Arrwst Memo in “GAMEKRAFT” Case Quashed

Karnataka High Court — W.P. Nos. 15130, 15277 & 15278 of 2026

Justice M. Nagaprasanna | Pronounced: 16.06.2026

Parties: Deepak Singh, Vikas Taneja & Prithvi Raj Singh (Petitioners) v. Directorate of Enforcement (Respondent)

SUBMISSIONS BY THE PETITIONER-ACCUSED

• Section 19 PMLA — Core Contention (Dr. S. Muralidhar): Under Section 19(2), arrest can only be made if material exists at the time of arrest in the form of evidence capable of leading to prosecution. The entire basis of the grounds of arrest and reasons to believe was rooted in findings from Crime No.722/2024, the very proceedings that were stayed by this Court.

• Arrest to circumvent the Stay Order: The registration of the new ECIR and subsequent arrest was a device to get around the interim stay order dated 22-01-2026 granted by this Court in W.P. No.1668/2026. The second ECIR was not genuinely independent — it relied on the same allegations.

• Arrest only in extreme circumstances: Arrest cannot be a matter of course or routine. In the arrest memo, the only reason stated was that the petitioners did not answer questions during search, and therefore had to be taken into custody for interrogation — which is not a valid ground for arrest.

• No new material post-search: The extensive search conducted between 18-11-2025 and 22-11-2025 under the first ECIR (based on Crime No.722/2024) did not result in arrest. Therefore, how could the same material, now dressed in a new ECIR, justify arrest six months later?

• Evasive reply is not a ground for arrest (Sri Vikram Chaudhary): The second ECIR was a misrepresentation and a blatant affront to the stay order. Material in possession under Section 19(1) had no proximate link with the necessity for arrest on 08-05-2026. Even refusal to cooperate after receiving summons cannot directly lead to arrest. An "evasive reply" cannot be projected as non-cooperation sufficient to justify arrest.

• Search under Section 17 cannot be a ground for arrest: Arrival at satisfaction of guilt is the only pre-requisite for arrest. The search proceeding is not itself a valid ground to arrest any person.

• Material from first ECIR cannot be used in the second (Sri Sajan Poovayya): Material collected during the first ECIR cannot form the basis for arrest under the new ECIR.

• This is a permissible exercise of judicial review (Sri Sandesh J. Chouta): The petitioners are challenging the legality of the arrest, which falls squarely within the scope of judicial review under Article 226; the consequence is release.

• No summons issued before arrest: Between 23-02-2026 (registration of new ECIR) and 07-05-2026 (searches), no summons under Section 50 of the PMLA were ever issued to any of the petitioners. The petitioners were arrested directly, without any prior opportunity to cooperate.

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JUDGEMENTS RELIED UPON BY THE PETITIONERS

#	Case	Citation	Court
1	Vijay Madanlal Choudhary v. Union of India	2022 SCC OnLine SC 929	Supreme Court (3-Judge Bench)
2	V. Senthil Balaji v. State	(2024) 3 SCC 51	Supreme Court
3	Pankaj Bansal v. Union of India	(2024) 7 SCC 576	Supreme Court
4	Arvind Kejriwal v. Directorate of Enforcement	2024 SCC OnLine SC 1703	Supreme Court
5	Arnab Manoranjan Goswami v. State of Maharashtra	(2021) 2 SCC 427	Supreme Court
6	Joginder Kumar v. State of U.P.	(1994) 4 SCC 260	Supreme Court
7	Arnesh Kumar v. State of Bihar	(2014) 8 SCC 273	Supreme Court
8	Mohd. Zubair v. State (NCT of Delhi)	(2023) 16 SCC 764	Supreme Court
9	Siddharth v. State of Uttar Pradesh	(2022) 1 SCC 676	Supreme Court
10	Priyavrat Mandhana v. Directorate of Enforcement	2024 SCC OnLine Bom. 4233	Bombay High Court
11	Anilkumar Khanderao Pawar v. Directorate of Enforcement	Criminal W.P. No.4779/2025 (15-10-2025)	Bombay High Court
12	R.K.M. Powergen Pvt. Ltd. v. Directorate of Enforcement	2025 SCC OnLine Mad. 3272	Madras High Court
13	Satinder Singh Bhasin v. State of U.P.	2025 SCC OnLine All 8082	Allahabad High Court

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PETITIONERS' CONTENTIONS ON THE JUDGEMENTS RELIED UPON

• Vijay Madanlal Choudhary: Relied upon to establish that Section 19 of the PMLA is not an unbridled power — it is hedged with safeguards of a higher order. Material in possession must exist before the reason to believe is formed. The sequence is mandatory: material → reason to believe → recording in writing → arrest. Any departure vitiates the arrest.

• V. Senthil Balaji: Relied upon to urge that compliance with Section 19(1) is mandatory, not directory. Any non-compliance vitiates the very arrest. The authorized officer must assess and evaluate material already in possession — not collect it post-arrest. Forwarding a sealed envelope to the Adjudicating Authority immediately after arrest is also a mandatory obligation.

• Pankaj Bansal: Relied upon to establish the proposition that mere non-cooperation in response to summons under Section 50 is not sufficient to arrest a person under Section 19. Evasive replies or failure to confess cannot constitute a ground for arrest. ED's conduct of registering a second ECIR immediately after the appellants secured interim protection from the first ECIR was declared to reek of arbitrary exercise of power — precisely the same modus operandi alleged here.

