You may be crusader against corruption but act according to law: Karnataka High Court pulls up ED

The Karnataka High Court on Wednesday orally observed that in its zeal to act against corruption, the Enforcement Directorate (ED) cannot bypass the limits of the law [Mahadevi Manjunath & Others v. Union of India and others].

Justice M Nagaprasanna made the oral observation while hearing petitions filed by Karnataka Excise Department Additional Commissioner Y Manjunath, and his wife Mahadevi Manjunath (sister of Minister Satish Jarakiholi) and some others.

They challenged certain search and seizure proceedings initiated against them by the ED in a money laundering case.

They argued that they were not accused in the bribery case on which the ED's case was based, nor were they linked to any alleged act of money laundering.

The Court today directed the ED not to take any precipitative action against the petitioners for until the matter is heard next on July 22.

It passed the interim order after expressing prima facie reservations over the ED's invocation of its search and seizure powers in the present case.

"You may be a crusader (against) corruption, but it should be in accordance with law. If you really have the zeal to cut corruption in any department, do it in accordance with law. No court will interfere. But you need not come here and defend an action that is, prima facie, indefensible," the judge observed.

The ED's actions were founded on a Lokayukta trap case in which one Jagadish Nayak was allegedly caught accepting a bribe of ₹25 lakh. Nayak was booked under Section 7A of the Prevention of Corruption Act.

The petitioners contend they are neither accused in that case nor connected with the alleged offence. Nevertheless, they had to face search and seizure action related to the said corruption case.

The petition states that the ED issued search authorisations on June 23. ED officers searched the Manjunath family's Belagavi residence from around 6.45 AM the following day for nearly 23 hours. During the search, Mahadevi Manjunath's streedhan jewellery was seized despite it having been disclosed in income-tax records.

Simultaneous searches were allegedly carried out at the petitioners' Bengaluru residence for approximately 17 hours, resulting in the seizure of mobile phones, electronic devices, cash of around ₹2 lakh, foreign currency worth nearly ₹3 lakh and property documents.

The petition characterises the searches as a "fishing and roving inquiry", contending that the ED failed to establish any nexus between the seized materials and any alleged proceeds of crime.

The plea argues that in the absence of a predicate offence attributable to the petitioners, there can be no "proceeds of crime" and consequently no offence of money laundering under Section 3 of the Prevention of Money Laundering Act (PMLA).

They, therefore, seek the quashing of the search and seizure proceedings initiated by the ED against them under Section 17 (search and seizure) of PMLA.

During today's hearing, Justice Nagaprasanna repeatedly questioned the ED on how it had proceeded against persons who were not accused in the predicate offence.

"There should be a money trail. There should be a connection. These are unconnected people. You can't simply draw them in ... No predicate offence. Then how did you go? It is unfathomable," the Court observed.

Questioning the ED's jurisdiction, the Bench remarked,

"Absolutely no problem for you to get a right to search a particular house. But first there should be a predicate offence. One should either be an accused in that predicate offence or there should be a money trail connecting that person. Now who are these people, and who is Jagadish Nayak?"

The Court also remarked,

"That is a Prevention of Corruption Act trap case. Is ₹25 lakh in a trap case itself proceeds of crime? ED can proceed against the person who allegedly accepted the bribe. How do you go against unconnected people?"

Further, the Bench was critical of the ED's reliance on a press release referring to alleged widespread corruption in the Excise Department.

"There is a well-oiled institution in Karnataka in the form of the Lokayukta. Are you doing the Lokayukta's job?" Justice Nagaprasanna asked.

Senior Advocate Prabhuling Navadagi along with Advocate Vivek Jain appearing for the petitioners, argued that the ED's own press release could not confer jurisdiction under the PMLA.

Senior Advocate KN Phanindra added that the petitioners had already been subjected to searches and seizures and should be protected from further coercive action pending adjudication.

Advocates Gautam S Bharadwaj, and Prashant F Goudar also appeared for the petitioners.

Appearing for the ED, Special Public Prosecutor Madhu N Rao submitted that the agency had acted based on linkages emerging during the investigation and sought time to obtain instructions on the issues raised by the Court.