The Supreme Court of India, in a judgment delivered on 3 October 2023, held that the Enforcement Directorate must furnish the grounds of arrest in writing to every person arrested under Section 19 of the Prevention of Money Laundering Act, 2002, without any exception. The Bench of Justice A.S. Bopanna and Justice Sanjay Kumar ruled that an arrest made without providing written grounds to the accused is illegal, as it violates the constitutional guarantee under Article 22(1) of the Constitution.
Background
The matter involved directors and associates of the M3M group of companies, arrested by the ED in connection with money laundering allegations linked to FIRs against IREO group companies. Between 2018 and 2020, multiple FIRs were registered based on complaints from property buyers. The ED's investigation revealed alleged diversion of substantial funds from IREO group to M3M group entities. Pankaj Bansal, a director of M3M group companies, along with Basant Bansal and Roop Kumar Bansal, founders of M3M India Limited, challenged their arrest on the ground that the ED had not furnished written grounds of arrest as required under the statute.
Section 19 of the PMLA empowers the Director or authorized officers of the ED to arrest any person if they have reason to believe, on the basis of material in their possession, that the person is guilty of a money laundering offence. The provision mandates that the reasons for such belief be recorded in writing. The question before the Court was whether this requirement translated into an obligation to furnish those recorded reasons to the arrested person in writing, as distinct from oral communication.
Key Holdings
The Supreme Court laid down the following principles:
Written grounds mandatory: The ED must provide the arrested person with grounds of arrest in writing at the time of arrest. Oral communication of grounds is not sufficient to discharge the obligation under Section 19 of the PMLA read with Article 22(1) of the Constitution.
No exceptions: The requirement of furnishing written grounds applies categorically and admits no exception. The Court rejected arguments that operational exigencies or the nature of economic offences could justify dispensing with written communication.
Constitutional underpinning: Article 22(1) guarantees every arrested person the right to be informed of the grounds of arrest. The Court held that this right can be meaningfully exercised only when the grounds are communicated in a written, tangible form that the accused can retain and use to seek legal counsel and prepare a defence.
Illegality consequence: An arrest conducted in violation of this requirement is illegal. The non-compliance renders the arrest itself vitiated and can form the basis for seeking release.
Prospective application: The Court clarified that the ruling operates prospectively, applying to arrests made after the date of judgment. This spared the ED from challenges to all prior arrests conducted without written grounds.
Implications for Practitioners
This judgment introduces a concrete procedural safeguard that criminal defence practitioners can enforce in every PMLA arrest scenario. At the time of arrest, counsel should immediately demand and verify the written grounds document, and any deficiency can form the basis for challenging custody before the Magistrate.
The prospective-only application is a pragmatic compromise — retrospective application would have opened the floodgates to hundreds of pending PMLA matters being challenged on procedural grounds. However, the limited temporal scope means the ruling benefits future arrestees while leaving those already in custody without this remedy.
For the ED, this mandates an operational protocol change. Investigating officers must prepare a written document setting out the grounds of arrest before taking any person into custody, and must ensure the arrested person receives a copy. Non-compliance now carries the direct consequence of the arrest being declared illegal by courts.