Supreme Court Clarifies Arrest Procedures in Money Laundering Cases: Tarsem Lal vs. Directorate of Enforcement (2024) INSC 434 (16 May 2024)

Introduction

Date of the Judgment: 16 May 2024

Citation: 2024 INSC 434

Judges: Abhay S. Oka, J. and Ujjal Bhuyan, J.

Can an individual, who was not arrested during the investigation of a money laundering case, be directly taken into custody upon appearing before a Special Court after being summoned? The Supreme Court of India recently addressed this critical question, clarifying the procedures under the Prevention of Money Laundering Act, 2002 (PMLA). This judgment clarifies the powers of the Enforcement Directorate (ED) and the rights of the accused, ensuring a balance between investigation and personal liberty. The bench comprised Justices Abhay S. Oka and Ujjal Bhuyan.

Case Background

The appellants in this case were accused of offenses under Section 44(1)(b) of the PMLA. They had not been arrested by the ED after the Enforcement Case Information Report (ECIR) was registered. The Special Court took cognizance of the offense under Section 4 of the PMLA based on complaints filed under Section 44(1)(b). After summons were issued, the appellants did not appear before the Special Court, leading to the issuance of warrants for their arrest. Subsequently, the appellants applied for anticipatory bail, which was rejected by both the Special Court and the High Court. The Supreme Court, through interim orders, granted the appellants protection from arrest.

Timeline

Arguments

The appellants argued that the ED’s power to arrest under Section 19 of the PMLA ceases once the Special Court takes cognizance of the offense. They contended that if an accused appears in response to a summons, there is no need for an arrest warrant. They further argued that Section 88 of the Code of Criminal Procedure, 1973 (CrPC) is consistent with the PMLA, and if an accused offers to furnish bonds for appearance, the Special Court should accept them. They also stated that after cognizance, the Special Court cannot exercise remand powers under Section 167(2) of the CrPC, and that Section 170 of the CrPC is merely a procedural compliance.

The Additional Solicitor General (ASG), representing the respondents, submitted that an accused appearing before the Special Court is deemed to be in custody and must apply for bail under Section 439 of the CrPC. The ASG argued that the conditions under Section 45(1) of the PMLA apply to all bail applications and that the ED has the right to further investigate and arrest the accused under Section 19 of the PMLA, even after cognizance is taken. They also contended that the PMLA overrides the CrPC and that the guidelines in Satender Kumar Antil do not apply to special acts like the PMLA.

The following table shows the sub-submissions categorized by main submissions of all sides pertaining to the issue:

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the power to arrest under Section 19 of the PMLA can be exercised after the Special Court takes cognizance of the offense.
2. Whether an accused who appears before the Special Court after a summons is deemed to be in custody.
3. Whether Section 88 of the CrPC applies to proceedings under the PMLA.
4. Whether an order to furnish bonds under Section 88 of the CrPC is equivalent to granting bail.
5. Whether the Special Court can exercise the power of remand under Section 167(2) of the CrPC after cognizance.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court relied on the following authorities:

Judgment

The Supreme Court analyzed the submissions and authorities, clarifying the legal position regarding arrest procedures under the PMLA.

The following table shows how each submission made by the Parties was treated by the Court:

The following table shows how each authority was viewed by the Court:

What weighed in the mind of the Court?

The Supreme Court emphasized several points in its reasoning to reach its decision. The Court was primarily concerned with ensuring that the procedure followed by Special Courts is consistent with the principles of natural justice and personal liberty. The Court noted that the accused should not be taken into custody merely for appearing in response to a summons, as this would violate their rights. The Court also focused on the correct interpretation of the CrPC and PMLA provisions, ensuring that the powers of the ED are not misused and that the accused are not unduly harassed. The Court also considered the practical implications of its decision on the functioning of the Special Courts and the rights of the accused.

The following table ranks the sentiment analysis of reasons given by the Supreme Court:

The following table shows the ratio of fact:law percentage that influenced the court to decide:

Logical Reasoning

The Court’s logical reasoning for each issue is explained below:

Key Takeaways

• ✓ The ED’s power to arrest an accused named in a complaint under Section 44(1)(b) of the PMLA ceases once the Special Court takes cognizance of the offense.
• ✓ An accused who appears before the Special Court after a summons is not deemed to be in custody and does not need to apply for bail.
• ✓ Special Courts can direct the accused to furnish bonds under Section 88 of the CrPC to ensure their appearance, but this is not equivalent to granting bail.
• ✓ If an accused fails to appear after a summons, the Special Court can issue a warrant for their arrest, but initially, a bailable warrant should be issued.
• ✓ The ED can seek custody of an accused who appears after a summons for further investigation by applying to the Special Court, which must record brief reasons for permitting custody.

Directions

The Supreme Court directed the following:

• ✓ The warrants issued against the appellants were cancelled, subject to them appearing before the Special Court within one month and giving an undertaking to attend all dates, unless specifically exempted.
• ✓ The appellants were directed to furnish bonds in accordance with Section 88 of the CrPC within one month.
• ✓ The warrants would be cancelled only if compliance was made within one month, and the warrants were not to be executed for this period.
• ✓ Failure to comply within one month would allow the Special Courts to issue warrants against the appellants.

Development of Law

The ratio decidendi of this case is that an accused who appears before a Special Court in response to a summons is not deemed to be in custody and is not required to apply for bail. This judgment clarifies the procedure to be followed by Special Courts in PMLA cases, ensuring that the powers of the ED are not misused and that the accused are not unduly harassed. This decision also clarifies that the ED’s power to arrest under Section 19 of the PMLA ceases once the Special Court takes cognizance of the offense for the accused named in the complaint.

Conclusion

The Supreme Court’s judgment in Tarsem Lal vs. Directorate of Enforcement provides significant clarity on the procedures to be followed by Special Courts in cases under the Prevention of Money Laundering Act, 2002. The Court held that an accused who appears before the Special Court after a summons is not deemed to be in custody and does not need to apply for bail. The Court also clarified that the ED’s power to arrest under Section 19 of the PMLA ceases once the Special Court takes cognizance of the offense for the accused named in the complaint. This judgment ensures that the rights of the accused are protected, and the powers of the ED are exercised within the bounds of the law.