Referring to ED case against Kejriwal, why a Mumbai trial court released an accused in a PMLA case

What are the ED’s “reasons to believe”?

Section 19 of the stringent Prevention of Money Laundering Act (PMLA) states that an ED officer, to make an arrest, must record his “reason to believe” based on the “material on record” that the accused is guilty of an offence under the PMLA. The provision also states that after the arrest, “as soon as maybe [possible], inform him of the grounds for such arrest.”

These phrases and their precise meanings are crucial since the stringent framework of the PMLA makes grant of bail virtually impossible. A high threshold for bail, then, must be justified in scrupulously following the law while arresting an accused individual.

Section 45 of the PMLA bars courts from granting bail to an accused unless the court is satisfied that the accused is “not guilty” of the offence. Since this is a high bar for an accused to prove innocence even before a trial has begun, challenging the validity of an arrest itself is another legal route for ensuring release of the accused.

What did the SC rule in Kejriwal’s case?

On July 12, when the SC granted bail to Kejriwal, it raised larger concerns over the ED’s power to arrest. Kejriwal, challenging the legality of his arrest, argued that the ED had no sufficient grounds to arrest him. Essentially, this means challenging the ED’s “reasons to believe” that Kejriwal was guilty of money laundering, and is liable to be arrested.

“Arrest, after all, cannot be made arbitrarily and on the whims and fancies of the authorities. It is to be made on the basis of the valid ‘reasons to believe’, meeting the parameters prescribed by the law. 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,” the SC had said.

While the ED argued that this is part of internal communication and cannot be scrutinised by court, the SC said that there can be a judicial review of whether an arrest was in accordance with law.

As a corollary, if an accused has to challenge his arrest, then obtaining the “reasons to believe” in writing would be crucial. This document, so far, has only been part of the official record but not shared mandatorily with the accused. The SC said that “it is difficult to accept that the ‘reasons to believe’, as recorded in writing, are not to be furnished.”

While sharing the grounds for arrest with the accused in writing was made mandatory by a SC ruling in 2023, the mandate to also share the “reasons to believe” raises the bar for the agency to justify an arrest.

What are the grounds of arrest for an accused?

In 2023, in Pankaj Bansal vs Union of India, the SC ruled that disclosing the “grounds of arrest” to an accused, in writing, at the time of his arrest was mandatory.

Section 19 of the PMLA includes this requirement too. While the requirement could seem to merely be procedural but given that the stakes really go up for the agency after arrest, the SC said that it is critical that the grounds of arrest be shared within 24 hours of arrest. Usually, this is when a person is produced before a magistrate for remand (to direct him to formal custody of police or the judiciary).

The SC has extended this procedural shield even to the stringent anti-terror law — the Unlawful Activities Prevention Act, 1967. In May, the SC invalidated the arrest of NewsClick founder Prabir Purkayastha on the grounds that the Delhi Police failed to inform him of the grounds of his arrest before taking him into custody.

What is the significance of the trial court ruling?

These procedural safeguards emphasise due process and guard against arbitrary action by the state. These rulings are also significant since they mark a small but crucial retreat from the 2022 landmark Supreme Court ruling in Vijay Madanlal Chaudhary vs Union of India. This ruling upheld the constitutional validity of PMLA and reinforced its wide, sweeping powers.

The ruling had said that even the Enforcement Case Information Report (ECIR), akin to a First Information Report (FIR) is an internal document and it is not necessary to provide it to the accused.