TaxTMI 
TaxTMI 
2025 (10) TMI 1400
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....rary exercise of powers by the Arresting Officer, who by arresting the petitioner on 13th August 2025 infringed the petitioner's fundamental rights under Articles 14, 19, 21 and 22(1) and (2) of the Constitution of India. Closely related to this challenge, a further challenge has been made to the remand orders dated 14th August 2025 and 20th August 2025 passed by the Additional Sessions Judge, Designated Special Court under the Prevention of Money-Laundering Act, 2002 (in short, PMLA), City Civil and Sessions Court, Mumbai in ECIR No. ECIR/MBZO-II/10/2025. 2. This is the case of the Enforcement Directorate (in short, ED) that illegal constructions were raised and 41 buildings were constructed during 2008 to 2010 by the accused builders and developers in connivance with the officers of the City and Industrial Development Corporation of Maharashtra (in short, CIDCO) and, in connection therewith, a First Information Report (in short, FIR) was lodged on 26th November 2019 vide FIR No.1348 of 2019 at the instance of the Assistant Commissioner, Ward Committee-D, Achole, Vasai Virar City Municipal Corporation (in short, VVCMC). Then three other FIRs vide FIR No.195 of 2022 on 26th Apri....
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....e proceeds of crime. Even the writ Court did not make any adverse comment against him and, on the contrary, refused to initiate any disciplinary proceedings against the officials of the VVCMC. The paragraph nos.13, 14, 15 and 16 of the order dated 8th July 2024 passed by the High Court read as under: "13. Since the main relief in the Petition was to direct the VVCMC to take action against illegal constructions on the site reserved for the sewage treatment plant and the dumping ground, and since the VVCMC is proceeding with the action, there is no point in keeping this Petition pending. 14. The Petitioner's relief for disciplinary proceedings against the officials does not warrant consideration, at least in the facts of the present case. Ms Sagvekar pointed out that these constructions came up when CIDCO controlled the property. She also pointed out how notices were issued that notices could not be implemented because of court proceedings and interim reliefs. She pointed out how efforts were made to vacate the interim reliefs, and no sooner the interim reliefs were vacated, the VVCMC proceeded with the action of removing the illegal and unauthorised buildings. ....
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....ii) Mr. Y. S. Reddy being charged with predicate offence of corruption and (iii) statement of Mr. Y. S. Reddy recorded under section 50 of the PMLA being corroborated by the statements of the architects and the promoters/developers and, that, there is a clear link of the petitioner being involved in the corrupt practices. In paragraph no. 14 of the Brief Note, the ED has taken the following stand: - "14. Before making the arrest, The ED had substantial material in its possession including various statements WhatsApp chats, particularly Statement of Y. S. Reddy dated 07/08/2025 and 13/08/2025, Amol Patil, who is a relative of the Petitioner dated 11/08/2025, Statement of builders and architects recorded before the arrest. Now the ED/Respondents have also filed a complaint, the relevant part of the complaint is from page 273 till 287, which quantifies proceeds of crime, and also delivery of cash/Jewellery to the petitioner, Page 295 refers to the specific role of the petitioner. There is substantially more material collected drung the course of the investigation including the statement of Manali Shinde, Assistant Municipal commissioner, Confirming the Rate Card and payments ....
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....ned Additional Solicitor General would submit that the powers of judicial review to interfere with the arrest order dated 13th August 2025 shall be very limited and this is not such a case in which the powers under Article 226 of the Constitution of India can be exercised by this Court. The learned Additional Solicitor General relied on the decision in "Radhika Agarwal v. Union of India & Ors." (2025) 6 SCC 545 and submitted that when the legality of arrest made under the special Acts like PMLA, UPA, Foreign Exchange, Customs Act, GST Act etc. is challenged, the Court should be extremely loath in exercising its powers of judicial review. The learned Additional Solicitor General has laid emphasis on paragraph nos.90 to 95 of the said reported judgment which read as under: - "90. So far as the arrest is made under the Prevention of Money Laundering Act, 2002 is concerned, in Vijay Madanlal Choudhary v. Union of India [Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1 : (2023) 21 ITR-OL 1], also the three-Judge Bench of this Court has held inter alia that the safeguards provided in the PMLA and the preconditions to be fulfilled by the authorised officer before effec....
