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Arvind Kejriwal vs Directorate of Enforcement (12 July 2024)

Case Comment, Publications
  1. Judgment Cause Title: Arvind Kejriwal V. Directorate of Enforcement 
  2. Case Number: Criminal Appeal No. 2493 Of 2024 
  3. Judgment Date: July 12, 2024 
  4. Court: Supreme Court of India 
  5. Quorum: Sanjiv Khanna and Dipankar Datta, JJ. 
  6. Legal Provisions Involved: 
  • Prevention Of Money Laundering Act, 2002, Sections 19(1), 45. 
  • Constitution Of India, Article 22. 
  1. FACTS 
  1. On March 21, 2024, Arvind Kejriwal, the Chief Minister of Delhi, was arrested by the Enforcement Directorate (ED). The ED alleged that Kejriwal was the “mastermind.” Behind the Delhi Liquor Policy scam, accusing him of conspiring with Delhi government ministers to launder money and engage in corrupt practices while framing the now-repealed policy. Several Aam Aadmi Party (AAP) leaders, including former Deputy Chief Minister Manish Sisodia, had already been arrested in connection with the same case. 
  2. Kejriwal challenged his arrest by filing a writ petition under Article 226 of the Constitution 2, which empowers high courts to exercise original jurisdiction in matters where fundamental rights are violated. He argued that the arrest was illegal because The ED lacked sufficient material to justify his arrest. Section 19 of the PMLA requires that the reason to believe an accused is guilty must be recorded in writing. The grounds for arrest were not adequately communicated to him. However, the Delhi High Court rejected Kejriwal’s plea, ruling that the ED had sufficient material to demonstrate his involvement in concealing “proceeds of crime.” On April 9, 2024, the Delhi High Court dismissed his petition, upholding the validity of his arrest. In April 2024, Kejriwal appealed against the Delhi High Court’s decision before the Supreme Court of India. A bench comprising Justices Sanjiv Khanna and Dipankar Datta began hearing the case on April 30, 2024 
  3. Senior Advocate Abhishek Manu Singhvi appeared for Kejriwal and presented the following arguments: 
  1. The ED’s arrest was based on weak and unreliable witness statements that lacked credibility. He claimed the witnesses had been coerced into giving statements implicating Kejriwal. 
  2. Singhvi argued that the ED had cherry-picked statements that suited its narrative while ignoring evidence that could have exonerated Kejriwal. 
  3. He highlighted the timing of Kejriwal’s arrest, pointing out that it occurred just a week after the Model Code of Conduct (MCC) came into effect, despite the investigation being on-going for over 18 months. Singhvi suggested that the arrest was a political manoeuvre to target Kejriwal during the election season. 
  4.  He also emphasized that the Prosecution Complaint (equivalent to a chargesheet in PMLA cases) and the Enforcement Case Information Report (ECIR) had no mention of Kejriwal at the time of his arrest, further raising suspicions about the timing and intent behind the action.
  5. The ED defended its actions by asserting that: 
  1. The arrest was a legitimate part of the ongoing investigation into the liquor scam. Section 19 of the PMLA allows arrests even before a prosecution complaint is filed. 
  2. The ED maintained that “reasons to believe” that a person is guilty need not be proved through a mini-trial. Mere statements implicating an accused provide sufficient grounds for arrest under PMLA. 
  3. The agency further argued that the legality of an arrest under PMLA cannot be examined by a court of law while the investigation is still ongoing. 
  1. The Supreme Court granted interim bail to Kejriwal on May 10, 2024, allowing him to campaign for the 2024 General Elections in Delhi. The bail was granted on the condition that Kejriwal would surrender on June 1, 2024. 
  2. The Supreme Court heard final arguments and reserved its judgment on May 17, 2024. The case remains significant as it touches upon the interpretation of Section 19 of PMLA and the limits of ED’s powers in making arrests during high-profile investigations.
  1. ISSUES RAISED 
  2. Whether the “need and necessity to arrest” is a distinct and valid ground to challenge an arrest under Section 19(1) of the PMLA. Understanding Section 19(1) of the PMLA Section 19(1) of the Prevention of Money Laundering Act, 2002 (PMLA) empowers the Enforcement Directorate (ED) to arrest an individual if the authorized officer: 
  1. Has “reason to believe” that the accused is guilty of an offense punishable under PMLA. 
  2.  Such “reason to believe” is based on material evidence in possession of the officer. 
  3.  The reason for the arrest is recorded in writing and communicated to the accused as per the constitutional requirement under Article 22(1). Interpretation of “Need and Necessity to Arrest” 
  4. “Need and necessity to arrest” is an evolving judicial concept that questions whether arresting an individual is essential to achieve the objectives of the investigation. 
  5. It asks whether the arrest was justified, given the facts of the case, or if an alternative means, such as a summons, custodial interrogation, or freezing of assets, could have sufficed. 
  6. Judicial Precedents Supporting The Concept that:- 
  1. The Supreme Court emphasized that arrest should be the last resort and only be made if necessary. 
  2. Similarly,The Court highlighted that personal liberty should not be curtailed without strong reasons. 
