Supreme Court Quashes Money Laundering Case Against Karnataka Dy CM DK Shivakumar & Aide

A bench of Justices Surya Kant and KV Viswanathan today allowed the special leave petitions filed by the Congress leader and his aide Anjaneya Hanumanthaiah against a 2019 Karnataka High Court verdict upholding the summonses issued to them by the Enforcement Directorate. The primary reason cited by the single-judge bench of the high court was that Section 120B of the Indian Penal constituted a stand-alone offence adequate to invoke the Prevention of Money Laundering Act. This rationale, however, has been held as 'unsustainable' by the apex court in view of its recent Pavana Dibbur judgment. 

The case stems from allegations of money laundering against Shivakumar and four others, following income tax raids in 2017 where unaccounted cash worth over Rs seven crore was reportedly seized. The ED had issued summonses to them in connection with the raids, under the Prevention of Money Laundering Act.

In August 2019, the Karnataka High Court had dismissed a petition by Shivakumar and others, upholding the central agency's summonses. While issuing notice in a set of pleas against this order, the Supreme Court had protected the appellants from coercive action in October of the same year.

In its ruling, the high court had addressed a crucial question regarding Section 120B of the Indian Penal Code and its applicability as a standalone and distinct offence for invoking provisions of the PMLA. It held that Section 120B can indeed be a predicate, standalone offence on the strength of which the anti-money laundering statute can be invoked.

In November, the Supreme Court in its landmark Pavana Dibbur case held that Section 120B of the Indian Penal Code becomes a scheduled offence only when the conspiracy is directed towards committing an offence that is otherwise scheduled. Notably, a bench of Justices Abhay S Oka and Pankaj Mithal clarified that the legislative intent behind the Prevention of Money Laundering Act was not to make every offence not included in the schedule a scheduled offence by applying Section 120B of the IPC.

Referencing this judgment, the Supreme Court today allowed the appeals of DK Shivakumar and his aides, setting aside the Karnataka High Court's judgment and quashing the proceedings initiated under the PMLA against them.

“In view of the Pavana Dibbur decision, the reasons assigned by high court in impugned judgment cannot sustain. Appeals are accordingly allowed and while setting aside the impugned judgment, the proceedings initiated against the appellants under the PMLA are hereby quashed,” the court held.

However, it noted that a review petition has been filed by the ED against the Pavana Dibbur judgment. Accordingly, the Justice Kant-led bench clarified that if the review petition is accepted, the view taken by the high court in the impugned judgment would stand affirmed, allowing the ED to seek a review or recall of this latest order if necessary.