Bombay High Court
Vijay Machindar vs Directorate Of Enforcement And Anr on 17 January, 2024
Author: Prakash D. Naik
Bench: Prakash D.Naik
2024:BHC-AS:2742
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION (ST) NO.585 OF 2024
Vijay Machindar ...Petitioner
Versus
Directorate of Enforcement and Anr. ...Respondents
....
Mr. Sandeep R. Karnik, Advocate for Petitioner.
Mr. Ashish Chavan a/w Mr. Zisnan Quazi for Respondent No.1./ED.
Mr. Arfan Sait, APP for the Respondent - State.
....
CORAM : PRAKASH D.NAIK, J.
DATE : 17th JANUARY 2024.
P.C.:-
1. The Petitioner invokes the powers of this Court under Article 227 of
the Constitution of India challenging the order dated 4 th January 2024
passed by learned Designated Special Court, under the PML Act, 2002, in
PMLA Remand Application No.26 of 2024.
2. The Oshiwara Police Station, Mumbai has registered FIR No. 837 of
2021 dated 14th December 2021 under Sections 406, 409, 420, 34 of the
Indian Penal Code, 1860 and Sections 3, 4, 5, 8 and 13 of Maharashtra
Ownership Flats (Regulation of the Promotion of Construction, Sale,
Management and Transfer) Act, 1963 (for short "MOFA").
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3. ECIR Bearing No. MBZO-I-17 of 2023 was registered on 29 th March
2023 for offence under Section 3 of the Prevention of Money Laundering
Act, 2002.
4. The petitioner preferred an application for Anticipatory Bail in
connection with FIR No. 837 of 2021 registered with Oshiwara Police
Station, Mumbai viz. Anticipatory Bail Application No. 2694 of 2021. The
said application was allowed by learned Additional Sessions Judge, City
Civil and Sessions Court, Mumbai vide order dated 7th April 2022.
5. The petitioner was arrested on 3rd January 2024 in connection with
ECIR Bearing No. MBZO-I-17 of 2023. The petitioner was produced before
learned Designated Special Court, under the PML Act, for Greater Mumbai
on 4th January 2024.
6. The Investigating Agency filed Remand Application on 4 th January
2024 and sought custody of the petitioner to the Directorate of Enforcement
for 14 days for the purpose of investigation into the offence of money
laundering in the above case.
7. The petitioner was produced before the learned Special Judge. The
remand application was opposed by the petitioner through his Advocate.
Vide order dated 4th January 2024, the petitioner was remanded in E.D.
custody till 12th January 2024.
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8. The order dated 4th January 2024 remanding the petitioner to ED
custody is under challenge in this petition.
9. Learned Advocate for Petitioner submitted as under:-
(i) The petitioner was produced before the Special Court under PML Act
which was first available opportunity to the petitioner to raise contention
that the ground of arrest given by Respondent No.1 does not meet mandate
of Section 19 of the PML Act.
(ii) The arresting officer did not record the reasons to show his
satisfaction that arrest was necessary.
(iii) The grounds of arrest were served upon the petitioner to complete
the formality and there is no application of mind reflected in the grounds of
arrest.
(iv) The grounds of arrest merely refers to the facts of the predicate
offence with vague assertion that considering the seriousness and the
gravity of matter under investigation, it is essential to arrest the petitioner
under Section 19 of the PML Act.
(v) Section 19 of the PML Act requires the authorised officer to record
reasons about his satisfaction for effecting arrest and the said provision is
mandatory. As per Section 19 (1) of the Act, the reasons for such belief
stipulated in the said provisions are required to be recorded in writing.
There is no such reason being recorded in the Remand Application and
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therefore, mandate of Section 19 of PML Act is not complied. The
compliance of section 19 of PML Act is independent of the remand
application and the material produced in support of the said remand.
(vi) The remand order dated 4th January 2024 is illegal. It is required to
be set aside and the petitioner has to be released from detention. The
petitioner was granted anticipatory bail in predicate offence on the ground
that it was the third FIR on the same facts.
(vii) The grounds of arrest does not reflect reasons for arrest for the
purpose of investigation and application of mind to Section 19 of the Act.
(viii) It was expected that the Special Court ought to have considered
whether section 19 is complied.
(ix) The arrest order dated 3rd January 2024 is cryptic. It does not satisfy
the requirement of Section 19 of the Act.
