Deciphering Legal Judgments: A Comprehensive Analysis of Judgment

Reported as:

2025 (5) TMI 2001 - Supreme Court

2024 (5) TMI 837 - SUPREME COURT

2024 (5) TMI 468 - SUPREME COURT

1. Introduction

The set of three Supreme Court decisions under consideration collectively mark a significant development in the procedural framework governing prosecutions under the Prevention of Money Laundering Act, 2002 (PMLA). They operate at the intersection of:

• The special statutory scheme of the PMLA;
• The general criminal procedure under the Code of Criminal Procedure, 1973 (CrPC); and
• The newly enforced Bhartiya Nagarik Suraksha Sanhita, 2023 (BNSS).

The most recent decision [2025 (5) TMI 2001 - Supreme Court] concerns a complaint filed u/s 44(1)(b) of the PMLA after the BNSS came into force on 1 July 2024. The Court applied Section 223 BNSS (corresponding to Section 200 CrPC) and emphasised the mandatory nature of its first proviso, which bars cognizance without giving the accused an opportunity of being heard. Finding non-compliance, the Court set aside the order taking cognizance.

This ruling cannot be understood in isolation. It explicitly relies on the earlier decisions of 8 April 2024 and 16 May 2024, which establish, in relation to PMLA complaints:

• That complaints u/s 44(1)(b) are governed by Sections 200-204 CrPC (Yash Tuteja); and
• That, in such complaints, CrPC provisions concerning summons, warrants, bonds and appearance (including Sections 88, 205, 70, 89) apply, with important safeguards for personal liberty and limitations on the Enforcement Directorate's (ED's) arrest powers after cognizance (Tarsem Lal).

Read together, these decisions realign PMLA complaint procedure with general criminal process, while preserving PMLA's substantive rigour. The 2025 decision extends that jurisprudence into the BNSS regime, superimposing a new pre-cognizance hearing requirement in PMLA prosecutions.

2. Key Legal Issues

2.1 Applicability of CrPC/BNSS provisions to PMLA complaints

The primary recurring issue is whether, and to what extent, general criminal procedure (CrPC, and now BNSS) governs complaints u/s 44(1)(b)PMLA. This is a question of statutory interpretation and harmonisation between a special statute and the general procedural code.

2.2 Nature and scope of cognizance in PMLA cases

The courts address what "taking cognizance" means in the context of PMLA complaints, and what procedural steps and safeguards (Sections 200-204 CrPC / Sections 223-226 BNSS) must precede or accompany cognizance.

2.3 Preconditions for existence of "proceeds of crime"

In the 8 April 2024 decision, the Court examines whether a PMLA prosecution can be sustained in the absence of a scheduled offence, and therefore in the absence of "proceeds of crime" u/s 2(1)(u)PMLA. This raises a substantive interpretative issue: whether Section 3PMLA can operate in isolation from a valid scheduled offence.

2.4 Effect of the BNSS Section 223 proviso - right of pre-cognizance hearing

The 9 May 2025 decision centers on whether the new proviso to Section 223(1) BNSS-"no cognizance... shall be taken... without giving the accused an opportunity of being heard"-applies to PMLA complaints, and, if so, what consequences flow from non-compliance.

2.5 Arrest, custody and bail post-complaint in PMLA proceedings

The 16 May 2024 decision addresses whether, after a PMLA complaint is filed and cognizance is taken:

• ED can still invoke Section 19PMLA to arrest an accused named in the complaint;
• Accused appearing on summons are to be treated as in custody and required to apply for bail; and
• How Section 88 CrPC bonds, Section 205 CrPC exemptions and Section 70/89 CrPC warrants operate in this context.

This is a complex question of the interface between personal liberty under Article 21 and the stringent bail and arrest framework of PMLA.

