Mere copy-paste of law by ED not sufficient: Karnataka HC quashes property attachment in MUDA case

The Enforcement Directorate (ED) has to strictly adhere to the procedure prescribed under the Prevention of Money Laundering Act (PMLA) and merely copy-pasting legal provisions to indicate compliance would not be sufficient, the Karnataka High Court held on Tuesday [Jayamma v Directorate of Enforcement].

Justice S Sunil Dutt Yadav made the observation while setting aside an order issued by the ED to provisionally attach certain land plots allotted to a woman by the Mysore Urban Development Authority (MUDA)

The Court found that that material on record did not reveal the urgent need to attach the property and ED's explanation for such attachment was not sufficient since it was a mere reproduction of statutory provisions.

Any deviation from the procedure would vitiate the order of the provisional attachment, the Court said.

"In the guise of adherence to law, mere copy-paste of statutory language to indicate compliance would not be sufficient. There must be application of mind to the particular facts to demonstrate that material in possession would indicate the failure of passing an order for provisional attachment would likely frustrate the proceedings under the PMLA," the Bench said.

The ED case was connected to alleged irregularities in the allotment of land by MUDA. It is the same case in which former Chief Minister Siddaramaiah was once facing accusations of misuse of official position.

Though the present petitioner Jayamma was not an accused in the case, the land allotted to her was also under scrutiny of the Lokayukta police and ED.

As per Jayamma's plea before the Court, after her family land was used for formation of Jayanagar Layout, she had approached the MUDA for allotment of sites instead of compensation.

Though MUDA executed sale deeds in respect of these sites, the revenue authorities did not issue any ownership records or katha for the plots.

Meanwhile, the Lokayukta Police started investigating the matter. This also led to registration of a money laundering case by the ED. The central agency alleged that sites allotted to the petitioner constituted proceeds of crime and thus ordered their attachment under PMLA .

The High Court held that the competent officer did not have any reason to believe that if the property was not attached immediately, it would likely to frustrate the proceedings under PMLA.

The Court also noted that since the issue relating to the revenue records was still pending, there was no question of the petitioner in any manner dealing with or transferring the sites in question.

"If that were to be so, the question of transferring the proceeds of crime and layering such proceeds would not arise," the Bench said, as it quashed the provisional attachment order.

Advocate Jaysham Jayasimha Rao represented the petitioner.

Additional Solicitor General Aravind Kamat and advocate Madhukar M Deshpande represented the ED.

[Read Order]