Dismissed¶15

Sh. Y. Shiva Reddy v. Directorate of Enforcement Zonal Office II through Assistant Director and Anr.

Bombay HC6 Jan 2026WP/5843/2025

Case brief

AI extract

What is this about?

PMLA s.19 arrest legality; ED arrest 13-08-2025; ECIR/MBZO-II/10/2025; VVCMC Deputy Director Town Planning; 41 illegal buildings Vasai-Virar demolition WP 15853/2022; scheduled offences IPC ss.420/467/471 and PC Act s.13; proceeds of crime s.2(1)(u) expansive; Vijay Madanlal Choudhary relied; Radhika Agarwal relied; Anilkumar Pawar distinguished; remand orders R.A.1136/2025 quashing sought; s.45 bail bypass; judicial review manifest arbitrariness standard; writ petition dismissed.

What did the court decide?

None — writ petition dismissed; the Court clarified that its observations are confined to adjudication of this writ petition and shall not prejudice the rights and contentions of the parties in any proceedings before the trial Court, including a bail application as and when filed. ¶15

Sh. Y. Shiva Reddy vs Directorate of Enforcement Zonal… — Money Laundering | Bombay HC (2026)

What the court decided

AI extract

Outcome

¶15

Issue for consideration

Whether the petitioner's arrest by the ED on 13.08.2025 conforms to section 19 PMLA and due process, and is illegal / violative of Articles 14, 19, 21 and 22 so as to warrant quashing of the remand orders in R.A. No.1136 of 2025 and release from custody. +3 more

¶1

Court's answer

Scope of judicial review over arrest under special statutes: it must be exercised cautiously and only in cases of manifest arbitrariness or gross non-compliance with statutory safeguards (standard elucidated in Radhika Agarwal); sufficiency or adequacy of the material underlying the authorised officer's 'reasons to believe' is not a matter for judicial scrutiny at the nascent stage of investigation.

¶9

Ratio / Principle

Due process prescribed under the PMLA was followed before arresting the petitioner: repeated examinations, searches, recording of reasons and show cause notice under s.8(1) (23.06.2025), sharing under s.66(2) culminating in FIR No.330/2025, communication of grounds of arrest and reasons to believe under s.19 with signature affixed, and production before the Special Court with police custody thereafter judicial custody; hence there is no illegality in the arrest process, and the compliance asserted in the ED counter-affidavit dated 02.12.2025 stands unrebutted.

¶10

Key takeaways

Merely because the petitioner appeared before the ED on twelve occasions (cooperation with investigation), that circumstance cannot be a ground to hold his arrest illegal or to order his release.ratio¶12
The four FIRs (2019-2022) against builders/developers under sections 420, 467 and 471 IPC are all scheduled offences under the PMLA; the ECIR dated 21.02.2025 was registered on them, and in the course of that investigation the petitioner's role in relation to development permissions and illegal construction (including on government land) came to light, leading to the searches and seizures.ratio¶11

Detailed headnote1 paragraphs

Writ dismissed (Bombay HC, per Gautam A. Ankhad J.; coram Shree Chandrashekhar CJ). Petitioner, Deputy Director (Town Planning), Vasai-Virar City Municipal Corporation, arrested by ED on 13.08.2025 under s.19 PMLA in ECIR/MBZO-II/10/2025 (registered 21.02.2025 on FIRs Nos.1348/2019, 195/2022 and 69/2023 under ss.420/467/471 IPC concerning illegal construction of 41 buildings, later demolished pursuant to this Court's order dt.08.07.2024 in W.P. No.15853/2022), had sought a declaration that the arrest was illegal (Arts.14, 19, 21, 22) and quashing of remand orders in R.A. No.1136/2025. Held: (i) judicial review of arrests under special statutes must be exercised cautiously and only for manifest arbitrariness or gross non-compliance with statutory safeguards; sufficiency of material behind 'reasons to believe' is not justiciable at the nascent stage (relying on Radhika Agarwal); (ii) statutory sequence was followed — s.50 statements (from March 2025), searches (14/15.05, 03.06.2025) yielding Rs.8.23 crore cash and Rs.23.28 crore jewellery, reasons recorded with s.8(1) notice (23.06.2025), sharing under s.66(2) producing FIR No.330/2025 under s.13 PC Act (01.08.2025), ECIR addendum (04.08.2025), arrest with written grounds/reasons-to-believe; compliance asserted in counter-affidavit dt.02.12.2025 unrebutted; (iii) the four IPC FIRs are scheduled offences and prior arraignment in the predicate FIR is unnecessary (Vijay Madanlal Choudhary); s.2(1)(u) 'proceeds of crime' is expansive — indirect derivations relatable to a scheduled offence qualify, and a bribe-taker acquires proceeds of crime; (iv) quantification first appearing in the counter-affidavit is immaterial at arrest stage; twelve prior appearances do not preclude arrest; (v) Anilkumar Pawar distinguished (officer assumed charge in 2022; nothing incriminating seized therein); (vi) petition deemed an attempt to bypass s.45 PMLA; dismissed, observations confined to this writ and not to prejudice trial/bail proceedings.

