New Delhi: A Bengaluru court last week granted bail to Congress MLA K.C. Veerendra in a money laundering case, in a ruling that emphasised the crucial link between predicate offences and proceeds of crime.
The Enforcement Directorate (ED) in August 2025 arrested the sitting MLA from Karnataka’s Challakere alleging that he was principal operator of an illegal online betting and gambling syndicate.
The special PMLA court of Judge Santhosh Gajanan Bhatt said in the 94-page ruling on 30 December 2025 that the proceeds of crime should relate to the criminal activity under the scheduled or predicate offence—a link that ED failed to establish adequately.
A predicate offence is the underlying crime that is committed to illegally amass money or “proceeds of crime”. For instance, in this case, Veerendra is accused of facilitating illegal online betting, which becomes the predicate offence.
Predicate offences listed under Prevention of Money Laundering Act (PMLA) are derived from various statutes, including the Indian Penal Code, Narcotic Drugs and Psychotropic Substances Act, Explosive Substances Act, and Arms Act, among others.
To be accused of money laundering under PMLA, the offence must be linked to at least one of the listed offences.
The Bengaluru court relied on several arguments to grant bail to the Congress MLA.
Also Read: How HC punched holes in ED, EoW probe, granted bail to Chhattisgarh ex-CM Bhupesh Baghel’s son
5 of 6 FIRs reached ‘logical end’
Cases against Veerendra date to 2011, when the first FIR was registered. More followed between 2015 and 2022.
The court noted that out of six FIRs against Veerendra, five had reached their “logical end” either through discharge, quashing or acquittal.
“The only predicate offence prevailing against the accused person is with respect to a complaint lodged before the Harohalli Police Station (in Karnataka),” the court observed, adding that this was a case of cheating and defrauding a person to the extent of Rs 30,000.
ED had filed its Enforcement Case Information Report (ECIR) – a document that kicks off money laundering investigation – on the basis of this Harohalli FIR, following which it arrested the MLA and remanded him to custody.
Advocate Arpit Goel, representing Veerendra, pointed out that even in the 6th FIR – the Harohalli one – police had “filed a closure report”, further strengthening the defence’s argument that “ED failed to link the FIR and the proceeds of crime in that FIR” with his client.
ED’S counter argument & Section 23
The petitioner’s lawyers, who argued that this was a case of “witch-hunting”, contended before the court that allegations of the predicate offence involved only Rs 30,000, while PMLA proceedings kick off only if money laundering exceeds Rs 1 crore.
Arguing against bail, ED relied on a 2008 Bombay High Court ruling in the Babulal Verma vs Union of India case, which held that once the agency registers a PMLA case, the money laundering investigation stands independently and does not depend on the ultimate result of the predicate offence.
It further argued that proceeds of crime cannot be restricted only to the Harohalli case. To make its case, ED said its investigators invoked Section 23 of PMLA, which refers to the presumption of interconnectedness of transactions. This provision states that if one or more transactions are proven to be part of money laundering, the law will presume that all interconnected transactions are also connected to that offence.
Dismissing this contention, the court pointed out that the Harohalli FIR – on which the ED investigation was based – was confined to Rs 30,000. Allegations of crores of rupees being circulated in interconnected transactions were not “proven”.
Section 23 of PMLA states: “Where money-laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation” it will be “presumed that the remaining transactions from part of such interconnected transactions”.
The court, relying on Section 3 of the Evidence Act, said a fact is only proven when the court believes it to exist.
But these other transactions worth crores were not apparently related or emanated from the Harohalli FIR, it said. It added that ED could not show an “iota of material” in the predicate offence to prove that the proceeds of crime were being passed on, despite claiming to have unearthed a lot of documents.
The Bengaluru court also invoked the 2014 Supreme Court ruling in Hardeep Singh vs State of Punjab case, which said that trial commences only after framing of charges, and therefore, the presumption under Section 23 could not be invoked fore trial has begun in the Veerendra case.
Advocates Madhur and Mayank Jain, who also represented Veerendra, pointed out that the judgment interprets Section 23 of PMLA at length.
“This is one of the first few instances, where at length, Section 23 of the Prevention of Money Laundering Act has been interpreted,” Madhur said.
Advocate Goel explained the order, saying: “Money laundering has to be linked to a predicate offence under Section 30. ED had argued that as per Section 23, all transactions will be presumed to be interconnected, if one or more of them are proved to be involved in money laundering. But the court disagreed and said, Section 23 can only be applied after framing of charges. The court also pointed out that in this case, even the trial had not commenced yet so Section 23 could not have been used to deny bail.
The ED case
Veerendra, famously known as “Puppy”, was arrested by ED on 23 August 2025 from Gangtok, Sikkim, and was remanded to custody from then on.
According to ED, they unearthed money laundering worth Rs 2,300 crore through ‘Fonepaise’ – a system owned by Veerendra that was used to collect funds from players for illegal online betting websites such as King567 and Raja567.
ED alleged that money collected from players moved through payment gateways, shell companies, and benami accounts to conceal its origins, demonstrating a clear mens rea or intention to commit a crime. The agency said Veerendra was a “key enabler” and conspirator”, and Fonepaisa was the engine that drove the illegal online betting machine.
Veerendra’s wife had challenged the ED arrest, but the Karnataka High Court on 15 October 2025 denied bail, saying that the MLA was at liberty to approach a trial court.
Meeting bail conditions & link with AAP ruling
Advocate Jain told ThePrint the defence was able to meet the “stringent twin conditions” for bail under Section 45 of PMLA.
Section 45 outlines the two main conditions for granting bail in PMLA cases: the public prosecutor should be given an opportunity to oppose the bail plea, and the court must be prima facie satisfied that the accused has not committed the offence.
“The first condition is already fulfilled since the Public Prosecutor has been notified and an opportunity has been granted to the prosecution to file their necessary objections,” the court said.
As for the second condition, it said, at this stage, the case was still at its “inception” and it could not insist that the prosecution provide materials for considering a bail application since it is the domain of the investigating agency to decide the manner in which they carry out the probe.
Separately, the court said the trial was unlikely to be completed in the near future, so Veerendra should not be kept in custody indefinitely.
For this, the court recalled the 2025 case involving Aam Aadmi Party (AAP) leader Manish Sisodia, in which the Supreme Court had held that it is a well-settled principle of law that “bail is a rule and refusal is an exception”.
It would not be appropriate to detain the accused in custody as a matter of punishment, the court said, adding that there were reasonable grounds for it to believe that the accused was not guilty of the offence and won’t commit such an offence in the future.
(Edited by Prerna Madan)
Also Read: ED’s case against NGO run by climate activist—took foreign funds to influence climate narrative