ECIR can be challenged under Article 226: Karnataka High Court in Gameskraft vs ED case

The Karnataka High Court on Wednesday rejected objections made by the Enforcement Directorate (ED) to the maintainability of two Gameskraft writ petitions seeking to quash the Enforcement Case Information Report (ECIR) and search and seizure conducted by the agency on allegations of money laundering [Gameskraft v. Directorate of Enforcement].Rejecting the ED's contention that the ECIR was an administrative document and did not fall under the ambit of the Code of Criminal Procedure (CrPC) and, therefore, could not be challenged before a High Court, Justice M Nagaprasanna held,"The power of judicial review is part of the basic structure of the Constitution. It cannot be rendered illusory merely because the foundational document is nomenclatured as an ECIR, instead of an FIR. If the consequences are coercive, the scrutiny must be constitutional. If liberty, property and reputation stand imperilled, judicial review cannot be denied at the threshold on a plea of semantics...The contention that a criminal petition becomes non-maintainable merely because the ECIR is projected to be an internal document of the Directorate of Enforcement stands unequivocally repelled. The form of the document can never eclipse its consequences; nor can nomenclature outweigh substance when the liberty of an individual and the majesty of justice are at stake.".While deciding the question of whether an ECIR can be quashed by a High Court under Section 482 of the Code of Criminal Procedure (CrPC), the Court held,"Therefore, the description of an ECIR as an internal or administrative document does not, by itself, erect an impregnable bar against the exercise of constitutional or inherent jurisdiction. An administrative label cannot become a judicial shield. If the continuance of such an administrative act occasions injustice or frustrates the efficacy of an order passed under the Cr.P.C., the High Court is neither denuded of its power nor divested of its constitutional obligation to intervene.".Gameskraft, an online gaming platform that hosted games of skill, discontinued its business upon the enforcement of the Promotion and Regulation of Online Gaming Act, 2025In 2024, upon the registration of a complaint alleging fraudulent gaming operations, an investigation was initiated that culminated in a police closure report. 6 months after the issuance of the closure report, the ED conducted a search and seizure operation on the basis of the same alleged offence..The ED had alleged that Gameskraft operated online gaming platforms that manipulated gameplay, cheated users through deceptive practices and laundered proceeds of crime through bogus business expenditure entries and cash transactions. According to the ED, Gameskraft and its associated entities lured users to real-money rummy platforms through bonuses, referral incentives, instant cash offers and tournament benefits.The agency alleged that new users were initially allowed to win small amounts in low-stake games to build confidence and induce larger deposits, thereby creating a false impression that earning money on the platforms was easy. The ED also claimed that users complained of one-sided games, suspected use of algorithms and bots, duplication of cards, recurring score patterns favouring certain players, collusion among players, forced logouts and blocking of user IDs, resulting in heavy financial losses.It had further alleged that the directors and founders, acting in collusion with former chief financial officer Ramesh Prabhu, diverted and laundered nearly ₹250 crore under the guise of investments in futures and options and mutual funds..Challenging the ED's conduct, Gameskraft approached the Karnataka High Court to quash the ECIR. The ED argued that a writ petition could not challenge an ECIR, which is an internal administrative record of the ED. Since the ECIR was not an FIR or a document recognized under the Code of Criminal Procedure (CrPC), the agency contended that the document could not be challenged under Section 482 of the CrPC. .Another petition filed by Gameskraft seeking the quashing of the search and seizure under an amended ECIR that was based on the offence complained in 2024 was also challenged on maintainability..The Court reasoned that the PMLA's objective was to preserve, identify, trace, and confiscate proceeds of crime that were generated from criminal activity."The PMLA is not designed merely to regulate property. It is enacted to identify, trace, preserve and ultimately confiscate proceeds of crime generated from criminal activity. The jurisdiction of the Directorate of Enforcement is thus inextricably intertwined with criminality. Attachment of property is merely an instrumentality employed in aid of prosecuting the offence of money laundering. It cannot, therefore, be artificially divorced from the criminal proceedings that give it life.".The Court dismissed the ED's objections in both petitions and will continue to hear the writ petitions on their merits..Earlier this year, the Karnataka High Court held the arrest of Gameskraft's founders for the same 2024 offence by the ED to be illegal..Senior Advocates Dr S Muralidhar, Vikram Chaudhary, Sajan Poovayya, Sandesh Chouta, along with Advocates Suhaan Mukherji, Arshiya Ghose, Nithin N Patil, Harshvardhan Mudhole, Aishwarya M, Sankalp A Sharma, Diya Bhagwan, Varuni Aggarwal and Palash Maheshwari appeared for Gameskraft in both petitions. .Senior Advocate Zoheb Hossain along with Special Public Prosecutor Madhu N Rao and Central Government Counsel Anuparna Bordoloi appeared for the ED..[Read Orders]