The Enforcement Directorate (ED) cannot arrest anyone under the Prevention of Money Laundering Act (PMLA) for failing to respond to agency’s questions, or for a mere non-cooperation in response to summons, the Supreme Court has held, adding it is not legitimate for the federal anti-money laundering agency to expect an admission of guilt from a person called for interrogation.

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“It is not open to ED to expect an admission of guilt from the person summoned for interrogation and assert that anything short of such admission would be an ‘evasive reply’… Mere non-cooperation of a witness in response to the summons issued under Section 50 of the 2002 Act would not be enough to render him/her liable to be arrested under Section 19,” declared a bench of justices AS Bopanna and Sanjay Kumar in a judgement delivered on Tuesday but released on Wednesday.

According to the bench, an interrogation cannot be equated with a confession. Therefore, it said, the failure of a person to respond to the questions put by ED would not be sufficient in itself for the investigating officer to opine that they were liable to be arrested under PMLA Section 19. It pointed out that the section specifically requires an officer to find reasons to believe that an accused was guilty of an offence under the PMLA before making an arrest.

The judgment further held that a trial court has a duty to examine the validity of an arrest at the time of remanding an accused to custody and that a flawed order of remand cannot validate an unlawful arrest made by the ED in breach of the requirements under the PMLA or the applicable provisions of the Criminal Procedure Code (CrPC).

“The court has a duty to verify and ensure that the conditions in Section 19 (of PMLA) are duly satisfied and that the arrest is valid and lawful. In the event, the court fails to discharge this duty in right earnest and with the proper perspective, the order of remand would have to fail on that ground and the same cannot, by any stretch of imagination, validate an unlawful arrest made under Section 19,” the court said.

HT reported on Wednesday that the judgment quashed the arrest of Pankaj and Basant Bansal, two directors of real estate firm M3M, and ruled that ED is bound to provide a copy of the grounds of arrest to accused under PMLA Section 19, adding that mere verbal information would be construed as a breach of the Constitutional rights of the arrested person.

The top court’s judgment circumscribing ED’s vast powers to make arrests and prescribing necessary conditions came over a year after a three-judge bench affirmed the sweeping powers given to ED under the 2002 Act for summoning individuals, making arrests, conducting raids, and attaching properties of the suspects, saying that law enforcement agencies must be armed with an effective mechanism to safeguard the nation’s wealth from criminals.

The July 2022 judgment had further held that “informing” an accused about the grounds of arrest is “sufficient compliance” of the mandate of Article 22(1) of the Constitution, which lays down that no arrested person shall be detained in custody without being informed of the grounds of arrest nor shall he be denied the right to legal representation of his choice. It also upheld the validity of Section 50 of the PMLA, empowering the ED to summon witnesses and record statements which are treated as admissible in evidence.

The 2022 judgment was criticised for a disquieting erosion of the safeguards to rights to life, liberty, property and against self-incrimination, especially at a time when a spate of ED raids and other actions against opposition leaders has mired the federal financial crime agency in allegations of politicisation.

In the present case, the top court noted that the ED arrested Pankaj and Basant Bansal in June on the grounds that one of them refused to accept summons while the other did not cooperate. Curiously, both of them had appeared before the agency in connection with a different case and they were issued summons in a fresh case lodged on the same day after the two were granted interim protection from arrest by the Delhi high court.

“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,” said the bench.

It added that 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 order to enable a person to be apprised of the reasons of his arrest and be able to make out a case before a court of law for bail, the top court ordered that “it would be necessary, henceforth, that a copy of such written grounds of arrest is furnished to the arrested person as a matter of course and without exception.”

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The latest judgment, marking afresh the limits of ED’s powers in the matters of arrests, came at a time when another three-judge bench has scheduled a hearing for October 18 to examine the correctness of the July 2022 judgment and take a call on referring the matter to a Constitution bench.

Last week, the Supreme Court said it would revisit the 2022 judgment to reconsider if a person being arrested can be denied a copy of the Enforcement Case Information Report (ECIR), and whether the law can ascribe presumption of guilt on an accused as against the presumption of innocence. These two issues were flagged by the court on August 25, 2022, when it had agreed to consider reviewing the previous judgment. To be sure, if the matter goes to a five-judge bench, the entire judgment and not just the two issues flagged in the first order of review can be reconsidered by the larger bench.