Sashikanta Mishra, J.
1. The petitioners are in custody since 08.06.2023 having been remanded in Criminal PML Case No. 6 of 2023 of the Court of learned Sessions Judge, Khordha at Bhubaneswar for the alleged commission of offence under Section 3 of Prevention of Money Laundering Act, 2002 (for short, “the Act”) punishable under Section 4 of the said Act.
2. The above case has arisen out of a complaint filed by the Enforcement Directorate (E.D.) under Section 44 of the PML Act. It is alleged in the complaint that both the petitioners are accused of committing offences under Sections 21(c) and 29 of the N.D.P.S. Act in Sahadevkhunta P.S. Case No.352 dated 27.10.2022. Said offences are predicate/schedule offences as per the PML Act. It is alleged that the petitioners and five other persons were found to be in possession of 10 kgs 394 grams of contraband brown sugar on their personal search, which is worth Rs.10.39 crores. Charge sheet has been submitted on 21.04.2023 in the said case under Sections 21(c)/29 of N.D.P.S Act read with Section 120(B) of IPC.
3. All these offences, as already stated, being scheduled offences as per the PML Act, investigation of the case under Sections 22/2(1)(n)(a) of PML Act was initiated after recording brief facts of the schedule offences in ECIR dated 14.11.2022 against the accused persons for alleged commission of the offence under Section 3 of the PML Act punishable under Section 4 of the said Act. On such facts, initially, an application was filed under Section 50 of the PML Act with prayer for production of the accused persons before the Special Court for their custodial interrogation by E.D. Since both of them were in custody in connection with the aforementioned P.S. Case. Learned Sessions Judge, by order dated 03.05.2023 granted such prayer of the E.D. by requesting the learned District and Sessions Judge, Balasore, under whose custody the accused persons then were, to spare them for being produced before his Court. Accordingly, both the accused persons were produced before the learned Sessions Judge, Khordha on 08.06.2023 and on the same day, the E.D. was directed to take them into remand for a period of four days, i.e. from 09.06.2023 to 12.6.2023. On 12.06.2023, on application being filed by the E.D., the period of remand was extended till 14.06.2023. On 14.06.2023, the accused persons were remanded to jail custody.
4. On 07.08.2023, the complaint under Section 44 of the P.M.L. Act was filed by the E.D.. On the same day, learned Sessions Judge took cognizance of the offence under Section 3 of the PML Act punishable under Section 4 of the said Act. Being thus remanded to custody, both the petitioners filed application for bail, which was heard and rejected by learned Special Judge (CBI Court No.1) on the same day.
5. Heard Mr. D.P. Dhal, learned Senior Counsel with Mr. B.S Dasparida for the petitioners and Mr. P.K. Ray, learned Special P.P. appearing for E.D.
6. The main plank of arguments advanced by Mr. Dhal, learned Senior Counsel, is violation of the mandatory requirements of Section 19 of the P.M.L. Act. In this context, Mr. Dhal would argue that Section 19 of the P.M.L. Act makes it mandatory for the Authorized Officer seeking to arrest the accused to inform him of the grounds of his arrest and further, while remanding the accused so arrested, the Court must record its reasons for believing that the offence under P.M.L. Act had been committed. In the instant case, the accused persons being in custody in connection with the case relating to the predicate offences were never informed of the grounds of their arrest in the present case. That apart, on mere application submitted by the E.D., the learned Sessions Judge allowed the petitioners to be taken on remand by it without recording reasons for his belief that the accused persons were prima facie guilty of the alleged offence. In other words, the order of remand, according to learned Senior Counsel is a product of non-application of judicial mind by learned Sessions Judge. Mr. Dhal further argues that the complaint filed by E.D. does not make out any offence under the P.M.L. Act. Moreover, if as many as seven persons were involved in the said case, why did the E.D. single out the petitioners. Mr. Dhal further argues that brown sugar weighing 10 kgs 394 grams was allegedly seized and it is not the case of E.D. that it was sold and the said proceeds were utilized by the accused persons. Only on the basis of the valuation of the contraband, it cannot be held that the seized article can partake the nature of “proceeds of crime” within the meaning of P.M.L. Act.
