Case Note & Summary
The batch of writ petitions was filed under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka. The petitioners, including Sachin Narayan, Anjaneya Hanumanthaiah, Rajendra N, Sunil Kumar Sharma, and D.K. Shivakumar, initially sought to quash various proceedings such as private complaints, sanction orders for prosecution under the Income Tax Act, 1961, and allied reliefs. However, they later restricted their prayer solely to challenging the summons issued by the Directorate of Enforcement (ED) directing them to appear for investigation under the Prevention of Money Laundering Act, 2002 (PMLA). The impugned summons arose from an ECIR registered by the ED as an offshoot of searches conducted by the Income Tax Department, which had led to a complaint and sanction for prosecution under Sections 276C(1), 277, 278 of the IT Act and Sections 193, 199 read with Section 120B of the Indian Penal Code. The petitioners contended that the offences under the IT Act are not scheduled offences under the PMLA, making the ED's proceedings illegal. It was argued that Section 120B IPC cannot stand alone without a predicate scheduled offence, and that the definition of money laundering under Section 3 requires proceeds of crime from a scheduled offence. Reliance was placed on the stay order dated 30.07.2018 passed by a coordinate bench in W.P.No.32593/2018, which had stayed further proceedings relating to the sanction order and cognizance. The court heard extensive arguments from senior counsels for the petitioners and the Additional Solicitor General for the respondents. The judgment text provided does not contain the court's final decision, analysis, or ratio, and ends mid-argument.
Issue of Consideration
Whether proceedings under the Prevention of Money Laundering Act, 2002 can be initiated based on offences under the Income Tax Act, 1961 which are not scheduled offences under the PML Act, and whether Section 120B IPC can be invoked without a predicate scheduled offence.
Case Details
2019 LawText (KAR) (08) 23
W.P.Nos.5299/2019, 5408/2019, 5420-5423/2019, 5824/2019, 6210/2019 (GM-RES)
Kapil Sibal, B.V. Acharya, C.V. Nagesh, A. Shankar, Shashikiran Shetty, D.N. Nanjunda Reddy, Sandeep Patil, Latha S Shetty, M.S. Shyam Sundar, Omkaresha, Aravind V Chavan, Prabhuling K Navadagi, K.M. Nataraj, Jeevan J Neeralgi, Unnikrishnan
Sachin Narayan, Anjaneya Hanumanthaiah, Rajendra N, Sunil Kumar Sharma, D.K. Shivakumar
Income Tax Department, Directorate of Enforcement
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Nature of Litigation
Writ petitions filed under Articles 226 and 227 of the Constitution of India challenging summons issued by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002.
Remedy Sought
Quashing of summons issued by the Enforcement Directorate and a declaration that proceedings under PMLA based on Income Tax Act offences are illegal.
Filing Reason
Petitioners alleged that the ED summons were based on offences under the IT Act and IPC which are not scheduled offences under PMLA, and that the sanction for prosecution under the IT Act was invalid and stayed.
Previous Decisions
A coordinate bench in W.P.No.32593/2018 granted stay of further proceedings relating to the sanction order on 30.07.2018.
Issues
Whether the provisions of the Prevention of Money Laundering Act, 2002 can be invoked for offences under the Income Tax Act, 1961 which are not scheduled offences under the PML Act.
Whether Section 120B IPC can be invoked in the absence of a predicate scheduled offence.
Whether the stay order in W.P.No.32593/2018 bars the ED from issuing summons.
Submissions/Arguments
Sri Kapil Sibal contended that the ED summons are based on an Income Tax Act complaint and sanction, but offences under IT Act are not scheduled under PMLA; Section 120B IPC cannot be invoked without a predicate scheduled offence; the definition of money laundering under Section 3 requires proceeds of crime from a scheduled offence, and IT Act offences are compoundable.
Sri B.V. Acharya argued that the sanction order is under challenge and stayed in W.P.No.32593/2018, which extends to ED proceedings; the authority granting sanction lacked jurisdiction; penalty under Section 279(1A) bars prosecution; proceedings under PMLA cannot be sustained.
Judgment Excerpts
the reliefs now sought for in the respective writ petitions relates to quashing of the summons issued by ED
issue an appropriate writ or order declaring that the action of the Enforcement Directorate Authorities registered ECIR/HQ/4/2018 for an alleged offence under Prevention of Money Laundering Act, 2012, whereby necessitating the petitioner to appear for an investigation and other proceedings as illegal and resultantly quash the summons issued to the petitioner dated 15.02.2019 vide Annexure-L and summons dated 25.02.2019 vide Annexure-M to the writ petition and quash all further proceedings pursuant thereto
Procedural History
The writ petitions were initially filed seeking quashing of various orders including sanction orders and complaints. The petitioners subsequently restricted their prayer to quashing summons issued by the Enforcement Directorate as per memos filed on 07.03.2019. A related writ petition (W.P.No.32593/2018) was filed challenging the sanction order, and a stay of proceedings was granted on 30.07.2018.
Acts & Sections
- Prevention of Money Laundering Act, 2002: 2(p), 2(u), 3
- Income Tax Act, 1961: 276C(1), 277, 278, 279(1), 279(1A), 279(2)
- Indian Penal Code, 1860: 120B, 193, 199
- Constitution of India: 226, 227
