Introduction:
In Tarsem Lal v. Directorate of Enforcement Jalandhar Zonal Office,[1] the bench comprising Justices Abhay S. Oka and Ujjal Bhuyan of the Supreme Court (“SC”) held on (i) the Enforcement Directorate’s (“ED”) powers of arrest under Section 19 of the Prevention of Money Laundering Act, 2002[2] (“PMLA”), once cognizance is taken of a PMLA complaint under Section 44(1)(b) of the PMLA,[3] and (ii) the applicability of the twin conditions of bail under Section 45 of the PMLA[4] in instances where the accused has furnished a bond in accordance with Section 88 of the Code of Criminal Procedure, 1973[5] (“CrPC”), for appearance in court following summons. In this significant decision, the SC essentially addresses the extent of the ED’s powers of arrest and applicability of the stringent twin conditions of bail under Section 45 of the PMLA once the Special Court has taken cognizance of a complaint under Section 44 of the PMLA.
The SC held that (i) the ED and its officers cannot exercise powers under Section 19 of the PMLA to arrest an accused person once the Special Court takes cognizance of a complaint; and (ii) furnishing of bonds under Section 88 of the CrPC is merely an undertaking that does not amount to grant of bail; hence, Section 45 of the PMLA remains inapplicable.[6]
Factual Scenario:
The Assistant Director of the Enforcement Directorate, Jalandhar Zone, Punjab (“Respondent”) filed a complaint punishable under Sections 3 and 4 of the PMLA (“Main Complaint”), based on the predicate offence under Sections 409, 420, 465, 466, 467, 471, 120-B Indian Penal Code, 1860 (“IPC”), and Sections 7 and 7-A of the Prevention of Corruption Act, 1988 (“PCA”), against Varinder Pal Singh Dhoot and other persons, including Tarsem Lal (“Petitioner”). The accused being revenue officials had abused their official positions by wrongfully allocating lands in exchange for large amounts of money from property dealers. The Petitioner had illicitly sold land measuring 54 acres through direct sales or by giving sub-Power of Attorney to others and received large sums of money, including INR 39.75 lacs, from selling 20.5 acres of land of an individual, Kulwinder Singh, which was more than his allotted 15 acres of land.
The Petitioner failed to appear before the Special Court despite the service of summons. Resultantly, the Special Court issued a warrant for procuring his presence. Apprehending arrest, the Petitioner appeared before the Punjab & Haryana High Court (“HC”) and sought anticipatory bail under Section 438 of the CrPC[7]. Interim anticipatory bail was granted to the Petitioner vide order dated September 22, 2023. The Respondent opposed this, submitting that the Petitioner had failed to satisfy the twin conditions of bail under Section 45 of the PMLA. Moreover, evidence existed of the Petitioner confessing to receiving massive amounts of money by facilitating illegal transfers of land.
The HC, dismissing the petition, rejected the Petitioner’s grant for anticipatory bail for, among other things, failing to satisfy the twin conditions of bail under Section 45 of the PMLA:[8]
- The first condition under Section 45(1) – the Public Prosecutor must be given an opportunity to oppose the application – was fulfilled as proper opportunity was given to the Public Prosecutor to oppose the application and thereafter, file a reply.
- The second condition under Section 45(1) – the court shall be satisfied that there are reasonable grounds for believing the accused is not guilty and not likely to commit an offence while on bail – was not complied with due to sufficient evidence to the contrary, showing that the Petitioner took benefit of the alleged proceeds of crime.
Aggrieved, the Petitioner sought an appeal before the SC, impugning the judgment passed by the HC.
