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Is Enforcement Directorate Empowered Under Prevention Of Money Laundering Act, 2002 To Seek Remand?

Ashima Mandla and Syed M. Ahmad 
4 May 2022 6:52 AM GMT
Is Enforcement Directorate Empowered Under Prevention Of Money Laundering Act, 2002 To Seek Remand?
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Before the pronouncement of the much-awaited judgment by the Supreme Court on whether Chapter XII of the Code of Criminal Procedure, 1973 ("CrPC") applies to the Prevention of Money Laundering Act 2002 ("PMLA"), a pertinent question arises which requires examination, one which was perhaps not comprehensively deliberated in the marathon hearing - whether the officers of...


Before the pronouncement of the much-awaited judgment by the Supreme Court on whether Chapter XII of the Code of Criminal Procedure, 1973 ("CrPC") applies to the Prevention of Money Laundering Act 2002 ("PMLA"), a pertinent question arises which requires examination, one which was perhaps not comprehensively deliberated in the marathon hearing - whether the officers of Enforcement Directorate ("ED") have the power to seek custody of the accused under the PMLA?.

Concept of Remand under CrPC

CrPC envisages completion of investigation within 24 hours of arrest. When an investigation cannot be completed within 24 hours, section 57 mandates a "special order" of the Magistrate under Section 167 to allow a "Police officer" to detain the accused in his custody for the purposes of investigation. The Code provides that arrest can be made even by a private person subject to immediate handing over of such arrested person to police[1]. Section 167(2) empowers the Magistrate to authorise the further detention of the accused in either police custody or judicial custody in the first 15 days after which remand can only be in judicial custody[2]. Thus, under Section 167(2) there can be a remand to only judicial or police custody.

First question: Are Officers of ED Police Officers?

The test laid out in by Supreme Court in Romesh Chandra Mehta v. State of West Bengal[3] and Badaku Joti Savant v. State of Mysore[4], is whether an officer is invested with all the powers of a police officer qua investigation including the power to submit a report under section 173 of the CrPC. Furthermore, as per Section 54(f) of PMLA, the legislature has expressly provided for Enforcement Directorate officials to receive assistance from police officers, hence creating a deliberate distinction.

History of Enforcement Directorate

The origin of ED dates back to 1956 when the enforcement unit under the Department of Economic Affairs was established under Foreign Exchange Regulation Act, 1947 ("FERA"). It was headed by a Legal Services Officer as Director and an officer on deputation from RBI.[5]FERA was repealed by enactment of the Foreign Exchange Management Act, 1999 ("FEMA"), wherein Section 36 of the FEMA Act provided for the establishment of ED.

Investigation of Offence under PMLA

Section 48 of PMLA enumerates the authorities for the purposes of the Act as (i) Director/Addl. Director/Joint Director; (ii) Deputy Director; and the (iii) Assistant Director.

Interestingly, prior to its amendment in 2005, Section 44(1)(b) of PMLA read as "a Special Court may upon perusal of police report of the facts which constitute an offence under this Act or upon complaint made by an authority authorised in this behalf under this Act take cognizance of offence under section 3..."

Subsequently, vide Act 20 of 2005, section 44(1)(b) of PMLA was amended and now a Special Court under PMLA can take cognizance only upon receiving a complaint from the Authority under the Act, and not based on any police report.

This indicates a conscious understanding of legislature that police report u/s 173 CrPC and a complaint made by ED (for the purposes of Section 44 of PMLA) are distinct. The 2005 Amendment goes on to demonstrate that only upon complaint by ED can the Special Court take cognizance and thereby cement the aforesaid understanding.

The same stands further substantiated by proviso to Section 45(1) of PMLA which states that the Special Court shall not take cognizance except upon a complaint by Director or any officer authorised by Central Government by general or special order. Section 45(1A) of PMLA further categorically states that no police officer shall investigate any offence under the PMLA unless specifically authorised by Central Government even which shall be subject to conditions as may be prescribed. Section 2(na) of PMLA states the investigation includes all proceedings conducted by the Director or authority authorised for the collection of evidence.

