ED can’t arrest after special court takes cognisance: SC

The Supreme Court on Thursday ruled that the Enforcement Directorate (ED) loses the authority to arrest an accused once a special court takes cognisance of a charge sheet filed under the Prevention of Money Laundering Act (PMLA), in a judgment that limits ED’s power to execute arrests and emphasises the inviolability of personal liberty.

“Once cognisance is taken of the offence punishable under Section 4 of the PMLA, the special court is seized of the matter. After the cognisance is taken, ED and other authorities named in Section 19 cannot exercise the power of arrest of the accused shown in the complaint,” held a bench of justices AS Oka and Ujjal Bhuyan.

A charge sheet is called a prosecution complaint under PMLA.

The judgment significantly curtails ED’s authority to arrest individuals not detained during the investigation phase under PMLA, noting that after the court takes cognisance of the agency’s complaint, the accused are under the jurisdiction of the court, rendering the agency “powerless”.

“In such a case, an apprehension that the ED will arrest such an accused by exercising powers under Section 19 can never exist,” it added.

The court added it cannot countenance a situation where before the filing of the complaint, the accused is not arrested but after the complaint is filed and the person appears in compliance with the summons of the trial court, he is taken into custody and is forced to apply for bail. It directed that special courts should issue a summons to an accused who was not arrested during the probe, and not a warrant.

“Hence, such a practice, if followed by some special courts, is completely illegal. Such a practice may offend the right to liberty guaranteed by Article 21 of the Constitution of India,” said the bench, rejecting ED’s contention that after an accused appears before a special court in compliance with the summons, he shall be deemed to be in custody and must secure bail.

It clarified that if ED wants custody of the accused who appears following summons, the agency will have to seek permission of custody of the special court, which will hear the accused as well and will record reasons why someone not arrested during the investigation has to be arrested at that stage.

The judgment further declared that an accused, who is not arrested by ED during a probe but appears before the special court pursuant to issuance of a warrant, does not need to satisfy the stringent twin test for bail under Section 45 of PMLA.

Section 45 of PMLA stipulates that the public prosecutor must be given an opportunity to oppose the bail application of the accused. Furthermore, it requires the court to be convinced that there are reasonable grounds to believe the accused is not guilty and is not likely to commit any offence while on bail. These conditions generally make it challenging for an accused in a money laundering case to secure bail.

“If the accused appears before the special court by summons, it cannot be treated that he is in custody... 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,” held the bench, adding such an accused does not need to satisfy the twin conditions for bail under Section 45 of PMLA.

The verdict arose from a case questioning whether an accused not arrested during the investigation period under PMLA would be required to meet the stringent bail conditions if they appear before the court after the trial court summons them or issues warrant for their failure to show up, after the special court has taken cognisance of the offence. Senior advocate Sidharth Luthra represented the accused in the case. Additional solicitor general SV Raju appeared for ED.

The court also deliberated on whether the accused could apply for bail under the regular provisions of the Code of Criminal Procedure (CrPC) if they appear pursuant to a summons issued by the special court under PMLA.

The legal questions in the case stemmed from a Punjab and Haryana high court order that denied pre-arrest bail to several accused in a money laundering case linked to an alleged land scam involving revenue officials. The Supreme Court granted interim protection to the accused in January.

In the case, the Supreme Court cancelled the warrants issued against the accused subject to their appearing before the special court and furnishing an undertaking that they will regularly show up during the court proceedings. They were also directed to furnish bonds under CrPC for their appearance before the court.

By restricting ED’s post-cognisance arrest powers, the judgment sought to address potential abuses where an accused, complying with court summons, could be taken into custody and forced into the complex and stringent bail process under PMLA.