Contention of the Parties
The counsel for the Petitioner (hereinafter known as “Appellant”), among other things, primarily made the following submissions:
- Power to arrest under Section 45 of the PMLA cannot be exercised after the Special Court takes cognizance of the offence, and there is no reason to issue a warrant of arrest against an accused appearing before the Special Court pursuant to summons;
- There is no inconsistency between the provisions of the PMLA and Section 88 of CrPC. All provisions of CrPC would apply to proceedings before the Special Court. The Special Court should normally accept the bonds under Section 88 of the CrPC and it can take recourse to Section 89 of the CrPC, i.e., issue warrant for procuring the accused before the Special Court;
- Considering Satender Kumar Antil v. Central Bureau of Investigation and Anr.,[9] when prosecution does not seek custody after cognizance has been taken, there is no need to arrest the accused;
- In case of an offence under the PMLA, a complaint under Section 44(1)(b) partakes the character of a chargesheet under Section 173 of the CrPC. If custody of the accused is required for further investigation, the ED shall apply to the Special Court for grant of custody; and
- When an accused appears before the Special Court pursuant to summons, Section 437 of the CrPC[10] is not applicable, and it’s not necessary to seek bail.
Whereas the counsel for the Respondent, among other things, made the following contentions:
- Accused appearing before the Special Court is within its deemed custodyand must apply for bail under Section 439 of the CrPC[11];
- Special Court takes cognizance of an offence based on prima facie determination of an offence. The accused applying for bail under Section 438 of the CrPC is required to satisfy the twin conditions of bail in Section 45(1) of the PMLA;
- Application under Section 88 of the CrPC is an application for grant of bail and thus Section 45(1) of the PMLA is applicable;
- The case of Satender Kumar Antil is inapplicable to special statutes such as PMLA;
- The ED has the right to make further investigations and can exercise its powers under Section 19 of the PMLA.Further, relying upon Vijay Madanlal Choudhary v. Union of India,[12]the gravity of offences under PMLA requires mandatory compliance of Section 45(1) of the PMLA; and
- PMLA has an overriding effect over provisions of CrPC as per Section 65 read with Section 71 of the PMLA.[13]
Findings of the Hon’ble Supreme Court
Re: Warrant of arrest cannot be issued against an accused appearing before the Special Court pursuant to summons
Placing reliance on Yash Tuteja v. Union of India,[14] the SC held that Section 46(1) of the PMLA provides that the provisions of CrPC shall apply to the proceedings before a Special Court. “Therefore, once a complaint is filed before the Special Court, the provisions of Sections 200 to 204 of the CrPC will apply to the Complaint. There is no provision in the PMLA which overrides the provisions of Sections 200 to Sections 204 of CrPC”.[15]
If the Special Court prima facie makes out the commission of an offence under the PMLA, the issue of process can be initiated as per Section 204 (1) of the CrPC – issuance of a warrant or summons. The SC also observed that “while taking cognizance on a complaint under Section 44 (1)(b), if the Court finds that till the filing of the complaint, the accused was not arrested, generally at the first instance, as a rule, the Court must issue a summons on the complaint . . . the Special Court may issue a bailable warrant at the first instance while issuing the process if accused has not cooperated and is in defiance of the summons issued”.[16]The form of summons under Section 61 of the CrPC shows that summons is issued merely to secure the appearance of the accused, and the question of seeking custody of the accused does not arise.
Further, rejecting the argument that an accused appearing before Special Court in compliance with summons shall be in deemed custody, the SC noted “the object of issuing a summons is to secure the accused’s presence before the Court. It is not issued for taking an accused in custody”.[17]
Additionally, a plain reading of Section 437(1) of the CrPC suggests that the same is inapplicable when an accused appears before a High Court or Sessions Court. As per Section 44(1)(d) of the PMLA, a Special Court acts as a Sessions Court as it holds trial in accordance with CrPC provisions. Hence, Section 437 will not apply to a PMLA accused appearing before a Special Court following issuance of summons based on a complaint under Section 44(1)(b) of the PMLA.
The SC further stated that once cognizance is taken, the ED is powerless and cannot arrest accused persons under Section 19 of the PMLA, as the accused falls within the jurisdiction of the Special Court dealing with the complaint.
