Recently, the Bombay High Court held that courts must exercise extreme caution while reviewing arrests made under the Prevention of Money Laundering Act, 2002 (PMLA) and should interfere only when there is manifest arbitrariness or gross violation of statutory safeguards. Consequently, the Court declined to invalidate the petitioner’s arrest by the Enforcement Directorate (ED). Emphasising the limited scope of judicial review in such matters, the Court observed that the sufficiency or adequacy of material forming the basis of an arrest cannot be scrutinised in depth at the early stage of investigation.
Brief Facts:
The case arose from allegations of large-scale illegal constructions and corruption within the Vasai–Virar City Municipal Corporation. Several FIRs were registered alleging that developers had erected multiple buildings using forged permissions on lands reserved for public infrastructure. Based on these scheduled offences, the Enforcement Directorate initiated proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) by registering an ECIR and conducting searches during the investigation.
During the probe, statements were recorded under Section 50 of the PMLA and searches at the petitioner’s premises allegedly led to the seizure of substantial unaccounted cash and jewellery. The information was later shared with State authorities under Section 66(2) of the PMLA, resulting in the registration of a corruption case under Sections 13(1)(b) and 13(2) of the Prevention of Corruption Act, 1988. Relying on the material collected, the ED arrested the petitioner under Section 19 of the PMLA, prompting him to approach the High Court challenging the legality of the arrest and his continued custody.
Contentions of the Petitioner:
The Petitioner contended that his arrest was illegal and in violation of the safeguards prescribed under Section 19(1) of the Prevention of Money Laundering Act, 2002 (PMLA). The Counsel argued that he was not named as an accused in the FIRs relating to illegal construction and therefore no predicate scheduled offence could be attributed to him. The petitioner further submitted that the subsequent case registered under the Prevention of Corruption Act, 1988, was independent and could not retrospectively justify the ED’s action.
The Petitioner also argued that the ED failed to establish any nexus between the seized cash or jewellery and the alleged “proceeds of crime.” Emphasising that he had cooperated with the investigation, the petitioner maintained that the ED lacked sufficient material to form a valid “reason to believe” at the time of arrest under the PMLA. Reliance was placed on the decisions of the Supreme Court in Vijay Madanlal Choudhary v. Union of India and Arvind Kejriwal v. Directorate of Enforcement to contend that the statutory conditions governing arrest were not satisfied.
Contentions of the Respondent:
The Respondent contended that the arrest was carried out in strict compliance with the safeguards prescribed under Section 19 of the Prevention of Money Laundering Act, 2002 (PMLA). It was submitted that the petitioner was duly furnished with the grounds of arrest, reasons to believe, and other statutory documents, and was produced before the competent Special Court, which remanded him to custody after examining the material.
The ED further submitted that the investigation revealed a network of officials, developers, and intermediaries allegedly involved in corruption linked to illegal constructions. According to the Respondent, the seizure of substantial cash and jewellery, along with digital evidence and statements recorded under Section 50 of the PMLA, provided sufficient material to form a reasonable belief that the petitioner was involved in money laundering. It was also argued that the writ petition was filed belatedly and appeared to be an attempt to circumvent the stringent bail regime under Section 45 of the PMLA.
Observation of the Court:
The Division Bench of Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad emphasised that judicial review over arrests made under special statutes such as the PMLA is inherently limited. Referring to the Supreme Court’s decision in Radhika Agarwal v. Union of India, the Court reiterated that courts should intervene only where there is “manifest arbitrariness or gross violation or non-compliance of the statutory safeguards.”
The Bench clarified that the expression “reasons to believe” requires the authorised officer to form a prima facie opinion based on available material, and courts cannot assess the sufficiency or adequacy of such material at the nascent stage of investigation. The Court noted that the ED had conducted searches, recorded statements under Section 50 of the PMLA, and seized large quantities of unexplained cash and jewellery from the petitioner’s premises. These materials, according to the Bench, constituted a credible foundation for the arresting authority to form the belief that the petitioner was involved in money laundering.
Rejecting the argument that the petitioner must be named in the predicate FIRs for the PMLA to apply, the Court relied on the Supreme Court’s ruling in Vijay Madanlal Choudhary v. Union of India, which clarifies that “the offence of money laundering is an independent offence regarding the process or activity connected with the proceeds of crime.”
The Bench further held that the definition of “proceeds of crime” under Section 2(1)(u) of the PMLA is broad enough to include assets derived from criminal activity linked to scheduled offences, including bribes received in the course of official duties.
The Court also observed that the petitioner’s challenge had been filed several months after his arrest and after successive remand orders had already been passed. In such circumstances, the petition appeared to be an attempt to bypass the stringent bail mechanism under Section 45 of the PMLA, rather than a genuine challenge to procedural illegality.
The decision of the Court:
In light of the foregoing discussion, the Bombay High Court dismissed the Petition, holding that no case had been made out to declare the petitioner’s arrest illegal or to quash the remand orders passed by the Special Court. The Court concluded that the ED had complied with the statutory safeguards under Section 19 of the PMLA and possessed tangible material justifying the arrest.
Case Title: Sh. Y. Shiva Reddy, Vs. Directorate of Enforcement and Anr.
Case No.: Criminal Writ Petition No.5843 Of 2025
Coram: Hon’ble Chief Justice Shree Chandrashekhar and Hon’ble Justice Gautam A. Ankhad
Advocate for the Petitioner: Sr. Adv. Vikas Pahwa, Adv. Kathyaeni Ramshetty, Adv. Hrishikesh Mundargi, Adv. Soma Srinath, Adv. Shashi Preetham Adv. Riya Arora, Adv. Pravada Raut,
Advocate for the Respondent: ASG. Anil C. Singh, Adv. Chaitanya Pendse, Adv. Aditya Thakkar, Adv. Krishnakant Deshmukh, Adv. Rajdatta Nagre, Adv. Adarsh Vyas, Adv. Rama Gupta,
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