorised officer can redact the sensitive portions and furnish the edited copy to the accused, so as to safeguard the sanctity of the probe, the bench said.
On the trial court’s conduct, the SC said the judge failed to mention in the remand order that he had perused the grounds of arrest to ascertain whether the ED had recorded its reasons to arrest the Bansals.
“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 SC said.
In doing so, the top court rejected the ED’s submission that passing of a remand order validates the arrest of the Bansals, holding that it was not in conformity with the requirements of the PMLA.
(Edited by Sunanda Ranjan)