Are PMLA Search, Seizure and Freezing Measures Open to Criminal-Writ Review? Karnataka High Court’s Gameskraft Ruling

Are PMLA Search, Seizure and Freezing Measures Open to Criminal-Writ Review? Karnataka High Court’s Gameskraft Ruling

The Karnataka High Court has held that a challenge to search, seizure and freezing measures taken under Section 17 of the Prevention of Money-Laundering Act, 2002 is maintainable before a Bench exercising constitutional and inherent criminal jurisdiction when those measures arise from an ECIR and the alleged scheduled offence.

In M/s Gameskraft Technologies Private Limited v. Directorate of Enforcement, W.P. No. 18285 of 2026, decided on 5 August 2026, Justice M. Nagaprasanna rejected ED’s preliminary contention that Section 17 measures possess an exclusively civil character and therefore cannot be examined in a petition under Article 226 read with former Section 482 CrPC.

The decision addresses forum and maintainability only. It does not hold that the searches were unlawful, that the freezing order must be quashed, or that the properties were not proceeds of crime. The Court directed that those merits be considered later.

The proceedings before the Court

The petition challenged a fresh ECIR, search and seizure operations, consequential proceedings and a freezing order dated 13 May 2026. The order identifies the immediate foundation as ECIR/BGZO/07/2026 dated 23 February 2026, which ED linked to FIR Nos. 97 of 2026, 330 of 2026 and 10 of 2026 registered in Hyderabad and FIR No. 29 of 2026 registered in Lucknow. The Court recorded the petitioners’ contention that these cases traced back to an earlier predicate case, Crime No. 722 of 2024, whose closure had already generated a connected challenge.

ED raised a roster and jurisdiction objection before the Court considered the merits. It argued that attachment, retention and adjudication under the PMLA are civil proceedings concerning property. On that view, a challenge to a freezing or search measure should not be entertained on the criminal side merely because an ECIR preceded it.

The petitioners responded that Section 17 action is part of one investigative sequence: the alleged scheduled offence supplies the foundation, ED records an ECIR, and search, seizure, freezing and retention are then used to trace and preserve alleged proceeds. Splitting the challenge between civil and criminal jurisdictions, they argued, would separate legally interdependent steps.

Section 17 and its safeguards

Section 17 is not a general power to search property. The authorised officer must possess information and, on the basis of material in possession, have reason to believe that a person has committed acts specified in the provision or possesses relevant proceeds, records or property. The reason must be recorded in writing. The provision then permits entry, search, breaking open where legally justified, seizure of records or property, marking, inventory and examination on oath.

Where seizure is impracticable, Section 17(1A) permits an order restraining transfer or dealing with the property. The officer must comply with statutory reporting and follow-up requirements, including placing the recorded material before the Adjudicating Authority and seeking retention or continuation within the prescribed process.

These requirements matter at the merits stage. The present Gameskraft order did not find that any one of them had been breached. It decided only that a court with constitutional and inherent criminal jurisdiction could hear the challenge.

Why “civil” and “criminal” were not treated as watertight categories

PMLA proceedings have both property-focused and penal dimensions. Provisional attachment and adjudication operate against alleged proceeds, while Section 3 creates the offence of money laundering and Section 4 prescribes punishment. In Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1, the Supreme Court described attachment and confiscation as civil action while recognising that evidence collected through the PMLA machinery may support prosecution.

The Karnataka High Court did not reject that distinction. Instead, paragraphs 14 to 23 reason that Section 17 action cannot be classified for maintainability by looking only at the immediate object seized or frozen. The measure is taken by an investigating authority, in an investigation concerning alleged proceeds of scheduled criminal activity, and may preserve evidence and property for adjudication and prosecution.

The Court relied on Bermaco Energy Systems Limited v. Directorate of Enforcement, 2024 SCC OnLine Bom 3833, where the Bombay High Court treated appeals from PMLA attachment adjudication as matters for the criminal side because the proceedings aid the prosecution. It also considered Opto Circuit India Limited v. Axis Bank, (2021) 6 SCC 707, in which the Supreme Court examined a freezing direction made during a PMLA investigation and set it aside for failure to satisfy Section 17’s statutory conditions.

The legal chain identified by the Court

At paragraphs 15 to 20, the High Court traced the asserted chain from predicate FIRs to the ECIR and then to search, seizure and freezing. Its point was jurisdictional: consequential measures do not arise in isolation, and a challenge questioning the legality of the foundation and each resulting step presents one connected controversy.

At paragraph 20, the Court held that where Section 17 proceedings emanate from an ECIR that itself depends on a predicate offence, a challenge is maintainable under Article 226 read with inherent criminal jurisdiction. At paragraphs 22 and 23, it rejected a division that would send the ECIR question to one Bench and the search question to another, because that could fracture the same cause and create inconsistent findings.

The Court distinguished Pareena Swarup v. Union of India, (2008) 14 SCC 107. That decision concerned the constitutional structure and independence of the Adjudicating Authority and Appellate Tribunal. It did not decide which High Court roster must examine a challenge to Section 17 action arising from an ECIR.

Current procedural reference: Section 528 BNSS

The order frames the petition under Article 226 read with former Section 482 CrPC. Since 1 July 2024, Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 substantially preserves the High Court’s inherent power previously stated in Section 482 CrPC. Section 531 BNSS contains repeal-and-savings rules, so the correct provision in any given matter depends on when the investigation, application and proceeding commenced.

