Failure To Arrest On Time Enabled Mallya, Nirav, Choksi To Flee The Country: PMLA Court

Fugitives such as Vijay Mallya, Nirav Modi, and Mehul Choksi were able to flee the country because of the failure of investigative agencies to arrest them on time, a special court constituted under the Prevention of Money Laundering Act has recently said.

The court said so in a case involving Vyomesh Shah, managing director of a real estate company, who sought a relaxation of his bail conditions so that he could travel abroad for work.

Shah was never arrested by the ED under the PMLA, however, his name was recorded in the complaint. He was taken into judicial custody by the court on ED’s request but was subsequently released on bail.

In response to the special prosecutor's argument that lenient bail terms could lead to another Modi, Mallya, or Choksi-like situation, the court said that these three were able to flee because the agencies did not arrest them on time.

Mallya, Modi, and Choksi have defrauded public sector banks by syphoning off funds through their companies, resulting in a total loss of nearly Rs 23,000 crore to the banks, according to the Enforcement Directorate.

While Mallya and Modi are designated fugitive economic offenders, proceedings are underway to include Choksi on the same list.

When a court labels an offender as a fugitive economic offender, the central government has the authority to confiscate and dispose of properties derived from the proceeds of crime. These properties could be located in India or abroad.

The special court observed that the ED has made it a routine affair wherein it does not arrest an accused person under the PMLA, but enters their name in the prosecution complaint. This leads to a situation where, despite the accused's timely response to the summons and his bona fide appearance in the case, it is pleaded that the accused be taken into judicial custody, which forces him to run from pillar to post, seeking bail under the PMLA.

It is worth noting that the rigours of stringent bail conditions under the PMLA make it extremely difficult for an accused to get bail.

The court said that it is now an established practice of PMLA courts that if the ED does not arrest a person under the PMLA, then the accused does not have to seek bail under the PMLA. In such cases, the accused should be released forthwith on personal bond with or without sureties.

It is the ED that allows such a person to be scot-free without any apprehensions of his travelling abroad, tampering and hampering evidence, flight risk, and the like. However, as soon as such a person appears before the court, all such contentions and objections astonishingly crop up before the court, the court observed.

The court categorically stated that the ED cannot get a person arrested through the court when it had failed to do so in a timely manner.

Observing that an accused has a fundamental right to travel abroad, the court noted that in many ED cases, an accused is not arrested by the ED under the PMLA. In such cases, it causes great hardship when a person has to seek the court’s permission to exercise a fundamental right.