ED's search and seizure at ex-MUDA chief's residence unlawful: Karnataka High Court

The court also granted the official the right to initiate legal action against those involved in the search.

Bengaluru: In a significant order, the Karnataka High Court has quashed the Directorate of Enforcement (ED) action initiated against DS Natesha, former Commissioner of Mysuru Urban Development Authority (MUDA) in the alternative sites allotment case involving Chief Minister Siddaramaiah, his wife and others.

Justice Hemant Chandanagoudar has said that the search and seizure under the garb of investigation, in absence of any prima facie evidence to establish an offence under section 3 of the Prevention of Money Laundering (PML) Act, is nothing but an abuse of process of law.

The ED had registered an Enforcement Case Information Report (ECIR) on October 1, 2024, based on the predicate offence being investigated by the Lokayukta police. On October 28 and 29, 2024, the Assistant Director of ED had conducted a search at the residence of Natesha, seized his mobile phone and transferred its data to a hard disk. Further, the ED also examined him on oath under section 17(1) (f) of the PMLA.

Challenging these actions, Natesha contended that the 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 PMLA. It was further submitted that to qualify as proceeds of crime, the property must be derived or obtained, directly or indirectly, as a result of criminal activity related to a scheduled offence. The advocate for Natesha placed reliance on several judgements of the Apex Court, including the Arvind Kejriwal case, and said that the top court held that ‘reason to believe’ must be distinguished from ‘mere grave suspicion’.

On the other hand, the ED argued that section 50 of the PMLA explicitly empowers the competent authority to summon any person, compel their attendance, and require the production of records or evidence during the course of an Investigation. It also said that the competent authority, having recorded its ‘reason to believe’ in writing, has rightly concluded that the petitioner as MUDA Commissioner assisted the accused in the illegal allotment of sites and may be in possession or control of records or properties relevant to the investigation.

Justice Hemant Chandanagoudar noted that where no prima facie case has been established under the PMLA and no incriminating material elicited at the time of search and seizure, the issuance of summons lacks legal authority. The court said the petitioner could not have been compelled to appear and record the statement or produce documents, as such actions would unjustly infringe upon the personal right to liberty.

“The petitioner is not an accused in the predicate offence and that unless the petitioner were to be informed that the investigation conducted is in relation to the particular predicate offence, and that the impugned search and seizure and the subsequent issuance of summons were in relation to purported role of the petitioner in the illegal allotment of 14 sites to an accused in the predicate offence, it cannot be expected of the petitioner to disclose past fact of having discharged any duties of such nature,” the court said.

The court also said that in absence of the material against the petitioner any conclusion arrived at necessitating the search does not satisfy the threshold of ‘reason to believe’, as envisaged under the PMLA, and is therefore, no more than a mere suspicion of involvement in the offence. However, the court opined that the search and seizure under section 17 of PMLA, 2002 cannot be faulted for lack of jurisdiction as there is proper authorization in the case at hand.