Can ED probe relatives if accused is dead? Karnataka High Court to decide on ‘dangerous’ money laundering case precedent

Senior Advocate Sandesh J Chouta, appearing for Gupta, submitted that the predicate offence (the offence or many offences related to money laundering registered against the accused before the ED takes up the case) was against his grandmother, who was accused of cheating and criminal breach of trust. Swarna Kumari died in 2017, and in 2018, the case against her stood abated.

It was alleged that the grandmother had secured certain monetary compensation to the tune of Rs 16 crore from the Karnataka Industrial Areas Development Board (KIADB) by providing documents that were not genuine. Another case was registered at the Koramangala police station.

Chouta argued, “In 2017, when the death of the grandmother took place, the predicate offence goes. How can they (ED) have PMLA in 2023? They cannot say that after seven years we have come to know that there are some proceeds of crime, that is not how PMLA (Act) works, it works on the basis of schedule offences.”

Schedule offence is the list of cases in the PMLA Act that allow ED to probe.

‘It is going to be very, very dangerous’

Further, Chouta argued, “It would be a dangerous proposition if anything that is closed, ED can anytime say today we will start the proceedings. It is going to be very, very dangerous. The whole concept of schedule offence will go.”

Advocate Madhukar Deshpande, appearing for ED, opposed the petition, submitting that in the present case, it is the children of the deceased who have the proceeds of crime, which is to be investigated.

Justice Nagaprasanna then said, “In the predicate offence, if a person should be held guilty, on the guilt of the person, you can confiscate the property, saying it is proceeds of crime after adjudicating.”

‘Offence cannot hang in thin air’

Further, the court orally asked, “Offence is qua the lady. If the chargesheet had been filed against any other accused you could have. Offence cannot hang in thin air; it is qua someone, if that someone goes, would that offence not die with that someone?

Deshpande, in reply, said, “PMLA is not only punishing persons who are involved in the crime but also in regards to confiscation of properties.”

He referred to Section 8 (7) of the Act and argued that “We have to investigate and find out who all are involved in this, just because the sole accused passed away, the crime does not vanish. If confiscation of property is involved, the offence will continue.”

The court has now posted the matter for further hearing on February 21.

A chargesheet then came to be filed for offences under Sections 406 and 420 (cheating) of the IPC. Since the grandmother of the petitioner passed away on 27 September 2017, the proceedings pending before the Bengaluru court were disposed of as abated.

The petition filed by Gupta contends that all monies received from Sarwan Kumari by him (Rs 50,00,058) had already been recovered and transferred to the account of the recovery officer. Thus, he does not have any money transferred to him.

In the petition, it is pleaded that Gupta cannot be made liable in any manner whatsoever for offences alleged against Sarwan Kumari in the chargesheet under the PMLA since he is admittedly not holding any sum of money which is relatable to the compensation received by Sarwan Kumari from KIADB.

Gupta’s father, Mahendra Kumar Gupta, has been questioned by ED earlier. The plea contends that the summons and the proceedings sought to be initiated against the petitioner are a gross abuse of process and infringe several fundamental and constitutional rights and guarantees.