The Bombay High Court has declared the arrest of Jitendra Pandey by the Enforcement Directorate illegal, holding that once the ED invoked Section 50 of the PMLA to confront the accused with material in its possession and obtained a judicial order for recording his statement, it could not abandon that process and arrest him under Section 19 on the identical material absent any supervening circumstance. The Court quashed three remand orders and directed the petitioner's immediate release.
Background & Facts
The Dispute
The petitioner, Jitendra Pandey, challenged his arrest by the Directorate of Enforcement (ED) and subsequent remand orders passed by the Special Court under the Prevention of Money Laundering Act, 2002 (PMLA) at Mumbai. The arrest was effected on 23 June 2026 in connection with ECIR No. MBZO-I/53/2023 dated 26 December 2023, which alleged proceeds of crime amounting to Rs. 1,618 crore and fraudulent foreign remittances of Rs. 7,569 crore through a network of shell entities and mule bank accounts.
Key Facts
- 06.10.2023: FIR No. 294/2023 registered at Naupada Police Station, Thane under IPC Sections 409, 420, 467, 468, 34, 120B and IT Act Sections 66C, 66D; petitioner arraigned as Accused No. 4 with no specific role imputed.
- 26.12.2023: ED registered ECIR No. MBZO-I/53/2023 for predicate offences in the FIR, showing proceeds of crime of Rs. 1,618 crore.
- 08.01.2024: Charge sheet filed; petitioner not chargesheeted.
- 31.03.2024: Petitioner arrested by ED.
- 14.05.2024: Supplementary charge sheet filed arraigning petitioner as Accused No. 1. Allegations included formation of 97 partnership agreements and 18 private limited companies using gullible persons' KYC, opening 269 mule bank accounts, forging invoices, bills of lading, 15CA/15CB certificates, and A2 forms for remitting foreign currency; total remittance Rs. 7,569 crore; intent to evade customs duty by under-invoicing.
- 07.06.2024: Petitioner granted regular bail by JMFC, Thane.
- 02.01.2025: Search under Section 17 PMLA at petitioner's native place (Uttar Pradesh) and Mumbai residence; no incriminating material recovered.
- 02.01.2025 to 25.02.2026: Petitioner appeared before ED on 30 occasions over 14 months; statements recorded.
- 26.02.2026 and 27.02.2026: Second search at Mumbai residence; movable properties seized and attached.
- 01.03.2026 to 15.05.2026: Petitioner's statement recorded on 5 occasions (28.02, 01.03, 09.03, 12.05, 15.05.2026); never summoned.
- 23.06.2026: Petitioner arrested from residence; remanded to ED custody for 7 days by Sessions Court.
- 25.06.2026, 26.06.2026, 27.06.2026: Petitioner's statements recorded again.
- 29.06.2026 and 04.07.2026: ED filed second and third remand applications seeking further custodial interrogation; allowed by Sessions Court.
Procedural History
- 23.06.2026: First remand order passed by Additional Sessions Judge, Special Court (PMLA), Mumbai in Remand Application No. 903/2026.
- 29.06.2026: Second remand order passed by In-charge Court for Additional Sessions Judge, Special Court (PMLA), Mumbai.
- 04.07.2026: Third remand order passed by Additional Sessions Judge, Special Court (PMLA), Mumbai; judicial custody extended till 18.07.2026.
- Present Petition: Filed under Article 227 of the Constitution and Sections 528, 529 of the Bharatiya Nagarika Suraksha Sanhita, 2023 challenging the legality of arrest and the three remand orders.
The Parties' Positions
Petitioner: Arrest effected despite continued cooperation (38 appearances over 18 months) and absence of fresh material or supervening circumstances between 15.05.2026 and 23.06.2026. Power of arrest under Section 19(1) PMLA is drastic and not for investigation; non-cooperation cannot be a ground. ED had already invoked Section 50(2) and (3) to confront petitioner with material and obtained judicial order for recording statement; cannot abandon that process to arrest on same material.
Respondent (ED): Petitioner controlled shell entities for fraudulent remittances of Rs. 7,358 crore; admitted complicity in Section 50 statements; earned Rs. 17-18 crore in hawala setup; disposed properties acquired through proceeds of crime. Petitioner was evasive and non-cooperative, withholding crucial information about fund owners, intermediaries, and ultimate beneficiaries. Arrest necessary to trace complete hawala network and end use of remitted funds.
Relief Sought
The petitioner sought: (a) declaration that arrest by ED in ECIR No. MBZO-I/53/2023 is illegal and violative of Section 19(1) PMLA and Articles 14, 21 of the Constitution, with direction for forthwith release from judicial custody; (b) quashing of remand orders dated 23.06.2026, 29.06.2026, and 04.07.2026 and any subsequent remand orders.