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....has committed the offence under the relevant special Act. Sufficiency or adequacy of the material on the basis of which such belief is formed by the authorised officer, would not be a matter of scrutiny by the courts at such a nascent stage of inquiry or investigation. 93. As held in Adri Dharan Das v. State of W.B. [Adri Dharan Das v. State of W.B., (2005) 4 SCC 303 : 2005 SCC (Cri) 933], ordinarily arrest is a part of the process of investigation intended to secure several purposes. The accused may have to be questioned in detail regarding various facets of motive, preparation, commission and aftermath of crime and the connection of other persons, if any, in the crime. There may be circumstances in which the accused may provide information leading to discovery of material facts. It may be necessary to curtail his freedom in order to enable the investigation to proceed without hindrance and to protect witnesses and persons connected with the victim of the crime, to prevent his disappearance, to maintain law and order in the society, etc. For these or such other reasons, arrest may become an inevitable part of the process of investigation. 94. It is pertinent to n....
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....special Acts, required to be followed by the authorised officers when an arrest is made of a person prima facie guilty of or having committed offence under the special Act." 7. Before proceeding further, we may usefully have a glance through the "grounds of arrest" and the "reasons to believe". In the grounds of arrest, the ED gave the following reasons for the petitioner's arrest: - "You, Anil Kumar Khanderao Pawar, are hereby informed that during the ongoing inquiry and investigation under PMLA by the Directorate of Enforcement, various incriminating records (including the digital devices), Whatsapp Chats and statements of various persons were taken on record, wherein it has been revealed that: 1. You have deliberately and intentionally committed omission to perform your lawful public duty and thereby actually involved in acquisition, possession of several crores of the Proceeds of Crime and thereafter its concealment and utilisation for your personal benefit and enrichment. 2. You have organized a cartel of VVCMC officers, Junior Engineers, Architects, CAS and Liasoners after joining as Commissioner and involved in an organized action plan to acquir....
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.... also concealed and project the same as untainted and integrated the crime proceeds in the financial main-stream of the economy. 10. You have incorporated various firms in order to channelize and utilize the proceeds of crime and also to integrate the proceeds of crime in the financial main-stream of the economy. 11. You in order to conceal the source of acquisition of the Proceeds of crime have incorporated the firms wherein your wife has been ostensibly shown as the partner however she denies having knowledge of basic facts pertaining to all the projects/entities incorporated in her name. 12. You have infused huge amount of cash in all your projects/entities/investments in the multiple entities floated in the name of your Wife, daughters and distant relatives. These entities were engaged in construction of residential projects wherein huge amount of cash has been suspected to be infused by you. 13. You have destructed and tampered with the crucial evidences and had deleted the call logs and whatsapp data from mobile phone. 14. You hold the office as Commissioner, VVCMC till 25.07.2025 and in view of the authority and influence inherent....
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....nderao Pawar is an IAS officer of 2014 batch. He joind Vasai Virar City Municipal Corporation as Commissioner on 13.01.2022 and remained there till 25.07.2025. He organized a cartel of VVCMC officers. Junior Engineers. Architects, CAs and Liasoners after joining as Commissioner. That Sh. Anil Kumar Khanderao Pawar was involved in an organized action plan to acquire the Proceeds of crime by committing the illegal omission to perform his public duty and thereafter granting development permissions at fixed rate. 2. That Sh. Anil Kumar Khanderao Pawar, as Commissioner of VVCMC, was directly responsible for taking preventive actions so that no illegal construction occured over government/private land in the jurisdiction of VVCMC. 3. That Sh. Anil Kumar Khanderao Pawar, as a head of Demolition department of VVCMC, was legally duty bound and responsible for taking action against illegal construction over government/private land in the jurisdiction of VVCMC. 4. That Sh. Anil Kumar Khanderao Pawar flourished the already existing cartel comprising of senior VVCMC officers, local builders and Liasoners for keeping a blind eye and taking no action over rampant illega....
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.... is handled by ADTP and for proposals with less than 2000sqmtrs, it is handled by Town Planner..." That statement of certain builder and Architects were also recorded wherein they have stated the details of commission paid. The excerpt of the statement of a builder/Architect recorded u/s 50 of the PMLA, 2002 dated 09.07.2025 is reproduced under: Sr. No. Department Name Commission Paid 1 Legal Department Rs 50,000 to Rs1 Lakh per file 2 Engineering Department Rs 25,000 per file 3 Junior Engineer Rs 1 - Rs 2 per Square Feet 4 Municipal Engineer Rs 2 per Square Feet 5 Assistant Director of Town Planning Rs 5 per Square Feet 6 Deputy Director of Town Planning Rs 10 - Rs 12 per Square Feet 7 Commissioner Rs 25 per Square Feet Commission is mostly paid directly to the concerned officer. However, sometimes it is also paid through the architect to the concerned officer..." 8. That Sh. Anil Kumar Khanderao Pawar established an intricate codeword system for collection of commission/bribe amount from builders, Architects and Local Liasoners. In depth analysis of Whatsapp chats of Sh. Anil Kumar ....
