Karnataka High Court Refuses To Quash Proceedings Against Congress MLA Zameer Ahmed Khan In Disproportionate Assets Case

The Karnataka High Court has dismissed a petition filed by Congress party legislator Zameer Ahmed Khan, seeking to quash proceedings initiated against him under the provisions of the Prevention of Corruption Act, for allegedly possessing assets disproportionate to his known source of income.

A single judge bench of Justice M Nagaprasanna said “A perusal at the source information report or the communication under Section 66(2) of the Enforcement Directorate would prima facie bring the petitioner under the ambit of Section 13(1)(b) of the Act.”

As per the prosecution case a complaint came to be registered on 09-06-2019, for offences punishable under Sections 420 and 120B of the IPC against the promoter of I-Monetary Advisory Private Limited, Mohammed Mansoor Khan. Immediately thereafter, the Enforcement Directorate also registered an Enforcement Case Information Report.

During the investigation by the Enforcement Directorate, the Investigating Officer found the role of the petitioner and then searched the office and residence of the petitioner. Certain information was gathered on the conduct of such search by the Enforcement Directorate with regard to certain transactions between the petitioner and the promoter of IMA which was to the tune of Rs.9.38 crores by way of cheque. Further, the statement tendered by the promoter was that he had given cash up to Rs.29.38 crores and further Rs.25 crores to the petitioner as loan and the same was not returned.

Based upon this information, a report was submitted to the then ACB, who based on it registered the impugned crime.

The petitioner argued that crime so registered for offences punishable under Section 13(1(b) r/w 13(2) of the Act is loosely registered. No preliminary inquiry was conducted, no source report was drawn and there was no permission from the Competent Authority to register the crime, it was argued.

The plea was opposed saying it is always open to the Enforcement Directorate to inform the agency of what it has gathered during any investigation. "The crime was already registered, against the promoter of IMA in which, the role of the petitioner was writ large to the tune of several crores. It is, therefore, all the proceedings have sprung. The ACB had drawn up a source report correctly.”

The bench referring to Section 66(2) of the Prevention of Money Launder Act (PMLA) said, “Section 66(2) directs that if the Director or any other authority, on the basis of information or material in his possession, is of the opinion that the provisions of any other law are contravened, then the Director or such other authority shall share the information with the concerned agency for necessary action.”

It noted that after the search was conducted at the residence and office premises of the petitioner, a communication was made immediately by the Additional Director of Enforcement Directorate, bringing in detail as to what are the assets that were found at the time when the search was conducted by the officers of the Enforcement Directorate.

Rejecting the contention of petitioners the bench said “On a coalesce of all the aforesaid information under Section 66(2) to the ACB, the source report and the order permitting registration of crime if considered, what would unmistakably emerge is, untenability of the submissions made by the learned senior counsel for the petitioner.”

It observed it is not a case where no crime was registered in which involvement of the petitioner is absent. "The crime is registered against the promoter of IMA and the premises and office of the petitioner is searched in connection with the said crime. Investigation in the said crime is still pending. The information that is received from the Enforcement Directorate under Section 66 cannot be termed to be a nothing in law, for it to become a foundation for registration of the subject crime. It has statutory credence under Section 66(2).”

Further it said “If the communication under Section 66(2) of the 2002 Act was alone made as the foundation for the entire proceedings, it would have been an altogether different circumstance. The ACB did conduct a preliminary inquiry, the preliminary inquiry led to the drawing up of a source report and the source information report led to registration of crime for offences punishable under Section 13(1)(b) r/w 13(2) of the Act.”

Noting that the communication under Section 66(2) is on 28-02-2022 and the FIR is registered only on 05-05-2022, it held “The submission is preliminary inquiry was not conducted during the said period. There is no reason to believe that it has not been conducted, on a sheer look at the communication between the officers of the Enforcement Directorate to the officers of the then ACB and registration of crime.”

Finally it said “In the case at hand, a crime has already been registered against the promoter of IMA, in connection with which the Enforcement Directorate searches the premises and office of the petitioner. It is then a report is sent under Section 66(2) of the 2002 Act. Thus, the registration of crime had preceded the information by the Enforcement Directorate. Merely because information is furnished and a source report is drawn on that basis it would not vitiate the proceedings initiated against the petitioner as they are all backed by the statute.”

However, since the order seeking interim order of stay of investigation was earlier rejected by the High Court and it came to be challenged before the Supreme Court which had stayed the high court order, the Bench said “In the light of the pendency of the petition before the Apex Court in a challenge to the refusal of interim stay and an interim stay granted by the Apex Court, I deem it appropriate to suspend the operation of this order for a period of 30 days.”

Appearance: Senior Advocate V. Lakshminarayana for Advocate Chandra L for Petitioner.

Advocate B B Patil for respondents

Citation No: 2023 LiveLaw (Kar) 437

Case Title: Zameer Ahmed Khan AND The State of Karnataka By Lokayukta P.S

Case No: CRIMINAL PETITION No.9821 OF 2022

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