The statutory requirements under Section 19 of the PMLA mandate that reasons to believe must be recorded and communicated promptly to the arrestee, ensuring safeguards against arbitrary detention.

JUDGMENT

ANISH DAYAL, J.

I. PROCEEDINGS BEFORE THIS COURT

1. This petition seeks quashing of Arrest Memo and Arrest Order for arrest of petitioner on 9^th July 2024 and consequent remand orders.

2. The challenge pivots on alleged violation of Section 19 of Prevention of Money Laundering Act, 2002 (“PMLA”) and of constitutional safeguards against arbitrary detention.

3. Petitioner contends inter alia that exculpatory material, which exonerates petitioner, was not considered in the “grounds of arrest”; petitioner was not provided with “reasons to believe”, grounds of arrest erroneously rely on “directions to investigate” vide Supreme Court’s order dated 27^th February 2024 in a public interest litigation (“PIL”) being Jaskaran Singh Chawla v. Union of India & Ors. W.P. (Crl.) 246/2022; the arrest could not be justified on the basis of lack of cooperation by petitioner which was violative of constitutional safeguard against self-incrimination; and other related grounds.

4. To provide a brief overview of proceedings before the Court - notice, in the present petition, was issued on 20^th August 2024 and counsel for respondent was directed to file the reply. On the next date of hearing, opening arguments were addressed by Senior Counsel for petitioner. Based on the reply filed by respondent, time was sought to file the rejoinder. On the next date, Senior Counsel for petitioner handed up a detailed list of dates, a note of arguments, and compilation of judgements relied upon; further arguments were addressed by Senior Counsel for petitioner on two further dates; subsequently, arguments were addressed by Special Counsel for respondent who also handed up a note of arguments; on the next date, counsel for respondent handed up another note and a compilation of judgements. Yet another compilation of judgements was handed by Senior Counsel for petitioner; respondent’s counsel continued arguments; thereafter final arguments were heard from both sides and judgement was reserved.

II. FACTUAL BACKGROUND

5. Mr. Vikram Chaudhary, Senior Counsel for the petitioner, has presented a sequence of dates and events which, as per petitioner, would itself bear out that the petitioner’s arrest was illegal.

6. The petitioner is a 63-year-old former promoter of M/s Amtek Auto Ltd. (“AAL”) which, over a period of time, burgeoned into various subsidiary and sister companies, that are broadly referred to as the ‘Amtek Group’. Post global slowdown in 2008, Amtek faced liquidity constraints, as per the petitioner, leading to delay in meeting loan payments and commitments to interest. On 15^th March 2016, ACI Ltd. (“ACIL”) was declared a Non-Performing Account (“NPA”) by IDBI Bank (a financial institution). Subsequently in 2018, the Bank of Maharashtra also declared it is an NPA. In the meantime, the Corporate Insolvency Resolution Proceedings (“CIRP”) was initiated against AAL and other associate companies in 2017-2018. ACIL, petitioner, and other entities were declared ‘wilful defaulter’ by IDBI Bank on 25^th July 2018, which was subsequently stayed by the Bombay High Court by order dated 24^th October 2018 in W.P. 3656/2018.

7. A preliminary Forensic Audit Report (“FAR”) was prepared by M/s M.K. Agarwal and Co. (“MKA”) on 30^th July 2018. On 17^th September 2019, by a letter, the Forensic Auditor clarified that no angle of fraud was discovered. Meanwhile, declaration of ‘wilful defaulter’ by Bank of Maharashtra was also stayed by the Delhi High Court in W.P.(C) 10981/2019.

8. An FAR was conducted in 2020 for AAL by M/s. KG Somani and Co. (“KGS”) and no finding of ‘fraud’ was reported. Similar was the case for Castex Technologies Ltd (“Castex”)

9. Resolution plans under the CIRP were approved of AAL and other sister companies including Castex and AGRL. ACIL was declared as a ‘fraud account’ by IDBI in 2021 but FAR for Metalyst Forging Ltd. (“MFL”) also did not report any finding of fraud by the auditor.

10. On 21^st December 2022, a First Information Report (“FIR”) bearing RC22320