ED Officer Must Also Consider Materials Exonerating Accused Before Deciding To Arrest, Can't Pick & Choose: Supreme Court

A crucial development in the PMLA jurisprudence took place on Friday (July 12) when while granting interim bail to Delhi Chief Minister Arvind Kejriwal, the Supreme Court held that an officer of the Enforcement Directorate (ED), exercising power of arrest under Section 19(1), Prevention of Money Laundering Act cannot ignore material which exonerates the arrestee.

"The legality of the “reasons to believe” have to be examined based on what is mentioned and recorded therein and the material on record. 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. First, it would negate the legislative intent which imposes stringent conditions...Secondly, any undue indulgence and latitude to the DoE 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", the bench of Justices Sanjiv Khanna and Dipankar Datta said.

The court acknowledged that opinion of the concerned officer on arrest is subjective. However, it emphasized that the formation of the same has to be in accordance with law.

"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."

Insofar as Kejriwal had raised a plea in support of his case that ED ignored exculpatory statements of witnesses, the court made no specific comment. It was recorded that Kejriwal chose not to address the court on factual aspects and his arguments on the statements and material relied by ED in "reasons to believe", though worthy of consideration, were in the nature of propositions or deductions which did not justify quashing of "reasons to believe" in exercise of limited power of judicial review.

Accordingly, the court left it open for Kejriwal to raise the plea regarding exculpatory statements (and other arguments) before the trial Court during bail proceedings.

"Arvind Kejriwal can raise these arguments at the time when his application for bail is taken up for hearing. In bail hearings, the court's jurisdiction is wider, though the fetters in terms of Section 45 of the PML Act have to be met. Special Court would have to independently apply its mind, without being influenced by the opinion recorded in the “reasons to believe”. To adjudicate on a bail application, pleas and arguments of Arvind Kejriwal and the DoE, including the material that can be relied on and the inferences possible shall be examined. The court will have to undertake the balancing exercise."

Power Of Judicial Review Over ED Officer's Opinion On Arrest

To recapitulate briefly, Kejriwal argued in support of his case that ED's “reasons to believe” selectively referred to implicating material and ignored the exculpatory material. As such, there was no attempt to evaluate the entire material and evidence on record.

ED, on the other hand, claimed that "reasons to believe" were the prerogative of the Investigating Officer and review of his opinion (on the question of arrest) tantamount to interference with investigation. The agency further averred that if the assessment is regarding whether a person is "guilty", all material is not required to be considered and reflected in "reasons to believe"; on the contrary, if the assessment relates to whether a person is "not guilty", all material has to be considered.

Considering the rival submissions, the court has now held that it possesses power of judicial review over an Investigating Officer's opinion.

"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...The court only ensures that the enforcement of law is in accordance with the statute and the Constitution."

Distinguishing judicial review from merits review, and noting that a decision-making error under Section 19(1), PMLA can lead to deprivation of liberty of the arrestee, it said,

"...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."

Ultimately, the Court referred the matter to a larger bench, to consider the question whether the necessity of arrest should be read as a condition in Section 19, and decided to grant interim bail to Kejriwal, considering his incarceration over 90 days.

Other detailed reports on the judgment can be read here.

Case Title: Arvind Kejriwal v. Directorate of Enforcement, SLP(Crl) 5154/2024

Citation : 2024 LiveLaw (SC) 463

Click here to read the judgment