(x) As per Section 19(1) of the Act, if the Director, Deputy Director,
Assistant Director, or any other officer authorised in this behalf by the
Central Government by general or special order, has on the basis of material
in his possession, reason to believe (the reason for such belief to be
recorded in writing) that any person has been guilty of an offence
punishable under this Act, he may arrest such person and shall, as soon as
may be, inform him of the grounds for such arrest.
(xi) The Director, Deputy Director, Assistant Director or any other officer
is required to forward copy of the order to the Adjudicating Authority in
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sealed envelope, in the manner, as may be prescribed and such Adjudicating
Authority shall keep this order and material for such period, as may be
prescribed after the arrest of such person. The reasons for belief were not
before the remand Court. There is distinction between order referred to
Section 19 and the arrest order.
10. Learned Advocate for the petitioner has relied upon the following
decisions:-
(i) Pankaj Bansal Vs. Union of India & Ors. delivered in
Criminal Appeal Nos. 3051-3052 of 2023 decided on 3 rd
October 2023.
(ii) V. Senthil Balaji Vs. The State of Represented by Deputy
Director and Ors. delivered in Criminal Appeal Nos. 2284-
2285 of 2023 decided on 7th August 2023.
11. Learned Advocate for Respondent No.1 submitted as under:-
(i) There is compliance of Section 19 of PML Act. As soon as petitioner
was arrested, the grounds of arrest were served upon the petitioner.
(ii) The petitioner was produced before the remand Court, the
application for remand was filed by Respondent. The remand application
and grounds of arrest reflect application of mind to Section 19 of the PML
Act.
(iii) Considering the material on record and the reasons stated in the
remand application, the petitioner was remanded to custody. The remand
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is not illegal. The reasons are assigned for remanding the petitioner to
custody.
(iv) The remand application, grounds of arrest and arrest order reflects
application of mind by respondents justifying arrest of the petitioner in
accordance with Section 19 of PML Act. The arrest order has to be read
with grounds of arrest.
(v) The respondent had also forwarded the reasons for belief in
accordance with Section 19(2) of the PML Act in sealed envelope to
Adjudicating Authority in compliance with Section 19(2) of the PML Act.
(vi) The case diary and all requisite documents were produced before the
Court. The remand application contained material against the petitioner
and reflects need for arrest of the petitioner. Grounds of arrest supports the
arrest with reason in compliance with Section 19 of the Act.
12. Reliance is placed on the decision of Apex Court in the case of Ram
Kishor Arora Vs. Directorate of Enforcement dated 15th December 2023
delivered in Criminal Appeal No. 3865 of 2023.
13. The FIR dated 14th December 2021 registered with Oshiwara Police
Station, Mumbai vide FIR No. 837 of 2021 contains the following
allegations:-
(a) The complainant Rajendra Nihalchand Surana owns a
company namely M/s. Siddhartha Ratna Pvt. Ltd. wherein Mr.
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Rajendra Surana and his brother Mahendra Surana are Directors.
(b) Mr.Anil Sharma, one of complainant's friend, introduced him
to Mr. Vijay Machinder, Director of M/s. Ornate Spaces Ltd. and
during the meeting Mr.Vijay Machinder gave him the information
about one project namely Grove Tower adjacent to Oshiwara
Police Station, Mumbai and also told that the said project would
be completed within three years and assured him that if an
investment is made in the said project, it will accrue huge
benefits/ profit.
(c) On assurance of Mr. Vijay Machinder, the complainant Mr.
Rajendra Surana decided to purchase 14 flats in the said project
and accordingly, paid an amount of Rs.15,60,40,000/- to the
account No. 00840350000046 of HDFC Bank pertaining to
accused persons/entity through multiple cheques from
11.04.2012 to 05.02.2019 and accordingly receipts were issued
to them for accepting money. These transactions were done from
the accounts of M/s. Siddhartha Ratna Pvt. Ltd., Ms. Kusumlata
Surana, Mr. Rajendra Surana, his father Mr. Nihalchand Surana
and his wife Mrs. Bina Surana. Moreover, from 2012 to 2019,
complainant paid Mr. Vijay Machinder an additional Rs.28 Crore
in cash for those 14 apartments and Mr. Vijay Machinder also
provided Mr. Rajendra Surana with a receipt on the letterhead of
Ms. Ornate Spaces Pvt. Ltd.
(d) Mr. Rajendra Surana was given allotment letters of only three
flats out of 14 purchased flats and agreement for sale of
remaining 11 flats was prepared at the same time however it has
not been registered till now.
