New Delhi: In a setback to K.C. Veerendra, the incarcerated Congress MLA from Chitradurga, the Karnataka High Court Wednesday junked a plea challenging his arrest by the Enforcement Directorate (ED) on charges of running an inter-state betting syndicate. Accepting the ED’s arguments that a preliminary probe indicated his involvement with illegal betting apps, the court gave its nod for Veerendra’s custodial interrogation.
The high court was hearing a plea filed by Veerendra’s wife, R.D. Chaitra.
His arrest as part of a probe into alleged money laundering was upheld despite the high court noting that six of the seven cases comprising the predicate offence were closed and that the closure report for the seventh and final case was pending before the trial court.
A predicate offence is a case registered by investigative agencies such as the CBI and state police, based on which ED can initiate money laundering proceedings under the Prevention of Money Laundering Act, 2002.
The ED arrested Veerendra from Gangtok on 23 August and seized assets worth more than Rs 150 crore, including more than 60 kg of gold, besides Indian and foreign currency notes.
The agency’s case against him stemmed from five cases filed by Karnataka Police, one by CBI and another by Telangana Police between 2011 and 2022 under, among other sections, 420 (cheating) of the IPC.
“Perusal of the same (reasons to believe and grounds of arrest) shows that the preliminary investigation reveals involvement of the husband of the petitioner in running of the alleged illegal betting apps and being benefited through them, which requires a detailed investigation. The material on hand discloses, cheating people through betting apps and realising proceeds of crime through it and that it requires custodial interrogation of the accused. Thus, in my opinion, the respondent had reason to believe to arrest the husband of the petitioner under Section 19 of the PMLA, 2002,” Justice M.I. Arun observed in the order.
Adding, “Thus, under the given facts and circumstances of the case, it has to be considered that there exists a predicate scheduled offence as contemplated under the PMLA, 2002 and there is sufficient material in possession of the respondent which gives sufficient reason to believe that the husband of the petitioner is guilty of an offence punishable under the PMLA, 2002. It justifies the registration of ECIR and arrest of the husband of the petitioner under the PMLA, 2002.”
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Pending closure report
In her petition, Chaitra argued that all five cases against her husband cited as the basis of the Enforcement Complaint Information Report (ECIR) were either quashed or the accused acquitted, including one case from 2022 from which Veerendra’s name was dropped from the chargesheet. Additionally, she argued that Veerendra was acquitted in a case in 2011.
An ECIR is the agency’s equivalent of an FIR.
In the Telangana case, the parties settled with each other, whereas Karnataka Police have closed the case in their jurisdiction.
While the trial court in Karnataka is yet to decide on the police’s closure report, Chaitra argued that the case is civil in nature, involving a measly amount of Rs 30,000.
ED argued before the court that although these cases registered by the police involved charges of cheating, its probe established Veerendra as the kingpin of a larger network of companies, including some based overseas.
Though the high court agreed with Chaitra’s contention, it justified ED’s anti-money laundering probe based on the opinion that a prima facie case was made out against Veerendra. At the same time, the court gave him the liberty to file a petition seeking quashing of the ED case, in case the trial court accepts Karnataka police’s closure report.
According to past Supreme Court rulings, a predicate offence is mandatory for a money laundering case to survive.
“Thus, existence of a scheduled offence (predicate offence) is foundational for registration of an ECIR under the PMLA, 2002. Without a scheduled offence, there can be no proceeds of crime. The powers of the Enforcement Directorate are derived from the predicate offence and it arises only if there exists a scheduled offence and there are proceeds of crime generated from that offence, and not otherwise,” the court observed.
(Edited by Tony Rai)
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