Karnataka High Court
Dr B K Nagarajappa vs Directorate Of Enforcement on 27 June, 2025
Author: S Vishwajith Shetty
Bench: S Vishwajith Shetty
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CRL.P No. 7909 of 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF JUNE, 2025
BEFORE
THE HON'BLE MR JUSTICE S VISHWAJITH SHETTY
CRIMINAL PETITION NO. 7909 OF 2025
BETWEEN:
DR. B.K. NAGARAJAPPA
S/O S KRISHNAPPA
AGED ABOUT 55 YEARS
R/AT NO. 1089, 4TH MAIN ROAD
M.C.R. LAYOUT, VIJAYANAGAR
BENGALURU -560 040.
...PETITIONER
(BY SRI BIPIN HEGDE, ADV., FOR
SRI B.S. JEEVAN KUMAR, ADV.)
AND:
DIRECTORATE OF ENFORCEMENT
GOVERNMENT OF INDIA
BANGALORE ZONAL OFFICE
3RD FLOOR, BLOCK-B, BMTC BUILDING
Digitally signed SHANTHINAGAR, K.H. ROAD
by NANDINI M BENGALURU - 560 027
S
Location: HIGH REP. BY ITS INVESTIGATION OFFICER.
COURT OF ...RESPONDENT
KARNATAKA
(BY SRI UNNIKRISHNAN M, ADV.)
THIS CRL.P IS FILED U/S 439 CR.PC (U/S 483 OF BNSS)
PRAYING TO ENLARGE THE PETITIONER/ACCUSED NO.2 ON
REGULAR BAIL REGISTERED BY THE ADDL. DIRECTOR,
DIRECTORATE OF ENFORCEMENT, BANGALORE, WITH THE OFFENCE
P/U/S. 3 AND 4 OF PMLA IN ECIR/BGZO/05/2025 PENDING BEFORE
THE PRL.CITY CIVIL AND SESSIONS JUDGE AT BENGALURU.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER
WAS MADE THEREIN AS UNDER:
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CORAM: HON'BLE MR JUSTICE S VISHWAJITH SHETTY
ORAL ORDER
Accused No.2 in ECIR/BGZO/05/2025 registered by
the Additional Directorate, Directorate of Enforcement,
Bengaluru, for the offence punishable under Section 4 of
the Prevention of Money Laundering Act, 2002 (for short,
‘PML Act‘) pending before the Court of Principal City Civil &
Sessions Judge, Bengaluru is before this Court under
Section 483 of BNSS, 2023 seeking regular bail.
2. Heard the learned counsel appearing for the
parties.
3. The petitioner was working as a General
Manager of the Karnataka Bhovi Development Corporation
(herein after referred to as ‘Corporation’ for short) for the
period between 05.04.2021 to 01.07.2022. FIR was
registered before the various Police Stations in the State
against the management and employees of the
Corporation alleging that there was misappropriation of
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funds belonging to the Corporation and particulars of the
said FIRs as follows:
Sl. Date FIR/Crime No. Name of Police
Station
No
1 18.03.2023 Crime No.56/23 Siddapura Police
Station,
Bengaluru City
2 18.01.2023 Crime No.7/23 Doddaballapua
Police Station,
Bengaluru
District
3 09.12.2022 Crime No.79/22 Kalagi Police
Station, Kalburgi
District
4 10.10.2024 Crime No.98/24 Vidhan Soudha
Police Station,
Bengaluru.
4. The respondent subsequently initiated
proceedings under Section 19 of the PML Act and
ECIR/BGZO/05/2025 was registered against three persons
for the offence punishable under Section 4 of the PML Act
and the petitioner herein is arraigned as accused no.2 in
the said case. It is alleged that, aforesaid four FIRs were
registered for the offences punishable under Section 420
and 120B of IPC etc., which are the scheduled offences
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and utilising the proceeds of the crime, properties were
derived/obtained by the accused, which amounted to
offence punishable under Section 4 of the PML Act.
