New Delhi: On July 12, the Supreme Court granted interim bail to Delhi chief minister Arvind Kejriwal in the Delhi excise policy case taken against him by the Directorate of Enforcement (ED) under the Prevention of Money Laundering Act, 2002.
Kejriwal, who was arrested on March 21 and has since been lodged at Tihar jail, will not, however, walk free yet because he was arrested on June 25 by the Central Bureau of Investigation (CBI) on corruption charges in connection with the same issue.
In the excise policy case, the ED had claimed that there is “direct” evidence to show that Kejriwal demanded Rs 100 crore and that the money was used by his party, the Aam Aadmi Party (AAP), to fund its Goa election expenses.
Kejriwal appealed to the Supreme Court for bail on the grounds that the ED case against him is a violation of Section 19 of the Prevention of Money Laundering Act, 2002. This Section confers upon any officer recognised by the Central government, the power to arrest any person if the officer has “reason to believe” that the person is guilty of an offence under the Act. However, the Section also lists several conditions under which an officer can make such an arrest, keeping in mind the rights afforded by the Indian constitution to individuals. Kejriwal’s bail plea argued that the “reasons to believe” do not mention and evaluate the entire material and that it refers to incriminating material.
On July 12, the Supreme Court, while granting interim bail to Kejriwal, also noted several aspects of the legalities surrounding the case, including the importance of judicial review, the evidence presented by the Directorate of Enforcement, and more. Here are 12 salient points from the Supreme Court’s judgment:
1. The Supreme Court noted that the very important Section 19 of the PMLA, while conferring upon a designated officer the power to make arrests if the officer has “reason to believe” that a person is guilty of a crime under the PMLA, also lists several “preconditions” for such an arrest.
“It is mandatory to record the ‘reasons to believe’ to arrive at the opinion that the arrestee is guilty of the offence, and to furnish the reasons to the arrestee. This ensures an element of fairness and accountability,” the SC judgment noted.
It also noted: “Power to arrest a person without a warrant from the court and without instituting a criminal case is a drastic and extreme power. Therefore, the legislature has prescribed safeguards in the form of exacting conditions as to how and when the power is exercisable. The conditions are salutary and serve as a check against the exercise of an otherwise harsh and pernicious power.”
2. Citing examples of how courts have interpreted Section 19 of the PMLA, including from the recent case involving the arrest of media house NewsClick’s founding editor Prabhir Puryakastha, the SC noted that the Section also upholds Article 22 of the Indian Constitution:
“The Court explained that Section 19(1) of the PML Act is meant to serve a higher purpose, and also to enforce the mandate of Article 22(1) of the Constitution. The right to life and personal liberty is sacrosanct, a fundamental right guaranteed under Article 21 and protected by Articles 20 and 22 of the Constitution.”
Article 22 of the Indian constitution protects and safeguards the rights of persons who have been arrested or detained by authorities.
3. The judgment noted that the ED had argued that the power to arrest “is neither an administrative nor a quasi-judicial power as the arrest is made during investigation”, and that judicial scrutiny is “not permissible” as it would interfere with the investigation. The ED also claimed that “discretion and right to arrest vests with the competent officer, whose subjective opinion should prevail”. However, the SC judgment said that the SC does not agree with this, and that they “must reject this argument”.
The SC upheld the importance of judicial review – wherein the judiciary has the power to examine the constitutionality of any law, and if the law goes against the tenets of the Indian constitution.
“We hold that the power of 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 SC judgment noted.
“The exercise of the power to arrest is not exempt from the scrutiny of courts,” the SC added, adding that the power of judicial review exists both before and after the filing of criminal proceedings or the prosecution complaint.
4. The Supreme Court clarified and interpreted the meaning of a few words and terms pertaining to Section 19 of the PMLA. The SC judgment had much to say about the phrase “reasons to believe”: “As the “reasons to believe” are accorded by the authorised officer, the onus to establish satisfaction of the said condition will be on the DoE and not on the arrestee,” the SC noted. Furthermore, the “reasons to believe” that the person is guilty of an offence under the PMLA “should be founded on the material in the form of documents and oral statements,” it added.
“Clearly, ‘reason to believe’ has to be distinguished and is not the same as grave suspicion. It refers to 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,” the SC noted.
The ED claimed that the “reasons to believe” need not be furnished to the person who is arrested, but the SC did not agree: “It is difficult to accept that the ‘reasons to believe’, as recorded in writing, are not to be furnished,” it noted.