Mr. Dhal has cited a judgment of the Supreme Court in the case of Pankaj Bansal v. Union of India and Others (2024) 93 OCR SC 57 in support of his contentions.
7. Per contra, Mr. Ray would argue that firstly, the petitioners were never arrested and therefore, the provisions of Section 19 are not attracted. Secondly, the petitioners were only taken on remand for custodial interrogation and thereafter, were produced before the Court after recording their statements under Section 50 of the Act. From the statements so recorded, it is seen that they had multiple bank accounts and that they were involved in multiple offences. Since the petitioners were already in custody, the ED sought for their remand in order to carry out the investigation as per Section 50 of the P.M.L. Act. The petitioners could not have been treated as accused persons prior to cognizance of the offences being taken by the Sessions Court.
8. After taking note of the sequence of facts narrated before and the rival contentions of the parties, this Court finds that the crux of the issue involved is the applicability or otherwise of Section 19 of P.M.L. Act, which is quoted hereunder:
“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 1 [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 2 [Special Court or] Magistrate’s Court.”
9. The constitutional validity of Section 19 was considered and upheld by the Supreme Court in the case of Vijay Madanlal Choudhary and Others v. Union of India and Others, 2022 SCC OnLine 929 wherein the three Judge Bench, inter alia, held as follows:
“The safeguards provided in the 2002 Act and the preconditions to be fulfilled by the authorised officer before effecting arrest, as contained in Section 19 of the 2002 Act, are equally stringent and of higher standard. Those safeguards ensure that the authorised officers do not act arbitrarily, but make them accountable for their judgment about the necessity to arrest any person as being involved in the commission of offence of money-laundering even before filing of the complaint before the Special Court under Section 44(l)(b) of the 2002 Act in that regard. If the action of the authorised officer is found to be vexatious, he can be proceeded with and inflicted with punishment specified under Section 62 of the 2002 Act. The safeguards to be adhered to by the jurisdictional police officer before effecting arrest as stipulated in the 1973 Code, are certainly not comparable. Suffice it to observe that this power has been given to the high-ranking officials with further conditions to ensure that there is objectivity and their own accountability in resorting to arrest of a person even before a formal complaint is filed under Section 44(1)(b) of the 2002 Act. Investing of power in the high-ranking officials in this regard has stood the test of reasonableness in Premium Granites, wherein the Court restated the position that requirement of giving reasons for exercise of power by itself excludes chances of arbitrariness. Further, in M/s. Sukhwinder Pal Bipan Kumat, the Court restated the position that where the discretion to apply the provisions of a particular statute is left with the Government or one of the highest officers, it will be presumed that the discretion vested in such highest authority will not be abused. Additionally, the Central Government has framed Rules under Section 73 in 2005, regarding 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 the period of its retention. In yet another decision in Ahmed Noormohmed Bhatti, this Court opined that the provision cannot be held to be unreasonable or arbitrary and, therefore, unconstitutional merely because the authority vested with the power may abuse his authority. Also see Manzoor Ali Khan.
90. Considering the above, we have no hesitation in upholding the validity of Section 19 of the 2002 Act. We reject grounds pressed into service to declared section 19 of the 2002 Act as unconstitutional. On the other hand, we hold that such a provision has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act of prevention of money-laundering and confiscation of proceeds of crime involved in money-laundering, including to prosecute persons involved in the process or activity connected with the proceeds of crime so as to ensure, that the proceeds of crime are not dealt with in any manner which may result in frustrating any proceedings relating to confiscation thereof.”
