Deepak Singh Vs Directorate of Enforcement (Karnataka High Court)
Conclusion: Where an ECIR based on an earlier predicate offence had already resulted in search and seizure proceedings and no fresh incriminating material subsequently emerged, the Enforcement Directorate could not justify arrest under Section 19 PMLA by merely incorporating another FIR through an addendum and relying on substantially the same allegations. Since no summons under Section 50 PMLA had been issued and no new circumstances existed necessitating arrest, the arrests were held illegal and assessees were directed to be released forthwith.
Held: Assessee had challenged their arrest by the Enforcement Directorate (ED) saying that it was illegal, arbitrary and violated their fundamental rights under Articles 14 and 21 of the Constitution. They had sought quashing of the arrest letter and the subsequent remand orders and prayed for their immediate release. The controversy originated from the ED’s probe into the company’s online gambling business. Initially, a crime was recorded in Bengaluru alleging losses of money to the users. However, the police filed a ‘B’ report (closing report) which was accepted by the court in July 2025. However, the ED had performed searches and registered an ECIR in November 2025, albeit the case was closed. The corporation aggrieved by the same moved the High Court which issued an interim stay on the proceedings in the ECIR on January 22, 2026. Assessee including his Lawyers contended that after this stay, the ED invented a new story by using three fresh FIRs lodged in Telangana in January and February 2026. “These FIRs related to cheating and financial losses through online gambling. These predicate offences have led to the registration of a new ECIR on 23 February 2026. Assessee had submitted that no summons had been issued under Section 50 of the PMLA for a period of three months. Instead, on May 7-8, 2026, ED authorities conducted searches at their dwellings and apprehended them in the early hours (between 2:30 AM and 4:50 AM). Assessee stated that the grounds of arrest were ambiguous and did not show any information to constitute a “reason to believe” as required under Section 19 of the PMLA. On the other hand, the Additional Solicitor General of India, arguing for the ED vigorously contested the applications. He said the new ECIR was based on separate and lawful scheduled crimes of proceeds of crime. He said the court should not get into adequacy of grounds for arrest since the scope of judicial review was limited in such areas. The ED said the arrest was required for custodial interrogation to unravel the money laundering trail. High Court held that the material forming the basis of the earlier ECIR, search proceedings and the subsequent arrest was substantially the same and no fresh incriminating material had emerged. A fresh ECIR or an addendum could not convert stale allegations into a fresh necessity for arrest. The Court observed that Section 19 PMLA contemplated satisfaction based upon material available at the time of arrest and did not permit resurrection of old allegations to manufacture a fresh justification for incarceration. The Court held that arrest under PMLA was not the first step but a measure of last resort and that the ED possessed adequate powers under Section 50 PMLA to secure cooperation through summons. In the present case, no summons had been issued and no opportunity to cooperate had been afforded to assessee. The necessity for arrest must arise from fresh circumstances, new material or subsequent conduct and could not spring merely from procedural repackaging of earlier allegations.The Court further observed that the existence of a pending bail application did not preclude constitutional review of the legality of arrest. The challenge before the Court was confined to the validity of arrest under Section 19 PMLA and not to the merits of the prosecution.
