Introduction:

In the significant case of Kushal Kumar Agarwal v. Directorate of Enforcement, Petition for Special Leave to Appeal (Crl.) No. 2766/2025, the Supreme Court of India, through a bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan, pronounced a landmark judgment on the applicability of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), particularly Section 223(1), in proceedings under the Prevention of Money Laundering Act, 2002 (PMLA). The Court quashed the cognizance order dated 20th November 2024 passed by the Special Court under Section 44(1)(b) of PMLA, citing that the accused was not given the opportunity of being heard before the cognizance was taken, which is now a mandated procedural safeguard under the newly enacted BNSS. The Court held that since the BNSS came into force on July 1, 2024, its provisions will apply to pending procedural stages, thereby making it mandatory for the Special Court to hear the accused before cognizance is taken, a departure from the earlier Code of Criminal Procedure (CrPC) which had no such requirement. The judgment reaffirms the judiciary’s commitment to ensuring fair trial guarantees and procedural due process in light of the legislative transition from CrPC to BNSS.

Arguments of Both Sides:

During the proceedings, the appellant, Kushal Kumar Agarwal, challenged the Special Court’s order of cognizance taken without granting him the opportunity to be heard as now mandated under Section 223(1) of BNSS. His contention was grounded on the clear language of the proviso to Section 223(1) which prohibits any Magistrate or Court from taking cognizance of an offence unless the accused is given an opportunity of being heard. The appellant argued that this procedural safeguard is now a statutory right, and its denial vitiates the order of cognizance. Further reliance was placed on the Supreme Court’s previous judgment in Tarsem Lal v. Enforcement Directorate, where it was held that complaints under Section 44(1)(b) of PMLA are governed by Sections 200 to 204 of CrPC, which by substitution now includes Sections 223 to 226 of BNSS. The appellant’s counsel emphasized that the legislative shift must be respected and procedural rights under BNSS must be extended to all accused in such matters.

In response, the Additional Solicitor General (ASG) S.V. Raju, appearing for the Enforcement Directorate (ED), raised two key submissions. Firstly, he contended that the scope of the hearing contemplated under the proviso to Section 223(1) should be limited to the examination of whether a prima facie case exists to proceed against the accused based only on the complaint and accompanying documents. This, he argued, ensures that the hearing does not become a mini-trial or a forum for delay. Secondly, he argued that cognizance is taken of the offence, not of the offender, and once cognizance is taken in accordance with Section 223(1), it does not require to be taken afresh for subsequent complaints or supplementary charges. However, the Supreme Court declined to decide on these broader interpretative issues as they were not central to the appeal and left them open for adjudication in appropriate cases in the future.

Court’s Judgment:

The Supreme Court delivered a clear and structured ruling in favor of the appellant. The bench held that since the BNSS has replaced the Code of Criminal Procedure and came into force from July 1, 2024, its procedural provisions apply to all complaints that are pending cognizance or are filed thereafter. The Court categorically observed that the proviso to Section 223(1) of BNSS introduces a crucial change in criminal procedure by requiring that before taking cognizance of any offence, including those under special legislations like the PMLA, the accused must be given a chance to be heard. The bench stressed that this safeguard is in tune with the broader constitutional ethos of fair procedure under Article 21 of the Constitution of India. It opined that denying the accused an opportunity of hearing before cognizance fundamentally violates due process and renders the order susceptible to being quashed.

Addressing the specific facts of the case, the Court noted that the Special Court had passed the cognizance order on November 20, 2024, after the BNSS had already come into effect. It was therefore incumbent upon the Special Court to adhere to the mandate of Section 223(1) by granting the accused an opportunity of being heard. The Court found that there was an admitted failure to comply with this requirement, and thus, the order taking cognizance could not be sustained in law. The bench clarified that such procedural rights, though newly introduced, are prospective and apply to all proceedings not yet completed at the time of BNSS’s enforcement.

The Court also considered and dismissed the ED’s earlier argument—though not pressed during the final hearing—that since the investigation was completed before July 1, 2024, the procedural requirements under BNSS would not apply. The Court implicitly rejected this line of reasoning by applying BNSS to the stage of cognizance, thereby setting a precedent that post-BNSS procedural rights must be observed for proceedings pending at or after its commencement.

In its final directive, the Court quashed the order of cognizance dated 20th November 2024 and directed the appellant to appear before the Special Court on July 14, 2025, where he would be given a hearing in terms of the proviso to Section 223(1) of BNSS. The judgment thus reinstates the procedural right of the accused under the new statutory framework and underscores the judiciary’s role in ensuring the fair implementation of newly enacted criminal procedure laws. The ruling has significant implications for all pending and future money laundering cases under PMLA, reinforcing that procedural compliance under BNSS is now indispensable.