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.... distant relatives and local liasoners. 10. That during inquiry and investigation, it is further gathered that the Proceeds of crime was acquired and possessed by Sh. Anil Kumar Khanderao Pawar in cash and the said cash has been collected and delivered through VVCMC officers, distant relatives and local liasoners. The in-depth analysis of Whatsapp chats of Sh. Anil Kumar Khanderao Pawar with Sh. Y S Reddy, of Local Liasoners with Sh. Y S Reddy and others established that: ● Sh. Anil Kumar Khanderao Pawar received more than Rs. 17.75 crore from Sh. Y S Reddy for clearing files giving various development permissions and same was delivered to distant relative. ● Distant relative collected huge amount of cash for Sh. Anil Kumar Khanderão Pawar from Sh. Reddy on other occasions. The cash so collected by distant relative was invested in properties situated at various locations in Maharashtra. The excerpt of the statement of distant relative recorded u/s 50 of the PMLA, 2002 dated 11.08.2025 is reproduced under: "...I would like to state that I have perused the said chat and state that this contact details belong to me. The said chat ....
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....operty as untainted." 9. After hearing the learned senior counsel for the petitioner and the learned Additional Solicitor General and on perusing the materials on record, we have formed an opinion that as on 13th August 2025 the Arresting Officer had no such material in his possession which would establish that the petitioner committed offence under the PMLA so as to form reasons to believe under section 19 of the PMLA. When we say that the Arresting Officer had no such material, we mean that "no tangible material" was available with the Arresting Officer to establish that the petitioner was guilty of the offence under the PMLA and, that, we are not weighing such materials so as to examine the sufficiency of the materials in possession of the Arresting Officer. In "Radhika Agarwal", the Hon'ble Supreme Court referred to "Vijay Madanlal Choudhary v. Union of India" (2023) 12 SCC 1 and held that the safeguards provided in the PMLA and the pre-conditions to be fulfilled by the Arresting Officer before effecting arrest as contained in section 19 of the PMLA are stringent and of higher standard. Those safeguards ensure that the authorized officer does not act arbitrary but make them ....
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....ectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. Furthermore, if this is the case of the ED that the proceeds of crime were seized from the possession of Mr. Y. S. Reddy, there is no indication how the petitioner is involved in money-laundering. In "Arvind Kejriwal", the Hon'ble Supreme Court explained the expression "reasons to believe" in section 19 and held that belief is beyond speculation or doubt. The Hon'ble Supreme Court further held that the requirement in law is not satisfied by just providing "written grounds of arrest" and such action of the Arresting Officer does not in itself satisfy the compliance requirement. The Hon'ble Supreme Court further held that the subjective opinion of the Arresting Officer must be founded and based upon fair and objective consideration of the materials available with him as on the date of arrest and the Court shall be entitled to examine the soundness of the "reasons to believe". In paragraph no. 44 of the reported judgment, the Hon'ble S....
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.... will be deleterious to the constitutional values of rule of law and life and liberty of persons. An officer cannot be allowed to selectively pick and choose material implicating the person to be arrested. They have to equally apply their mind to other material which absolves and exculpates the arrestee. The power to arrest under Section 19(1) of the PML Act cannot be exercised as per the whims and fancies of the officer." 11. When we examined the materials on record with reference to the aforementioned dictum, we see no prima-facie case made out against the petitioner for his arrest on 13th August 2025. We observed that the same and similar facts are reiterated in the "grounds of arrest" and "reasons to believe". The stand taken by the ED is speculative and based on hazy facts. The case built up by the ED based on the statement of Mr. Y. S. Reddy that a Codeword system for collection of commission was devised and huge tainted money was received does not lead anywhere inasmuch as no recovery was effected from the premises of the petitioner or from his possession or in the possession of his family members. The ED referred to illegal constructions of 41 buildings but the petitione....
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....inal activity relating to a scheduled offence under the general law cannot be regarded as the proceeds of crime and there may be cases where the property involved in a crime of scheduled offence attached by the investigating agency dealing with that offence may not be wholly or partly regarded as the "proceeds of crime" within the meaning of section 2(1)(u) of the PMLA. In paragraph no. 109 of the said judgment, the Hon'ble Supreme Court held as under: - "109. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence that can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named....