2021 (5) TMI 189 - HC - Money Laundering

Money laundering - proceeds of crime - huge difference between the said cash deposit and the income of the petitioner - creation of benami Funds - shell companies - Validity of arrest of petitioner - Guilt standard - charge against the arrested person for having committed the predicate offence. Whether in terms of Section 19 of PMLA the Investigating Officer or the Arresting Officer is required to inform the grounds of arrest to the person being arrested if so is it oral information or does it have to be in writing? - HELD THAT - The term Arrest has not been defined under the Cr.P.C. or under the IPC nor for that matter has it been defined under the PMLA. Arrest as generally understood is to restrain to stay and in relation to a person connected to an offence or suspected to be connected to offence an arrest would mean to detain and restrain a person - Section 41 to 44 and 46 of Cr.P.C. deal with the arrest of a person Section 41 empowering the police officer to arrest any person without a warrant Section 42 empowering a Police officer to arrest a person who commits an offence in his presence Section 43 enabling a private person to arrest any person who commits an offence in his presence and or a proclaimed offender Section 44 deals with arrest by a Magistrate and Section 46 lays down the manner in which the arrest has to be made. In the present case the power to arrest is circumscribed by the PMLA itself. This power has to be exercised in the manner as provided under PMLA or not at all. Apart from the exercise of power to arrest in a particular manner PMLA also provides or mandates that the arresting officer inform the arrestee of the grounds of his arrest at the earliest without any unnecessary delay so as to safeguard the individual freedom of that person who can on that basis apply for and seek for bail if so provided - The question is as to whether the arresting officer is required to only inform the grounds of arrest or provide the same in writing to the person arrested for an offence under the PMLA. The PMLA has various provisions relating to the offence of money laundering as regards which stringent punishments are prescribed. Furthermore in terms of Section 45 of the PMLA for the person arrested to seek bail it is required that such a person establishes before the said Court that the accused is not guilty of the offence alleged against him. Since it is required that the arresting officer inform and provide the arrestee with the arrest order and grounds of arrest in writing it would be required that the investigating officer establish the positive fact of having provided the same in writing since the negative cannot be established by the arrestee. Hence in such cases apart from obtaining the acknowledgement of the arrestee on the said arrest order and grounds of arrest it may also be advisable for the arresting officer to email the said arrest order and grounds of arrest to the arrestee s email account to the e-Mail account of the lawyer and or the near and dear ones of the arrestee if the lawyer or the near and dear ones are provided with a physical copy of the arrest order or grounds of arrest to obtain their acknowledgement of having received the same. Thus in terms of Section 19 of PMLA the Investigating Officer or the arresting officer is required to inform and provide a physical copy of the arrest order and grounds of arrest to the person being arrested. Mere oral information would not be sufficient - In the present case on facts having come to the conclusion that the grounds of arrest have been provided to the petitioner I hold that requirement of Section 19 in providing grounds of arrest has complied with and there is no infirmity in the same. Whether the expression reason to believe that any person has been guilty of an offence found under Section 19 of the PMLA Act require a preliminary adjudication by the Investigating Officer as regards the guilt of the accused before arresting him? - HELD THAT - The arresting officer should have reason to believe that a person is guilty of an offence . The reason to believe cannot be said to be an adjudication which is required to be performed by the Investigating Officer as regards the guilt of the person being arrested; the Investigating officer cannot be a Judge jury and executioner. The investigating officer is only to investigate and place the material before the competent court for adjudication - The requirement under Section 19(1) as extracted above is a reason to believe on the basis of the material in his possession . This reason to believe in my considered opinion would be the objective satisfaction of the Investigating Officer on the basis of the material available with him since the Investigating officer has conducted the investigation and has secured material. The only requirement under the Act is the reason to believe by the Investigating officer or the arresting officer that the person is guilty of the offence . It is therefore not required for the Investigating officer to prove the purpose of arrest or even to make any submission as regards the requirement of arrest to protect the proceeds of the crime. Though of course the same is not part of Section 19(1) as contended by Shri Aravind Kamath learned Senior counsel the same would be examined by the Court while granting bail to consider whether the person arrested is required to be retained in judicial custody for the reason that the said person may tamper with evidence and or with the proceeds of crime. Said factor would have to be considered at the time of granting of bail and not at the time of the arrest. Arrest and remand to police custody and thereafter to judicial custody which would also include custodial interrogation which is an essential weapon in the armoury of the Investigating Officer enabling the Investigating officer to properly and effectively investigate a particular offence. Suffice to say that one Mohammed Anoop was arrested with possession of the drugs in commercial quantity thereby having committed an offence under the NDPS Act. On his arrest during the course of his interrogation Mohammed Anoop has stated that the petitioner is his boss; he would act as per the instructions of the petitioner. The petitioner has invested money in his businesses and he has transferred monies to the petitioner for use - No proper explanation was given by the petitioner during the course of his interrogation; there are serious offences that have been alleged against the said Mohammed Anoop and the petitioner and several others for offences under the NDPS Act huge amounts of money had changed hands. It is suspected that these have been realized on account of trafficking or dealing with drugs which is a scheduled offence under the PMLA therefore the money is suspected or believed to have been generated on account of such dealing with or trafficking in Narcotic or psychopathic substances these monies would amount to proceeds of crime. Thus the phrase reason to believe that any person has been guilty of an offence would mean the objective satisfaction of the Investigating Officer or the arresting officer that the person who is to be arrested is guilty of an offence punishable under the Act. It does not mean that the said Investigating officer or the arresting officer has to adjudicate on the guilt pass a detailed order or record the same in writing to indicate as to why he is of the opinion that the person to be arrested is guilty of the offence the recordal of the objective satisfaction with reference to the material on record would be sufficient compliance - on the basis of the discussion made as regards the facts that the investigating officer has in writing indicated as to why he is of the opinion that the petitioner is believed to be guilty of committing the offence the recordal of the objective satisfaction with reference to the material on record is sufficient compliance of the requirement and there is no infirmity in the arrest made. Whether the objective satisfaction of the guilt of the accused is required to be reduced to writing on the grounds of arrest formulated by the Investigating Officer? - HELD THAT - The objective satisfaction of the guilt of the accused can only be ascertained from the material on record it cannot be expected of an Investigating Officer to in detail record the same in writing and form a part of grounds of arrest formulated by the Investigating Officer - However the grounds of arrest are required to be sufficiently detailed out as to why a person is being arrested in brief state as to what is the material available with the Investigating officer which would link the person to be arrested to an offence under the Act and why the person is believed to be guilty of the commission of such an offence. These factors if contained in the grounds of arrest would be sufficient it would not be required for a detailed adjudicatory order to be made by the Investigating Officer as to the guilt of the accused. Thus the objective satisfaction of the guilt of the accused is required to be reduced to writing in the grounds of arrest formulated by the Investigating Officer prior to the arrest and to be furnished in writing to the arrestee at the time of arrest or immediately thereafter. Petition dismissed.

