'Stale material', no summons: Why ED arrests in Gameskraft PMLA case didn't hold up before Karnataka HC

THe mysore heights margaret court endure hebdomad ordered the immediate release of three Gameskraft founders from judicial custody, ruling that the Enforcement Directorate had arrested them on material it possessed from a previous case and had failed to show that any fresh evidence had emerged since.Quashing the arrests of Deepak Singh, Vikas Taneja and Prithviraj Singh under the Prevention of Money Laundering Act (PMLA), the court said the agency cannot use “stale material” from an old case file to justify arrests in a fresh case.The 134-page judgment, pronounced on 16 June by Justice M Nagaprasanna, steps into a long-running judicial debate over how far Section 19 of PMLA — the ED's powers to arrest — stretches.The judgment does not decide whether the allegations against Gameskraft or its founders are valid, nor does it dive into the merits of the ED’s money-laundering investigation itself. What it does is draw a line between investigating a case and arresting a person over it, reiterating that the ED’s power to arrest cannot rest on “recycled suspicion”.What happened in the Gameskraft case?The controversy traces to 2024, when Bengaluru police registered an FIR against Gameskraft after a player alleged losses on the company's gaming platform. The ED opened an Enforcement Case Information Report (ECIR), equivalent to a police FIR, off the back of it and searched the company's premises in November 2025.Bengaluru police, however, concluded that the allegations lacked substance and filed a closure report. Consequently, the Karnataka high court, on 22 January 2026, stayed the ED case that had arisen from that FIR.Days later, three fresh FIRs surfaced in Telangana, alleging cheating and fraud by online rummy platforms linked to Gameskraft. The ED treated the Telangana cases as “scheduled offences” (offences believed to have generated illicit gains) under PMLA and registered a fresh ECIR on 23 February 2026.Between 7 and 8 May this year, it searched the company’s premises again and arrested the three founders the same month. The founders then challenged the arrests before the high court.Also read: Right to be heard before cognisance of charges under BNSS applicable under PMLA: SCWhy did HC find the arrests illegal?Section 19 of PMLA lets the ED arrest someone if an authorised officer holds material and has “reason to believe” the accused has committed money laundering. The authorised officer must record those reasons in writing and communicate the grounds of arrest to the accused.Section 50 of the law, by contrast, hands the ED investigative powers short of arrest — to summon people, record statements under oath, and demand documents.ED, the high court found, did not satisfy both provisions of the law.i) ED relied on old materialJustice Nagaprasanna cited the Supreme Court’s 2023 ruling in Pankaj Bansal vs Union of India, which had held that the ED must give arrested individuals written grounds of arrest, and went a step further. He examined not just whether incriminating material existed, but when it had surfaced. Where the agency arrests on the strength of information it already held from earlier proceedings, with no significant fresh material emerging in between, he ruled, Section 19 does not permit resurrecting that stale material.Examining the ED’s grounds of arrest and recorded “reasons to believe’, the high court found that most of the material came from the November 2025 searches conducted during the earlier investigation. The fresh searches conducted just before the May 2026 arrests, it found, turned up nothing significantly new.“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," the court said, adding: “Section 19 is not elastic enough to permit arrest on recycled suspicion when no new incriminating material has emerged.”Also read: ‘Gross abuse of law’: HC quashes FIR, ED proceedings against NewsClick, founder in foreign funding caseii) No summons were issued before the arrestsThe judge also held that arrest is not meant to be the first move in an investigation when the law gives the agency a softer alternative — summoning the accused under Section 50 for questioning before resorting to arrest under Section 19.That alternative, the court found, was never used. The fresh ECIR was registered on 23 February 2026, the arrests followed on 8 May, and in the two-and-a-half months in between, the ED never summoned any of the founders.“No summons were issued. No opportunity for cooperation was afforded. No fresh incriminating material emerged. Yet, the petitioners were arrested,” the HC said.Courts, it held, are entitled to examine whether the material an agency relies on bears a rational connection to its decision to arrest. Here, the ED’s “reasons to believe” drew mainly from information already on file from the earlier proceedings — and that fell short of the threshold Section 19 demands, it noted.The case statusAs the court did not venture into the underlying allegations against Gameskraft founders, ED’s money laundering investigation against them continues even as they remain free. Last year, Gameskraft also suspended its services amidst the cases, citing compliance after a nationwide ban on real-money gaming apps was enforced.