Karnataka HC reserves verdict on plea by Congress MLA Veerendra Puppy’s wife against arrest of her husband by ED for money laundering

On Monday, Additional Solicitor General (ASG) Arvind Kamath, who appeared for the ED, told the high court that the quantum of money in the predicate offence (Rs 30,000 in the Karnataka MLA’s case) need not be tied down as the proceeds of crime as the PMLA has a broader definition.

Proceeds of crime

Proceeds of crime, as defined by the legislature, refers to money generated as a result of criminal activity “relating to” a scheduled offence, the ASG argued.

“The term ‘relating to’ is a much broader definition, which goes beyond the scheduled offence. If there is any criminal activity which goes beyond the scheduled offence, then that also comes within the sweep of the scheduled offence,” the ASG said.

“What the law targets is criminal activity, not the quantum. The PMLA targets the criminal activity related to the scheduled offence,” he added.

The ASG referred to the FIR for cheating registered in Harohalli in Karnataka – from which the PMLA case against the MLA was derived by the ED – to point out that the complaint explains various facts involved in cheating by online betting apps, including, in this case, the diversion of betting funds deposited with the Betin Exchange to the payment gateway Fonepaisa.

“The complaint is not about Rs 30,000, it is about the larger footprint in an economic offence,” the ASG said. “In this case, the running of various online betting games is closely associated with Fonepaisa, and from Fonepaisa, the money has gone to several mule accounts. From these mule accounts, the air tickets are booked by which the accused has travelled,” he added.

The ASG said that a high-end car that was being used by the MLA was registered with a private company where the wife of Fonepaisa director Gulshan Khattar is a director. The ASG argued that the proceeds of illegal online betting were being received by the MLA and others through the diversion and layering of funds processed by Fonepaisa and others.

“All these apps use Fonepaisa and other mule accounts. We already had the material, and the FIR only corroborated the material,” the ASG stated. The ED said that nearly Rs 500 crore generated by Fonepaisa in a period of five years was the proceeds of crime.

Karnataka Congress MLA K C Veerendra Puppy was arrested on August 23 for laundering a huge amount of money through illegal online gambling apps. On Friday, the Karnataka HC had asked the ED whether the proceeds of crime in a PMLA case can exceed the amount specified in a predicate criminal offence on which the money laundering case is based.

“In this FIR, the sum alleged is the cheating of Rs 30,000. Proceeds of crime is money derived from the criminal activity which is made out as the predicate offence. If you quantify the amount as Rs 30,000 in the FIR that is alive then can there be criminal proceeds that exceed Rs 30,000? This is required to be answered,” the judge said.

“Nothing prevents you from filing a fresh FIR for cheating with the name of the accused and continuing your proceedings? Can you sustain allegations beyond Rs 30,000?” the court said.

MLA’s counter

Siddharth Dave, the senior counsel for the Congress MLA, argued that K C Verendra was not named in the FIR for the predicate offence and was not called for investigations in the FIR.

“The money alleged to have been cheated has not percolated to me. When I am not there at all, how did ED at the stage of investigation add my name to the case? How do they know that I am involved? Have they collected all the gambling FIRs and are now trying to connect me to these FIRs?” Dave argued on behalf of the MLA.

The ED has seized assets worth Rs 150 crore of the MLA since his arrest in August.

“ED investigation revealed that K C Veerendra, in association with other friends and family members, is involved in operations of many illegal online betting websites viz. King567, Raja567, etc and cheating innocent players through the same. Further, the funds collection from players has been routed using several gateways like FonePaisa, etc,” the ED said.

“The estimated turnover of these betting applications being controlled by K C Veerendra is more than Rs 2,000 crore,” an ED statement said last week.

K C Veerendra is considered to be a close associate of Karnataka Deputy Chief Minister D K Shivakumar.

Among the premises linked to Veerendra searched by the ED were properties of Anil Gowda, an advocate and brother of Congress RR Nagar MLA candidate Kusuma G (a close associate of the Karnataka deputy CM’s brother and former MP D K Suresh).

On September 16, a single-judge bench of the Karnataka High Court had stayed the ED investigation against Anil Gowda on account of the issue of the investigation of advocates pending before the Supreme Court.

K C Veerendra is the son-in-law of Kannada film actor Doddanna and was arrested in 2016 by the Central Bureau of Investigation (CBI) for allegedly attempting to launder money during the demonetisation period. He was arrested by the CBI after Income Tax officials seized Rs 5.7 crore of cash in new Rs 2,000 notes in a secret chamber in the bathroom of his Chitradurga home. He was later discharged from the case for lack of evidence of wrongdoing.

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