This cross-reference does not mean that Section 17 PMLA is created by the BNSS. It means that a High Court’s constitutional and inherent powers may be invoked to examine alleged illegality in a connected criminal-investigative process, subject to restraint and any effective specialised remedy.

Opto Circuit and the statutory threshold for freezing

Opto Circuit supplies the principal substantive caution for investigators and affected account-holders. The Supreme Court held that the statutory procedure cannot be bypassed by issuing an informal communication to a bank. The authorised officer must act under the correct part of Section 17, possess the required material, record the statutory belief and observe the follow-up procedure.

The case does not imply that every freezing order is invalid. It establishes that interference with property and banking operations must have a traceable statutory basis. On a merits challenge, the court can examine whether the correct authority acted, whether the required belief was recorded on relevant material, whether the property or records fell within Section 17, whether reporting and adjudicatory steps were timely, and whether the duration of restraint remains lawful.

What Gameskraft does not decide

The order does not decide that the FIRs identified by ED were legally insufficient scheduled offences. It does not decide whether Crime No. 722 of 2024 was the sole source of the alleged proceeds or whether the later FIRs supplied an independent foundation.

It does not determine whether ED possessed adequate material or properly recorded reasons under Section 17. It does not adjudicate ownership, legitimate-source claims or third-party rights in the frozen property.

It does not eliminate the statutory process before the Adjudicating Authority or the appellate remedies provided by the PMLA. A High Court may decline discretionary interference when an effective specialised remedy can decide the dispute, unless the case presents a recognised reason for immediate constitutional review such as want of jurisdiction, breach of natural justice or manifest violation of a statutory precondition.

Finally, the ruling does not classify every PMLA proceeding as criminal for every purpose. It decides that Section 17 measures connected to an ECIR and predicate-offence chain are not so exclusively civil that a criminal-writ petition must fail at the threshold.

Practical guidance for affected persons

A person challenging a search or freezing measure should preserve the search authorisation shown, panchnama, inventories, restraint communication, digital-device record, acknowledgment of seized materials, notices from the Adjudicating Authority and all correspondence seeking copies or release. The chronology often determines whether mandatory timelines and follow-up duties were observed.

The petition should distinguish between a challenge to jurisdiction and a factual dispute over whether property is tainted. It should identify the precise scheduled offence, the alleged proceeds, the connection asserted by ED and the specific Section 17 condition said to be absent. General complaints about hardship are unlikely to replace this statutory analysis.

Where business accounts are frozen, targeted relief may be more proportionate than an all-or-nothing request. Depending on the record, a court or authority may consider ring-fencing the alleged amount, permitting statutory payments or salaries, substituting security, or requiring periodic review. No such relief is automatic; it depends on ownership, traceability, investigation needs and the wording of the restraint.

Practical guidance for investigators

The ruling underscores the value of a complete written record. ED should identify the scheduled criminal activity, the alleged proceeds, the material connecting the place, person, record or property to that activity, and the statutory basis for seizure or restraint. Communications to banks and third parties should disclose the legal authority and comply with Section 17 rather than rely on informal requests.

When multiple FIRs are relied upon, the record should clarify whether each is independently scheduled, whether it concerns the same alleged proceeds and how later cases relate to any earlier closure order. That clarity allows effective adjudication and reduces the risk that an otherwise justified investigation fails because its jurisdictional foundation is left ambiguous.

Conclusion

The Karnataka High Court’s second Gameskraft order is a maintainability ruling with practical consequences. It recognises that Section 17 search, seizure and freezing measures are connected to the ECIR, the alleged proceeds and the scheduled offence, and therefore may be examined through Article 226 and the High Court’s inherent criminal jurisdiction.

The judgment does not decide the merits of the petitioners’ challenge. Its lasting contribution is to reject an absolute forum bar: describing a property measure as civil cannot, by itself, prevent a court from examining the legality of the investigative chain from which it arose.

This article provides general legal information and does not constitute legal advice.

Sources

Karnataka High Court, M/s Gameskraft Technologies Private Limited v. Directorate of Enforcement, W.P. No. 18285 of 2026, order dated 5 August 2026, especially paragraphs 14–25. Judgment available through the Karnataka High Court judgments portal: https://judiciary.karnataka.gov.in/

Supreme Court of India, Opto Circuit India Limited v. Axis Bank, (2021) 6 SCC 707, judgment dated 3 February 2021: https://api.sci.gov.in/supremecourt/2020/22673/22673_2020_33_1501_26064_Judgement_03-Feb-2021.pdf

Supreme Court of India, Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1, judgment dated 27 July 2022, especially paragraphs 253, 269–270, 283 and 369–370: https://api.sci.gov.in/supremecourt/2018/20982/20982_2018_1_1501_37292_Judgement_27-Jul-2022.pdf

Supreme Court of India, Pareena Swarup v. Union of India, (2008) 14 SCC 107, judgment dated 30 September 2008. Judgment searchable through the Supreme Court judgments portal: https://www.sci.gov.in/judgements-judgement-date/

Bombay High Court, Bermaco Energy Systems Limited v. Directorate of Enforcement, 2024 SCC OnLine Bom 3833. Judgment searchable through the Bombay High Court judgment portal: https://bombayhighcourt.nic.in/

India Code, Prevention of Money-Laundering Act, 2002, especially Sections 2(1)(u), 3, 5, 8, 17 and 44: https://www.indiacode.nic.in/handle/123456789/15402

India Code, Bharatiya Nagarik Suraksha Sanhita, 2023, Sections 528 and 531: https://www.indiacode.nic.in/handle/123456789/20099

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