ED Cannot Abandon Section 50 PMLA Summons To Effect Section 19 Arrest On Same Material Without Fresh Incriminating Evidence: Bombay High Court

"Power to arrest can and should wait and the power in terms of Section 19(1) of the PMLA can be exercised only when the material with the designated officer enables him to form an opinion by recording reasons in writing that the arrestee is guilty." Bombay High Court held on October 27, 2026, that the Directorate of Enforcement cannot bypass or abandon its statutory invocation of summons under Section 50 of the Prevention of Money Laundering Act, 2002 to effect a drastic arrest under Section 19(1) PMLA using the very same material already in its possession, absent any fresh incriminating circumstances.

A Single Judge Bench of Justice Milind N. Jadhav ruled that arresting an accused without supervening material while an application to confront and question him under Section 50(2) and (3) PMLA remains active constitutes a colourable exercise of statutory power.

The Directorate of Enforcement registered an ECIR against the petitioner arising out of predicate offences alleging hawala remittances of over seven thousand crore rupees using dummy entities. While the petitioner appeared before the agency thirty-eight times over eighteen months to tender his statements, the agency carried out residential searches and later obtained judicial permission to confront him under Section 50 PMLA. However, without unearthing any fresh incriminating material after his last interrogation, the agency arrested him on June 23, 2026, and secured consecutive remand orders from the Special Court.

Whether the Directorate of Enforcement, having elected to invoke Section 50(2) and (3) of the Prevention of Money Laundering Act to confront an individual, can abandon that process to effect an arrest under Section 19(1) PMLA on the basis of pre-existing material without any supervening circumstances?

Whether custodial interrogation under Section 19(1) PMLA can be justified on grounds of alleged non-cooperation or the sheer gravity of the offence when no attempts were made to summon or question the accused in the weeks preceding the arrest?

The Court observed that Section 19(1) PMLA employs the term "may arrest," reflecting a discretionary, drastic, and extreme measure rather than an automatic tool for investigation. The bench emphasized that the power to investigate and summon under Section 50(2) and (3) PMLA constitutes a statutory process deemed to be a judicial proceeding under Section 193 of the Indian Penal Code, which cannot be lightly discarded once initiated.

Statutory summons power under Section 50 cannot be sidestepped to effectuate drastic Section 19 arrest on stale material

The Court held that once the investigating agency elects to invoke Section 50 to question a person with existing material, it cannot pivot to an arrest under Section 19(1) unless fresh material surfaces. The bench noted that the agency had candidly conceded that no new incriminating material was unearthed between the petitioner's fifth statement in May 2026 and his arrest in June 2026.

"Once such an opinion was formed in writing and allowed by a judicial order, Respondent No.1 cannot proceed with arresting the Petitioner by supplying him the grounds of arrest invoking Section 19 on the basis of the very same material, which was the basis for forming the earlier opinion. This can only be justified if there is a supervening exigency or fresh material so incriminating in nature arisen or discovered in the interregnum such that the Petitioner is required to be arrested due to the same."

Old material in agency's possession cannot animate fresh arrest or justify custodial interrogation

The bench underscored that old material already in possession of the investigating authority cannot be recycled to justify an arrest under the PMLA. Custodial interrogation cannot be sought simply to facilitate ongoing investigation or trace end-use of funds, because the statutory threshold under Section 19(1) requires a pre-existing satisfaction of guilt.

"It is seen that power to arrest under Section 19(1) is not for the purpose of investigation... Power to arrest can and should wait and the power in terms of Section 19(1) of the PMLA can be exercised only when the material with the designated officer enables him to form an opinion by recording reasons in writing that the arrestee is guilty."

Non-cooperation cannot be alleged when agency failed to issue summons or question accused prior to arrest

Rejecting the agency's contention that the petitioner was evasive and withholding the identity of fund owners, the Court noted that the petitioner had appeared on thirty-eight separate occasions spanning eighteen months. The bench pointed out that the agency failed to make any attempt to question the petitioner for more than a month prior to taking him into custody, negating any plea of non-cooperation.

"It is seen that despite having period of more than a month, no attempt was made to question the Petitioner before he was arrested on 23.06.2026. In that view of the matter, Petitioner's non-cooperation or evasiveness would never arise, rather there would be a question mark on the conduct of the Respondent No.1."

Gravity of offence cannot insulate agency's statutory non-compliance from constitutional judicial review

Addressing the agency's reliance on the magnitude of the hawala remittances, the Court ruled that the gravity of an alleged offence does not diminish the scope of judicial review over the legality of arrest. The bench held that courts must examine both the existence and the soundness of the reasons to believe under Section 19(1) to protect personal liberty under Articles 14 and 21 of the Constitution.

The High Court allowed the writ petition, declared the petitioner's arrest under Section 19(1) PMLA illegal, quashed the subsequent remand orders passed by the Special PMLA Court, and directed his immediate release from judicial custody while declining the agency's oral application for a stay of the order.

Date of Decision: October 27, 2026