Breaking: Karnataka HC stays ED probe against Gameskraft, questions ED’s ‘Updated ECIR’ practice

The Karnataka High Court on Thursday stayed further investigation by the Enforcement Directorate (ED) against online real money gaming firm Gameskraft Technologies Pvt. Ltd. insofar as it relates to a money laundering case founded on an FIR that has already been closed, while granting the central agency time to place on record whether it can rely on other pending criminal cases to sustain its probe.

High Court bench of Justice M. Nagaprasanna was hearing a writ petition filed by Gameskraft challenging the ED’s Enforcement Case Information Report (ECIR), contending that the money laundering proceedings were initiated after the predicate offence itself had ceased to exist.

FIR Closed, Yet ECIR Registered

Senior advocate Sandesh Chouta, appearing for Gameskraft, submitted that the ECIR in question was registered on 11 November 2025, nearly four months after the jurisdictional police had filed a ‘B report’ (closure report) in Crime No. 722 of 2024, which was subsequently accepted by the competent court on 5 July 2025.

He argued that once the predicate offence stood closed and the closure had attained finality, the ED could not sustain a money laundering investigation based on the same FIR.

“The foundation itself has vanished. When the predicate offence goes, the ECIR cannot survive,” Choutha submitted, relying on principles laid down by the Supreme Court in Vijay Madanlal Choudhary vs Union of India, which held that proceedings under the Prevention of Money Laundering Act (PMLA) cannot exist independently of a scheduled offence.

Court Questions ED’s Basis

Justice Nagaprasanna closely examined documents placed on record, including the ECIR and applications filed by the ED under Section 17(4) of the PMLA relating to freezing of bank accounts. The court noted that multiple official records explicitly cited Crime No. 722 of 2024 as the sole predicate offence.

“If the ECIR is only based on this FIR, which now stands closed, you cannot continue investigation on that basis,” the court orally observed, making it clear that any probe emanating from Crime No. 722 would not be permitted to proceed.

ED Seeks Time, Cites Other FIRs

Appearing for the ED, Additional Solicitor General Arvind Kamath submitted that the agency was entitled to “update” an existing ECIR if, during investigation, it came across other FIRs involving the same accused. He claimed that there were at least six other FIRs registered prior to Crime No. 722 of 2024, which could independently sustain the ECIR.

The ASG argued that an ECIR is not equivalent to an FIR and that the PMLA framework allows the agency to expand the scope of investigation without registering a fresh ECIR every time a new predicate offence surfaces.

However, the court expressed scepticism over this contention and asked the ED to place on record the statutory provision or judicial precedent permitting such “updation” of an ECIR after its foundational predicate offence has collapsed.

“That concept is not yet known to this court,” Justice Nagaprasanna remarked, while granting the ED time to file a detailed statement of objections along with supporting judgments.

Undertaking Recorded, Investigation Stayed

Crucially, the court recorded the ED’s undertaking that it would not conduct any further investigation under the ECIR insofar as it relates to Crime No. 722 of 2024.

“In the light of the closure report, the foundation for the subject ECIR has vanished. Therefore, investigation based on this FIR cannot continue,” the court noted, granting interim protection to the petitioner.

However, the bench clarified that if the ED was able to demonstrate the existence of other valid and subsisting predicate offences, it would consider the agency’s submissions on whether the ECIR could be sustained on that basis.

During the hearing, the petitioner also pointed out that an earlier ECIR registered in 2021 on the basis of three FIRs had not been pursued by the ED after the company responded to notices, and no complaint had ever been filed in that matter.

The court noted this history while observing that the present ECIR appeared to be entirely anchored to the now-closed 2024 FIR.

The Karnataka High Court has listed the matter for 6 February, directing the ED to file its objections and place all relevant material on record. Until then, the stay on investigation linked to Crime No. 722 of 2024 will continue.

The case is being closely watched by the online gaming industry, as it raises critical questions on the scope of the ED’s powers, the validity of money laundering probes post-closure of predicate offences, and whether the agency can indefinitely sustain investigations by relying on multiple FIRs without fresh ECIRs.

The petition, filed jointly by Gameskraft and Nirdesa Networks Pvt. Ltd.—the parent company of online poker platform Pocket52—seeks to set aside the Enforcement Case Information Report (ECIR) bearing number ECIR/BGZO/29/2025 dated November 11, 2025, along with all consequential proceedings arising from it. The matter has been registered as WP No. 1810/2026 before the Karnataka High Court.

In its plea, titled M/s Gameskraft Technologies Pvt. Ltd. and Another vs Directorate of Enforcement, the company has also sought interim relief, requesting the court to stay the operation of the ECIR and all follow-up actions by the ED in the interest of justice.

The ED’s investigation stems from searches conducted by its Bengaluru zonal office at the corporate offices of Gameskraft and Nirdesa Networks, as well as the residences of senior executives, including CEOs, COOs and CFOs. According to the agency, the searches are linked to allegations of cheating and money laundering, including suspected use of cryptocurrency.

ED officials have claimed that evidence was found indicating that promoters of the companies owned cryptocurrency wallets, which the agency alleges could point to potential laundering of proceeds of crime. The agency is probing whether digital assets were used to conceal or route funds generated from alleged illegal activities on gaming platforms.

The searches are also connected to Pocket52, an online poker platform operated by Nirdesa Networks and owned by Gameskraft. Pocket52 ceased operations by July 2025, citing mounting regulatory pressure and the impact of the 28% goods and services tax (GST) levied on real-money gaming. The ED said it has frozen eight escrow accounts containing approximately ₹18.57 crore as part of its probe.