In a significant judgment that could have far-reaching implications for money-laundering probes, the Delhi High Court has ruled that earnings generated from illegal betting can be treated as "proceeds of crime" under the Prevention of Money Laundering Act (PMLA) if the activity originates from, or is funded by, tainted money.
The court said that once the source of funds is unlawful, every layer of profit that emerges from it carries the same illegality - drawing an analogy to the "fruit of a poisoned tree."
A bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar emphasised that the taint attached to the original criminal proceeds "continues to travel downstream," even if subsequent activities are not listed as scheduled offences under PMLA.
The ruling came while hearing a cluster of petitions linked to a 2015 Enforcement Directorate investigation into a sprawling cricket-betting operation. According to the probe agency, the network used offshore platforms, hawala operators, and domestic handlers to circulate money, generating transactions worth nearly Rs 2,400 crore over a year.
During searches, investigators recovered cash, documents, and digital material indicating that the key accused controlled access to foreign betting portals through special login IDs. ED argued that the betting profits - although not arising directly from a scheduled offence - were built upon funds already linked to illegal activity.
The accused contested the attachment, insisting that betting is not a scheduled offence and therefore its earnings cannot be seized under PMLA.
Rejecting the challenge, the High Court noted that the PMLA's definition of 'proceeds of crime' is intentionally broad. What matters, the bench said, is the criminal character of the initial funds used - not the nature of the later activity.
The judges observed that when tainted money is used as capital, any profit flowing from it becomes inseparable from the original illegality and remains liable for attachment.
Broader implications for PMLA enforcement
Legal observers say the judgment strengthens the ED's ability to pursue cases where illegal funds are diverted into activities not expressly covered under the law's schedule. It could influence future cases involving inflated stock profits, unauthorised businesses, or ventures financed through illegal kickbacks - all of which may now fall within the reach of PMLA if the underlying money is found to be tainted.
The ruling marks a clear shift toward tracing the lineage of money rather than limiting scrutiny to the nature of the immediate transaction.
