Karnataka HC declares Gameskraft founders’ arrest illegal, orders release

In a significant setback to the Enforcement Directorate (ED), the Karnataka High Court on Tuesday declared the arrest of Gameskraft founders Deepak Singh, Prithvi Raj Singh and Vikas Taneja illegal and ordered their immediate release, holding that the central agency had failed to adhere to the statutory safeguards governing arrests under the Prevention of Money Laundering Act (PMLA).

The order was passed by Justice M. Nagaprasanna, who had reserved judgment after hearing extensive arguments from both sides over the legality of the founders' arrest following searches conducted by the ED on May 7 and 8.

The ruling marks a major development in the high-profile money laundering probe involving online gaming platform Gameskraft Technologies Pvt. Ltd., with the court examining whether the ED had complied with the mandatory requirements under Section 19 of the PMLA before depriving the founders of their liberty.

Court Questions ED's Arrest Procedure

During the hearings leading up to Tuesday's order, the court repeatedly underscored the importance of procedural safeguards in criminal investigations, particularly in cases involving arrest.

Senior advocate S. Muralidhar, appearing for Gameskraft founder Deepak Singh, had argued that the ED effectively decided to arrest the founders before completing the search operation, rendering the statutory process under the PMLA meaningless.

According to the petitioners, searches at the founders' residences in Gurgaon began on May 7 and concluded on May 8. However, the grounds of arrest and reasons recorded by the agency appeared to have been prepared in advance and were not based on any material discovered during the search and seizure exercise.

Muralidhar contended that Section 19 of the PMLA requires the authorised officer to arrive at a "reason to believe" based on material available before him, and that such satisfaction must emerge from the investigative exercise itself rather than from a pre-determined decision to arrest.

"Imagine a whole team conducting search and seizure. First, they have to be satisfied that the result of the search and seizure is enough for arrest. But they have already gone with typed documents," the senior counsel had submitted.

Justice Nagaprasanna, during the hearing, had observed that "procedure is the lifeblood of liberty", signalling the court's concern over whether the safeguards built into the anti-money laundering law had been followed in substance and not merely in form.

Focus on Section 19 of PMLA

A key issue before the court was whether the ED had genuinely formed its satisfaction for arrest based on material unearthed during the May search operation or had relied on material that was already in its possession.

The petitioners argued that the agency's grounds of arrest did not stem from any fresh incriminating material recovered during the searches. Instead, they were allegedly based on information that had already formed part of earlier investigations.

The court, while hearing arguments, repeatedly examined the distinction between the existence of material justifying arrest and the adequacy of that material. The founders maintained that they were not inviting judicial scrutiny of the merits of the investigation, but only asking the court to determine whether the mandatory statutory process had been followed before their arrest.

During the proceedings, Justice Nagaprasanna had also orally remarked that the ED was expected to "search and then write, not research and then write", a comment that reflected the court's reservations about the sequence of events leading to the arrests.

The founders' legal team argued that if investigative agencies are permitted to rely on previously available material while conducting fresh searches, the safeguard embedded in Section 19 would become illusory and arrests could effectively become pre-decided exercises.

Founders Argued There Was No Urgency

The petitioners also questioned the necessity of immediate custodial action.

Muralidhar told the court that the founders were not absconders, had cooperated with investigations and had not diverted assets. He argued that the ED could have issued summons rather than resorting to arrests.

"Because they bypassed the procedure, we are taken into custody and remain there for a month," counsel had submitted, questioning what circumstances warranted immediate arrest.

The founders separately maintained that the legality of arrest was an issue distinct from the question of bail and therefore required independent judicial examination.

Dispute Over Fresh ECIR

Another aspect of the challenge related to the ED's decision to register a fresh Enforcement Case Information Report (ECIR) in Bengaluru on February 23, 2026.

The petitioners pointed to three predicate offence FIRs registered in Telangana and argued that the agency initiated the fresh ECIR months later despite those cases having remained dormant.

They further contended that the fresh action was premised on material that had already been examined in connection with an earlier ECIR and was therefore vulnerable to challenge.

Background: Earlier HC Stay on ED Probe

The latest ruling comes against the backdrop of an earlier order passed by the Karnataka High Court in January.

On January 22, 2026, the High Court had stayed the ED's investigation against Gameskraft after a closure report, commonly known as a 'B report', was filed in relation to the Bengaluru predicate offence that formed the basis of an earlier ECIR registered in November 2025.

At the time, the court had observed that once the underlying FIR was closed, the very foundation of the ECIR appeared to have disappeared.

The founders argued that despite the earlier stay and the absence of fresh tangible material, the ED proceeded with searches on May 7 and subsequently arrested them.

Following the searches, the three founders were brought to Bengaluru after the agency secured transit remand from Gurgaon. The ED subsequently obtained custodial remand on two occasions before the founders were sent to judicial custody.

Major Relief for Gameskraft Founders

Tuesday's ruling effectively nullifies the arrests and grants immediate relief to Deepak Singh, Prithvi Raj Singh and Vikas Taneja, who had been in custody since the ED action in early May.

The judgment is likely to have wider implications for PMLA investigations, particularly on the issue of how enforcement agencies record reasons for arrest and whether courts can scrutinise compliance with procedural safeguards under Section 19.

Legal experts said the ruling reinforces the Supreme Court's repeated emphasis that personal liberty cannot be curtailed without strict adherence to statutory procedure, even in cases involving specialised economic offences.

The detailed judgment is expected to be closely examined for its interpretation of the safeguards governing arrests under the anti-money laundering law and its potential impact on future ED investigations.