Declaring the arrest of three directors of online gaming company Gameskraft in a money laundering case illegal, the Karnataka High Court on Tuesday underlined that “the power to arrest may be statutory, the right to liberty is constitutional. Whenever the two intersect, the law demands that the former bow to the safeguards, fairness, and accountability that the latter commands.”
Further, it added that 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.
Justice M Nagaprasanna, in a 134-page order, said, “Arrest of these petitioners is declared contrary to law. As a consequence thereof, the petitioners shall be set at liberty forthwith.”
The bench added, “Further, it clarified it shall be open to the Enforcement Directorate to issue summons under Section 50 of PMLA Act to the petitioners – Deepak Singh, Prithvi Raj Singh, and Vikas Taneja, and proceed further in accordance with law, should the circumstances, so warrant.”
On May 8, the agency had arrested the three petitioners on charges of alleged cheating, fraud, and other offences. The ED had registered a case under the Prevention of Money Laundering Act (PMLA) against Gameskraft Technologies Ltd and its associated entities in February, after multiple FIRs were registered in Telangana.
On May 7, searches were carried out at the residence of the petitioners. The next day, the petitioners were taken into custody. Deepak Singh and Prithvi Raj Singh were arrested in the NCR region, and Vikas Taneja was arrested in Bengaluru and was produced before the jurisdictional court. Since then, they have been in custody.
ED probed same allegations
Senior Advocate Dr S Muralidhar, appearing for the petitioners, argued that the arrest of a person can be made only if material is available at the time of arrest in the form of evidence that could lead to prosecution against the said person.
He informed the court that an ECIR was registered by ED in 2025, based on an offence registered by the Central CEN Crime Police Station of Bengaluru in 2024, wherein it was alleged that the complainant had sustained a financial loss of up to Rs 3 crore by playing the online games.
The police had then conducted an investigation and found no substance in the allegation and filed a ‘B’ report (case closure report) on July 5, 2025. Subsequently, the high court, on a petition filed by the company, stayed further investigation in the ED probe. Following this, multiple FIRs were registered in Telangana, and the ED had filed the present ECIR on February 23.
Muralidhar had argued that the materials available during the search between November 18, 2025, and November 22, 2025, after registration of the earlier ECIR, could not have been a reason to believe that they should be arrested now without any material.
The court referred to the grounds of arrest and reasons furnished to the accused at the time of arrest on May 8, wherein it mentioned that the foundation upon which the Enforcement Directorate erected its edifice of suspicion was Crime No. 722 of 2024 (Crime registered with CEN police) and the material gathered in relation thereto.
Then the bench in its order said, “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.”
It added, “If the earlier ECIR, fortified by search and seizure operations spread over several days, did not persuade the Enforcement Directorate the arrest of the petitioners was either warranted or necessary, it is difficult to fathom how very same material, merely paraphrased and transplanted into a new ECIR, could suddenly acquire the potency to justify their incarceration.”
The bench in the order held, “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.”
‘Arrest cannot be matter of course’
The counsel for the petitioner had argued that the arrest of a person can happen only in extreme circumstances, and it cannot be a matter of course. The arrest memo only indicated that the petitioner did not answer a question of the Enforcement Directorate and, therefore, he had to be taken into custody for custodial interrogation.
Justice Nagaprasanna said, “In the present case, it is an admitted position that no summons under Section 50 was ever issued to the petitioners prior to their arrest. Their liberty was curtailed even before the search proceedings conducted on 07-05-2026 had reached fruition. The arrest was thus not preceded by any demonstrable attempt to secure cooperation through the statutory mechanism.”
Further, the bench emphasised, “Enforcement Directorate is armed with the power to summon persons under Section 50 of the PMLA and to secure their participation in the investigation through lawful means. If, despite such summons, a person refuses to cooperate, the law provides adequate remedies. Arrest is thus not the first step; it is the last resort.”
Pendency of bail application
Additional Solicitor General S V Raju had pointed out that petitioners have sought regular bail before the special court, and that factor ought to dissuade this court from entertaining the present petitions.
The bench in its order relied on the Supreme Court judgment in the case of ‘Arnab Manoranjan Goswami v State of Maharashtra’ (2021), wherein the court has observed that Constitutional Courts remain the first line of defence against unlawful deprivation of liberty and that refusal to intervene when liberty stands imperilled would amount to an abdication of constitutional duty.
Justice Nagaprasanna said, “The existence of a bail application, therefore, cannot erect a jurisdictional barrier against the exercise of constitutional review where the legality of arrest itself is under challenge.”
In its order, the bench held, “The arrest of the petitioners is unsupported by any fresh tangible material capable of driving home inference of guilt, so as to satisfy the mandate of Section 19 of the PMLA. The arrests, therefore, cannot withstand judicial scrutiny and must be declared contrary to law.”
File photo of the Karnataka High Court. 
Share
