Rajendra Narpatmal Lodha v. Directorate of Enforcement, Mumbai & Anr.

Bombay High Court   •   23 September 2026   •   2026:BHC-AS:38365
Case Summary
The Bombay High Court held that where the Enforcement Directorate had already invoked Sections 50(2) and 50(3) PMLA, approached the Special Court and obtained permission to confront and examine the petitioner on the basis of material already in its possession, it could not simply abandon that course and proceed to arrest him under Section 19 on essentially the same material, in the absence of fresh incriminating material or a supervening circumstance. The Court emphasised that Section 19 uses the expression “may arrest”, demonstrating that arrest is discretionary rather than an automatic consequence of investigation. On the facts, the Court found the change from Section 50 interrogation to Section 19 arrest unsustainable and characterised the exercise as a colourable exercise of power. The arrest and consequential remand were interfered with, and the petitioner was granted bail subject to conditions.
Coram: Justice Milind N. Jadhav
Area of Law: PMLA / Criminal Law — Section 19 Arrest, Section 50 Interrogation, Personal Liberty & Judicial Review
Citation: 2026:BHC-AS:38365
Date: 23 September 2026

Legal Issue

- Whether the ED could arrest the petitioner under Section 19 PMLA after having already invoked Sections 50(2) and 50(3) and obtained judicial permission to interrogate him on the material in its possession.
- Whether the ED could abandon the Section 50 course and arrest the petitioner on substantially the same material without fresh incriminating material or any supervening circumstance.
- Whether the statutory requirement under Section 19 that the authorised officer possess material giving rise to a recorded “reason to believe” that the person is guilty of an offence under the PMLA had been lawfully satisfied.
- Whether the exercise of the arrest power in these circumstances amounted to a colourable exercise of statutory power.
- Whether the consequential remand orders could survive if the foundational arrest itself was legally unsustainable.

Brief Facts

Rajendra Narpatmal Lodha was arrested in September 2025 in connection with predicate offences registered by the Mumbai Police. The Enforcement Directorate subsequently initiated proceedings under the PMLA and registered an ECIR in relation to the alleged money-laundering activity.

On 12 November 2025, the ED conducted searches in connection with its investigation. The ED's own contemporaneous press release stated that searches were conducted at 14 locations in the Mumbai region and that assets and documents were seized or frozen during the operation.

While Lodha remained in custody, the ED filed an application before the Special Court on 29 January 2026 under Sections 50(2) and 50(3) PMLA. It sought permission to confront him with documents and other material already in its possession and to record his statement.

On 30 January 2026, the Special Court allowed the ED's application. However, the ED did not proceed to record the petitioner's statement before he was granted interim bail on 5 February 2026 to visit his ailing mother.

Lodha surrendered after expiry of the interim-bail period on 11 February 2026 and was produced before the Special Court the following day. Instead of proceeding with the interrogation for which it had already obtained permission, the ED moved an application seeking permission to arrest him under Section 19 PMLA. The arrest was subsequently effected on 13 February 2026, followed by remand proceedings.

Lodha challenged the legality of the arrest before the Bombay High Court, contending principally that there had been no new incriminating material or supervening circumstance between the ED's Section 50 application and its subsequent decision to invoke Section 19.

Held / Decision

The Bombay High Court allowed the petition challenging the petitioner's arrest under Section 19 of the Prevention of Money Laundering Act, 2002. The Court treated the power of arrest as a drastic and discretionary statutory power, emphasising that the conditions governing its exercise must be independently satisfied.

Having already invoked Sections 50(2) and 50(3) PMLA and obtained judicial permission to interrogate the petitioner on the material in its possession, the ED could not abandon that course and arrest him under Section 19 on essentially the same material without fresh incriminating material or a supervening circumstance. The change from Section 50 interrogation to Section 19 arrest was found unsustainable and characterised as a colourable exercise of power. The arrest and consequential remand were interfered with, and the petitioner was granted bail subject to conditions.

Important Observations

1. Section 19 Arrest Is a Drastic and Discretionary Power: The power of arrest under Section 19 PMLA directly affects personal liberty. The expression “may arrest” shows that arrest is discretionary and not an automatic consequence of an investigation.

2. “Reason to Believe” Must Be Based on Material: Before arresting a person under Section 19, the authorised officer must have material giving rise to a reason to believe that the person is guilty of an offence under the PMLA, and such reasons must be recorded in writing.

