The Karnataka High Court has ruled that a writ petition challenging an Enforcement Case Information Report (ECIR) and the consequential actions taken under the Prevention of Money Laundering Act (PMLA) is maintainable before a Bench exercising jurisdiction under Article 226 of the Constitution read with Section 482 of the Code of Criminal Procedure (now Section 528 of the BNSS). The Court rejected the Directorate of Enforcement's (ED) preliminary objection, allowing the Gameskraft petitions to proceed for consideration on merits.
Background of the Case
The petitions were filed by Gameskraft Technologies Pvt. Ltd. and its subsidiary, Nirdesa Network Pvt. Ltd., challenging an ECIR registered by the ED. According to the petitioners, the ECIR was initiated after the police investigation into the scheduled offence had already concluded with the filing and judicial acceptance of a 'B' report, which closed the criminal case. They argued that all subsequent actions under the PMLA flowed from an ECIR that lacked a surviving predicate offence.
In a connected matter, several Gameskraft group companies also questioned search, seizure and bank account freezing orders issued under Section 17 of the PMLA. The ED, however, raised a preliminary objection that such proceedings were civil in nature and could only be challenged before a civil writ roster, not before a Bench dealing with criminal matters.
Court's Observations
Justice M. Nagaprasanna examined whether proceedings arising from an ECIR could be questioned under Article 226 read with Section 482 of the CrPC or whether they were restricted to the civil writ jurisdiction.
The Court observed that search, seizure and freezing proceedings under Section 17 of the PMLA cannot be viewed in isolation. Instead, they form part of a continuous statutory process originating from the ECIR.
Rejecting the ED's objection, the Court observed:
"A search undertaken under Section 17 of the PMLA is not an independent civil exercise; it is a consequence of the ECIR, a continuation of the investigative process."
The Court also held that dividing challenges to an ECIR and the consequential search proceedings between different Benches would unnecessarily fragment one cause of action and create the possibility of conflicting judicial decisions.
In the ECIR challenge, the Court further stressed that merely describing an ECIR as an internal administrative document does not place it beyond constitutional scrutiny where it has serious consequences for liberty, property and reputation.
As the Court stated:
"The label attached to a proceeding cannot eclipse its true character. Substance must always prevail over nomenclature."
It added that constitutional judicial review cannot be curtailed by administrative terminology when coercive legal consequences follow from the ECIR.
Decision
The High Court held that a writ petition under Article 226 of the Constitution read with Section 482 of the CrPC (Section 528 BNSS) is maintainable to examine the legality of an ECIR as well as search, seizure, freezing and other consequential proceedings arising from it.
Accordingly, the Court rejected the Directorate of Enforcement's preliminary objections in both petitions and directed that the matters would now proceed for hearing on their merits.
The Court did not examine the validity of the ECIR or the search and seizure actions at this stage, limiting its ruling solely to the issue of maintainability.
Case Title: M/s Gameskraft Technologies Pvt. Ltd. and Another v. Directorate of Enforcement