The Legal Issue
Whether the arrest of an accused under Section 19(1) of the PMLA is legal when the Enforcement Directorate has already invoked Section 50(2) and (3) to confront the accused with the same material in its possession, obtained a judicial order for recording the accused's statement, and no fresh incriminating material or supervening circumstance has emerged between the last statement recording and the arrest.
Arguments Presented
For the Petitioner
Mr. Ravindra Kadam, Senior Advocate, submitted that the power of arrest under Section 19(1) PMLA is a drastic action not meant for investigation. The petitioner had cooperated fully, appearing 38 times over 18 months and making all disclosures. The ED failed to demonstrate any non-cooperation or evasiveness. The necessity of arrest is a vital factor, and old material already in possession cannot animate a new arrest. Custodial interrogation cannot be sought merely to facilitate investigation because the power to arrest arises only upon recording satisfaction of guilt. The gravity of the offence does not deter judicial review of the legality of arrest. Reliance was placed on Arvind Kejriwal v. Directorate of Enforcement, V. Senthil Balaji v. State, Shankesh Prithviraj Sanghavi v. State of Maharashtra, Radhika Agarwal v. Union of India, Pankaj Bansal v. Union of India, and Rajendra Narpatmal Lodha v. Directorate of Enforcement. It was further argued that the alleged acts (account opening deception, forged documents, bank presentation) are distinct from generation of proceeds of crime relatable to scheduled offences, and the foundational nexus between proceeds of crime and scheduled offences is absent.
For the Respondent
Mr. C.R. Pendse, Advocate for ED, submitted that the petitioner controlled bank accounts of shell entities used for fraudulent foreign remittances of Rs. 7,358 crore. Statements of directors of shell entities confirmed the petitioner approached them as dummy directors and forged signatures. The petitioner admitted complicity in Section 50 statements, acknowledging fraudulent remittances through dummy firms and forged documents, earning commission, and integrating proceeds into the formal economy. The petitioner used Sahakari Bank for layering proceeds in accounts of himself, family, and associates (corroborated by statements of Kedar Dighe and Gaurav Daple), admitted earning Rs. 17-18 crore in the hawala setup, and disposed of properties acquired through proceeds of crime. Despite multiple opportunities, the petitioner was evasive and non-cooperative, withholding details of fund owners, foreign recipients, intermediaries, and ultimate beneficiaries. Arrest was necessary to trace the complete hawala network, the end use of Rs. 7,358 crore, and the full extent of proceeds of crime, especially given disposal of properties after initiation of PMLA investigation.
The Court's Analysis
The Court examined the statutory scheme of Sections 19 and 50 of the PMLA. Section 19(1) empowers an authorised officer to arrest a person if, "on the basis of material in his possession, reason to believe (that reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act". The crucial phrase is "on the basis of material in his possession" - the satisfaction of the authorised officer must be founded on such material.
The Court noted that the ED had itself filed an Application under Section 50(2) and (3) on 04.07.2026 (Exhibit 'O') to record the petitioner's statement, which was allowed by the Special Court (Exhibit 'P'). This Application specifically referenced the petitioner's statement of 09.03.2026 admitting use of bank accounts for hawala operations and cheque-discounting mechanisms, acquisition of properties worth several crores, and disposal of properties with intent to layer proceeds of crime. Paragraph 24 of the Application alleged the petitioner had not disclosed complete details of fund owners, foreign recipients, and intermediaries despite multiple opportunities.
"Thus, it is seen that the Application made by Respondent No.1 under the provisions of Section 50 and more specifically for compliance with Sections 50(2) and (3) having been allowed itself shows that the Respondent No.1 has invoked the said statutory provision to confront and question the Petitioner with the material which it has in its possession."
The Court emphasised that Section 50(4) deems every proceeding under Sections 50(2) and (3) to be a judicial proceeding within the meaning of Sections 193 and 228 IPC. Once the ED invoked this statutory power and obtained a judicial order to confront and record the petitioner's statement on the basis of material in its possession, it could not "forego the same and notwithstanding completion of that action invoke Section 19 to arrest the Petitioner, unless a very strong and fresh circumstance and material incriminating the Petitioner is placed on the record".
The ED candidly admitted during arguments that no new, incriminating, or extraneous material had surfaced between 22.05.2026 (5th statement) and 23.06.2026 (arrest). The ED contended that the gravity of the offence authorised such arrest. The Court rejected this, relying on Deepak Singh v. Directorate of Enforcement (Karnataka HC), which held that necessity of arrest is a vital factor and old material cannot animate a new arrest; custodial interrogation cannot be sought merely to facilitate investigation.
