The story so far: A Delhi Court on Thursday extended the Enforcement Directorate’s (ED) custody of Delhi Chief Minister Arvind Kejriwal till April 1 in the money laundering case registered in connection with the Delhi Excise Policy issue. He was earlier remanded to the agency’s custody till March 28.
Mr Kejriwal was arrested on March 21, hours after his plea for interim protection from arrest was rejected by the Delhi High Court. This is the first instance of a Chief Minister in India being put behind bars while still in office.
Soon after his arrest, a plea was moved before the Supreme Court challenging the move. However, it was eventually withdrawn on the morning of March 22. On Wednesday, Justice Swarana Kanta Sharma of the Delhi High Court denied any interim relief to the Chief Minister after opining that the nature of the relief sought could not be granted without giving the ED an opportunity for effective representation, as that would amount to a violation of the principles of natural justice.
Accordingly, the Court granted the agency time till April 2 to respond to Mr. Kejriwal’s plea challenging his arrest as well as his application seeking interim relief, and posted the matter for further consideration on April 3.
ED’s allegations against the Chief Minister
The case arose from a report submitted by Delhi Chief Secretary Naresh Kumar to Lieutenant Governor (LG) Vinai Kumar Saxena in July 2022 alleging that there were procedural lapses in the formulation of the Delhi Excise Policy 2021-22, which came into force in November 2021 but was later scrapped in July 2022.
The Chief Secretary alleged that kickbacks received by the Aam Admi Party (AAP) leaders from operators of alcohol businesses for preferential treatment were used to “influence” the 2022 Assembly elections in Punjab and Goa. Subsequently, the ED claimed that the scam involved giving wholesale liquor businesses to private entities with a fixed margin of 12% for a 6% kickback.
Contending that Mr. Kejriwal was the “kingpin and key conspirator” of the scam, the central agency in its remand application said that the excise policy was drafted “considering the favours to be granted to the South Group” — a group of influential persons from South India who purportedly secured undue favours to establish wholesale businesses and paid the political party Rs. 100 crore in return. On March 15, K Kavitha, Bharat Rashtra Samithi (BRS) leader and daughter of former Telangana Chief Minister K Chandrasekhar Rao, was arrested for allegedly being part of this group. After her arrest, the ED for the first time alleged that Mr. Kejriwal was also a conspirator in the case.
Others accused in the case include Raghav Magunta, Ongole MP Magunta Srinivasulu Reddy’s son, and P Sarath Chandra Reddy, the son of P.V .Ramprasad Reddy and co-founder of Hyderabad-based Aurobindo Pharma. Both later turned approvers in the case.
Appearing for the ED, Additional Solicitor General (ASG) S.V. Raju argued during the remand hearing that the Chief Minister had been arrested because of “both individual and vicarious liability.” “AAP is a beneficiary which exists as a company. Every person responsible for the conduct of the company is responsible… apart from being liable as an individual, the CM is also vicariously liable (as the national convenor of the party),” he elucidated further. It was further alleged that proceeds of about Rs. 45 crores received from the South group were used by AAP election campaigning in Goa.
Kejriwal’s defense
During the proceedings before the High Court, senior advocate Abhishek Manu Singhvi, appearing for Mr. Kejriwal, contended that his arrest was solely based on the statements made by accused persons who later turned approvers in the case. He further underscored that the ED had failed to rely on any independent evidence to corroborate these statements, as required by law.
Comparing such approvers to a “Trojan horse” and an “untrustworthy friend,” Mr. Singhvi pointed out that the accused persons succeeded in securing bail only after turning approvers. “This has happened in every case in the liquor policy case. It is blowing to smithereens the constitutional safeguards,” he alleged.
Pointing out the context in which statements were extracted out of Sarath Chandra Reddy as an approver, the senior counsel remarked, “There are two statements which are not against me. Now comes the statement after arrest. He continues to maintain his stance (which is) not against me in nine statements. These nine statements are not out in six of the prosecution complaints. It is suppressed and they are making a mockery of the procedure. He then starts singing.. eighteen months later. Then nine days after the statement against me, he gets bail on medical grounds and twenty days later he gets pardoned.”
Similarly, it was alleged that Raghav Magunta was granted bail only after his father gave statements to the ED incriminating the Chief Minister.
Notably, Mr. Kejriwal while personally arguing his case before Delhi’s Rouse Avenue court on Wednesday, alleged that the ED was running an extortion racket in the name of investigation. He pointed out that a firm named in the alleged scam had donated money to the ruling BJP, after which its owners managed to secure bail.
“Sarath Reddy [director of Aurobindo Pharma] has donated ₹55 crore to the BJP. I have proof that it’s an extortion racket,” he said. Data divulged by the Election Commission revealed that Aurobindo Pharma Limited, which has Mr .Reddy as one of its directors, donated ₹5 crore to the BJP in 2022 through the now invalidated electoral bonds scheme, just five days after he was taken into custody. Another ₹25 crore was donated to the BJP after Mr. Reddy turned approver in the case.
Legal issues in focus
Impleading AAP as an accused
The ED’s claim that Mr. Kejriwal is “vicariously liable” for the offence of money laundering could result in AAP being subsequently impleaded as an accused in the case. In such a scenario, the ED could have the political party’s assets attached or confiscated as per the provisions of the Prevention of Money Laundering Act, 2002 (PMLA).
Vicarious liability is a legal principle that holds a person or entity responsible for the actions of others. It is based on the concept of agency that presumes that a person or entity has been authorised to act on behalf of another person or entity.