Difference in power of investigation between Director of PMLA and Police Officers under CrPC

Powers of Director/ Authorities (PMLA)

Powers of Police Officers (CrPC)

Section 50(2)- Power to "summon" any person to give evidence or produce any records

Section 91- Power of Officer in Charge of Police Station to compel production of any document or thing.

Section 50(3)- Persons summoned bound to attend and state the truth.

Section 63(2)- Penalty if person

-refuses to sign the statement

-refuses to answer any question

-omits to attend or produce books of account

Section 160- Power to require the attendance of witnesses

Section 161- Examination of Witness by Police- Bound to answer truly except self-incriminating questions. Statement not admissible in evidence as per Section 25-26 of Evidence Act, except for disclosure u/s 27 of Evidence Act.

Section 162- Statements to police not to be signed

Proceedings u/s 50(2) and 50(3) are judicial proceedings per Section 50(4)

Section 16- Power of Survey

-

Section 17- Search and Seizure- This power among other things includes the power to examine on oath any person found to be in possession or control of any record or property for investigation.

Section 92- Power of Police officer to seize certain property

Section 18-Search of persons

Section 165- Search by Police Officer

Section 19- Power to arrest

Section 41- Power to arrest

No express provision

Section 167(2)- Power to seek remand

Section 45- Power to file Complaint

Section 173- Power to file Final Report

Section 54 of PMLA which is titled "Certain officers to assist in inquiry, etc" states that "following officers and others are hereby empowered and required to assist the authorities in the enforcement of this Act, namely: -

***

(f) officers of Police

(g) officers of enforcement appointed under sub-section (1) of section 36 of the Foreign Exchange Management Act, 1999"

The Chattisgarh High Court in Paritosh Kumar v. State[6] dealing with officers under GST Act stated that they are not police officers and therefore cannot seek custody of the arrested persons.

Inferences that can be drawn from the above are:

1. Authorities have wide powers for purpose of investigation unlike Police officers under CrPC. The nature of investigation by both is distinct. An investigation by Authorities under PMLA is a judicial proceeding, while there is no such provision under CrPC for police investigation.

2. Earlier, Police could file a final report before the Special Court but the same has been intentionally omitted by the legislature in the Amendment Act of 2005.

3. The Director of ED is the primary authority under the Act for investigation of offences, and not any police officer. By amendment, the legislature has excluded the general power of police officers to investigate offences under PMLA and made the same an exception u/s 45(1-A).

4. However, a provision for police officers to assist ED officials for purposes u/s 54 PMLA has been provided.

5. Since the enactment of PMLA, not only were police officers consciously identified to be distinct from ED officials under the Act, but subsequent amendments divested and limited the role of Police officers under the Act.

In summation, it can be argued that Officers of ED (including Director/Addl.Director/Deputy Director/Joint Director) are distinct from Police Officers.

No provision for remand in PMLA

Section 19 of PMLA empowers the Director/Addl.Director/Deputy Director/Joint Director, for purposes of arrest. The same incorporates elements of sections 41, 57 and 167 of CrPC, in a limited sense.

Comparison between Section 167 of CrPC and Section 19 of PMLA

167. Procedure when investigation cannot be completed in twenty-four hours

Section 19. Power to arrest

"(1) Whenever any person is arrested and detained in custody, and it appears that the investigation cannot be completed within the period of twenty-four hours fixed by section 57… the officer in charge of the police station or the police officer making the investigation, ………shall at the same time forward the accused to such Magistrate.

(2) The Magistrate to whom an accused person is forwarded may authorise the detention of the accused in such custody as such Magistrate thinks fit, for a term not exceeding fifteen days in the whole; …………

Provided that— 1 [(a) the Magistrate may authorise the detention of the petitioner person, otherwise than in the custody of the police, beyond the period of fifteen days, if he is satisfied that adequate grounds exist for doing so, ……."

"(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, a 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 the 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 [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."

Procedure under Section 41 r/w 57 r/w 167 of CrPC: -




Procedure under Section 19 of PMLA: -

Can there be no custody under or after arrest under section 19?