¶1

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

¶2

CRIMINAL WRIT PETITION NO.5843 OF 2025

¶3

Sh. Y. Shiva Reddy, ] R/o. Nalasopara, Vasai Road, ] Dist. Palghar ].. Petitioner Versus 1. Directorate of Enforcement, ] Zonal Office II, ] Through its Assistant Director ] 2. State of Maharashtra, ] Home Department, ] Through its Secretary ] .. Respondents

¶4

Mr. Vikas Pahwa, Senior Advocate, with Ms. Kathyaeni Ramshetty, Mr. Hrishikesh Mundargi, Mr. Soma Srinath, Mr. Shashi Preetham and Ms. Riya Arora, i/by Ms. Pravada Raut, Advocates for the Petitioner.

¶5

Mr. Anil C. Singh, Additional Solicitor General, with Mr. Chaitanya Pendse, Mr. Aditya Thakkar, Mr. Krishnakant Deshmukh, Mr. Rajdatta Nagre, Mr. Adarsh Vyas and Mr. Rama Gupta, Advocates for Respondent No.1-ED.

¶6

Mr. J.P. Yagnik, Additional Public Prosecutor for Respondent No.2State of Maharashtra.

¶7

CORAM : SHREE CHANDRASHEKHAR, CJ & GAUTAM A. ANKHAD, J.

¶8

Judgment is reserved on : 2^nd February 2026 Judgment is pronounced on : 9^th March 2026

¶9

“JUDGMENT”

¶10

PER, GAUTAM A. ANKHAD, J.

¶11

By the present petition filed under Articles 226 and 227 of the Constitution of India read with section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, the petitioner seeks a declaration that his

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arrest by the respondent no.1 (“ ED ”) on 13^th August 2025 is illegal and violates his fundamental rights guaranteed under Articles 14, 19, 21 and 22 of the Constitution of India. The petitioner further prays for quashing and setting aside the orders dated 14^th August 2025, 20^th August 2025 and all other orders passed in Remand Application No.1136 of 2025 by the learned Additional Sessions Judge (PMLA) and for a direction for his release from custody.

¶16

The petitioner joined the Vasai-Virar City Municipal Corporation (“VVCMC”) as a Deputy Director, Town Planning on 13^th August 2010. Between 2019 and 2023, the following four First Information Reports (“FIR”) were registered at the Tulinj police station and Achole police station:

¶17

(i) FIR no.1348 of 2019 dated 26^th November 2019 registered under sections 420, 467 and 471 of the Indian Penal Code, 1860 (“ IPC ”);

¶18

(ii) FIR no.195 of 2022 dated 26^th April 2022 registered under section 420 of IPC;

¶19

(iii) FIR no.196 of 2022 dated 27^th April 2022 registered under sections 420, 467 and 471 of IPC; and

¶20

(iv) FIR no.69 of 2023 dated 2^nd February 2023 registered under section 420 of IPC.

¶21

The allegations in these FIRs pertain to illegal construction of 41 buildings by developers using upon forged permissions and fabricated documents on lands that were reserved for a sewage treatment plant and dumping ground. By an order dated 8^th July 2024 in Writ Petition No.15853 of 2022, this Court directed demolition of 41 illegal buildings. The demolitions were carried on

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20^th February 2025, affecting approximately 2,500 families. On the very next day, i.e., 21^st February 2025, an Enforcement Case Information Report vide ECIR/MBZO-II/10/2025 was registered by the ED on the basis of the FIRs bearing nos.1348/2019, 195/2022 and 69/2023 concerning the illegal constructions and matters connected therewith.

