The Supreme Court has held that once cognizance of an offence of money laundering is taken for a complaint under Section 44 (1)(b) Prevention of Money Laundering Act, 2002 then the Directorate of Enforcement would be ‘powerless’ to exercise its power under Section 19 to arrest.

The Bench explained that if the Directorate of Enforcement (ED) wanted custody of an accused who appeared after service of summons for conducting further investigation in the same offence, the ED would have to seek custody of the accused by applying to the Special Court. After hearing the accused, the Special Court must pass an order on the application by recording brief reasons. While hearing such an application, the Court may permit custody only if it is satisfied that custodial interrogation at that stage is required, even though the accused was never arrested under Section 19 PMLA.

Justice Abhay S. Oka and Justice Ujjal Bhuyan observed, “After cognizance is taken of the offence punishable under Section 4 of the PMLA based on a complaint under Section 44 (1)(b), the ED and its officers are powerless to exercise power under Section 19 to arrest a person shown as an accused in the complaint.."

Sr. Advocate Sidharth Luthra represented the appellant, while ASG S.V. Raju appeared for the respondent.

The accused in the case was not arrested after the registration of the Enforcement Case Information Report (ECIR) till the Special Court took cognizance under the PMLA of an offence punishable under Section 4 of the PMLA. After the complaint under Section 44(1)(b) of the PMLA, the accused was not arrested by the ED by the exercise of power under Section 19 of the PMLA till the complaint was filed. The accused was denied the benefit of anticipatory bail by the Special Court.

The Punjab & Haryana High Court had dismissed an anticipatory bail sought by the accused on grounds that one of the twin conditions under Section 45 of the PMLA was not complied with i.e. there should be reasonable grounds for believing that the person is not guilty of such offence. Aggrieved by the decision, the accused appealed before the Supreme Court.

The Court clarified that once a complaint under Section 44 (1)(b) of the PMLA was filed, it would be governed by Sections 200 to 205 of the CrPC as none of the other provisions were inconsistent with any of the provisions of the PMLA.

If the accused was not arrested by the ED till filing of the complaint, the Court stated that “while taking cognizance on a complaint under Section 44(1)(b), as a normal rule, the Court should issue a summons to the accused and not a warrant. Even in a case where the accused is on bail, a summons must be issued.

The Bench stated that After a summons is issued under Section 204 of the CrPC on taking cognizance of the offence punishable under Section 4 of the PMLA on a complaint if the accused appears before the Special Court pursuant to the summons, “he shall not be treated as if he is in custody. Therefore, it is not necessary for him to apply for bail.” However, the a Special Court had the power to direct an accused to furnish bond in terms of Section 88 of the CrPC.

In a case where the accused had furnished bonds under Section 88 of the CrPC and failed to appear on subsequent dates, the Special Court had the powers under Section 89 read with Sections 70 of the CrPC to issue a warrant directing that the accused to be arrested and produced before the Special Court.

The Court further explained that if such a warrant were to be issued, it would always be open for the accused to apply for cancellation of the warrant by giving an undertaking to the Special Court to appear before the said Court on all the dates fixed by it. While cancelling the warrant, the Court can always take an undertaking from the accused to appear before the Court on every date unless appearance is specifically exempted.

When the ED has not taken custody of the accused during the investigation, usually, the Special Court will exercise the power of cancellation of the warrant without insisting on taking the accused in custody provided an undertaking is furnished by the accused to appear regularly before the Court. When the Special Court deals with an application for cancellation of a warrant, the Special Court is not dealing with an application for bail. Hence, Section 45(1) will have no application to such an application,” the Court remarked.

Consequently, the Bench set aside the impugned orders declining the grant of anticipatory bail to the accused and directed the warrant issued by the Special Court to be cancelled.

Accordingly, the Supreme Court allowed the appeal.

Cause Title: Tarsem Lal v. Directorate of Enforcement (Neutral Citation: 2024 INSC 434)


Appellant: Sr Advocate Sidharth Luthra; AOR Akbar Siddique, Sakshi Kakkar and Nikhil Jain; Advocates Sheezan Hashmi, Mihir Joshi, Siddharth R. Gupta, Sanjay Singh, Shakti Singh, Kartikey Dang, Harshit Sethi, and Harshit Sethi

Respondent: ASG S.V. Raju; AOR Mukesh Kumar Maroria; Advocates Zoheb Hussain, Annam Venkatesh, Arkaj Kumar and Rajeshwari Shankar

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