Supreme Court’s Landmark Judgment in Tarsem Lal vs Directorate of Enforcement: ED Has No Power to Arrest for Complaints Registered Under Section 44(1)(b) of PMLA, 2002

On May 16, 2024, the Supreme Court of India delivered a landmark judgment in the case of Tarsem Lal vs Directorate of Enforcement (Criminal Appeal No. 2608 of 2024), providing much-needed clarity on the intricate interplay between the power of arrest by the ED in terms of complaints registered under Section 44(1)(b). This pivotal ruling addressed crucial issues concerning the arrest powers of the Enforcement Directorate (ED) under the PMLA when a complaint is preferred under Section 44(1)(b) of the PMLA and when the Special Court takes cognizance of such complaints. Furthermore, our Apex Court made distinct findings on the applicability of bail provisions under Section 45 of PMLA in circumstances where a complaint is filed under Section 44(1)(b).

To summarize, our Apex Court issued a significant judgment observing that the Enforcement Directorate has no power to arrest a person once a complaint has been registered under Section 44(1)(b) of the PMLA and a special court has taken cognizance of such a complaint.

Keywords.

Arrest by ED under 44(1)(b), Bail under PMLA for cases under 44(1)(b), Section 19 PMLA, Section 44(1)(b) PMLA, Sections 200-205 CrPC, Section 204 CrPC, Summons under PMLA, Warrant under PMLA, Anticipatory bail PMLA, Section 88 CrPC, Bonds for appearance, Section 437 CrPC, Section 439 CrPC.

Brief Summary

The appellants, including Tarsem Lal, faced charges through a complaint filed under Section 44(1)(b) of the PMLA. The Enforcement Directorate (ED) initiated action against them, registering an Enforcement Case Information Report (ECIR). Despite the allegations, the appellants were not arrested immediately following the registration of the ECIR. Instead, the Special Court took cognizance of the offenses, leading to the issuance of summons for their appearance.

Upon receiving the summons, the appellants applied for anticipatory bail, which the Special Court denied. Dissatisfied with this outcome, the appellants approached the Supreme Court, seeking relief and clarification on the application of Section 88 of the CrPC in their cases. Additionally, the appellants questioned the powers of the ED to arrest in circumstances where the Special Court has taken cognizance.

Arguments put forth before the Supreme Court by the Parties:

By the Appellant:

The appellants contended that the ED’s power to arrest under Section 19 of the PMLA cannot be exercised after the Special Court takes cognizance of the offense in complaints filed under Section 44(1)(b) of PMLA. They argued that if an accused appears pursuant to a summons issued by the Special Court, there is no legal requirement for the accused to be arrested or seek bail. Further, they asserted that the provisions of the CrPC, including Section 88 (power to take bonds for appearance), should apply, allowing the accused to furnish bonds and secure their attendance before the court without the need for custodial detention. They also argued that in circumstances where a complaint under Section 44(1)(b) is cognized, the court does not have powers to remand under Section 167 and the only recourse available to the court is to take resort under Section 309(2).

By the respondent:

The Enforcement Directorate argued that once an accused appears before the Special Court, they are deemed to be in the court’s custody, necessitating the application for bail under Section 439 of the CrPC. The ED further contended that even after cognizance is taken, it retains the right to conduct further investigations and file supplementary complaints. Consequently, the ED argued that it can exercise its power under Section 19 of the PMLA to arrest the accused named in the complaint, irrespective of the court’s cognizance.

Both arguments posed a simple question as to whether the ED has the power to arrest after the court seizes its cognizance and whether the application of bail or anticipatory bail under Section 437 of CrPC read with Section 45 of PMLA is mandatory even when the court seizes its cognizance.

Both arguments posed a simple question as to whether the ED has the power to arrest after the court seizes its cognizance and whether the application of bail or anticipatory bail under Section 437 of CrPC read with Section 45 of PMLA is mandatory even when the court seizes its cognizance.

