New Delhi : The Supreme Court on Friday said the power to arrest under the anti-money laundering law “must be restricted” and “cannot be exercised according to the whims and fancies” of the Enforcement Directorate’s officer, and also questioned central agency’s arrest policy, against the backdrop that only 513 persons were arrested under the Prevention of Money Laundering Act (PMLA) out of 1,142 prosecution complaints filed in various courts.
A bench comprising justices Sanjiv Khanna and Dipankar Dutta granted interim bail to Delhi Chief Minister Arvind Kejriwal in the money laundering case linked to alleged excise policy scam. The bench made several observations regarding the power of arrest in its 64-page judgment on Kejriwal’s petition challenging his arrest in the liquor scam case. The bench observed that the officer must ask himself the questions – why arrest? Is it really necessary to arrest? What purpose would it serve, and what object would it achieve?
Power of arrest cannot be exercised as per the whims, fancies of the officer
The apex court said the legality of the “reasons to believe” have to be examined based on what is mentioned and recorded therein and the material on record. Justice Khanna, who authored the judgment on behalf of the bench, said however, the officer acting under Section 19(1) of the PML Act cannot ignore or not consider the material which exonerates the arrestee and any such non-consideration would lead to difficult and unacceptable results.
The bench said first, it would negate the legislative intent which imposes stringent conditions and, secondly, any undue indulgence and latitude to the ED will be deleterious to the constitutional values of rule of law and life and liberty of persons.
“An officer cannot be allowed to selectively pick and choose material implicating the person to be arrested. They have to equally apply their mind to other material which absolves and exculpates the arrestee. The power to arrest under Section 19(1) of the PML Act cannot be exercised as per the whims and fancies of the officer”, said Justice Khanna.
Justice Khanna said that courts have emphasised that the power to arrest must be exercised cautiously to prevent severe repercussions on the life and liberty of individuals. “Such power must be restricted to necessary instances and must not be exercised routinely or in a cavalier fashion”, he reiterated, adding that Section 19(1) of the PML Act does not permit arrest only to conduct investigation.
“Subjectivity of the opinion is not a carte blanche to ignore relevant absolving material without an explanation. In such a situation, the officer commits an error in law which goes to the root of the decision making process, and amounts to legal malice”, said Justice Khanna.
The bench said in terms of Section 19(1) of the PML Act, a decision-making error can lead to the arrest and deprivation of liberty of the arrestee, though not akin to preventive detention cases, but given the nature of the order entailing arrest – it requires careful scrutiny and consideration.
“Yet, at the same time, the courts should not go into the correctness of the opinion formed or sufficiency of the material on which it is based, albeit if a vital ground or fact is not considered or the ground or reason is found to be non-existent, the order of detention may fail”, said Justice Khanna.
Questions on ED’s data on arrest
The apex court said as per the data available on ED’s website, as on January 31, 2023, 5,906 ECIRs were recorded. “However, search was conducted in 531 ECIRs by issue of 4,954 search warrants. The total number of ECIRs recorded against ex-MPs, MLAs and MLCs was 176. The number of persons arrested is 513”, said the bench. “Whereas the number of prosecution complaints filed is 1,142. 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 PML Act”, said Justice Khanna.
SC observations on Kejriwal’s contention
The bench noted that arguments raised on behalf of Arvind Kejriwal, which 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. The bench said 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.
It was contended that the statements relied upon by the ED have been extracted under coercion, a fact that is contested and has to be examined and decided. “This argument does not persuade us, given the limited power of judicial review, to set aside and quash the ‘reasons to believe’. Accepting this argument would be equivalent to undertaking a merits review”, said Justice Khanna.
Kejriwal asserted that the “reasons to believe” do not mention and evaluate “all” or “entire” material. It selectively refers to “incriminating” material by giving it a semblance of good faith exercise and in reality, the reasons are a sham, and the exercise is undertaken in a predetermined and biased manner.
Kejriwal submitted that the “reasons to believe '' selectively refer to the implicating material, and ignore the exculpatory material and there is no attempt to evaluate the entire material and evidence on record. “The co accused, in view of prolonged incarceration, strong-arm tactics and threats have been coerced to accept the DoE’s version of facts. In support, it is highlighted that the DoE changed their position, viz. the co-accused conspirators, who were granted bail post the statements implicating Arvind Kejriwal. This establishes and shows prejudice and malicious intent”, noted the bench.
On behalf of Kejriwal, it was submitted that there was no necessity to arrest on March 21. The RC/ECIR were registered in the month of August 2022. Further, most of the material relied upon in the “reasons to believe” are prior to July 2023. The statements under Section 50 of the PML Act and under Section 164 of the Code, or otherwise, of Magunta Srinivasulu Reddy, Raghav Magunta, Siddharth Reddy, etc., relate to the period prior to July 2023. Thus, it was not necessary to arrest Arvind Kejriwal based on the said material.
ED’s defence on arresting Kejriwal
The ED submitted that DoE submits that the investigation in the present case is complicated and as it is a case of political corruption, independent witnesses are not available, and the co-accused were initially reluctant to name and blame the top political stakeholders. “Admissibility or veracity of the approver/witness statements cannot be dealt with in the present proceedings, as credibility of the witnesses is to be tested during trial”, argued the agency.
“At this juncture, we would like to reiterate and clarify that we are not deciding an appeal against an order rejecting the prayer/application for grant of bail under Section 45 of the PML Act. We are examining the question of the legality of the arrest of Arvind Kejriwal on March 21. While doing so, we would be exercising the power of judicial review and not merit based review”, said Justice Khanna.
“A wrong application of law or arbitrary exercise of duty leads to illegality in the process. The court can exercise their judicial review to strike down such a decision. This would not amount to judicial overreach or interference with the investigation, as has been argued by the ED”, added the bench.
ED submitted that the test of “necessity to arrest” is satisfied in view of Arvind Kejriwal failing to appear despite the issuance of 9 summons and the arrest is a part and parcel of investigation intended to secure evidence, leading to discovery of material facts and relevant information as held in P. Chidambaram v. Directorate of Enforcement.
ED must act uniformly in making arrests
The bench said it is 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. Section 45 (PMLA) gives primacy to the opinion of the DoE when it comes to grant of bail. DoE should act uniformly, consistent in conduct, confirming one rule for all”, it said.
The apex court said a view accepted in the 2022 verdict of Vijay Madanlal Choudhary, which upheld the validity of PMLA, is that the order of arrest under Section 19(1) of the PMLA is a decision taken by a high ranking officer. "Thus, it is expected that the high ranking officer is conscious of the obligation imposed by Section 19(1) of the PMLA before passing an order of arrest. We are of the opinion that it would be incongruous to argue that the high ranking officer should not objectively consider all material, including exculpatory material," it said.
Questions framed for consideration by larger bench
The bench did not give any final opinion on Kejriwal’s plea to quash his arrest and referred three questions of law to a larger bench.
The bench said whether the “need and necessity to arrest” is a separate ground to challenge the order of arrest passed in terms of Section 19(1) of the PML Act? “Whether the “need and necessity to arrest” 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 in the facts and circumstances of the said case?”, said the bench.
Ans, if questions (a) and (b) are answered in the affirmative, what are the parameters and facts that are to be taken into consideration by the court while examining the question of “need and necessity to arrest”?
The apex court said since this question of law would require an in-depth deliberation, it finds fit to grant interim bail to Kejriwal.
