The Karnataka High Court on April 2 declined to stay a single judge's order that had quashed the Enforcement Directorate's (ED) summons issued to Dr. Natesha D B, the former Commissioner of Mysore Urban Development Authority (MUDA). The summons were related to an alleged illegal land allotment to Parvathi, the wife of Karnataka Chief Minister Siddaramaiah.
However, the court clarified that this decision does not prevent the continuation of the investigation against other accused individuals in the case.
A division bench comprising Chief Justice N V Anjaria and Justice K V Aravind, while delivering the order, stated:
"Here is a case where the government is allotting plots to landholders. Where is the question of money laundering? It may be a wrong decision, but there is no money derived from criminal activity. Therefore, there are no proceeds of crime, which is a condition precedent."
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The prayer for stay as such is not accepted. However, this judgment is not in rem and cannot halt the investigation against other persons involved in the case. We have permitted investigations to continue. ED shall be at liberty to utilize all the documents and materials gathered, recovered, or seized at the place of the petitioner, as well as use the petitioner's statement for the purpose of the rest of the investigation in accordance with the law.
The court also noted that this decision would not prejudice Dr. Natesha D B as his case remains under consideration on its merits. It further clarified that whether his statement could be retracted would be determined during the appeal.
All investigations under the Act are permitted to continue in accordance with the law, notwithstanding the judgment of the single judge being challenged in the appeal. ED is entitled to proceed and carry on the investigation against other accused in accordance with the law. The present application is disposed of.
Background of the Case
On March 27, the High Court had reserved its verdict on the ED’s application for a stay. The single judge had previously ruled in favor of Dr. Natesha D B, holding that the search and seizure at his residence by ED and his subsequent statement recorded under Section 17(1)(f) of the Prevention of Money Laundering Act (PMLA) were vitiated due to the absence of 'reason to believe,' making them invalid and illegal. Consequently, the summons issued to him under Section 50 of the PMLA was also quashed.
ED challenged this ruling by filing an appeal and a stay application.
During the hearing, Additional Solicitor Generals S V Raju and Aravind Kamath, representing ED, argued that the single judge's ruling had effectively stalled the investigation, affecting future searches.
Senior Advocate Dushyant Dave, representing Dr. Natesha D B, contended that there was no case for money laundering.
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Dave argued that the allotment of plots was a policy decision made by MUDA and had nothing to do with any criminal activity.
At this stage, the bench orally remarked that proceeds of crime are not necessarily limited to money. Dave countered:
"Yes, proceeds of crime can be in any form, but they must still qualify as proceeds of crime. My emphasis is that there are no proceeds of crime."
On the issue of ED's justification for initiating action under PMLA, Dave argued that an inquiry could only commence
Reason to believe is not the same as mere suspicion or doubt. Mere seeing cannot be equated to believing. Reason to believe is a higher level of state of mind.
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Case No: WA 299/2050