3. Detailed Issue-wise Analysis

3.1 CrPC/BNSS procedural provisions in PMLA complaints

In the April 2024 decision, the Court interpreted Section 46(1)PMLA, which provides that CrPC applies to proceedings before the Special Court "save as otherwise provided" in the PMLA. The Court held that once a complaint u/s 44(1)(b) is filed:

• Sections 200-204 CrPC necessarily apply;
• No PMLA provision overrides these sections; and
• The Special Court must apply its mind to whether a prima facie case u/s 3PMLA is made out.

That conclusion was reaffirmed and expanded in the May 2024 decision, which expressly held:

• A complaint u/s 44(1)(b) "will be governed by Sections 200 to 205 CrPC" as none of these are inconsistent with PMLA; and
• Consequently, the entire architecture of summons, warrants, appearance and bonds in Chapter XVI and Chapter VI CrPC applies.

The May 2025 decision carries this line of reasoning forward into the BNSS era. Recognising Section 223 BNSS as the successor to Section 200 CrPC, the Court held that, because prior precedent has already determined that complaints u/s 44(1)(b) are governed by Sections 200-204 CrPC, the corresponding BNSS provisions (Sections 223-226) must now apply to complaints filed after 1 July 2024.

This is doctrinally consistent: the thread is that PMLA is a special statute primarily in its substantive and some procedural aspects (e.g., Section 19, Section 45, Section 50), but does not displace the basic complaint-cognizance-process scheme of general criminal procedure unless expressly inconsistent.

3.2 Existence of scheduled offence as condition precedent to PMLA prosecution

The April 2024 judgment, in dealing with a PMLA complaint founded on Income-tax Act and IPC offences, squarely applied the earlier ruling in Pavana Dibbur. The Court reiterated that:

• A "scheduled offence" is a condition precedent to the existence of "proceeds of crime";
• Without a scheduled offence, there can be no "proceeds of crime" u/s 2(1)(u)PMLA; and
• Without proceeds of crime, no offence u/s 3PMLA can be made out.

It also reaffirmed that Section 120-B IPC becomes a scheduled offence only when the object of the conspiracy is the commission of an offence specifically included in the Schedule to PMLA. In the case before it, the conspiracy alleged related only to non-scheduled offences; accordingly, there was no scheduled offence at all, and the PMLA complaint was quashed.

This reinforces a substantive jurisdictional threshold: PMLA cannot be used as a standalone economic crime statute; its invocation is legally contingent upon a valid scheduled predicate offence.

3.3 Cognizance under BNSS Section 223 and the new hearing requirement

Section 223 BNSS, corresponding to Section 200 CrPC, sets out the procedure for examination of complainant and witnesses at the stage of taking cognizance on complaint. The critical innovation is the first proviso:

"Provided that no cognizance of an offence shall be taken by the Magistrate without giving the accused an opportunity of being heard."

The Court in the May 2025 decision characterised this proviso as creating an embargo on the Court's power to take cognizance absent such opportunity. Applying this to a PMLA complaint filed after BNSS came into force, the Court found it undisputed that no such opportunity had been given prior to cognizance. On this sole ground, the order taking cognizance was set aside.

Two submissions by the Additional Solicitor General were recorded but left open:

• That the "hearing" contemplated under the proviso is confined to examining whether a case is made out to proceed on the basis of the complaint and accompanying documents; and
• That, since cognizance is of the offence and not of the offender, once cognizance is taken in relation to a complaint, no fresh cognizance (and thus no fresh hearing) is needed for supplementary or further complaints relating to the same offence.

The Court expressly declined to decide these questions, preserving them to be urged before the Special Court. This leaves open significant interpretive questions regarding:

• Whether the accused has a right to place defence material at the pre-cognizance stage; and
• Whether multiple hearings will be necessary in complex PMLA matters involving supplementary complaints.

Nonetheless, the operative holding is clear: compliance with the Section 223(1) proviso is mandatory in PMLA complaints filed after 1 July 2024, and failure results in invalidation of the cognizance order.