Supreme Court’s Deliberations on this issue:

In its comprehensive judgment, the Supreme Court meticulously addressed each contention raised by the parties, providing a detailed analysis and interpretation of the relevant provisions of the PMLA and the CrPC. The court’s findings can be summarized as follows:

• Applicability of CrPC provisions:

The Supreme Court held that Sections 200 to 205 of the CrPC, which deal with the issuance of summons and warrants, are not inconsistent with the provisions of the PMLA and are, therefore, applicable to complaints filed under Section 44(1)(b) of the PMLA.

1. Section 200 – Procedure in certain cases: This section deals with the procedure to be followed by a Magistrate when a complaint is filed before them. It outlines the steps the Magistrate must take to examine the complainant and witnesses (if any). The Magistrate must record their statements and the substance of the complaint. This section ensures that the Magistrate examines and evaluates the complaint before taking any further action.
2. Section 204 – Issue of process: Section 204 comes into play after the Magistrate has examined the complaint under Section 200 and formed an opinion that there are sufficient grounds to proceed further. It gives the Magistrate the power to issue summons or warrants against the accused based on their assessment of the case:
   • If it appears to be a summons case, the Magistrate shall issue a summons for the accused’s attendance.
   • If it appears to be a warrant case (offenses punishable with imprisonment over 3 years), the Magistrate may issue a warrant or summons for the accused’s appearance.

This section gives the Magistrate discretion to decide whether to issue a summons or warrant based on the seriousness of the alleged offense and the likelihood of the accused evading the legal process or tampering with evidence.

In these circumstances, while relying on precedents, our Supreme Court observed that Sections 200 and 204 are applicable to complaints under Section 44(1)(b).

• Issuance of Summons or Warrants and Taking an Accused into Custody After Such Summons:

The court ruled that if an accused was not arrested by the ED until the filing of the complaint, the Special Court should normally issue a summons while taking cognizance of the complaint. The issuance of a warrant should be an exception, reserved for cases where the accused is likely to tamper with evidence or evade the process of law. The court relied on its earlier decision in Inder Mohan Goswami & Anr. v. State of Uttaranchal & Ors. (2007) 12 SCC 1, which laid down guidelines for the exercise of the court’s discretion in issuing summons or warrants.

Further, our Hon’ble Court referred to Section 61 of CrPC read with Form 1, where the Apex Court succinctly observed that if the accused appears before the Court, there is sufficient compliance with the summons. Hence, the question of taking the accused into custody on their appearance before the Court pursuant to the summons does not arise at all.

• Appearance of the Accused Pursuant to a Summons:

The Supreme Court unequivocally clarified that if an accused appears pursuant to a summons issued on a complaint, they shall not be treated as if they are in custody. The object of issuing a summons is to secure the accused’s presence before the Court, not to take the accused into custody. Therefore, it is not necessary for the accused to apply for bail. However, the Special Court can direct the accused to furnish bonds under Section 88 of the CrPC to ensure their appearance before the court.

• Exercise of Arrest Powers by the ED After Cognizance:

In this significant ruling, the Supreme Court held that after cognizance is taken based on a complaint under Section 44(1)(b) of the PMLA, the ED and its officers are powerless to exercise the power of arrest under Section 19 against an accused named in the complaint. If the ED requires custody of the accused for further investigation, it must seek custody from the Special Court by filing an application and recording reasons for the need for custodial interrogation.eeks to balance the need for procedural discipline in reporting seizures promptly to magistrates.

• The Interpretation of Section 205 of the CrPC in Conjunction with Sections 65 and 71 of the PMLA:

The Supreme Court examined whether Section 205 of the CrPC, which deals with dispensing with the personal attendance of the accused and allowing them to appear through a pleader, would apply to complaints filed under Section 44(1)(b) of the PMLA. The court observed that Sections 65 and 71 of the PMLA are relevant in determining the applicability of CrPC provisions to PMLA cases.

