Case Law Details
Directorate of Enforcement Vs Subhash Sharma (Supreme Court of India)
The case arose from a bail application filed before the Chhattisgarh High Court under Section 439 of the Code of Criminal Procedure (CrPC) by an accused arrested in connection with an ECIR registered by the Directorate of Enforcement (ED) under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA). The ECIR was based on three FIRs treated as scheduled offences, alleging that the accused had obtained loans amounting to ₹31.37 crore from Punjab National Bank and Axis Bank through forged and fabricated documents in the names of his companies. According to the ED, the loans later became non-performing assets (NPAs). The accused contended that he had cooperated with the investigation since registration of the ECIR, challenged the validity of the Look Out Circular (LOC), and argued that after being detained at IGI Airport, New Delhi, he was illegally transported to Raipur without being produced before the nearest Magistrate within the constitutionally prescribed period of 24 hours. The ED opposed bail, arguing that the arrest was lawful, that the applicant was a flight risk, and that economic offences required a stricter approach in matters of bail.
Read HC Judgment in this case:Chhattisgarh HC Grants Bail as PMLA Accused Was Not Produced Before Court Within 24 Hours
The Chhattisgarh High Court examined the case diary, trial court records, and the sequence of custody and concluded that the applicant had been detained at IGI Airport at 6:00 p.m. on 4 March 2022 when the Bureau of Immigration executed the LOC issued at the instance of the ED. The Court found that the ED took physical custody of the applicant at 11:00 a.m. on 5 March 2022, transported him to Raipur, prepared the arrest memo only at 1:15 a.m. on 6 March 2022, and produced him before the remand court later that day. Relying on Article 22(2) of the Constitution and earlier judicial precedents, including Manoj v. State of Madhya Pradesh and Ashak Hussain Allah Detha v. Assistant Director of Customs, the High Court held that arrest commences when a person’s liberty is restrained and not when an arrest memo is formally prepared. It observed that “detention in custody for interrogation” is unknown to law and that the investigating agency could have produced the applicant before the competent court at Delhi and sought transit remand instead of transporting him to Raipur. Finding that the applicant had not been produced before the competent court within 24 hours of detention and that the trial was likely to take considerable time, the High Court granted bail subject to specified conditions while declining to decide the legality of the LOC in the bail proceedings.
The Directorate of Enforcement challenged the bail order before the Supreme Court, contending that the respondent had been formally arrested only at 1:15 a.m. on 6 March 2022 and was produced before the Magistrate within 24 hours of that recorded arrest. The Supreme Court rejected this contention, observing that the LOC had been issued at the instance of the ED and that the Bureau of Immigration had detained the respondent on behalf of the ED. The Court accepted the High Court’s factual finding that the ED had taken physical custody of the respondent at 11:00 a.m. on 5 March 2022. It also noted that the arrest order had been typed in advance, with only the date and time of arrest left blank and later filled in by hand. Since the respondent had not been produced before the nearest Magistrate within 24 hours from the time the ED assumed physical custody, the Supreme Court held that the arrest was rendered completely illegal due to violation of Article 22(2) of the Constitution. It further held that such continued custody infringed not only Article 22(2) but also the fundamental right to personal liberty under Article 21.
The Supreme Court further held that the constitutional safeguard under Article 22(2) is reflected in Section 57 of the Code of Criminal Procedure and that, through Section 65 of the PMLA, Section 57 applies to proceedings under the PMLA because there is no inconsistency between the two enactments. The Court held that once a court dealing with a bail application finds that the accused’s rights under Articles 21 and 22 have been violated during or after arrest, it is duty-bound to release the accused on bail because the arrest itself stands vitiated. It also ruled that where an arrest is illegal or vitiated, bail cannot be denied merely because the twin conditions contained in Section 45(1)(ii) of the PMLA have not been satisfied. Finding no error in the High Court’s reasoning or conclusion, the Supreme Court dismissed the ED’s appeal and affirmed the order granting bail.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. Heard learned counsel appearing for the appellant.
