Former MUDA Commissioner's residence search under Section 17 PMLA declared illegal for lacking proper authority and evidence

Karnataka HC held that search and seizure conducted at petitioner's residence (former MUDA Commissioner) under Section 17 of PMLA, 2002 was illegal and invalid. Court found that proceedings were based on mere suspicion rather than "reason to believe" as required under PMLA. No evidence demonstrated petitioner's role in possessing proceeds of crime related to alleged illegal site allotments. The search lacked proper authority and violated procedural safeguards. HC declared the search, seizure, and recorded statements invalid, quashed summons under Section 50, and granted petitioner liberty to initiate action under Section 62 against concerned officers. Petition allowed.

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

i. Whether the authorization for the search and seizure at the petitioner's residence was issued without jurisdiction under Section 17 of the Prevention of Money-Laundering Act, 2002 (PMLA).

ii. Whether the search and seizure and the subsequent statement recorded under Section 17 were conducted without the requisite "reason to believe," thus constituting an abuse of process.

iii. Whether the summons issued under Section 50 of the PMLA and the statements recorded thereunder can be sustained under the law.

iv. Whether the attachment of property under Section 5 of the PMLA must mandatorily precede the conduct of search and seizure under Section 17 of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue No. 1: Jurisdiction of Authorization for Search and Seizure

The petitioner challenged the jurisdiction of the authorization for the search and seizure conducted at his residence, arguing that the Joint Director, who authorized the Assistant Director, was not competent under the Act. The Court analyzed Section 17 of the PMLA, which requires that such authorization be given by the Director or an officer not below the rank of Deputy Director. The Court found that the authorization was valid as the Joint Director, being above the Deputy Director in rank, was competent to authorize the search and seizure under the PMLA.

Issue No. 2: Lack of "Reason to Believe"

The petitioner contended that the search and seizure lacked the requisite "reason to believe" as mandated by Section 17 of the PMLA. The Court reviewed the precedents and emphasized that "reason to believe" must be based on credible material indicating involvement in money laundering activities. The Court found that the reasons recorded for the search were based on mere suspicion without substantive evidence of the petitioner's involvement in money laundering or possession of proceeds of crime. Consequently, the search and seizure were deemed unwarranted and an abuse of process.

Issue No. 3: Validity of Summons under Section 50

The petitioner argued that the summons issued under Section 50 were vague and violated constitutional protections against self-incrimination. The Court referred to precedents indicating that summons under Section 50 are procedural and do not imply an accusation. However, the Court found that since the search and seizure were based on unfounded suspicion, the subsequent summons lacked legal authority and were unjustified.

Issue No. 4: Precedence of Property Attachment

The petitioner argued that property attachment under Section 5 should precede search and seizure under Section 17. The Court clarified that Section 5 is an investigative tool and does not mandatorily precede search and seizure. The Court held that the sequence of these actions is at the discretion of the investigating agency, depending on the facts and circumstances of each case.

3. SIGNIFICANT HOLDINGS

The Court concluded that the search and seizure conducted at the petitioner's residence were invalid due to the absence of a legitimate "reason to believe." The summons issued under Section 50 were quashed as they were based on an invalid search. The Court emphasized the importance of procedural fairness and the protection of individual rights against arbitrary actions by investigative agencies.

ORDER

i. The petition is allowed.

ii. The search and seizure conducted at the petitioner's residence and the statement recorded under Section 17 (1) (f) of the PMLA are declared invalid and illegal.

iii. The statement recorded under Section 17 (1) (f) is ordered to be retracted.

iv. The summons issued under Section 50 of the PMLA and the various statements recorded thereunder are quashed.

v. The petitioner is granted the liberty to initiate action under Section 62 of the PMLA against the concerned officer, as the matter of whether the search and seizure were vexatious is subject to trial.

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