CAN'T ATTACH PROPERTY WITH STAY ON IPC PROCEEDINGS: HC

NT Correspondent

Bengaluru: The High Court of Karnataka has held that the order to attach properties of an accused by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) cannot be undertaken while there is a stay granted on the same issue under the Indian Penal Code (IPC).

C Uma Reddy, Shivakumar Reddy, RH Kasturi, Kavveri Telecom Products, Ms Keona, SMR Telecom, C Rohit Reddy, C Mokshith Reddy and Sankethram Reddy approached the High Court against the order of the ED dated August 8, 2022 by which their movable and immovable properties were provisionally attached under Section 5(1) of the PMLA. Uma Reddy manages a flower distribution business under Ms Keona.

The other business she runs is a company called Kavveri Telecom Infrastructure. The Telecom company obtained loans from Dena Bank. Alleging the loan was used for certain other purposes, a CBI enquiry was initiated against the directors of the company.

The ED sought to freeze accounts of the accused. The case is pending against the accused in the Special Court for CBI cases in which they are accused under several sections of the IPC. They had filed a petition in the High Court, which had granted a stay on the proceedings in the lower court on December 10, 2020.

The ED then filed an Enforcement Case Information Report (ECIR) under Sections 3 and 4 of the PMLA. In this proceeding, the Deputy Director of ED passed an order for attachment of movable and immovable properties of the accused to the tune of Rs 40,14,26,327.

Challenging this, the accused approached the HC. They contended that the new ED case was based on the CBI case and there is a link between the two. Since there is a stay on the original case, the ED could not have ordered for the attachment and this proceeding should also be stayed.

Justice M Nagaprasanna, who heard the case cited several earlier judgments and said, “I deem it appropriate to stall all further action in the impugned proceedings till conclusion of the Writ Petition and Criminal Petition (CBI cases). If the proceedings in the predicate offences are stayed, the impugned proceedings of attachment under the ECIR cannot be permitted to continue.”

The HC said that if the stay on the earlier CBI case is vacated, the ECIR case will also be allowed to continue. “If the proceedings more on in the predicate offence, the offence under the ECIR should also be permitted to continue, failing which, it would defeat the proceedings under the PMLA or the IPC,” it said.

The HC ordered that the attachment order “shall be kept in abeyance” till the disposal of the petitions related to the CBI case. This also meant “the properties subject to attachment cannot be released in favour of the petitioners nor can be confirmed or sold by the Enforcement Directorate,” the HC said.