10. Thus, there can be no dispute with regard to the powers available to the Authorized Officers(s) to arrest a person, but only after informing him of the grounds for such arrest. The mandatory nature of this provision and consequences of its contravention came up for consideration before the Supreme Court in the case of Pankaj Bansal V. Union of India and Others (supra), wherein, the Supreme Court after referring to the observations in Vijay Madanlal Choudhary and Others (supra) and v. Senthil Balaji v. The State represented by Deputy Director and others, 2023 SCC ONLINE 934:2023 INSC 677 held as follows:
“16. In terms of Section 19(3) of the Act of 2002 and the law laid down in the above decisions, Section 167 Cr.P.C. would necessarily have to be complied with once an arrest is made under Section 19 of the Act of 2002. The Court seized of the exercise under Section 167 Cr.P.C of remanding the person arrested by the ED under Section 19(1) of the Act of 2002 has a duty to verify and ensure that the conditions in Section 19 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, as pointed out hereinbefore, 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 of the Act of 2002.
17. In the matter of Madhu Limaye and others was a 3-Judge Bench decision of this Court wherein it was observed that it would be necessary for the State to establish that, at the stage of remand, the Magistrate directed detention in jail custody after applying his mind to all relevant matters and if the arrest suffered on the ground of violation of Article 22(1) of the Constitution, the order of remand would not cure the constitutional infirmities attaching to such arrest.”
11. Thus, what follows from reading of the decision in Pankaj Bansal (supra) is that it is not only obligatory on the part of the arresting officer to inform the accused of the grounds for his arrest in a meaningful manner but also for the Court to verify and an ensure that the conditions in Section 19 are satisfied and that the arrest is valid and lawful.
12. The relevant order passed by the learned Sessions Judge now needs to be examined on the touchstone of law laid down by the Supreme Court in the decisions cited earlier. As already stated, on an application under Section 50 of the Act being filed by the E.D. on 27.04.2023, learned Sessions Judge directed production of the accused persons who were then in custody in connection with the case relating to the schedule offence. Further, the accused persons being produced, learned Sessions Judge in his order dated 08.06.2023, allowed the E.D. to take them on remand for four days, said order of learned Sessions Judge reads as follows:
“The ED in his petition dt. 27.04.2023, on the basis of which accused persons namely Rintu Tarei & Sk. Sameer@Badu have been produced in Court today and remanded to custody, have prayed for custodial interrogation for four days on the ground stated therein. Keeping view, the prayer of ED & the gravity of offence committed, ED is directed to take the accused persons namely Rintu Rarei & Sk. Sameer@ Badu on remand for a period four days, i.e. from 09.06.2023 to 12.05.2023, subject to the following conditions:
1. The accused persons will be medically examined by a registered medical Practitioner.
2. The ED shall take care of the health and hygiene of the accused persons so also their food, clothing & shelter, during the period of remand.
3. The ED shall not inflict any kind of torture or ill-treatment to the accused persons during the period of their remand.
4. The ED shall ensure that all the Constitutional rights of the accused persons are preserved and with due regard to law.
5. The ED shall allow the remand advocate/defence counsels to remain present at the time of interrogation, if the accused persons so desire and the ED shall inform the accused persons their right to be interrogated in presence of their counsels.
6. The ED shall produce the accused persons before this Court on 13.06.2023 during office hour along with their medical reports.
Intimate the Superintendent, Special Jail, Bhubaneswar and Spl. PP, ED, accordingly.”
13. It is evident that the only ground cited by learned Sessions Judge is “keeping in view, the prayer of E.D. and the gravity of the offence committed”. The order is silent as regards the satisfaction of learned Sessions Judge regarding compliance of the requirements of Section 19. The order of remand was thus passed mechanically without considering the stringent requirements of Section 19.