3. The appellant is the Directorate of Enforcement. By the impugned order, the High Court has granted bail to the respondent in connection with an offence punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (for short, ‘the PMLA’). The High Court found that the respondent’s arrest was illegal, and on that ground, he was granted bail.
In paragraph 10 of the impugned judgment, the High Court has recorded factual findings which read thus:
“From the documents available in the case diary and the aforesaid order, it is crystal clear that the applicant was detained and taken into custody at 18.00 hours (6 pm) on 04.03.2022 at IGI Airport, New Delhi when the Bureau of Immigration executed the LOC issued against the applicant and held him in custody on behalf of ED. It is also not in dispute that ED took physical custody of the applicant from the Bureau of Immigration at 11.00 hours (11 am) at IGI Airport on 05.03.2022 and brought him to Raipur where the ED in the afternoon on 06.03.2022 before the remand Court.”
(underline supplied)
5. The submission of the learned counsel appearing for the appellant is that pursuant to the Look Out Circular (for short, ‘the LOC’) issued against the respondent, he was detained at IGI Airport from 11.00 hours, on 5th March, 2022. But he was shown as arrested at 01.15 hours on 6th March, 2022 by the appellant Enforcement Directorate and was produced before the Court of the learned Magistrate within 24 hours from 1.15 hours on 6th March, 2022.
6. This argument cannot be accepted. Admittedly, the LOC was issued at the instance of the appellant – Directorate of Enforcement. By executing the LOC, the Bureau of Immigration detained the respondent at IGI Airport from 4th March 2022 on behalf of the Appellant. The finding of fact recorded in paragraph 10 is that undisputedly, the physical custody of the respondent was taken over by the appellant from the Bureau of Immigration at 11.00 hours on 5th March, 2022. Thereafter, at 1.15 hours on 6th March 2022, an arrest memo was prepared by ED at Raipur. He was produced before the Court at 3 p.m. on 6th March, 2024. The perusal of the arrest order(Annexure p-1) shows that the typed order was kept ready. The date and time of arrest were kept blank which appear to have been filled in by hand. Admittedly, the respondent was not produced before the nearest learned Magistrate within 24 hours from 11.00 a.m. on 5th March, 2022. Therefore, the arrest of the respondent is rendered completely illegal as a result of the violation of clause 2 of Article 22 of the Constitution of India. Thus, the continuation of the respondent in custody without producing him before the nearest Magistrate within the stipulated time of 24 hours is completely illegal and it infringes fundamental rights under clause 2 of Article 22 of the Constitution of India. Therefore, his arrest gets vitiated on completion of 24 hours in custody. Since there is a violation of Article 22(2) of the Constitution, even his fundamental right to liberty guaranteed under Article 21 has been violated.
7. The requirement of clause 2 of Article 22 has been incorporated in Section 57 of the Code of Criminal Procedure, 1973 (for short ‘the Cr.P.C). There is no inconsistency between the provisions of the PMLA and Section 57 of Cr.P.C. Hence, by virtue of Section 65 of the PMLA, Section 57 of the Cr.P.C applies to the proceedings under the PMLA.
8. Once a Court, while dealing with a bail application, finds that the fundamental rights of the accused under Articles 21 and 22 of the Constitution of India have been violated while arresting the accused or after arresting him, it is the duty of the Court dealing with the bail application to release the accused on bail. The reason is that the arrest in such cases stands vitiated. It is the duty of every Court to uphold the fundamental rights guaranteed under Articles 21 and 22 of the Constitution.
9. Therefore, when arrest is illegal or is vitiated, bail cannot be denied on the grounds of non-fulfillment of twin tests under clause (ii) of sub-section 1 of Section 45 of PMLA.
10. Hence, we find no error in the impugned order, and accordingly, the appeal is dismissed.
11. Pending application(s), if any, shall stand disposed of.
Leave granted.
The appeal is dismissed in terms of the signed Reportable Judgment.
Pending application(s), if any, shall stand disposed of.
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