A Delhi Court, while discharging Arvind Kejriwal, Manish Sisodia and others in the excise policy case, criticised the ED for making arrests before the predicate offence is judicially tested. The Court warned that mechanical use of PMLA powers risks violating Article 21 and turning investigation into punishment.
A Delhi Court has raised serious concerns about the manner in which the Enforcement Directorate (ED) is exercising its powers under the Prevention of Money Laundering Act (PMLA). The Court observed that in many cases, arrests and prosecution complaints are being filed even before the facts of the related predicate (scheduled) offences are properly examined by a court of law.
The observations were made by Special Judge (PC Act) Jitendra Singh while passing an order discharging several accused persons, including former Delhi Chief Minister Arvind Kejriwal, former Deputy Chief Minister Manish Sisodia and Telangana Jagruthi President K Kavitha, in a money laundering case.
The Court explained that offences under the PMLA are based on the existence of “proceeds of crime” arising out of a scheduled offence. This means that unless the predicate offence stands on firm legal ground, the money laundering case itself cannot survive.
Despite this clear legal position, the Court noted that ED has often been invoking its powers of arrest and filing prosecution complaints even before the investigation into the main offence is completed or tested in court.
Referring to this trend, the Court said,
“Despite this settled legal position, the prevailing practice reveals a disturbing inversion of the statutory scheme, wherein coercive powers of arrest and prolonged custody are invoked even before the foundational facts relating to the scheduled offence are judicially tested. This results in a situation where an individual is deprived of personal liberty on the strength of an allegation whose legal sustainability remains uncertain and contingent upon a future outcome in a parallel investigation.”
The Judge pointed out that in several instances, proceedings under the PMLA move forward even when the investigation in the scheduled offence is still incomplete and no charge sheet has been filed.
The Court remarked that it had itself witnessed a case where arguments on charge in the money laundering matter had reached the final stage, while the investigation in the predicate offence was still ongoing to determine whether any offence had been committed at all.
Highlighting the seriousness of this “anomalous situation,” the Court stated that such a practice raises important constitutional concerns.
It underlined that the continuation of PMLA proceedings depends entirely on the survival of the scheduled offence. If the predicate offence fails, the money laundering case cannot stand.
The Court also emphasised the importance of Article 21 of the Constitution of India, which guarantees the right to life and personal liberty. It said that any deprivation of liberty must be just, fair and reasonable not only in form but also in substance.
In this context, the Court observed,
“A procedure which permits prolonged or indefinite incarceration on the basis of a provisional and untested allegation, while the very substratum of the offence remains under investigation, risks degenerating into a punitive process rather than a regulatory or investigative one. Liberty, once curtailed, cannot be meaningfully restored by a subsequent acquittal, nor can the passage of time compensate for the loss occasioned by unwarranted pre-trial detention.”
At the same time, the Court recognised that Parliament has given wide powers to the ED to tackle the serious problem of money laundering. These powers include attachment of properties, arrest of accused persons and filing of prosecution complaints.
The Judge acknowledged that money laundering is often transnational and carried out in a secretive manner, making investigation difficult. He observed that the object of the PMLA is legitimate and important.
However, the Court made it clear that even wide statutory powers cannot override constitutional safeguards. Stressing the need for caution in exercising arrest powers, the Judge stated,
“The exercise of such power must therefore be harmonised with the settled principle that arrest and prolonged incarceration are exceptions, and not the rule.”
Based on his judicial experience, the Court suggested that there is a need to evolve a balanced framework. Such a framework should ensure effective investigation of economic offences while also protecting the fundamental right to personal liberty.
The Court noted that while provisional attachment of alleged proceeds of crime may be justified to secure the subject matter of investigation, arrest and strict bail conditions should not be applied mechanically.
In this regard, the Court observed,
“While provisional attachment of alleged proceeds of crime may be justified to preserve the subject-matter of investigation, the coercive measure of arrest and the consequent application of onerous bail conditions cannot be permitted to operate mechanically in the absence of a crystallised and judicially cognisable predicate offence.”
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The Judge further remarked that the credibility and legitimacy of the PMLA framework depend not only on the strictness of its provisions but also on their fair and proportionate application in line with constitutional principles. Concluding with a strong note on constitutional balance, the Court said,
“The balance between the power of the investigating agency and the right to life and personal liberty is not a matter of legislative grace, but a constitutional command. Any failure to maintain this balance is likely to undermine both the rule of law and public confidence in the administration of criminal justice,”
it stressed.
Through these observations, the Delhi Court has reignited the debate on the balance between strong anti-money laundering enforcement and the protection of individual liberty, making it clear that constitutional safeguards must remain at the centre of criminal justice administration.
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