14. At this stage, it would be apposite to refer to the contention advanced that the taking of the petitioners on remand by the E.D. with permission of the Court for the purpose of Section 50 of the Act does not amount to arrest within the meaning Section 19 of the Act. What is arrest is not a matter of debate. While addressing the issue of arrest as per Section 19 of the Act, the Supreme Court in Vijay Madanlal Choudhary (supra) referring to some previous decisions rendered in respect of the Customs act held as follows:
“xxx xxx In Romesh Chandra Mehta, the Constitution Bench of this Court enunciated that Section 104 of the Customs Act confers power to arrest upon the Custom Officer if he has reason to believe that any person in India or within the Indian Customs waters has been guilty of an offence punishable under Section 135 of that Act. Again, in the case of Padam Narain Aggarwal l533, while dealing with the provisions of the Customs Act, it noted that the term “arrest” has neither been defined in the 1973 Code nor in the Indian Penal Code, 1860 nor in any other enactment dealing with offences. This word has been derived from the French word “arrater” meaning “to stop or stay”. It signifies a restraint of a person. It is, thus, obliging the person to be obedient to law. Further, arrest may be defined as “the execution of the command of a court of law or of a duly authorised officer”. Even, this decision recognizes the power of the authorised officer to cause arrest during the inquiry to be conducted under the concerned legislations. While adverting to the safeguards provided under that legislation before effecting such arrest, the Court noted as follows:
“Safeguards against abuse of power
36. From the above discussion, it is amply clear that power to arrest a person by a Customs Officer is statutory in character and cannot be interfered with. Such power of arrest can be exercised only in those cases where the Customs Officer has “reason to believe” that a person has been guilty of an offence punishable under Sections 132, 133, 135, 135-A or 136 of the Act. Thus, the power must be exercised on objective facts of commission of an offence enumerated and the Customs Officer has reason to believe that a person sought to be arrested has been guilty of commission of such offence. The power to arrest thus is circumscribed by objective considerations and cannot be exercised on whims, caprice or fancy of the officer.
37. The section 534 also obliges the Customs Officer to inform the person arrested of the grounds of arrest as soon as may be. The law requires such person to be produced before a Magistrate without unnecessary delay.
38. The law thus, on the one hand, allows a Customs Officer to exercise power to arrest a person who has committed certain offences, and on the other hand, takes due care to ensure individual freedom and liberty by laying down norms and providing safeguards so that the power of arrest is not abused or misused by the authorities. ….”
(emphasis supplied)
15. Admittedly, both the petitioners were in judicial custody in connection with the schedule offence. Obviously, they could not have been arrested again “whilst in custody”. They could only be taken on remand on the order of the concerned Court, which is exactly what has happened in the present case. Had the petitioners not being in custody also, on arrest, they would have been produced before the concerned Court in compliance of Section 167 of Cr.P.C. and their further remand sought for. The only difference in the present case is, the accused being in custody were produced before the Court as per its order on the prayer of E.D. The consequences are the same. In other words, the accused persons having been produced before the Court on production warrant issued at the instance of E.D., it amounts to taking them to custody as contemplated under Section 19 of the Act. The contention of Mr. Ray cannot, therefore, be accepted.
16. It has been further argued that the petitioners cannot be treated as accused persons prior to taking of cognizance of the offences. This Court is not concerned with the description of the person arrested prior to lodging of the complaint and/or taking of cognizance by the Court. The question to be considered is, as long as said persons, by whatever named described are permitted to be arrested then the mandatory requirements of Section 19 would come into play as held hereinbefore. In Vijay Madanlal Choudory (supra) answering the plea whether it is permissible for the Authorized Officer to arrest someone being involved in the commission of offence of Money Laundering without formal complaint against him was answered in the following words:
