Kejriwal case: Supreme Court bail order shakes ED’s ground but leaves Delhi CM hanging

AAP leader gets interim bail, but court punts on core issues of arrest necessity and agency discretion to larger bench.

Delhi Chief Minister Arvind Kejriwal addresses supporters and members of the Aam Aadmi Party (AAP) at the party’s headquarters in New Delhi on June 2, 2024. | Photo Credit: ANUSHREE FADNAVIS/REUTERS

On July 12, the Supreme Court’s division bench of Justices Sanjiv Khanna and Dipankar Datta granted interim bail to Delhi Chief Minister Arvind Kejriwal in the liquor scam money laundering case. The ruling raises questions about whether the court could have granted the same relief earlier by separating it from the complex issue of his arrest’s legality, now referred to a larger bench for adjudication.

The Enforcement Directorate (ED) arrested Kejriwal on March 21. The Supreme Court first granted him interim bail on May 10 for Lok Sabha election campaigning, directing him to surrender on June 2. The Court refused to extend his bail even for a week for medical reasons.

The July 12 interim bail, granted belatedly, imposed unreasonable conditions on the Delhi Chief Minister, preventing him from attending his office and signing official files. This decision came despite the bench’s admission that it was doubtful whether it could direct Kejriwal to step down from office in exchange for interim bail. The bench has referred the question of what conditions can be imposed in such cases to a larger bench.

The bench had reserved its judgment on May 17. While the bench needed time to deliver the judgment, the Centre seemingly sought to ensure Kejriwal couldn’t use other legal remedies in the meantime.

The Supreme Court case was a result of Kejriwal’s appeal against the Delhi High Court’s April 9 dismissal of his challenge to the ED’s arrest legality. On June 20, the trial court granted him bail, citing the ED’s failure to provide direct evidence against him regarding proceeds of crime. The ED alleged that the Delhi excise policy for liquor sales was a product of criminal conspiracy, involving a cartel of liquor manufacturers, wholesalers, and retailers. The ED claimed this provided undue pecuniary gain to public servants and other accused, resulting in huge losses to the government exchequer and the public. Kejriwal was not named in the ED’s previous chargesheets but was included as an accused in its seventh supplementary complaint on May 17.

The ED alleges Kejriwal demanded Rs. 100 crore, of which Rs. 40 crore funded his party’s Goa Assembly election campaign. The ED registered its complaint in August 2022 but arrested Kejriwal only one and a half years later, on the eve of the general elections.

The trial court’s grant of bail to Kejriwal was immediately stayed by the Delhi High Court. The High Court cited the ED’s insufficient time to present its case and the trial court’s disregard of the April 9 judgment dismissing Kejriwal’s challenge to his arrest’s legality. The High Court noted that the Supreme Court, while hearing Kejriwal’s appeal against the April 9 judgment, did not stay it.

As Kejriwal’s legal team prepared to challenge the Delhi High Court’s stay in the Supreme Court, the Central Bureau of Investigation (CBI) arrested him under the Prevention of Corruption Act for the same case. The Supreme Court expressed reservations about the High Court’s stay, but Kejriwal withdrew his appeal to pursue other legal remedies. Meanwhile, the ED filed a supplementary complaint naming Kejriwal and the Aam Aadmi Party as accused, which the trial court took cognizance of.

The July 12 verdict should be seen as a setback to the ED, as it raised serious questions about Kejriwal’s arrest’s legality. Although the verdict didn’t provide full relief to Kejriwal, it cast doubt on the ED’s credibility, potentially aiding his future legal battles.

The key issue

Kejriwal challenged his arrest’s legality, citing violation of Section 19 of the Prevention of Money Laundering Act, 2002. This provision requires an authorised officer to have material evidence and written reasons to believe the accused is guilty. It also mandates promptly informing the arrested person of the “grounds of arrest.”

The July 12 verdict states that these safeguards ensure fairness, objectivity, and accountability in forming an opinion about the accused’s involvement in money laundering.

The Supreme Court rejected the ED’s argument that judicial scrutiny is impermissible and that the competent officer’s subjective opinion should prevail. The verdict affirmed that judicial review remains applicable both before and after filing criminal proceedings or prosecution complaints.

Supreme Court lawyer Shadan Farasat, representing Delhi Chief Minister Arvind Kejriwal, speaks to the media on the Court granting interim bail to the CM in the ED matter of Excise Policy case, at the court premises, in New Delhi on July 12, 2024. | Photo Credit: ANI

The July 12 verdict rejected the ED’s claim that the accused can be denied a copy of the “reasons to believe”, which could enable challenging the arrest’s validity. Judicial review is limited to determining whether the “reasons to believe” are based on material that “establishes” the arrestee’s guilt under the PMLA. The verdict underlined that arrest must be based on valid “reasons to believe”.

The bench ruled that an officer acting under Section 19(1) of the PMLA cannot ignore exonerating material or selectively choose evidence implicating the person to be arrested. Kejriwal argued that the statements relied upon by the ED were coerced. The bench, however, couldn’t set aside the “reasons to believe” on this ground due to the ED’s contestation.

Kejriwal also contended that the “reasons to believe” didn’t mention the “necessity to arrest”, a concept recognised by the Supreme Court in Arnesh Kumar vs State of Bihar (2014). He argued there was no necessity to arrest him on March 21. The bench found merit in this argument and questioned whether the ED has a policy on when to arrest someone under the PMLA. The ED should act uniformly, consistent in conduct, confirming one rule for all accused, the bench held.

Despite its clear stance, the bench referred the question of whether “need and necessity to arrest” is a separate ground to challenge arrest under Section 19(1) of the PMLA to a larger bench. Noting Kejriwal’s 90-day incarceration and the need for in-depth consideration of the referred questions, the bench released him on interim bail with certain conditions. It left the decision to step down as Chief Minister to Kejriwal, while agreeing with many of his legal arguments against his arrest.

The bench justified referring the case to a larger Constitution bench because a 2022 three-judge bench in Vijay Madanlal Choudhary vs Union of India didn’t establish a substantive threshold test on the “necessity to arrest,” addressing the question only in a limited way. However, it’s debatable whether this alone warranted referral to a five-judge Constitution Bench. The two-judge bench could have proposed such a test in its July 12 verdict, consistent with previous court rulings.

V. Venkatesan is an independent legal journalist based in New Delhi. Formerly Senior Associate Editor with Frontline, he has been reporting and commenting on legal issues.