Mysuru Urban Development Authority (MUDA) office in Mysuru.
| Photo Credit: M A Sriram

The High Court of Karnataka has declared as ‘unwarranted, illegal and abuse of process of law’ the actions of the Enforcement Directorate (ED) in searching the residence D.B. Natesh, a former commissioner of the Mysuru Urban Development Authority (MUDA), summoning him and recording of his statement, in connection with his role in the case of alleged illegal allotment of 14 sites to Parvathi, wife of Chief Minister Siddaramaiah.

The court reserved liberty to Mr. Natesh to prosecute — under Section 62 [punishment for vexatious search] of the Prevention of Money Laundering Act (PMLA), 2002 — against the officer concerned of the ED before the appropriate forum for conducing search at his residence ‘as whether the search and seizure is vexatious or not is a matter of trial’.

“Statement to be retracted’

The statement of Mr. Natesh, recorded by the ED under Section 17(1)(f) of PMLA, is ordered to be retracted, the court stated.

Section 62 of the Act states that any authority or officer exercising powers under this PMLA or rules, who, without reasons recorded in writing, searches or causes to be searched any building or place; or detains or searches or arrests any person, shall for every such offence be liable to conviction for imprisonment for a term which may extend to two years or fine which may extend to ₹50,000, or both.

Justice Hemant Chandangoudar passed the order while allowing the petition filed by Mr. Natesh, who had questioned the legality of ED’s actions initiated based on the predicate offence registered against Chief Minister Siddaramaiah, his wife and others by the Lokayukta police on registering a First Information Report (FIR) on September 27, 2024.

No money laundering

“…the alleged predicate offence pertains to the illegal allotment of [14] 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,” the court said while stating out that “Consequently, the petitioner cannot be attributed any role in possessing, concealing, or using the proceeds of crime to constitute an offence under Section 3 [offence of money laundering] of the PMLA, 2002.”

Pointing out that the PMLA mandates that based on materials in possession, the ED officer has to record in writing ‘reason to believe’ that offence of money laundering is committed, the court stated: “The reasons recorded [by ED] do not in any manner, whatsoever, indicate the involvement of the petitioner in any act constituting money laundering or to be in possession of proceeds of crime involved in money-laundering, or to be in possession of any records or property related to money laundering or crime, respectively.

“The reasons do not contain any specific allegation or remark against the petitioner having suspected to either received illegal gratification against the allotment of sites, or having placed or layered any proceeds of crime, or having knowingly assisted in the same, much less any evidence to substantiate the suspicion.”

The court pointed out that the standard of ‘reason to believe’ must meet a higher threshold than mere suspicion.

Therefore, the court said, the ‘search and seizure conducted at the residence of the petitioner was unwarranted and based on unfounded suspicion, and is therefore, an abuse of process of law’.

As ‘no prima facie case has been established showing that an offence of money laundering has been committed and no incriminating material has been elicited during search’, the issuance of summons to the petitioner ‘lacks legal authority,” the court said while describing the ED’s action of summoning him and recording his statement as ‘unjustly infringe upon their personal right to liberty’.

“The ED 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 and privacy of individuals cannot be trampled upon, and that any curtailment of civil liberties is subject to the due process of law,” the court observed.