The Karnataka High Court has ruled that mere possession of a site, allegedly allotted illegally, does not in itself constitute an offence under the Prevention of Money Laundering Act, 2002 (PMLA). The ruling came during the court’s examination of a case involving D.B. Natesh, the former commissioner of the Mysuru Development Authority (MUDA), who had been investigated by the Enforcement Directorate (ED) for his alleged involvement in the illegal allotment of properties.
Justice Hemant Chandangoudar, in his judgment, emphasized that for an act to be considered money laundering under Section 3 of the PMLA, there must be definitive evidence of the accused’s control over or intent to launder the proceeds of crime. Mere accidental possession or holding of property does not meet these criteria.
The case came to light following ED’s actions against Natesh, who was investigated in connection with the alleged illegal allotment of 14 sites to Parvathi, the wife of Chief Minister Siddaramaiah. The High Court’s observations are particularly significant as they also impact notices issued by the ED to Ms. Parvathi and Minister for Urban Development Byrathi Suresh. The court had previously stayed these notices, requiring them to appear for recording their statements.
The ED had argued that Natesh’s role as the then commissioner of MUDA was crucial since the sites allotted were treated as proceeds of crime. The agency contended that the allotment process overseen by Natesh assisted in an activity connected with the proceeds of crime, providing a reasonable basis for conducting searches and seizures under Section 17 of the PMLA.
However, the court found that the evidence presented by the ED, which included the reasons recorded for conducting the search and recording Natesh’s statement, did not substantiate the involvement of Natesh in any acts constituting money laundering. The judgment noted, “Except for the improper allotment of sites in favor of Parvathi, and that the petitioner is close to realtors, the reasons recorded do not indicate involvement of the petitioner in any act constituting money laundering.”