3.4 Arrest, custody and process in PMLA cases post-complaint

The May 2024 decision undertakes a comprehensive analysis of CrPC provisions in the specific context of PMLA complaints where the accused was not arrested prior to filing of the complaint and cognizance. Key strands include:

• Summons vs. warrant (Section 204 CrPC): Given that PMLA offences are warrant cases, the Court held that as a general rule, where the accused has not been arrested till the filing of complaint, the Special Court should issue summons, not warrants, for securing presence, drawing on Inder Mohan Goswami to emphasise personal liberty and a graduated approach to warrants.
• Appearance on summons and custody: The Court rejected the argument that an accused appearing on summons is in "deemed custody". Such an accused is not required to seek bail. The Court pointed to Section 205 CrPC (dispensation of personal appearance) and Section 88 CrPC (bond for appearance) as inconsistent with any fiction of deemed custody.
• Section 88 CrPC and its character: Section 88 is an enabling, discretionary power of the Court to require bonds for appearance. Acceptance of bonds u/s 88 does not amount to grant of bail; it merely secures appearance. This is consistent with Pankaj Jain and the Constitution Bench in Madhu Limaye, and is held applicable to PMLA by virtue of Sections 65 and 71PMLA.
• Non-appearance and warrants: If an accused who has been summoned fails to appear, the Court may issue warrants u/ss 70 and 89 CrPC, initially bailable, escalating to non-bailable as necessary. Such warrants, being purely to secure presence, can be cancelled on application with undertakings; such applications are not bail applications and Section 45PMLA does not apply.
• Limitation on ED's arrest power after cognizance: The Court held categorically that once cognizance of an offence u/s 4PMLA is taken on a complaint, ED and other authorities u/s 19PMLA cannot thereafter arrest a person who is already shown as an accused in the complaint. If custody is needed for further investigation, ED must move the Special Court, which will decide after hearing the accused.

This substantially recalibrates the balance between PMLA's stringent arrest/bail architecture and the accused's right to liberty, especially in cases where ED has chosen not to arrest during investigation but seeks to use court process to secure custody ex post.

4. Key Holdings and Reasoning

4.1 Ratio decidendi

• From April 2024 decision:
  • Existence of a scheduled offence is a condition precedent to the existence of "proceeds of crime" and thus to any offence u/s 3 PMLA.
  • Section 120-B IPC is a scheduled offence only where the conspiracy relates to a scheduled predicate offence; conspiracy to commit non-scheduled offences cannot trigger PMLA jurisdiction.
  • Complaints u/s 44(1)(b) are governed by Sections 200-204 CrPC, as no PMLA provision overrides them.
• From May 2024 decision:
  • Complaints u/s 44(1)(b)PMLA are governed by Sections 200-205 CrPC; consequently, the CrPC framework on summons, warrants, bonds and exemption applies.
  • Accused not arrested before complaint and appearing on summons are not in custody and need not seek bail; courts may require bonds u/s 88 CrPC.
  • An order accepting bonds u/s 88 is not an order granting bail; Section 45(1)PMLA does not apply to such orders or to applications for cancellation of warrants issued merely to secure presence.
  • After cognizance on a PMLA complaint, ED cannot exercise Section 19 arrest powers against persons already shown as accused in that complaint; custody for further investigation must be sought from the Special Court.
• From May 2025 decision:
  • With BNSS in force, PMLA complaints u/s 44(1)(b) filed after 1 July 2024 are governed by Chapter XVI BNSS (Sections 223-226), in place of Sections 200-204 CrPC.
  • The first proviso to Section 223(1) BNSS is mandatory and creates an embargo: no cognizance can be taken without giving the accused an opportunity of being heard.
  • Non-compliance with the Section 223(1) proviso invalidates the order taking cognizance, irrespective of the merits of the complaint.

