Karnataka High Court allows ED to continue probe in MUDA case

Bengaluru: The Karnataka High Court on Wednesday permitted the Directorate of Enforcement (ED) to proceed with the investigation into the MUDA alternative sites allotment case.

A division bench comprising Chief Justice N V Anjaria and Justice K V Aravind, however, declined to stay the order passed by a single bench, quashing the ED summons issued to D B Natesh, former MUDA Commissioner.

The ED had challenged the January 27, 2025 judgement of the single bench, which quashed the search and seizure conducted at the residence of Natesh between October 28 and October 29, 2024.

The single bench had also set aside the subsequent statement recorded under Section 17(1)(f) of PMLA, 2002 on the grounds of absence of ‘reason to believe’. Further, the summons issued under Section 50 of PMLA, 2002, on October 29, 2024 and November 6, 2024 as well as the statements recorded under Section 50 were also quashed.

The ED prayed the division bench to stay the single bench order claiming that the investigation is hampered as the single bench order is being cited by other parties involved in the case. The ED said that in at least in seven instances, the summons issued by it to the other persons in the case have been stayed by the different courts and that the whole investigation is halted.

The bench said that it cannot permit that a judgment which could be viewed only as, and which is indeed an inter-parte, has the effect of stalling all the investigation process in general, as if it is a verdict in rem.

“All investigations under the Prevention of Money Laundering Act are needed to be permitted to be carried on in accordance with law, notwithstanding the directions in the operative order of Single bench impugned in the appeal. The applicant-investigating agency therefore is entitled to proceed and to carry on the investigation in respect of other persons or accused, in accordance with law,” the division bench said in the interim order passed in the writ appeal filed by the ED.

The bench also said that ED will be at liberty to utilise all the documents and materials which may have been gathered, recovered and secured in course of the search and seizure at the place of Natesh, as well as to utilize the statement recorded, for the purpose of rest of the investigation in accordance with law.

“This would not prejudice the respondent-petitioner as his case is pending consideration on merits. Whether petitioner’s statement recorded under 17(1)(f) of the PML Act, 2002 can be ordered to be retracted by the court, is also an issue at large to be considered in appeal,” the bench said.