Tarsem Lal v. Directorate of Enforcement: summons, custody, and the Section 45 bail bar after cognizance

The Supreme Court's judgment of 16 May 2024 in Tarsem Lal v. Directorate of Enforcement, Jalandhar Zonal Office — reported as 2024 INSC 434 — is one of the most consequential procedural clarifications of the Prevention of Money Laundering Act, 2002 to emerge in that year. A Division Bench of Justices Abhay S. Oka and Ujjal Bhuyan, in an opinion authored by Justice Oka, settled what happens to an accused who was never arrested during the ED's investigation once the Special Court takes cognizance of the complaint against him. The answer reorganises the sequencing of coercive power in PMLA prosecutions and, in doing so, disarms one of the standing anxieties of white-collar defence practice.

The question the Court answered

The situation is common. The ED completes its investigation, files a prosecution complaint under Section 44(1)(b) naming persons it did not arrest, and the Special Court takes cognizance. Summons issue, and the accused appears. Two questions then arise. Can the ED, at that stage, still arrest the accused under Section 19 as though the investigation were live? And when the accused appears on summons, must he apply for bail — and therefore clear the rigorous twin conditions of Section 45 — merely to remain at liberty during the trial?

The appellants in Tarsem Lal were accused who had not been arrested during investigation and who apprehended exactly this: that appearance before the Special Court would either expose them to a fresh Section 19 arrest or force them into a Section 45 bail application. The Court took the opportunity to lay down the general position rather than dispose of the matter on its narrow facts.

The statutory sequence

Section 19 PMLA is the ED's power of arrest. It is exercisable by an authorised officer who, on material in his possession, records in writing a "reason to believe" that a person is guilty of an offence under the Act. It is, by its terms and its place in the scheme, an investigation-stage power. Section 44(1)(b) is the provision under which the ED lays its complaint before the Special Court, and cognizance under it marks the point at which the proceeding turns from investigation to trial.

The Court's central move was to read these provisions together with the Code of Criminal Procedure. Once a complaint is filed and cognizance taken, the Court held, the trial is governed by the CrPC to the extent the CrPC is not inconsistent with the PMLA — including the provisions governing complaints (Sections 200 to 204) and the machinery of summons, attendance, and remand. There is no provision in the PMLA that displaces this ordinary criminal-procedure architecture at the post-cognizance stage.

What the Court held

On the arrest question, the Court was categorical: the Section 19 power does not survive cognizance in respect of an accused who was never arrested during the investigation. The power is investigative, and the taking of cognizance exhausts it as against such a person.

On the bail question, the Court drew a clean line between arrest and voluntary appearance. An accused who appears before the Special Court in answer to a summons is not in the custody of the court. Because he is not in custody, he is not required to apply for bail merely to secure his continued liberty, and the twin conditions of Section 45 — which condition release on the court being satisfied that there are reasonable grounds to believe the accused is not guilty and is not likely to offend on bail — are simply not engaged. The Section 45 regime is triggered by arrest and custody; it is not triggered by submission to the court's jurisdiction on summons. This is the distinction between being released from custody and never having been in custody at all.

Section 88 bonds, Section 170, and remand under Section 309

Having removed both the arrest threat and the Section 45 hurdle, the Court addressed how the Special Court secures the accused's attendance through the trial. The answer is Section 88 of the CrPC, under which a court before which a person is bound to appear may take a bond for that appearance. Crucially, the Court held that taking a bond under Section 88 is not the grant of bail. It is merely an undertaking by the accused that he will appear on the dates fixed. Because it is not bail, the Section 45 twin conditions do not attach to it. The bond is an instrument of attendance, not of release from custody.

The Court also clarified Section 170 CrPC, which speaks of the officer forwarding the accused when a case is to be sent to the Magistrate. That provision, the Court held, is a matter of procedural compliance; it does not require that the accused be arrested and produced in custody as a precondition to the court taking cognizance. Reading Section 170 as mandating arrest would be inconsistent with the whole thrust of the judgment.

Finally, the Court did not leave the ED without a route to custody where custody is genuinely required after cognizance. If the agency needs custody at that stage, it must apply to the Special Court, which may grant remand under Section 309(2) CrPC — but only after hearing the accused and recording brief reasons. The custody decision, in other words, is relocated from the agency's unilateral Section 19 power to a reasoned judicial order.

