Karnataka High Court Upholds ED Arrest of MLA’s Husband in Money Laundering and Illegal Betting Case

Headnote:

The Karnataka High Court upheld the arrest of K.C. Veerendra alias “Puppy,” husband of Chitradurga MLA R.D. Chaitra, by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA). The Court dismissed the petitioner’s challenge to the arrest as being illegal and violative of fundamental rights, holding that the ED had sufficient material to form “reason to believe” under Section 19 PMLA for the arrest. The Court observed that the existence of a predicate offence and substantial evidence of large-scale betting and money-laundering operations justified the arrest and custodial interrogation.

Background:

1. The petitioner, Ms. R.D. Chaitra, wife of MLA K.C. Veerendra (alias Puppy), filed a writ petition challenging his arrest by the Bengaluru Zonal Office (BGZO) of the Enforcement Directorate (ED) under PMLA.
2. She alleged that the arrest was illegal, arbitrary, and violated fundamental rights, arguing that most FIRs against Veerendra were either closed or compromised, except for FIR No. 218/2022 involving a ₹30,000 dispute.
3. She claimed that this FIR was a civil matter with no direct link to any illegal betting platform or payment gateway.
4. ED, however, initiated investigation based on multiple FIRs relating to cheating through online/offline betting and gambling, uncovering a network of illegal betting platforms such as King567 operated through payment gateways like FonePaisa Payment Solutions Pvt. Ltd.
5. Funds were allegedly routed via shell companies and casinos in India, Sri Lanka, Nepal, and Dubai, generating Proceeds of Crime (POC) worth several crores of rupees.
6. Based on gathered evidence, ED arrested K.C. Veerendra in Gangtok (Sikkim) on 23.08.2025, and he has been in judicial custody since then. The investigation led to seizure of over ₹150 crore of POC.

Court’s Observations:

1. The High Court found that there existed a valid predicate offence, satisfying the precondition for invoking the PMLA.
2. It held that PMLA proceedings can continue until the “B report” (closure report) in the predicate offence is judicially accepted.
3. Referring to ED’s submissions, the Court observed that the Proceeds of Crime (as defined under Section 2(1)(u) PMLA) are not confined to the specific FIR amount, but extend to property derived from any related criminal activity.
4. The Court accepted the ED’s contention that the ₹30,000 complaint was only a “tip of the iceberg”, and the investigation revealed a large-scale betting racket.
5. It found the grounds of arrest and the ED’s reasons to believe to be well-founded, noting that Veerendra was involved in managing illegal betting applications, cheating the public, and laundering illicit proceeds through cross-border channels.
6. The Court concluded that there was sufficient material to justify Veerendra’s arrest and custodial interrogation under Section 19 of the PMLA.

Legal Provisions Discussed:

1. Section 19, Prevention of Money Laundering Act, 2002 — Power to arrest on the basis of “reason to believe.”
2. Section 2(1)(u), PMLA — Definition of “Proceeds of Crime.”
3. Article 226, Constitution of India — Writ jurisdiction of the High Court.

Disposition:

The writ petition was dismissed, and the arrest of K.C. Veerendra was held to be legal and justified. The petitioner was granted liberty to file for bail before the competent court.

Case: R.D. Chaitra v. Directorate of Enforcement (ED) & Anr.

Court: High Court of Karnataka at Bengaluru