In a significant legal development, the Madhya Pradesh High Court, in Asif Hanif Thara v. Enforcement Directorate, 2024 SCC OnLine MP 7379, has underscored the importance of procedural adherence under the Prevention of Money Laundering Act, 2002 (PMLA) and the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). The Court granted bail to the applicant while addressing key concerns surrounding procedural lapses and the admissibility of evidence.
Background of the Case
An FIR was lodged on 16th June 2023 at Police Station Morar, Gwalior, accusing the applicant and others of fraudulent activities related to import authorizations for poppy seeds. The charges included using benami entities, violating licensing regulations, and causing a financial loss to the government exchequer. The proceeds of crime were estimated to be ₹141.8 crore.
Following the FIR, the Enforcement Directorate (ED) initiated proceedings under the PMLA and subsequently arrested the applicant based on statements from co-accused individuals.
Key Contentions by the Applicant
1. Violation of Sections 19 and 50 of PMLA:
The applicant argued that the ED failed to comply with the procedural mandates under Sections 19 (arrest) and 50 (recording of statements) of the PMLA.
2. Reliance on Inadmissible Evidence:
The arrest was primarily based on the statements of co-accused persons, which are inadmissible as evidence.
3. Lack of Prima Facie Evidence:
No direct material evidence was presented linking the applicant to money laundering. The ED also did not seek custodial interrogation or submit sufficient evidence to justify continued detention.
4. No Consultation with Licensing Authority:
The ED did not gather information from the licensing authority to substantiate the claims of fraudulent practices in obtaining import licenses.
Arguments by the Enforcement Directorate
The ED contended that:
• The applicant was directly involved in money laundering, with proceeds of crime amounting to ₹141.8 crore.
• While they admitted to not summoning the applicant or conducting custodial interrogation before the arrest, they maintained that co-accused statements established prima facie guilt.
Court’s Observations and Rulings
The single-judge bench, led by Justice Prakash Chandra Gupta, critically examined the procedural aspects and the admissibility of evidence. The Court relied on several landmark judgments to reach its decision:
1. Inadmissibility of Co-Accused Statements:
• Prem Prakash v. Union of India, 2024 SCC OnLine SC 2270 – Statements made in custody to the same agency are inadmissible.
• Pankaj Bansal v. Union of India, 2023 SCC OnLine SC 1244 – Emphasized the necessity of statutory compliance under Section 19 of PMLA.
2. Procedural Compliance under Section 19 of PMLA:
• The Court stressed that the arrest must be backed by written reasons and a documented belief of guilt by the designated officer. Non-compliance would benefit the arrested individual, as highlighted in V. Senthil Balaji v. State, (2024) 3 SCC 51.
3. Requirement of Fair and Rational Arrest:
The Court ruled that arrests based solely on inadmissible evidence violate legal principles. The arrest should be rational, fair, and supported by legally admissible evidence.
4. Failure to Consult Licensing Authority:
The lack of information from the licensing authority further weakened the ED’s case.
Outcome
Considering the procedural lapses and insufficient admissible evidence, the Court granted bail to the applicant. The applicant was directed to:
• Furnish a personal bond of ₹5,00,000 with two sureties of the same amount.
• Comply with Section 480(3) of BNSS, 2023, including cooperation with the investigation.
Key Takeaways for Legal Practice
1. Importance of Procedural Compliance:
Adherence to Sections 19 and 50 of PMLA is crucial in arrest procedures, and failure to comply can undermine the prosecution’s case.
2. Inadmissibility of Co-Accused Statements:
Reliance on statements from co-accused individuals, without corroborative evidence, is insufficient for establishing guilt under PMLA.
3. Rational Arrest Standards:
Arrests must be justified by admissible evidence, ensuring fairness and legality.
At August Attorneys LLP, we remain committed to staying abreast of key legal developments and providing our clients with informed counsel. This case serves as a reminder of the significance of due process and procedural integrity in financial crime investigations.
For further insights on legal developments and procedural law, stay tuned to our blog or reach out to our expert team.