Scrutiny of Bail Procedures in the Arvind Kejriwal Case

Prefatory Note

The Delhi High Court delivered a landmark ruling in the case of Directorate of Enforcement v. Arvind Kejriwal[i]. This decision addresses significant legal questions surrounding the Prevention of Money-Laundering Act, 2002 (‘PMLA’) and procedural issues pertinent to the grant of bail. The petitioner, the Directorate of Enforcement (‘ED’), challenged the bail granted to the respondent, Arvind Kejriwal, by the Vacation Judge of the Special Court, asserting procedural lapses and misapplication of legal standards.

Factual Background

• The case originated with an FIR registered by the Central Bureau of Investigation (‘CBI’) on 17.08.2022 against Manish Sisodia, the Deputy Chief Minister of GNCTD, and others for alleged irregularities in the formulation and implementation of the Excise Policy 2021-22.

• Following this, the ED lodged the ECIR and initiated an investigation on 22.08.2022 under the PMLA to trace the proceeds of the crime.

• Thereafter, the CBI filed a chargesheet, and the ED filed prosecution complaints along with several supplementary ones.

• The ED issued 9 summonses to Mr. Arvind Kejriwal (‘Respondent’). However, he did not appear before the ED. Subsequent legal proceedings saw the Respondent challenging various orders, and the summons issued under s. 50 of the PMLA. However, no interim relief was granted, leading to his arrest on 21.03.2024 by the ED under s. 19 of the PMLA for the purpose of further investigation.

• Upon his arrest, the ED initially moved to the Supreme Court to challenge the Respondent’s arrest. The court dismissed the petition as withdrawn, giving the ED the liberty to raise all such contentions before the Trial Court during remand proceedings.

• Another writ was filed before the Delhi High Court and was rejected. On appeal against the same, the ED moved the Supreme Court, wherein he was granted interim bail from 10.05.2024 till 01.06.2024 on account of Lok Sabha election campaigning.

• Thereafter, the Respondent filed interim and regular bail applications before the special judge. In the said case, the Vacation Bench granted bail to the Respondent vide order dated 20.06.2024, prompting the ED to file the present petition for cancellation of the bail by grant of stay against the order of the Vacation Bench.

Issue

Whether the bail granted to the Respondent by the Vacation Judge was tenable, given the procedural and substantive legal requirements under the PMLA?

Held

• The High Court allowed the ED's application and granted a stay on the order of the vacation bench that granted bail to the Respondent.

• It was observed that although the Supreme Court granted the interim bail, it was only on the account of the Lok Sabha Elections and not on the basis of merit.

• The Court underscored the paramount importance of considering all relevant materials in such cases, did not appreciate the submissions made by the ED and that the grounds raised under s. 439(2) of the Criminal Procedure Code, 1973 (CrPC) needed serious consideration, which could not have been summarily decided. Thus, upon reviewing the detailed arguments and the legal principles involved, the Delhi High Court identified several critical lapses in the Vacation Judge’s order

• Firstly, the Vacation Judge’s acknowledgement of not being able to thoroughly examine the voluminous documents submitted by both parties before passing the order raises concerns about the comprehensiveness and fairness of the decision-making process. The Court underscored the importance of considering all relevant materials in such cases.

• Secondly, the High Court found merit in the ED’s argument that the Vacation Judge did not fully adhere to the twin conditions mandated by s. 45 of the PMLA.

• Thirdly, the High Court noted discrepancies in the timeline and factual assertions made by the Vacation Judge, particularly regarding ED's alleged mala fide actions. The earlier observations of the Supreme Court, which found no mala fide intent on the part of the ED, were not appropriately considered, indicating a lack of judicial discipline.

• Lastly, the High Court highlighted the importance of giving the ED a fair opportunity to present its case, which was seemingly denied, thus contravening principles of natural justice. The procedural irregularities, coupled with substantive legal oversights, led the High Court to scrutinise the validity of the bail order.

Our Analysis

The judgment scrutinises whether the trial court adhered to the mandatory conditions while granting bail. A significant aspect of the judgment was examining the conditions under which bail was granted. The court critiqued the lower court’s failure to address the satisfaction of the twin conditions of s explicitly. 45 of the PMLA.

The judgment sets a precedent for the rigorous application of s. 45 conditions, reinforcing lower courts' need to follow judicial discipline and established legal procedures. This serves as a critical reference for future cases involving the grant of bail under PMLA, highlighting that the courts must evaluate the conditions of bail, considering the gravity of money laundering offences and the potential for misuse of bail provisions.

Therefore, while the respondent's personal liberty is crucial, procedural integrity and adherence to statutory requirements under the PMLA are equally vital to ensure justice. The Delhi High Court analysed the need for a judicial approach in cases involving complex economic offences, balancing individual rights with broader societal interests.

End Note

[i] [2024] 163 taxmann.com 723 (Delhi)[25-06-2024].

Authored by Sanyam Aggarwal, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.