The Karnataka High Court last week ordered the immediate release of three Gameskraft founders from judicial custody, ruling that the Enforcement Directorate had arrested them based on material it had in its possession from an earlier case and had failed to show that any new evidence had emerged since then.
After 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 “old material” from an old case file to justify arrests in a new case.
The 134-page ruling, delivered by Justice M Nagaprasanna on June 16, enters into a long-standing judicial debate on the extent of the extension of Section 19 of the Anti-Corruption Act – the powers of the police department to make arrests.
The ruling does not decide whether the allegations against Gameskraft or its founders are true, nor does it delve into the merits of the ED’s money laundering investigation itself. What it does is draw a line between investigating a case and arresting someone for it, and stressing that the ED’s arrest power cannot rely on “recycled suspicions”.
What happened in the Gameskraft case?
This controversy dates back to 2024, when Bengaluru Police registered an FIR against Gameskraft after a player claimed losses on the company’s gaming platform. The CEO opened the Enforcement Case Information Report (ECIR), the equivalent of a police FIR, behind him and searched the company’s headquarters in November 2025.
However, Bengaluru Police concluded that the allegations lack substance and filed a report closing the case. Hence, the Karnataka High Court, on January 22, 2026, stayed the ED case arising out of that FIR.
Days later, three new FIRs surfaced in Telangana, alleging cheating and fraud through online rummy platforms linked to Gameskraft. The CEO treated the Telangana cases as “scheduled offences” (crimes believed to have made illicit gains) under the Anti-Money Laundering and Countering Terrorism Financing Act and registered a new ECIR on 23 February 2026.
From May 7 to 8 of this year, it searched the company’s headquarters again and arrested the three founders in the same month. The founders then appealed the arrests to the Supreme Court.
Read also: Right to be heard before knowing charges under BNSS applicable under PMLA: SC
Why did the HC find the arrests illegal?
Section 19 of the Anti-Money Laundering Law allows the Enforcement Department to arrest a person if a licensed officer is in possession of materials and has “reason to believe” that the accused has committed a money laundering offence. The authorized officer must record those reasons in writing and inform the accused of the reasons for the arrest.
By contrast, Section 50 of the law gives the police department investigative powers other than arrest – to summon people, record statements under oath, and demand documents.
The Supreme Court found that the ED did not meet both provisions of the law.
i) ED relied on old materials
Justice Nagaprasanna cited the Supreme Court’s 2023 judgment in Pankaj Bansal v. Union of India, which stated that the EDS must provide written reasons for the detention of arrested individuals, and went further. It examined not only whether incriminating material was present, but when it surfaced. When an agency makes an arrest on the strength of information it already has from previous actions, but no significant new material has come to light in between, it has been ruled that Article 19 does not permit the revival of that meaningless material.
Examining the reasons for arrest provided by the ED and recording “reasons to believe”, the Supreme Court found that most of the material came from searches conducted in November 2025 during the previous investigation. It found that new searches conducted just before the May 2026 arrests did not yield anything significantly new.
The court said: “This clause considers the assessment of the materials available at the time of arrest, and does not encourage the revival of meaningless materials to invent a new justification for deprivation of liberty,” adding: “Article 19 is not flexible enough to allow arrest based on recycled suspicions when no new incriminating material appears.”
Read also: ‘Grave abuse of law’: HC quashes FIR and ED proceedings against NewsClick, founder in foreign funding case
b) No subpoenas were issued prior to the arrests
The judge also held that arrest is not intended to be the first step in an investigation when the law gives the agency a softer alternative – summoning the accused under Article 50 for questioning before resorting to arrest under Article 19.
The court found that this alternative was never used. The new ECIR was registered on 23 February 2026, the arrests followed on 8 May, and in the two and a half months in between, the CEO did not summon any of the founders.
“No summons were issued. No opportunity for cooperation was provided. No new incriminating material has emerged. However, the petitioners have been arrested,” the High Commissioner said.
The court held that courts are entitled to examine whether the material relied upon by the agency has a logical connection to its decision to arrest. Here, the Executive Director’s “reasons for belief” referred mainly to information already on file from previous proceedings – which was less than the minimum required by Article 19.
Case status
Since the court did not venture into the underlying allegations against the Gameskraft founders, the ED’s money laundering investigations against them are continuing even as they remain free. Last year, Gameskraft also suspended its services amid these cases, citing compliance after a nationwide ban on real-money gaming apps was imposed.
