Supreme Court examines the legality of arrest under Section 19 of the Prevention of Money Laundering Act: Arvind Kejriwal vs. Directorate of Enforcement (2024) INSC 512 (12 July 2024)

Introduction

Date of the Judgment: 12 July 2024
Citation: 2024 INSC 512
Judges: Sanjiv Khanna, J., Dipankar Datta, J. (authored by Sanjiv Khanna, J.)

Can an arrest under Section 19 of the Prevention of Money Laundering Act, 2002 (PML Act) be challenged if the arresting officer fails to consider all available material, including exculpatory evidence? The Supreme Court of India recently addressed this critical question in a case involving the arrest of Arvind Kejriwal by the Directorate of Enforcement (DoE). This judgment delves into the scope of judicial review over arrests made under the PML Act, emphasizing the importance of adhering to statutory safeguards to protect individual liberty. The bench comprised Justices Sanjiv Khanna and Dipankar Datta, with the opinion authored by Justice Sanjiv Khanna.

Case Background

The case originated from a complaint by the Lieutenant Governor of the Government of National Capital Territory (NCT) of Delhi, leading to the registration of a case by the Central Bureau of Investigation (CBI) on 17 August 2022. The CBI case alleged criminal conspiracy in the formulation of the excise policy for the sale of liquor in Delhi, implicating a cartel of liquor manufacturers, wholesalers, and retailers. The Directorate of Enforcement (DoE) subsequently registered an Enforcement Case Information Report (ECIR) on 22 August 2022, based on the CBI’s findings, initiating an investigation into money laundering. Arvind Kejriwal was not named as an accused in the initial chargesheets filed by the CBI. However, he was later named as an accused in the seventh supplementary prosecution complaint filed by the DoE on 17 May 2024. Prior to his arrest, Arvind Kejriwal was issued multiple summons under Section 50 of the PML Act, which he failed to comply with.

Timeline:

Legal Framework

The core of the judgment revolves around the interpretation of Section 19 of the PML Act, which outlines the power to arrest. The section reads:

“19. Power to arrest.—(1) If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.”

The Supreme Court emphasized that this power to arrest is not absolute and is subject to specific preconditions:

• The officer must possess material.
• Based on this material, the officer must form and record in writing “reasons to believe” that the person is guilty of an offense under the PML Act.
• The arrested person must be informed of the grounds for the arrest as soon as possible.

These preconditions serve as safeguards to protect individual rights and liberties, aligning with Article 22(1) of the Constitution of India, which mandates that no person can be detained without being informed of the grounds of arrest.

Arguments

Appellant (Arvind Kejriwal)’s Submissions:

• The arrest was in violation of Section 19(1) of the PML Act, making the subsequent remand order illegal.
• The “reasons to believe” recorded by the DoE were not based on an evaluation of the “entire” material, but rather selectively focused on incriminating evidence while ignoring exculpatory material.
• Statements of co-accused relied upon by DoE were extracted under coercion and threats, and are contradictory.
• No incriminating document involving Arvind Kejriwal was recovered during the investigation.
• The statements do not establish involvement of Arvind Kejriwal in the predicate offense or in the act of money laundering.
• There was no “necessity to arrest” Arvind Kejriwal, as the investigation had been ongoing since August 2022, and most of the material relied upon was from before July 2023.
• The “reasons to believe” did not mention and record reasons for “necessity to arrest”.

