COLOURABLE EXERCISE OF THE POWER TO ARREST BY THE DIRECTORATE OF ENFORCEMENT UNDER SECTION 19 OF PMLA

The Hon’ble High Court of Judicature at Bombay (“Hon’ble Court”), in Rajendra Narpatmal Lodha v. Directorate of Enforcement, Mumbai & Anr.,^[1]has held that once the Directorate of Enforcement (“ED”) itself obtains permission from the Special Court (“Ld. Special Court”) under Section 50(2) and 50(3) of Prevention of Money Laundering Act, 2002 (“PMLA”) to examine an accused and confront him with material in its possession, thereafter, it cannot abandon the entire process and arrest him in terms of Section 19 of PMLA on the very same material in its possession, unless fresh incriminating material or supervening circumstances have emerged. Essentially, the Hon’ble Court held such an arrest to be a colorable exercise of power of arrest and in view of the same has set aside the order of remand passed by the Ld. Special Court and granted bail to the Petitioner herein subject to certain conditions.

[1] Rajendra Narpatmal Lodha v. Directorate of Enforcement, Mumbai & Anr., Writ Petition No. 1910 of 2026, Hon’ble High Court of Judicature at Bombay, decided on 21 September 2026, 2026:BHC-AS:38365.

The dispute arose from the Enforcement Case Information Report bearing no. ECIR/MBZO-I/41/2025 registered by the ED on 30.09.2025 on the basis of two FIRs registered on 16.09.2025, in connection with which the Petitioner had been arrested in the predicate offences on 17.09.2025 and was in judicial custody. On 12.11.2025, the ED conducted a search at the Petitioner’s residence under Section 17 of PMLA. Thereafter, the chargesheet was filed in the predicate offences on 12.12.2025 and cognizance of the offences was taken by the Ld. Magistrate on 30.12.2025. Subsequently, the ED applied to the Ld. Special Court on 29.01.2026 for permission to record the Petitioner’s statement under Sections 50(2) and 50(3) of PMLA. The said application was allowed on 30.01.2026, permitting the statement to be recorded between 02.02.2026 and 06.02.2026; however, no statement was recorded. On 12.02.2026, the ED sought and obtained permission from the Ld. Special Court to arrest the Petitioner. In furtherance to the said order, the Petitioner was arrested the same day and remanded to the ED’s custody vide order dated 13.02.2026. The present Writ Petition challenged the remand order dated 13.02.2026 and the subsequent orders and sought enlargement of the Petitioner on bail.

KEY FINDINGS

At the outset, the Hon’ble Court held that the power to arrest can and should wait and the said power should be exercised, in terms of Section 19(1) of PMLA, only when the material in possession of the Authorized Officer i.e., ED enables it to form an opinion of guilt. The Hon’ble Court observed that the material relied upon by the ED was already in its possession and on the basis of that material, it had applied before the Ld. Special Court under Section 50 of PMLA to record the statement of the Petitioner. Further, it was clarified that the power under Section 50 of PMLA cannot be waived off once it is invoked since proceedings under the said provision are deemed to be judicial proceedings, particularly in terms of Section 50(4) of PMLA. Therefore, the Hon’ble Court held that the ED cannot proceed to arrest the Petitioner essentially on the very same material and after obtaining an order under Section 50 of PMLA, unless there is fresh incriminating material or a supervening exigency warranting such arrest.

The Hon’ble Court emphasized that the power to arrest under Section 19 of PMLA is a drastic power that infringes personal liberty and is not a power merely for the purpose of investigation, relying on the judgment of the Hon’ble Supreme Court in

Radhika Agarwal v. Union of India, 2025 SCC OnLine SC 449.

Additionally, the Hon’ble Court held that the courts can judicially review the legality of arrest by virtue of the jurisdictional conditions / procedural safeguards envisaged under Section 19 of PMLA. In this regard, the Hon’ble Court relied on the judgment of Hon’ble Supreme Court in Arvind Kejriwal v. Directorate of Enforcement, (2025) 2 SCC 248 wherein it was held that: (i) the “reasons to believe” must be furnished to the arrestee;

(ii) the Court examining the validity of arrest must examine both the existence and soundness of the “reasons to believe”, based on the material available with the Authorized Officer; and (iii) scrutiny of the action to arrest, whether in accordance with law, is amenable to judicial review. Accordingly, the petition was allowed and the Petitioner was released on bail, particularly on the ground of illegality of arrest of the Petitioner in the first place.

SIGNIFICANCE

The decision is significant as it draws a clear limit on the exercise of the power of arrest by the ED under the regime of PMLA. First, the existence of material in the possession of the authorized officer does not, by itself, justify arrest, when the ED has chosen the route of investigation under Section 50 of PMLA, and then abandoned that route without any supervening circumstances or fresh material. The power to arrest cannot be used as a mechanical or alternative substitute for a procedure the ED itself initiated. Second, the judgment emphasizes that the Ld. Special Court is under a duty to examine whether the jurisdictional preconditions of Section 19 have been satisfied and cannot ignore its own earlier order granting permission under Section 50. Third, the decision reinforces that personal liberty cannot be curtailed by a colorable exercise of the drastic power of arrest under a special statute.

The authors of the article are: Karanveer Singh Anand: Senior Associate : Nandini Gupta: Associate