Can ED seize assets related to non-scheduled offences under PMLA? SC to weigh in

The Supreme Court on February 9 stayed a November 2025 Delhi High Court ruling on the Enforcement Directorate’s (ED’s) powers under the Prevention of Money Laundering Act (PMLA). It has thus revived a familiar debate: how far can the agency go in tracing “proceeds of crime”? Over the past decade, the ED’s authority to attach property has repeatedly come under judicial scrutiny, with courts asked to balance the State’s interest in preventing money from disappearing against an individual’s right to property before guilt is established. The latest order places that tension squarely before the top court. The high court had upheld the ED’s attachment of assets allegedly linked to an international online cricket betting operation. The petitioners argued that the high court allowed the agency to treat betting income, not itself a scheduled offence under the PMLA, as tainted money by connecting it to a separate offence of forgery. Under the PMLA, the ED derives jurisdiction only when property flows from a scheduled offence. According to the petitioners, linking betting revenues to another crime dilutes the statutory requirement that money-laundering proceedings can begin only when property is derived “as a result of criminal activity relating to a scheduled offence.” The plea also raised a procedural concern. While the high court held the petitions non-maintainable because the Act provides its own appellate route, it nonetheless examined the matter on its merits and endorsed the ED’s actions, a move the petitioners said effectively bypassed the statutory mechanism. It was against this backdrop that a bench led by Justices M M Sundresh and N Kotiswar Singh issued notice to the Enforcement Directorate. The Supreme Court will examine whether income from an activity not listed in the PMLA Schedule should be treated as criminal proceeds solely because another offence appears somewhere in the chain. What triggered the case The dispute traces back to an ED investigation into what it described as “large scale hawala transactions and illegal international cricket betting operations” conducted through the UK-based website Betfair.com. This was part of a wider pattern that enforcement agencies say has reshaped illegal betting in India from street-level bookmaking to digitally coordinated networks. Searches conducted during the probe recovered “incriminating documents, digital records and cash” allegedly tied to a hawala-backed betting system. Investigators claimed the petitioner functioned as a middleman, distributing betting login IDs for the platform within India. Each “Super Master” login ID enabled the creation of multiple betting accounts, with commissions allegedly ranging from Rs 30 to Rs 110 per US dollar. The ED further claimed these IDs were issued without prescribed KYC checks, allowing what it described as “anonymous, unregulated and unverifiable” wagering. A separate investigation by the Mumbai Detection Crime Branch had previously uncovered a similar racket. According to the ED, the firm involved generated roughly Rs 2,400 crore through illegal betting activities, with settlements including Rs 60 crore allegedly paid to the petitioner. On this material, FIRs, bank records, ledger entries and statements, the ED issued a Provisional Attachment Order in September 2015, freezing movable and immovable assets worth about Rs 20 crore as suspected proceeds of crime. Property attachment is one of the agency’s most powerful tools. Unlike a conviction, it operates at the investigation stage, aimed at ensuring that assets are not transferred or concealed before trial. What the law says about property attachment PMLA allows ED to step in only when money is linked to a scheduled offence, a crime listed in the act that can trigger a money laundering case. Section 2(1)(u) of the PMLA defines “proceeds of crime” as property derived or obtained, directly or indirectly, from such criminal activity. Section 5 gives the ED the power to provisionally attach property if it has “reason to believe” that the property represents proceeds of crime and is likely to be concealed or transferred. This is done through a Provisional Attachment Order. Ordinarily, such attachment requires filing a police report or complaint relating to the scheduled offence. However, the second proviso permits attachment of “any property of any person” if immediate action is necessary to prevent frustration of proceedings. The act provides its own appellate route, from the adjudicating authority to a tribunal and then to the high court. The petitioners argued that this proviso was ultra vires (overstepping one’s bounds or authority), as it allowed attachment without the safeguard of a predicate offence. The court rejected this, holding that the proviso was intended to prevent dissipation of assets and that individual interests are protected through adjudication under Sections 5 and 8. What the Delhi High Court said Dismissing the petitions, the Delhi High Court grounded its reasoning in the structure of the PMLA, describing it as a “self-contained and comprehensive statute” with a layered appellate system, from the adjudicating authority to the Appellate Tribunal and then the High Court. Permitting litigants to bypass these forums and directly invoke writ jurisdiction, the court said, risks “clogging the judicial system” and undermining legislative design. Article 226, it held, functions as a “carefully guarded constitutional safety valve”, reserved for exceptional cases such as violations of fundamental rights or natural justice. The Court found neither. On the central dispute, what counts as “proceeds of crime,” the bench adopted a wide reading. While cricket betting is not a scheduled offence, it held that property may still qualify if it is derived “directly or indirectly” from a scheduled offence. Here, the court noted, the betting infrastructure allegedly relied on acts such as forgery, cheating and criminal conspiracy to procure SIM cards and digital access, offences that are listed under the PMLA. “The taint attached to the property at its very inception… persists throughout its subsequent use. Pithily put, ‘Fruit of a poisoned tree’,” the court noted, pointing to the contaminated gains once criminality enters the financial chain. It further held that the ED had crossed the statutory threshold of “reason to believe”, noting that the attachment was based on tangible material rather than “mere suspicion.”