The SC also added why: “We are concerned with violation of personal liberty, and the exercise of the power to arrest in accordance with the law. Scrutiny of the action to arrest, whether in accordance with law, is amenable to judicial review. It follows that the “reasons to believe” should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest.”
5. Regarding the scope of judicial review – which the ED claimed is not permissible in Kejriwal’s case – the SC said that the exercise of judicial review is 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”.
The SC judgment further added: “If adequate and due care is taken by the [ED] to ensure that the “reasons to believe” justify the arrest in terms of Section 19(1) of the PML Act, the exercise of power of judicial review would not be a cause of concern. Doubts will only arise when the reasons recorded by the authority are not clear and lucid, and therefore a deeper and in-depth scrutiny is required. Arrest, after all, cannot be made arbitrarily and on the whims and fancies of the authorities…In fact, not to undertake judicial scrutiny when justified and necessary, would be an abdication and failure of constitutional and statutory duty placed on the court to ensure that the fundamental right to life and liberty is not violated.”
6. The SC also made a distinction between the expressions ‘material in possession’ in Section 19(1) of the PML Act instead of ‘evidence in possession’, which the ED pointed out in its argument in Kejriwal’s case. Though this argument is “etymologically correct”, it “overlooks the requirement that the designated officer should and must, based on the material, reach and form an opinion that the arrestee is guilty of the offence under the PML Act. Guilt can only be established on admissible evidence to be led before the court, and cannot be based on inadmissible evidence,” the SC judgment noted.
It further added that: “Power to arrest under Section 19 (1) is not for the purpose of investigation. 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.”
7. The ED’s arguments in the Kejriwal case claim that “grave suspicion” is enough to frame a charge and put the accused to trial, the SC noted. “This contention should not be accepted, since we are not dealing with the trial, framing of charge or recording the evidence. The issue before us, which has to be examined and answered, is whether the arrest of the person during the course of investigation complies with the law,” the SC noted.
8. The SC also clarified the differences between Section 19 and Section 45 of the PMLA, which are similar in their mandate: in the former, it is the designated officer who lists their “reasons to believe”, while in the latter, a Special Court does so.
“The Special Court is not bound by the opinion of the designated/authorised officer recorded in the ‘reasons to believe’,” the SC judgment read. “A court’s opinion is different and cannot be equated to an officer’s opinion. While the Special Court’s opinion is determinative, and is only subject to appeal before the higher courts, the DoE’s opinion is not in the same category as it is open to judicial review.”
9. The SC noted that “all” or “entire” material must be examined and considered by the designated officer to determine the guilt or innocence of a person under the PMLA. Kejriwal’s bail plea had argued that the “reasons to believe” presented by the ED in his case do not mention and evaluate the entire material and that it refers to incriminating material.
“The legality of the ‘reasons to believe’ have to be examined based on what is mentioned and recorded therein and the material on record,” the SC noted. “However, the officer acting under Section 19(1) of the PML Act 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.”
The court further added that 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,” it noted. “This would not amount to judicial overreach or interference with the investigation, as has been argued by the DoE. The court only ensures that the enforcement of law is in accordance with the statute and the Constitution.”
10. The SC also noted the difference between the power to arrest and the need to arrest, referring to several recent and other cases.
“This Court in Mohammed Zubair v. State of NCT of Delhi, has held that [the] power to arrest is not unbridled. The officer must be satisfied that the arrest is necessary. Where the power is exercised without application of mind, and by disregarding the law, it amounts to abuse of the law,” the SC judgment on Kejriwal’s bail noted.
It further added: “Such power [to arrest] must be restricted to necessary instances and must not be exercised routinely or in a cavalier fashion.”
The SC, however, did not set aside and quash the “reasons to believe” in the Kejriwal case since this would be “equivalent to undertaking a merits review”, the SC noted. Kejriwal can “raise these arguments at the time when his application for bail is taken up for hearing”, the SC said.
Finally, taking all these into consideration, and also the SC’s stand on the fact that “reasons to believe” cannot be dropped in the Kejriwal case, it said that the Delhi chief minister should be granted interim bail, “given the fact that right to life and liberty is sacrosanct, and Arvind Kejriwal has suffered incarceration of over 90 days”.
The court added that it was “doubtful” whether the court could direct an elected leader to step down, or not take up his duties as the chief minister or minister, and left that decision to Kejriwal.