  3. The Key Question: The Supreme Court examines whether “need and necessity to arrest” can be considered a distinct and independent ground to challenge an arrest, separate from procedural compliance with Section 19. If affirmed, this would mean that: 
  1. Even if the procedural requirements of Section 19 are met, the necessity of arrest can still be questioned. 
  2. The courts would have to ensure that the arrest was not only procedurally valid but also substantially justified in the context of the case. 
  3. Does The Concept Of “Need And Necessity” Relate Only To Procedural Compliance Under Section 19, Or Does It Include Evaluating the Facts and Circumstances Of The Case? 
  4. Procedural Compliance Under Section 19, which prescribes a three-step process for a valid arrest: 
  1. Reason to believe: Based on material evidence, the officer must be convinced of the accused’s guilt. 
  2. Recording reasons in writing: The reasons for the arrest must be documented to ensure transparency. 
  3. Communication to the accused: The grounds of arrest must be conveyed to the accused to enable them to seek legal remedies. 
  4. Beyond Procedural Compliance: Evaluating Facts and Circumstances 
  1.  The “need and necessity to arrest” doctrine introduces an additional layer of scrutiny that goes beyond procedural compliance. 
  2.  It suggests that courts should not only verify if the procedural steps under Section 19 were followed but also analyze the broader facts and circumstances to determine: 
  1. Was an arrest required to prevent the accused from tampering with evidence? 
  2. Did the accused pose a flight risk? 
  3. Would the arrest aid in unearthing the larger conspiracy or recovering proceeds of crime? 
  4. Could the objectives of the investigation have been achieved without curtailing the liberty of the accused? 
  5. Why This Evaluation Matters: 
  1. Evaluating facts and circumstances ensures that arrests are not made arbitrarily or as a tool of harassment. 
  2. It prevents abuse of power by enforcement agencies and protects the accused’s fundamental rights. 
  3. CONTENTION 
  4. Petitioner (Arvind Kejriwal): 
  1. Argued that his arrest was illegal and politically motivated, violating Section 19 of the PMLA. 
  2. Claimed that the ED failed to establish the “need and necessity” of arrest, making it arbitrary and unjust. 
  3. Contended that the arrest was an abuse of power, intended to prevent his participation in elections. 
  4. Respondent (Directorate of Enforcement): 
  1. Justified the arrest by stating that Kejriwal was the “kingpin” in the Delhi Liquor Policy scam, facilitating money laundering. 
  2. Asserted that there was sufficient material evidence justifying his arrest under Section 19. 
  3. Argued that Section 19 does not explicitly require proving the “need and necessity” beyond the grounds laid out in the PMLA. 
  1. RATIONALE 
  1. The Supreme Court acknowledged that while Section 19 of the PMLA prescribes the procedure for arrest, “need and necessity to arrest” is an evolving concept that merits judicial scrutiny. 
  2. The Court emphasized that considering the seriousness of offenses under PMLA, the Power to arrest must be exercised cautiously to prevent abuse. 
  3. To ensure that the “need and necessity to arrest” is not misused, the Court referred the matter to a larger bench to lay down clear guidelines for evaluating arrests under the PMLA. 
  1. DEFECTS OF LAW 
  1.  Ambiguity in Section 19: The provision does not explicitly mandate courts to examine the “need and necessity” of arrest before approving detention. 
  2.  Potential for Misuse: The lack of specific criteria allows enforcement agencies to exercise discretion arbitrarily, leading to the risk of politically motivated arrests. 
  3. Judicial Oversight Gap: The current framework does not sufficiently safeguard against wrongful arrests under PMLA, necessitating stronger judicial oversight. 
  1. INFERENCE 
  1. The case highlights the need for a judicial framework to prevent the arbitrary use of arrest powers under PMLA. 
  2. The Supreme Court’s decision to refer the matter to a larger bench indicates that future interpretations of Section 19 may establish stricter guidelines to ensure fairness and prevent abuse. 
  3. The outcome of this case will set a precedent for determining the circumstances under which arrests under PMLA are justified, potentially impacting high-profile cases in the future. 

The outcome of Kejriwal vs. the Directorate of Enforcement will have far-reaching consequences for India’s legal framework on money laundering investigations. If the larger bench affirms the “need and necessity to arrest” as a valid ground for challenging arrests, it will usher in a new era of judicial scrutiny over the powers exercised by investigative agencies under PMLA. 

Establishing Safeguards: A well-defined judicial framework will act as a safety net against 

arbitrary arrests, balancing investigative powers with the protection of fundamental rights. 

Strengthening Rule of Law: Stricter guidelines will enhance transparency and accountability, 

ensuring that the investigative process remains aligned with constitutional principles. Setting Landmark Precedents: The larger bench’s decision will set a precedent that shapes future judicial interpretations, safeguarding individual liberty while strengthening India’s legal framework for combating money laundering. 

Name: – Huzefa Malkapurwala.

University: – ICAI and RTMNU.

Date: -25/04/2025