What next After Kejriwal’s Arrest

The Delhi HC has heard and reserved its verdict in the case concerning Mr Arvind Kejriwal’s arrest by the Directorate of Enforcement (ED).

The sitting Chief Minster’s arrest is about a lot of things. In many ways, it marks a flashpoint in a period of continued political decadence in India: arguments regarding unraveling of the level playing field before the Lok Sabha elections have been made, and rightly so. Yet, at the heart of it, this matter remains about the unlawful curtailment of a citizen’s liberty on account of stringent laws which do not pass muster with the Constitution. A careful examination of the facts surrounding the Chief Minister’s arrest- all of which are available in the public domain- would reveal that there are glaring illegalities in the ED’s case, even as per the Prevention of Money Laundering Act, 2002 (PMLA) in its current draconian form.

What is more, the ED has not provided cogent answers to fill these gaps in its case put forth before the Delhi High Court.

The 50-17-19 Triad

The scheme of the PMLA envisages a three-fold procedure in case of a potential PMLA offence (offences are delineated in Section 3 of the PMLA Act), which concerns the interplay amongst three of its most crucial provisions: Sections 50, 17 and 19. While Section 50, inter alia, empowers the ED to issue summons, Section 17 confers powers to effect search and seizure. Section 19 deals with the power to arrest. Together, these provisions also read various safeguards in the PMLA, which otherwise makes enlargement on bail virtually impossible.

Section 50 summons

Section 50 is the first stage of the three-fold procedure- it empowers the ED to send a summons bu justice Ms Kaveri Bawaja (room number 512, 5th floor off Rouse Avenue District Court) for the purposes of the PMLA. As has been reported widely, the ED had issued 9 summons to the Chief Minister under Section 50 of the PMLA. These summons were sent over a protracted period of 6 months- the first of such summons was sent in October 2023, and the last summon was sent in mid-March.

A cursory reading of the provision would show that under Section 50(2) of the PMLA, ED has the power to summon any person only for either of the two purposes: (i) to give evidence, or (ii) to produce any records during the course of any investigation/proceeding under the PMLA. In Vijay Madanlal Choudhary vs Union Of India on 27 July, 2022 the Supreme Court has characterised the import of Section 50 in the following terms:

Vijay Madanlal makes it abundantly clear that the Section 50 examination is in the nature of an inquiry. It follows, therefore, that:

1. At the Section 50 summons stage, there exists no formal document indicative of the likelihood of involvement of such a person as an accused of the offence of money laundering.
2. Under Section 50, PMLA, the Chief Minister could have been interrogated only in the capacity of a witness for an inquiry, and not in the capacity of an accused.
3. It is only the information and evidence collated during the inquiry under Section 50, which could have disclosed, if at all, the commission of a PMLA offence, and the involvement of such summoned person in the alleged offence.

The two October 2023 judgments

In October 2023, two judgments- one by the Supreme Court and another by the Delhi High Court- further clarified the scope of Section 50 by reading necessary safeguards into this benign provision of summons. The Delhi High Court ruled that the power to arrest is conspicuously absent in Section 50; the Supreme Court unequivocally held that mere non-cooperation of a witness in response to Section 50 summons would not be enough to necessitate their arrest.

The Delhi CM had challenged the ED summons before the Delhi High Court. On 21 March 2024, when the Delhi High Court refused to grant him any interim relief in the case, the ED was required to issue a fresh summon to the CM; the ED, however, proceeded to search the residence of, and subsequently arrest, the Chief Minister.

This overnight change in legal strategy is where the core of the illegality lies.

Section 17 Search

On Mar 21, 2024, hours after the Delhi HC’s refusal to stay the Section 50 summons, the ED proceeded to search the Chief Minister’s residence. Soon after, the CM was arrested. We will come to the arrest later: we first need to examine whether the search conducted by the ED was in compliance with the law.

Section 17 of the PMLA is the second stage of the three-fold mechanism under the PMLA. Per Section 17 of the PMLA, ED can search a person’s place only if it has reason to believe, based on ‘information’ in its possession, that the said person has (i) committed an offence of money laundering; (ii) is in possession of any proceeds of crime involved in money-laundering; and (iii) is in possession of any records relating to money-laundering, or (iv) is in possession of any property related to crime. Where such search results in the recovery of any relevant record or property , the ED is empowered to examine the concerned person for the purposes of an investigation.