¶26

From March 2025 onwards, statements of several persons including the petitioner were recorded under section 50 of the Prevention of Money Laundering Act, 2002 (“ PMLA ”). On 14^th May 2025, 15^th May 2025 and 3^rd June 2025, search and seizure operations were conducted at the petitioner’s residences in Hyderabad and Mumbai. Along with property documents, unaccounted cash of Rs. 8.23 crores and diamond-studded jewellery valued at Rs. 23.28 crores (26,338 grams) were found and seized by the ED. Based on the material so gathered, an information was shared with the State authorities and a First Information Report vide FIR no. 330 of 2025 was registered on 1^st August 2025 under sections 13(1)(b) and 13(2) of the Prevention of Corruption Act, 1988 (“ PC Act ”) against the petitioner. By way of an Addendum, the aforesaid FIR was made a part of the ECIR on 4^th August 2025. On 13^th August 2025, the petitioner was arrested by the ED and furnished with the written grounds of arrest and the reasons to believe for invoking section 19 of the PMLA. The petitioner is presently in judicial custody pursuant to successive remand orders including orders dated 14^th August 2025, 20^th August 2025, 3^rd September 2025, 8^th September 2025, 17^th September 2025 and 1^st October 2025. It is in this backdrop that the present petition has been filed.

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Mr. Vikas Pahwa, the learned senior counsel for the petitioner submitted that the petitioner’s arrest is illegal and is liable to be so declared notwithstanding the remand orders, as the arrest of the petitioner was not in conformity with section 19(1) of the PMLA. He contended that no predicate offence is attributed to the petitioner in relation to the first four FIRs¹ , which concern illegal construction by developers between 2013 and 2021. The petitioner is neither named as an accused in those FIRs nor in any charge-sheet filed pursuant thereto. According to the learned senior counsel, the jurisdictional facts sine qua non for constituting the offence of money laundering under sections 2(1)(u) and the offence under section 3 of the PMLA are absent, as no criminal activity relating to a scheduled offence is attributable to the petitioner. It was urged that the allegation against the petitioner arises from FIR no.330 of 2025 registered under the PC Act for taking commission/bribes for granting development permissions. The alleged offence is distinct and require a separate factual foundation; and any investigation into bribery falls within the domain of the police and not the ED. The learned senior counsel contended that section 3 of the PMLA does not criminalize possession of property, but only the processes or activities connected with “proceeds of crime”. According to him, the ED cannot first register an ECIR and thereafter seek to establish a predicate offence to validate its actions. This is jurisdictionally fatal and not a curable defect.

¶31

Mr. Pahwa further submitted that the power of arrest under section 19 of the PMLA is conditional upon the existence of materials

¶32

1 First Information Reports bearing C.R. nos.1348/2019, 195/2022, 196/2022 and 69/2023

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with the Arresting Officer to record a satisfaction that he has reasons to believe that the person is guilty of the offence of money laundering. He argued that at the time of his arrest, neither the petitioner’s role nor the proceeds of crime were identified. The alleged proceeds of crime are quantified for the first time in the ED’s counter-affidavit at Rs. 51.77 crores for the period 13^th January 2022 to 28^th July 2025. This is allegedly for issuance of construction permissions, but it has no nexus with the subject matter of the earlier four FIRs relating to illegal construction of 41 buildings between 2013 to 2021. The ED has failed to demonstrate any live nexus between the seized cash/ jewellery and the offence of money laundering. Reliance on the statements recorded under section 50 of the PMLA or on What’sApp chats is not enough and the ED cannot arrest the petitioner merely on the basis of suspicion. There was no necessity to arrest as the petitioner had fully co-operated with the investigation on twelve occasions prior to his arrest. The petitioner had furnished explanations on affidavit regarding the assets seized by the ED, but the same is not considered. Mr. Pahwa relied on the judgments of the Hon’ble Supreme Court in “Vijay Madanlal Choudhary v. Union of India”² and “Arvind Kejriwal v. Directorate of Enforcement”³ and the judgment of this Court in “Anilkumar Khanderao Pawar v. Directorate of Enforcement & Anr.”⁴ in support of the reliefs prayed for in this petition.

