Karnataka HC Dismisses DK Shivakumar's Plea For Quashing ED Summons In Alleged Money laundering Case [Read Judgment]

The Karnataka High Court on Thursday dismissed a petition filed by Congress party leader in the state, DK Shivakumar and four others, seeking to quash the summons issued to them by the Enforcement Directorate in an alleged case of money laundering, under the Prevention of Money Laundering Act.

Justice Aravind Kumar while dismissing the petitions said "The mere issuance of a show cause notice or notice to appear for the purpose of investigation does not infringe the right of a party, as it does not affect the right of such a party. Thus question of fundamental right guaranteed under Article 21 of Constitution of India cannot be held to have been infringed by petitioners on account of them being summoned for investigation by the issuance of impugned summons by ED."

Income Tax officials had raided the properties in New Delhi on August 2, 2017 and had seized unaccounted cash worth over Rs 7 cr. Cases have been registered under Section 277 and 278 of the Income Tax Act of 1961 and Sections 120(B), 193 and 199 of the IPC against DK Shivakumar, Sachin Narayana, Sunil Kumar Sharma, Anjaneya Hanumanthaiah and Rajendra. Following which, the ED had issued summons to them to appear for questioning in connection with the I-T raids.

Senior Counsel Kapil Sibal appearing for Shivakumar argued that "Basis on which Enforcement Directorate have issued summons is for a purported investigation being carried out which is an offshoot of search conducted by Income Tax Department and a complaint having being filed before the jurisdictional court. Section 120 B of IPC cannot be invoked in the absence of predicate offence under IT Act; not being a schedule offence, proceeding under PML Act cannot be continued. Section 3 of PML Act would clearly indicate that it is only 'proceeds of crime' if attempted to be ploughed into main stream of the economy would attract definition of money laundering. Offence alleged to have been committed by petitioner even according to respondents being under IT Act, and same not being a schedule offence, which is sine qua non for the provisions of the PML Act being attracted. Petitioner appearing before ED does not arise."

Then Additional Solicitor General of India, Prabhuling K Navadgi argued that "Irrespective of the offence under IT Act, the Enforcement Directorate is empowered to proceed to investigate and satisfaction of money being proceeds of crime would be sufficient to proceed. He would contend that the writ petitions are premature and notice is issued in consonance with section 50 of PML Act.

The bench observed:

The object of issuance of summons is to trace or ascertain the proceeds of crime if any and to take steps in that regard like attaching the proceeds of crime if proved in a given case. The person issued with summons in proceedings initiated under the PML Act, may or may not be the offender of the schedule offence.

The authorities under the PML Act can initiate investigation on any of the schedule offences stipulated under section 2 (1) (x) and 2 (1) (y) of the act. The predicate offence may be a trigger for initiating the offence stipulated under PML Act, and the investigation can be relatable predicate offence or for the offence of money laundering, as defined under Section 3 of the PML Act.

It added "Proceedings under the PM Act are independent, separate, distinct and different from the proceedings initiated for schedule offences by other law enforcement agencies. PML Act is a standalone enactment which differentiates the schedule offences and the money laundering offences separately. The mere suspicion of the authorities that proceeds of crime are being ploughed into main stream of the economy as untainted money is sufficient enough for the authorities to investigate and examine and this can be done only by collecting the information, recording the statements who might not be the offender also."

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