Karnataka HC Quashes LOC Against Brother Of Bitcoin Scam Accused, Says ED Can't Repeatedly Summon A Person U/S 50 PMLA On Mere Suspicion

The Karnataka High Court has held that summoning of a person repeatedly under Section 50 of the Prevention of Money Laundering Act, without probable cause or reasonable ground and only on the ground of suspicion alone is not in accordance with the principles of due causes and fairness.

A single judge bench of Justice Hemant Chandangoudar said,

“Section 50 is a crucial provision and states that a person, who is being summoned for investigation must be provided with a written notice specifying the nature and the reasons for it. While the said provision does not explicitly use the term " Probable cause", it emphasises the importance of providing valid reasons and grounds for summoning an individual. The purpose of this provision is to protect the right of the person being summoned and ensure that investigation is not arbitrary.”

The bench made observations while allowing a petition filed by Sudarshan Ramesh, brother of bitcoin scam accused Sirkrishna, and declared that the LOC issued against the petitioner by Bureau of Immigration, is unenforceable.

Earlier, High Court had rejected Sudarshan's plea challenging an endorsement affixed on his passport for cancellation. Subsequently, the Court had directed the ED complete the probe in six weeks and consider the representations made by Sudarshan to recall the LOC.

The petitioner had contended that in the absence of cognizable offence registered against the petitioner and in the absence of reasonable grounds, the petitioner cannot be repeatedly summoned which would otherwise result in violating the principles of fairness, justice and the Rule of Law, more so when the petitioner has cooperated with the investigation. He cannot be expected to give a self incriminating statement which would otherwise result in dilution of rights under Section 50 of the Act.

The prosecution opposed the plea saying that the present petition under Article 226 r/w 482 of Cr.P.C. is not maintainable, since the fundamental rights enshrined in the constitution can be enforced only under Article 226 of Constitution of India. Secondly, it was argued there are reasonable grounds for summoning the petitioner to record his statement for investigation of the offence under PMLA against his brother. Therefore, if the LOC issued against the petitioner is withdrawn, in all probability he will abscond and not available for further investigation in future, it was submitted.

Prosecution claimed petitioner is not cooperating in the investigation by providing information with regard to the Password and email I.D. of the transaction that has taken place between his father and third party, wherein a sum of Rs.50,000 GBP (Great Britain Pounds) was transferred from the account of the petitioner to the account of one Mr. Hanish Patel and though the petitioner has the knowledge of the said transaction, he has not divulged the information.

The bench on going through the records noted that the concept to issue Look-out circular is to secure a person against whom the cognizable offence is registered.

LOC can be issued in a cognizable offences under IPC or other penal laws, where the accused was deliberately evading arrest or not appearing before the Trial Court despite Non Bailable Warrant (NBW) and other coercive measures, and the accused is not participating in the trial, and every likelihood of the accused leaving the country. In exceptional circumstances, the LOC can be issued against the witness, in the event, he does not cooperate with the investigation.

Following which it said “In the instant case, there is no cognizable offence registered against the petitioner nor a non-bailable warrant is issued against the petitioner. The petitioner is summoned solely on the ground that his brother has been implicated as an accused in the scheduled offences and under the PMLA, and also alleging that his father had transferred 50,000 GBP which is the proceeds of the crime to a third party.”

Court noted Petitioner was summoned under Section 50 of the PMLA, 2002, on several occasions, and in pursuance of the same, he appeared and his statement was recorded, and in the statement so recorded, nothing incriminating is elicited to summon him for further investigation.

“LOC cannot be issued solely on the ground that the petitioner has not provided information to the convenience and satisfaction of the respondent No.2. The petitioner cannot be repeatedly summoned to give information to suit the convenience of the prosecution,” it thus held.

The court then opined that a person can be summoned to give statements during the course of investigation only when there exists a reasonable ground to believe that the said person has knowledge or information with regard to the commission of a crime. "The principle of reasonable suspicion/ probable cause is fundamental to the criminal justice system and it ensures that persons are not subjected to investigation or summoned to give statements during the course of investigation which would otherwise result in violating the principles of fairness, justice and the Rule of Law.”

Noting that the Respondent has not placed any material to substantiate that the suspicion or reasonable ground to summon petitioner is based on credible information, except that he is the brother of the accused, the bench held, “Therefore, in the absence of any reasonable suspicion leave alone probable cause, the LOC issued for securing the presence of the petitioner for recording further statements would be arbitrary and violate the fundamental rights enshrined under Article 21 of the Constitution of India.”

Rejecting the ground of maintainability of petition raised by the prosecution the court said, “The proceedings initiated under the provisions of PMLA against the brother of the petitioner is the basis for issuing LOC and any action taken or order passed under PMLA can be challenged by invoking inherent jurisdiction under Section 482 Cr.P.C or under Article 226 r/w Section 482 Cr.P.C to prevent the abuse of the process of law/or to secure the ends of justice.”

Further it said “Hence, the fundamental right of the petitioner to travel abroad as enshrined in Article 21 of the Constitution of India is infringed by the respondent No.1 (Union of India) in the course of investigation under the provisions of PMLA. The petitioner has been restrained from travelling abroad for a period of 1 year 10 months spreading over from January 2021 till date. Therefore, the contention of the learned ASG that the LOC can only be challenged under Article 226 and not under 482 Cr.P.C. is not acceptable.”

Accordingly it allowed the petition and said, “I am of the considered view that the continuation of the LOC against the Petitioner indefinitely on the ground of suspicion alone will be an abuse of process of law and also the object of LOC.”

Appearance: Senior Advocate Sandesh J. Chouta, for Advocate Gaurav N for Petitioner.

Additional Solicitor General Sundareshan, a/w Advocate Madhukar M.Deshpande for R3.

Deputy Solicitor General H.Shanthi Bhushan, for R1 & R2.

Citation: 2023 LiveLaw (Kar) 398

Case Title: Sudarshan Ramesh AND Union of India & Others

Case No: WRIT PETITION NO. 17027 OF 2023

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