Distinguishing Ganesh Prasad Singh

Tarsem Lal is the Supreme Court's foundational statement; the Patna High Court's later decision in Ganesh Prasad Singh v. Union of India is an application of it in a distinct procedural posture, and the two should not be collapsed. Tarsem Lal answers the question prospectively and structurally: it lays down the general rule about what the ED may and may not do once cognizance is taken, and how the Special Court manages the un-arrested accused's attendance through Sections 88, 170 and 309 CrPC. Its centre of gravity is the bail question — that appearance on summons is not custody and Section 45 is not attracted.

Ganesh Prasad Singh engages the same cognizance-stage bar from the other end. There, an accused who had never been arrested moved for anticipatory bail, apprehending a post-cognizance Section 19 arrest; the High Court, applying Tarsem Lal, held that the Section 19 power was spent and that the apprehension was answered by the legal position itself. The ratio it deploys is the arrest limb of Tarsem Lal, operationalised at the protective, anticipatory-bail stage. The distinction is worth holding onto: Tarsem Lal fixes the rule and the trial-court machinery that follows from it; Ganesh Prasad Singh is a downstream, fact-specific application of the arrest limb in an anticipatory-bail matter. Citing one for the work of the other blurs a boundary the cases themselves keep clean.

Where it sits in the PMLA line

Tarsem Lal operates within, and does not disturb, the architecture upheld in Vijay Madanlal Choudhary v. Union of India. Vijay Madanlal validated the twin conditions of Section 45 and the wider PMLA scheme; Tarsem Lal does not weaken those conditions but identifies the situation in which they never arise — because the accused, appearing on summons, was never in custody. The two are complementary: the twin conditions remain the operative test for an accused who has been arrested and seeks release, while Tarsem Lal carves out the un-arrested, summons-appearing accused from that test altogether.

This should also be distinguished from the liberty-and-custody line represented by Prem Prakash v. Directorate of Enforcement, where the accused was in prolonged PMLA custody and the Court moderated the Section 45 inquiry through the "bail is the rule" principle and the Article 21 proportionality frame. Prem Prakash is about softening the twin conditions for a person in custody; Tarsem Lal is about a person for whom the twin conditions do not apply at all. The first is a doctrine of release; the second is a doctrine of never-custody.

Why it matters

The practical effect of Tarsem Lal is to impose discipline on the sequencing of ED action. An agency that chooses to complete its investigation and file its complaint without arresting an accused cannot keep a Section 19 arrest suspended over that accused to be sprung after the trial has begun. The choice not to arrest during investigation carries a consequence: it forecloses the unilateral arrest route, and any later custody must be sought by a reasoned application to the Special Court. For the accused, the judgment removes the perverse incentive to seek pre-emptive protective relief simply to attend one's own trial; appearance on summons, backed by a Section 88 bond, is enough.

For practitioners, the decision is a template. In any PMLA matter where the complaint has been filed and cognizance taken on a never-arrested accused, Tarsem Lal answers three recurring points at once — no Section 19 arrest, no Section 45 application on summons, and attendance secured by a Section 88 bond rather than by bail. It is, in the end, a judgment about reading the extraordinary powers of the PMLA against the Act's own sequencing, and against the ordinary criminal procedure that governs a trial once it has begun.

Related on Valkya

• Ganesh Prasad Singh v. Union of India: ED arrest power after cognizance under PMLA
• Vijay Madanlal Choudhary v. Union of India: the PMLA architectural ruling
• Prem Prakash v. Directorate of Enforcement: 'bail is the rule' under the PMLA

Sources

1. Supreme Court of India — Tarsem Lal v. Directorate of Enforcement, Jalandhar Zonal Office, 2024 INSC 434, Criminal Appeal No. 2608 of 2024, judgment dated 16 May 2024: https://www.sci.gov.in/
2. Verdictum — "ED Has No Power To Arrest Accused After Special Court Takes Cognizance Of PMLA Offence: Supreme Court": https://www.verdictum.in/court-updates/supreme-court/tarsem-lal-v-directorate-of-enforcement-2024-insc-434-ed-powerless-to-arrest-money-laundering-case-cognizance-us-44-1b-pmla-1535836
3. Supreme Court Observer — "Enforcement Directorate's power to arrest under PMLA after Special Court's cognisance: Tarsem Lal v. Directorate of Enforcement": https://www.scobserver.in/cases/enforcement-directorates-power-to-arrest-under-pmla-after-special-courts-cognisance-tarsem-lal-v-directorate-of-enforcement/
4. Cyril Amarchand Mangaldas, Dispute Resolution Blog — "Tarsem Lal v Directorate of Enforcement: Supreme Court further clarifies PMLA framework": https://disputeresolution.cyrilamarchandblogs.com/2024/05/tarsem-lal-v-directorate-of-enforcement-supreme-court-further-clarifies-pmla-framework/