New Delhi: On 3 October 2023, a bench of two justices of the Supreme Court of India delivered a verdict that set the media buzzing. It was in respect of petitions filed by the Bansals, a father-son duo called Basant and Pankaj, who had challenged their arrest by the Enforcement Directorate (ED) in June on allegations of having committed offences under the draconian Prevention of Money Laundering Act (PMLA) 2002 and their subsequent remands to custody by the concerned court.
The common judgement, Pankaj Bansal vs Union of India & Ors. set the father and son at liberty. That, in itself, is a notable outcome. What makes the judgement in Pankaj Bansal remarkable is that the Court did not need to pen paeans to liberty or creatively interpret statutory texts to somehow arrive at this conclusion.
The Allegations
What were the ‘grave allegations’ that convinced the courts below that the petitioners ought to remain in custody? The Supreme Court’s order extracts these to a limited extent.
The story began sometime in 2018 with corruption and mismanagement allegations in respect of the affairs of the IREO group, a real-estate business from Gurgaon, Haryana. These allegations had led to 13 cases registered between 2018 and 2020 against the group and its officials before courts in Haryana. In 2022, the ED filed its first case in the matter as well, before a special judge in Panchkula.
The Bansals were not in the picture yet. It was only after the anti-corruption bureau, Panchkula, alleged that the judicial officer before whom some cases had been pending, including the ED prosecution against IREO, had given favours to IREO and another Bansal-owned real-estate company called M3M during his postings across Haryana. This led to registration of a fresh case on 17 April 2023 by the anti-corruption branch of the local police, which directly implicated the Bansals.
Still, neither Pankaj Bansal nor Basant Bansal were named as accused persons yet. It was only Roop Bansal, brother of Basant Bansal, who was accused of money laundering and arrested by the ED on 8 June 2023. Worried, the Bansals sought and obtained protection from any arrest by the ED from the Delhi High Court on 9 June 2023.
Here lay the catch—the arrest of Roop Bansal, and the protection granted to the other Bansals, was in respect of PMLA cases lodged by the ED in respect of the original allegations involving laundering and mismanagement of funds by the IREO group. So far, there was no separate case lodged by the ED in respect of the fresh corruption allegations involving the judicial officer that had led to a criminal case in April 2023.
The plot thickened. The non-arrested Bansals were summoned for investigation by the ED on 13 July 2023 and directed to appear the next day. This summons was under the first case. That same day, unknown to the Bansals, the ED had lodged a fresh case under the PMLA in respect of the corruption allegations involving the judicial officer.
The Bansals appeared before the agency, answered questions, and while they were at the ED office in Rajokri, they were served with a fresh summons in respect of the second case, of which they had no knowledge and no protection from arrest.
After being questioned in respect of the fresh summons, both were arrested a few hours later, under the second case on 14 June 2023. The Bansals were produced within 24 hours before a court, where the ED sought their custody for questioning and was granted for five days. They ultimately remained in ED custody for 10 days, and were sent to judicial custody on 26 June.
A ‘Wanton’ Abuse of Power?
The Bansals claimed that the arrest by the ED was a “wanton abuse of power” [para 21], and not only were the arrests illegal, so was the subsequent order of 15 June 2023 by which they were sent to custody. ED officials contested this claim and argued that the arrest was done as per law, and there was no illegality with the judicial orders issued thereafter.
To better understand the argument, we need to break it up into its constituent parts. When the Bansals challenged the arrest, this meant challenging three different aspects of the exercise of power by the ED.
First, challenging whether there was reasonable grounds to believe that the Bansals were guilty of money laundering, which is the statutory premise for exercising arrest powers under section 19 of the PMLA.
Second, challenging that even if there were such reasons, resorting to arrest meant there had to be some immediate or urgent need to take a person into custody.
Third, that if these two requirements were made out, an arrest could only be made by scrupulous adherence to the law, which meant communicating grounds of arrest to the arrested person.
In respect of the judicial order remanding the person into custody, the Bansals’ argument was again a composite one. It was not the job of the court to merely inquire into whether there was a good investigative reason to grant custody to the agency, but rather that this was the second of a two-step inquiry.
The first, and critical, step was to examine whether the arrest itself had been done in the manner established by law. In other words, the trial court had to satisfy itself on the three issues I have outlined above. This, the Bansals argued, had not taken place at all.
Viewed from this prism, the ED’s responses went like this:
First, there was enough material providing reasonable grounds to believe that the persons were guilty of money laundering.
Second, the persons were “deliberately attempting to withhold information” [para 12] and “adopted an attitude of non-cooperation” [para 12] during their questioning and the fact that they had bribed judicial officers confirmed there was a threat they may pervert the course of justice if not arrested.
Third, the grounds of arrest were “read out” to the accused persons, and they were taken before a court within the stipulated time. The ED also argued that, in any event, the legality of the arrest was a non-issue since a competent court had confirmed the arrest and granted further custody of the accused persons in this case.
‘A Total Failure In Discharging His Duty’
In Pankaj Bansal, the Supreme Court [at para 13] makes it clear that it is not considering the first issue of the three I have framed above: the sufficiency of material available with the authority to determine if there could be reasonable grounds to believe the accused were guilty of money laundering.
This meant the focus on the arrest part was in respect of the second and third issues. And, also, determining what effect would the subsequent judicial order have on the aspect of arrest.
