Karnataka High Court Quashes ED Arrest Of Gameskraft Founder, Says Arrest Cannot Spring From Ashes Of Old Allegations

The Karnataka High Court on Tuesday quashed the Enforcement Directorate's arrest of gaming platform Gameskraft founder Deepak Singh and two company executives, holding that the agency could not justify their arrest on the basis of material that was substantially the same as that relied upon in earlier proceedings.

Justice M Nagaprasanna passed the order while allowing petitions filed by Singh and Gameskraft executives Vikas Taneja and Prithvi Raj Singh. The court observed that the ED itself had not considered arrest necessary when it first investigated the allegations months earlier.

“What renders the action particularly vulnerable is, the undeniable fact that 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,” the court observed.

The court held that the arrests were not supported by any fresh tangible material capable of driving home an inference of guilt. It ruled that the statutory requirements for arrest had therefore not been met.

“Therefore, this Court is left with the irresistible conclusion that 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. The inevitable consequence is that the petitioners are entitled to be restored to their liberty,” the court held.

The dispute stems from Gameskraft's online gaming operations. The company operated platforms offering skill-based games such as rummy, ludo and poker.

A criminal case was registered in Bengaluru in December 2024 after a gamer alleged that he had suffered losses of about ₹3 crore while using one of the company's gaming platforms. Police later filed a closure report, which was accepted by a court in July 2025.

The ED subsequently registered an enforcement case in November 2025 based on that FIR. It conducted searches at company offices and residential premises linked to the company between November 18 and November 22, 2025.

Gameskraft and its subsidiary challenged the proceedings before the High Court. On January 22, 2026, the court stayed further proceedings in that enforcement case after noting that the underlying criminal case had already been closed.

Soon afterwards, three fresh criminal cases were registered in Telangana. One complainant alleged losses of ₹53,080 after playing online rummy games. Another alleged loss of about ₹1.85 crore. A third alleged losses of about ₹40 lakh while using a gaming platform linked to the company.

Based on those FIRs, the ED registered a fresh enforcement case on February 23, 2026.

Searches were carried out at the residences of Singh, Taneja and Prithvi Raj Singh in Bengaluru and Gurugram on May 7 and 8, 2026. All three were arrested during the search operations.

The court noted that no summons had been issued to any of the petitioners between the registration of the fresh enforcement case and their arrest.

Examining the material relied upon by the ED, the court concluded that the allegations in the new enforcement case were essentially a repackaging of material that had already formed the basis of earlier proceedings.

The court noted that the ED had conducted extensive search and seizure operations under the earlier enforcement case. Despite that, it had not considered arrest necessary at the time.

“If the earlier ECIR, fortified by search and seizure operations spread over several days, did not persuade the Enforcement Directorate that the arrest of the petitioners was either warranted or necessary, it is difficult to fathom how the very same material, merely paraphrased and transplanted into a new ECIR, could suddenly acquire the potency to justify their incarceration. The inference is inescapable,” the court observed.

According to the court, the subsequent searches did not yield any fresh incriminating material. Nor did the grounds of arrest disclose the emergence of any new tangible evidence capable of justifying arrest.

The court further found that the grounds of arrest and the reasons recorded by the ED relied predominantly on material that was already available from earlier proceedings.

The ED argued that the fresh enforcement case was based on three separate FIRs registered in Telangana and therefore stood on an independent footing. The court, however, held that apart from those three complaints, no fresh predicate offence had been shown against the petitioners.

“The learned Additional Solicitor General painstakingly invited the attention of the Court to several complaints and allegations said to have surfaced subsequently. Yet, barring three complaints registered after the interim order dated 22-01-2026, no fresh predicate offence has been shown to exist against the petitioners. That position is not disputed. 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 court held.

"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.", it added.

Relying on principles laid down by the Supreme Court in Pankaj Bansal and Arvind Kejriwal, the court emphasised that arrest under the money laundering law cannot be treated as a routine investigative step and remains subject to constitutional safeguards.

The court observed that the ED had ample statutory authority to secure the petitioners' participation in the investigation through summons. No such step was taken before the arrests.

“Had the petitioners thereafter obstructed the process or refused cooperation, 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 observed.

While declaring the arrests unlawful, the court clarified that the ED's powers to continue the investigation remain unaffected. It held that the agency is free to issue summons and proceed further in accordance with law if circumstances so warrant.