“Being a premier investigating agency, charged with the onerous responsibility of curbing the debilitating economic offence of money laundering in our country, every action of the Enforcement Directorate in the course of such exercise is expected to be transparent, above board and conforming to pristine standards of fair play in action,” the judgment notes.
IN a scathing judgment, the Supreme Court has severely castigated the Directorate of Enforcement (ED) for arresting the M3M India directors Pankaj Bansal and Basant Bansal in a “clandestine” conduct which, the court opines, reeks of arbitrary exercise of power.
Castigating the ED, the court said the ED, mantled with far-reaching powers under the stringentPrevention of Money Laundering Act (PMLA), 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.
A Bench comprising Justices A.S. Bopanna and Sanjay Kumar directed the release of the duo forthwith holding their arrest illegal and in breach of Section 19(1) of the Prevention of Money Laundering Act, 2002.
“The clandestine conduct of the ED in proceeding against the appellants, by recording the second Enforcement Case Information Report (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,” Justice Kumar, who authored the judgment for the Bench, has held.
“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,” the judgment reads.
Commenting on Section 19 of the PMLA, the Bench held that henceforth the ED would be required to furnish in writing the grounds of arrest to the accused without exception.
The Bench noted thatArticle 22(1) of the Constitution provides 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,” the judgment reads.
It continues, “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,” the judgment reads further.
The judgment goes on to say: “To meet this requirement, it would be essential for the arrested person to be aware of the grounds on which the authorised 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.”
The judgment avers further: “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 purpose and must be given due importance,”the Bench has held.
The Bench has also held that the failure of the accused 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 are liable to be arrested under Section 19, as that provision specifically requires him to find a 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,” the Bench has held.
“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 categorised as ‘evasive’ and that record is not placed before us for verification,” the judgment notes.
“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,”the Bench has held.
In this case, the first enforcement case information report (ECIR) was registered by the ED on June 15, 2021, and Roop Bansal (Promotor of M3M Group) was arrested in connection with the said ECIR on June 8, 2023. Neither of the appellants was shown as an accused in the first ECIR. However, it is the case of the ED that the investigation in relation to the first ECIR is still ongoing.
After the arrest of Roop Bansal, both the appellants secured interim protection by way of anticipatory bail on September 9, 2023, albeit till the next day of hearing, July 5, 2023, from the Delhi High Court. However, both the appellants were summoned on June 14, 2023 for interrogation in connection with the first ECIR, in which they had interim protection.
Summons in that regard were served upon them on June 13, 2023, at 06.15 p.m.
Significantly, as the Bench notes in its judgment, the second ECIR was recorded only on that day, i.e., on June 13, 2023 in connection with FIR No. 0006 which was registered on April 17, 2023. In this case 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 a.m. on June 14, 2023. While they were there, Pankaj Bansal was served with summons at 04.52 p.m., requiring him to appear before another investigating officer at 05.00 p.m. in relation to the second ECIR.
The Bench noted that there is ambiguity as to when Basant Bansal was served with such summons. It was 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 p.m. on June 14, 2023. Pankaj Bansal received the summons and appeared but as he did not divulge relevant information, the investigating officer arrested him at 10.30 p.m. on June 14, 2023.
Frowning upon the ED for its clandestine conduct, the Bench has noted: “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 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.”
On the facts, the Bench held that 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 first information report (FIR) dated back to April 17, 2023, and then went about summoning the appellants on one pretext and arresting them on another within a short span of 24 hours or so, manifests complete and utter lack of bonafide.
“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 four 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 April 17, 2023 at that time,”the Bench has underscored.
The Bench has added: “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.”
On April 17 this year, an FIR was registered by the Anti-Corruption Bureau, Panchkula, Haryana, under Sections 7, 8, 11 and 13 of the Prevention of Corruption Act, 1988, read with Section120B IPC for the offences of corruption and bribery along with criminal conspiracy.
The names of the accused in this FIR are:
Sudhir Parmar (the then special judge, Central Bureau of Investigation and ED, Panchkula);
Ajay Parmar (nephew of Sudhir Parmar and deputy manager (legal) in M3M Group);
Roop Bansal (Promotor of M3M Group); and
Other unknown persons.
Significantly, prior to this FIR, between the years 2018 and 2020, FIRs were registered by allottees of two residential projects of the IREO Group, alleging illegalities on the part of its management.
On the strength of these FIRs, the ED recorded ECIR No. GNZO/10/2021 dated June 15, 2021(first ECIR) in connection with the money laundering offences allegedly committed by the IREO Group and Lalit Goyal, its vice-chairman and managing director.
On January 14, 202, the ED filed prosecution complaint No. 01/2022, titled Assistant Director, Directorate of Enforcement versus Lalit Goyal and others, against seven named accused, under Section200 of the Code of Criminal Procedure, 1973 read with Sections 44 and 45 of the PMLA.
The case was pending in the court of Sudhir Parmar, special judge. 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 April 17, 2023. On May 12, 2023, the ED issued summons to M3M India Pvt Ltd, calling upon it to provide information and documents pertaining to transactions with certain companies.
On June 1, 2023, the ED raided the properties of M3M Group and effected seizures of assets and bank accounts. Roop Bansal was arrested by the ED on June 8, 2023, apropos the first ECIR.
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 the meanwhile, on the basis of FIR No. 0006 dated April 17, 2023, the ED recorded another ECIR, on June 13, 2023 (the second ECIR)