After carefully examining the PMLA, the Supreme Court found no provision inconsistent with Section 205 of the CrPC. Therefore, the court held that Section 205 would apply to complaints filed under Section 44(1)(b) of the PMLA. The court reasoned that if an accused who appears pursuant to a summons is deemed to be in custody, there would be no occasion for the court to dispense with their personal attendance under Section 205. The very existence of Section 205 implies that an accused who appears pursuant to a summons is not considered to be in custody.

Furthermore, the court noted that Section 205(2) empowers the court to enforce the accused’s attendance at the trial stage, even if their personal attendance was dispensed with earlier. This provision would be redundant if the accused were deemed to be in custody upon appearance pursuant to a summons. In summary, the Supreme Court’s interpretation harmonized Section 205 of the CrPC with the PMLA provisions, ruling that Section 205 is applicable to PMLA cases. This interpretation upholds the court’s discretion to dispense with the personal attendance of the accused who appears pursuant to a summons, indicating that such an accused is not deemed to be in custody merely by appearing before the court.

• Distinguishing Bonds from Bail in Terms of Section 88 of CrPC: Preserving Procedural Integrity:

The Supreme Court asserted that when an accused appears before the Special Court pursuant to a summons issued on a complaint under the PMLA, the Special Court is vested with the power to direct the accused to furnish bonds in accordance with Section 88 of the CrPC. This provision not only ensures the accused’s regular appearance before the court, which nullifies the necessity of applying for bail.

The Supreme Court’s judgment draws a clear demarcation between bonds furnished under Section 88 and the grant of bail, a distinction that carries profound implications for the procedural integrity of PMLA cases. The court unequivocally clarified that an order accepting bonds from the accused under Section 88 does not amount to a grant of bail. This distinction underscores the fundamental principle that a bond furnished under Section 88 is merely an undertaking by the accused, who is not in custody, to appear before the court on the dates fixed, thus aiding the court in procuring the accused’s presence during the trial and preserving the sanctity of the legal proceedings without the necessity for applying for separate bail or anticipatory bail.

• Application of Section 45(1) of the PMLA:

The court clarified that when an accused applies for cancellation of a warrant issued for non-appearance, the Special Court is not dealing with a bail application. Therefore, the stringent conditions for granting bail under Section 45(1) of the PMLA are not applicable in such cases. This ruling ensures that the accused is not subjected to unnecessary hardship when seeking the cancellation of a warrant issued solely for their non-appearance.

Gist of case laws cited by our Supreme Court:

• Yash Tuteja & Anr. v. Union of India & Ors. (2024 INSC 301): This case dealt with the applicability of CrPC provisions to complaints filed under Section 44(1)(b) of the PMLA and held that Sections 200 to 204 of the CrPC are applicable to such complaints.
• Ashok Munilal Jain & Anr. v. Assistant Director, Directorate of Enforcement (2018) 16 SCC 158: This case addressed the interplay between the PMLA and the CrPC, highlighting that only those provisions of the CrPC that are inconsistent with the specific provisions of the PMLA will not apply.
• Inder Mohan Goswami & Anr. v. State of Uttaranchal & Ors. (2007) 12 SCC 1: This case laid down guidelines for the exercise of the court’s discretion in issuing summons or warrants, emphasizing that summons should be the norm, and warrants should be issued only in exceptional circumstances.
• Pankaj Jain v. Union of India and Anr. (2018) 5 SCC 743: This case clarified that the use of the word “may” in Section 88 of the CrPC confers discretionary power on the court to direct an accused to furnish bonds for appearance.
• Satender Kumar Antil v. Central Bureau of Investigation & Anr. (2021) 10 SCC 773 and Satender Kumar Antil v. Central Bureau of Investigation and Anr. (2022) 10 SCC 51: These two cases provided guidance on the interpretation of Sections 88, 170, 204, and 209 of the CrPC and clarified that there is no need for an insistence on a bail application while considering applications under these sections.
• Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. (2022 SCC OnLine SC 929): This case highlighted the gravity and severity of money laundering offenses, emphasizing the need for mandatory compliance with the requirements of Section 45(1) of the PMLA.