This judicial order is where the Court chose to begin its scrutiny and held that it reflected a “total failure (on part of the judge) in discharging his duty”, as it appeared that the judge had not tested whether the arrest satisfied the legal mandate of section 19 PMLA but was merely guided by the seriousness of the allegations while passing his order [para 18].
This led the Supreme Court to examine for itself whether the mandates of section 19 had been complied with by the ED officials and the observations made in this regard have garnered significant media attention:
“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. 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.” [para 20]
“The way in which the ED recorded the second ECIR … 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.” [para 22]
These were only general observations, prefacing what the Court held in respect of the specifics of the second and third issues that I flagged above.
Could the ED arrest persons for their non-cooperation? That the persons were evasive or did not cooperate in the questioning and thus merited arrest was painting the situation with too broad a brush, the Court held.
Such a scenario would draw us perilously close to a situation where anything other than the accused singing a confessional hymn would be seen as non-cooperative, which would be in the teeth of the fundamental right against compelled self-incrimination.
Instead, the Court hinted that a fact-based examination of such claims of non-cooperative or evasive replies made by agencies was necessary to see if they had any legs to stand on [para 25].
Supply The Grounds For Arrest In Writing: SC
This takes care of the second issue. In respect of the third issue, procedures for conducting the arrest, the Court noted that the ED officials had not supplied a copy of the grounds of arrest but claimed to have read them out to the accused persons. Section 19 of the PMLA0 itself stated that the grounds had to be “informed” to a person, and reading them out met the threshold was the contention of the ED [para 26].
The Court’s engagement with this issue makes for good reading on how to examine the claims of any state agency.
It began with the Court asking if reading out the grounds was consistent departmental practice; the ED admitted there was no standard practice and to having supplied written grounds of arrest in cases [para 26].
So how do you decide what is good to satisfy a threshold such as ‘informing’ a person about the grounds? Since section 19 PMLA reflected a constitutional commitment to inform a person about the grounds, the Court held that the threshold had to be “meaningful” [para 29]. Especially in the context of the PMLA where bail itself was made contingent on the merits of the case, meaningful communication of the grounds of arrest was essential to prevent the exercise of seeking bail from being rendered a futility akin to shooting arrows in the dark [para 29].
The importance of conveying the grounds in PMLA cases coupled with the complexity of such cases—some grounds of arrest ran into many pages—convinced the Supreme Court that it was prudent to stipulate that the grounds ought to be supplied in writing in all cases for meaningful compliance of the constitutional imperative.
Besides securing constitutional objectives, such as ensuring a person can seek meaningful legal assistance, such a move would also help the ED because it prevented an accused from later disputing whether the grounds had been supplied to her or not [paras 32-33]. Judgments of high courts holding otherwise, which the Directorate had placed reliance upon, were declared as being incorrect.
Assessing the Importance of Pankaj Bansal
In another universe, Pankaj Bansal is just another judgement where a court has examined the legality of a governmental action and pronounced upon it.
But we cannot ignore the context of the universe in which the Supreme Court of India operates, and that the judgement came in 2023—in a case under the PMLA being investigated by the ED—makes the observations criticising the conduct of the agency and the findings arrived at on points of law significant in themselves. This perhaps explains the wide coverage that the decision has received in all corners.
On points of law, Pankaj Bansal is a simple and highly efficient reminder of how statutory and constitutional mandates on issues of personal liberty ought to be interpreted and applied by Courts: By Holding State Action Depriving Personal Liberty to a High Burden of Accountability.
We may even afford a dramatic flourish to call it a ‘golden rule’ in such matters. The key here is high burden, and not just any burden. The logic of imposing merely a burden instead of a high burden is what allows police and judges to reduce robust procedural norms into mere checklists with each issue of compliance nothing more than a box needing to be ticked.
Seeking ‘meaningful’ implementation of the norms, as sought in Pankaj Bansal, restores the robustness of the legal protection, and in turn ensures that the scales are not tilted too far in favour of the state.
If considered specifically in respect of the PMLA regime, Pankaj Bansal suggests there is still life left in challenges to the exercise of power under the PMLA by the ED, even after the Supreme Court had unanimously upheld the validity of various statutory clauses in 2022.
The judgement further brightens the faint glow of hope that has been emerging over the last year across high courts as well as the Supreme Court. In a sense, this logic is that old adage of great power coming with great responsibility.
It is with this spirit that the Constitutional courts have accepted the argument that the wide powers conferred upon authorities under the PMLA merit significant scrutiny to ensure no misuse or abuse takes place.
While the judgment in Pankaj Bansal merits all plaudits, it should not be at the cost of forgetting the context in which it has been delivered: that an adherence to the most basic precepts of the rule of law by an institution which is meant to do so appears exceptional, poignantly sums up the state of play when it comes to questioning state power in India today.
One judgement is not going to change that overnight, as was demonstrated merely a few days afterwards when a different agency sought to adopt essentially similar tactics of obstructing meaningful compliance of Article 22—protection against arrest and detention in certain cases—by not providing a copy of the FIR or grounds of arrest to persons after arrest.
But that one judgement slowly builds a body of precedent, and in the long run it can certainly help tip the scales.
(Abhinav Sekhri is a Delhi-based lawyer who writes on criminal law and procedure.)
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