Facts
The petitioners are Directors/Founders of M/s Games Kraft Technologies Pvt. Ltd., an online gaming platform
Source reference: p.6In 2024, a predicate offence (FIR 722/2024) was registered for cheating, but the police filed a 'B' report (closure report) which was accepted by the court on 05-07-2025
Source reference: p.7Despite this, the Enforcement Directorate (ED) registered an ECIR and conducted searches in November 2025
Source reference: p.7The Karnataka High Court stayed that ECIR on 22-01-2026 because the predicate offence was closed
Source reference: p.8Subsequently, three new FIRs were registered in Telangana for similar allegations of gaming fraud
Source reference: p.8-9Based on these, the ED registered a new ECIR (No. 07/2026) on 23-02-2026
Source reference: p.9Without issuing any prior summons under Section 50, the ED conducted searches on 07-05-2026 and arrested the petitioners in the early hours of 08-05-2026
Source reference: p.9, 22The petitioners challenged the legality of their arrest via writ petitions
Source reference: p.9Issues
1. Whether the arrest of the petitioners satisfied the mandatory requirements and "reasons to believe" under Section 19 of the PMLA
Source reference: p.102. Whether the ED can justify an arrest based on "stale" material already in its possession from a previous stayed investigation without fresh incriminating evidence
Source reference: p.12, 1323. Whether the "necessity of arrest" is a jurisdictional prerequisite that must be satisfied before depriving a citizen of liberty under the PMLA
Source reference: p.96, 130Law Applied
The court applied Section 19 of the Prevention of Money Laundering Act (PMLA), 2002, which mandates that an officer must have "material in possession" and "reason to believe" that a person is guilty of an offence to effect an arrest
Source reference: p.57, 62It relied on the Supreme Court's interpretation in Vijay Madanlal Choudhary v. Union of India, which categorized Section 19 safeguards as "stringent"
Source reference: p.67-68It further applied Pankaj Bansal v. Union of India, which held that mere non-cooperation or evasive replies do not justify arrest
Source reference: p.82-83The court also integrated the "necessity to arrest" doctrine from Arvind Kejriwal v. Directorate of Enforcement, emphasizing that the existence of power to arrest is distinct from the justification for its exercise
Source reference: p.89-90It cited Arnab Manoranjan Goswami v. State of Maharashtra regarding the High Court's duty to protect personal liberty under Article 226 even during the pendency of bail applications
Source reference: p.129Reasoning
The court found that the "grounds of arrest" provided by the ED were substantially identical to the allegations in the 2024 investigation, which was already stayed by the High Court
Source reference: p.124-126The ED failed to show any fresh incriminating material discovered during the May 2026 search that was not already in its possession during the November 2025 search
Source reference: p.126-127Specifically, the court noted that if the ED did not find arrest necessary in 2025 based on the same material, it could not claim a "necessity to arrest" in 2026 simply by attaching the material to new FIRs
Source reference: p.132The court emphasized that the ED bypassed the investigative mechanism of Section 50 (summons) and moved directly to arrest without any demonstrable attempt at securing cooperation
Source reference: p.131It reasoned that "reason to believe" must be founded on objective facts demonstrating guilt, not "recycled suspicion" or administrative convenience
Source reference: p.128, 130The court rejected the ED’s argument that judicial review is barred by the pendency of a bail application, holding that the legality of the arrest is a fundamental jurisdictional question
Source reference: p.130Holding
The court allowed the writ petitions and declared the arrest of the petitioners illegal for violating the mandate of Section 19 PMLA and Article 21 of the Constitution
The court held that the arrest was unsupported by fresh tangible material and that the "necessity of arrest" was not established
Source reference: p.133Consequently, the petitioners were ordered to be set at liberty forthwith
Source reference: p.134The court clarified that the ED remains free to issue summons under Section 50 and continue its investigation in accordance with law
Source reference: p.133Original Court PDF
PRITHVI RAJ SINGHvsDIRECTORATE OF ENFORCEMENT
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