RummyCulture parent obtains stay against provisional attachment order by GST authorities

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The Karnataka High Court yesterday stayed the provisional attachment order issued by GST authorities freezing bank accounts in alleged tax evasion by GamesKraft. Last month, the tax department raided the offices of the Bengaluru headquartered company. The company was founded in the year 2017 and operates skill games. The company has investments in Pocket52 and Rummytime.

The company had challenged that no reasons have been assigned by the department to come to the conclusion that it has evaded payment of GST to a sum of Rs.419 crores. The matter was heard by Justice S.R. Krishna Kumar and was argued by senior counsel S.S.Naganand for GamesKraft. The GST department counsel sought time to file a statement of objections.

The company argued that though it is alleged that it has evaded payment of GST from November 2017 onwards, no steps / action had been taken against the company till the issuance of the provisional attachment orders, except for summoning the company’s officers and seizing the records, equipment, materials, etc. “It is therefore submitted that the material on record clearly indicates that the impugned orders passed by the respondents attaching the back accounts of the petitioner are illegal, arbitrary and the same deserve to be quashed,” the daily order of High Court records the submission of GamesKraft.

The High Court noted that the department has proceeded to pass the confirmation order without properly or correctly considering or appreciating the objections and documents submitted by the company. The company submitted that the attachment order resulted in a cascading effect by preventing the petitioner from paying the statutory dues, salary to employees, and monies payable to the customers and vendors, all of which have resulted in irreparable injury.

“…………in fact, no reasons, much less valid or cogent reasons are assigned by the respondents to come to the conclusion that the GST dues alleged to be payable by the petitioner is about Rs.419 crores and that the amount of Rs.451 crores said to be the bank balance in the bank accounts of the petitioner are required to be frozen; so also, the details and material particulars as to how the respondents quantifed, calculated and came to the conclusion that the petitioner is due in a sum of Rs.419 crores is conspicuously absent and missing in the confrmation order, which is clearly a non speaking and unreasoned order.”

Daily order dated 3 December 2021

The company also offered immovable properties worth INR 130 crores by way of security.

“I am of the considered opinion that pending consideration of the interim relief sought for by the petitioner, in the interest of justice, it would be just and appropriate to make an interim arrangement by permitting the petitioner to operate the bank accounts detailed in the impugned orders………….”

Daily order dated 3 December 2021

By permitting the company to operate bank accounts, the Court directed the company to file a statement of accounts concerning the bank accounts on or before the next date of hearing, file an affidavit of undertaking to not alienate, encumber or create third party rights over its immovable property, until further orders by this Court.

The Court further directed the company founders / senior executives Mr.Deepak Singh Ahlawat and Mr.Prithviraj Singh to attend the hearing before the GST department on 06.12.2021 and 08.12.2021. The matter will now be listed on 16 December 2021. GamesKraft is one of the petitioners challenging the recent game ban laws by the Tamil Nadu, Karnataka, and Kerala governments before the respective High Courts. Recently, the gaming company bought commercial property worth INR 130 crores.