Karnataka High Court Reserves Verdict On ED's Plea To Stay Order Quashing Case Against Former MUDA Commissioner

The Karnataka High Court on Thursday (March 27) reserved its order on Enforcement Directorate's application seeking to stay a single judge's order which quashed the summons issued to Dr Natesha DB, former MUDA Commissioner during whose tenure alleged illegal allotment of land was made to CM Siddaramaiah's wife Paravathi.

A division bench of Chief Justice N V Anjaria and Justice K V Aravind reserved its order after hearing the parties.

During the hearing Additional Solicitor Generals S V Raju and Aravind Kamath appearing for the agency told the court that due to the order the investigation has been effectively stalled, the order is completely perverse affecting all future searches.

Further it was submitted that judgment of the single judge is per-incuriam and if the judgment is prima facie wrong then it should be stayed.

While allowing the former Commissioner of Mysore Urban Development Corporation's plea, the single judge had held that the search and seizure conducted at his residence by the ED and the subsequent statement recorded under Section 17(1)(f) of PMLA, is vitiated on the grounds of absence of 'reason to believe', and declared it to be invalid and illegal. It also quashed the summons issued to him under Section 50 of the Act.

The agency has moved an appeal challenging the single judge's order and by way of interim relief sought to stay the order, alternatively declare that it cannot be used as a precedent.

No criminal activity, can ED go after innocent citizens

Appearing for the respondent Dr Natesha DB senior advocate Dushyant Dave submitted, "Here is a case where government is giving plots to land holder. Where is the question of money laundering here? It may be a wrong decision but there is no money derived from criminal activity. Therefore there are no proceeds of crime which is condition precedent. The plots were given in lieu of land acquired without authority of law because admittedly no compensation was paid. Plot was given to Shrimati Parvathy. I as a Commissioner have nothing to do with. It was given as a policy decision by MUDA. Allotment of plots is part of government policy, a statutory exercise. It has nothing to do with a crime". 

At this stage the bench while referring to the provisions of PMLA orally said that proceeds of crime is not limited to money. To which Dave said that yes it can be in any form but it must be proceeds of crime. 

"My emphasis is that there are no proceeds of crime. It is irrespective of a political party. Janta Dal government has given, Congress government has given, BJP government has given. Is the ED going to re-open all those millions of cases and say these are all proceeds of crime and therefore we will  go after innocent citizens. That is the question before court today," Dave emphasized. 

He submitted that an "innocent action of government" need not be treated as a crime, as that is not the power of the agency and thats not how Supreme Court's decision in Vijay Madanlal Chaudhary v. UOI must be read. 

He submitted that the single judge's judgment is imminently just judgment adding that the court was not only a court of law but also a court of equity which also protects rights of innocent citizens. 

"My learned friend (ED's counsel) used the expression 'judgment is perverse' 17 times during his argument. I was counting. It is not a perverse judgment it is completely erudite...If a government takes policy decision which is implemented for 3 decades by every authority of allotment of plots, are we going to reopen those cases and condemn people under this Act. That is a very serious issue...Government scheme is a statutory scheme under law...If you have no jurisdiction you cant start inquiry," he said. 

Reason to believe for ED action not present

On the issue of establishment of reason to believe for action under PMLA by ED, Dave said, "Inquiry can be started only when there is reason to believe...So you cannot enter unless you have a reasonable belief".

On what constitutes reasonable belief he referred to Supreme Court's judgment in Jyoti Prasad v Haryana (1993) and submitted that as the apex court had said that "reason to believe is not same thing as mere suspicion or doubt. And mere seeing cannot be equated to believe. Reason to believe is a higher level of state of mind". 

"Learned single judge called for reasons. ED supplied reasons in sealed cover. The single judge says there are no reasons here...I have not seen a more greater abuse of power than this," Dave argued. 

He further submitted, "Article 21 has now been expanded by your lordships courts including SC very widely. It includes right to goodwill, peace of mind and reputation. Someone who is issued section 50 notice shudders today of ED coming in. Across the country this is happening. This is a very nice way of de-stablizing governments. Why has it not happened in a single BJP state , I ask myself? It is only happening in opposition states–Tamil Nadu, Karnataka. These are states facing the brunt of ED. Your lordships have to protect. Please see the purpose behind this exercise". 

ED cannot do fishing inquiry

"Im not here to defend Shrimati Parvathy or Siddaramaiah. But what have I (Dr Natesha) got to do ? I have discharged duty as per Constitution as per rule of law as per statutory act, rules and MUDA's resolution. Why should I be penalised like this? Your lordships can imagine what my neighbours will be thinking when ED comes to my house that Im some corrupt bureaucrat. Am I some drug trafficker?," Dave added. 

He submitted that ED wants stay today because they want to "issue some 100 summons". He said that power to enter is not unbridled that ED can go into a fishing inquiry. 

"In my search nothing was found, except mobile phone. Nothing no incriminating document...You said allotment to 14 sites to Shrimati Parvathy is a crime. What is happening in this country? This is not the authority which Vijay Madanlal Chaudhary gives to them. This is having serious consequences on liberties of citizens, their constitutional rights. Single judge says there is no reasonable belief and ED cannot do this," Dave said. 

He further said that notices issued to former commissioner does not say anything about FIR adding that the whole exercise suffers from complete exercise of jurisdiction and "malice in law". He further said that notice given to the respondent has no detail about the inquiry, which is why the single judge had called for the file.

"What becomes clear is that power of ED officials under act is not to go on a fishing inquiry or a roving inquiry...The purpose is to stop money laundering. Yes it is not necessary that cash alone is involved. But giving 14 plots is it money laundering?," Dave said.

Closing his submissions Dave said that in the present case, "vindictiveness is writ large and it is political vindictiveness", adding that just because an FIR was filed with respect to certain events would not mean that the ED takes it as a basis to "swoop and start investigating everybody". 

Influential persons directed ex-Commissioner to allot sites

In rejoinder ASG Kamath argued that the single judge has not appreciated that there is a prima facie case made out. Proceeds of crime would be anything that is derived or obtained from a criminal activity he said. 

Referring to Section 50 of the PMLA Kamath said “Summoning is to be in respect of an investigation, power to summon is to give evidence or produce documents. In this case the investigation is ongoing and ECIR is registered by us. There was a predicate offence registered on a complaint by Snehamayi Krishna alleging thousands of sites being allotted by MUDA in violation of laws. For the purpose of ECIR i only need a registration of FIR in a predicate offence. I have exercised my power rightly".

Noting that summons were rightly issued to the former commissioner Kamath said “A past commissioner knows exactly what documents he has issued.”

He added “These 14 sites are generated due to criminal activity. The criminal activity is that certain influential person's directed the Commissioner to allot the 14 sites. My respectful submission is whether an offence is committed or not for me it is only that FIR is registered to summon him. A writ court examining the challenge to summons cannot go into examining whether the predicate offence is committed or not.”

Case Title: Directorate Of Enforcement AND DR NATESHA D B

Case No: WA 299/2025