ED Can't Trample Upon Individual Liberty & Privacy, Search & Seizure Operations Must Adhere To Procedural Fairness Under PMLA: Karnataka HC

The Karnataka High Court has observed that the Enforcement Directorate (ED) cannot give the elements of procedural fairness contained in the Prevention of Money Laundering (PMLA) a go-by in the course of its administration.A single judge bench of Justice Hemant Chandangoudar made the observation while allowing the petition filed by former Commissioner of Mysore Urban Development Authority (MUDA), Dr Natesha D B, during whose tenure alleged illegal allotment of land sites was made to Chief Minister Siddaramiah's wife Paravathi. The bench allowed the petition and held that the search and seizure conducted at the petitioner's residence by the ED and the subsequent statement recorded under Section 17(1)(f) of PMLA, is vitiated on the grounds of absence of 'reason to believe', and declared it to be invalid and illegal. It also quashed the summons issued to him under Section 50 of the Act.Moreover, the Court granted the Petitioner liberty to initiate action under Section 62 PMLA against the concerned officer of the ED. Whether the impugned search and seizure is vexatious or not, the Court said will be a matter of trial.The court said, “Enforcement Directorate is a premier investigative agency established for the purpose of preventing serious offences of money laundering and confiscation of the proceeds of crime, and that it is expected to discharge its duties with fairness. The right to liberty and privacy under Article 21 of the Constitution vests a right against the conduct of arbitrary searches, and therefore, the search conducted on the premises of the petitioner under the garb of investigation, when there is no prima facie evidence to establish the offence under Section 3 is but an abuse of process of law.”It added, “The Enforcement Directorate cannot give the elements of procedural fairness contained in the PMLA a go-by in the course of its administration. It is pertinent that the right to liberty and privacy of individuals cannot be trampled upon and that any curtailment of civil liberties is subject to the due process of law.”Case Details: ED had recorded an ECIR on 01.10.2024, based on an FIR filed by the Lokayukta concerning a predicate offence related to the illegal allotment of sites by MUDA during the petitioner's tenure as Commissioner of MUDA. Pursuant to authorization by the Joint Director of the respondent agency, the Assistant Director conducted a search of the petitioner's residence on 28.10.2024 and 29.10.2024. Furthermore, the respondent examined the petitioner on oath under Section 17(1)(f) of the Act. On 29.10.2024, summons were served on the petitioner under Section 50. Petitioner argued that ED lacked credible evidence to demonstrate that the “proceeds of crime” related to a predicate offence were either concealed or projected as untainted money, as required under Section 3 of the Act. Without such credible evidence the procedural safeguards under the Act have been violated, rendering the entire process unsustainable in law.Further, an officer authorized to conduct a search and seizure must have “reason to believe,” based on material in his possession, that a person is involved in the offence of money laundering. This reason to believe must be recorded in writing prior to initiating such proceedings. However, in the instant case, the respondent agency conducted the search and seizure on the mere assumption that the petitioner, as the then Commissioner of MUDA, had illegally allotted sites.The agency contended that issuance of summons merely calls upon the petitioner to produce records in his possession during the course of an ongoing investigation. The issuance of summons has not caused any prejudice to the petitioner, as it is procedural in nature and falls within the statutory framework of the Act. It was claimed that the sites derived by the accused (Parvathi) in the scheduled offence fall squarely within the ambit of “proceeds of crime” as defined under Section 2(1)(u) of the Act. The competent authority, having recorded its “reason to believe” in writing, has rightly concluded that the petitioner, as the former Commissioner of MUDA, assisted the accused in the illegal allotment of sites and may be in possession or control of records or properties relevant to the investigation.Findings: The bench noted that the alleged predicate offence pertains to the illegal allotment of sites during the petitioner's tenure as the Commissioner of MUDA. However, there is no evidence to demonstrate that any consideration passed in relation to the conveyance or relinquishment of such sites was received by the petitioner. Thus it said “The petitioner cannot be attributed any role in possessing, concealing, or using the proceeds of crime to constitute an offence under Section 3 of the PMLA, 2002."It further held that mere possession of a site that was allegedly illegally allotted to an accused in connection with a scheduled offence does not by itself constitute an offence under PMLA, unless the essential ...

ED Can't Trample Upon Individual Liberty & Privacy, Search & Seizure Operations Must Adhere To Procedural Fairness Under PMLA: Karnataka HC

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