Summary

Issues Involved:
1. Whether the Investigating Officer is required to inform the grounds of arrest to the person being arrested, and if so, whether it must be in writing.
2. Whether the expression "reason to believe that any person has been guilty of an offence" under Section 19 of the PMLA requires a preliminary adjudication by the Investigating Officer regarding the guilt of the accused before arresting him.
3. Whether the objective satisfaction of the guilt of the accused is required to be reduced to writing in the grounds of arrest formulated by the Investigating Officer.

Detailed Analysis:

1. Informing Grounds of Arrest:
The court examined whether the Investigating Officer must inform the grounds of arrest to the person being arrested and if such information must be in writing. The court held that under Section 19 of the Prevention of Money Laundering Act (PMLA), the Investigating Officer is required to inform and provide a physical copy of the arrest order and grounds of arrest to the person being arrested. Mere oral information is not sufficient. This decision was supported by the need to ensure that the accused can adequately prepare for bail, which requires a detailed understanding of the grounds for arrest. The court noted that the petitioner had been provided with the grounds of arrest, as evidenced by his signature on the documents and his ability to file a bail application on the same day.

2. Reason to Believe and Preliminary Adjudication:
The court addressed whether the phrase "reason to believe that any person has been guilty of an offence" necessitates a preliminary adjudication by the Investigating Officer regarding the guilt of the accused before arresting him. It was determined that the Investigating Officer's "reason to believe" is based on objective satisfaction derived from material in possession. This does not require a detailed adjudicatory order but rather an objective satisfaction that the person is guilty of an offence under the PMLA. The court rejected the argument that the Investigating Officer must adjudicate the guilt of the accused before making an arrest, as this would be akin to putting the cart before the horse.

3. Objective Satisfaction and Grounds of Arrest:
The court considered whether the objective satisfaction of the guilt of the accused must be reduced to writing in the grounds of arrest formulated by the Investigating Officer. It was held that while the grounds of arrest need to be sufficiently detailed to explain why a person is being arrested and the material linking the person to the offence, a detailed adjudicatory order is not required. The grounds of arrest should briefly state the material available and why the person is believed to be guilty of the offence. In this case, the court found that the grounds of arrest provided were in compliance with these requirements.

Conclusion:
The petition was dismissed. The court concluded that the Investigating Officer had complied with the requirements of informing the grounds of arrest in writing, and the objective satisfaction of the guilt of the accused was sufficiently recorded in the grounds of arrest. The court also clarified that the Investigating Officer's "reason to believe" does not necessitate a detailed adjudication of guilt before arrest.