New Delhi: The Supreme Court Friday questioned the Enforcement Directorate’s (ED) arrest policy, given that it has so far arrested only 513 persons under the Prevention of Money Laundering Act (PMLA) out of 1,142 prosecution complaints filed in various courts.
“The data raises a number of questions, including the question whether the DoE has formulated a policy, when they should arrest a person involved in offences committed under the PMLA,” a bench of justices Sanjiv Khanna and Dipankar Dutta observed in its judgement on Delhi Chief Minister Arvind Kejriwal’s petition challenging his arrest in the liquor scam case.
The 64-page judgement culled out data from ED’s official website and noted that as on 31 January 2023 5,906 ECIRs – akin to First Information Report (FIRs) under the now erstwhile Indian Penal Code (IPC) – were recorded. However, search was conducted in 531 ECIRs by issuing 4,954 search warrants. The total number of ECIRs recorded against former parliamentarians, legislators and counsellors, the court recorded, was 176.
The bench remarked when it comes to grant of bail, ED’s opinion is given primacy under section 45 of PMLA. Hence, it said, the agency should act “uniformly, consistent in conduct, confirming one rule of for all.”
Section 45 of PMLA relates to grant of bail in PMLA cases. The section underlines a stringent twin-test condition that reverses the burden on the accused to prove he/she is not guilty. If the accused is found prima facie guilty, the court has to reject the bail.
The judges did not give any final opinion on Kejriwal’s plea to quash his arrest, as it asked a larger bench (of three or five judges) to determine whether an accused in PMLA case can ask for invalidation of his/her arrest on the ground that it was not necessary. This, the court said, was important, in view of the doctrine of proportionality, Supreme Court-evolved jurisprudence intended to ensure a fair balance between individual rights and public interest.
And, since this question of law would require an in-depth deliberation, the court found it fit to grant interim bail to Kejriwal. At the same time, it said that his regular bail plea, pending in the Delhi High Court, would be considered on merits.
However, the bench said Kejriwal’s arrest did meet the parameters under section 19 of PMLA under which an ED officer can arrest someone if he/she has “reasons to believe” that the accused is guilty of the offence of money laundering. Section 19 of PMLA deals with an ED officer’s powers to arrest a person.
Kejriwal, who was arrested on 21 March in the PMLA case, had challenged his arrest, claiming it violated section 19 of PMLA. He had argued that his arrest ‘would falter on the ground that the ‘reasons to believe’ do not mention and record reasons for ‘necessity to arrest’.”
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What law says on arrest by ED
According to the law, a senior ED officer — director, deputy director, assistant director or any other officer, authorised by the central government — can arrest a person either on the basis of material in his possession, or has reasons to believe that any person has been guilty of an offence under PMLA. These reasons have to be recorded in writing and the ED has to convey the grounds of arrest in writing to the accused.
Kejriwal had argued that his arrest did not satisfy the requirements in terms of section 19 because ED’s “reasons to believe” did not mention and evaluate all or entire material before it. The department selectively referred to “incriminating” material by giving it a semblance of “good faith” exercise.
In reality, the reasons, it said, are a sham, and the exercise was undertaken in a predetermined and biassed manner.
Kejriwal’s legal team had argued that the requirement for arrest in PMLA should be as stringent as grant of bail. Conditions prescribed in the Criminal Procedure Code (CrPc) are applied in addition to conditions outlined in the special law. Similarly, they said, an additional factor, which is necessity of arrest, should be factored while making an arrest under PMLA.
As for Kejriwal, they argued, there was no necessity to arrest him in March 2024, given that the ECIR was registered in August 2022. And, since most of the material relied upon to prepare a ground under “reasons to believe” are prior to July 2023, they were not necessary to arrest him now.
The ED defended the arrest based on the narration of facts and assertions made in the ground related to “reasons to believe” from where a subjective satisfaction can be drawn that Kejriwal is guilty of the money-laundering offence. Being a case of political corruption, the ED added, the probe in the present case is complicated. As for admissibility or veracity of approver or witness statements are concerned, they can be tested during the trial.
The agency submitted that the test of “necessity to arrest” was satisfied in view of Kejriwal failing to appear despite the issuance of nine summonses and that arrest is “a part and parcel of investigation intended to secure evidence, leading to discovery of material facts”.