¶37

On the other hand, Mr. Anil Singh, the learned Additional Solicitor General submitted that this petition has been belatedly filed

¶38

2 (2023) 12 SCC 1

¶39

3 (2025) 2 SCC 248

¶40

4 Judgment dated 15^th October 2025 passed in Criminal Writ Petition no. 4779 of 2025

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in November 2025, more than three months after the arrest. The learned Additional Solicitor General relied upon the counter-affidavit dated 2^nd December 2025 and submitted that all safeguards under section 19 of the PMLA have been complied with. The petitioner has been supplied with the arrest memo, personal search memo, written grounds of arrest and reasons to believe, thus complying with the requirements of law. The learned ASG submitted that the ECIR investigation by the ED revealed a large cartel including the petitioner, architects, liasioners, developers and other VVCMC officials responsible for illegal construction and large scale corruption in VVCMC. During the search operations, large number of documents, unaccounted cash, digital devices, agreements and bank statements have been seized from various persons. Statements of various persons are recorded under section 50 of the PMLA and the incriminating What’sApp chats disclose use of coded language for bribe/commission payments. The custodial interrogation of the petitioner has revealed that the petitioner was involved in corrupt practices during his tenure at VVCMC. The petitioner not only turned a blind eye to the illegal constructions, but protected them in lieu of fixed rate for bribes. The information of unaccounted cash and jewellery was shared under section 66(2) of the PMLA with the jurisdictional police, leading to registration of FIR no.330 of 2025, investigation of which is on-going. Thus, it is only after the predicate offence was registered on 1^st August 2025 that an Addendum to ECIR was made on 4^th August 2025 and the petitioner was arrested by the ED on 13^th August 2025. It is not the case of any reversal of statutory sequence provided under the PMLA.

¶45

The learned ASG further submitted that the petitioner under

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the garb of the present petition cannot bypass the provisions of section 45 of the PMLA. The jurisdictional Court upon examining the material was duly satisfied about the existence of the conditions for remanding the petitioner to judicial custody. The present petition is filed almost four months after the arrest and seeks to re-agitate issues already argued before the Special Court. This shows that the petition is not bona fide , but an attempt to seek bail by-passing the statutory requirement under section 45 of the PMLA. The petitioner has failed to demonstrate as to how the material relied upon by the ED is extraneous or renders his arrest illegal. The learned ASG submitted that at this stage, the Court cannot assess the quality of the material in the reasons to believe. The offence of money laundering is an independent offence and in any case, the petitioner has been charged with a predicate offence of corruption under the PC Act. Hence, there is no question of any reliefs being granted to the petitioner. The learned ASG relied upon the judgments in “Vijay Madanlal Choudhary” and also in “Radhika Agarwal v. Union of India”⁵ and sought for dismissal of the petition.

¶50

Reasons and Analysis:

¶51

We have perused the record and after hearing the learned counsels for the parties at length, find no merit in this petition. The scope of judicial review over arrest under the special statutes is elucidated in the judgment of “ Radhika Agarwal” wherein the Hon’ble Supreme Court has held that the power of judicial review must be exercised cautiously and only in cases of manifest arbitrariness or gross non-compliance with statutory safeguards. The relevant portions of the said judgment read as under:

5 (2025) 6 SCC 545

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“92. It hardly needs to be reiterated that the power of judicial review over the subjective satisfaction or opinion of the statutory authority would have different facets depending on the facts and circumstances of each case. The criteria or parameters of judicial review over the subjective satisfaction applicable in service related cases, cannot be made applicable to the cases of arrest made under the special Acts. The scrutiny on the subjective opinion or satisfaction of the authorised officer to arrest the person could not be a matter of judicial review, inasmuch as when the arrest is made by the authorised officer on he having been satisfied about the alleged commission of the offences under the special Act, the matter would be at a very nascent stage of the investigation or inquiry. The very use of the phrase “reasons to believe” implies that the officer should have formed a prima facie opinion or belief on the basis of the material in his possession that the person is guilty or 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.

¶57

93. As held in Adri Dharan Das v. State of W.B.63, 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.

¶58

94. It is pertinent to note that the special Acts are enacted to achieve specific purposes and objectives. The power of judicial review in cases of arrest under such special Acts should be exercised very cautiously and in rare circumstances to balance individual liberty with the interest of justice and of the society at large. Any liberal approach in construing the stringent provisions of the special Acts may frustrate the very purpose and objective of the Acts. It hardly needs to be stated that the offences under the PMLA or the Customs Act or FERA are the offences of very serious nature affecting the financial systems and in turn the sovereignty and integrity of the nation. The provisions contained in the said Acts therefore must be construed in the manner which would

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enhance the objectives of the Acts, and not frustrate the same. Frequent or casual interference of the courts in the functioning of the authorised officers who have been specially conferred with the powers to combat the serious crimes, may embolden the unscrupulous elements to commit such crimes and may not do justice to the victims, who in such cases would be the society at large and the nation itself. With the advancement in technology, the very nature of crimes has become more and more intricate and complicated. Hence, minor procedural lapse on the part of authorised officers may not be seen with magnifying glass by the courts in exercise of the powers of judicial review, which may ultimately end up granting undue advantage or benefit to the person accused of very serious offences under the special Acts. Such offences are against the society and against the nation at large, and cannot be compared with the ordinary offences committed against an individual, nor the accused in such cases be compared with the accused of ordinary crimes.

