Illegal mining isn't a scheduled offence. The ED arrested him anyway.

An MLA, a 1:40 AM Arrest, and a Mining Case That Collapsed on a Technicality

Surender Panwar, a sitting MLA from Sonipat, was woken up at 1:40 AM on 20 July 2024. Officers from the Enforcement Directorate were at his door. By dawn, he was in custody, accused of being a beneficiary of an illegal mining syndicate in Yamuna Nagar. The stakes were brutal: a life behind bars under the Prevention of Money Laundering Act, a looming Haryana Assembly election, and a political career hanging by a thread.

On 23 September 2024, Justice Mahabir Singh Sindhu of the High Court of Punjab & Haryana at Chandigarh did something rare. He declared the arrest illegal, non-est, and against the statutory provisions of the PMLA and the Constitution. The remand orders were set aside. Panwar was ordered to be released forthwith. The judgment, cited as 2024:PHHC:125421, is a masterclass in why the ED cannot skip the foundational question: is the predicate offence even in the PMLA Schedule?

The 1:40 AM Knock

The ED's case began with ECIR/GNZO/19/2023, registered on 23 September 2023 by the Gurugram Zonal Office. The predicate offences were 8 FIRs from Yamuna Nagar under Sections 120-B, 411, 419, 420, 467, 471 of the IPC, and a 9th FIR under Section 21(1) of the Mines and Minerals (Development and Regulation) Act, 1957, read with Sections 15 and 16 of the Environment Protection Act, 1986. The ED alleged that a syndicate was generating fake e-rawana bills for illegal mining, and that the proceeds of crime were funnelled through Development Strategies India Pvt. Ltd. (DSPL). Panwar, the ED claimed, was a beneficiary through his family's shareholding.

But here is the catch the ED missed. Panwar had ceased to be a director of DSPL on 07 November 2013 — over a decade before the ECIR was registered. The public records showed this. The ED produced no contrary material. The learned Counsel for the petitioner argued that the arrest was politically motivated, timed just before the Haryana Assembly elections. The Court did not need to go that far. It found a simpler, deadlier flaw.

What the ED's Own Schedule Says

The PMLA's Schedule lists the offences that can be treated as "scheduled offences" — the predicate crimes that can trigger money laundering charges. Paragraph 25 of that Schedule covered offences under the Environment Protection Act. But here is the twist: Paragraph 25 was deleted with effect from 13 August 2024. By the time the Court heard the matter, the very foundation for prosecuting Panwar under the PMLA based on the EPA offences had vanished.

More fundamentally, the Court examined whether illegal mining under Section 21(1) of the MMDR Act is a scheduled offence at all. The answer was a clear no. The learned Judge observed that illegal mining, by itself, does not find a place in the PMLA Schedule. Without a scheduled offence, there can be no offence of money laundering under Section 3 PMLA, and no arrest under Section 19 PMLA.

The Court held: "Illegal mining under Section 21 MMDR Act is not a scheduled offence under PMLA; hence arrest and prosecution under PMLA on the foundation of illegal mining alone is unsustainable." This is Ratio 1, and it is devastating for the ED's case.

The 15-Hour Interrogation and the Missing Material

Panwar was interrogated for nearly 15 hours before being arrested. The Court noted this with concern. In obiter, Justice Sindhu observed that the ED should implement reasonable time limits for interrogation in one go, consistent with Article 21 of the Constitution and basic human rights standards of the UNO. This is not a binding ratio, but it is a shot across the bow for future cases.

More critically, the Court found that the ED had no material connecting Panwar to DSPL's affairs after 2013. The petitioner had ceased to be a director on 07.11.2013. The ED could not produce a single document showing his involvement in the company's subsequent activities. The Court held: "Where petitioner ceased to be Director of the company w.e.f. 07.11.2013 per public records and ED produces no contrary material, no liability under PMLA can be fastened for company's subsequent affairs." This is Ratio 4.

Why the Remand Orders Could Not Save the Arrest

The ED tried a familiar argument: even if the initial arrest was flawed, the subsequent remand orders by the Special Court PMLA, Ambala, had validated the detention. The ED cited Pragyna Singh Thakur v. State of Maharashtra and Serious Fraud Investigation Office v. Rahul Modi to argue that infirmity in initial detention cannot invalidate subsequent detention.

The Court distinguished both. In Pragyna Singh Thakur, the right under Article 22(2) was against illegal police detention, not against a judicial custody order. But here, the arrest itself was illegal because the predicate offence was not a scheduled offence. In SFIO v. Rahul Modi, the Court noted that the petitioner was not found to be involved in any illegal activity under the PMLA. The foundational flaw could not be cured by later remand orders.

The Court applied the maxim sublato fundamento cadit opus — if the foundation is removed, the structure falls. Citing Chairman-cum-MD Coal India Ltd. v. Ananta Saha, the Court held: "If initial action is not in consonance with law, subsequent proceedings would not sanctify it." The remand orders dated 20.07.2024 and 29.07.2024 were set aside.

The Precedent Chain the Court Followed

The Court relied on a string of Supreme Court judgments that have tightened the screws on PMLA arrests. In Arvind Kejriwal v. Directorate of Enforcement (2024 INSC 512), the Court held that reasons to believe must be recorded and grounds of arrest must be furnished. In Pankaj Bansal v. Union of India (2023 SCC Online SC 1244), the Court reiterated that grounds of arrest must be supplied to the arrestee. In Vijay Madanlal Choudhary v. Union of India (2022 SCC Online SC 929), the Court held that material must be in possession before arrest, and reasons to believe must be in writing. In V. Senthil Balaji v. State (2023 SCC Online SC 934), the Court required that grounds of arrest be supplied and material be sent to the adjudicating authority in a sealed envelope. In Ram Kishore v. Directorate of Enforcement (2023 SCC Online SC 1682), the Court interpreted "as soon as may be" in Section 19 to mean "as early as possible without avoidable delay."

The Court followed all these precedents. The ED had failed on every count.

The Obiter That Matters

Beyond the ratio, the Court made two observations that will be cited in every PMLA arrest challenge going forward. First, the Court noted that the word "may" in Section 19(1) PMLA means arrest is discretionary, not mandatory. It should be treated as a last resort. Second, the Court called for reasonable time limits for interrogation, consistent with Article 21 and UN human rights standards. These are not binding, but they signal a judicial mood that the ED cannot treat arrest as a routine tool.

THE PLAY: If you are challenging a PMLA arrest, start with the Schedule. Check whether the predicate offence is listed. If it is not, the arrest is unsustainable from the word go — and no subsequent remand can save it.

What This Means for Practitioners

For advocates defending clients in PMLA cases, this judgment is a gift. The first question to ask is: what is the scheduled offence? If the predicate is illegal mining under the MMDR Act, or an offence under the Environment Protection Act after 13.08.2024, the arrest collapses. The second question: when did your client last have any connection with the company? If the public records show cessation of directorship years before the ECIR, the ED must produce contrary material. If it cannot, the arrest is illegal.

For CFOs and founders, the lesson is stark. If you have ever been a director of a company that later becomes the subject of an ED investigation, the clock starts ticking from the date you resigned. Keep your resignation letters, board resolutions, and MCA filings in order. The ED will try to connect you to the company's affairs years after you left. This judgment says they cannot — unless they have material to the contrary.

The Bottom Line

If the ED arrests you for money laundering based on a predicate offence that is not in the PMLA Schedule, or based on your connection to a company you left years ago, the arrest is illegal — and no number of remand orders can make it legal.