New Delhi: The Supreme Court Tuesday quashed a Prevention of Money Laundering Act (PMLA) case against Karnataka Deputy Chief Minister D.K. Shivakumar. A bench of justices Surya Kant and K. V. Vishwanathan allowed the special leave petition (SLP) filed by Shivkumar’s aide Anjaneya Hanumanthaiah against a 2019 order of the Karnataka High Court upholding the PMLA case.
The top court relied on an earlier judgment of its own, which in November 2023 declared that the criminal conspiracy section in the Indian Penal Code (IPC), which is section 120B, does not constitute a standalone offence and is not adequate to invoke the PMLA.
“In view of the Pavana Dibbur decision, the reasons assigned by the high court in the impugned judgment (of the Karnataka HC) cannot sustain. Appeals are accordingly allowed and while setting aside the impugned judgment, the proceedings initiated against the appellants under the PMLA are hereby quashed,” the SC bench observed in its brief order Tuesday.
The SC also noted that the Enforcement Directorate’s (ED’s) review petition against the Dibbur judgment is pending in the top court and clarified that in case the agency’s plea is accepted, the latter can seek a review of the Tuesday order.
ThePrint explains the Dibbur judgment and how it impacted Shivakumar’s case.
The 2023 Dibbur ruling
In November 2023, a bench led by Justice Abhay S Oka held that the offence of criminal conspiracy cannot be attributed as a scheduled offence under the PMLA unless it is associated with committing a crime that is specifically included as a scheduled offence under the anti-money laundering law.
In case the alleged offence is related to any other offence, which is not a part of the Schedule to the PMLA, then the alleged criminal conspiracy by itself shall not be considered as a “scheduled offence” and, therefore, no PMLA proceedings would lie in such a scenario.
The 2023 judgment came on an appeal filed by Pavana Dibbur, who purchased a property from Alliance Business School in July 2013. The business school was affiliated to Alliance University in Karnataka. Later, she picked up another property from Madhukar Angur, who, according to the ED, was posing as the chancellor of Alliance University.
In November 2017, a criminal case was registered against Angur for collecting Rs 107 crore from students by claiming to be the chancellor of Alliance University. The ED undertook measures under the PMLA and attached the two properties that were purchased by Dibbur.
The ED filed a complaint against Dibbur in October 2021, alleging she had conspired with Angur by executing nominal sale deeds for the two properties in her name. This, the agency said, was done for the benefit of Angur. Dibbur was further accused of using her bank accounts to siphon off university funds, thus facilitating Angur in handling the proceeds of crime. She was arraigned as an accused in the complaint.
Dibbur filed a quashing petition against the complaint, which the Karnataka High Court rejected. This was followed by an appeal by Dibbur in the apex court.
It was argued on her behalf that the properties could not be treated as “proceeds of crime” since they were not tainted properties and had no nexus with the scheduled offences.
The first property, she submitted, was acquired much before the commission of the alleged scheduled offence. As for the second property, she argued, the same was acquired by using her own resources. It was also contended that Dibbur was not named as an accused in any predicate offence and, thus, no action can be taken against her.
On its behalf, the ED claimed that the second property was acquired through proceeds of crime and can be delved into only during the process of trial. According to it, a person not accused in any predicate offence can also be accused of committing a money laundering offence.
Partly accepting Dibbur’s contention, the top court observed that since the scheduled offence took place after the date of acquiring the first property, it is not connected with the proceeds of crime.
With regard to her argument on the second property, the SC said that Dibbur had not adduced sufficient evidence to prove that this property was not acquired by utilising the proceeds of crime. It, therefore, ordered Dibbur to face trial to come clean on the status of the second property.
On her argument of not being named as an accused in a predicate or scheduled offence, the court held that two conditions are necessary for an offence to be covered under PMLA — there must be a scheduled offence, and second, there must be proceeds of crime in relation to the offence.
It rejected the ED’s contention that criminal conspiracy can be treated as a standalone offence, even if it is for an offence that is not in itself a part of the Schedule under PMLA. The court observed that if such an interpretation is allowed, then any offence that is not included in the Schedule to the PMLA, will be covered under the special law. This action would render an action “patently arbitrary,” the court said.
It added though penal statutes are to be strictly construed as per the legislative intent, in case of two reasonable interpretations to a particular provision, the interpretation which avoids the imposition of penal consequences is to be adopted by the courts.
Since there was no allegation of commission of criminal conspiracy in respect of a scheduled offence included in the PMLA, the top court ruled that Dibbur cannot be prosecuted for an anti-money laundering offence.
What SC held in Shivakumar case
On Tuesday, SC relied on the principles enumerated in the Dibbur case to quash the case against Shivakumar.
The bench observed that the IPC section 120B (criminal conspiracy) in Shivakumar’s case was slapped alongwith violations under the Income Tax Act, which was not a scheduled offence under the PMLA.
It accepted the argument of his counsel, senior advocates Abhishek Manu Singhvi and Siddhartha Luthra, that in the absence of a scheduled offence, there is no basis for the money laundering probe to continue.
However, the quashing order will have no impact on the other PMLA proceedings against Shivakumar. The ED had registered this second case after the CBI booked the Congress leader under the Prevention of Corruption Act following the revelations made by the anti-money laundering agency while it was looking into the Income Tax Act violations.
The PMLA case against Shivakumar was lodged in 2018. He and a few others were accused of establishing a network for the purpose of transporting and using unaccounted cash.
The Income Tax department in August 2017 searched several premises in the national capital as part of its investigation into alleged tax evasion by Shivakumar, his aide Hanumanthaiah and others.
The IT department later filed a charge sheet before a Bengaluru court on charges of tax evasion against all the accused and the ED took cognisance of this complaint and filed the money laundering case in 2018.
Shivakumar was arrested by the ED in September 2019 in connection with the case, and granted bail by the Delhi High Court a month later.
(Edited by Gitanjali Das)
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