The Karnataka High Court has declared the arrest of three directors and office-bearers of Gameskraft Technologies Private Limited by the Directorate of Enforcement (ED) as contrary to law. Delivering the ruling on Tuesday, Justice M. Nagaprasanna allowed petitions filed by Deepak Singh, Vikash Taneja, and Prithvi Raj Singh, who challenged the legality of their arrests on May 8. While the High Court quashed the arrests, it clarified that the federal agency remains free to continue its investigation by following due process under the Prevention of Money Laundering Act (PMLA).
Arrest Power Distinct from Investigation
In its order, the court observed that the power to arrest is distinct from the power to investigate and cannot be exercised solely because an investigation is continuing. The bench noted that any necessity to arrest must arise from fresh material, new circumstances, or new conduct, rather than allegations that have remained unchanged. Justice Nagaprasanna pointed out that the material relied upon by the ED to justify the May 8 arrests substantially overlapped with evidence already available from earlier proceedings, meaning it ran contrary to the statutory framework of Section 19(1) of the PMLA.
The executives were originally detained a day after the ED conducted search operations under Section 17 of the PMLA at their residential premises in Bengaluru and Gurugram. The court noted that the material which animated the earlier case, along with the searches and seizures conducted, were mere reflections of the same underlying allegations.
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Conflicting Submissions Over Previous Stay Orders
During the proceedings, the petitioners argued that the ED had registered the fresh case specifically to overcome an interim stay granted by the court in connection with an offence registered in 2024. Opposing the plea, the Additional Solicitor General submitted that the ongoing investigation related to three separate FIRs registered by the Telangana Cyber Police in February 2026 and was entirely unaffected by the earlier stay order.
Absence of Section 50 Summons Prior to Custody
The High Court heavily emphasized the admitted position that no summons had been issued to the petitioners under Section 50 of the PMLA before they were taken into custody. The court observed that the executives’ liberty was curtailed even before the agency’s search proceedings had reached fruition.
While declaring the specific arrests illegal, the court reiterated that the ED is at liberty to exercise its powers under Section 50 of the PMLA to issue fresh summons and proceed with its investigation in accordance with legal due process.