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(e) The complainant Mr.Rajendra Surana learnt that M/s. Ornate
Spaces Pvt. Ltd. and its Directors had taken loan from many
banks and NBFCs for the said project and that the said project of
Grove Towers had gone into NCLT.
(f) Upon gathering information from NCLT, the complainant got
to know that 07 flats out of his purchased 14 flats were also sold
to other persons which further raised suspicion and when he
enquired the same from Mr. Vijay Machinder, he informed that he
will soon submit a new allotment plan and thereafter, he started
to avoid and gave evasive replies to the complainant Mr.Rajendra
Surana.
(g) 20-25 persons known to Mr. Rajendra Surana also paid Rs.30
Crores for 31 flats in the said project, however, Mr. Vijay
Machinder failed to provide possession of 14 flats to Mr.Rajendra
Surana and 31 flats to the persons known to Mr. Rajendra
Surana. No construction work except digging in the said plot of
land has been carried out till the date of filing of the complaint.
14. Thus, it has been alleged in the FIR that Mr. Vijay Machinder, during
the year 2012 to 2019, by accepting the flat booking amounts, has
misappropriated the collected funds and defrauded various buyers to the
tune of Rs.74 Crore by unjustly breaching the trust thus have deceived
them.
15. As Section 420 of IPC is scheduled offence as detailed in Paragraph 1
of Part A of schedule of the Prevention of money laundering Act, 2002, the
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instant ECIR bearing no. ECIR/MBZO-I/17/2023 dated 29.03.2023 has
been recorded. The Proceeds of Crime in the case as per the FIR is Rs.74
Crore.
16. In the instant case, it is alleged as follows:-
(i) During the year 2009, United Trust of India (UTI) had a plot
admeasuring 10500 sq mtr. located at Oshiwara, Jogeshwari (W) which was
to be developed for employees of UTI. The said plot was allotted to UTI by
MAHDA in the year 1987. There were several litigations and complexities,
due to which matter has gone before Hon'ble Bombay High Court.
Subsequently, on 15.03.2010, a tri party agreement was executed and
registered among MHADA, UTI and M/s Ornate, according to which UTI
Employee Sai Samruddhi Co-Op HSG Society would have plot admeasuring
area 8003 sq. mtr. including a disputed plot of 1364 sq. mtr. and MAHDA
has retained 2500 sq. mtr. area. Subsequent to tri party agreement and
signing of consent terms, one Mr. Shahid A Khan had taken stay on
construction/development on the abovesaid plot from City Civil and Session
court and thereafter on 17.04.2015, again a consent term was signed
between Ornate, Shahid A Khan and MAHDA, according to which society
had to surrender disputed plot of 1364 sq. mtr. to Shri Shahid A Khan and
thus, society was left with plot admeasuring area 6629 sq. mtr.
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(ii) As per the terms and conditions of development agreement dated
18.05.2010 between M/s Ornate Spaces Pvt. Ltd. and society, M/s Ornate
Spaces Pvt. Ltd. would construct 152 flats admeasuring carpet area 650 sq.
ft. + floor bed and dry balcony (maximum permissible) within 54 months
from the date of commencement certificate which was issued on
06.05.2015 for construction as per 2.5 F.S.I. on plot area admeasuring
6629.18 mr. However, after receipt of commencement certificate,
construction was not commenced and fresh requests were made to increase
the F.S.I. to "3.5". Thereafter, commencement certificate was issued again on
21.02.2018 which was valid till 05.05.2018 subjected to fulfilling the
condition as stipulated therein.
(iii) In the meantime, M/s Ornate Spaces Pvt. Ltd. and Shri Vijay
Machinder had started taking flat bookings as well as acquired huge loans
from various financial institutions even though the construction was not
even commenced.
(iv) Thereafter, M/s Ornate Spaces Pvt. Ltd. was admitted to NCLT on
29.06.2020 wherein NCLT passed an order dated. 29.06.2020 appointing
Shri Jayesh Natvarlal Sanghrajka as resolution professional. M/s IDBI
Trustship Services Ltd. (Piramal loan acquired by IDBI Trustship) had
admitted M/s Ornate Spaces Pvt. Ltd. to NCLT due to default of loan
amounting to approx..Rs.194.36 Crore.