¶63

95. Though, the power of judicial review keeps a check and balance on the functioning of the public authorities and is exercised for better and more efficient and informed exercise of their powers, such power has to be exercised very cautiously keeping in mind that such exercise of power of judicial review may not lead to judicial overreach, undermining the powers of the statutory authorities. To sum up, the powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation or non-compliance of the statutory safeguards provided under the 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.”

¶64

In the present case, the record reveals that due process prescribed under the PMLA has been followed before arresting the petitioner. While investigating into the illegalities at VVCMC, the petitioner was examined on several occasions and his residences were raided by the ED. On 23^rd June 2025, the ED recorded reasons and issued a show cause notice under section 8(1) of the PMLA. The material gathered during investigation was shared with the jurisdictional police under section 66(2) of the PMLA, culminating in registration of FIR no.330 of 2025 on 1^st August 2025. Upon arrest on 13^th August 2025, the petitioner was informed of the grounds of

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arrest and reasons to believe under section 19 of the PMLA, where he affixed his signature. He was produced before the Special Court, initially remanded to police custody and thereafter to judicial custody by the designated Court. Thus, there is no illegality in the process followed while arresting the petitioner. The compliance with statutory safeguards is specifically asserted in the counter-affidavit dated 2^nd December 2025 filed by the ED and the same is not rebutted by any material by the petitioner.

¶69

We are unable to accept the petitioner’s contention that no predicate offence is attributable to him in the first four FIRs and that the fifth FIR dated 1^st August 2025 under the PC Act is wholly distinct and unconnected with the earlier offences. The four FIRs against the builders/ developers between 2019 and 2022 are registered for the offences under sections 420, 467 and 471 of IPC which are all scheduled offences under the PMLA. Pursuant to the orders of this Court, 41 illegal buildings were demolished in 2025. The ECIR dated 21^st February 2025 was registered on the basis of these FIRs relating to large-scale illegal permissions and constructions. During the course of investigation, statements of various accused persons including developers, architects, liasioners and VVCMC Officials were recorded. It was in the course of such investigation that the petitioner’s role in relation to development permissions and the illegal construction including on government land came to light. Consequently, search and seizure operations were conducted on 14^th May 2025, 15^th May 2025 and 3^rd June 2025 at the petitioner’s premises in Mumbai and Hyderabad, resulting in discovery and seizure of Rs.8.23 crores in unaccounted cash, diamond-studded jewellery valued at Rs.23.28 crores and

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several documents pertaining to rental and lease arrangements. Section 2(1)(u) of the PMLA defines “proceeds of crime” in expansive terms to mean any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. The Explanation to section 2(1)(u) clarifies that the proceeds of crime includes property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. The definition is wide and will encompass a situation like the present one. If a person takes a bribe, he acquires proceeds of crime. Therefore, prima facie the recovery of unaccounted cash, jewellery and other incriminating articles and the statement of witnesses recorded under section 50 of the PMLA taken together provided sufficient foundation for the Arresting Officer to believe that the petitioner is prima facie guilty of money laundering. The relevant grounds mentioned in the arrest memo extracted below indicate that there is tangible material and credible evidence of the involvement of the petitioner in the commission of predicate offence:

¶74

“GROUNDS OF ARREST FOR INVOKING SECTION 19 OF PMLA, 2002 FOR ARREST OF SHRI Y.S. REDDY IN ECIT/MBZO-II/10/2025

¶75

You, Y S REDDY, 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:

¶76

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.

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2. You have organized a cartel of VVCMC officers, Junior Engineers, Architects, Cas and Liasoners as Deputy Director Town Planning and 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 permission at fixed rate.

¶81

3. You have grossly misused your position as Deputy Director Town Planning of VVCMC, and was directly responsible for taking no preventive actions so that illegal construction occurs over government/private land in the jurisdiction of VVCMC and has taken the substantial amount of bribe money for keeping a blind eye and taking no action over rampant illegal construction on government/private land.