Section 17, therefore, is distinct from Section 50 in two significant ways:

1. The ED can proceed U/S 17 only when it has credible ‘information’ about the commission of an offence, which necessitates a search. The Section 17 threshold is, therefore, higher than the Section 50 threshold.
2. Unlike under Section 50, U/S 17, a person may be examined in the capacity of a witness as well as an accused. In other words, there exists a likelihood of the involvement of such a person as an accused of a PMLA offence.

Basis the ‘information’ available with it, the ED had issued 9 summons U/S 50 to the CM. The last of such summons was sent on 17 March 2024, merely 4 days before the arrest of the Chief Minister. If the information available with the ED was only sufficient to send a Section 50 summons, a search U/S 17 basis of the same information, with no change in circumstances, would not be sustainable.

The ED, therefore, has to satisfy the test of Section 17 to prove that within a period of 4 days, it got hold of fresh ‘information’ which necessitated a search of the CM’s residence: in the hearings conducted before the Delhi High Court, the ED has not answered this most essential question.

Section 19 arrest

Section 19 is the third and final stage of the three-fold procedure. The ED has the power to arrest U/S 19 only if it has, (i) basis the material in its possession, (ii) a reason to believe that the Petitioner is guilty, of a PMLA offence. It follows, therefore, that:

1. The basis of arrest under the PMLA cannot be mere suspicion or a likelihood of involvement, but guilt- the provision casts an obligation upon the ED to satisfy itself that the allegations against the accused are prima facie true;
2. This satisfaction is to be had basis of the ‘material’ in the ED’s possession, which is clearly a higher threshold than the ‘information’ requirement at the Section 17 stage.
3. The Section 19 threshold does not permit a person’s arrest for a probe in his role/involvement in the alleged offence; on the contrary, Section 19 makes the establishment of his role/involvement- and prima facie guilt- a pre-requisite to the arrest.

This brings us to another important question: what incriminating ‘material’ did the ED find in a 4-hour search at the CM’s residence which helped them establish his prima facie guilt?

The ED did not make this specific disclosure before the Delhi High Court. Reportedly, the ED only recovered INR 70,000 cash and the CM’s mobile phone from his residence. The cash recovered was not even seized by the ED. It appears, therefore, that during the intervening period, that is, between the last summon dated 17th March and the CM’s arrest- which happened on 21st March, there was no change in the ‘material’/‘information’ in possession with the ED. There was only one change in the third week of March, however: the calling of the Lok Sabha elections.

Manifest illegality

The sequence of events as aforesaid demonstrates the following:

1. Repeated Section 50 summons over a protracted period of 6 months establish that the Chief Minster was not accused of any alleged PMLA offence.
2. All of a sudden, on 21.03.2024, the ED took a leap to the stage of search of his residence U/S 17, which is a higher threshold than Section 50 and requires credible ‘information’ as the jurisdictional pre-condition.
3. The basis of this ‘information’ in the current case is unclear, as the Section 50 stage was abruptly abandoned by the ED, and CM and was never inquired U/S 50.
4. It is not the ED’s case that some incriminating material relevant to the alleged offence was recovered from the CM’s residence. As such, the search at the CM’s house could not have been the basis of his arrest.
5. As Per Section 17 (1) (iv) (f) of the PMLA, it was not open to the ED to even record a statement of the CM without recovery of any relevant record or property, let alone effect an arrest.
6. In arresting the CM, then, the ED has met the high threshold of ‘reason to believe’ U/S 19 using the very same ‘material’ basis for which it was sending Section 50 summons for 6 months. 

Evidently, the Chief Minister’s arrest (and everything that followed, including the remand orders) contravenes the Section 50-17-19 triad safeguards and is in the teeth of the very scheme of the PMLA.

That an elected, sitting chief minister has been jailed with such brazen illegality, is not the subject matter of this blog.

Best,

Adv. Sanjay Sonkar

B.Com(H), LL.B(H), LL.M(NLU)