Introduction:
The Karnataka High Court, in M/s Gameskraft Technologies Pvt. Ltd. & Others v. Directorate of Enforcement (WP No. 18285/2026), has delivered an important ruling on the scope of judicial review over proceedings initiated under the Prevention of Money Laundering Act, 2002 (PMLA). Justice M. Nagaprasanna held that a writ petition under Article 226 of the Constitution read with Section 482 of the Code of Criminal Procedure is maintainable to challenge search, seizure and freezing actions initiated by the Enforcement Directorate (ED) under Section 17(1A) of the PMLA.
The petitions were filed by Gameskraft Technologies Private Limited and several associated companies after the ED froze their bank accounts and investments pursuant to an Enforcement Case Information Report (ECIR) registered on February 23, 2026. The companies challenged the legality of the freezing orders, while the ED raised a preliminary objection contending that such proceedings were civil in nature and therefore beyond the scope of a petition under Article 226 read with Section 482 CrPC. Before considering the merits of the challenge, the High Court was required to decide whether such petitions were maintainable in law.
The issue arose against the backdrop of earlier proceedings in which the High Court had stayed the ED’s investigation based on an earlier ECIR after the predicate FIR in Karnataka had been closed. Subsequently, the ED registered a fresh ECIR relying upon three FIRs registered in Telangana and initiated fresh action under Section 17(1A) of the PMLA, leading to the present litigation.
Arguments of the Parties:
The petitioners contended that the freezing of their bank accounts and investments under Section 17(1A) of the PMLA was directly connected with an ongoing criminal investigation initiated through an ECIR. They argued that since the search and freezing orders were inseparable from the criminal investigation into the alleged offence of money laundering, they were entitled to invoke the writ jurisdiction of the High Court under Article 226 along with its inherent jurisdiction under Section 482 CrPC. The petitioners submitted that the ED’s actions had serious civil and commercial consequences and therefore required immediate judicial scrutiny.
The Directorate of Enforcement raised a preliminary objection questioning the maintainability of the petitions. It argued that freezing property under Section 17(1A) of the PMLA is essentially a civil measure intended to preserve assets during investigation and does not amount to a criminal proceeding. Consequently, according to the ED, such actions could not be challenged through a petition under Article 226 read with Section 482 CrPC or the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita. The agency urged the Court to dismiss the petitions on the ground of lack of maintainability without entering into the merits of the dispute.
Court’s Judgment:
Rejecting the Enforcement Directorate’s preliminary objection, the Karnataka High Court held that proceedings under Section 17(1A) of the PMLA cannot be viewed in isolation from the criminal investigation into the offence of money laundering. Justice M. Nagaprasanna observed that a search or freezing order under Section 17 is not an independent civil exercise but forms an integral part of the investigation initiated through an ECIR.
The Court reasoned that the powers of search, seizure and freezing under Section 17 are exercised only during the course of investigation into an alleged offence under the PMLA. Once an ECIR is registered and investigation commences, every consequential action undertaken under Section 17 derives its character from that criminal investigation. Therefore, the contention that such proceedings possess an exclusively civil character was held to be legally unsustainable.
The Bench observed that merely because freezing of property has financial consequences, it does not cease to be part of the investigative process. The purpose of Section 17(1A) is to preserve property where physical seizure is not practicable by prohibiting its transfer or disposal without prior permission. Such powers are exercised to facilitate investigation into money laundering offences and cannot be divorced from the criminal proceedings from which they originate.
Accordingly, the Court held that petitions invoking Article 226 of the Constitution read with Section 482 CrPC to challenge search, seizure or freezing proceedings arising out of an ECIR are maintainable. The Court categorically rejected the ED’s objection and held that the petitioners were entitled to seek judicial review of the impugned actions before the High Court.
Having answered the preliminary issue in favour of the petitioners, the Court clarified that it had not expressed any opinion on the legality or validity of the freezing orders themselves. The question decided was confined solely to the maintainability of the writ petitions. Consequently, the preliminary objection raised by the Enforcement Directorate stood rejected, and the Court directed that the petitions would now proceed to be heard on their merits.
The ruling assumes significance in the ongoing litigation involving the petitioners and the Enforcement Directorate. Earlier, the High Court had stayed the ED’s investigation after the predicate FIR registered in Bengaluru had culminated in a closure report, observing that the foundation of the earlier ECIR no longer survived. Thereafter, the ED registered a fresh ECIR based on FIRs lodged in Telangana and initiated fresh proceedings, including freezing of bank accounts and investments under Section 17(1A). In separate proceedings, the High Court had also declared the arrest of three company directors illegal, observing that the ED had effectively repackaged the earlier ECIR.
By holding that challenges to search and freezing actions under Section 17(1A) are maintainable under Article 226 read with Section 482 CrPC, the Karnataka High Court has reaffirmed the constitutional power of judicial review over investigative measures adopted under the PMLA. While the legality of the ED’s actions remains to be examined on merits, the judgment ensures that persons affected by such coercive measures are not denied access to constitutional remedies merely on the ground that the proceedings are characterised as civil in nature.