¶82

4. You have failed to give plausible explanation of Rs. 8.23 crore cash seized from your premises during the course of search operation on 14.05.2025, 15.05.2025 and 03.06.2025.

¶83

5. You have failed to give plausible explanation of Diamond Studded Jewellery worth Rs. 23.25 crore seized from your premises during the course of search operation on 14.05.2025, 15.05.2025 and 03.06.2025.

¶84

6. You have acquired assets disproportionate to your known source of income.

¶85

7. You have charged huge commission/bribe for granting various development permissions required from VVCMC for starting different residential/commercial/other projects which was fixed at the rate of Rs 10 per sq. ft of the built area of the project.

¶86

8. You have established and used an intricate codeword system for collection of commission/bribe amount from builders, Architects and Local Liasoners in order to guise the enforcement agencies and to conceal the movement Proceeds of crime.

¶87

9. You have acquired and possessed the proceeds of crime in cash and the said cash has been collected and delivered through VVCMC officers, distant relatives and local liasoners.

¶88

10. You have not only acquired or possessed the proceeds of crime but also concealed and project the same as untainted and integrated the crime proceeds in the financial mainstream of the economy.

¶89

11. You hold the office as Deputy Director Town Planning of VVCMC, VVCMC and in view of the authority and influence inherent to such an offence you held, there exists a grave and reasonable apprehension that you may exercise undue influence, inducement, or threat and coercion upon Builders, Architects, Liasoners and

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officials of VVCMC. There is every likelihood that you by utilising his official position will influence, induce and threaten the material witnesses and co-accused persons, thereby impeding the further course of investigation.

¶94

On the basis of aforesaid facts and circumstances and material in possession, I have reasons to believe that you have not only acquired, possessed, concealed and utilized the proceeds of crime of several crores of rupees, but also actually involved and knowingly assisted in layering and laundering of proceeds of crime, and thus you are guilty of the offence of money laundering as defined under section 3 of PML Act, 2022 punishable under section 4 of MPL Act, 2022.

¶95

Accordingly, there exists sufficient reasons to believe that your arrest is necessary for various reasons as already detailed in the ‘reasons to believe’ being served along with this ‘grounds of arrest’.

¶96

In view of the above and based on material in possession, I have reasons to believe that you, Y S Reddy, are guilty of offence of the money laundering under section 3 of PMLA, 2002, punishable under section 4 of PMLA, 2002 and therefore, you arrest under Section 19(1) of PMLA is warranted.

¶97

Sd/- 13/08/25 (Praduman Sharma) Assistant Director (Arresting Officer)

¶98

I have been intimated about the grounds of arrest at the time of my arrest in adherence to the provisions of Article 22(1) of the Constitution and Section 19(1) of PMLA and have also been made aware of my rights as laid down by the Hon’ble Supreme Court of India in the case of D. K. Basu Vs. West Bengal with regard to the rights of the arrested person.

¶99

Sd/- 13/8/25 (Signature of Y.S. Reddy) Arrestee/Arrested person”

¶100

The ED arrived at a subjective satisfaction about the commission of offence of money laundering based on the materials against the petitioner which included the seizure of disproportionate assets from the petitioner. The allegation is that the petitioner calculated bribes file-wise and the proceeds of crime so generated were disguised and concealed while purchasing jewellery and other

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luxury items. A perusal of the reasons to believe indicates that the same is based on the material in possession of the ED. At this stage, it cannot be argued that the first four FIRs are not linked or interconnected to the fifth FIR. The offence under section 13 of the PC Act registered against the petitioner is itself a scheduled offence. The ED has set out in detail the grounds for arrest and the recorded reasons to believe under section 19 of the PMLA based on the digital devices and unaccounted cash/jewellery recovered from the petitioner. The ED has recorded the statements of several persons including the petitioner under section 50 of the PMLA which clearly implicate him. The ED had sufficient tangible material to arrest the petitioner. Therefore, merely because the petitioner has appeared before the ED on twelve occasions this circumstance cannot be a ground to hold that his arrest was illegal and to order his release.

¶105

The petitioner’s contention that prior arraignment of the petitioner in the first four FIRs is necessary to attract the PMLA is misconceived. Such a construction cannot be accepted as it would defeat the statutory scheme of the PMLA. This law is well settled by the Hon’ble Supreme Court in “ Vijay Madanlal Choudhary”, the relevant portions of which read as under:

¶106

“134. From the bare language of Section 3 of the 2002 Act, it is amply clear that the offence of money laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form — be it one of concealment, possession, acquisition, use of proceeds of crime as much as projecting it as untainted property or claiming it to be so. Thus, involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence — except the proceeds of crime derived or obtained as a result of that crime.