• Arvind Kejriwal: Relied upon to establish that the power to arrest under Section 19 is a "drastic and extreme power" subject to judicial review. The courts are required to examine not just the formal compliance but also the "necessity to arrest." The "reasons to believe" must be furnished to the arrestee. The material must objectively demonstrate guilt, not merely invoke suspicion. The ED cannot selectively rely on incriminating material while ignoring exculpatory circumstances.

• Arnab Manoranjan Goswami: Relied upon to refute the ED's contention that the High Court should not entertain these petitions since bail applications are already pending. The Apex Court held that constitutional courts are the first line of defence against unlawful deprivation of liberty, and that "deprivation of liberty even for a single day is one day too many."

• Joginder Kumar, Arnesh Kumar, Siddharth, Mohd. Zubair: Relied upon collectively to assert the doctrine of "necessity to arrest" — that the mere existence of power to arrest does not mean arrest must be made. The officer must independently justify the necessity. Arrest is the exception; not the norm.

• Priyavrat Mandhana & Anilkumar Khanderao Pawar (Bombay HC): Relied upon to show that where the ED was already in possession of sufficient material and did not find it necessary to arrest earlier, a subsequent arrest on the same material — especially after a related person is released — is impermissible. The threshold under Section 19 is considerably higher than ordinary criminal law.

• R.K.M. Powergen (Madras HC): Relied upon to establish that the ED is not a "super cop" and cannot proceed without a live predicate offence. Where the predicate offence has been closed (as Crime No.722/2024 was by 'B' report), there is no jurisdiction for the ED to continue. "No predicate offence, no action by ED."

OBSERVATIONS OF THE KARNATAKA HIGH COURT

• The core controversy lies at the confluence of individual liberty and the State's resolve to combat money laundering. The PMLA is not merely a legislative response to economic crime; it is a carefully crafted mechanism to trace, identify, attach, confiscate and extinguish benefits flowing from criminal activity.

• Section 19 is not an administrative power — it is a constitutional balance between the interest of the State in investigating serious economic offences and the citizen's right to be protected from arbitrary deprivation of liberty. Material must precede the formation of opinion; the opinion cannot precede the material.

• The "reasons to believe" are not merely ritualistic. The expression is a phrase of profound legal significance — stronger than conjecture, yet short of adjudicatory certainty. The belief must be founded upon tangible and objective material.

• The foundation of the new ECIR is the same as the old. The statement of objections filed by the ED itself (paragraphs 6, 9, and 12) candidly acknowledged that the reasons to believe dated 11-11-2025 and the searches between 18-11-2025 and 22-11-2025 were anchored on Crime No.722/2024. The same allegations — online gaming fraud, use of bots, collusive gameplay, withdrawal restrictions — merely resurfaced in the new ECIR. The foundation was repackaged, not reconstructed.

• No fresh material emerged from subsequent searches. The searches on 07-05-2026 to 08-05-2026 did not yield any new incriminating evidence beyond what was already known. The grounds of arrest and reasons to believe were predominantly founded on material already in possession from earlier proceedings.

• No summons were issued before arrest. Between 23-02-2026 and 07-05-2026 (a period of about three months), no summons under Section 50 of the PMLA were ever served on any of the petitioners. Their liberty was curtailed even before the search proceedings had concluded. Arrest was made during the course of the search, not as a last resort after exhausting investigation tools.

• The rationale of Pankaj Bansal stands as a complete answer. Arrest under the PMLA cannot be reduced to administrative expediency. Section 50 provides adequate remedies for securing cooperation. Arrest is the last resort, not the first step.

• The parallel with Pankaj Bansal is striking. Just as in that case — where the second ECIR was registered immediately after the appellants secured anticipatory bail — here too, the new ECIR and the subsequent arrest follow immediately after this Court granted an interim stay. The conduct is indicative of arbitrary exercise of power.

• Evasiveness during interrogation cannot justify arrest. The arrest memos cited the petitioners' "evasive" replies or failure to answer questions as a ground. Relying on Pankaj Bansal and Arvind Kejriwal, the Court rejected this — an expectation of admission of guilt is not a valid basis for arrest.

• On the maintainability of the writ petition: The contention that the existence of a bail application is a bar to these writ petitions was rejected. The petitions challenge the legality of the arrest itself — a narrower and more fundamental question. Relying on Arnab Goswami, the Court held that constitutional courts are the first line of defence against deprivation of liberty and cannot abdicate that role.

• The necessity of arrest was not established. Six months earlier, on substantially the same material gathered during the first ECIR's searches, the ED itself did not consider arrest necessary. The mere registration of a new ECIR cannot convert old allegations into a newfound necessity for arrest. Liberty cannot fluctuate due to changing procedural labels.

• The Court's conclusion: The arrests were "unsupported by any fresh tangible material capable of driving home inference of guilt" so as to satisfy Section 19 of the PMLA. The arrests could not withstand judicial scrutiny and were declared contrary to law. The petitioners were entitled to be set at liberty forthwith.

• The ED's powers under Section 50 remain intact. The Court clarified that it was not shutting down the investigation — the ED remains free to issue summons under Section 50 and proceed further in accordance with law, should circumstances so warrant.

  
  

Result: All three Writ Petitions allowed. Arrests declared illegal. Petitioners directed to be released forthwith.