Deepak Singh Vs Directorate of Enforcement: Karnataka High Court Strikes Down ED Arrests as Illegal Under PMLA
Background and Overview
The Karnataka High Court, in a significant ruling concerning the Prevention of Money Laundering Act, 2002, declared the arrests of the Directors and office-bearers of M/s Games Kraft Technologies Private Limited to be illegal and in violation of Section 19 of the PMLA as well as the fundamental rights guaranteed under Articles 14 and 21 of the Constitution of India. Three connected writ petitions were heard together and disposed of through a common order, as all three petitioners were drawn as accused in the same Enforcement Case Information Report (ECIR).
The case raises fundamental questions about the Enforcement Directorate's power to arrest under Section 19 of the Prevention of Money Laundering Act, 2002, the legitimacy of registering successive ECIRs to overcome judicial stay orders, and whether custodial interrogation can substitute for the statutory process of issuing summons under Section 50 of the PMLA.
Factual Matrix: How the Chain of Events Unfolded
The Company and Its Business
M/s Games Kraft Technologies Private Limited was incorporated on 06-06-2017. The company operated technology platforms enabling users to participate in skill-based online games including rummy, ludo, and poker using real money. The company also derived income from its real estate portfolio through rental and maintenance of owned properties.
The online gaming business continued until the enactment of the "Promotion and Regulation of Online Gaming Act, 2025", which came into force on 22-08-2025, following which the company ceased its gaming operations.
The Original FIR and Its Closure
On 05-12-2024, Crime No.722 of 2024 was registered before the Central CEN Crime Police Station, Bengaluru, for offences punishable under Section 318(2) of the BNS and Section 66 of the Information Technology Act, 2000. The complainant alleged financial losses of up to Rs. 3 crores sustained while playing on the company's platform known as Pocket-52.
Importantly, Section 66 of the Information Technology Act, 2000 is not a scheduled offence under the PMLA, while Section 318(2) of the BNS is. Police investigated the matter and found no substance in the allegations. A 'B' report (closing report) was filed on 05-07-2025, and since the company had settled the disputed amount of Rs. 3 crores with the complainant, the 'B' report was accepted by the competent court. The predicate offence thus stood extinguished.
ED Registers ECIR Despite Closed Predicate Offence
Notwithstanding the closure of Crime No.722 of 2024, the Enforcement Directorate registered an ECIR on 11-11-2025 against the company and M/s Nirdesa Network Private Limited, premised squarely upon the very same Crime No.722 of 2024. The ED then conducted search and seizure proceedings under Section 17 of the Prevention of Money Laundering Act, 2002 from 18-11-2025 to 22-11-2025 across the office premises and residential properties of the Directors and employees.
The company and its subsidiary thereafter filed Writ Petition No.1668 of 2026 before the Karnataka High Court challenging the ECIR on the ground that the predicate offence had ceased to exist. The Court, by its order dated 22-01-2026, granted an interim order staying further proceedings in the subject ECIR arising out of Crime No.722/2024.
The ED's Response: New FIRs and a Fresh ECIR
Telangana FIRs Registered Immediately After Stay
Conspicuously, the very moment the stay order was passed by the Karnataka High Court, three new FIRs came to be registered in Telangana:
FIR No.97 of 2026 dated 24-01-2026 — Registered at P.S. Cyber Crimes, Hyderabad, for offences under
Sections 318(4)and319(2)of the BNS andSections 66Cand66Dof the Information Technology Act, 2000. The complainant alleged losses of Rs. 53,080/- through online rummy platforms operated by the company.FIR No.10 of 2026 dated 10-02-2026 — Registered at P.S. Kasipet, Ramagundam, Telangana, for offences under
Section 318(4)of the BNS andSection 66Dof the Information Technology Act, 2000. Five complainants alleged losses of approximately Rs. 1.85 crores through platforms styled as 'RummyCulture' and 'RummyTime', incurred between 2017 and 06-08-2025.FIR No.330 of 2026 dated 12-02-2026 — Registered at P.S. Cyber Crimes, Cyberabad, Telangana, for offences under
Section 318(4)of the BNS. The complainant alleged losses of approximately Rs. 40,00,000/- between 2017 and 2019.
Notably, all three FIRs named unknown accused persons.
Fresh ECIR Registered on 23-02-2026
On the basis of these three Telangana FIRs, the ED registered a new ECIR bearing No. ECIR/BGZO/07/2026 on 23-02-2026, recording the scheduled offences under Sections 318 and 316 of the BNS. This fresh ECIR formed the foundation of the subsequent searches and arrests.
The Arrests: Procedure Followed by the ED
Between 23-02-2026 and 07-05-2026 — a period of approximately three months — no summons whatsoever were issued to any of the petitioners or to the company under Section 50 of the Prevention of Money Laundering Act, 2002.