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135. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money laundering to indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money laundering under the 2002 Act — for continuing to possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The offence of money laundering is not dependent on or linked to the date on which the scheduled offence, or if we may say so, the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime.”

¶111

The learned senior counsel for the petitioner is not correct in his submission that the “proceeds of crime” was quantified only in the counter-affidavit and, therefore, the ED had no material in its possession at the time of arrest. In our opinion, the existence of material giving rise to a reason to believe that the petitioner is involved in money laundering is the relevant consideration at the stage of arrest. Quantification for the purpose of attachment or adjudication may vary as investigation progresses. We may further note that the petitioner was produced before the designated Court, which upon consideration of the material remanded him to custody. Thereafter, successive remand orders have been passed and the present petition has been belatedly filed nearly four months after the arrest. While it is correct that an illegal arrest may be challenged notwithstanding remand orders, the Court must be satisfied of

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patent illegality or non-compliance with statutory safeguards. No such infirmity has been demonstrated in this case. The petitioner’s reliance on “ Anil Kumar’s” case is misplaced and easily distinguishable on facts. In that case, Anil Kumar took charge of the VVCMC in 2022, after the construction of the 41 illegal buildings. In the search operations carried out by the ED, no tangible or incriminating material was found at that stage against Anil Kumar, which would have established that an offence under the PMLA was committed. The panchanama prepared by the ED recorded that after a thorough and systematic search of his premises, no incriminating document or unaccounted cash or electronic device was found or seized from the said premises. Whereas, in the present case, unaccounted cash and jewellery are recovered from the petitioner. In our view, the present petition appears to be an attempt to bypass the statutory mechanism of section 45 of the PMLA governing bail. We have also bestowed our consideration to the submissions advanced before us relating to sufficiency of evidence, nexus between assets and alleged crime and credibility of section 50 of the PMLA statements and What’sApp chats. However, we do not find a prima facie case made out for interference. These matters generally fall within the domain of trial or bail proceedings and an indepth examination by this Court may cause prejudice to the parties.

¶116

For the above reasons, no case is made out for exercise of writ jurisdiction to declare the arrest of the petitioner illegal or to quash the remand orders. Writ Petition No.5843 of 2025 is devoid of merits and is dismissed. It is clarified that the observations made herein are confined to adjudication of this writ petition and shall not prejudice the rights and contentions of the parties in any

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proceedings before the trial Court including bail application, as and when filed by the petitioner.

¶121

[ GAUTAM A. ANKHAD, J. ]

¶122

[ CHIEF JUSTICE ]

¶123

Digitally signed by SNEHA SNEHA ABHAY ABHAY DIXITDate: WP-5843-2025.doc DIXIT 2026.03.1010:13:53 +0530

¶124

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Issues for consideration

4 issues framed by the court

AI extract

1.
Whether the petitioner's arrest by the ED on 13.08.2025 conforms to section 19 PMLA and due process, and is illegal / violative of Articles 14, 19, 21 and 22 so as to warrant quashing of the remand orders in R.A. No.1136 of 2025 and release from custody.¶1
The court held
Scope of judicial review over arrest under special statutes: it must be exercised cautiously and only in cases of manifest arbitrariness or gross non-compliance with statutory safeguards (standard elucidated in Radhika Agarwal); sufficiency or adequacy of the material underlying the authorised officer's 'reasons to believe' is not a matter for judicial scrutiny at the nascent stage of investigation.ratio¶9
2.
Whether, absent the petitioner's arraignment in the first four FIRs, a predicate / scheduled offence was attributable to him so as to sustain the ECIR, invocation of the PMLA and the arrest; and whether the fifth FIR (PC Act) is connected to the earlier FIRs.¶11
The court held
The four FIRs (2019-2022) against builders/developers under sections 420, 467 and 471 IPC are all scheduled offences under the PMLA; the ECIR dated 21.02.2025 was registered on them, and in the course of that investigation the petitioner's role in relation to development permissions and illegal construction (including on government land) came to light, leading to the searches and seizures.ratio¶11
3.
Whether the ED possessed sufficient material at the time of arrest notwithstanding that the alleged proceeds of crime (Rs. 51.77 crores) were quantified for the first time only in the ED's counter-affidavit.¶14
The court held
The relevant consideration at the stage of arrest is the existence of material giving rise to a reason to believe that the person is involved in money laundering; quantification for purposes of attachment or adjudication may vary as investigation progresses — hence first-time quantification of proceeds in the counter-affidavit does not establish absence of material at arrest.ratio¶14
4.
Whether the writ petition, filed nearly four months after the arrest and after successive remand orders, is an attempt to bypass the section 45 PMLA bail mechanism and merits judicial interference with the arrest/remand decisions.¶14
The court held
An illegal arrest may rightly be challenged notwithstanding intervening remand orders, but the Court must be satisfied of patent illegality or non-compliance with statutory safeguards; no such infirmity was demonstrated in this case.ratio¶14

