Arvind Kejriwal vs Directorate of Enforcement

Held: Such review might be conflated with stipulations in s.41 of the Code of Criminal Procedure, 1973 which lays down certain conditions for the police to arrest without warrant – However, s.19(1) does not permit arrest only to conduct investigation – Conditions of s.19(1) have to be satisfied – Clauses (a), (c), (d) and (e) to s.41(1)(ii) of the CrPC, apart from other considerations, may be relevant – Vijay Madanlal Choudhary, a three Judge Bench decision states that the safeguards provided as pre-conditions in s.19(1) of the PML Act have to be fulfilled by the designated officer before affecting arrest – The safeguards are of a higher standard and ensure that the designated officer does not act arbitrarily, and is made accountable for their judgment about the ‘necessity to arrest’ the person alleged to be involved in the offence of money laundering, at the stage before the complaint is filed – “necessity to arrest” is not mentioned in s.19(1) however, it has been judicially recognised in Arnesh Kumar laying down that “necessity to arrest” must be considered by an officer before arresting a person – Power to arrest must be exercised cautiously to prevent severe repercussions on the life and liberty of individuals and such power must be restricted to necessary instances and must not be exercised routinely – Right to life and liberty is sacrosanct, and the appellant has suffered incarceration of over

90 days and as the questions of law inter alia as regards whether the “need and necessity to arrest” is a separate ground to challenge the arrest u/s.19(1) of the PML Act is referred to larger Bench, the appellant is granted interim bail in the ECIR recorded by respondent-ED, on the conditions as imposed, which may be extended/recalled by the larger Bench. [Paras 18, 67, 74, 84, 85] Prevention of Money Laundering Act, 2002 – s.19(1) – Validity of arrest – “Need and necessity to arrest” – Parameters to be considered – Questions of law referred to larger Bench: Held: Questions as regards whether the“need and necessity to arrest” is a separate ground to be considered beyond the conditions stipulated in s.19(1); whether it refers to the satisfaction of formal parameters to arrest and take a person into custody, or it relates to other personal grounds and reasons regarding necessity to arrest a person; and if questions (a) and (b) are affirmatively answered, what are the parameters and facts to be taken into consideration while examining the question of “need and necessity to arrest”. [Para 85]

Prevention of Money Laundering Act, 2002 – s.19(1) – Preconditions to arrest under – Power to arrest – Judicial review – Plea of the respondent-Directorate of Enforcement that there should not be judicial scrutiny of the power to arrest as it will interfere with the investigation:

Held: Rejected – The exercise of the power to arrest is not exempt from the scrutiny of courts – A decision-making error u/s.19(1) can lead to the arrest and deprivation of liberty of the arrestee – Courts have the power of judicial review and must examine that the exercise of the power to arrest meets the statutory conditions – The legislature imposed strict conditions as preconditions to arrest and was aware that the arrest may be before or prior to initiation of the criminal proceedings/prosecution complaint and did not exclude the examination of the said preconditions being satisfied in a particular case – This flows from the mandate of s.19(3) which requires that the arrestee must be produced within 24 hours and taken to the Special Court, or court of judicial/metropolitan magistrate having jurisdiction – The power of judicial review remains both before and after the filing of criminal proceedings/prosecution complaint. [Paras 21, 61]

Prevention of Money Laundering Act, 2002 – s.19(1) – Penal Code, 1860 – s.26 – “reasons to believe” – Rights of the accused – Whether the arrestee is entitled to be supplied with a copy of the “reasons to believe”:

Held: Yes – Providing the written “grounds of arrest”, though a must, does not in itself satisfy the compliance requirement – The authorized officer’s genuine belief and reasoning based on the evidence that establishes the arrestee’s guilt is also the legal necessity – As the “reasons to believe” are accorded by the authorised officer, the onus to establish satisfaction of the said condition will be on the ED and not on the arrestee – s.26 defines the expression “reason to believe” as sufficient cause to believe a thing and not otherwise – “reasons to believe” are the reasons for the formation of the belief which must have a rational connection with or an element bearing on the formation of belief – The reason should not be extraneous or irrelevant for the purpose of the provision – Existence and validity of the “reasons to believe” goes to the root of the power to arrest – The subjective opinion of the arresting officer must be founded and based upon fair and objective consideration of the material available on the date of arrest – On the reading of the “reasons to believe” the court must form the ‘secondary opinion’ on the validity of the exercise undertaken for compliance of s.19(1) when the arrest was made – The “reasons to believe” that the person is guilty of an offence under the PML Act should be founded on the material in the form of documents and oral statements – Accused is entitled to challenge his arrest u/s.19(1) – Not furnishing a copy of the “reasons to believe” would prevent the accused from challenging their arrest, questioning the “reasons to believe”, violating the personal liberty – The “reasons to believe” should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest – However, in a one-off case, ED may claim redaction and exclusion of specific particulars and details however, the onus to justify redaction would be on the ED – This requires consideration and decision by the court and ED is not the sole judge. [Paras 28, 29, 33, 34, 36, 37] Prevention of Money Laundering Act, 2002 – s.19(1) – Legality of arrest – Judicial review – Scope and ambit: Held: Judicial review of arrest u/s.19(1) which is based on the opinion of the designated/authorised officer who records in writing, their “reasons to believe” that the arrestee is ‘guilty’ of an offence under the PML Act, is not merit based review – Judicial review does not amount to a mini-trial or a merit review – The exercise is confined to ascertain whether the “reasons to believe” are based upon material which ‘establish’ that the arrestee is guilty of an offence under the PML Act and to ensure that the ED acted in accordance with the law – The courts scrutinize the validity of the arrest in exercise of power of judicial review – In-depth judicial scrutiny is required when the reasons recorded by the authority are not clear and lucid – Arrest is to be made on the basis of the valid “reasons to believe”, meeting the parameters prescribed by the law. [Paras 39, 44]

