Karnataka High Court Quashes ED Arrest Of Gameskraft Directors, Says Previously Rejected ECIR Was Re-packaged

Outlining the safeguards of accused persons under the Prevention of Money Laundering Act (PMLA), the Karnataka High Court declared the arrest of three directors of the online gaming company Gameskraft Technologies Private Limited- as illegal and ordered their immediate release from prison. [2026 LiveLaw (Kar) 209].The single judge bench of Justice M.Nagaprasanna, while allowing the pleas of Directors Vikas Taneja, Deepak Singh and Prithviraj Singh, opined that the Enforcement Directorate did not comply with Section 19 of the PMLA Act.Pertinently, the high court had on January 22 stayed ED's investigation against Gameskraft Technologies after a closure report was filed in the FIR registered for the predicate offence at Bengaluru, noting that once the FIR is closed, the foundation for ECIR from November 2025 had vanished. On February 23, 2026, the ED registered a new ECIR based on the three FIRs registered in Telangana subsequent to the stay order.Criticising the ED for "re-packaging" the earlier ECIR, the High Court observed :"The narrative... unfolds with unmistakable clarity. The material that animated the earlier ECIR, the searches and seizures conducted thereunder, and the material now relied upon to justify arrest under the new ECIR, are but reflections of the same underlying allegations. The foundation may have been repackaged; it has not been reconstructed."Referring to the same instance and the subsequent registration of three FIRs in Telangana, the high court noted in the current order that the submissions of ASG faltered since Section 19 of PMLA Act wouldn't allow arrest on 'recycled' suspicion.“…barring three complaints registered after the interim order dated 22-01-2026, no fresh predicate offence has been shown to exist against the petitioners…Therefore, the attempt to justify arrest on the strength of material already in possession of the Enforcement Directorate from earlier proceedings runs contrary to the very architecture of Section 19(1) of the PMLA. The provision contemplates an assessment of the material available at the time of arrest; it does not countenance the resurrection of stale material to manufacture a fresh justification for deprivation of liberty. Section 19 is not elastic enough to permit arrest on recycled suspicion when no new incriminating material has emerged”, the court held.According to the founders, the ED had conducted searches in November 2025 but did not find any necessary material to arrest the petitioners at that time.Relying on Pankaj Bansal v. Union of India 2023 LiveLaw (SC) 844 & Arvind Kejriwal v. Directorate Of Enforcement 2024 LiveLaw (SC) 463, the court opined that the ED has wrongfully registered a new ECIR founded upon old allegations, and that ED could have summoned the accused U/s 50 of the Act to ensure their participation in the investigation.The court emphasised that between February 23, 2026, and May 7, 2026, till their arrest from Gurgaon after a search in their residences, the ED did not issue a single summons under Section 50 of the PMLA.“…Had the petitioners thereafter obstructed the process or refused cooperation (U.s 50), the question of arrest may have arisen in a different factual setting. But no such situation had arisen. No summons were issued. No opportunity for cooperation was afforded. No fresh incriminating material emerged from the subsequent searches. Yet, the petitioners were arrested…”, the court emphasised further about the illegality of the arrest.Section 19 of the PMLA Act allows arrest solely on the basis of 'material in possession' giving rise to 'a reason to believe' that the accused is guilty of the specific offence. The court noted that the grounds of arrest mentioned by ED were part of the material already in the its possession during the earlier search in November, and they did not constitute any new material justifying the arrest.“...six months earlier, on substantially the same material, the Enforcement Directorate itself did not consider arrest necessary. If the material then available did not warrant arrest, the mere registration of a new ECIR cannot transmute, old allegations into a newfound necessity for arrest. Liberty cannot fluctuate due to changing procedural labels. The necessity to arrest must arise from new circumstances, new material, or new conduct; it cannot spring from the ashes of allegations that have remained unchanged”, court observed in its order.Relying on the apex court precedent in Arnab Manoranjan Goswami v. State of Maharashtra (2020), the court also noted that 'deprivation of liberty even for a single day is one day too many'.Noting the above reasons, the court declared the arrest of founders as illegal and ordered their expeditious release from prison. The operative portion of the order was intimated to the prison authorities on June 17. However, the court also kept it open for the ED to proceed further against the accused in accordance with law."…It is made abundantly clear that the...

Karnataka High Court Quashes ED Arrest Of Gameskraft Directors, Says Previously Rejected ECIR Was Re-packaged

Sebin James

The Court noted that there were no new circumstances or materials necessitating the arrest of the petitioners.

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Sebin James

Karnataka High Court Quashes ED Arrest Of Gameskraft Directors, Says Previously Rejected ECIR Was Re-packaged

Sebin James

The Court noted that there were no new circumstances or materials necessitating the arrest of the petitioners.

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INR 1099+GST

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Sebin James

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