Case Citation: Criminal Appeal No. 2608 Of 2024
Court: Supreme Court of India
Bench: A.S. Oka and Ujjal Bhuyan, JJ.
Date of Judgment: May 16, 2024
1. FACTS
On June 16, 2023, Tarsem Lal was implicated in a case involving the alleged illegal allotment of Shamlat Lands to ineligible private parties in Punjab. However, de facto, these lands are meant for the benefit of villagers. The claim was that revenue officials, along with property dealers, orchestrated a scheme where land meant for collective use was wrongfully allocated, with Lal allegedly receiving large sums of money for “facilitating” these transactions.
These acts formed the predicate offences under the Prevention of Money Laundering Act, 2002 (PMLA), prompting the Enforcement Directorate (ED) to initiate proceedings and file an Enforcement Case Information Report (ECIR). A Special PMLA Court took cognisance of the complaint under Section 44(1)(b) of the Act and issued summons to Lal. Notably, Lal was not arrested at this point.
Lal, however, failed to appear before the Special Court, prompting it to issue non-bailable warrants. In response, he applied for anticipatory bail under Section 438 of the CrPC, which was rejected. He approached the Punjab & Haryana High Court next, which further dismissed his plea, applying the “twin conditions” under Section 45 of the PMLA: that the accused must prove a prima facie case of innocence and that they are unlikely to reoffend.
Aggrieved by the rejection of prayers by both the Special Court and the High Court, Lal moved the Supreme Court. By then, eight similar appeals had reached the Court, where accused persons, though summoned, were denied bail on the grounds that they were “in custody” and needed to meet the assertive PMLA standard. Consequently, the Supreme Court tagged Lal’s matter with eight other criminal appeals and passed interim protection orders from arrest.
2. ISSUES RAISED
The case highlighted issues of prospective and profound nuances of law:
1. Substantial Question of Law: Can the Enforcement Directorate arrest a person under Section 19 of the PMLA after a Special Court has already taken cognisance of the complaint under Section 44(1)(b)?
2. Does the appearance of an accused pursuant to a summons order amount to “custody” which furthers into requiring the accused to seek bail under stringent PMLA conditions?
3. Can a bond for appearance under Section 88 of the CrPC be treated as a bail application under Section 45 of the PMLA.
3. CONTENTIONS
Arguments of the Appellants
- Lack of judicial scrutiny after cognisance: Lal argued that once the Special Court takes cognisance of the complaint under Section 44(1)(b) of the PMLA, the ED’s power to arrest under Section 19 ends. The process shifts from investigation to trial and any further action like taking an accused into custody must happen only with court permission.
- Summons is not custody: He emphasised that a court-issued summons merely directs appearance and does not amount to arrest. If the accused appears and furnishes a bond under Section 88 of the CrPC, he is not in custody and thus not required to seek bail or satisfy the twin conditions under Section 45 of the PMLA. Since there is no custody, there is no occasion for a bail application and therefore the twin bail conditions of Section 45 of PMLA are not triggered.
- Primacy of CrPC unless explicitly excluded: Relying on Sections 65 and 71, which state that the provisions of the CrPC shall apply to proceedings under the PMLA to the extent they are not inconsistent with the PMLA. Lal’s counsel contended that the CrPC continues to govern procedure unless specifically excluded. Therefore, general provisions of CrPC must apply around summons, arrest and bond unless the PMLA clearly overrides them.
Arguments of the Respondents
- PMLA overrides CrPC: The ED contended that the PMLA is a special statute and prevails over general criminal procedural laws. It claimed that arrest powers under Section 19 are not exhausted by the filing of a complaint or taking of cognisance, especially in cases involving supplementary investigations or fresh evidence.
- Appearance equals custody: The ED claimed that any accused appearing after summons is already considered to be in constructive custody and therefore must seek bail under Section 439 of the CrPC. Accordingly, a bond under Section 88 of the CrPC, in their view, is tantamount to a bail application and must be assessed using the rigorous bail test under Section 45 of the PMLA, including the twin conditions.
4. RATIONALE
In a well-reasoned 37-page judgment authored by Justice Abhay S. Oka, the Hon’ble Supreme Court clarified the procedural contours governing arrest powers under the Prevention of Money Laundering Act, 2002 (PMLA), particularly in the context of post-cognisance proceedings before a Special Court.
A. Arrest Not Permissible After Cognisance
The Court categorically held that once cognisance of the complaint is taken by the Special Court under Section 44(1)(b) of the PMLA, the Enforcement Directorate cannot exercise arrest powers under Section 19 of the Act in respect of the accused named therein. Any subsequent deprivation of liberty must occur only through an application made to the Special Court, which is required to exercise judicial discretion, provide an opportunity of hearing to the accused and record reasons in writing before granting such custody.
