Karnataka High Court delivers relief to Zo employees of Winzo Games; salary payments allowed despite ED’s frozen accounts

The Karnataka High Court has recently dismissed an appeal filed by the Enforcement Directorate challenging an order of the single judge which directed Zo Private Limited, a subsidiary company of Winzo Games Private Limited, to provide a list of its employees to whom salaries are to be paid from bank accounts frozen by the ED.

A Division Bench of Justice Anu Sivaraman and Justice Vijaykumar A Patil, in its order dated March 9, while dismissing the appeal said, “Since the issue of payment of salaries from the frozen accounts could not have been considered by the Adjudicating Authority, we are of the opinion that exercise of discretion by the learned Single Judge cannot be said to be incorrect.”
As per the PMLA, an order of freezing bank accounts in proceedings initiated for alleged money laundering is subject to an adjudication being done by the Adjudicating Authority.

ED has registered an Enforcement Case Information Report (ECIR) against Winzo Games Private Limited and others for offences of money laundering, in relation to its real money gaming operations.

During the investigation, it was alleged that Winzo had generated total proceeds of crime amounting to Rs 3,522.05 crore during the financial years from 2021-22 till 2025-26.

The books of accounts allegedly revealed that Winzo Games had extended unsecured loans amounting to Rs 255 crore to its Indian wholly owned subsidiary- Zo Private Ltd.

Accordingly, an order of freezing of accounts was passed under Section 17(1A) of the PMLA on 30.12.2025, in respect of assets amounting to approximately Rs 690 crore.

Single judge order unsustainable
Additional Solicitor General Aravind Kamath appeared for the ED and contended that when Zo has been relegated to the Adjudicating Authority for a consideration whether the freezing of its accounts was in accordance with law, the impugned order to defray the salary expenses not only of Zo but also of its parent entity — Winzo Games — was completely uncalled for.

Kamath also argued that all property derived or obtained directly or indirectly as a result of a ‘criminal activity relating to a scheduled offence’ would amount to ‘proceeds of crime’.

Thus, the company cannot argue that the amount involved in the offence alleged against Winzo Games alone is completely unsustainable.

Senior Advocate Sajan Poovayya, appearing for the company, submitted that freezing of the bank accounts could only be to the extent relatable to the predicate offences as reflected in the First Information Reports.

The said FIRs do not contain any allegation against the respondent (Zo Pvt Ltd), nor do they disclose any proceeds of crime or any element of money laundering to attract the jurisdiction of the Enforcement Directorate.

Povvayya pointed out that the only FIR pending against Winzo Games is registered with the Cyber Crime Police Station, Gurgaon, wherein it is alleged that the complainant is stated to have suffered losses of approximately Rs 42 lakh.

The allegation that proceeds of crime amount to more than Rs 3,500 crore is false.

The bench in its order referred to the apex court decision in the case of Vijay Madanlal Choudhary and Others v.

Union of India, 2023, wherein the court had held that proceeds of crime have to be linked to a predicate offence and it is only such property which is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence that can be regarded as ‘proceeds of crime’.

Noting that in the present case, the predicate offence is one involving Rs 42 lakh and having been registered with reference to an incident which occurred on Sptember 20, 2024.

The bench in the order said, “The contention of the learned ASGI that the entire amount in the possession of the respondent – Zo Private Limited as well as its parent entity — Winzo Games Private Limited — represents proceeds of crime cannot be accepted.”
The order added, “The predicate offence being one involving Rs 42 lakh and having been registered with reference to an incident which occurred on 20.09.2024, the contention of the learned ASGI that the entire amount in the possession of the respondent – Zo Private Limited as well as its parent entity – Winzo Games Private Limited represents proceeds of crime cannot be accepted.”
The bench also underscored that the Adjudicating Authority under Section 8 of the PMLA has no power to issue any interim directions or to make any payments from the amounts that are frozen.

The court in its order held, “We are of the opinion that exercise of discretion by the learned Single Judge while relegating the respondent to its statutory remedy cannot be said to be perverse or unwarranted.”