SC quashes ED case against Karnataka deputy chief minister DK Shivakumar

The Supreme Court on Tuesday quashed a case lodged under the Prevention of Money Laundering Act (PMLA) against Karnataka deputy chief minister DK Shivakumar in view of its November 2023 ruling that criminal conspiracy, which is punishable under Section 120B of the Indian Penal Code (IPC), cannot be the only offence for initiating a money laundering probe.
A bench of justices Surya Kant and KV Viswanathan took note of the Supreme Court’s judgment in the Pavana Dibbur case, in which another two-judge bench declared that criminal conspiracy can be a charge under the PMLA only when the conspiracy relates to a crime enlisted as a scheduled offence under the 2000 Act.
In the present case, Shivakumar and a few other co-accused were accused of establishing an extensive network of individuals and places across Bangalore and Delhi with the purpose of transporting and using unaccounted cash.
The ED probe followed a spate of Income Tax raids in 2019 as the federal agency alleged Shivakumar conspired with Anjaneya Hanumanthaiah, Sunil Kumar Sharma and some others to evade tax.
The Karnataka high court had in August 2019 refused to quash the ED summons to the Congress leader and others, which they appealed against in the top court. In this case, Shivakumar was arrested in September 2019 and remained incarcerated for nearly two months.
On Tuesday, senior counsel Abhishek Manu Singhvi and Sidharth Luthra, appearing for Hanumanthaiah and Shivakumar threw their weight behind the November 2023 ruling by a coordinate bench. The lawyers pointed out that the ED probe against Shivakumar and others was premised solely on the criminal conspiracy charge under Section 120 of the IPC and that there was no scheduled offence involved in the matter.
The PMLA enumerates certain offences in the Schedule annexed to it. These include numerous offences under the IPC, Narcotic Drugs and Psychotropic Substances (NDPS) Act, and other statutes, besides offences having cross­-border implications.
Singhvi pressed that the high court order was not tenable in law after the top court’s ruling that Section 120B cannot be a standalone offence to initiate a probe under the PMLA. He added that the alleged offence under the Income Tax Act was admittedly not a scheduled offence under the Act and therefore, there is no basis for the money laundering probe to continue.
Luthra, on his part too, cited the 2023 ruling of the top court to contend that since there was no allegation of the commission of criminal conspiracy to commit any of the offences included in the PMLA Schedule, Shivakumar could not be prosecuted under the Act.
Representing the ED, additional solicitor general SV Raju conceded that a prosecution under the PMLA cannot be conducted only based on invocation of Section 120B in the wake of the November 2023 judgment by the Supreme Court.
At the same time, the law officer informed the bench that the agency has filed a review petition against the 2023 judgment in the Pavana Dibbur case and if it succeeds, the ED should be granted the liberty to revive the prosecution.
At this point, the bench proceeded to quash the ED case against Shivakumar and two others. “The ASG fairly submits that the question whether 120B can be standalone and distinct offence had been decided by a two-judge bench in 2023, holding that Section 120B can become an offence only when it is applied with a main offence, which is a scheduled offence. The judgment said that it wasn’t the legislative intent to make all offences under PMLA by applying Section 120B. In view of this, the reasons assigned by the high court cannot be sustained. Appeals are allowed and the proceedings under the PMLA are quashed,” the order stated.
The bench also granted ED the liberty to seek review or recall this order if its review petition against the 2023 judgment eventually succeeds.
By its judgment on November 29, a bench of justices AS Oka and Pankaj Mithal had held that criminal conspiracy to commit any crime cannot be a ground to initiate money laundering proceedings against a person, adding the conspiracy must relate to an offence which is a scheduled offence under the PMLA.
The decision by the top court came in a case from Bengaluru where the woman named Pavana Dibbur challenged the money laundering case initiated against her by the Enforcement Directorate in 2020 on the ground that the lone charge against her was of criminal conspiracy under Section 120B of the IPC and this alone cannot be sufficient to accuse her of money laundering punishable under Section 3 of PMLA.
The court had in its judgment nixed the case against her, holding, “The offence punishable under Section 120B of the IPC would become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule (under PMLA).”
In this case, the ED had argued that since Section 120­B of the IPC is included among the scheduled offences, the offence became a scheduled offence even if the accusation was made of engaging in a criminal conspiracy to commit an act that was not covered by the Schedule.
Rejecting this, the court said in its November ruling that if the argument of the ED were accepted, the Schedule to the PMLA would become redundant and meaningless. It had also warned that the interpretation suggested by the ED may attract the vice of unconstitutionality for the Act being manifestly arbitrary.