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(v) During NCLT proceedings, various claims had been received and
subsequently as per the final claims as on 30.05.2023, total claim admitted
amount to approx..Rs.734.27 Crore. Total number of claims admitted in the
capacity of flat buyers were about 99 individuals/ entity out of which about
86 were finally admitted for claim. Total amount transferred to M/s OSPL
in lieu of purchase/ advance of flats is approx..Rs.93.44 Crore. There are
total of 09 claimant who had claimed principal amount of
approx..Rs.470.60 Crore and a total amount of Rs.585.17 Crore including
interest+ compensation + default interest.
(vi) On the directions of Resolution professional, transactional audit was
conducted by M/s Jain Jagawat Kamdar & Co. and Shri Sandip Bigchandani
& M/s True Val were appointed for valuation of land and building. M/s Jain
Jagawat Kamdar & Co. submitted their report on 13.05.2021 according to
which M/s OSPL had granted loans to related parties totally amounting to
approx..Rs.116.26 Crore out of which approx..Rs.114.59 Crore had been
transferred to M/s Ornate Developers. M/s Jain Jagawat Kamdar & Co. also
pointed out that from accounting software (Tally) of FY 2018-2019,
approximately an amount of Rs.42.42 Crore was outstanding as loans
advanced to entities or persons other than related parties under the head
'Loans to Others', however, as on 31 March 2020 the amount of loans
advanced to entities or persons other than related parties reduced from
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Rs.42.42 Crore to Rs.15.27 Crore. Various other irregularities with regard to
routing of sum received as interest on fixed deposits, dilution of fixed
deposits, cash transactions with ornate developers, reconciliation with sales
mis - (booking advance grove tower) were also highlighted in the said
report.
(vii) Hence, since 2012, Shri Vijay Machinder induced common flat buyers
for purchase of flats in the project of Grove Tower at CTS No: 2A, 3(Part) at
Village: Oshiwara, Taluka: Andheri, Mumbai Suburban District, Mumbai on
the pretext of good return and assurance of completion of project in three
years. After giving such assurance, Vijay Machinder had taken flat bookings,
even issued allotment letters and registered sale deeds also. The funds so
received by Vijay Machinder were not utilized for construction of the said
project and was diverted to related entities and other projects. Shri Vijay
Machinder had also availed loans to the tune of approx..Rs.710 Crore out of
which principal amount of approx..Rs.470 Crore is outstanding. From the
year 2012 to the date of registration of FIR, M/s. Ornate Spaces Pvt. Ltd.
did not carried out any construction except digging on the said plot of land.
In this manner Shri Vijay Machinder have misappropriated and diverted,
the aggregate amount of Rs.15.6 Crore (complainant in FIR) and also
cheated the complainant.
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(viii) Thus, Shri Vijay Machinder in connivance with his family members
had hatched a conspiracy to induce & cheat flat buyers by collecting
advances/ purchase amount and misappropriated the funds collected from
financial institutions. Further, Vijay Machinder knowingly and indirectly
indulged in generation of proceeds of crime in terms of section 2(1)(u) of
PML Act, 2002, r/w explanation to Section 2(1)(v) of the Act, 2002.
17. In the grounds of arrest which were undisputedly served upon
petitioner after his arrest, the facts of the crime committed by accused has
been narrated. It is alleged that the petitioner in connivance with his family
members had hatched conspiracy to induce and cheat flat buyers by
collecting advances/purchase amount and misappropriated the funds
collected from financial institutions. The petitioner knowingly and
indirectly indulged in generation of proceeds of crime in terms of section
2(1)(u) of PMLA, 2002, r/w explanation to Section 2(1)(v) of the Act,
2002. It is further stated that based on the material in possession it is
apparent that petitioner has directly involved himself in the offence of
money laundering as defined under Section 3 of PML, Act and punishable
u/s 4 of PML Act 2002 and has committed offence of money laundering.
Considering the seriousness and gravity of the matter under investigation, it
is essential to arrest the petitioner under section 19 of the PML Act who is
guilty of indulging in the act of money laundering as under Section 3 of
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PML Act and punishable as per Section 4 of PML Act.
18. The Assistant Director, Directorate of enforcement, Mumbai Zone-I
issued Arrest order dated 3rd January 2024 indicating that the Assistant
Director, Directorate of Enforcement, Zone-I, Mumbai have reason to
believe that petitioner has been found to be guilty of an offence punishable
under the provisions of Prevention of Money Laundering Act, 2002. Now
therefore, in exercise of the powers conferred on the officer under sub-
section (1) of section 19 of the PML Act, he hereby arrest the petitioner on
3rd January 2024 and he has been informed of the grounds for such arrest.
