Karnataka HC: PMLA Search and Seizure Challenge Maintainable Before Criminal Bench, Not Just Civil Writ Side

Justice M. Nagaprasanna holds that a writ petition under Article 226 read with Section 482 CrPC challenging ED search and freezing of 106 bank accounts is perfectly maintainable before a criminal roster bench.

The High Court of Karnataka, in a considered order on maintainability pronounced on 5 August 2026, has rejected the Directorate of Enforcement’s contention that a challenge to search, seizure and bank account freezing under Section 17 of the Prevention of Money Laundering Act, 2002 (PMLA) must be heard only by a bench exercising civil writ jurisdiction. Justice M. Nagaprasanna, sitting singly, held that where such proceedings emanate directly from an Enforcement Case Information Report (ECIR) — and the ECIR itself traces its existence to a predicate criminal offence — a petition under Article 226 of the Constitution read with Section 482 of the CrPC is perfectly maintainable before a criminal roster bench. The ruling arises from a challenge by online gaming companies Gameskraft Technologies and five associated entities to a May 2026 search operation and a freezing order covering 106 bank accounts.

The Dispute Before the Court

Six petitioners are arrayed in the writ petition: M/S Gameskraft Technologies Pvt. Ltd. and M/S Rummytime Technologies Pvt. Ltd., both engaged in hosting online money games, and four subsidiaries — M/S K.N. Support Services Pvt. Ltd., M/S Kworks Technologies Pvt. Ltd., M/S Wimo Technologies Pvt. Ltd., and M/S Rummyculture Technologies Pvt. Ltd.

The sequence of events begins on 5 December 2024, when a complaint was registered before the Central CEN Crime Police Station under Section 318(2) of the Bharatiya Nyaya Sanhita and Section 66 of the Information Technology Act, 2000. The complainant, Mr. Nishant Srivastava, alleged fraudulent online gaming activity causing him a loss of ₹3 crores. Police investigation did not disclose material warranting prosecution and a ‘B’ report was filed on 27 May 2025. The jurisdictional court accepted the closure report on 5 July 2025 after hearing the complainant. That order was not challenged by either the investigating agency or the complainant and attained finality.

Nearly four months after that closure, the Directorate of Enforcement registered an ECIR — ECIR/BGZO/29/2025 dated 11 November 2025 — and conducted search and seizure operations between 18 November 2025 and 22 November 2025, freezing eight bank accounts. The Directorate then filed an Original Application before the Adjudicating Authority under Section 17(4) of the PMLA in O.A. No. 370 of 2025 seeking retention of seized property. Show cause notices followed under Section 8 of the PMLA.

This Court, in earlier proceedings challenging the first ECIR, granted an interim order of stay on 22 January 2026, prima facie noting that on the date of registration of the ECIR, no surviving predicate offence remained. The Directorate of Enforcement thereafter registered a fresh ECIR — ECIR/BGZO/07/2026 dated 23 February 2026 — premised on FIR Nos. 97 of 2026, 330 of 2026 and 10 of 2026 registered before jurisdictional police at Lucknow. Pursuant to the fresh ECIR, a second round of search and seizure operations was carried out between 7 May 2026 and 14 May 2026. Electronic devices, mobile phones and hard disks were seized. By an order dated 13 May 2026, the Directorate froze 106 bank accounts of the petitioners and associated persons. It is that freezing order, along with consequential proceedings under Sections 20 and 21 of the PMLA and show cause notices issued by the Adjudicating Authority, that the petitioners challenge in Writ Petition No. 18285 of 2026.

The Jurisdictional Question

Before the Court could examine the merits, the Directorate of Enforcement raised what it described as a jurisdictional embargo. Senior Counsel Mr. Zoheb Hossain, appearing for the Directorate, argued that proceedings under Section 17 of the PMLA — search, seizure and freezing — partake the character of civil proceedings, not criminal ones. Such proceedings ultimately culminate before the Adjudicating Authority, which is an independent civil body dealing with attachment, retention and confiscation of property. Any challenge, therefore, must travel before a bench exercising civil writ jurisdiction under Article 226, not before a bench assigned a criminal roster merely because the proceedings originate from an ECIR.

