The Karnataka High Court on Tuesday[July 14] questioned the Enforcement Directorate's contention that freezing proceedings under Section 17(1-A) of the PMLA are civil in nature, prima facie observing that the 'entire edifice of the money laundering act is based on proceeds of crime'.

The High Court was hearing a writ petition filed by Gameskraft Technologies Private Limited and five other connected companies challenging the freezing of their bank accounts and investments under the Prevention of Money Laundering Act, 2002 (PMLA).

The petitioners have sought quashing of the freezing order dated May 13, 2026, passed by the ED under Section 17(1-A) of the PMLA. The petitioners have also sought interim relief seeking a stay on the operation of the impugned freezing order and consequential defreezing of their bank accounts and investments.

A single-judge bench of Justice M. Nagaprasanna was hearing the matter.

The petitioners are represented by Senior Counsels Sandesh Chouta, Vikram Chaudhary, and Sajan Poovayya, while Senior Advocate Zoheb Hossain appeared for the Enforcement Directorate.

At the outset, the petitioners sought permission to amend the petition. The amendment was sought to challenge the original application filed by the ED before the adjudicating authority, and the show cause notice issued by the authority.

Zoheb Hossain, appearing for the ED, raised a preliminary objection, contending that the amendment exceeded the scope of the present proceeding.

The bench has asked the ED to file their objections to the amendment application by the next date of hearing[July 27]

The petitioners also emphasized the urgency in the matter, pointing out the disproportionate nature of the freezing action.

“The disputed amount is about Rs 2.35 crore and the amount of about Rs 560 crore is now the subject matter of attachment/freezing. Therefore, there is urgency in the matter”, the petitioners' counsel submitted.

The petitioners have contended that the freezing order was passed in violation of statutory procedural mandates and without proper application of mind, and that the action is disproportionate as assets worth Rs 560 crore have been frozen over a disputed amount of merely Rs 2.35 crore.

A major part of the hearing revolved around the ED's contention that proceedings under Section 17(1-A) of the PMLA are civil in nature and, therefore, not amenable to jurisdiction under Section 482 of the CrPC/ 528 of BNSS.

“…As far as freezing under 17(1) of PMLA which goes to adjudicating authority under 8(1) are amenable to civil jurisdiction, In Vijay Madanlal Chaudhary, it is said that it's a civil aspect, you don't even need an FIR [for freezing]. The proviso to Section 17 was deleted by way of amendment which was challenged in Vijay Madanlal which was upheld by SC. The search and freezing have removed itself from the shackles of FIRs”, ED submitted.

“…For Section 528 BNSS analogous to Section 482 CrPC to be maintainable…in Suchit Kumar Rana (2004) 4 SCC 129, [it has been held] Section 482 requires abuse of process of criminal court or proceedings therein, or Section 482 won't apply,” Hossain submitted.

However, Senior Counsel Vikram Chaudhary for the petitioners responded that such an argument was 'thoroughly misconceived'.

The Court, however, appeared prima facie unconvinced, observing that the entire edifice of the money laundering act is based on proceeds of crime.

“…Your existence (ED) is for investigation of proceeds of crimes. Attachment proceedings pursuant to prima facie wealth generated to proceeds of crime. How will it be civil, sir?" Justice Nagaprasanna asked.

“..However you dress it, it still remains proceeds of crime… the entire edifice of money laundering act is on proceeds of crime”, the Court orally added.

Hossain responded: “I will overcome this. I will demonstrate it,” assuring the Court that he would show the latest position of law.

“…. these are freezing proceedings and seizure proceedings which are all actions under PMLA… civil or criminal, its writ jurisdiction, because its abuse of process of law if Section 17(1) is violated completely… one clarification…Section 17 proceedings cannot emanate from thin air. Now Section 17 proceedings, you say that you need not need a predicate offence. We will consider that. But what do you adjudicate? Proceeds of a civil proceeding or proceedings of a crime?”, the Court opined further, expressing its prima facie opinion.

Section 17(1-A) of PMLA empowers the Director or any authorized officer to freeze, seize, or attach property if he has reason to believe, based on material in his possession, that such property is proceeds of crime. Section 17(1-A) of the PMLA specifically provides that where it is not practicable to seize such record or property, the authorized officer may make an order to freeze such property, whereupon the property shall not be transferred or otherwise dealt with, except with the prior permission of the officer.

The matter will be heard again on July 27,2026.

Background

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.

To recap, The Directorate of Enforcement had initiated action under Section 17(1-A) of the PMLA, 2002, freezing bank accounts and investments of the petitioners based on ECIR/BGZO/07/2026 dated February 23, 2026.

The matter involves Gameskraft Technologies Private Limited, Rummytime Technologies Private Limited, KN Support Services Private Limited, Kworks Technologies Private Limited, Wimo Technologies Private Limited, and Rummyculture Technologies Private Limited as petitioners.

Gameskraft Technologies Pvt. Ltd. (GTPL), an online intermediary company incorporated in June 2017 that runs technology and gaming platforms, allowed users to play skill-based online games against each other, such as real money rummy games. Online games such as RummyCulture and Pocket-52 were operated on the Company's platform. The company had over 10 Lakh users from across India, and was headquartered in Bangalore.

On June 18, 2026, the Karnataka High Court had declared the arrest of three directors of Gameskraft Technologies—Vikas Taneja, Deepak Singh, and Prithviraj Singh—as illegal and ordered their immediate release from prison, criticizing the ED for 're-packaging' an earlier ECIR in the new one.

ALSO READ- 'Why Should I Suffer If Arrest Is Illegal?' Gameskraft Founder Tells Karnataka High Court; ED Gets Time To Respond

Case Title: M/s Gameskraft Technologies Pvt Ltd & Ors. v. Directorate of Enforcement

Case No.: WP 18285/2026

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