The arrest order has to be read with the grounds of arrest.
19. The petitioner was produced before the Special Court under PML Act
on 4th January 2024 with Remand Application which elaborately contained
the material against the petitioner and needs for arrest in accordance with
Section 19 of the PML Act.
20. The Remand Application dated 4th January 2024 mentions that the
petitioner with malafide intentions had taken loans from Financial
institutions against the project and utilized the same for repayment of
earlier loans since executing the development agreement. Hence, since
2012, the petitioner had induced common flat buyers for purchase of flats
in the project of Grove Tower at CTS No. 2A, 3(Part) at Village, Oshiwara,
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Taluka Andheri, Mumbai Suburban, District Mumbai on the pretext of good
return and assurance of completion of project in three years. After giving
such assurance, the petitioner tad taken flat bookings even issued allotment
letters and registered sale deeds. The funds received by the petitioner were
not utilized for construction of the project and was diverted to related
entities and other projects. The petitioner also availed loans to the tune of
approx. Rs. 710 crore out of which principal amount of approx. Rs.470
crores is outstanding. From the year 2012 to the date of registration of FIR,
M/s. Ornate Spaces Pvt. Ltd. did not carried out any construction except
digging on the plot. The petitioner misappropriated huge amount. Thus,
the petitioner in connivance with others hatched the conspiracy to induce
and cheat flat buyers by collecting advances/purchase amount and
misappropriated the funds collected from financial institutions. The
petitioner knowingly and directly indulged in generation of proceeds of
crime in terms of Section 2(1)(u) of PML Act 2002 read with explanation to
Section 2(1)(v) of the Act 2002. Based on the material in possession, it is
apparent that the petitioner has directly involved himself in the offence of
money laundering as defined under section 3 of the PML Act and
punishable under Section 4 of PML Act. Considering the seriousness and
gravity of the matter under investigation, the petitioner has been arrested
under Section 19 of the PML Act. The petitioner being director of M/s.
Ornate Spaces Pvt. Ltd. took advance flat booking to the tune of Rs.15.6
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crores from the complainant and induced and promised but did not hand
over the flats. The constructions of the project was commenced in 2018
that too only excavation work was completed. Loan was obtained garb of
the Oshiwara Project since 2011 and advance flat bookings were taken
since 2012. The funds collected has been siphoned off by the petitioner
which needs further investigation. Thorough investigation is required to
determine the flow of funds related to loans taken from financial
institutions and to identify the involvement of other co-accused, as well as
the accused himself and given his complete knowledge of the transactions,
his custodial interrogation is necessary. The entire money trail requires to
be established. The material in the form of statements, seizures made
during searches under PMLA, the respondent had reasons to believe that
the petitioner is guilty of offence of money laundering and sustained
interrogation is required in order to enable the investigation to get to the
bottom of the nefarious deals entered into by the petitioner. It is further
stated that, role of the petitioner is crucial for investigation under the
PMLA. Having reasons to believe, based on the material in possession of
the Directorate that the petitioner is guilty of offence of money laundering
as defined under Section 3 punishable under Section 4 of PML Act. The
petitioner was informed about the grounds of arrest. He has played vital
role of money laundering. He has not co-operated with investigation. He
did not provide the required information regarding the laundering of
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proceeds of crime. Sustained interrogation under custody is required to
unearth the trail of funds, for corroboration with other persons involved in
the crime. If custody is not granted it may hamper further investigation.
The proceeds of crime would amount to hundreds of crores, which is
paramount in the interest of investigation that the accused is sent to ED
custody.
