'No coercive steps' means no arrest of accused, not a stay on investigation: Karnataka HC clarifies

The Karnataka High Court has clarified that an order directing an investigating agency not to take any coercive steps against an accused person only protects the person's liberty from arrest and does not restrain the continuation of the investigation or consequential steps [Pavitra Ramanujam v Directorate of Enforcement].

Justice M Nagaprasanna made the observation in a plea challenging a property attachment order issued against against a company's director (petitioner) in connection with a money laundering case.

The petitioner pointed out that the Court had earlier directed the ED not to take any coercive steps against her, provided she cooperates with the ED's investigation. On this ground, she contended that the attachment order issued against her was invalid.

Justice Nagaprasanna, however, ruled that such a 'no coercive steps' order did not prevent the Enforcement Directorate (ED) from continuing its investigation or the passage of an attachment order.

"An order restraining the investigating agency from taking coercive steps is essentially a judicial shield erected to preserve the personal liberty of the individual under investigation. Such a direction, in its ordinary legal connotation, proscribes the investigating agency from resorting to arrest or other measures directly impinging upon the person's liberty. It does not, however, denude the statutory authority of its power to continue the investigation, collect evidence, file a prosecution complaint (by the Enforcement Directorate), or invoke such other statutory remedies as the enactment itself contemplates," the Court explained.

The Court added that such a 'no coercive steps' order is narrower in its scope than an order directing that no 'precipitative steps' be taken against the accused.

"An order directing 'no coercive steps' or 'no coercive measures' would only mean that the accused, or any person in whose favour such an order is passed, shall not be arrested. An order directing that no precipitative action be taken is of wide amplitude. It stays or suspends the process of investigation in its entirety, which would mean that all action pursuant thereto would remain stayed," the Court said.

The Court was dealing with a plea by the director of a company that had been accused of embezzling an amount of ₹7.9 crores. She was arraigned by the ED as an accused in the money laundering case.

The petitioner had earlier filed a petition questioning the legality of a summons issued by the ED against her. By an order passed in March, the Court said that no coercive steps should be taken against the petitioner, provided she cooperates with the investigation.

The investigation led to the filing of a prosecution complaint before the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA).

The Adjudicating Authority proceeded to pass a provisional attachment order that attached the petitioner's properties.

She proceeded to file a fresh petition questioning how such an attachment order could have been passed when the High Court had granted her protection from any coercive steps while the investigation continues.

By a July 7 ruling, the Court highlighted that it had only protected the petitioner from arrest or similar steps that could affect her personal liberty.

It had never directed the ED not to take "precipitative action", the Court observed.

"The words employed by this Court were precise, deliberate and unambiguous—'not to take any coercive steps,'" it added.

It, therefore, ruled that there was nothing to prevent the issuance of an attachment order. The Court further noted that the petitioner can still place her objections to the attachment order before an adjudicatory authority under the PMLA before the attachment order is confirmed.

If the petitioner fails to get relief from the adjudicatory authority, she would still have an option to approach the High Court again, Justice Nagaprasanna added.

"The doors of judicial review are never irrevocably closed; they merely await the ripening of the statutory process. The petitioner would, therefore, be at liberty to seek appropriate relief before this Court at the appropriate stage, if the circumstances so warrant," the Court said, before closing the petition.

Advocate Gautham Bharadwaj and Ankith Jain appeared for the petitioner.

The ED was represented by counsel Madhu N Rao.

[Read Order]