Arrest under Money Laundering Act : judicial review is limited to legality and procedural propriety, not merits of evidence

Chhattisgarh High Court Upholds Enforcement Directorate’s Arrest in Liquor Scam Money Laundering Case, Emphasizes Judicial Review Limits. Court stresses strict compliance with PMLA’s arrest safeguards while dismissing plea challenging arrest’s timing and procedural aspects, affirming ongoing investigation’s legitimacy.

In a significant ruling dated October 17, 2025, the Chhattisgarh High Court, presided over by Justice Arvind Kumar Verma, dismissed a petition filed by Chaitanya Baghel challenging his arrest by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA). The arrest was connected to a high-profile investigation into a liquor scam in Chhattisgarh.

The petitioner contended that his arrest on July 18, 2025, was illegal and arbitrary, citing a lack of “necessity and need” for custodial detention. He argued that despite an extensive investigation spanning over three years, no summons under Section 50 of the PMLA had ever been served to him, and that the ED had possessed all incriminating materials well before the arrest. The petitioner also alleged malafide conduct by the ED, pointing to a four-month delay between the ED’s search and the eventual arrest without disclosure of any fresh material, and questioned the validity of the remand orders passed by the Special Court.

Justice Verma meticulously examined the submissions, citing a broad spectrum of Supreme Court precedents including the landmark judgments in Arvind Kejriwal v. Directorate of Enforcement (2025), Pankaj Bansal v. Union of India (2024), and Vijay Madanlal Choudhary v. Union of India (2023). These precedents emphasize that while the power to arrest under Section 19 of the PMLA is discretionary and contingent upon “reason to believe” grounded in material possession, judicial review is circumscribed and does not extend to re-evaluation of evidentiary sufficiency. The court underscored that “reason to believe” must be recorded in writing, and the accused must be informed of the grounds of arrest promptly.

The Court acknowledged the petitioner’s argument regarding the absence of summons under Section 50 but clarified that issuance of such summons is not a precondition for arrest under Section 19 of the PMLA. The Court further noted that non-cooperation with investigation alone is insufficient to justify arrest, but can form part of the grounds alongside other incriminating evidence.

Addressing the alleged delay in arrest, the Court observed that the four-month gap between the ED’s search and the arrest does not, in itself, indicate malafides, especially when fresh developments and analysis post-search justified the action. The Court rejected the petitioner’s contention that the ED’s failure to arrest a co-accused absconder-despite a permanent warrant-demonstrates improper selective prosecution, stating that such irregularity does not vitiate the proceedings against the petitioner.

Significantly, the Court reaffirmed that the power to arrest is an investigative tool integral to the inquiry process under the PMLA and clarified that further investigation after filing a complaint is permissible, subject to judicial oversight as per Section 44 of the PMLA and relevant Supreme Court rulings. The Court also highlighted that trial commences only after framing of charges, reinforcing the authority’s right to conduct ongoing investigations.

On the procedural front, the Court found that the grounds of arrest, while brief, adequately referred to the necessity of arrest to prevent destruction of evidence, influence on witnesses, and tracing proceeds of crime-objectives aligned with the statutory safeguards. The remand orders were found reasoned and reflected proper judicial application of mind, thus insulating the arrest from retrospective invalidation under Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

The judgment clarified the limited scope of judicial interference at the arrest stage, emphasizing that only patent illegality, procedural non-compliance, or malafide exercise of powers warrant quashing. The petitioner was thus advised to seek regular bail through appropriate channels, complying with the twin conditions under Section 45 of the PMLA.

This ruling represents a nuanced balancing act between protecting individual liberty and empowering investigating agencies to combat complex financial crimes. It reiterates the importance of adhering to statutory safeguards while recognizing the practical necessities of investigation in special statutes like the PMLA.

Bottom Line:

Arrest under Section 19(1) of the Prevention of Money Laundering Act (PMLA) must be based on recorded "reasons to believe" founded on admissible material, with necessity and procedural safeguards strictly complied with; judicial review of such arrest is limited to legality and procedural propriety, not merits of evidence.

Statutory provision(s):  Section 19 of the Prevention of Money Laundering Act, 2002; Section 50 of the Prevention of Money Laundering Act, 2002; Section 44 of the Prevention of Money Laundering Act, 2002; Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023; Sections 200-204 of the Code of Criminal Procedure, 1973; Section 45 of the Prevention of Money Laundering Act, 2002; Article 21 and Article 22(1) of the Constitution of India.

Chaitanya Baghel v. Directorate of Enforcement, GOI, (Chhattisgarh) : Law Finder Doc Id # 2797184