21. The learned Special Judge remanded the petitioner to ED custody till
12th January 2024 vide order dated 4th January 2024. Order dated 4th
January 2024 also reflects application of mind by the learned Special Judge
to the necessity of arrest in accordance with section 19 of the PML Act. The
learned Special Judge has in detail appreciated the facts of the case and
investigation conducted by respondent and the need for arrest reflected in
the remand application. The learned Judge has also observed that the table
provided in remand application by respondent pointing out the method of
generating of proceeds of crime by the accused by obtaining loans keeping
the repayments pending by allowing them to become overdue and
subsequently taking another loan to fulfill earlier loans. The dispute had
also reached to NCLT wherein various amount of Rs.734.27 Crore
approximately which is proceeds of crime. The contention of the ED is that
in spite of taking huge amounts from the complainant and other investors,
the accused had never given delivery of a single flat to anyone. The FIR
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bearing No.837 of 2021 is the basis for ECIR. The said FIR is still in
existence. Prima facie there is an abundant material with the Investigating
Officer to ascertain that the accused is guilty of offence of money-
laundering. Paragraph 7 of the order dated 4 th January 2024 refers to the
fact that careful perusal of statements of prosecution witnesses which run in
thousands of pages prima facie indicate how the money was taken from the
flat buyers and not used for the purpose for which the same was accepted
and the investors not only lost hard-earned life earning, but could not get a
brick of dream flat. At this juncture this is sufficient. The learned Special
Judge further observed that, he carefully examined this argument. There
are 16 to 17 statements of witnesses recorded by the ED under Section
50(2) and (3) of the PML Act which clearly indicate how systematically the
accused has generated POC by collecting huge monies from them and
drawing multiple loans. This material prima facie have prompted
investigating Officer in forming opinion that the accused has been guilty of
offence punishable under PML Act. Therefore, whatever stated in the
paragraph 1 to 12 cannot be assumed only a replica of the story in the FIR's
relating to the Predicate Offence but the same has to be considered as
materials and reasons in writing for effecting arrest of accused under
Section 19 of the PML Act. Thus, the Court is of the opinion that arrest of
the accused is legal and perfectly qualifies the legal requirements of Section
19 of the PML Act. The offence of money laundering is serious. The method
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for investigation is exceptional. In the instance case the amount is Rs.734
crore, the ED has to trace out the trail of money. The investigation is
required to be done by remanding the petitioner in ED custody. If the
prayer is rejected, it will paralyze the investigation which will ultimately
frustrate the very object of the PML Act. Hence, sufficient opportunity has
to be given to the ED by granting ED custody of the accused. The petitioner
was remanded in ED custody till 12th January with all over requisite
conditions.
22. Operative part of order dated 4th January 2024 reads as follows:-
"1. Remand Application is partly allowed.
2. Accused Vijay Sopan Machindar is remanded in ED custody till
12.01.2024 holding that his arrest is legal.
3. ED shall permit the accused to carry his all prescribed medicines and also
take his care for illness he has been suffering/undergoing, as submitted
by his Ld. Adv. Nikhil Rajeshirke. Also ED shall immediately respond the
accused if he complains of any health issue and attend the same without
prolonging.
4. Any one Ld. Adv. of the accused may meet him for an hour everyday at
08.00 a.m. to 09.00 a.m. and also his lawyer be permitted to sit at
visible but not audible distance, during the custodial interrogation.
5. Considering the health and medical issues of the accused, he is allowed
to avail home cooked food on a daily basis, provided that he should
submit an undertaking to the ED that he will avail this facility at his own
risk and will not hold anyone responsible if anything adverse occurs."
23. Thus, the grounds of arrest, arrest order, remand application and the
order of remand clearly reflects application of mind with regard to the
arrest of the petitioner in accordance with section 19 of the PML Act. The
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respondent had also produced for the perusal of Court, the document
relating to grounds of belief which was forwarded to Adjudicating Authority
in accordance with Section 19(2) of PML Act. The respondent has applied
its mind to the need for arrest as contemplated under Section 19 of the Act.
Order remanding the accused also indicate that the learned Judge has
considered scope of section 19 and held that the arrest is legal. The
contention of the petitioner devoid of merits.
24. Learned Advocate for Petitioner has relied upon the decision of the
Apex Court in the case of V. Senthihl Balaji Vs. The State Represented by
Deputy Director and Ors (supra). In paragraph 66 of the said decision it is
observed that sub-section (3) of Section 167 of the Cr.P.C. warrants
Magistrate to record reasons by speaking, reasoned order while granting
authorisation. This being judicial order, touching upon the rights of an
accused, adequate reasons are expected to be recorded. In paragraph 68, it
is observed that a Magistrate has distinct role to play when remand is made
of an accused person to an authority under the PML Act. It is his bounden
duty to see to it that Section 19 of the PML Act is duly complied with and
any failure would entitle the arrestee to get released. The Magistrate shall
also peruse the order passed by the authority under Section 19(1) of the
PML Act. Section 167 of Cr.P.C. is also meant to give effect to Section 19 of
the PMLA, 2002 and therefore it is for the Magistrate to satisfy himself of its
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due compliance. Upon such satisfaction, he can consider the request for
custody in favour of authority, as Section 62 of the PMLA, 2002 does not
speak about the authority which is to take action for non-compliance of the
mandate of Section 19 of the PMLA, 2002. The remand being made by the
Magistrate upon person being produced before him, being an independent
entity, it is well open to him to invoke the said provision in a given case.
