On October 19, the Delhi High Court clarified the powers that the Enforcement Directorate have under Section 50 of the Prevention of Money Laundering Act (PMLA). As provided by the single-judge bench of Justice Anup Jairam Bhambhani, the power of the ED to issue summons under the aforementioned section does not include the power to arrest a person. In the order of the court, the bench stated that the power to arrest is “conspicuously absent” in section 50 of the PMLA.
“The power under section 50 of the PMLA to issue summons to a person and to require the production of documents and record statements, which is akin to the powers of a civil court, is different and distinct from the power under section 19 to arrest a person,” the judgment stated in Para 27.
The case under consideration:
The aforementioned observations were made by the High Court while dismissing a plea moved by one Ashish Mittal seeking quashing of an ECIR (Enforcement Case Information Report) registered by ED in 2020 in relation to the affairs of a company named Educomp Solutions. Mittal had also sought stay of all the proceedings emanating from the said ECIR. This was after Mittal was issued summons requiring him to appear before ED on August 21. It was his case that he had a strong apprehension that he will be “illegally detained or arrested and will be made a scapegoat”. He submitted that he was not supplies with a copy of the ECIR.
Observations made by the court in the judgment:
In para 23 of the judgment, the Court has provided that Section 50 of the PMLA only confers upon ED the powers of the civil court. The judgment states: “Section 50 of the PMLA confers upon specified officers of the ED, the powers vested in a civil court trying a suit; including the power to enforce the attendance of any person for recording statements on oath, with a mandate that any person so summonsed shall be bound to attend, to answer and make statements truthfully; to compel discovery, inspection and production of documents and records; and to impound and retain records, by giving reasons in writing.”
The Court then elucidates that the power of ED to arrest someone falls under a different section of the PMLA.
The judgment states that “Though section 19 of the PMLA empowers designated officers of the ED to arrest any person, subject to satisfying the conditions mentioned in that provision, it is clear that the power to arrest does not reside in section 50 nor does it arise as a natural corollary of summons issued under section 50.” (Para 25)
The court also emphasized the different powers that flow from Section 19 and Section 50 of the PMLA.
The judgment states: “The power under section 50 of the PMLA to issue summons to a person and to require the production of documents and record statements, which is akin to the powers of a civil court, is different and distinct from the power under section 19 to arrest a person. These are two separate and distinct provisions.” (Para 27)
The court added that the court cannot restrain the ED from exercising its power to issue summons under one section on the apprehension that ED may arrest some based on the powers of the ED to do so under another section as that may lead to more cases of resistance to the summons.
“The exercise of the powers under one, cannot be restrained on the apprehension that it could lead to the exercise of powers under the other. If that is permitted, any and every person summonsed [sic] under section 50 of the PMLA, to produce documents or give a statement on oath, could resist such summons expressing mere apprehension that he may face arrest at the hands of the ED, in exercise of the powers under section 19 of the PMLA,” the court stated in the judgment in Para 27.
On the issue of quashing of the ECIR raised by the petitioner, the court noted that since the ECIR was not before the court nor was Mittal he was entitled as per law to be given a copy of the same, the court held that there was obviously no way that the grounds on which quashing was sought could be assessed and evaluated.
“Based on the provisions and precedents referred-to above; on a bare perusal of section 50 of the PMLA under which summons have been issued to the petitioner; and the fact that the petitioner is not an accused in the proceeding under the PMLA, this court is not persuaded to agree with the petitioner’s apprehension that he may be subject to coercive measures,” the court said in Para 28 of the judgment.
The court further pointed out that a writ petition using the extraordinary plenary jurisdiction under Article 226 of the Indian Constitution would always be appropriate if it were true that Mittal was without recourse with regard to his complaint.
“This court would hasten to clarify that it is not the purport of the present decision that the High Court, in exercise of its jurisdiction under Article 226 of the Constitution, is per-se barred from entertaining a petition by a person who is not a named accused in a scheduled offence, or in a prosecution compliant arising from an ECIR,” the court said. (Para 45)
Lastly, the Court reiterated in the judgment that the authority to arrest conferred to ED under section 19 of the PMLA is not unrestricted. The authorities do not have the power to arrest on their “whims and fancies”. The court then emphasized the three conditions that the ED must meet in order to legally arrest someone, which is as follows:
- “Firstly, the Director must entertain a reasonable belief that the person arrested is guilty of an offence under the PMLA, and not under any other enactment;
- Secondly, the reasons for such belief must be recorded in writing; and
- Thirdly, such belief must be based on material that is in the Director’s possession.” (Para 41)
The judgment also quoted the recent verdict of the Supreme Court in the case of V. Senthil Balanji v State [W.P.(CRL) 2416/2023] the Supreme Court has expressly held that any non-compliance to the mandate of section 19(1) of the PMLA would vitiate the arrest itself. Notably, through this judgment, the Supreme Court had held that Section 19 requires the ED to inform the accused of the grounds of arrest in a written format.
The High Court, in its current judgment also stated that compliance with section 19(2) “is a solemn function which brooks no exceptions.”
The complete judgment can be read here: