Money Laundering : When ED can not arrest and accused even need not apply for bail

D.S. Chawla, Advocate, +91 9416327678, Former Senior Public Prosecutor CBI

Supreme Court of India in Tarsem Lal v. Directorate Of Enforcement ruled on procedure post-cognizance in money laundering cases. The Supreme Court clarified that post-cognizance, Enforcement Directorate cannot arrest accused in money laundering cases, emphasizes issuing summons over warrants.

The Tarsem Lal v. Directorate Of Enforcement laid down detailed procedural guidelines for handling cases under the Prevention of Money Laundering Act, 2002, post-cognizance. The case highlighted crucial aspects concerning the powers of arrest and the issuance of summons versus warrants.

The judgment, delivered by Justices Abhay S. Oka and Ujjal Bhuyan, arose from appeals by accused individuals who faced warrants after failing to appear in response to summons issued by the Special Court under PMLA. The Court emphasized that the Enforcement Directorate (ED) and other authorities lose the power to arrest once the Special Court has taken cognizance of the offence, as per Section 4 of the PMLA.

The Court ruled that in cases where the accused were not arrested before filing the complaint, the Special Court should generally issue a summons, not a warrant. Moreover, if the accused appears in response to a summons, they are not deemed to be in custody, thus negating the need for bail applications. The Court also elaborated that an accused providing a bond under Section 88 of the CrPC does not equate to being granted bail.

The Supreme Court directed that if an accused fails to appear after a summons, the Special Court can issue a bailable warrant initially, escalating to a non-bailable warrant if necessary. The judgment also clarified that the ED must seek the Special Court’s permission for custody if further investigation is required post-cognizance.

The Supreme Court extensively dealt with the legal provisions concerning the arrest of an accused under the PMLA, especially after the Special Court takes cognizance of the offence. The Court laid down several points which clarify the legal position:

• 1. Cognizance and Arrest Powers: Once cognizance is taken by the Special Court for an offence under the PMLA, the Enforcement Directorate (ED) and other authorities named in Section 19 of the PMLA cannot exercise the power to arrest the accused shown in the complaint. This is because the accused is now under the jurisdiction of the Special Court, and the ED is powerless to arrest them.
• 2. Issuance of Summons: The judgment emphasized that if the accused was not arrested by the ED until the filing of the complaint, the normal rule upon taking cognizance is for the Court to issue a summons to the accused, rather than a warrant. The Court should follow the process of issuing a summons, and only if the accused fails to appear, subsequent steps like issuing a warrant may be taken.
• 3. Appearance and Custody: When an accused appears in response to a summons, they are not to be treated as in custody. Therefore, they do not need to apply for bail just because they have appeared. The Special Court may require the accused to furnish a bond to ensure their appearance at future dates, but this does not amount to a grant of bail.
• 4. Further Investigations: If the ED requires the custody of the accused for further investigation after they have appeared in response to a summons, they must apply to the Special Court for custody. The Court will then decide if custodial interrogation is necessary.
• 5. Existing Practice: The Court noted that any practice by Special Courts of taking accused into custody upon their appearance pursuant to a summons is illegal and against the right to liberty guaranteed under Article 21 of the Constitution of India.

The Tarsem Lal v. Directorate Of Enforcement clearly stipulates that once cognizance is taken, the ED cannot arrest the accused simply based on the complaint, and any such apprehension is unfounded. Arrest can only be considered if further investigation is warranted and approved by the Special Court. Hence, the accused cannot be arrested just because the Court has taken cognizance if they were not arrested before that stage.

 Tarsem Lal v. Directorate Of Enforcement Jalandhar Zonal Office, (SC) : Law Finder Doc id # 2580567