Manas Dasgupta
NEW DELHI, Mar 5: In a major relief to the Karnataka Deputy Chief Minister DK Shivakumar ahead of the Lok Sabha polls, the Supreme Court on Tuesday dismissed a 2018 money laundering proceedings against him instituted by the Directorate of Enforcement (ED) under the Prevention of Money Laundering Act (PMLA) on the basis of an Income Tax department complaint.
A Bench of Justices Surya Kant and K.V. Viswanathan passed the order on the basis of special leave petitions filed by Mr Shivakumar and two others, variously represented by senior advocates A.M. Singhvi, Siddharth Luthra, S. Nagamuthu and advocate Parmatma Singh, challenging the jurisdiction of the Central agency.
They had appealed to the top court against a Karnataka High Court judgment in August 2019 refusing to intervene in the case and upholding the summons issued by the ED. The Supreme Court, however, had issued notice on October 15, 2019, and directed the ED to not take any coercive action against Mr Shivakumar, Anjaneya Hanumanthaiah, and Sunil Kumar Sharma.
Mr Shivakumar had argued that the ED had commenced “illegal proceedings” by registering an Enforcement Case Information Report (ECIR) against him under Section 3 of the Prevention of Money Laundering Act (PMLA), 2002.
The senior lawyers contended that the ED strayed far from its turf by basing its ECIR entirely on an Income Tax department complaint alleging tax and penalty offences. None of the offences were ‘scheduled offences’ under the PMLA, the petitioners said.
“The admitted basis of commencing investigations under PMLA is a criminal complaint filed by Income Tax authorities which alleged ‘criminal conspiracy’ punishable under Section 120B of the Indian Penal Code only for alleged commission of such offences punishable under the Income Tax Act and the Code,” Mr Shivakumar’s petition underscored.
Mr Shivakumar had argued that with no scheduled offence alleged, there was no proceeds of crime. Evidence of crime proceeds was necessary to invoke money-laundering charges.
On Tuesday, the Supreme Court referred to its recent Pavana Dibbur judgment, which had held that Section 120B would be deemed a scheduled offence under the PMLA only if the conspiracy had been directed towards the commission of an offence specified in the 2002 Act.
“To invoke PMLA, the first requisite is commission or conspiracy to commit a scheduled offence resulting in the proceeds of crime. For invoking Section 3 of PMLA against any person, it is necessary that a person must not only be involved in an activity connected with proceeds of crime, but must also project or claim the proceeds of crime as untainted property,” Mr Shivakumar’s plea said.
Mr Shivakumar had argued that even the Income Tax proceedings had been separately stayed by the Karnataka High Court in 2019. The prosecution complaint filed by the Income Tax department before the Special Court for Economic Offences was based on searches conducted in the premises of Mr Shivakumar and his associates in different places in Bengaluru and outside the city.
The complaint said “during the search, certain incriminating documents and materials were found and seized.” It said Mr Shivakumar had “active business concerns in the sectors of education, trust and real estate for a significant amount of time. In the course of conducting the business activities, there has been a modus operandi employed by him to engage different people for the purpose of concealing and projecting the unaccounted and illegal money as untainted property for the purpose of evading income tax. It was in this background that a criminal conspiracy to evade income tax and to enable the accused (Shivakumar) to evade income tax was hatched.”
Mr Shivakumar has maintained that the case was motivated by political reasons. The Congress leader was arrested by Enforcement Directorate (ED) officials in September 2019 in connection with this case. The Delhi High Court had granted him bail the next month. Mr Shivakumar had then accused the BJP of political vendetta and said he had full faith in the judiciary.
The ED’s investigation against the Congress leader had followed Income Tax department’s raids on premises linked to him and his aides in 2017. Officials had then said cash worth nearly ₹ 300 crore was recovered in these raids. Mr Shivakumar had hit back, saying that the cash was linked to the BJP.
“Question of whether 120B IPC can constitute a predicate standalone offence to enable ED to invoke PMLA has already been decided by the Supreme Court,” the court said on Tuesday. In November last year, the Supreme Court ruled that criminal conspiracy – under 120 B of IPC – will be treated as a scheduled offence under the Prevention of Money Laundering Act only if the alleged conspiracy is to commit an offence included in the Schedule to the Act. The ED has sought a review of this ruling. The court said the agency was free to see a recall of today’s order if the review request was accepted.
Mr Shivakumar had in 2019 approached Karnataka High Court and sought dismissal of summons issued by ED. On finding no relief there, he had approached the Supreme Court.
Another corruption case against Mr Shivakumar is at the centre of a massive political row in Karnataka at this point. The Siddaramaiah-led government recently withdrew the sanction to CBI to probe the case. The central agency, which got a go-ahead in the case before the Congress came to power in Karnataka, has now challenged the new government’s move in court. Mr Shivakumar has repeatedly accused the BJP of harassing him by misusing central agencies.
