Cannot Interfere With ED Case Registered In Another State : Karnataka High Court

A single judge bench of Justice K Natarajan dismissed the petition filed by Vihaan Direct Selling India Private Limited which had approached the Court seeking to quash the case registered in 2013 by the Enforcement Directorate and to declare that the search conducted under Section 17 of the Prevention of Money Laundering Act as illegal and unconstitutional.

The bench said “This Court cannot interfere and pass any order with the action taken by the respondent-ED in the case registered at Mumbai.”

The ED had registered the case based upon the FIR registered by the Oshiwara Police Station, Mumbai in 2013 for various IPC offences including Sections 120B and 420 of IPC which are the scheduled offences under the Prevention of Money Laundering Act, 2002.

The ED then conducted a search and froze the bank account of the company and sent the seized amount and other materials to the Adjudicating Authority. The bank accounts were in Bengaluru and Chennai.

Petitioner's argument

The company argued that the predicate offence registered by the Mumbai Police in Crime No.316/2013 has been stayed by the Supreme Court on 27.03.2017. When the predicate offence is already stayed by the Supreme Court, the ED has no authority to proceed with its investigation and seize any documents in the PMLA case.

Further, the company is suffering heavy loss and is in need to access to bank accounts to pay salaries and meet other running expenses and tax dues.

However, the special counsel for ED, Madhukar Deshpande contended that the petitioner is not maintainable before Karnataka HC since the predicate offence and the ED case are registered at Mumbai.

The court placed reliance on Madras High Court judgment in the case of S. Ilanahai vs. The State of Maharashtra in Criminal.O.P.No.22498/2014 and M.P.No.1/2014 reported in 2015 (1) MWN (Cr.) 618 and Delhi High Court judgment in the case of Sayed Mohd. Masood vs.Union of India and Another reported in 2013 SCC OnLine Del 4510.

It then said “The judgment of the Madras High Court and the Delhi High Court categorically held that when the FIR is registered in some other State, merely the petitioner-accused staying in Karnataka State and bank account is operating at Karnataka, this Court cannot take the cognizance and quash or stay the criminal proceedings in favour of the petitioner.”

Thus it held “I am in respectful agreement with the decision rendered by the Madras High Court as well as the Delhi High Court that this Court has no jurisdiction to entertain the petition and pass any order against the respondent-ED when the case was registered at Mumbai and properties were seized and forwarded to the Adjudicating Authority at Delhi.”

It added “The only option available to the petitioner is to approach the Mumbai Court having territorial jurisdiction and also an alternative and efficacy remedy available before the Adjudicating Authority at Delhi.”

Case Title: Vihaan Direct Selling India Private Limited And The Assistant Director, Directorate of Enforcement

Case No: WRIT PETITION NO.2576 OF 2023

Citation: 2023 Livelaw (kar) 98

Date of Order: 28-02-2023

Appearance: Senior Advocate Kiran S Javali for Advocate Shreehari for petitioner.

Special Counsel Madhukar Deshpande for respondent.

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