The Court further relied on the majority view in Radhika Agarwal v. Union of India (paragraphs 1-33), which adopted Arvind Kejriwal, Pankaj Bansal, Prabir Purkayastha, and Vijay Madanlal Choudhary to hold that the power to arrest without warrant is drastic and extreme, and the legislature prescribed exacting safeguards in Section 19: material in possession, formation of opinion and recording of reasons to believe in writing, and informing grounds of arrest forthwith. Paragraph 34 of Radhika Agarwal decisively rejected the contention that "reasons to believe" need not be disclosed, holding they must be furnished to enable the arrestee to challenge the arrest.
In the present case, the material was admittedly already in ED's possession; a previous opinion had been formed and an Application under Section 50(2) and (3) duly made and allowed by judicial order. Once such an opinion was formed in writing and allowed by a judicial order, the ED could not arrest the petitioner on the very same material unless a supervening exigency or fresh incriminating material arose. Nothing of that nature had occurred. The petitioner's 5th statement was recorded on 15.05.2026; despite more than a month, no attempt was made to question him before arrest on 23.06.2026. The remand application of 23.06.2026 did not refer to any supervening circumstances. "Petitioner's non-cooperation or evasiveness would never arise, rather there would be a question mark on the conduct of the Respondent No.1."
The Verdict
The petition was allowed. The Court declared the arrest of the petitioner by the ED in ECIR No. MBZO-I/53/2023 illegal and violative of Section 19(1) PMLA and Articles 14 and 21 of the Constitution. The remand orders dated 23.06.2026, 29.06.2026, and 04.07.2026 passed by the Special Court (PMLA), Mumbai in Remand Application No. 903/2026 were quashed and set aside, along with any subsequent remand orders. The petitioner was directed to be released forthwith from judicial custody on the basis of an authenticated copy of the order. The ED's request for a two-week stay of the order to approach the Supreme Court was declined.
What This Means For Similar Cases
Section 50 Proceedings Preclude Section 19 Arrest On Same Material
Once the ED invokes Section 50(2) and (3) to summon and confront an accused with material in its possession and obtains a judicial order for recording the statement, it has elected its statutory remedy. The ED cannot then abandon that judicial proceeding and arrest the accused under Section 19 on the identical material. Practitioners should immediately flag any pending Section 50 application when challenging a subsequent arrest.
- If a Section 50 application is pending or has been allowed, argue that arrest under Section 19 on the same material constitutes a colourable exercise of power.
- Demand production of the Section 50 application and the judicial order allowing it to demonstrate the ED's prior election.
Fresh Material Or Supervening Circumstance Is Mandatory For Arrest After Section 50 Invocation
The Court made clear that arrest after Section 50 invocation is permissible only if a "very strong and fresh circumstance and material incriminating the petitioner" emerges. The burden is on the ED to demonstrate this supervening exigency.
- Scrutinise the remand application for any reference to new material discovered after the last Section 50 proceeding.
- If the remand application is silent on supervening circumstances, argue that the arrest is unsupported by necessity.
Judicial Review Of Arrest Legality Remains Robust Despite Gravity Of Offence
The Court refused to dilute judicial review based on the gravity of the alleged offence (Rs. 7,358 crore remittances). Following Radhika Agarwal and Arvind Kejriwal, the safeguards in Section 19 are jurisdictional conditions, not mere procedural formalities. Courts must examine both the existence and soundness of the "reasons to believe".
- Challenge arrest legality by focusing on statutory non-compliance, not the quantum of alleged proceeds.
- Seek disclosure of the "reasons to believe" recorded by the authorised officer; the onus to justify redaction lies on the ED.
Cooperation Over Extended Period Negates "Non-Cooperation" Ground
The petitioner's 38 appearances over 18 months, including 5 statements in the two months preceding arrest, established cooperation as a matter of record. The ED's own admission that no new material emerged between the last statement and arrest undermined the non-cooperation narrative.
- Maintain a detailed chronology of all appearances, statements recorded, and documents produced.
- Use the ED's own case records to demonstrate cooperation and absence of fresh material.
Remand Orders Based On Same Material Are Vulnerable
The Court quashed all three remand orders (23.06, 29.06, 04.07) because they were founded on the same material that underpinned the Section 50 application. A remand order that does not reference fresh material or supervening circumstances after a Section 50 invocation is legally unsustainable.
- Challenge each successive remand order by demonstrating the static material basis.
- Argue that extension of custody on unchanged material violates the statutory scheme.