Procedural history

How this case reached the court

AI extract

Order under challenge
Orders dated 14th and 20th August 2025 (with all other orders) passed in Remand Application No.1136 of 2025 by the learned Additional Sessions Judge (PMLA), sought to be quashed and set aside, along with a direction for release, alongside declaration that the ED arrest of 13th August 2025 is illegal.¶1
Additional Sessions Judge (PMLA) / Special Court · 14th and 20th August 2025
Prior proceeding
Petitioner joined the Vasai-Virar City Municipal Corporation (VVCMC) as Deputy Director, Town Planning on 13.08.2010.¶2
Prior proceeding
FIR No.1348 of 2019 dated 26.11.2019 registered at Tulinj/Achole police station under sections 420, 467 and 471 IPC.¶2
Prior proceeding
FIR No.195 of 2022 dated 26.04.2022 registered under section 420 IPC.¶2
Prior proceeding
FIR No.196 of 2022 dated 27.04.2022 registered under sections 420, 467 and 471 IPC.¶2
Prior proceeding
FIR No.69 of 2023 dated 02.02.2023 registered under section 420 IPC.¶2
Prior proceeding
Allegations in the FIRs: illegal construction of 41 buildings by developers using forged permissions and fabricated documents on lands reserved for a sewage treatment plant and dumping ground.¶3
Prior proceeding
By order dated 08.07.2024 in Writ Petition No.15853 of 2022, this Court directed demolition of the 41 illegal buildings.¶3
Prior proceeding
Demolitions carried on 20.02.2025, affecting approximately 2,500 families.¶3
Prior proceeding
ECIR/MBZO-II/10/2025 registered by ED on 21.02.2025 on the basis of FIRs Nos.1348/2019, 195/2022 and 69/2023.¶3
Prior proceeding
From March 2025 onwards, statements of several persons including the petitioner recorded under section 50 PMLA.¶4
Prior proceeding
Search and seizure operations at petitioner's residences in Hyderabad and Mumbai on 14.05.2025, 15.05.2025 and 03.06.2025.¶4
Prior proceeding
Seizure of unaccounted cash of Rs. 8.23 crores and diamond-studded jewellery valued at Rs. 23.28 crores (26,338 grams).¶4
Prior proceeding
ED recorded reasons and issued show cause notice under section 8(1) PMLA on 23.06.2025.¶10
Prior proceeding
Material gathered shared with jurisdictional police under section 66(2) PMLA, culminating in registration of FIR No.330 of 2025 on 01.08.2025.¶10
Prior proceeding
FIR No.330 of 2025 registered on 01.08.2025 under sections 13(1)(b) and 13(2) PC Act against the petitioner.¶4
Prior proceeding
Addendum made FIR No.330/2025 a part of the ECIR on 04.08.2025.¶4
Prior proceeding
Petitioner arrested by ED on 13.08.2025 and furnished written grounds of arrest and reasons to believe under section 19 PMLA.¶4
Prior proceeding
Petitioner in judicial custody pursuant to successive remand orders dated 14.08.2025, 20.08.2025, 03.09.2025, 08.09.2025, 17.09.2025 and 01.10.2025.¶4
Prior proceeding
Produced before the Special Court; initially remanded to police custody and thereafter to judicial custody by the designated Court upon consideration of material.¶10
Prior proceeding
Present writ petition filed in November 2025, more than three months (nearly four months) after the arrest.¶7
Prior proceeding
ED counter-affidavit dated 02.12.2025 asserting compliance with statutory safeguards; not rebutted by the petitioner with any material.¶10

Sh. Y. Shiva Reddy v. Directorate of Enforcement Zonal Office II through Assistant Director and Anr.

Case brief

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Sh. Y. Shiva Reddy v. Directorate of Enforcement Zonal Office II through Assistant Director and Anr.

Case brief

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