Delhi High Court Rules Illegal Betting Profits as 'Proceeds of Crime' Under PMLA

The ruling emerged during the hearing of multiple petitions connected to a 2015 Enforcement Directorate investigation.

New Delhi:

The Delhi High Court has delivered a landmark judgment that could significantly impact money-laundering investigations, declaring that profits from illegal betting can be classified as "proceeds of crime" under the Prevention of Money Laundering Act (PMLA) when such activities originate from or are funded by illegally obtained money.

The court stated that when the initial source of funds is unlawful, every subsequent profit layer stemming from it inherits the same illegality - likening it to the "fruit of a poisoned tree" doctrine.

Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, forming the bench that delivered the judgment, highlighted that the illegal nature attached to the original criminal proceeds "continues to travel downstream," even when subsequent activities do not appear as scheduled offences under PMLA.

This ruling came while addressing multiple petitions related to a 2015 Enforcement Directorate probe into an extensive cricket-betting operation. According to the investigating agency, the network utilized offshore platforms, hawala operators, and domestic handlers to move money, generating transactions amounting to nearly Rs 2,400 crore within a year.

During their searches, investigators discovered cash, documents, and digital evidence indicating that the primary accused controlled access to foreign betting portals through specialized login credentials. The ED argued that although betting profits did not directly arise from a scheduled offence, they were built upon funds already connected to illegal activity.

The accused challenged the attachment, maintaining that betting is not listed as a scheduled offence, and therefore its proceeds cannot be seized under PMLA.

The High Court dismissed this challenge, observing that the PMLA's definition of 'proceeds of crime' is deliberately comprehensive. The court emphasized that what truly matters is the criminal character of the initial funds utilized - not the nature of subsequent activity.

The judges noted that when tainted money serves as capital, any resulting profit becomes inseparable from the original illegality and remains subject to attachment.

Broader implications for PMLA enforcement

Legal experts suggest this judgment strengthens the ED's capacity to pursue cases where illegal funds are channeled into activities not explicitly covered under the law's schedule. The ruling could influence future cases involving inflated stock profits, unauthorized businesses, or ventures financed through illegal kickbacks - all potentially falling within PMLA jurisdiction if the underlying money is determined to be tainted.

This decision marks a significant shift toward tracing the origin of money rather than limiting scrutiny to the nature of the immediate transaction.