Respondent (Directorate of Enforcement)’s Submissions:

• The power to arrest is neither administrative nor quasi-judicial and is part of the investigation process.
• Judicial scrutiny should be limited to cases of subversive abuse of law.
• The designated officer’s subjective opinion should prevail.
• “Reasons to believe” need not be supplied to the arrestee, only the “grounds of arrest.”
• The investigation is complex and involves political corruption, making it difficult to find independent witnesses.
• The co-accused were initially reluctant to name top political stakeholders.
• The test of “necessity to arrest” is satisfied in view of Arvind Kejriwal failing to appear despite the issuance of 9 summons.
• Arrest is a part of investigation intended to secure evidence.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. 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?
2. 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?
3. 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”?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

The Court relied heavily on Pankaj Bansal v. Union of India and others [2023 SCC Online SC 1244]*, V. Senthil Balaji v. State and others [(2024) 3 SCC 51]*, and Prabir Purkayastha v. State (NCT of Delhi) [2024 SCC OnLine SC 934]*, to emphasize the importance of recording “reasons to believe” in writing and communicating the grounds of arrest to the arrestee. These cases established that the failure to comply with Section 19(1) of the PML Act would vitiate the arrest. The Court also followed Vijay Madanlal Choudhary and others v. Union of India and others [(2022) SCC Online SC 929]*, which highlighted the stringent safeguards under Section 19(1) of the PML Act. However, it distinguished Vijay Madanlal Choudhary (supra) on the point of furnishing ECIR. The Court referred to Gifford v. Kelson [(1943) 51 Man. R 120]*, to explain the difference between “reasons to believe” and “suspicion”, emphasizing that “reasons to believe” requires a higher degree of satisfaction. The Court distinguished decisions such as The King Emperor v. Khawaja Nazir Ahmad [AIR 1945 PC 18]*, Dukhishyam Benupani, Asst. Director, Enforcement Directorate (FERA) v. Arun Kumar Bajoria [(1998) 1 SCC 52]*, and State of Bihar and another v. J.A.C. Saldanha and others [(1980) 1 SCC 554]*, stating that the principle that Courts should not interfere with the statutory right of the police to investigate is not applicable in the present case. The Court also referred to Arnesh Kumar v. State of Bihar [(2014) 8 SCC 273]*, and Mohammed Zubair v. State of NCT of Delhi [(2022) SCC OnLine SC 897]*, to reiterate that the power to arrest is not unbridled and that there must be a “necessity to arrest”. The Court also referred to M. Ravindran v. Intelligence Officer, Directorate of Revenue Intelligence [(2021) 2 SCC 485]*, to state that in case of any ambiguity in the construction of a penal statute, the courts must favor the interpretation which leans towards protecting the rights of the accused. The Court extensively relied on the principle of proportionality, referring to cases such as Chairman, All India Railway Recruitment Board v. K. Shyam Kumar [(2010) 6 SCC 614]*, State of Uttar Pradesh v. Lal [(2006) 3 SCC 276]*, and Modern Dental College & Research Centre v. State of Madhya Pradesh [(2016) 4 SCC 346]*, and Association for Democratic Reforms v. Union of India [(2024) 5 SCC 1]*, to emphasize that proportionality is an appropriate standard of review when human rights are concerned.

Flowchart of the Decision-Making Process

Conclusion

The Supreme Court’s judgment in *Arvind Kejriwal vs. Directorate of Enforcement* (2024 INSC 512) provides a crucial interpretation of Section 19 of the Prevention of Money Laundering Act, 2002. While the court did not quash the arrest order, it emphasized that the power to arrest is not absolute and is subject to specific preconditions, including the recording of “reasons to believe” based on all available material, including exculpatory evidence. The court also highlighted the importance of communicating the grounds of arrest to the arrestee. The Court acknowledged the importance of “necessity to arrest” as a separate ground to challenge the order of arrest, and referred this issue to a larger bench for consideration. This judgment underscores the judiciary’s role in safeguarding individual liberties against potential abuse of power by investigating agencies. The decision also reinforces the principle that judicial review shall prevail, and the court/magistrate is required to examine that the exercise of the power to arrest meets the statutory conditions. The Supreme Court’s decision to refer the “necessity to arrest” issue to a larger bench indicates a significant step towards further clarifying the scope and limitations of arrest powers under the PML Act. This will have far-reaching implications for future cases involving arrests under the PML Act, ensuring a more balanced approach between the need for effective investigation and the protection of individual rights.