What does the interim bail in the ED case mean for Arvind Kejriwal?

It is a shot in the arm for Kejriwal and AAP. A trial court had granted regular bail to Kejriwal in the same case but the Delhi High Court had stayed the order. However, Kejriwal will remain in jail for now, since he is also under arrest in the Central Bureau of Investigation’s (CBI’s) case in the same alleged scam.

A special CBI court is likely to hear that case on July 17. What happens then will dictate when he can be released from custody. The bar for bail in a CBI case is lower compared to an ED case.

On what grounds has the SC granted Kejriwal interim bail now?

The SC did not really make a finding on whether Kejriwal’s arrest was legal or not — but it did find sufficient grounds to question how the ED uses its power to arrest. This issue required “in-depth consideration” by a larger Bench, the court said.

Therefore, until the larger Bench decides this question, Kejriwal who “has suffered incarceration of over 90 days”, must be released on bail, the court said.

In 2022, a three-judge Bench headed by Justice AM Khanwilkar (now retired) in Vijay Madanlal Choudhary v Union of India had upheld the PMLA and virtually all of the ED’s powers, including its power to arrest. However, the ruling did not specifically address the principles on the necessity to arrest. A Bench of five judges will now have to hear the issue.

What is the Enforcement Directorate’s power to arrest under the PMLA?

The SC’s ruling on Friday is essentially on the ambit of Section 19 of the PMLA, the provision in the law from which the ED draws its power to arrest.

Section 19(1) reads: “If [the authorised officer]…has on the basis of material in his possession, reason to believe (that reason for such belief to be recorded in writing) that any person has been guilty of an offense punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.”

The benchmark for arrest that can be distilled from this provision is that the ED officer must, from the “material in his possession”, have “reason to believe” that the accused is “guilty” of the offense — and then record his reasons and share them with the accused at the time of arrest.

These words are crucial since the PMLA is a departure from ordinary criminal law. While the threshold in ordinary law is far lower, getting bail is also not as difficult. Under Section 41 the Code of Criminal Procedure (CrPC), police can arrest a person without a warrant when a “reasonable suspicion exists” that the person has committed a cognizable (serious) offense.

The bar for bail under PMLA, which imposes a reverse burden of proof — which means that instead of the prosecution having to prove their accusation, it is the accused who must prove their innocence — too, is different from ordinary criminal law.

Under PMLA, the test for bail is a prima facie finding by the court that the accused is not guilty. In Vijay Madanlal, one of the grounds on which the SC upheld the stringent bail provisions was that the power to arrest is also narrow compared to ordinary law.

So what was Kejriwal’s case?

Kejriwal’s case was essentially that the ED had “no necessity to arrest him” on March 21. His lawyers argued that the ED’s “reasons to believe” selectively refer to the implicating material, and ignore the exculpatory material.

Kejriwal’s lawyers argued that the ECIR (Enforcement Case Investigation Report, akin to an FIR) was registered in August 2022, and the material that the ED relied on for the arrest was available to it by July 2023 — but the arrest finally happened in March 2024. The ED’s “material” was basically the statements of approvers, and Kejriwal argued that the agency relied upon only those statements in which he was named.

The legality of arrest is not just a technical aspect. Since stringent laws such as the PMLA and the Unlawful Activities Prevention Act (UAPA) impose a high bar for bail, the procedural safeguards become the test against arbitrary arrest. Since getting bail is so difficult, due process requires the agency to scrupulously follow the rigors of the law in arresting an individual.

And what did the court find?

The court has a primary finding on how it interprets the words “reasons to believe”. Since Section 19 states the “reasons to believe” must be to establish a finding of “guilt” and nothing less, the SC held that the ED must have a higher bar for what it considers reason to believe. Essentially, the reason must virtually be “evidence admissible in court”, because that is what is needed to establish guilt — and not just a subjective finding of the ED.

“DoE (ED) has drawn our attention to the use of the expression ‘material in possession’ in Section 19(1) of the PML Act instead of ‘evidence in possession’. Although etymologically correct, this argument overlooks the requirement that the designated officer should and must, based on the material, reach and form an opinion that the arrestee is guilty of the offense under the PML Act. Guilt can only be established on admissible evidence to be led before the court, and cannot be based on inadmissible evidence,” the SC said.

“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,” it said.

What is the upshot of the ruling?

Although the issue has to be debated before a larger Bench, Friday’s ruling essentially restricts the ED’s scope for arrest. The criticism that the ED has over the years used its powers arbitrarily, and that jail under PMLA means bail is virtually impossible, will now face fresh judicial scrutiny.

“The language of Section 19(1) is clear, and should not be disregarded to defeat the legislative intent — to provide stringent safeguards against pre-trial arrest during pending investigations. Framing of the charge and putting the accused on trial cannot be equated with the power to arrest. A person may face the charge and trial even when he is on bail,” the court said.