The Enforcement Directorate (ED) has arrested senior Karnataka Congress leader D K Shivakumar in action that the party has decried as political vendetta by the BJP. Shivakumar was arrested in Delhi on Tuesday, and subsequently remanded in the custody of the agency until September 13.
What is the origin of the ED’s money laundering case (ECIR/HQ/4/2018) in which Shivakumar has been arrested?
The origins of the ED’s case lie in an investigation carried out by the Income-Tax Department beginning August 2017. Based on the findings of this probe, a deputy director for investigations in the I-T Department had filed a private complaint on June 13, 2018 in a special court for economic offences in Bengaluru.
The complaint alleged that Shivakumar and four associates based in Delhi and Bengaluru were part of “a well hatched conspiracy” to help the Congress leader evade tax.
“Investigation has painstakingly acquired the leads over a period of time about the extensive network of tax evasion set up by Accused no. 1 (Shivakumar) and has been successful in discovering unaccounted cash and in the process established beyond any revocable doubt that Accused no. 1 has involved in organised tax evasion as part of a conspiracy by engaging others,” I-T said.
On the basis of the I-T investigations, and complaint to the court of tax evasion and criminal conspiracy to evade tax under Section 120 B of the Indian Penal Code, the ED registered a case against Shivakumar and his associates in September 2018.
The four associates named in the ED case were: Sachin Narayan, a real estate businessman and Shivakumar’s business partner; Sunil Kumar Sharma, a businessman and Shivakumar’s associate; Anjaneya Hanumanthaiah, a government employee who was the caretaker of properties and funds linked to Shivakumar; and Rajendra N, an aide of the Congress leader.
The case was registered under The Prevention of Money Laundering Act (PMLA), 2012, and IPC Section 120B (criminal conspiracy).
So what specific findings from the I-T investigation led to the ED case?
At the core of the ED case is the discovery, during the I-T searches of 2017, of unaccounted cash to the tune of over Rs 8.5 crore in four apartments in New Delhi linked to Shivakumar and his associates Sachin Narayan and Sunil Kumar Sharma.
Shivakumar has been accused of money laundering also on the basis of statements — which were subsequently retracted — by Anjaneya Hanumanthaiah and N Rajendra, who allegedly stored cash in these apartments on the Congress leader’s behalf.
Hanumanthaiah who “was responsible for storing/handling unaccounted currency of Accused no. 1 in Delhi”, and the custodian of the keys to the flats where the cash was found, told the I-T department that all the cash found in the flats belonged to Shivakumar — although his associates, who owned two of the flats, too, have claimed it.
“It is clear through the statements of Accused no. 4 (Hanumanthaiah) recorded from all four premises searched and also the facts found during the course of search proceedings that the cash found at all these four premises were brought and kept as per the direction of Accused no. 1,” I-T said in its court complaint.
“The object of purchasing these flats… was to entertain the guests of Accused no. 1 and… to store the unaccounted cash generated by Accused No. 1. Therefore, the cash generated by Accused no. 1 in Bangalore and other places used to be transported by Accused no. 3 (Sunil Sharma), stored in the flat, which in turn used to be distributed to various sources as directed by Accused no. 1. The entire conspiracy was hatched by Accused no. 1, Accused no. 2 (Sachin Narayan) and Accused no. 3 at Bangalore for the purposes of evading tax,” the June 13, 2018 private complaint said.
According to I-T, Shivakumar did not provide valid documentary evidence to account for the cash seizures. It has also said that documents found during the searches suggest that payments were made to AICC functionary V Mulgund from the stash in the flats. The I-T searches were carried out as Shivakumar was sheltering 44 Gujarat Congress MLAs from poaching by the BJP in a resort outside Bengaluru ahead of a crucial Rajya Sabha election in which senior Congress leader Ahmed Patel was a candidate.
How has Shivakumar responded to the I-T and ED cases?
On June 25, 2019, a special court in Bengaluru rejected Shivakumar and his associates’ plea for discharge in the I-T case.
In February 2019, Shivakumar and his associates asked the Karnataka High Court to quash the summons issued by the ED for appearance for investigation of the money laundering case.
Shivakumar has argued that he cannot be prosecuted under PMLA since the cash found in the I-T searches was not the proceeds of crime, as stipulated under the money laundering law. He has also argued that the tax evasion case brought against him by I-T remains, and he cannot, therefore, be prosecuted in the PMLA case.
The ED has said that it is empowered to investigate whether the unaccounted funds were “proceeds of crime” irrespective of the outcome of the I-T cases.
On August 29, Justice Arvind Kumar of Karnataka High Court rejected Shivakumar and his associates’ plea to quash the summons, and directed them to appear for the ED investigations. The ED issued a fresh notice on the same day, asking Shivakumar to appear before it on August 30 for questioning. After four days of questioning, the ED arrested Shivakumar on September 3, saying he had failed to cooperate.