2025 (1) TMI 1575 - SC - Money Laundering

Illegal arrest - bail granted on the ground that the arrest was illegal - production before the Court of the learned Magistrate within 24 hours or not - violation of right to liberty - grant of bail for non-fulfillment of twin tests under clause (ii) of sub-section 1 of Section 45 of PMLA or not - HELD THAT - 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. 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. Thus 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. There are no error in the impugned order and accordingly the appeal is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the arrest of the respondent was lawful, specifically in light of the procedural requirements under Article 22(2) of the Constitution of India and Section 57 of the Code of Criminal Procedure, 1973 (Cr.P.C.);

(b) Whether the detention of the respondent by the Bureau of Immigration pursuant to a Look Out Circular (LOC) issued by the Directorate of Enforcement (ED) amounts to arrest under the PMLA;

(c) Whether the failure to produce the respondent before the nearest Magistrate within 24 hours of taking physical custody renders the arrest illegal and vitiates the subsequent custody and proceedings;

(d) The applicability of fundamental rights under Articles 21 and 22 of the Constitution in the context of arrest and detention under the Prevention of Money Laundering Act, 2002 (PMLA);

(e) The implications of an illegal arrest on the grant of bail under the PMLA, particularly concerning the twin tests under Section 45(1)(ii) of the PMLA.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (c): Legality of Arrest and Compliance with Article 22(2) and Section 57 Cr.P.C.

Relevant Legal Framework and Precedents: Article 22(2) of the Constitution mandates that no person arrested shall be detained in custody without being produced before the nearest Magistrate within 24 hours of arrest, excluding the time necessary for the journey from the place of arrest to the Magistrate's court. Section 57 of the Cr.P.C. codifies this requirement for criminal proceedings. Section 65 of the PMLA incorporates the provisions of the Cr.P.C. into PMLA proceedings, ensuring no inconsistency.

Court's Interpretation and Reasoning: The Court observed that the respondent was detained by the Bureau of Immigration pursuant to the LOC issued by the ED at 6 pm on 4th March 2022 and physically taken into custody by the ED at 11 am on 5th March 2022. However, the arrest memo was prepared only at 1.15 am on 6th March 2022, and the respondent was produced before the Magistrate at 3 pm on 6th March 2022. This timeline clearly shows that the respondent was not produced before the Magistrate within 24 hours of taking physical custody, violating Article 22(2) and Section 57 Cr.P.C.

Key Evidence and Findings: The factual findings in paragraph 10 of the impugned judgment state the timeline of custody and arrest. The arrest memo's preparation time and the delayed production before the Magistrate were critical evidentiary points. The Court also noted the arrest memo had the date and time of arrest filled in by hand after the typed order was prepared, indicating procedural irregularity.

Application of Law to Facts: The Court held that the failure to produce the respondent before the Magistrate within the prescribed 24-hour period rendered the arrest illegal and vitiated the custody. This constituted a violation of the fundamental rights under Article 22(2) and Article 21 (right to life and personal liberty).

Treatment of Competing Arguments: The appellant argued that the respondent was detained from 11 am on 5th March 2022 and arrested at 1.15 am on 6th March 2022, and produced before the Magistrate within 24 hours from the arrest time. The Court rejected this, emphasizing that physical custody began earlier and the entire detention period must be counted from that point for the purpose of Article 22(2).

Conclusions: The Court concluded that the arrest was illegal due to non-compliance with constitutional and statutory mandates, thereby infringing the fundamental rights of the respondent.

Issue (b): Nature of Detention under LOC and its Effect on Arrest

Relevant Legal Framework: The Look Out Circular (LOC) is an administrative mechanism to detain a person at an airport or border to prevent flight from justice. The question was whether detention under LOC equates to arrest under the PMLA and Cr.P.C.

Court's Interpretation and Reasoning: The Court recognized that the LOC was issued at the instance of the ED, and the Bureau of Immigration detained the respondent on behalf of the ED. The detention under LOC was effectively physical custody by the ED through the Bureau of Immigration, amounting to arrest for the purpose of constitutional safeguards.

Key Evidence and Findings: The factual timeline showed detention starting on 4th March 2022 at 6 pm by Bureau of Immigration executing the LOC, and physical custody taken over by ED on 5th March 2022 at 11 am.

Application of Law to Facts: The Court held that the respondent's detention under LOC was to be treated as arrest in the eyes of law, triggering the requirement to produce the person before the Magistrate within 24 hours.

Treatment of Competing Arguments: The appellant's attempt to distinguish detention under LOC from arrest was not accepted, as the Court emphasized the functional equivalence of physical custody and the need to protect constitutional rights.

Conclusions: Detention under LOC executed by Bureau of Immigration on behalf of ED is equivalent to arrest, requiring compliance with Article 22(2) and Section 57 Cr.P.C.

Issue (d): Applicability of Fundamental Rights under Articles 21 and 22 in PMLA Proceedings

Relevant Legal Framework: Articles 21 and 22 of the Constitution guarantee the right to life and personal liberty and procedural safeguards against illegal arrest and detention. The PMLA is a special statute but does not exclude constitutional protections.

Court's Interpretation and Reasoning: The Court affirmed that constitutional safeguards under Articles 21 and 22 are fully applicable to proceedings under the PMLA. The Court referred to Section 65 of the PMLA, which incorporates Cr.P.C. provisions, ensuring no dilution of fundamental rights.

Key Evidence and Findings: The violation of Article 22(2) in the present case was held to also infringe Article 21 rights.

Application of Law to Facts: The Court emphasized that the fundamental rights cannot be overridden by procedural technicalities or special statutes.

Treatment of Competing Arguments: The appellant's position that PMLA provisions may override certain procedural safeguards was rejected.

Conclusions: Fundamental rights under Articles 21 and 22 are paramount and apply fully to PMLA arrests and proceedings.

Issue (e): Impact of Illegal Arrest on Bail under Section 45(1)(ii) of the PMLA

Relevant Legal Framework: Section 45(1)(ii) of the PMLA lays down twin tests for bail, generally making bail difficult to obtain. However, constitutional violations may override these provisions.

Court's Interpretation and Reasoning: The Court held that when an arrest is illegal or vitiated due to violation of fundamental rights, the twin tests under Section 45(1)(ii) cannot be used to deny bail. The Court stated it is the duty of the Court to uphold fundamental rights