Court quashes money laundering case against Janardhana Reddy

‘ED has no jurisdiction to initiate proceedings under PML Act, 2002’

BANGALORE, 11/12/2007: A view of Karnataka High Court in Bangalore. Photo: V. Sreenivasa Murthy 11-12-2007

In a major relief to former Minister G. Janardhana Reddy, the High Court of Karnataka on Monday set aside proceedings initiated by the Enforcement Directorate (ED) against him, his wife Lakshmi Aruna, and two mining companies with which the duo were associated, and also against attachment of their assets worth around ₹900 crore.

The court declared that the ED had no jurisdiction to initiate proceedings and provisionally attaching their assets under the Prevention of Money Laundering (PML) Act, 2002 as the offences, booked against them for illegal mining and transportation of ore under the provisions of the other laws, were not declared as “scheduled offences” under the PML Act during the period in which Mr. Reddy and others allegedly committed those offences.

A Division Bench comprising Chief Justice Subhro Kamal Mukherjee and Justice Budihal R.B. passed the order while allowing the petitions filed by Mr. Reddy, his wife, and two companies — Obulapuram Mining Company Pvt. Ltd. and Bramhani Industries Ltd.

The ED initiated proceedings against them in 2010 and their assets were provisionally attached by the adjudicating authority in 2014 on the

prima facie reason that the assets were “proceeds of the crime” as defined under the PML Act.

It was contended on behalf Mr. Reddy that certain offences under the Mines and Minerals (Development and Regulations) Act, the Forest (Conservation) Act, the Indian Penal Code and the Prevention of Corruption Act were included under the PML Act declaring them as “scheduled offences” only with effect from June 1, 2009. However, the offences alleged against him and others were committed during the period that ended in July 2007 and hence the ED could not have invoked provisions of PML Act with retrospective effect.

However, Assistant Solicitor General of India Krishna S. Dixit contended that the process of attachment of assets is a civil action and hence PML Act could be invoked with retrospective affect for the offences committed prior to June 2009. But the Bench upheld the contention raised on behalf of Mr. Reddy and declared that the proceedings initiated by the ED was bad in law, while setting aside the proceedings as well as the orders of provisional attachment of the assets.