The Karnataka High Court (Bengaluru Bench) has declared the arrest of gaming platform Gameskraft founder Deepak Singh and two company executives (petitioners), by the Enforcement Directorate, contrary to law, and directed them to be set at liberty forthwith. The Court also directed the Registry to intimate the order to the prison authorities for release of the petitioners. At the same time, the Court clarified that the statutory powers vested in the Enforcement Directorate under Section 50 of the PMLA remained wholly unaffected, and it would be open to ED to issue summons and proceed further in accordance with law, should the circumstances so warrant.
The Court explained that arrest under Section 19 of the PMLA must be founded on objective, tangible material in possession of the authorised officer at the time of arrest, such material must sustain a recorded “reason to believe” that the person is guilty of an offence under the PMLA, and the power of arrest cannot be exercised on recycled or stale material, merely because a new ECIR has been recorded. Section 19 does not permit arrest to be justified by repackaging old allegations when no fresh incriminating material has emerged, especially where no summons under Section 50 were issued and no attempt was made to secure cooperation through the statutory mechanism.
The Court further held that legality of arrest under Section 19 is amenable to judicial review in a writ petition notwithstanding pendency of bail proceedings, and if the arrest is unsupported by fresh tangible material capable of sustaining the statutory threshold, it is contrary to law.
A Single Judge Bench of Justice M. Nagaprasanna observed that Section 19 of the PMLA requires the existence of “material in possession” of the authorised officer, such material must precede formation of opinion, the “reason to believe” must be recorded in writing, and only thereafter can the power of arrest be exercised. The Bench emphasised that the expression “reason to believe” imports objectivity and excludes arbitrary exercise of power; the material must be tangible and capable of sustaining the satisfaction that the person has been guilty of an offence under the PMLA.
The Bench further observed that Section 50 is an investigative provision and Section 19 is a coercive provision, and the transition from one stage to the other cannot be automatic. Arrest cannot be justified merely because investigation is underway, nor can it be used as the first step where statutory powers of summons remain available.
Applying those principles, the Bench found that the grounds of arrest and reasons to believe substantially rested on the same body of allegations and material that had animated the earlier ECIR and search proceedings. It noted that the foundation may have been repackaged but had not been reconstructed. If the earlier ECIR, fortified by earlier search and seizure operations, had not persuaded ED that arrest was warranted or necessary, the same material could not suddenly justify arrest under a new ECIR in the absence of fresh tangible incriminating material.
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The Bench specifically recorded that between February 23, 2026 and May 07, 2026 no summons under Section 50 were issued, no opportunity for cooperation was afforded, and no fresh incriminating material emerged from the later searches. It therefore held that Section 19 does not countenance resurrection of stale material to manufacture a fresh justification for deprivation of liberty, and that arrest is not the first step but the last resort.
The Bench also rejected the respondent’s objection that the writ petitions were not maintainable because the petitioners had bail applications pending. It held that the existence of a bail application cannot operate as a jurisdictional bar where the legality of arrest itself is challenged, and that constitutional courts remain the first line of defence against unlawful deprivation of liberty. The issue before the Court was not the sufficiency of evidence on merits or entitlement to bail under Section 45 of the PMLA, but the narrow and fundamental question whether the arrests satisfied the constitutional and statutory mandate of Section 19.
Briefly, the petitioners were founders/directors/office bearers of Gameskraft Technologies Private Limited, which operated technology platforms for skill-based online games such as rummy, ludo and poker. An earlier predicate offence, registered in Bengaluru, was closed upon filing and acceptance of a ‘B’ report on July 05, 2025. Despite that, the Enforcement Directorate had earlier registered an ECIR founded on that crime, and this Court had stayed further proceedings in that ECIR on January 22, 2026.
Thereafter, three FIRs came to be registered in Telangana in January-February 2026, alleging cheating and fraud in relation to the Company’s online gaming platforms, and on that basis ED recorded ECIR on February 23, 2026. No summons under Section 50 of the PMLA were issued to the petitioners after registration of this new ECIR. Searches were conducted at the petitioners’ residences, and during the course of such search, all three petitioners were taken into custody in the early hours of May 08, 2026. The petitions challenged the legality of their arrest under Section 19 of the PMLA and sought release on the ground that the arrest was illegal and violative of Articles 14 and 21 of the Constitution of India.
