Political Party Can Be Brought Under PMLA, Kejriwal Would Be Liable For Affairs Of AAP Under Section 70(1): Delhi High Court

While dismissing the plea moved by Delhi Chief Minister Arvind Kejriwal challenging his arrest in the liquor policy case, the Delhi High Court on Tuesday said that a political party can be brought within the purview of Prevention of Money Laundering Act, 2002.

Justice Swarana Kanta Sharma made the observation while analyzing Section 70 of PMLA (offences by companies) and Section 2(f) (political party) and 29A (Registration with the Election Commission of associations and bodies as political parties) of the Representation of Peoples Act, 1951.

“After examining the definitions mentioned above, this Court is of the opinion that the definition of 'political party' as per Section 2(f) of the Representation of Peoples Act is that a political party means an 'association or body of individuals'. As per Explanation-1 of Section 70 of PMLA, a 'company' also means an 'association of individuals',” the court said.

Definition of Political Party and Applicability of Section 70 of PMLA

The court observed that the material put forth by the Enforcement Directorate (ED) prima-facie make it clear that Kejriwal is in charge of and responsible for the conduct of the business of Aam Aadmi Party, and prima facie would be liable for affairs of the political party so as to attract Section 70(1) of PMLA.

The court upheld the arrest of Kejriwal, who is presently in judicial custody in the money laundering case.

ED had contended that Kejriwal was, at the time of commission of offence under PMLA, incharge of and responsible for the “company” (Aam Aadmi Party) and thus, as per Section 70(1) of PMLA, he shall be deemed to be guilty of offences punishable under Section 4 of the enactment.

The central probe agency contended that Kejriwal was intrinsically involved in the entire conspiracy of the excise policy scam and that the proceeds of crime were used in the election campaign of Aam Aadmi Party for Goa Assembly elections, and that everything was not only done with his knowledge but also with his active collusion.

Observing that it is a matter of arguments and trial which may be taken up at the time of framing of charge or any other appropriate stage, Justice Sharma said:

“This Court notes that there is sufficient material on record with regard to Sh. Kejriwal being the National Convenor of the Aam Aadmi Party, and in view of the statement of Sh. N.D. Gupta recorded on 16.11.2023, and other sufficient material on record in light of statements of the Hawala operators and the statement of one of the Aam Aadmi Party candidates 'X' who has contested the Goa elections in the relevant year, recorded under Section 50 of PMLA which specifically refers to him, that he had ensured that funds for expenditure during Goa Elections 2022 for his constituency is made available, and similarly for other constituencies also,” the court said.

While holding that Kejriwal would be liable for the affairs of Aam Aadmi Party to attract Section 70(1) of PMLA, the court however said that as per the proviso of the provision, Kejriwal will have the right to prove, at the appropriate stage, that he did not have any knowledge of the contravention of provisions of PMLA committed by his party or that he had exercised due diligence to prevent the same.

Replying to Summons issued under Section 50 of PMLA cannot amount to Joining Investigation

Justice Sharma rejected Kejriwal's submission that there was no non-compliance on behalf of Kejriwal since he had replied to all nine summons issued to him by ED.

The court said that replying to summons is not equivalent to joining investigation under Section 50 of PMLA as there is no procedure prescribed that replying to a summon will suffice joining an investigation or any other proceeding.

“Further, replying to summons in this case cannot be equated with joining of investigation as the replies sent by Sh. Kejriwal were counter questioning the investigating agency about its intent and authority to summon him to join investigation of a pending case, which could not have been done by way of a reply but only through the order of a court of law,” the court said.

Repeated non compliance of summons by Kejriwal a contributing factor in his arrest

The court held that repeated non-compliance of summons by Kejriwal for over 6 months was a contributing factor in his arrest and that ED had no other option but to seek his custody through remand to make him join probe.

It said that Kejriwal was not summoned for the first time after General Elections were declared or the MCC came into existence, but he was first summoned in October, 2023.

The court observed that it was Kejriwal himself who had chosen not to join the investigation, but had sent replies to all the summons.

It said that there was nothing that barred ED to have searched Kejriwal's residence and to have arrested him when he was not joining investigation since October 2023 despite being given repeated opportunities.

Furthermore, the court said that there was nothing to conclude that the timing of Arvind Kejriwal's arrest was deliberate by ED and that Kejriwal's conduct was not responsible for a situation in which there was no other option other than to arrest to make him join probe.

Justice Sharma also said that there is no separate treatment or protocol which any investigating agency is to follow for the purpose of summoning or questioning of a common man or a Chief Minister of a State.

Absence or non recovery of proceeds of crime of little value

The court further held that the absence of or non- recovery of proceeds of crime in the present case can be of little value or importance as part of the money already stands spent in Goa elections by the Aam Aadmi Party.

For this, the court noted the statements placed on record by ED of those individuals on whom the money was spent and those who had given the money as well as those through whom the money was sent.

“Once there is prima-facie material regarding laundering of the kickbacks on Goa Elections and the money being already spent for the said purpose in the year 2022 itself, the recovery in the year 2024 or non recovery of any remaining amount will become clear only once prosecution complaint is filed,” the court said.

Also Read: BREAKING | Delhi CM Arvind Kejriwal's ED Arrest In Liquor Policy Case Valid: Delhi High Court

Counsel for Petitioner: Dr. Abhishek Manu Singhvi, Mr. Vikram Chaudhari, and Mr. Amit Desai, Senior Advocates with Mr. Vivek Jain, Mohd. Irshad, Mr. Rajat Bhardwaj, Mr. Karan Sharma, Mr. Rajat Jain, Mr. Mohit Siwach, Mr. Kaustubh Khanna, Mr. Rishikesh Kumar, Mr. Shailesh Chauhan, Mr. Sadiq Noor, Mr. Mehul Prasad, Ms. Priyanka Sarda, Ms. Sheenu Priya and Ms. Princy Sharma, Advocates

Counsel for Respondent: Mr. S.V. Raju,  ASG with Mr. Zoheb Hossain, Special Counsel for ED, Mr. Annam Venkatesh, Mr. Arkaj Kumar, Mr. Vivek Gurnani, Mr. Hitarth Raja, Ms. Abhipriya Rai, Mr. Kartik Sabharwal, Mr. Vivek Gaurav, Mr. Agrimaa Singh, Mr. Kanishk Maurya and Mr. Ritumbhara Garg, Advocates for ED

Case Title: ARVIND KEJRIWAL v. DIRECTORATE OF ENFORCEMENT

Citation: 2024 LiveLaw (Del) 424

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