2024 (7) TMI 760 - SC - Money Laundering

Money Laundering - proceeds of crime - reasons to believe - violation of Section 19 of the Prevention of Money Laundering Act 2002 or not - It is contended that the arrest was illegal which makes the order of remand to custody of the DoE passed by the Special Court dated 01.04.2024 also illegal. HELD 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 legislature while imposing strict conditions as preconditions to arrest was aware that the arrest may be before or prior to initiation of the criminal proceedings/prosecution complaint. The legislature neither explicitly nor impliedly excludes the court surveillance and examination of the preconditions of Section 19(1) of the PML Act being satisfied in a particular case. This flows from the mandate of Section 19(3) which requires that the arrestee must be produced within 24 hours and taken to the Special Court or court of judicial/metropolitan magistrate having jurisdiction. The exercise of the power to arrest is not exempt from the scrutiny of courts. The power of judicial review remains both before and after the filing of criminal proceedings/prosecution complaint. It cannot be said that the courts would exceed their power when they examine the validity of arrest under Section 19(1) of the PML Act once the accused is produced in court in terms of Section 19(3) of the PML Act. 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. Section 45 of the PML Act does not stipulate the stage when the accused may move an application for bail. A bail application can be submitted at any stage either before or after the complaint is filed. Whether the charge is framed or evidence is recorded or not recorded is immaterial. Clearly the fact that the prosecution complaint has not been filed the charge has not been framed or evidence is either not recorded or partly recorded will not prevent the court from examining the application for bail within the parameters of Section 45 of the PML Act - It is only on establishing the three facts that the offence of money laundering is committed. When the foundational facts of Section 24 are met a legal presumption would arise that the proceeds of crime are involved in money laundering. The person concerned who has no causal connection with such proceeds of crime can disprove their involvement in the process or activity connected therewith by producing evidence or material in that regard. In that event the legal presumption would be rebutted. Undoubtedly the opinion of the officer is subjective but formation of opinion should be in accordance with the 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. The principle of parity or equality enshrined under Article 14 of the Constitution cannot be invoked for repeating or multiplying irregularity or illegality. If any advantage or benefit has been wrongly given another person cannot claim the same advantage as a matter of right on account of the error or mistake. However this principle may not apply where two or more courses are available to the authorities. The doctrine of need and necessity to arrest possibly accepts the said principle. Section 45 gives primacy to the opinion of the DoE when it comes to grant of bail. DoE should act uniformly consistent in conduct confirming one rule for all. Arvind Kejriwal is an elected leader and the Chief Minister of Delhi a post holding importance and influence. We have also referred to the allegations. While no direction given since it is doubtful whether the court can direct an elected leader to step down or not function as the Chief Minister or as a Minister it is left to Arvind Kejriwal to take a call. Larger Bench if deemed appropriate can frame question(s) and decide the conditions that can be imposed by the court in such cases. The Registry is directed to place the matter before the Hon ble Chief Justice of India for constitution of an appropriate Bench and if appropriate a Constitution Bench for consideration of the aforesaid questions. The questions framed above if required can be reformulated substituted and added to.

Summary

Issues Involved:
1. Legality of arrest under Section 19 of the Prevention of Money Laundering Act (PML Act).
2. Necessity and need to arrest under Section 19 of the PML Act.
3. Judicial review of the arrest.
4. Interim bail for the appellant.

Detailed Analysis:

1. Legality of Arrest under Section 19 of the PML Act:
The primary issue in this case is the legality of the arrest under Section 19 of the PML Act. The appellant challenged his arrest by the Directorate of Enforcement (DoE) on grounds of violation of Section 19 of the PML Act. Section 19 provides the power to arrest, stipulating that the arrest can only be made if the officer has "reason to believe" that the person is guilty of an offence under the Act, and this belief must be recorded in writing. The court emphasized that these preconditions act as stringent safeguards to protect the life and liberty of individuals. The court highlighted that the "reasons to believe" must be based on material in possession and must be recorded in writing, ensuring fairness, objectivity, and accountability.

2. Necessity and Need to Arrest under Section 19 of the PML Act:
The court examined whether the necessity to arrest is a separate ground to challenge the arrest under Section 19 of the PML Act. The 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 the necessity to arrest a person in the facts and circumstances of the case. The court noted that while the term "necessity to arrest" is not explicitly mentioned in Section 19, it has been given judicial recognition in cases like Arnesh Kumar v. State of Bihar, which lays down that the officer must consider the necessity to arrest before making an arrest. The court referred the matter to a larger bench to determine the parameters and facts to be considered while examining the necessity to arrest.

3. Judicial Review of the Arrest:
The court held 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 exercise of the power to arrest is not exempt from the scrutiny of courts, and the power of judicial review remains both before and after the filing of criminal proceedings/prosecution complaints. The court emphasized that the "reasons to believe" must be furnished to the arrestee to enable him to challenge the validity of the arrest. The court also noted that judicial review does not amount to a mini-trial or a merit review but is confined to ascertaining whether the "reasons to believe" are based on material that establishes the arrestee's guilt.

4. Interim Bail for the Appellant:
Given the fact that the right to life and liberty is sacrosanct, and the appellant had suffered incarceration of over 90 days, the court directed that the appellant may be released on interim bail on the same terms as imposed in the order dated 10.05.2024. The court left it to the larger bench to extend or recall the interim bail and determine any additional conditions.

Conclusion:
The court referred the matter to a larger bench for consideration of specific questions regarding the necessity to arrest and the parameters for judicial review. The appellant was granted interim bail pending the larger bench's decision. The observations made in the judgment were for deciding the present appeal and were not to be construed as findings on the merits of the case/allegations.