5. The petitioner was arrested in the present case
on 05.04.2025 and subsequently he was remanded to
judicial custody. The bail application filed by the petitioner
before the jurisdictional sessions Court was rejected on
28.05.2025. Therefore, he is before this Court.
6. Learned counsel for the petitioner having
reiterated the grounds urged in the petition submits that
charge sheet has not been filed till date in the criminal
cases registered for the predicate offences. The petitioner
was the person, who initially had submitted a complaint to
the Hon’ble Chief Minister of the Karnataka State about
the fraud and misappropriation of funds committed by the
officials of the Corporation. The complaint by the petitioner
was much prior to the registration of the aforesaid 4 FIRs
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for predicate offence. The petitioner is now implicated
falsely in the present case.
7. During the course of investigation in the
present case, no material has been recovered from the
petitioner which would prima-facie make out the alleged
offence against him. The properties, which have been
attached in the present case were purchased by the
petitioner, much prior to he taking charge as a General
Manager in the Corporation. He submits that, except the
confession statement of the co-accused in the criminal
case registered for predicate offences, there is no other
material collected against the petitioner in the present
case. Investigation of the case is already completed and
final report/complaint has been filed before the
jurisdictional Court by the respondent. Accordingly, he
prays to allow the petition.
8. Per contra learned counsel appearing for the
respondent referring to Section 3 of the PML Act submits
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that the petitioner is an accused in the FIR registered for
predicate offences and the proceeds of crime have been
directly or indirectly utilised by the petitioner for purchase
of properties and therefore a prima-facie case under the
provisions of PML Act is made out against him. He refers
to paragraph No.20 of the statement of objection and
submit that the statement recorded under Section 17 of
the PML Act and audio evidence clearly establishes a case
of money laundering against the petitioner, which is
punishable under Section 4 of the PML Act. He submits
that in view of the rigor under Section 45 of the PML Act
since there is prima-facie case against the petitioner, his
bail application is liable to be rejected.
9. Section 3 of the PML Act reads as follows:
3. Offence of money-laundering.- Whosoever
directly or indirectly attempts to indulge or knowingly
assists or knowingly is a party or is actually involved
in any process or activity connected with the
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[proceeds of crime including its concealment,
possession, acquisition or use and projecting or
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claiming] it as untainted property shall be guilty of
offence of money-laundering.
10. Proceeds of the crime has been defined under
section 2(i)(u) of the PML Act, which reads as follows:
“2(i)(u)”proceeds of crime” means any property
derived or obtained, directly or indirectly, by any
person as a result of criminal activity relating to a
scheduled offence or the value of any such property
15
[or where such property is taken or held outside the
country, then the property equivalent in value held
within the country] 16[or abroad]”.
11. Section 4 of the PML Act which provides for
punishment for money laundering reads as follows:
4. “Punishment for money laundering.-
Whoever commits the offence of money-laundering
shall be punishable with rigorous imprisonment for a
term which shall not be less than three years but
which may extend to seven years and shall also be
liable to fine
Provided that where the proceeds of crime involved
in money-laundering relates to any offence specified
under paragraph 2 of Part A of the Schedule, the
provisions of this section shall have effect as if for the
words “which may extend to seven years”, the words
“which may extend to ten years” had been
substituted.
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12. The petitioner was working as a General
Manager in the Corporation for the period from
05.04.2021 to 01.07.2022. The material placed on record
by the petitioner would go to show that, when he was so
working as a General Manager in the Corporation he had
made a complaint on 21.11.2021 to the Hon’ble Chief
Minister of the Karnataka State bringing to his notice
about the illegal grants and misappropriation of funds
belonging to the Corporation. It is only thereafter the
aforesaid criminal cases were registered against the
management and the employees of the Corporation
including the petitioner herein.
13. Undisputedly, till date no charge sheet has been
filed in anyone of the criminal cases registered for the
predicate offences. For the purpose of attracting the
offence punishable under Section 4 of the Act, the
prosecution is primarily required to prove that accused
was involved in committing predicate offence and the
proceeds of the said crime has been utilised by him
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directly or indirectly for the purpose of deriving or
obtaining any property, the accused is directly or indirectly
involved in the process or activity connected with the said
property being proceeds of the crime. It is only on
establishing these foundational facts, legal presumption
under Section 24 of the PML Act arises against accused
and unless the accused successfully rebuts the said
presumption, he would be liable to be punished for the
offence under Section 4 of the Act.