4.2 Obiter dicta and open questions

Notable dicta and unresolved issues include:

• The precise content and scope of the "opportunity of being heard" under the Section 223(1) proviso-especially whether the accused may rely on defence material, and the extent of enquiry by the Special Court-are left for future determination.
• Whether subsequent supplementary complaints in the same PMLA case require fresh hearings u/s 223(1), or if the initial cognizance suffices because cognizance is of the offence, not the offender, remains undecided.
• While the Court indicates that ED cannot arrest named accused post-cognizance, it preserves the possibility of seeking custody via the Special Court for further investigation, leaving the contours of such power to be refined case-wise.

4.3 Use of and impact on precedent

The decisions heavily rely on and develop existing precedent:

• Pavana Dibbur - for the foundational principle that scheduled offence is essential for proceeds of crime and, hence, for PMLA liability.
• Inder Mohan Goswami - for the presumption in favour of summons, cautious use of warrants, and protection of personal liberty.
• Pankaj Jain and Madhu Limaye - for the interpretation of Section 88 CrPC and its non-equivalence with bail.
• Satender Kumar Antil - for the broader philosophy that unnecessary arrests are to be avoided and that custodial remand powers are constrained after cognizance; adapted here to the PMLA context.
• Vijay Madanlal Choudhary - cited in argument to emphasise the gravity of money laundering; the Court nonetheless holds that even in such offences, constitutional protections of liberty and procedural fairness in summons/cognizance stages must be respected.

5. Conclusion

Taken together, these three Supreme Court decisions substantially reframe the procedural contours of PMLA prosecutions based on complaints u/s 44(1)(b). They firmly tether PMLA complaint proceedings to the general criminal procedure code-first via CrPC, and, prospectively, via BNSS-except where there is clear statutory inconsistency.

Substantively, the April 2024 judgment reinforces that PMLA cannot be invoked without a properly alleged and legally cognizable scheduled offence, preserving the integrity of the "proceeds of crime" concept and constraining jurisdictional overreach by enforcement agencies.

Procedurally, the May 2024 and May 2025 judgments affirm:

• That PMLA is not exempt from the basic protections embedded in ordinary criminal process-summons in preference to warrants, non-automatic custody on appearance, judicial control over post-complaint arrest, and opportunities to be heard before critical procedural steps such as cognizance.
• That the new BNSS requirement of pre-cognizance hearing for the accused applies even in specialised economic offences, representing a structural shift towards greater adversarial participation at the threshold stage.

Practically, these rulings will likely lead to:

• Standard practice of issuing summons (rather than warrants) in PMLA complaints where the accused has not been arrested at the investigation stage;
• Routine use of Section 88-type bonds to secure appearance, without invoking stringent PMLA bail conditions unnecessarily;
• Heightened scrutiny at the stage of taking cognizance, including a mandatory hearing for accused in post-BNSS complaints; and
• Greater reliance on Special Courts, rather than unilateral ED action, to authorise any post-cognizance custodial interrogation of accused already named in the complaint.

Future litigation can be expected on the precise contours of the Section 223BNSS hearing, the treatment of supplementary PMLA complaints, and the standards for granting post-cognizance custody for further investigation. Legislative clarification may also be considered to harmonise PMLA's special provisions with the BNSS framework, particularly in relation to the new hearing requirement and the sequencing of complaint, cognizance, and arrest powers.

 

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Full Text:

2025 (5) TMI 2001 - Supreme Court

2024 (5) TMI 837 - SUPREME COURT

2024 (5) TMI 468 - SUPREME COURT

 

PMLA complaints: BNSS imposes mandatory pre-cognizance hearing, affecting cognizance and arrest powers in money laundering cases. PMLA complaints are now governed by the general complaint-cognizance framework and, for complaints filed after BNSS commencement, by the corresponding BNSS provisions; the BNSS proviso requiring that the accused be given an opportunity to be heard before cognizance is mandatory, and failure to provide that opportunity invalidates the cognizance order. A scheduled predicate offence is a condition precedent to the existence of proceeds of crime and hence to PMLA liability, and once cognizance is taken, enforcement agencies' unilateral arrest powers against named accused are curtailed pending court-authorised custody.