42 Outlook

Illegal Arrest
Of Jignesh Shah: An Analysis Of The Judgement
The recent Special PMLA Court Judgment states that the arrest
of Jignesh Shah was illegal. Here is a look at the Judgment and
why the court declared it as illegal...

J
ignesh Shah - founder of Financial Technologies India subsidiaries, IBMA and NBHC, and not to the NSEL crisis.
Limited (FTIL), one of whose subsidiaries is National He added that the first complaint on March 30, 2015,
Spot Exchange Limited (NSEL) - was arrested by the was about NSEL and not about any fraud committed in
Enforcement Directorate (ED) in connection with the the capacity of Chairperson of FTIL (FTIL is the umbrella
` 5,600 crore payment default at NSEL. The following company of NSEL, IBMA and NBHC).
day on July 13, Shah, once the poster boy of the Indian
Exchange Markets, was remanded to police custody till After hearing both sides, Hon. Judge P.R. Bhavake, Special
July 18 and thento judicial custody till August 1. He was PMLA Court, Mumbai, granted bail to Shah on a bail bond
kept in a special single cell in Kalyan Jail. of `2 lakh and ruled: The learned counsel for the ED failed
to satisfy me that this arrest is for a separate crime I do
On August 3, Shah, pleaded for bail, while stating that not find any force in the contention that the ED wanted
his arrest was illegal even as ED maintained it was legal. to file a supplementary complaint against the applicant
Shahs counsel, Abad Ponda, argued that the July 12 (Shah) in respect of the investigation made against him as
arrest violated his clients right to personal liberty, and Chairman of FTIL. The ED has come with specific averments
was illegal because the law did not permit ED to make that the applicant is not arrested in special PMLA case
an arrest under the Prevention of Money Laundering Act no. 04/2015 but in other Enforcement Case Information
(PMLA) once a court had already taken cognisance of an Report (ECIR). The ED has failed to satisfy the Court how
offence under the Act. the applicants arrest is legal in different ECIR There is
no vicarious liability unless statute specifically provides
Ponda pointed out that a special court had already taken so There is no question of the applicant tampering with
cognisance of the case filed earlier, in which Shah was any evidence since all the evidence is already collected by
shown as second accused. He argued that at the post- the EOW of Mumbai Police and the MPID (Maharashtra
cognisance stage, any person already arraigned under Protection of Interest of Depositors) Court. There is no
sections 3 and 4 of the PMLA Act could not be arrested material before this Court also to show that the applicant
except if the court issued a warrant. Ponda reiterated that will attempt to influence the witnesses.
the court on December 4, 2015, had taken the view that
this was not a case fit for warrant but for summons, and Bail was granted to Shah, 21 days after his arrest.
the same had not been challenged by the ED. He said that
Shah had been earlier arrested on May 7, 2014 by the Case Background
Economic Offences Wing (EOW) and released on August
A case was first registered (FIR no. 216/2013) at MRA
22 the same year, and the ED had chosen not to arrest him
Marg Police Station, Mumbai, U/s. 120(B), 409, 465, 467,
in the first complaint and hence, his arrest now was illegal
468, 471, 472, 474 and 477-A of the IPC against directors
and only the result of pressure from vested interests.
and key management and brokers of NSEL for the alleged
Special counsel for ED, Hiten Venegaonkar, however, `5,600 crore payment crisis in activities and working of
argued that Shahs July 12, 2016 arrest was under a fresh NSEL. The said complaint was transferred to the EOW,
investigation and that the fresh probe pertained to alleged Mumbai, after which, a separate crime was registered by
money laundering between FTIL and two of its other EOW (no. 89/2013) U/s. 3 and 4 of the MPID Act, 1999.

September 2016 | Legal Era | www.legalera.in

Shah was arrested in the said crime on May 7, 2014, and brought to its notice that before filing of complaint, ED had
on August 4, 2014, EOW filed the charge-sheet against summoned Shah four or five times. Copies of summons
Shah before the MPID Court. On August 22, 2014, after issued to Shah had been placed on record and the ED too
detailed consideration of the charge-sheet, the Hon. had not disputed the same. If the ED wanted to investigate
Bombay High Court granted regular bail to Shah in the into Shahs functioning as Chairman, FTIL, it should have
said offence. Significantly, the Hon. Bombay High Court issued summons to Shah for inquiry or recording of his
observed that though the case had been projected as a statement. Non-issuance of summons clearly revealed that
scam of `5600 crore, it needed to be kept in mind that ED had not arrested the accused in a fresh crime but in the
these amounts had not been received by NSEL. The court same pending PMLA case.
further observed that the alleged ill-gotten money had not
The court ruled that as per ratio laid down by the Hon.
gone to Shah.
Punjab and Haryana High Court, the rigors of section 45
The ED on May 30, 2015 filed a complaint against Shah of PMLA, 2002, were not applicable to the present case
and 68 other accused U/s. 45 of the PMLA, 2002. It alleged against Shah. The ED had failed to satisfy the court as to
only negligence against Shah and failed to demonstrate how the arrest of Shah was legal in a different ECIR.
any case (prima facie or otherwise) against Shah being
involved in the offence of money laundering. On the Conclusion
contrary, the complaint said that the alleged acts of money All said and done, the manner of Shahs arrest raised
laundering were committed by 24 defaulting members and eyebrows. Having called for interrogation, he was asked to
certain employees of NSEL. On December 4, 2015, the stay back and eventually informed that he has been placed
Special PMLA Judge ruled that this was not a case fit for under arrest. What was more surprising was the fact that
warrant but for summons. The order was not challenged charges presented by the ED were already there in the first
by the ED. charge-sheet filed in the court. How can you arrest again
to file a supplementary charge? Worse, investigating
On the recent July 12, 2016, arrest of his client by ED,
agencies had informed the court that Shah had been more
Ponda argued that the ED had no right to arrest Shah
than cooperative during their probe and no money trail had
once the court had taken cognisance of the case and
been traced to him, as stated by Justice Abhay Thipsay of
issued process against the accused. Ponda said that the
the Hon. Bombay High Court while releasing Shah on bail
arrest itself was bad in law, and a violation of Shahs
nearly two years ago from his previous judicial custody. So
personal liberty. Ponda submitted that there were no grave
what was the need for another arrest, asked many.
allegations against Shah and it was alleged that he was
only negligent. It may be pointed out that Shah, being a non-executive
director of NSEL, was not involved in the day-to-day
The Judgement operations and functioning of NSEL. In fact, NSEL was
The court held that special counsel for ED had failed to run by a professional management. NSEL MD & CEO Mr
satisfy it that Shahs July 12, 2016 arrest was for a separate Anjani Sinha and his executive team were in-charge of the
crime. The court acknowledged that Ponda had rightly day-to-day operations. Hence, holding Shah responsible
brought to its attention that supplementary charge-sheet for alleged irregularities at NSEL is both, unfair and
or complaint cannot be filed by investigation machinery unwarranted.
when, after filing of complaint, culpability of any other
The arrest triggered a wave of anti-Shah Internet trolls who
person was found during investigation. The court thus did
surprisingly never spoke of the defaulters and fraudulent
not find any force in the contention of ED special counsel
brokers who lured alleged investors or bogus traders into
that ED wanted to file a supplementary complaint against
trades on NSEL exchange platform for arbitrage gains.
Shah in respect of the investigation into his functioning
as Chairman of FTIL. The court also said that it had been

Disclaimer The views expressed in this article are the personal views of the author and are purely informative in nature.

www.legalera.in | Legal Era | September 2016