ED can’t arrest accused after special court has taken cognizance on money laundering complaint, rules SC

New Delhi, May 16: The Supreme Court on Thursday held that the Enforcement Directorate (ED) cannot arrest an accused on money laundering charges after cognizance has been taken by the special court on the probe agency's complaint.

A bench headed by Justice Abhay S. Oka ruled that in case, the custody of such an accused is needed for further investigation, the ED would have to approach the special court.

“After hearing the accused, the Special Court must pass an order on the application after recording brief reasons. While hearing the application, the court may permit custody only if it is satisfied that custodial interrogation is required,” said the Bench, also comprising Justice Ujjal Bhuyan.

However, a person not arrayed as an accused in the complaint may be arrested by the ED fulfilling the mandate of Section 19 of the Prevention of Money Laundering Act (PMLA), 2002, the apex court said.

Further, it added that a person not arrested during the money laundering probe but appearing before the special court pursuant to the summons issued under PMLA need not satisfy stringent twin conditions for grant of bail.

Under Section 45 of the Prevention of Money Laundering Act (PMLA), twin tests must be met to obtain bail.

First, the court should be convinced that there are reasonable grounds for believing that the accused is not guilty of such an offence. Second, the court should be convinced that the accused seeking bail is not likely to commit any offence while on bail

In November 2017, a division bench of Justices Rohinton Nariman and S.K. Kaul struck down Section 45(1) of the PMLA for imposing two additional conditions to grant bail to the money laundering accused calling them arbitrary.

However, this decision was overruled by the July 2022 judgement by a bench comprising Justice A.M. Khanwilkar, Dinesh Maheshwari, and C.T. Ravikumar in the Vijay Madanlal Choudhary case. The three-judge bench upheld the 2019 amendments made to the PMLA, 2002 making it nearly impossible for the accused to secure bail and shifting the burden of proof of innocence onto the accused rather than the ED.

Subsequently, a bench headed by then CJI N.V. Ramana agreed to review the PMLA judgment for two main concerns -- non-providing of ECIR to the accused at the time of arrest and negation of presumption of innocence.

In November last year, days before Justice S.K. Kaul was due to retire, a special bench headed by him ordered the pleas challenging the powers of ED to be placed before the Chief Justice of India (CJI) for the constitution of a new bench.