Since the court was not doing a “merit-based review of the case,” but a judicial review of Kejriwal’s arrest, it said the chief minister’s arguments that “tend to dent the statements and material relied upon by the ED in the ‘reasons to believe’, though worthy of consideration, are in the nature of propositions or deductions”. They are a “matter of discussion” as they intend to support or establish a point of view on the basis of inferences drawn from the material, the court held.
His argument that statements of witnesses were extracted under coercion was contested and had to be examined and decided. Therefore, his argument, the court said “does not persuade us, given the limited power of judicial review, to set aside and quash the ‘reasons to believe’.”
It, however, added that in the “reasons to believe” ED recorded several facts and grounds. “One of the grounds for arrest relates to the formulation of the excise policy with the intent to obtain kickbacks/bribes,” the judgement said.
It further added: “What has been discussed above in the arguments raised by Arvind Kejriwal relates to corruption amounting Rs 45 crores to facilitate Goa elections for the AA Party (Aam Aadmi Party). However, the ‘reasons to believe’ also refer to the policy itself and that it was vitiated on the ground of criminality, viz. to promote cartelization and benefit from those providing bribes or kickbacks.” His arrest, the court said, was on several counts, which “are independent and separate from each other”.
Power to arrest not ‘unbridled’
However, on the point of “necessity of arrest,” the court said the said expression was not mentioned in section 19 of PMLA, but has been given judicial recognition. It referred to various judgements, most of which were related to cases registered under the erstwhile Indian Penal Code (IPC) and observed that power to arrest is not “unbridled”.
“The officer must be satisfied that the arrest is necessary,” it said, adding that “time and again, courts have emphasised that the power to arrest must be exercised cautiously to prevent severe repercussions on the life and liberty of individuals”. It said: “Such power must be restricted to necessary instances and must not be exercised routinely or in a cavalier fashion.”
Since the Vijay Madanlal Choudhary – the SC judgement that upheld the PMLA law and wide powers of arrest in it – did not lay down a substantive threshold test on the “necessity to arrest,” the bench remarked that this question of law must be examined whether “mere satisfaction of formal parameters (in the law) are sufficient to arrest or is the ‘satisfaction of necessity’ and “need to arrest, beyond formal parameters is required”.
The court examined provisions of section 41 of Criminal Procedure Code (CrPc) that provides for safeguards in cases where police can arrest without a warrant.
It then said: “One of the developments in the last decade is acceptance of the principle of proportionality, especially when fundamental rights such as right to life and liberty are involved. Proportionality test safeguards fundamental rights of citizens to ensure a fair balance between individual rights and public interest.”
Detailing the elements of principle of proportionality, the court said the doctrine requires the “court to judge whether the action (of arrest) taken was really needed and whether it was within the range of courses of action which could be reasonably followed”.
It intends to strike an equilibrium between the aims and intentions of the decision maker and whether the decision maker has achieved more or less the correct balance, the court said.
Bearing in mind that the ED hardly made any arrests, despite filing of many complaints, the court said: “We are conscious that the principle of parity or equality enshrined under Article 14 of the Constitution cannot be invoked for repeating or multiplying irregularity or illegality. If any advantage or benefit has been wrongly given, another person cannot claim the same advantage as a matter of right on account of the error or mistake. However, this principle may not apply where two or more courses are available to the authorities. The doctrine of need and necessity to arrest possibly accepts the said principle.”
The judgement also discussed in length the powers of an ED officer to arrest under PMLA and reiterated that the reasons for the same should be recorded in writing. This note, it added, must conclusively declare that the arrestee is guilty. It also said that the officer cannot ignore or not consider the material which exonerates the arrestee.
“Any such non-consideration would lead to difficult and unacceptable results. The power to arrest under Section 19(1) of the PML Act cannot be exercised as per the whims and fancies of the officer,” it added.
Arrest can and should wait, and the power in terms of Section 19(1) of the PML Act can be exercised only when the material with the designated officer enables them to form an opinion, by recording reasons in writing that the arrestee is guilty, the judgement further remarked.
“The language of Section 19(1) is clear, and should not be disregarded to defeat the legislative intent – to provide stringent safeguards against pre-trial arrest during pending investigations,” it added.
(Edited by Amrtansh Arora)