Provisions interpreted:

The Supreme Court interpreted and clarified the applicability of various provisions of the PMLA and the CrPC, including Sections 4, 19, 44(1)(b), 45(1), and 65 of the PMLA, as well as Sections 61, 70, 88, 89, 170, 200-205, 309(2), 437, and 439 of the CrPC.

Conclusion:

For easy understanding, the Supreme Court in Para 23 of its judgment itself issued a summary of its observations. The gist of its summary is as follows:

a) A complaint under Section 44(1)(b) of the PMLA is governed by Sections 200-205 of the CrPC.

b) If the accused is not arrested by the ED until the complaint is filed, a summons should be issued, reserving warrants for exceptional cases.

c) If the accused appears in response to a summons, they do not need to apply for bail but must furnish bonds under Section 88 of the CrPC.

d) If the accused fails to appear after a summons, the court can issue a warrant, starting with a bailable warrant.

e) A bond under Section 88 is an undertaking to appear and does not equate to bail.

f) If the accused fails to appear after furnishing bonds, the court can issue a warrant under Sections 89 and 70 of the CrPC.

g) Warrant cancellation applications are not bail applications, so Section 45(1) of the PMLA does not apply.

h) Bonds under Section 88 are not mandatory if an arrest warrant or proceedings under Sections 82 or 83 of the CrPC are initiated.

i) After a complaint is filed under Section 44(1)(b), the ED cannot arrest the accused under Section 19 for the same complaint.

j) The ED must seek custody from the Special Court if it wants to detain the accused for further investigation after they appear.

These conclusions apply to cases where the accused was not arrested until the complaint under Section 44(1)(b) was filed.

FAQ’s on the above judgment:

Q1. Can the ED arrest an accused after the Special Court takes cognizance of the offense based on a complaint under Section 44(1)(b) of the PMLA?

A1. No, the Supreme Court has held that after cognizance is taken based on a complaint under Section 44(1)(b) of the PMLA, the ED and its officers are powerless to exercise the power of arrest under Section 19 against an accused named in the complaint.

Q2. Is it necessary for an accused to apply for bail if they appear pursuant to a summons issued by the Special Court?

A2. No, the Supreme Court has clarified that if an accused appears pursuant to a summons issued on a complaint, they shall not be treated as if they are in custody. Therefore, it is not necessary for the accused to apply for bail. However, the Special Court can direct the accused to furnish bonds under Section 88 of the CrPC to ensure their appearance.

Q3. Can the ED seek custody of an accused who appears pursuant to a summons for further investigation?

A3. Yes, the Supreme Court has held that if the ED wants custody of the accused who appears after service of summons for conducting further investigation in the same offense, it must seek custody from the Special Court by filing an application and recording reasons.

Q4. Is Section 45(1) of the PMLA (stringent conditions for granting bail) applicable when an accused applies for cancellation of a warrant issued for non-appearance?

A4. No, the Supreme Court has clarified that when an accused applies for cancellation of a warrant issued for non-appearance, the Special Court is not dealing with a bail application. Therefore, Section 45(1) of the PMLA is not applicable in such cases.

Q5. What is the role of Section 88 of the CrPC in PMLA cases?

A5. Section 88 of the CrPC allows Special Courts to take bonds for ensuring the appearance of the accused, offering an alternative to immediate arrest and detention in PMLA proceedings.

Q6. How does this case affect future PMLA proceedings in Special Courts?

A6. This case sets a precedent for applying CrPC provisions in PMLA cases, guiding Special Courts on applicability of bail provisions in the circumstances when the special court seizes its cognisance.

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