The Bombay High Court has clarified that the power of judicial review in a writ petition challenging an arrest under the Prevention of Money Laundering Act, 2002 (PMLA) must be exercised with caution, and a court will not interfere unless there is manifest arbitrariness or gross non-compliance with the statutory safeguards provided under Section 19 of the PMLA.
The Court explained that the offence of money laundering under Section 3 of the PMLA is an independent offence concerning the process or activity connected with the proceeds of crime. It is not a prerequisite for a person to be arraigned as an accused in the predicate scheduled offence to be prosecuted under the PMLA.
Accordingly, the High Court held that the ‘reasons to believe’ required for an arrest under Section 19(1) of the PMLA can be founded upon tangible material gathered during an investigation, such as the seizure of disproportionate assets and incriminating statements. The sufficiency or adequacy of such material is not to be scrutinized in-depth by a court at the initial stage of the investigation.
When the statutory procedure for arrest has been duly followed and the accused has been remanded to custody by a competent court, a belated challenge to the arrest in a writ petition may be construed as an attempt to circumvent the specific and stringent provisions for bail laid down in Section 45 of the PMLA, added the Court.
The Division Bench comprising the Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad observed that reiterated that the power of judicial review over an arrest under special statutes like the PMLA must be exercised cautiously and only in cases of manifest arbitrariness or gross non-compliance with statutory safeguards. The Bench found that the material gathered during the investigation was shared with the jurisdictional police under Section 66(2) of the PMLA, leading to the registration of the predicate offence, before the petitioner’s arrest. Also, upon arrest, the petitioner was informed of the grounds of arrest and reasons to believe under Section 19 of the PMLA, and was produced before the Special Court which remanded him to custody.
The Bench rejected the petitioner’s contention that the first four FIRs were unconnected to him and the fifth FIR under the Prevention of Corruption Act, 1988 (PC Act) was distinct. It observed that the investigation into the illegal constructions, related to the first four FIRs, revealed the petitioner’s role, leading to the search and seizure operations. Further, the recovery of unaccounted cash and jewellery provided a sufficient foundation for the Arresting Officer to believe the petitioner was prima facie guilty of money laundering.
The definition of ‘proceeds of crime’ under Section 2(1)(u) of the PMLA is expansive and includes property derived from any criminal activity relatable to a scheduled offence, which would cover the alleged bribes, added the Bench.
The Bench also dismissed the argument that the petitioner needed to be named as an accused in the first four FIRs for the PMLA to apply. It reiterated that the offence of money laundering under Section 3 of the PMLA is an independent offence. It is not linked to the date of the scheduled offence but to the date on which a person indulges in a process or activity connected with the proceeds of crime.
Moving ahead, the Bench found that the Directorate of Enforcement (ED) had sufficient tangible material to arrest the petitioner. The seizure of disproportionate assets, along with statements recorded under Section 50 of the PMLA, provided a credible basis for the ‘reasons to believe’ that the petitioner was involved in money laundering. Further, the fact that the petitioner cooperated with the investigation on twelve occasions was not a sufficient ground to declare the arrest illegal.
Lastly, the Bench noted that the petition was filed nearly four months after the arrest, following successive remand orders. Hence, the petition appeared to be an attempt to bypass the stringent statutory mechanism for bail governed by Section 45 of the PMLA.
Briefly, the petitioner was the Deputy Director of Town Planning at the Vasai-Virar City Municipal Corporation (VVCMC), having joined on 13th August 2010. Between 2019 and 2023, four FIRs were registered concerning the illegal construction of 41 buildings by developers using forged permissions on reserved lands. Following a High Court order, these 41 illegal buildings were demolished on 20th February 2025. Thereafter, on 21st February 2025, the Directorate of Enforcement (ED) registered an Enforcement Case Information Report (ECIR) based on three of these FIRs.
During the investigation, the ED conducted search and seizure operations at the petitioner’s residences, recovering unaccounted cash of Rs. 8.23 crores and diamond-studded jewellery valued at Rs. 23.28 crores. Based on this, the ED shared information with State authorities, leading to the registration of FIR against the petitioner under the Prevention of Corruption Act, 1988 (PC Act). This FIR was then added to the ECIR.
Resultantly, the petitioner was arrested by the ED under Section 19 of the Prevention of Money Laundering Act, 2002 (PMLA) and was subsequently remanded to judicial custody. Hence, the petitioner approached the High Court, seeking a declaration that his arrest was illegal and violated his fundamental rights, and prayed for his release.
Appearances:
Senior Advocate Vikas Pahwa, along with Advocates Kathyaeni Ramshetty, Hrishikesh Mundargi, Soma Srinath, Shashi Preetham, Riya Arora, and Pravada Raut, for the Petitioner
ASG Anil C. Singh, along with Advocates Chaitanya Pendse, Aditya Thakkar, Krishnakant Deshmukh, Rajdatta Nagre, Adarsh Vyas, Rama Gupta, and J.P. Yagnik, for the Respondents
