The Power to Arrest under the Prevention of Money Laundering Act, 2002

Nitesh Rana

The officers of the Enforcement Directorate (ED) are not police. Therefore, the law relating to arrest in the Code of Criminal Procedure (CrPC), 1973 is not applicable to officials of the ED. 

Section 19 of the Prevention of Money Laundering Act (PMLA), 2002 empowers the investigating agency/ED to arrest any person who is guilty of money laundering under the Act.

Now let’s adumbrate the money laundering laws in India briefly.

India, being a signatory to the United Nations Convention which deals with anti-money laundering to counter financial terrorism, enacted a special law – the PMLA. It was enacted on the basis of a Standing Committee Report submitted on March 4, 1999, with the avowed objective to prevent money laundering.

After it was notified in the year 2005, the ED was given the responsibility of implementation of the Act. Thereafter, India, being an active member of the Financial Action Task Force (FATF) on Money Laundering established by the G-7 Summit in Paris, set out measures to implement effective anti-money laundering programs.

Section 3 of the PMLA defines offences under the Act and Section 4 expounds the punishment, which is a minimum of 3 years and a maximum of 7 years’ imprisonment. In special circumstances, the prison sentence may extend to 10 years.

Section 19 requires that before arresting anybody, there must be “reason to believe” based upon “the material in possession” that the arrestee is “guilty” of the offence of money laundering and the “reason to believe” must be “recorded in writing” firstly.

Secondly, the “ground of arrest’ must be informed to the arrestee “as soon as may be”.

Thirdly, the copy of the “order of arrest” along with the “material in possession” must be forwarded to the adjudicating authority in a sealed envelope.

The basic difference between arrest by police under Section 41 of the CrPC and arrest under Section 19 of PMLA is that in the former case, arrest may be done on “mere suspicion”, whereas, the arrest under PMLA – which has been put on a higher pedestal by the Legislature – requires sufficient evidence to form a “reason to believe” that the person is guilty of the offence of money laundering.

Lately, the power to arrest under the PMLA has been challenged on the ground that as per the mandate of the Act, “ground of arrest” must be supplied “as soon as may be” and non-supply of the ground of arrest would render the arrest illegal.

The Delhi High Court in the case of Moin Akhtar Qureshi v. UOI held that Section 19 of the PMLA uses the expression “informed of the grounds of arrest”, as used in Article 22 (1) of the Constitution, and does not use the expression “communicate” the grounds of arrest.

The Legislature has consciously used the word “inform”, which is also used in Article 22(1), in contradiction with the expression “communicate” used in clause (5) of Article 22. It further propounds that in the case of preventive detention, the detenue only has a right of making representation and, consequently, the obligation cast on the State is to “communicate” the grounds of detention “as soon as it may be possible”.

However, in the case of arrest, the arrestee has to be produced before the Magistrate within 24 hours of such arrest by virtue of Article 22(2). Therefore, there is an inbuilt safeguard of the rights of the arrestee, which is not available to the detenue under preventive detention.

The distinction in usage of the two expressions has to be viewed in the context in which they are so used. The obligation to “inform” the arrestee the grounds of arrest is not the same as the obligation to “communicate” the grounds of detention to the person preventively detained.

Therefore, the expression used in Section 19(1) is to inform the arrestee “as soon as may be” the grounds of such arrest. The provision does not oblige the investigating agency to inform/serve the order of arrest, or the grounds of such arrest to the arrestee simultaneously with such arrest. Therefore, the non-supply of grounds of arrest to the arrestee does not render the arrest illegal. Mere information satisfies the requirement of the provision.

A similar view has been expressed in Vakamulla Chandrashekhar v. UOI, where it was held that the “information of the ground of arrest” “as soon as may be” satisfies the requirement of the arrest under Section 19 of the PMLA.

However, in the case of Rajbhushan Omparaksh Dixit v. UOI the Hon’ble Delhi High Court has expressed a contrary view and referred all the related matters to a larger bench for consideration.

In the case of Chhagan Chandrakant Bhujabal v. UOI, the High Court of Bombay has also held that it is clear from the language of the Act that the grounds of arrest are not to be supplied at the time of arrest itself or immediately on arrest but “as soon as may be”. There is no breach of any statutory safeguards as the oral communication of grounds of arrest is not only substantial, but also in proper compliance with the PMLA provision.

In another landmark judgment of High Court of Delhi, Virbhadra Singh & Ors v. Enforcement Directorate, the Court has expressed a similar view.

Nevertheless, now the issue is presently pending before the Supreme Court for consideration. However, reading the observations made in all the judgments in juxtaposition, it emerges that the view expressed in Moin Akhtar Qurashi, Vakamulla Chandrashekhar, Chhagan Chandrakant Bhujabal and Virbhadra Singh is in consonance with the provisions of the PMLA, and hold the field.

Be that as it may, the PMLA was enacted to curb the offence of money laundering, which poses a serious threat not only to the financial system of  India, but also the integrity and sovereignty of the country.

The author is a counsel for the Enforcement Directorate.