Also Read: The despotic nature of the PMLA
ASG SV Raju’s argument stems from Mr Kejriwal’s role as the Chief Minister in the formulation of the liquor excise policy that purportedly generated “tainted funds” as proceeds of the crime. Further, his role as the convenor of AAP has been cited to explain his knowing participation in the alleged use of this laundered money in the Punjab and Goa Assembly elections. Similar arguments were raised during the bail hearings of former Delhi Deputy Chief Minister Manish Sisodia who is an accused in the case and is currently under judicial custody.
Section 70 of the PMLA that is often invoked to investigate companies stipulates that when an offence of money laundering is committed by a company, each individual who at the time of crime was in charge or responsible, being a part of the entity conducting business, “shall be deemed guilty of the contravention and shall be liable to be proceeded against and punished accordingly.” However, a person will not be prosecuted if they can prove that the contravention took place without their knowledge or that they had exercised all due diligence to prevent such contravention. Further, Explanation 2 of the provision clarifies that a company is a separate legal entity and can be prosecuted independently of its members or those who operate it.
Notably, the provision contains a crucial explanation that could bring a “political party” under the ambit of the anti-money laundering law by deeming it to be a “company” incorporated under the Companies Act, 2013. Explanation 1 defines “company” to mean “any body corporate and includes a firm or other association of individuals.”
Since Section 29A of the Representation of the People Act, 1951, refers to a political party as “any association or body of individual citizens of India” — the phrase “association of individuals” under Section 70 of the PMLA could include within its ambit a political party. If AAP is named as an accused in the case, it will be the first instance of a political party being brought under the ambit of the PMLA on charges of money laundering.
Reliance on approver’s testimony
An approver is an accomplice who is directly or indirectly involved in the commission of an offence and has been granted a pardon by the court under Section 306 of the Code of Criminal Procedure, 1973, (CrPC) with a view to securing his testimony against other persons guilty of the offence. Once an accomplice turns into an approver, he acquires the status of a prosecution witness.
But an approver who deposes falsely can be tried again for the offence for which a pardon was granted as per Section 308 of the CrPC. Courts over time have however warned that the testimony of an approver must be relied upon with utmost caution since it is prima facie of a tainted character. Additionally, illustration (b) of Section 114 of the Indian Evidence Act, 1872, stipulates that the court will presume that the testimony of an accomplice is unworthy of credit unless it is corroborated by material particulars.
In Mrinal Das and Ors. v. State of Tripura (2011), the Supreme Court ruled that it would be risky to base the conviction of an accused solely on the uncorroborated testimony of an approver. Thus, to ensure that he is a reliable witness, an approver’s testimony must be accompanied by independent corroborative evidence.
Elucidating further on the threshold of corroborative evidence required in such cases, the top Court relied on Sheshanna Bhumanna Yadav v. State of Maharashtra (1970) wherein it was held, “Corroboration must connect or tend to connect the accused with the crime. When it is said that the corroborative evidence must implicate the accused in material particulars it means that it is not enough that a piece of evidence tends to confirm the truth of a part of the testimony to be corroborated. That evidence must confirm that part of the testimony which suggests that the crime was committed by the accused. If a witness says that the accused and he stole the sheep and he put the skins in a certain place, the discovery of the skins in that place would not corroborate the evidence of the witness as against the accused. But if the skins were found in the accused’s house, this would corroborate because it would tend to confirm the statement that the accused had some hand in the theft.”
Whether money-laundering is a standalone offence?
While seeking Mr. Kejriwal’s remand, ASG SV Raju argued before a Delhi Court on March 22 that “one need not be an accused in the predicate offence to be an accused under PMLA.” The essence of such an argument is that even if the Chief Minister has not been arrayed as an accused in the primary case, i.e. the Delhi excise policy case, he can be booked for the offence of money laundering with respect to the “proceeds of crime” derived from the case. This brings to the fore the debate whether money laundering is a standalone offence or if it is extrinsically linked to a larger predicate offence.
The PMLA contains a list of scheduled offences which are also called predicate offences. In this case, the predicate offence that Mr. Kejriwal is to be tied to would be under the Prevention of Corruption Act, 1988. However, last year a Supreme Court bench of Justices Abhay Oka and Pankaj Mitha clarified in Pavana Dibbur v. Enforcement Directorate that an accused in a PMLA case, who becomes involved after the commission of the scheduled offence by assisting in the concealment or use of proceeds of crime, need not be an accused in the scheduled offence. The only requirement is that the the proceeds of crime that the accused has allegedly concealed or possessed must simply be linked to the scheduled offence.
In this case, only after the conclusion of the trial in the excise scam can it be determined if Mr. Kejriwal has laundered the money that forms the proceeds of the crime.
Editorial | AAP trap: On Arvind Kejriwal’s arrest
Is non-cooperation with ED summons a ground for arrest?
Mr. Singhvi contended during the proceedings that an arrest cannot be based on non-cooperation with the probe agency since it will be hit by the fundamental right against self-incrimination. Prior to being taken into custody, Mr. Kejriwal had ignored nine summons issued by the ED claiming that they are illegal.
Last year, a Supreme Court bench of Justices A.S. Bopanna and PV Sanjay Kumar in Pankaj Bansal v. Union of India underscored that a person cannot be arrested by the ED for mere non-cooperation in response to summons issued under Section 50 of the PMLA. Addressing contentions of the ED that the responses given by the accused were “evasive” in nature, the Court pointed out, “In any event, it is not open to the ED to expect an admission of guilt from the person summoned for interrogation and assert that anything short of such admission would be an ‘evasive reply.”