14. In the case of VIJAY MADANLAL CHOUDHARY
V. UNION OF INDIA – (2023) 12 SCC 1, the Hon’ble
Supreme Court at paragraph Nos.237, 239 & 240 has
observed as follows:
“237. Be that as it may, we may now
proceed to decipher the purport of Section 24 of
the 2002 Act. In the first place, it must be noticed
that the legal presumption in either case is about
the involvement of proceeds of crime in money-
laundering. This fact becomes relevant, only if,
the prosecution or the authorities have succeeded
in establishing at least three basic or foundational
facts. First, that the criminal activity relating
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to a scheduled offence has been committed.
Second, that the property in question has
been derived or obtained, directly or
indirectly, by any person as a result of that
criminal activity. Third, the person
concerned is, directly or indirectly, involved
in any process or activity connected with the
said property being proceeds of crime. On
establishing the fact that there existed
proceeds of crime and the person concerned
was involved in any process or activity
connected therewith, itself, constitutes
offence of money-laundering. The nature of
process or activity has now been elaborated in the
form of Explanation inserted vide Finance (No. 2)
Act, 2019. On establishing these foundational
facts in terms of Section 24 of the 2002 Act, a
legal presumption would arise that such proceeds
of crime are involved in money-laundering. The
fact that the person concerned had no causal
connection with such proceeds of crime and he is
able to disprove the fact about his involvement in
any process or activity connected therewith, by
producing evidence in that regard, the legal
presumption would stand rebutted.
239. Be it noted that the legal presumption
under Section 24(a) of the 2002 Act, would apply
when the person is charged with the offence of
money-laundering and his direct or indirect
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involvement in any process or activity connected
with the proceeds of crime, is established. The
existence of proceeds of crime is, therefore, a
foundational fact, to be established by the
prosecution, including the involvement of the
person in any process or activity connected
therewith. Once these foundational facts are
established by the prosecution, the onus must
then shift on the person facing charge of offence
of money-laundering–to rebut the legal
presumption that the proceeds of crime are not
involved in money-laundering, by producing
evidence which is within his personal knowledge.
In other words, the expression “presume” is not
conclusive. It also does not follow that the legal
presumption that the proceeds of crime are
involved in money-laundering is to be invoked by
the authority or the court, without providing an
opportunity to the person to rebut the same by
leading evidence within his personal knowledge.
240. Such onus also flows from the purport
of Section 106 of the Evidence Act. Whereby, he
must rebut the legal presumption in the manner
he chooses to do and as is permissible in law,
including by replying under Section 313 of the
1973 Code or even by cross-examining
prosecution witnesses. The person would get
enough opportunity in the proceeding before the
authority or the court, as the case may be. He
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may be able to discharge his burden by showing
that he is not involved in any process or activity
connected with the proceeds of crime. In any
case, in terms of Section 114 of the Evidence Act,
it is open to the court to presume the existence of
any fact which it thinks likely to have happened,
regard being had to the common course of natural
events, human conduct, and public and private
business, in their relation to the facts of the
particular case. Considering the above, the
provision under consideration [Section 24(a)] by
no standards can be said to be unreasonable
much less manifestly arbitrary and
unconstitutional.”
(emphasis supplied)
15. In the present case after registration of FIR, the
petitioner was arrested on 05.04.2025 and during the
course of investigation, provisional attachment order was
passed on 23.05.2025. Perusal of the attachment order
would go to show that, in spite of efforts made, the
proceeds of crime could not be traced. Insofar as the
petitioner herein is concerned, two properties belonging to
him which were listed for attachment, were purchased,
much prior to he taking charge as a General Manager in
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the Corporation. Investigation in the case is now
completed and final report/complaint is also filed. The
copy of the said final report/complaint is made available
before to Court by the learned counsel for the respondent.