3. ED Had Already Chosen the Section 50 Route: The ED had invoked Sections 50(2) and 50(3) and obtained permission from the Special Court to confront and interrogate the petitioner on the material already available with it. This prior course of action was relevant when examining the legality of the subsequent arrest.

4. Same Material Cannot Justify an Unexplained Change to Arrest: Having obtained permission for Section 50 interrogation, the ED could not simply abandon that course and arrest the petitioner under Section 19 on essentially the same material, without a legally sustainable reason for changing course.

5. Fresh Incriminating Material Can Change the Position: The judgment does not mean that a person questioned under Section 50 can never subsequently be arrested. A later arrest may stand on a different footing where fresh incriminating material or a supervening circumstance emerges.

6. Exercise of Power Was Held Colourable on the Facts: In the circumstances of this case, abandoning the authorised Section 50 process and proceeding to arrest on substantially the same material, without a fresh basis, was treated by the High Court as a colourable exercise of power.

7. Illegal Arrest Affects Consequential Remand: The Court interfered with both the Section 19 arrest and the consequential remand. Subsequent remand cannot automatically cure a foundationally unsustainable exercise of the power of arrest.

Full Headnote

Prevention of Money Laundering Act, 2002 — Sections 19, 50(2) and 50(3) — Arrest — Power of Enforcement Directorate — Personal Liberty — Reason to Believe — Section 50 Interrogation — Fresh Incriminating Material

Bombay High Court held that power of arrest under Section 19 PMLA is a drastic and discretionary power directly affecting personal liberty. Use of the expression “may arrest” in Section 19(1) indicates that arrest is not an automatic consequence of investigation. The authorised officer must independently satisfy the statutory prerequisites, including possession of material giving rise to the requisite reason to believe, which must be recorded in writing.

Sections 50 and 19 — Sequence of Exercise of Statutory Powers

ED had filed an application under Sections 50(2) and 50(3) seeking permission from the Special Court to confront the petitioner with documents/material already in its possession and record his statement. Special Court granted such permission. ED thereafter did not complete the proposed interrogation and subsequently sought to arrest the petitioner under Section 19.

Between the invocation of Section 50 and the subsequent arrest, no fresh incriminating material or supervening circumstance was demonstrated. Material forming the basis of arrest was substantially the material already available when the ED sought permission to interrogate the petitioner.

Held

Having invoked Section 50 and obtained judicial permission to interrogate the petitioner on the material in its possession, ED could not, in the circumstances of the case, simply abandon that statutory course and proceed to arrest the petitioner on essentially the same material without a fresh incriminating basis or supervening circumstance justifying the change. Such exercise of the Section 19 arrest power was held unsustainable and, on the facts, amounted to a colourable exercise of power.

The decision does not establish that arrest under Section 19 can never follow proceedings under Section 50. Fresh incriminating material or a material supervening circumstance may alter the legal position. The ruling turns upon the statutory safeguards governing arrest and the particular sequence in which the ED exercised its powers in the present case.

Relief

Petition allowed; arrest and consequential remand interfered with; petitioner granted bail subject to conditions, including surety of ₹5 lakh. No opinion expressed on the merits of the underlying money-laundering allegations.

Original Judgment: Rajendra Narpatmal Lodha v. Directorate of Enforcement, Mumbai & Anr., Writ Petition No. 1910 of 2026, 2026:BHC-AS:38365.

Legal Significance

The judgment is significant for PMLA arrest jurisprudence because it reinforces the distinction between the ED's extensive investigative powers and its separate power to deprive a person of liberty through arrest.

It does not create a blanket rule that Section 50 must always be exhausted before Section 19 can be invoked. Instead, it establishes a fact-sensitive principle: where the ED itself has sought judicial permission to interrogate an accused on particular material and then abandons that course, a subsequent arrest on essentially the same material requires a legally sustainable basis; the absence of fresh incriminating material or a supervening circumstance may render the exercise vulnerable to judicial review.

For criminal and PMLA practitioners, the judgment is particularly relevant to challenges concerning “reason to believe,” legality of arrest, remand, personal liberty and judicial scrutiny of ED action under Section 19.

View Original Judgment
Disclaimer: This case summary and headnote are provided for informational and educational purposes. Readers should refer to the original judgment for the complete text and authoritative legal position.