Constitutional courts cannot scrutinise each reason and grounds of arrest in action initiated by Enforcement Directorate under PML Act: Karnataka High Court insidelooknews

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The constitutional courts cannot examine the probative worth of each reason in the ‘reasons to believe’ and each ground in ‘the grounds of arrest’ given by the Enforcement Directorate (ED) while acting under the provisions of the Prevention of Money Laundering Act (PMLA) when there exists a demonstrable application of mind and that the arrest is not based on whim or conjecture, the High Court of Karnataka has said.

Justice M. Nagaprasanna gave these findings while upholding the procedure adopted and the grounds mentioned in the arrest memo by the Enforcement Directorate while arresting R.M. Manjunath Gowda, a former chairman of the Shivamogga District Cooperative Central (DCC) Bank in a money laundering case linked to a ₹62.77 crore gold loan scam in the bank. The ED arrested him on April 9.

It was argued on behalf Mr. Gowda that the grounds mentioned in the grounds of arrest in the arrest memo are completely erroneous, and they do not relate to the predicate offence; and that there is “no reason to believe” that Mr. Gowda and his wife, Asha H.C., possess proceeds of crime.

“In cases governed by the PMLA and kindred statutes, like the Unlawful Activities (Prevention) Act, the statutory scheme mandates disclosure of the grounds of arrest. Yet, while such disclosure is indispensable, the constitutional courts cannot transmute themselves into appellate tribunals, examining the probative worth of each ground or dissecting every syllable of the reasons, in the reasons to believe, or the grounds, in the grounds of arrest, so long as the two reflect a demonstrable application of mind and the fact that the arrest is not predicated upon whim or conjecture,” Mr. Justice Nagaprasanna said.

“Prima facie, Mr. Gowda is directly or indirectly indulging in concealment, possession, acquisition or use and projecting or claiming the money as untainted; and the money trail runs to several crores,” the court noted.

The reasons drawn by the ED to believe that Mr. Gowda and his wife are in possession of the proceeds of crime narrate vivid details of identification of disproportionate assets more than the income, and inter alia several aspects, the court pointed out while declining to interfere with the actions initiated against them by the ED.

The modus operandi of the case was opening of 785 fraudulent gold loan accounts without the knowledge of the accounts holders, by utilising fake, fabricated, and forged documents and syphonning off gold ornaments by replacing them with gold-quoted ornaments by accused manager, Shobha, on the instruction of Mr. Gowda, the court noted while pointing out from the records that the assets secured by Mr. Gowda had grown exponentially or tenfold after he came under the umbrella of the DCC bank.