Re: Furnishing of bonds under Section 88 of the CrPC does not amount to grant of bail under Section 45 of the PMLA
The SC observed Section 88 of the CrPC is an enabling provision that gives the Court discretionary powers to direct accused persons to furnish bonds – the objective being that they appear regularly before the Special Court. It is consistent with the provisions of PMLA and shall apply after the filing of a complaint under Section 44(1)(b) of the PMLA. “Therefore, when an accused appears pursuant to a summons issued on the complaint, the Court will be well within its powers to take bonds under Section 88 from the accused to ensure his appearance before the Court”.[18]
On whether an order of the Court accepting bonds under Section 88 amounts to grant of bail, the SC held that the accused appearing in a Special Court following summons is not in custody; hence, the issue of bail does not arise. “A bond furnished according to Section 88 is an undertaking to appear before the Court on the date fixed. The question of filing bail bonds arises only when the Court grants bail. When an accused furnishes a bond in accordance with Section 88 of the CrPC for appearance before a Criminal Court, he agrees and undertakes to appear before the Criminal Court regularly and punctually and on his default, he agrees to pay the amount mentioned in the bond. Section 441 of the CrPC deals with a bond to be furnished by an accused when released on bail. Therefore, in our considered view, an order accepting bonds under Section 88 from the accused does not amount to a grant of bail”.[19] Therefore,the application of Section 45(1)of the PMLA does not pertain.
The SC, cancelling the warrants issued, directed the Appellant (i) to give an undertaking to appear regularly before the respective Special Court on the dates fixed unless specifically exempted and (ii) to furnish bonds in accordance with Section 88 of the CrPC.
Conclusion
The present judgment is notably of high relevance especially in light of the decision in Vijay Madanlal Choudhary v. Union of India. The SCclarifies the scope of powers given to ED vis-à-vis the Special Court, laying down the contours of the powers of the ED where the Special Court has taken cognizance of the matter and where the provisions of the CrPC are applicable. It reinforces the rule that the Court must issue a summons on the complaint at the first instance. Further, the SC has minimised the applicability of the peculiar requirements of Section 45(1) in certain situations by holding that PMLA accused who furnish bonds under Section 88 of the CrPC are exempt from satisfying the twin bail-test conditions as the same does not amount to grant of bail. The judgment is also significant as it promotes a fine balance of powers in the legal framework and acts as a powerful deterrent to abuse of powers. It would be interesting to see the impact and effect of this judgment in the coming years.
For further information, please contact:
Vikash Kumar Jha, Partner, Cyril Amarchand Mangaldas
vikashkumar.jha@cyrilshroff.com
[1] Judgment Dated May 16, 2024, in Special Leave to Appeal (Crl.) No(s). 121/2024
[2] Prevention of Money Laundering Act, 2002, Section 19(1): If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.
[3] Prevention of Money Laundering Act, 2002, Section 44(1)(b): a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence under section 3, without the accused being committed to it for trial.
[4] Prevention of Money Laundering Act, 2002, Section 45(1): (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence under this Act shall be released on bail or on his own bond unless– (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:
Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, or is accused either on his own or along with other co-accused of money-laundering a sum of less than one crore rupees may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by (i) the Director; or (ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.
[5]Code of Criminal Procedure 1973, Section 88: Power to take bond for appearance.
When any person for whose appearance or arrest the officer presiding in any Court is empowered to issue a summons or warrant, is present in such Court, such officer may require such person to execute a bond, with or without sureties, for his appearance in such Court, or any other Court to which the case may be transferred for trial.
[6] Para 23
[7] Tarsem Lal v. Directorate of Enforcement, CRM No. 47406 of 2023
[8] Para 15 of Tarsem Lal v. Directorate of Enforcement, CRM No. 47406 of 2023
[10] Code of Criminal Procedure 1973, Section 437 deals with bail given in case of non-bailable offences.
[11] Code of Criminal Procedure 1973, Section 439 deals with special powers of High Court or Court of Session regarding bail.
[12] 2022 SCC OnLine 929
[13] Prevention of Money Laundering Act 2002, Section 65: The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation investigation, prosecution and all other proceedings under this Act.
Prevention of Money Laundering Act 2002, Section 71: The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
[14] 2024 INSC 301
[15] Para 6 of 2024 INSC 301
[16] Para 8
[17] Para 10
[18] Para 13
[19] Para 15