Prevention of Money Laundering Act, 2002 – s.19(1) – “reasons to believe” – Chats retrieved after the arrest of the appellant, not mentioned in the “reasons to believe” were referred in the additional note of ED – Examination of validity of the arrest of the appellant u/s.19(1) on basis thereof:

Held: Chats being retrieved after the arrest of the appellant and not being mentioned in the “reasons to believe” cannot be examined to determine the validity of the arrest in terms of s.19(1) – The legality of the “reasons to believe” have to be examined based on what is mentioned and recorded therein and the material on record – However, the officer acting u/s.19(1) cannot ignore or not consider the material which exonerates the arrestee – An officer cannot be allowed to selectively pick and choose material implicating the person to be arrested – The power to arrest u/s.19(1) cannot be exercised as per the whims and fancies of the officer – The opinion of the officer is subjective, but formation of opinion should be in accordance with the law. [Paras 54-56] Prevention of Money Laundering Act, 2002 – s.19(1) – Code of Criminal Procedure, 1973 – s.41 – Distinction: Held: Arrest u/s.41 can be made on the grounds mentioned in clauses (a) to (i) of s.41(1) which include a reasonable complaint, credible information or reasonable suspicion that a person has committed an offence, or the arrest is necessary for proper investigation of the offence, etc. – Grounds mentioned in s.41 are different from the juridical preconditions for exercise of power of arrest u/s.19(1) of the PML Act – s.19(1) conditions are more rigid and restrictive and the two provisions cannot be equated. [Para 40] Prevention of Money Laundering Act, 2002 – s.19(1) – “reasons to believe” – Power of judicial review to set aside the “reasons to believe” is limited – Contents of the “reasons to believe” records the subjective satisfaction that the appellant is guilty inter alia stating the role of the appellant as the kingpin in formulation of the policy; his involvement in the use of proceeds of crime generated in the Goa election campaign of Aam Aadmi Party; being guilty as an individual as a part of the conspiracy in the formulation of the excise policy, and, also vicariously as the in-charge of AAP; and not cooperating with the investigation despite nine summons being issued to him – “reasons to believe” also referred to the “material” to show appellant’s involvement in the offence of money laundering – However, the appellant contended that the “reasons to believe” did not mention and evaluate “all” or “entire” material and selectively referred to “incriminating” material and ignored the exculpatory material: Held: Though the arguments raised on behalf of the appellant as against the “reasons to believe”, are worthy of consideration, but are in the nature of propositions or deductions – The power of judicial review to set aside and quash the “reasons to believe” is limited and accepting the arguments raised would be equivalent to undertaking a merits review. [Para 65]

Prevention of Money Laundering Act, 2002 – Policy on arrest by ED – Lack of uniformity, consistency – Data on the website of ED as regards the number of ECIRs recorded and the arrests made, raise questions as regards the policy on arrest by ED as to when a person involved in offences committed under the PML Act should be arrested:

Held: ED should act uniformly, consistent in conduct, confirming one rule for all. [Para 79]

Prevention of Money Laundering Act, 2002 – Fundamental rights – Right to life and liberty – Review – Principle of proportionality test, discussed.

Prevention of Money Laundering Act, 2002 – ss.19, 45 – Distinction between.

Prevention of Money Laundering Act, 2002 – s.45 – Right to bail under, if dependant on the stage of the proceedings: Held: No – The power of the court u/s.45 is unrestricted with reference to the stage of the proceedings – s.45 does not stipulate the stage when the accused may move an application for bail and it can be submitted at any stage, either before or after the complaint is filed – It is immaterial whether the charge is framed or evidence is recorded or not recorded – All material and evidence that can be led in the trial and admissible, whether relied on by the prosecution or not, and can be examined – On the question of burden of proof, s.24 of the PML Act can be relied on by the prosecution. [Para 46]

Word and Phrases – “material”, “reason to believe”, and “guilty of the offence” – Interpretation.

Word and Phrases – “reasons to believe” and “suspicion” – Discussed.