Perusal of the said Complaint would go to show that
except the confession statement of the co-accused in the
cases registered for predicate offence there is no other
material collected by the Investigating Officer in the
present case which would prima-facie goes to show that
the petitioner is guilty of the offence punishable under
section 4 of the PML Act.
16. In the case of PREM PRAKASH V. UNION OF
INDIA THROUGH THE DIRECTORATE OF ENFORCEMENT –
(2024) 9 SCC 787, the Hon’ble Supreme Court in paragraph
No.38 and 44 has observed as follows:
“38. We have no hesitation in holding that
when an accused is in custody under PMLA
irrespective of the case for which he is under
custody, any statement under Section 50 PMLA to
the same investigating agency is inadmissible
against the maker. The reason being that the
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person in custody pursuant to the proceeding
investigated by the same investigating agency is
not a person who can be considered as one
operating with a free mind. It will be extremely
unsafe to render such statements admissible
against the maker, as such a course of action
would be contrary to all canons of fair play and
justice.
44. Being a co-accused with the appellant,
his statement against the appellant assuming
there is anything incriminating against the
present appellant will not have the character of
substantive evidence. The prosecution cannot
start with such a statement to establish its case.”
17. Though in the statement of co-accused in cases
registered for predicate offences, it is stated that, the
petitioner was a party to the predicate offences no
material has been collected by the Investigating Officer,
which would corroborate the said allegation made against
the petitioner and in the absence of any corroborative
evidence, the confession statement of the co-accused
alone cannot be a basis to arrive at a prima-facie
conclusion that, the prosecution has made out a case
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against the petitioner for the alleged offence under the
18. The Courts while considering bail application in
a case registered under the provisions of PML Act is
required to place its view based on the probability of the
basis and reasonable guilt during investigation. Under
Section 45 of PML Act, the words used are “reasonable
grounds for believing” and therefore, the Court is only
required to see whether there is a prima-facie case made
against the accused. In the present case after completing
investigation, no substantive piece of evidence is filed,
which would prima-facie establish the guilt of money
laundering against the petitioner.
19. Undisputedly, in the cases registered for the
predicate offences, investigation is not completed. Insofar
as the present case is concerned the prosecution has cited
54 witnesses and cognizance of the alleged offences is not
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yet taken. The maximum punishment for the alleged
offences is imprisonment for a period of seven years.
20. The Hon’ble Supreme Court in the case of
ANWAR DHEBAR V. DIRECTORATE OF ENFORCEMENT-
CRL.A.NO.(S) 2669 OF 2025 following the law laid down
in the case of V SENTHIL BALAJI v. DEPUTY DIRECTOR,
DIRECTORATE OF ENFORCEMENT – (2024) SCC ONLINE
SC 2626 taking into consideration the maximum
punishment for the alleged offences and that there is no
possibility of trial commencing in the near future has
granted bail to the accused. Similar view has been taken
by the Hon’ble Supreme Court in the case of ANIL TUTEJA
V. DIRECTORATE OF ENFORCEMENT – (SLP (CRL.)
NO.3148/2025. Under these circumstances, I am of the
opinion that, the prayer made by the petitioner for grant
of regular bail needs to be answered affirmatively.
21. Accordingly, the following:
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ORDER
Criminal Petition is allowed.
The petitioner is directed to be enlarged on bail in
ECIR/BGZO/05/2025 registered by the Additional
Directorate, Directorate of Enforcement, Bengaluru, for the
offence punishable under Section 4 of the Prevention of
Money Laundering Act, 2002, pending before the Court of
Principal City Civil & Sessions Judge, Bengaluru, subject to
the following conditions:
a) The petitioner shall execute a
personal bond for a sum of Rs.1,00,000 (Rupees
One Lakh only) with two sureties for the
likesum, to the satisfaction of the jurisdictional
Court;
b) The petitioner shall appear regularly
on all the dates of hearing before the Trial Court
unless the Trial Court exempts his appearance
for valid reasons;
c) The petitioner shall not directly or
indirectly threaten or tamper with the
prosecution witnesses;
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d) The petitioner shall not involve in
similar offences in future;
Sd/-
(S VISHWAJITH SHETTY)
JUDGE
NMS