The Magistrate concerned is the appropriate authority who has to be
satisfied about the compliance of safeguards as mandated under Section 19
of the PMLA, 2002. The detention/police remand can be allowed only in
special circumstances for reasons judicially scrutinized and for such limited
purposes only as the necessities of the case may require. The scheme of
Section 167 of the Criminal Procedure Code, 1973 is unambiguous in this
regard and is intended to protect the accused from the methods which may
be adopted by some overzealous and unscrupulous police officers. But it is
also equally true that the police custody although is not the be all and end-
all of the whole investigation, yet it is one of its primary requisites
particularly in the investigation of serious and heinous crimes. The
legislature also noticed this and, has therefore, permitted limited police
custody. The interplay between Section 19(1) of the PMLA, 2002 and
Section 167 of Cr.P.C. would facilitate the application of the latter after the
conclusion of the former. One cannot say that section 167(2) of the Cr.P.C.
is applicable to an authority when it comes to arrest but not to custody. In
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paragraph 88 of the decision by way of summation of law it is observed that
any non-compliance of the mandate of section 19 of the PML Act, would
enure to the benefit of the person arrested. For such noncompliance, the
Competent Court shall have the power to initiate action under Section 62 of
the PMLA, 2002.
25. Section 19 of the PML Act, 2002 reads as follows:-
"19. Power to arrest.-(1) If the Director, Deputy Director, Assistant Director,
or any other officer authorised in this behalf by the Central Government by
general or special order, has on the basis of material in his possession reason
to believe (the reason for such belief to be recorded in writing) that any
person has been guilty of an offence punishable under this Act, he may
arrest such person and shall, as soon as may be, inform him of the grounds
for such arrest.
(2) The Director, Deputy Director, Assistant Director or any other officer
shall, immediately after arrest of such person under sub-section (1), forward
a copy of the order, along with the material in his possession, referred to in
that sub-section, to the Adjudicating Authority, in a sealed envelope, in the
manner, as may be prescribed and such Adjudicating Authority shall keep
such order and material for such period, as may be prescribed.
(3) Every person arrested under sub-section (1) shall within twenty-four
hours, be taken to a [Special Court or] Judicial Magistrate or a Metropolitan
Magistrate, as the case may be, having jurisdiction:
Provided that the period of twenty-four hours shall exclude the time
necessary for the journey from the place of arrest to the [Special Court or]
Magistrate's Court".
26. Section 62 of the PML Act, 2002 reads as follows:-
"62. Punishment for vexatious search.-Any authority or officer exercising
powers under this Act or any rules made thereunder, who without reasons
recorded in writing,-
(a) searches or causes to be searched any building or place; or
(b) detains or searches or arrests any person,
shall for every such offence be liable on conviction for imprisonment for a
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term which may extend to two years or fine which may extend to fifty
thousand rupees or both."
27. Learned Advocate for Petitioner has relied upon the decision of the
Apex Court in the case of Pankaj Bansal Vs. Union of India and Ors. (supra).
In the said decision it is observed that, the language of section 19 of the Act
of 2002 puts it beyond doubt that the authorized officer has to record in
writing the reasons for forming the belief that the person proposed to be
arrested is guilty of an offence punishable under Act of 2002. Section 19(2)
requires the authorized officer to forward a copy of the arrest order along
with the material in his possession to the Adjudicating Authority in a sealed
envelope. Though it is not necessary for the arrested person to be supplied
with all the material that is forwarded to the Adjudicating Authority under
Section 19(2), he has right to be informed of the grounds of arrest, which
are recorded in writing by the authorized officer in keeping with the
mandate of section 19(1) of the Act. As already noted hereinbefore, the
mode of informing this to the persons arrested is left to the option of the
ED's authorized officers in different parts of the country, i.e. to either
furnish such grounds of arrest in writing or to allow such grounds to be
read by the arrested person or be read over and explained to such person.
The Court is referred Rule 6 of the Prevention of Money Laundering (the
Forms and the Manner of forwarding a Copy of Order of Arrest of a Person
along with the Material to the Adjudicating Authority and its Period of
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Retention) Rules, 2005, titled 'Forms of records', provides to the effect that
the arresting officer while exer4cising powers under section 19(1) of the
Act shall sign the arrest order in Form III appended to those Rules. There is
no valid reason as to why the copy of written grounds of arrest should not
be furnished to the arrested person as a matter of course and without
exception.
