Summary of Recent judgment

Case: V. Senthil Balaji vs. The State Represented By Deputy Director and Ors.



Date of / Judgment: 7 August 2023

Judges: Justice M. M. Sundresh, A.S. Bopanna

Introduction:

The case revolves around the arrest of Balaji, the Minister of Electricity, Prohibition, and Excise, in connection with a cash-for-jobs scam linked to his tenure as the Transport Minister in the 2011-16 AIADMK government. The Enforcement Directorate (ED) arrested him, and his wife filed a habeas corpus petition, challenging the legality of the arrest. The case highlights the legal questions regarding the ED's authority under the Prevention of Money Laundering Act (PMLA), particularly the issue of police custody.

Facts of the Case:

• Balaji, the Minister of Electricity, Prohibition, and Excise, was arrested by the Enforcement Directorate (ED) on June 15 in connection with a money laundering case related to a cash-for-jobs scam during his tenure as Transport Minister from 2011 to 2016 under the AIADMK government.

• The arrest followed after a Supreme Court order that set aside the Madras High Court’s decision, which had stayed the proceedings in the money laundering case against Balaji.

• On the same day of the arrest, Balaji’s wife filed a habeas corpus petition before the Madras High Court, claiming that his arrest and detention were illegal.

• The High Court denied interim bail to Balaji but allowed him to be shifted to Cauvery Hospital after he complained of chest pain.

• A division bench of the High Court gave a split verdict on the habeas corpus petition.

  • Justice Nisha Banu held that the Enforcement Directorate was not empowered to seek police custody under the PMLA.
  • Justice Bharatha Chakravarthy disagreed, ruling that the habeas corpus petition was not maintainable and that the ED was entitled to police custody of the accused.

• Due to the split verdict, the matter was referred to a third judge, Justice CV Kathikeyan, who ultimately ruled in favour of the Enforcement Directorate.

Issues:

1. Does the Enforcement Directorate have the authority to seek custody of a person arrested under the PMLA?

2. Is a Habeas Corpus petition maintainable after a judicial remand has been issued by a competent court?

3. Can the Enforcement Directorate seek exclusion of time for the period of hospitalization beyond the initial 15 days of remand?

Appellant's Argument (Senior Advocate Kapil Sibal):

• Senior Advocate Kapil Sibal argued that the power to make an arrest under the Prevention of Money Laundering Act (PMLA) cannot be conflated with the power to seek police remand. He contended that the Enforcement Directorate’s (ED) custody of the minister was unlawful, citing the 2022 Supreme Court judgment in Vijay Madanlal Choudhary.

• Sibal emphasized that ED officers are not "police officers" under the PMLA, as per the Vijay Madanlal Choudhary decision. Therefore, they do not have the authority to seek police remand, which is reserved for police officers.

• The senior counsel further explained that under the PMLA, "investigation" was interpreted as an "inquiry" in the Vijay Madanlal Choudhary ruling, which bars ED officers from seeking police remand.

Respondent’s Argument (Enforcement Directorate):

• The Enforcement Directorate, represented by the Solicitor General (SG), argued that Section 167 of the Code of Criminal Procedure (CrPC) does apply to the provisions of the Prevention of Money Laundering Act, especially when it comes to the grant of police remand.

• The SG cited the Deepak Mahajan case, arguing that Section 167 of the CrPC applies to all special laws unless explicitly stated otherwise, and therefore, the ED officers had the right to seek police remand.

Observations

The Supreme Court observed that:

• A writ of Habeas Corpus is not maintainable once an arrestee is presented before a jurisdictional Magistrate under Section 19(3) of the PMLA, as custody then becomes judicial.

• The words “such custody” occurring in Section 167(2) of the CrPC, 1973 would include not only a police custody but also that of other investigating agencies.

• Any claims of illegal arrest should be addressed before the Magistrate, and failure to comply with Section 19 of the PMLA could invalidate the arrest.

• Challenges to an order of remand must be directed to a higher court as prescribed under the Criminal Procedure Code (CrPC).

• Challenges to an order of remand must be directed to a higher court as prescribed under the Criminal Procedure Code (CrPC). • The Court clarified that Section 41A of the CrPC does not apply to arrests made under the PMLA and emphasized that the 15-day custody rule pertains to the overall investigation timeline i.e. during 60 or 90 days.

• The Court interpreted the arrest provisions under PMLA as:

  • • Section 19(1) gives authorized officials, such as the Director, Deputy Director, or Assistant Director, the power to arrest persons suspected of committing offenses under PMLA if they have sufficient reason to believe that the individual has committed an offense. The reasons for arrest must be recorded in writing and once arrested, the person must be informed of the grounds of their arrest.
  • • Under Section 19(2), after the arrest, the official who made the arrest must forward a copy of the order and relevant material, to the Adjudicating Authority in a sealed envelope and such authority must preserve the order and material for the specified period.
  • • Under Section 19(3) any person arrested under Section 19, must be be brought before a Special Court, Judicial Magistrate, or Metropolitan Magistrate within twenty-four hours of arrest.

• The Apex made it clear that non-compliance with the mandate under the aforesaid sections, would vitiate the arrest itself: the Court said,

"To effect an arrest, an officer authorised has to assess and evaluate the materials in his possession. Through such materials, he is expected to form a reason to believe that a person has been guilty of an offence punishable under the PMLA, 2002. Thereafter, he is at liberty to arrest, while performing his mandatory duty of recording the reasons. The said exercise has to be followed by way of an information being served on the arrestee of the grounds of arrest. Any non-compliance of the mandate of Section 19(1) of the PMLA, 2002 would vitiate the very arrest itself. If there is any violation of the procedure for arrest prescribed in Section 19 of the Prevention of Money Laundering Act, then action can be taken against the concerned officer in terms of Section 62 of the PMLA.”

Implication

• Once an arrestee is presented before a Magistrate under Section 19(3) of the PMLA, a Habeas Corpus petition is not maintainable, as the custody becomes judicial.

• The Court clarified that "such custody" under Section 167(2) of the CrPC includes custody by agencies like the Enforcement Directorate (ED), not just police custody.

• Claims of illegal arrest must be addressed before the Magistrate, and non-compliance with Section 19 of the PMLA could invalidate the arrest.

• Challenges to remand orders should be made to higher courts as prescribed under the CrPC.

• Section 41A of the CrPC does not apply to arrests under the PMLA.

• Arrests under Section 19 require sufficient grounds, written reasons for arrest, and the arrestee must be brought before a Magistrate within 24 hours.

• Non-compliance with arrest procedures (such as failing to record reasons or delaying the appearance before a Magistrate) invalidates the arrest.

• Violations of the arrest procedure can lead to action against the concerned officer under Section 62 of the PMLA.