The Directorate anchored this submission primarily on the three-judge bench decision of the Supreme Court in Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929, which draws a clear distinction between criminal prosecution for the offence of money laundering under Section 3 of the PMLA and the civil consequences of attachment, adjudication and confiscation before the Adjudicating Authority. Reliance was also placed on Pareena Swarup v. Union of India, (2008) 14 SCC 107, and on State of West Bengal v. Sujit Kumar Rana, (2004) 4 SCC 129, which holds that Section 482 CrPC jurisdiction can only be exercised in relation to matters before a criminal court.

The petitioners, represented by Dr. S. Muralidhar, Mr. Vikram Chaudhary, Mr. Sajan Poovayya and Mr. Sandesh J. Chouta as senior counsel, resisted the objection. Their central contention was that search, seizure, freezing, retention and eventual adjudication are successive links in one continuous statutory chain, the first link of which is the ECIR. To compel a litigant to assail the ECIR before one bench and each consequential seizure before another bench would fragment an indivisible cause of action into artificial compartments unknown to law. Proceedings before the Adjudicating Authority, though civil in complexion, are not independent civil proceedings; they are undertaken in aid of the criminal prosecution under the PMLA.

Mr. Vikram Chaudhary drew support from the Supreme Court’s decision in Opto Circuit India Limited v. Axis Bank, (2021) 6 SCC 707, where a freezing order was challenged before a coordinate bench of this Court exercising criminal jurisdiction and the matter thereafter travelled to the Supreme Court without any objection as to forum.

How the Bench Reasoned

Justice Nagaprasanna framed the question precisely: whether proceedings under Section 17 of the PMLA must be challenged only before a civil writ bench, or whether such proceedings, being inseparably connected with the ECIR and the predicate offence, can equally be questioned under Article 226 read with Section 482 CrPC.

The court began from first principles. An ECIR cannot exist in splendid isolation; it derives both legitimacy and jurisdictional competence from the existence of a predicate offence. The predicate offence is, in the court’s words, “the juridical bedrock upon which the entire edifice of proceedings under the PMLA is erected.” Using a structural metaphor drawn from the statutory scheme itself, the court described the predicate offence as the skeleton and the ECIR as the flesh and blood that envelopes it — flesh without a skeleton being an anatomical impossibility.

Viewed through this lens, proceedings under Section 17 do not arise spontaneously. Every search, seizure, freezing and retention of property is a successive statutory step flowing from the registration of the predicate offence. Severing one link from the other would dismantle the legislative scheme. The court held that 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, making the jurisdiction of the Directorate inextricably intertwined with criminality.

The court found significant support in the Division Bench ruling of the Bombay High Court in Bermaco Energy Systems Limited v. Directorate of Enforcement, 2024 SCC OnLine Bom. 3833. That bench, after examining the very judgments relied upon by the Directorate of Enforcement, held that proceedings before the Adjudicating Authority, though civil in complexion, are nonetheless in aid of criminal prosecution under the PMLA and are therefore liable to be entertained on the criminal side. The Karnataka High Court found this reasoning persuasive in reconciling the apparent divergence between the two streams of authority.

As for the Directorate’s reliance on Pareena Swarup, the court held it to be clearly distinguishable. That judgment examined the constitutional validity of the institutional framework of the PMLA — the Adjudicating Authority and the Appellate Tribunal — and never considered whether a challenge to Section 17 proceedings must be confined to a civil writ bench. Pressing Pareena Swarup into service to answer a question that never arose before the Supreme Court was, in the court’s assessment, misplaced.

The court identified the real fallacy in the Directorate’s submission as an attempt to compartmentalise one continuous statutory process into watertight compartments. Once an ECIR is questioned before a bench exercising criminal jurisdiction, every consequential action flowing from it necessarily follows the same stream. To have the legality of the ECIR examined by one bench while relegating the legality of a search carried out pursuant to that very ECIR to another bench would invite conflicting opinions on the same foundational facts and fracture what is otherwise one indivisible cause of action.

Outcome

Justice M. Nagaprasanna rejected the Directorate of Enforcement’s preliminary objection on maintainability. The court held that a petition invoking Article 226 of the Constitution read with Section 482 CrPC, challenging search and seizure proceedings that emanate from an ECIR, is perfectly maintainable before a bench exercising criminal jurisdiction. The issue was answered accordingly, and the matter was directed to proceed to be considered on its merits.