Gameskraft GST case: Karnataka High Court stays attachment orders for non-payment of ₹419 crore dues

The Karnataka High Court recently stayed orders passed by the Directorate General of GST Intelligence to attach the bank accounts of online gaming company Gameskraft for its failure to pay pending Goods and Services Tax (GST) dues (Gameskraft Technology Pvt Ltd v. DG GST Intelligence and ors)..It was alleged that Gameskraft had been avoiding payment of GST to the tune of ₹419 crore since November 2017, after which provisional and confirmation orders were passed on November 17 and 30 respectively, freezing the bank accounts of the company.Challenging these orders before the High Court, Gameskraft had offered an immovable property worth ₹130 crore as security in the interim, in exchange for being allowed to operate its bank accounts to pay its dues to employees and others. .Appearing for the petitioner, Senior Counsel SS Naganand and Advocate HM Siddhartha submitted that the orders had already led to a cascading effect, preventing Gameskraft from paying statutory dues and resulting in irreparable injury and hardship apart from huge financial loss.Advocate Amith Anand Deshpande, appearing for the respondents, argued that since the value of the property being offered as security was far lesser than the amount due, which Gameskraft has been "continuously evading," the company was not entitled to any interim relief. .After hearing the parties, Justice SR Krishna Kumar took the prima facie view that the investigation was at a nascent stage and that the respondents had passed the orders without considering the objections and documents submitted by Gameskraft. It further noted,"...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..."The Court also noted that the calculation of the dues was conspicuously missing from the confirmation order, which was a non-speaking and unreasoned order.Justice Kumar thus held,"...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...".As a result, the attachment of bank accounts was stayed to the extent of enabling Gameskraft to operate the same for the limited purpose of paying dues, salaries and payments to customers/vendors.Further, the company was ordered to file a statement of accounts before the Court by the next date of hearing, apart from an undertaking stating it will not alienate, encumber or create third-party rights over its immovable property which it had pledged as security.It also asked the founders and senior executives of Gameskraft to attend the hearings before the GST authorities.The matter will be next heard on December 16..[Read order]