B. Appearance on Summons Does Not Constitute Custody
The Court reiterated that compliance with a summons under the Code of Criminal Procedure, 1973 (CrPC), does not amount to being in custody. An individual who appears before the court voluntarily in response to a summons remains outside the control and supervision of the investigating agency. Consequently, the individual is not required to apply for bail and the twin conditions prescribed under Section 45 of the PMLA are not attracted in such circumstances.
C. Execution of Bond Under Section 88 CrPC Is Not Equivalent to Bail
The Court clarified that a bond executed under Section 88 of the CrPC is merely an undertaking to ensure the presence of the accused during court proceedings. It cannot be equated with a bail application. Any interpretation treating such a bond as a form of bail, thereby triggering the conditions under Section 45 of the PMLA, was expressly rejected by the Court as legally untenable and procedurally unjust.
D. Applicability of CrPC Unless Expressly Excluded
Invoking Sections 65 and 71 of the PMLA, the Court affirmed that the procedural provisions of the CrPC are applicable to proceedings under the PMLA unless a specific inconsistency is demonstrated. Accordingly, standard CrPC norms relating to summons, warrants, bonds and the conduct of trial proceedings shall continue to apply in PMLA cases unless there exists an express statutory deviation under the PMLA.
5. HIGHLIGHTING THE LACUANE
While the judgment is a clear reaffirmation of procedural safeguards under the PMLA, certain critical gaps remain unaddressed:
- Ambiguity Around the Twin Conditions
The Court steered clear of conclusively defining when Section 45’s twin bail conditions should apply. While it held that these conditions are inapplicable when a person appears pursuant to a summons, it remained silent on situations where custody is later sought through court permission. The lack of clarity means trial courts may continue to apply the twin test inconsistently, leaving accused persons in legal limbo.
- Executive Leeway
Though the ruling curtails post-cognisance arrests under Section 19 PMLA, it still permits the ED to seek custody by approaching the court. This opens the door to broad and vague claims of “further investigation” or the filing of supplementary complaints. Without judicial rigor at the trial stage, the ED may continue to use these justifications to press for custody even after cognisance is taken.
- No Structural Remedy
The judgment grants individual relief to the appellants but doesn’t establish any institutional safeguard to prevent future misuse. There is no requirement for public reasoning when custody is sought post-cognisance, no audit mechanism to track arrests after court cognisance and no deterrent for executive overreach. The absence of systemic accountability could weaken the practical impact of the ruling.
- Warrant-to-Custody Loophole Unaddressed
A recurring pattern in PMLA cases is the escalation from non-appearance on summons to issuance of warrants, which then serves as a pretext to deny anticipatory bail. The Court could have taken the opportunity to lay down stricter procedural safeguards for when and how warrants should translate into custody requests, especially given that non-appearance is not the same as criminal intent.
V. No Relief for Preceding Misuse
Although the Court held that bonds under Section 88 CrPC are not bail applications, it did not extend relief to similarly placed individuals who may have wrongly faced arrest or denial of bail under misinterpretations of this provision. The absence of retrospective clarity means that lower courts may not uniformly apply this ruling without further intervention.
6. INFERENCE
This judgment restores a critical line between investigation and trial. It affirms that once a court has taken cognisance of an offence under the PMLA, the executive no longer has unfettered powers to arrest. Any further deprivation of liberty must happen under judicial scrutiny, not investigative discretion or arbitrary power. This shift re-centres the role of courts in protecting individual freedom that furthers procedural discipline in economic offence cases and reinforces judicial oversight.
What also stands out is the Court’s rejection of the narrative that anyone appearing before the court is already “in custody.” That subtle but crucial distinction protects thousands of accused persons from being subjected to unnecessarily harsh bail standards. The acknowledgment that a bond under Section 88 of the CrPC is not a substitute for bail helps prevent an unfair elevation of procedural steps into substantive barriers.
Yet, the judgment is as much a beginning as it is a resolution. It outlines a fair process but stops short of ensuring its uniform application. Without detailed guidance on the twin conditions or concrete procedural guardrails for future cases, the ruling’s effectiveness will depend on how faithfully trial courts follow its spirit.
Nevertheless, the court’s verdict set a strong narrative, notably:
- summons are not tools of coercion and
- procedural fairness is non-negotiable, even under special laws.
As financial crime enforcement intensifies in India, this decision reasserts that due process remains the backbone of criminal and economic justice and that no law, however potent, can override the basic right to liberty without full justification under the eyes of the law.
~ Authored by
Abhishree Anandi
National Law University, Odisha