A comparison of Section 19 of PMLA and 167 CrPC shows that the legislature has expressly omitted vesting power to seek remand with the ED officials. The dicta of the Supreme Court in a catena of decisions[7] clearly implies that Courts cannot stretch the words used in the legislature to fill in gaps, and cannot assume that the legislature made a mistake. If there is a deficiency, Court would not go to make up for the deficiency.

Further, a plethora of decisions states that PMLA is a self-contained code. However, can this be used to argue that since there is no provision there can be no custody and the Magistrate will only have to release the accused on bail? The answer would be NO.

Section 65 of PMLA states that unless there is an inconsistency between CrPC and PMLA, the provisions of CrPC shall apply to PMLA. Therefore, joint reading of sections 19, 65 of PMLA and 167(2) CrPC leads to a sole logical conclusion that under section 19 of PMLA, after the ED officials produce the Accused before the Magistrate by virtue of Section 65 of PMLA, the Magistrate will have the power to remand the accused to the custody.

However, since Authorities under PMLA are not police officers such custody will only be judicial custody of the Magistrate. Nevertheless, interpreting sections 19, 65 of PMLA and 167 CrPC, to mean an assumption that the Magistrate has the power to remand the accused to custody of ED would be inconsistent & contrary to the intention of the legislature in light of section 65 of PMLA.

Addressing the Elephant in the room

The first case law which may be cited to counter the aforementioned interpretation is the decision of the Supreme Court in Directorate of Enforcement v. Deepak Mahajan[8], where the SC was tasked with the question of "Whether jurisdiction of the Magistrate to authorise the detention of an arrestee produced before him either in judicial custody or otherwise under Section 167(2) of the Code is completely excluded or ousted by the absence of any specific provision in the FERA or the Customs Act empowering the Magistrate to authorise the detention' of the arrestee under the Code?" The Court answered this question in negative and held that officer of Enforcement under FEMA can be given custody.

However, Deepak Mahajan would not be an authority on our proposition on the following grounds: -

a. The Apex Court was interpreting the provisions of the FERA Act, therefore Court's examination of the power of ED officers were those given under FERA not PMLA.

b. The question of law proposed to Court was wide enough to exclude the power to remand the accused even to judicial custody, which would have been incorrect as rightly held in Deepak Mahajan. It appears that because the entire reasoning of the Court was clouded to retain the power of the Magistrate to order judicial custody, Court did not independently consider the issue of "custody of Enforcement Directorate".

Furthermore, it is noteworthy that statements given to ED under PMLA are deemed as judicial proceedings u/s 50 and 63 of the Act, whereby refusal/false statements result in punitive action. In the eventuality, if the power of remand to ED is crystallised, the same would infringe Article 20 of the Constitution of India as amounting to self-incrimination.

Similarly, in the decision of the Supreme Court in Ashok Munilal Jain v. Assistant Directorate, ED[9], the question before the Court was limited to whether the right to default bail under section 167(2) is available to the accused under PMLA. The court making a brief reference to Deepak Mahajan answers the same in the affirmative. Although this decision again is no authority on whether ED can seek custody but in fact, it is harmonious to interpretation advanced by us. Right to default bail would be available to the accused even since the accused can still be remanded by the Magistrate to judicial custody before the filing of Complaint by Authority.

About the Authors: Ashima Mandla is a partner and Syed M. Ahmad is an Associate at Mandla & Singh Law Chambers


[1] Section 43 of CrPC

[2] CBI Cell-I v. Anupam Kulkarni, AIR 1992 SC 1768

[3] 1970 AIR 940,

[4] (1966)3 SCR 698

[5] https://enforcementdirectorate.gov.in/organisational_history.html?p1=12110201637408817737

[6] WPCR No. 469/2021

[7] Hira Devi v. Distt. Board, 1952 SCR 1122. P.K. Unni v. Nirmala Industries 1990 2 SCC 378

[8] [(1994) 3 SCC 440]

[9] SLP (Crl.) 2301/2017


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