“This argument clearly overlooks the overall scheme of the 2002 Act. As noticed earlier, it is a comprehensive legislation, not limited to provide for prosecution of person involved in the offence of money laundering, but mainly intended to prevent money-laundering activity and confiscate the proceeds of crime involved in money -laundering. It also provides for prosecuting the person involved in such activity constituting offence of money-laundering. In other words, this legislation is an amalgam of different facets including setting up of agencies and mechanisms for coordinating measures for combating money-laundering. Chapter III is a provision to effectuate these purposes and objectives by attachment, adjudication and confiscation. The adjudication is done by the Adjudicating Authority to confirm the order of provisional attachment in respect of proceeds of crime involved in money-laundering. For accomplishing that objective, the authorities appointed under Chapter VIII have been authorised to make inquiry into all matters by way of survey, searches and seizures of records and property. These provisions in no way invest power in the Authorities referred to in Chapter VIII of the 2002 Act to maintain law and order or for that matter, purely investigating into a criminal offence. The inquiry preceding filing of the complaint by the authorities under the 2002 Act, may have the semblance of an investigation conducted by them. However, it is essentially an inquiry to collect evidence to facilitate the Adjudicating Authority to decide on the confirmation of provisional attachment order, including to pass order of confiscation, as a result of which, the proceeds of crime would vest in the Central Government in terms of Section 9 of the 2002 Act. In other words, the role of the Authorities appointed under Chapter VIII of the 2002 Act is such that they are tasked with dual role of conducting inquiry and collect evidence to facilitate adjudication proceedings before the Adjudicating Authority in exercise of powers conferred upon them under Chapters III and V of the 2002 Act and also to use the same materials to bolster the allegation against the person concerned by way of a formal complaint to be filed for offence of money-laundering under the 2002 Act before the Special Court, if the fact situation so warrant. It is not as if after every inquiry prosecution is launched against all persons found to be involved in the commission of offence of money- laundering. It is also not unusual to provide for arrest of a person during such inquiry before filing of a complaint for indulging in alleged criminal activity.”
This Court has already found that the mandatory requirements of Section 19 have not been complied with in the case at hand.
17. Now, what would be the consequences. In Pankaj Bansal (Supra), the Supreme Court relying upon judgment in Senthil Balaji (supra) unequivocally held that non-compliance in this regard would entail release of the arrested person straightaway. In fact, taking note of the lack of uniformity followed by the adjudicating officers in the country while effecting arrest under Section 19, the Supreme Court held as follows:
“On the above analysis, to give true meaning and purpose to the constitutional and the statutory mandate of Section 19(1) of the Act of 2002 of informing the arrested person of the ground of arrest, we hold that it would be necessary, henceforth, that a copy of such written grounds of arrest is furnished to the arrested persons as a matter of course and without exception.”
There is nothing in the order dated 08.06.2023 to show that the grounds for arrest and subsequent remand of the petitioners were informed to them. Since the arrest itself has been held to be unlawful for the reasons indicated, the twin conditions stipulated under Section 45 of Act could not apply in view of non-compliance of the provision under Section 19 of the said Act.
18. To sum up, this is a case where learned Sessions Judge, before directing production of the accused persons before him, as per order dated 03.05.2023, has not recorded his satisfaction as regards the fact of the grounds for arrest of the accused persons being informed to them, save and except that the proceeding had been initiated against them resulting from the predicate offence under Sections 21(C)/29 of the NDPS Act, which is serious in nature, engulfing the youths at large. Significantly, by passing such order learned Sessions Judge also held as follows:
“(b) Supply of a copy of ECIR in every case to the persons concerned is not mandatory, it is enough, if ED at the time of arrest, disclosures the grounds of such arrest.
(c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorized representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering”, to maintain confidentiality did not file the complete ECIR. On the above submission, prayed to allow the petition.”
19. Despite holding so, when the accused persons were actually produced before him, the Sessions Judge failed to record reasons or his satisfaction regarding the need for remanding the accused persons for their custodial interrogation. Clearly this is a violation of the provision of Section 19 of the P.M.L. Act, which entitles the accused persons to be released on bail.
20. In such view of the matter, the other grounds raised by the petitioners touching the merits of the case are not required to be gone into.
21. For the foregoing reasons therefore, the bail application is allowed. Let the petitioners be released on bail on such terms and conditions as the learned Sessions Judge, Khordha may deem fit and proper to impose including the following conditions:
i. They shall appear before the IIC of Sahadevkhunta police station on every alternate day for a period of six months, except the dates on which they are required to attend the Court at Bhubaneswar.
ii. They shall personally appear before the court in seisin over the matter on each date of posting of the case and no representation through counsel shall be allowed under any circumstances.
22. The BLAPL is accordingly disposed of.
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