28. In the present case, it is not disputed that the written grounds of
arrest were served upon the petitioner. The learned Special Judge had
ascertained the said fact while the petitioner was produced before the Court
for remand. The order indicate that the accused had replied in affirmative
that the grounds of arrest are supplied to him. Considering the contents of
remand application, grounds of arrest, arrest order, communication
forwarded to the Adjudicating Authority, I am of the considered opinion
that, there is compliance of Section 19 of the PML Act. The offence is of
serious nature. The investigation is in progress. The learned Special Judge
has rightly held that ED custody of the petitioner is necessary. The remand
order assigned reasons. The remand order reflects application of mind by
the Court qua Section 19 of the PML Act. Hence, there is no reason to hold
that the remand of the petitioner is illegal.
29. In subsequent decision relied upon by learned Advocate for
Respondent in the case of Ram Kishor Arora Vs. Directorate of
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Enforcement (supra), the Apex Court has once again considered the
interpretation of Section 19 of PML Act which deals with the power of ED
to arrest. The Court referred to the decision in the case of Pankaj Bansal
Vs. Union of India and Ors. (supra) and V. Senthil Balaji Vs. State
represented by Deputy Director and Ors. (supra) as well as the decision
of three Judge Bench in the case of Vijay Madanlal Choudhary and Ors.
Vs. Union of India and Ors.1 It was observed that, the law laid down by
three Judge Bench in Vijay Choudhary's case that Section 19 (1) of PML
Act has a reasonable nexus with the purposes and objects sought to be
achieved by the PML Act and that the said provision is also compliance with
the mandate of Article 22(1) of the Constitution of India. Any observation
made or any finding recorded by the Division Bench of lesser number of
Judges contrary to the said ratio laid down in Vijay Mandanlal Choudhary
(supra) would be not in consonance with the jurisprudential wisdom
expounded by the Constitution Benches in cases referred above. The Three-
Judge Bench Vijay Mandanlal Choudhary case (supra) having already
examined in detail the constitutional validity of Section 19 of PMLA on the
touchstone of Article 22(1) and upheld the same. The Apex Court further
observed that, the interpretation of the expression "as soon as may be"
stipulated in Section 19 of the Act assumes significance. In view of the said
expression, contained in Section 19 is required to be construed as, "as early
1 (2022) SCC OnLine SC 929
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as possible without avoidable delay" or "within reasonably convenient" or
"reasonably requisite" period of time. Since by way of safeguard duty is
casted upon the concerned officer to forward a copy of the order along with
the material in his possession to the Adjudicating Authority immediately
after the arrest of the person, and to take the person arrested to the
concerned court within twenty-four hours of the arrest, the reasonably
convenient or reasonably requisite time to inform the arrestee about the
grounds of his arrest would be twenty-four hours of the arrest. It was
further observed that in the case of Vijay Choudhary (supra) it is held that
so long as the person has been informed about the grounds of his arrest,
that is sufficient compliance of mandate of Article 22(1) of the Constitution.
It is also observed that the arrested person before being produced before
the Special Court within twenty-four hours, the Court is free to look into
the relevant records made available. The Court turn down the submission
that the judgment was required to be given effect retrospectively cannot be
accepted when the judgment itself states that it would be necessary
"henceforth" that a copy of such written grounds of arrest is furnished to
the arrested person. The action of informing the person arrested about the
grounds of his arrest is a sufficient compliance of Section 19 of PMLA as
well as Article 22(1) of the Constitution of India, as held in Vijay
Mandanlal (supra).
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30. The record indicate that the petitioner was informed grounds of
arrest in writing. Grounds of arrest reflects the requirement of Section 19 of
the Act. The petitioner was remanded to custody by assigning reasons in the
light of Section 19 of the Act and there is arrest order on record which also
record satisfaction about the arrest. In view of Section 19 of the Act, the
communication which is provided under Section 19(2) is also forwarded to
the Adjudicating Authority. There is compliance of Section 19(2) of the
PML Act.
31. Considering the aforesaid circumstances, the petitioner has not made
any ground to declare that the remand is illegal and hence, the petition is
required to be dismissed.
ORDER
Criminal Writ Petition (ST.) No.585 of 2024 stands dismissed.
(PRAKASH D. NAIK, J.)
